“We are off to a record start in 2023 with very strong double-digit top line growth in the first quarter, driven by effective pricing and ongoing volume growth,” and adjusted gross profit dollar growth of $500m, which is well ahead of last year’s pace with 18.2% growth, he said.
Given the challenging economic environment’s impact on consumer shopping habits, this growth reaffirms the company’s “strategic decision to focus our portfolio on the attractive categories of chocolate, biscuits and baked snacks” – areas where consumers continue to gravitate, Van de Put said.
“Based on the strength of these Q1 results and our latest view across businesses, we are raising our revenue and adjusted earnings outlook to 10% plus for the year” from the prior outlook of 5% to 7%, he said. The company now expects earnings per share to be10%+ versus its previous outlook of high-single-digit growth.
European absorption of price increases better than expected
The company’s performance – and decision to raise its guidance – hinged in large part to Mondelez’s successful pricing execution in Europe, where Van de Put noted the company successfully implemented about 80% of the increases necessary to account for inflation.
While the price increases were necessary to help offset inflation, Mondelez executives worried about consumer pushback, but they happily reported elasticities of biscuits and chocolates overall were “less negative than we anticipated,” said Luca Zaramella, executive vice president and chief financial officer.
“Rather than cutting back significantly on the size of their basket, consumers are shopping around to find attractive deals and trading up and down in terms of pack sizes based on their specific needs and consumer occasions,” he said adding, “they remain loyal to branded products – particularly chocolate.”
With this positive reinforcement, the company now is focused on pushing through the remaining 20% of price increases in Europe necessary to offset higher costs, he said, cautioning that “we might have some more disruptions for the remaining pricing, which will potentially affect Q2.”
Additional pricing on top of that 20% and in other regions also might be necessary given the volatility of the current market and ongoing inflation, Zaramella cautioned.
“We still see double-digit inflation rate in 2023 with, obviously, energy and sugar ingredients posing most of the pressure,” in addition to a spike in cocoa that has offset other benefits, he said.
Still, he said, “we are quite pleased with the level of pricing that we have that this point in time,” especially in the US.
Strong US, emerging market performance
The company’s confidence to raise its overall guidance also was based in its strong performance in the US and emerging markets, Van de Put said.
“We expect that positive trends for North America will continue,” building on solid top and bottom lines that are driven by improvements in the supply chain and a recovery in Clif Bar’s profitability since the acquisition, he explained.
In emerging markets, he said the company tracked growth of 25%.
“Those would be my top three, I would say, of what’s carrying the quarter for us and probably is going to carry the year for us,” he said.