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Q3 Results

Mondelēz grows below global biscuits and chocolate market

By Oliver Nieburg+

28-Oct-2015

Mondelez Q3 2015 results: Chocolate buisness grows below market average during year-to-date
Mondelez Q3 2015 results: Chocolate buisness grows below market average during year-to-date

Mondelēz International has reported organic growth for the year-to-date up to September, but has grown below the category average in its largest segments biscuits and chocolate.

The company said it was continuing to feel the effects of leading chocolate price increases.

However, the Trident and Hall’s owner grew well above the gum and candy market over the same period.

Nielsen data showed the global biscuits, chocolate, gum & candy market grew 5.1% up to September year-to-date, but Mondelēz grew 3.8% over the same period. The Cadbury maker recorded 1.1% organic net sales growth in global chocolate, while the category grew 5.4%, according to Nielsen.

Price gap and European heatwave hurt chocolate business

Price hikes background

In 2014, Mondelēz implemented wholesale price hikes for chocolate and coffee in response to rising commodity costs, particularly for cocoa. The increases were met with retailer resistance in some European markets, especially France. Although Nestlé and Hershey also increased chocolate prices, Mars only raised wholesale prices in North America.

Mondelēz chairman and CEO Irene Rosenfeld said during the firm’s earnings call “This reflects that we led significant pricing in most markets due to rising input costs.”

However, she said price gaps across the world were starting to narrow, adding that Mondelēz will up advertising and promotions support in UK and India to address pricing concerns and also explore increasing its e-commerce presence in the UK.

“We had a big heatwave in continental Europe and that did have an impact on our chocolate business,” she added.

Mondelēz category performance versus overall market using Nielsen Global Data through to September 2015. Source: Mondelēz presentation

Chocolate is Mondelēz’s second largest business segment by revenue behind biscuits. Around 40% of the firm’s chocolate sales come in Europe.

Mondelēz altered pricing in markets outside Europe such as Brazil and Russia but Rosenfeld said it was well-received. For example, Rosenfeld said her firm’s shares were holding up in Russia despite altering prices three times during the year in response to the devaluation of the Russian rouble.

Pricing drives organic growth in Brazil

Mondelēz has created the new role of chief commercial officer and appointed management team member Mark Clouse (pictured). He will move into the role in January 2016, when his position as chief growth officer will be filled by Tim Cofer, currently Mondelēz ‘s executive vice president and president, Asia Pacific and EEMEA.

Today Mondelēz posted reported Q3 net revenues of $6.8bn, down 17.8% year-on-year. But it claimed 3.7% organic growth driven by price increases in inflationary markets like Brazil.

Organic net revenues in Q3 climbed 10.3% in emerging markets but dropped 0.5% in developed markets.

Q3 net earnings were $7.3bn, up from $899m in Q3 2014

Despite growing below the global chocolate and biscuits categories Mondelez did post 5% sales growth in gum & candy for the year-to-date, while the overall market grew just 1.8%. Rosenfeld said growth was fuelled led by gum in China and candy in the US.

Acquisition hunt and outlook

The company reaffirmed its full-year outlook and expects 3% organic net revenue growth.

Rosenfeld said the company would look to further acquisitions after recently adding Vietnamese biscuit business Kinh Do and US allergen-free snacks producer Enjoy Life Foods.

“We’ll look for more opportunities in the future for more bolt-on acquisitions like these,” she said.

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