Mondelez focuses on international markets as US growth lags
- Mondelez International's revenues held mostly steady during both the fourth quarter of 2018 and the entire year, according to the company's latest earnings report. Net revenues in the quarter were down 2.8% to about $6.8 billion, a drop the snacking company attributed to currency impacts. Looking at the entire year, net revenues were up 0.2%, to $25.9 billion.
- Gross profits during the quarter fell $104 million and profit margins dipped 0.5% to 37.6% due to higher restructuring costs. For the entire year, gross profit was up 3%, increasing by $318 million.
- In the earnings report, Chairman and CEO Dirk Van de Put praised the results. "Our fourth quarter and full-year 2018 results demonstrate the power of our brands, the strength of our global footprint and the potential of our strategic plan,” he said. "In 2019, we will continue to progress against our new strategy, which includes new investments to drive organic revenue growth and operational excellence across the organization."
While Mondelez's quarterly and annual numbers failed to impress, the maker of Ritz crackers and Oreo cookies was able to post modest increases for the year as a whole. According to quotes from Van de Put on Mondelez's Twitter account, the company believes growth with continue through new strategies, collaboration, innovation and investment. After all, he said, the company's position in the snacking space, and its product lines in many parts of the world, give it the niche and local attraction to succeed.
The strong brands that power Mondelez certainly helped during the quarter and for the last 12 months. According to a short video on the manufacturer's Twitter account, organic net revenues grew for chocolates, biscuits and candy and gum in 2018. Biscuits led the way with net revenues of $11.2 billion, representing a net revenue bump of 2.8%. Chocolate, which had net revenue of $8.2 billion, saw its net revenues increase 3.5%. And though net revenues for candy and gum slipped 4% to $3.5 billion total, organic net revenue saw a 0.1% bump.
And those brands did better almost everywhere other than the United States. Europe is the snacking giant's biggest market, with nearly $2.8 billion in Q4 net revenue. The North American region is a distant second, with $1.8 in net revenue for the same period. According to slides from the earnings presentation posted online, while the U.S. biscuit market has done well, organic net revenue only grew 0.8% in the quarter.
Mondelez seems to be relying on its international operations for its future growth. Considering the slow growth that other major CPG manufacturers have seen in the United States, this is a smart focus. North American-centered growth and plans were barely talked about in either the report or the earnings call.
"We are in snacking, we are not in general food, we are also all over the world, not just in North America and we have global and local brands that have unique place in consumer’s mind," Van de Put said in a transcript of the earnings call. "As such, we are a truly global company, operating in attractive, large and growing markets. And in those markets we have a strong manufacturing distribution and marketing network."
And while focus on markets in the rest of the world is a key part of Mondelez's strategy going into the future, in the earnings call, Van de Put announced a new three-pronged strategy for growth worldwide. He plans for more consumer-centric sales and marketing; attention to operations to ensure efficiency, demand fulfillment and low costs; and refocusing on long-term growth rather than short-term costs.
These strategic pillars sound beneficial, and it will be interesting to see how the company makes some of these changes. While the marketing team for Oreo has recently had quirky consumer-focused promotions, analysts have said the company as a whole needs to upgrade its e-commerce presence.
Operational and logistical efficiency has been the source of problems throughout the CPG space as a trucking shortage has increased costs across the board. It remains to be seen if the growth strategy entails higher prices for consumers, upgrades or closures of factories, layoffs, or some combination of the three.
Not much was said about new innovations, though the company's SnackFutures arm is in full swing. Mondelez also has been rumored to be interested in Arnott's, Campbell Soup's Australia-based cookie business. Considering the global strategy the company is pursuing, it's highly probable that any big changes and new products will be tasted by consumers outside of the United States.
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