Snacking behavior holds strong in face of inflation, says Mondelēz
"Our core chocolate and biscuit businesses continue to demonstrate volume and pricing resilience," said Van de Put on the company's Q2 2022 earnings call.
"Although we may see a more mixed consumer sentiment in the near term, given the macro environment, we expect the consumers to consume more at home and be more selective in the brands they buy," which translates into choosing more well-known and iconic name brands, according to Van de Put.
"Importantly, we are also delivering strong volume, which is important to Mondelez. It is a proof that consumers are eating more of our products every day and an indication of sustainable long-term growth," he added.
Organic net revenue increased by +13.1% in Q2 2022 vs. Q2 2021, building on its +8.6% growth in Q1 2022 vs. the same period last year.
Turning to the operating environment, Van de Put said the company is still grappling with cost inflation for several key business inputs including energy, transportation, packaging, wheat, dairy, and edible oils.
"Input cost inflation remains challenging. And although we may see commodity inflation beginning to ease, we expect other costs like wages to show significant inflation," said Van de Put.
Snacking represents an affordable indulgence for many consumers
While consumers are indeed frustrated by having to spend more on food purchases, their price sensitivity hasn't impacted the grocery category as greatly as it has for other categories, noted Van de Put, who argued the consumers are actually willing to spend more on food and beverage products such as biscuits and chocolate, viewing these items as an affordable indulgence.
"Our annual state of snacking survey shows that consumers increasingly prefer snacking over traditional meals. And because snacking plays such an important role in consumers' lives, our core categories of chocolate and biscuits historically have resilience to economic downturns and pricing actions... they continue to perceive chocolate and biscuits as affordable indulgences and an important pick-me-up," he said, adding that 40% of UK shoppers said that chocolate is a necessity.
Challenging the notion that private label is replacing name brands in certain categories, Van de Put added, "Private label is either flat or down in the vast majority of our markets, and shoppers say they are much less likely to switch to private label in chocolate and biscuits compared to other categories."
Clif bar acquisition
Committed to its vision of solidifying its position as a global snacking leader, Mondelēz acquired snack bar brand Clif Bar for $2.9bn in June 2022, creating a $1bn global snack bar business (Clif Bar generated $800m in sales last year) for the company and stronger positioning in the $16bn global snack bar category that's growing 5%+ year-over-year and giving it a greater presence in the $700m US protein and energy category, noted Van de Put.
"In terms of growth, we see substantial opportunities to increase household penetration and distribution in alternative and e-commerce as well as existing outlets. There is also an opportunity to unlock growth through revenue growth management and enhanced in-store excellence. And beyond the US, there are clear opportunities to drive international growth," he said.
Full-year outlook
Given its strong performance in the first half of 2022, Mondelēz expects +8% topline growth for the full 2022 year.
"This revised top line outlook factors in a number of considerations, including the negative full year impact anticipated from the Ukraine war including revenue losses related to products that previously were manufactured in the country and exported into Europe," said Mondelēz EVP and CFO, Luca Zaramella.
"As far as cost inflation goes, our expectations for low double-digit cost inflation for full year 2022 are confirmed."
Van de Put added that despite strong confidence in its brands, the company is expecting some softening of consumer confidence as the year progresses and as further pricing actions go into effect.
"Our brands are very strong and have a good connection to the consumer, and I do expect our categories to remain solid, probably flat to small growth in volume. We will have ongoing conversations with our customers about price increases, and we will try to drive a value equation there," he said.
