Mondelēz plans for December price increases but sees strong consumer brand loyalty

By Mary Ellen Shoup contact

- Last updated on GMT

Photo Credit: Mondelēz International
Photo Credit: Mondelēz International

Related tags: Mondelez International, Snacks, Inflation

While consumers are tightening their purse strings and cutting down on many discretionary purchases, snacking is one area many are not, according to Mondelēz International, which continues to see consumers opt for name brands over private label and value-priced options.

The company saw net revenue increase +8.1% in Q3 2022 to $7.76bn vs. the prior year period, driven by higher pricing across its portfolio and volume growth of +0.7%. 

In North America, net revenues increased 19.6% to $2.5bn for the quarter with volume down slightly at -0.6%.

The company expects a similar trend of growth moving into Q4 2022 and FY2023 as it follows its long-term growth strategy introduced in 2018 focused on investment in new brands and reshaping its portfolio to prioritize snacking.

"We view our performance in the third quarter and year-to-date as further evidence that our long-term strategy continues to pay off. Since the launch of our new growth plan in 2018, we have consistently over-delivered on net revenue growth through a virtuous cycle of increasing investment, strong local execution and targeted incentives. We remain confident that this strategy will continue to deliver attractive growth in the quarters and years to come,"​ Mondelēz chairman and CEO Dirk Van de Put said on the company's Q3 2022 earnings call.

Resilience of snacking

"Snacking continues to play a central role in consumers' lives. And as a result, our core categories of chocolate and biscuits remain resilient. Consumers in developed markets continue to prioritize groceries over other forms of spending, and they continue to view our brands as affordable indulgences,"​ said Van de Put.

Brand loyalty remains strong, noted Van de Put, who said that consumers are still seeking out the company's name-brand snacks over lower-priced alternatives.

"Because of this enduring brand loyalty, private label share is either flat or down in the vast majority of our markets. Shoppers continue to say they are much less likely to switch to private label in chocolate and biscuits compared to other categories,"​ he said. 

Managing volatility, further pricing actions to come

However, the company continues to navigate a volatile operating environment facing elevated input costs in areas of energy, transportation, packaging, wheat, dairy, and edible oils.

"We continue to manage through volatility in the supply chain, especially in the US due to labor shortages at third parties as well as a continuing shortage of trucking capacity and containers. We are prioritizing key SKUs to protect share and continue to make progress in improving manufacturing and warehouse capacity,"​ he said. 

As a result, further pricing actions are due to take effect in December 22, which it doesn't believe will deter core consumers from considering more affordable brands and products. 

"We believe our categories are still a necessity in these tough times,"​ said CFO Luca Zaramella.

Clif Bar acquisition

The Clif Bar business, acquired in August, "is up low double digits on a year-to-date basis and we are excited to take this great brand to the next level,"​ said Van de Put.

The year ahead

Entering into its fourth quarter and FY2023, Mondelēz expects to see continued growth across its portfolio but does not see inflationary pressures abating.

"We continue to expect broad-based growth in our core categories and markets. We also expect a significant contribution from pricing, and we continue to plan for double-digit cost inflation,"​ said CFO Luca Zamarella.

"In terms of the US, it is on a good trajectory. To accompany the price increase, we're going to significantly step up our investments. So we expect that we will enter '23 with good momentum in the US." 

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