- Mondelēz International sees plenty of opportunity to grow Clif Bar despite a crowded competitive set and supply chain issues that have throttled the brand’s profitability, according to remarks during the company’s second-quarter 2022 earnings call this week.
- The snacking giant expects the purchase to be “top-line accretive” in year two. “We did see the possibility to add a significant earnout if we would go with a substantial top line acceleration and margin expansion” for Clif Bar, CEO Dirk Van de Put said during the call. “And so we hope that we will see that sort of growth that we have been planning for.”
- Mondelēz is hoping to catch the tailwinds of a bar category revival with its $2.9 billion purchase of Clif, which is set to close in the third quarter.
Since Mondelēz first launched into its snacking-centric growth strategy in 2018, it has closed or announced nine acquisitions to fill gaps in its portfolio while adding more than $2.8 billion in annual revenues. More recently, these include its 2021 purchase of premium chocolate and snack maker Hu, its acquisition of European baked goods maker Chipita Global S.A. and its $1.3 billion deal to buy Mexican confectioner Ricolino from Grupo Bimbo.
Clif Bar — the largest and latest of these nine buys — also serves to bolster Mondelēz’s snacking lineup. But some analysts questioned the ROI and growth potential of the deal because of the brand’s recent challenges in growing profits and a downturn in bar sales over the past couple of years. But in comments during Mondelēz’s earnings call on Wednesday, Van de Put pegged the category’s problems as temporary, tied directly to a drop in consumer mobility during the pandemic.
“But clearly, the category is coming back in the recent months,” he said. Mobility is returning, although it has not yet hit pre-pandemic levels, the company acknowledged in its earnings presentation.
He argued that with the fastest-growing bar in the protein and energy bar market, Clif is in a strong position to take advantage of the revival with its appeal across age groups, especially the pivotal 18-to-24-year-old demographic. Elements that help Clif’s standing, he said, include its organic ingredients and taste. But Mondelēz believes it can also maximize Clif’s potential.
“When we look at the details, we believe that there is a big opportunity to expand distribution in existing and alternative channels, but also improve the quality of the distribution of where Clif is present,” Van de Put said. Mondelēz could also help improve Clif’s cost of goods and operating expenses, he noted. It also seeks to boost household penetration and grow international sales for the brand.
Van de Put said privately held Clif Bar’s profitability in 2021 “is not representative” of its potential. “We have a significant opportunity to optimize overheads, implement an RGM [revenue growth management] strategy, they've been experiencing supply chain disruption,” he said. “And we're already seeing in the first two quarters of this year, a much improved profitability for the business.”
Mondelēz International reported a 13.1% increase in net revenue for the second quarter, boosted by the strong performance of its chocolate and biscuit brands, which have proven resilient despite price increases. The company boosted its forecast for net revenue for the full year from 4% to at least 8%.
"While consumers express growing frustration with rising prices for a broad range of goods and services, they continue to perceive chocolate and biscuits as affordable indulgences and an important pick-me-up," Van de Put said.