Branded still better? Mondelez plays down private label threat citing ‘strong’ consumer confidence in Asia and Middle East

By Pearly Neo

- Last updated on GMT

Mondelez has highlighted continued strong demand for its snack brands such as Oreo and Cadbury in emerging markets as key to its Q3 profitability. ©Getty Images
Mondelez has highlighted continued strong demand for its snack brands such as Oreo and Cadbury in emerging markets as key to its Q3 profitability. ©Getty Images

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Snacking giant Mondelez has highlighted continued strong demand for its snack brands such as Oreo and Cadbury in emerging markets as key to its Q3 profitability, playing down threats from cheaper supermarket private label products.

Mondelez recently announced its Q3FY2023 financial results, reporting net revenue growth of 16.3% year-on-year to US$9bn and gross profit growth of 20.1% year-on-year to US$3.5bn.

During a call with investors to report these results, Mondelez Chairman and CEO Dirk Van de Put told the floor that the firm’s well known snacking brands such as Oreo and Cadbury continued going strong despite an apparent increase in competition from supermarket private label products such as house brand chocolates or biscuits which are usually cheaper.

“Consumers continue to prefer our widely-loved brands over private label alternatives,”​ he said.

“This is particularly clear in emerging markets, where consumer confidence remains strong and we continue to see resilient underlying demand.

“In fact, we are seeing lower price sensitivity [for snacks] as compared to in developed markets – this shows that there is clearly a strong preference for branded products in this region.”

Mondelez’s definition of emerging markets primarily consists of Asia (except Japan), the Middle East, Africa, Latin America and various Eastern European markets.

“Looking at results from emerging markets alone, Q3 has delivered strong growth in volume and value at 4% and 24% respectively,”​ he added.

“These very healthy results make us confident that there are strong opportunities to drive expanded distribution and create new snacking occasions here.”

Mondelez CFO Luca Zaramella reported that emerging markets made up 39% of the firm’s total revenue over the past nine months in 2023.

“Our business has proven to be resilient in these emerging markets, having grown 19% in this quarter,”​ he said.

“Across the board, chocolates, biscuits and baked snacks have all delivered double digit growth in the past quarter as well – Biscuits and backed snacks made up 50% of our total revenue growing 12.4%; whereas Chocolates made up 30% of our total revenue and grew 14.9%.”

Pricing adjustments were reported as 12%, but what was not highlighted in the announcement was that over half of growth in all of these categories was generated by pricing adjustments.

Plans for year ahead

Given the undeniable economic instability and inflationary pressures ongoing in the market, in order to maintain profitability the firm is being more selective about its investments, choosing to focus on areas that will hopefully bring down costs and spur further consumer demand.

“The three main areas we have been selectively investing into are digital services, marketing and sales, and this will continue into next year,”​ Zaramella added.

“All the rest has been kept absolutely controlled [though we will definitely] continue investing into sales capabilities particularly in emerging markets [given the enormous potential there].”

Van der Put also highlighted the snack bar categories as the next big thing for the firm.

“Snack bars are going to be a very big opportunity for us, especially when looking at the potential in the rest of the world [outside of the United States],”​ he said.

“The snack bar development here has been far ahead of the rest of the world, so in the years to come there is a lot of development to be anticipated.”

Mondelez has already entered the snack bar category with several brands such as Clif, Grenade and Perfect Snacks.

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