Dive Brief:
- Mondelez's cost-cutting efforts have had a significant impact on earnings, as the company reported a 71% leap in profits for the first quarter to $554 million, or $0.35 per share.
- Revenue fell 17% to $6.46 billion, but that figure beat analysts' estimates of $6.42 billion. Comparable sales, without currency fluctuations, acquisitions, and divestitures, saw a 2.1% uptick.
- Mondelez boosted gross margin from 37.9% to 39.3% and operating margin from 10.4% to 11.2%.
Dive Insight:
Mondelez's consistent drops in revenue, now ten quarters in a row and including a 13.5% decline in 2015, seem baffling. The snack company's revenue trends don't reflect the booming growth of the snack foods industry as a whole.
The disconnect is in the types of snack foods and the health benefits they provide. This is particularly true in the North America market, where Mondelez's sales dipped 0.4% this past quarter, as compared to a 0.5% increase in 2015. Mondelez is better known for more indulgent snack brands like Oreos and Chips Ahoy!.
But the company is out to change that with a goal to make better-for-you products comprise one-half of total revenue in the next five years. The company is on its way there thanks to new product lines like Good Thins, which uses not only the popular "thins" trend the company has propagated through Oreo Thins and Wheat Thins Even Thinner. It also contains ingredients like chickpeas and rice (for the gluten-free variety).
Mondelez is delivering a strong performance is in earnings and improving profit margins. But CEO Irene Rosenfeld has been pushing for drastic cost-cutting measures companywide. Investors weren't always convinced the initiatives went far enough because Mondelez's margins continued to lag behind other snack makers. Analysts have proposed a potential acquisition by Kraft Heinz, PepsiCo, General Mills, or Nestle, though other analysts argue that at this point, Mondelez might be too expensive to acquire.
Mondelez chief commercial officer Mark A. Clouse has also been named the new CEO of Pinnacle Foods, effective May 23. Mondelez does not currently have plans to replace Clouse, according to Reuters.