Mondelez looks at raising prices and snack innovation as sales continue to slow
- Mondelez International's net revenue dropped 3.7% to $6.29 billion, as sales struggled in North America, according to the company's most recent earnings report. These Q3 results were lower than analysts' expectation of $6.32 billion of revenue for the quarter.
- North America continued to see declining sales with a 2% drop in revenue growth. But the snack maker recorded a third-quarter net income of $1.19 billion — 81 cents per share — compared to $992 million a year ago. Key brands such as Oreo, belVita and Ritz helped boost Mondelez's revenue this quarter, particularly in emerging markets.
- Executives also announced on the earnings call that Mondelez will launch a business unit called SnackFutures aimed at developing the future of snacking next month. Mondelez expects this new program will contribute $100 million to revenue by 2022 and it will focus on well-being snacks, digital growth and premium snacks, according to Fortune.
Mondelez continues to battle slipping sales in North America, its second largest market. The company known for indulgences like Oreos has struggled to produce sales growth in the U.S. in recent years as demand has increased for better-for-you foods, and it has shown in the company's earnings each quarter.
Dirk Van de Put, Mondelez's chairman and CEO, said in the earnings call that the company has made significant changes in North America in the last couple of years they've made significant changes in North America, but plan to do more since sales are still pushing results down.
"In North America, as we discussed with you before, we are working to address several issues in our business, which, as expected, continue to impact results," Van de Put said, according to a transcript of the earnings call. "It will take us time to fix and as such progress will not be linear."
But Mondelez is far from the only company facing these struggles. Many CPG companies have faced slowing sales due to higher costs and changing consumer demands for healthier products. To keep its bottom line steady, Mondelez announced price hikes in this earnings report. The new round of price increases will take effect at the beginning of next year, according to The Wall Street Journal. Mondelez’s move follows Hershey’s announcement last week that it would also raise prices to ease pressures on margins. And Nestlé USA’s CEO told Food Dive this month that the company is also considering raising prices for some of the products it sells in 2019.
To get ahead of consumer demands, many companies — including Mondelez — have also turned to M&A. The Oreo maker has used acquisitions in the past to make a shift toward better-for-you foods — or at least products that have more of a health halo. In 2015, it bought Enjoy Life Foods, which makes allergy-friendly snacks, for an undisclosed amount.
More recently, Mondelez acquired Tate's Bake Shop — known for its clean label cookies made with high-quality, real ingredients such as brown cane sugar and butter — for about $500 million earlier this year. That acquisition has performed well this quarter, increasing double-digits above the company's expectation and continuing to increase its distribution in the U.S. And Van de Put said in the earnings call that Mondelez could be exploring more options for growth through acquisitions.
"Another route to drive additional growth is M&A," Van de Put said on the earnings call. "We remain excited about this platform and the opportunity we have to scale the business while preserving what makes it unique."
- Mondelēz International Mondelēz International Reports Q3 Results
- Wall Street Journal Mondelez Posts Weaker Sales in North America, Latin America
- Fortune Mondelez to Launch New Business Aimed at Shaping the Future of Snacking
- Reuters Mondelez plans price rises to cope with rising freight costs
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