Mondelēz International grew slower than the overall chocolate market in H1 after raising wholesale prices earlier than competitors.
In its Q2 results today it said that some retail customers particularly in Europe had rejected its price increases, which came before competitors Nestlé, Hershey and Mars Chocolate North America made similar moves.
Consequently, Mondelēz’s chocolate business registered organic net revenue growth of 1.4% in H1, below the global category, which was up 4.3%.
The price increases implemented in Q2 were intended to offset rising cocoa and dairy costs as well as currency fluctuations.
Premature price increases?
“Some customers, especially in Europe, most notably France have reacted quite severely to our price increases. In fact a number have refused to accept our pricing, which has led to extended disputes and near term distribution loses,” said Mondelēz chairman and CEO Irene Rosenfeld.
During Q2, Mondelēz rose wholesale price in most categories to combat rising cocoa and dairy prices. The biggest price hikes came in its chocolate category.
“Given our share positions in most markets we chose to lead those pricing actions and while we anticipated that this would be disruptive in the short term, it’s been even more challenging than we expected,” said Rosenfeld.
She said that Mondelēz was taking the brunt of punitive actions by retailers by being the first to raise prices. “But to be clear this is affecting the broader industry, not just us,” she said.
The Cadbury and Milka owner reported overall Q2 net sales of $8.4bn, down 1.8% (or up 1.2% organically), while net earnings were up 6% to $691m.
The company had expected around 3% organic net revenue growth. It has now lowered its full-year expectations to 3% following a turbulent quarter in Asia Pacific, where the company reported a slowdown in the Chinese biscuit category.