SUBSCRIBE

Breaking News on Confectionery & Biscuit Processing

Trends > Seasonal

Quarterly earnings

Mondelēz Q1 a ‘solid start’, driven by Oreo, Cadbury, belVita and Ritz

Douglas Yu

By Douglas Yu+

03-May-2017
Last updated on 05-May-2017 at 02:19 GMT2017-05-05T02:19:14Z

Mondelēz posted organic growth of 0.6% during its first quarter of 2017.  Photo: Mondelēz website
Mondelēz posted organic growth of 0.6% during its first quarter of 2017. Photo: Mondelēz website

Mondelēz has posted organic growth of 0.6% during Q1, beating the company’s expectation, CEO Irene Rosenfeld said.

The company’s net revenues, however, declined by 0.6% to approximately $6.4bn during the period.

“We’re off to a solid start in 2017… but there’s still work to do,” she said. “Our power brands continued to be a strong driver of overall performance, with organic growth up 2.5%, once again outpacing the category growth.”

In addition, adjusted operating income margin increased by 90 basis points to 16.8%, driven by overhead savings and productivity, Rosenfeld said.

“Adjusted earnings per share growth was solid, an increase of 6% at constant currency, driven mainly by operating earnings,” she added. “We returned significant capital to our shareholders in the first quarter, with nearly $800m in dividends and share repurchases.”

Rosenfeld also mentioned that the net revenue generated by e-commerce increased by 30% during Q1, as Mondelēz is set to generate over $1bn of e-commerce revenues by 2020.

Strong growth in international markets

In Q1, all Mondelēz’s markets saw organic net revenue growth except North America, according to company’s financial statement.

India rebounded faster than expected from the impact of demonetization, delivering high single-digit growth, Mondelēz said.

 

Mintel recently named India as one of the fastest growing chocolate markets in the world. Mondelēz’s competitor Hershey also posted 16% increase of constant currency net sales in India during its Q1, 2017.

“We’re investing in our power brands and key markets where we see good returns,” Rosenfeld said. “For example, in EMEA, Cadbury chocolate grew double digits in India, supported by solid innovation and strong marketing, while our team worked with customers to manage through demonetization.”

Additionally, Southeast Asia was up mid-single digits with the launch of belVita in Indonesia, Mondelēz reported.

Milka chocolate continues to build strong brand awareness and trial in China since the company first introduced the brand to the region in 2016, Rosenfeld said.

“In Q1, Milka achieved a 2.4% market share and brand awareness reached 40% [in China],” she said.

Rebuild North American business

Mondelēz posted 1.9% organic net revenue decline during Q1, with which Rosenfeld said the company was not satisfied.

“We clearly made great progress on margins, but over the past few quarters, we haven’t delivered the top line growth we expect,” she said.

Mondelēz’s EVP and CFO, Brian Gladden, said the decline was caused mainly by US biscuits and gum categories.

However, there were bright spots in North America, including belVita, which gained more than one point of share, and the launch of Ritz Crisp & Thins late in the quarter, which helped drive a 0.5 point of share improvement for the brand, Gladden said.

Rosenfeld believed Mondelēz’s advantages in North America, including its power brands, DSD (direct store delivery) capabilities, and a “robust” pipeline of well-being innovation, will position the company to “win over the long-term.”

“But we need to better leverage these assets,” she warned.

In Q2, Mondelēz expects North America to remain challenged and the revenue growth to be below Q1.

Mondelēz has experienced a series of leadership changes in its North American business earlier this year, ConfectioneryNews reported. The company’s chief growth officer Tim Cofer now serves as interim president of the North American business.

“Although it’s early days, Tim and the team are focused on fundamentals, fully leveraging our DSD capability, improving sales and marketing execution,” Rosenfeld said. “We expect to see material improvement in revenue and share in the back half of [2017] without losing focus on our margin commitments.”

Anticipating 1% full-year growth

Mondelēz expects organic net revenue to increase at least 1% in 2017 and adjusted operating income margin in the mid-16% range.

The company estimates currency translation would reduce net revenue growth by approximately 1% and adjusted EPS by approximately $0.02. 

Growth by category in Q1

Even though the snacking category growth declined about 2.5%, driven by the year-over-year calendar impact from Easter , Mondelēz remains “comfortable” with its full year view of category growth. Mondelēz’s biscuits business posted a slight revenue decline as strong growth in countries like the UK, Japan and Italy was offset by weakness in the US.

In chocolate, Mondelēz grew more than 5%, driven by solid results in Germany, India, and Brazil. In addition, the company continues to see good momentum with its recent launches of chocolate in the US and China.

Gum and candy declined over 5% as the gum category continues to experience significant weakness, especially in the US. Mondelēz anticipates continued declines in the gum category as the company focuses on growing its share and improving in-store execution. 

Key Industry Events

 

Access all events listing

Our events, Shows & Conferences...