Full-year Financial Results

Mondelēz forsees further emerging market challenges in 2016

By Douglas Yu

- Last updated on GMT

Cadbury maker hit by negative currency impact and emerging market slowdown. Photo: iStock - Ekaterina Minaeva
Cadbury maker hit by negative currency impact and emerging market slowdown. Photo: iStock - Ekaterina Minaeva

Related tags Organic net revenue Revenue Investment Irene rosenfeld Mondelez Us

Mondelēz has reported full-year organic revenue growth in chocolate below the overall market  and expects the macroeconomic environment in emerging markets to remain challenging.

The firm's net revenues decreased by 13.5% to $29.6bn for the full year, and Q4 net revenues were down to $7.4bn by 16.6%, the company announced yesterday.

However, the CEO of Mondelēz, Irene Rosenfeld said in a statement the results were strong in a highly volatile macroeconomic environment.

Positive outlook, yet challenging macroeconomic situation

Valerie Moens, associate director of corporate external communications at told ConfectioneryNews, the company’s organic net revenue was up 3.7% driven by pricing in inflationary markets.

“Our Power Brands, which represent approximately 70% of our revenues, grew 5.4% of the year. Emerging markets increased 10.6% while developed markets decreased 0.7%,” ​she said. 

MDLZ capture
Source: Mondelēz

Rosenfeld said in the company's conference call: "..Like many smart companies, we are selectively investing through the downturn in emerging markets with continued investments in Advertising & Consumer Support and route-to-market so we can benefit disproportionately as these markets recover."

She added that the strength of the US dollar forced Mondelēz to up prices in emerging markets. The company grew fiscal year organic revenues 10.6% in emerging markets, driven by pricing in Latin America. But Asia-Pacific organic revenue growth was up just 1.7% for the year.

The company's chocolate business grew just 0.9% in organic revenues for the year - below global category growth of 5.4%.

Rosenfeld said that reflected Mondelēz's move to up prices ahead of its major competitors.

Outlook for 2016

The company expects the macroeconomic environment to remain challenging in 2016, and estimates global growth of the snacks category of 3% to 4%, which is down from a growth of about 4% in 2015, excluding Venezuela.

The company CFO Brian Gladden said: "We are not counting on a return of emerging markets to historical growth rates here."

The company expects  organic net revenue growth of at least 2% for 2016.

Challenges magnified due to massive international markets

Mondelēz is no different than many other multinational food companies in coping with the dual challenges of a strong US dollar and a shaky international economy, Mintel analyst, Marcia Mogelonsky, told ConfectioneryNews.

Accounting in Venezuela

Mondelēz will no longer include net revenues, earnings or net assets from its Venezuelan subsidiaries within the company’s consolidated financial statements.“This is based on the loss of control of the business due to the inability to operate in the normal course of business and the lack of currency exchangeability,”​ said Valerie Moens. However, this is purely an accounting change, and Mondelēz will continue to do business in Venezuela.

Food companies are also facing the changing tastes of consumers, who are looking for health and wellness, she said.

The analyst suggested Mondelēz may be in a tougher position than other US food companies, as it gains a larger percentage of its revenue from outside the country.

However, Mondelēz CEO Irene Rosenfeld  is adapting to slowing growth outside the US, by eyeing cost savings of $3bn, partly by shifting production to lower-cost countries, according to Mogelonsky.

“This is a big change from 2009, when CEO Rosenfeld said that Mondelēz (then Kraft) would focus its international efforts on 10 countries, 10 brands and five product categories (chocolate, coffee, powdered drinks, biscuits and cream cheese),”​ she said.

Mogelonsky added Mondelēz in 2009 divvied up its global interests into “growth engines” (Russia, China, Brazil, Southeast Asia) and “scale markets” (UK, Australia, Spain, France, Italy, and Germany).

“Since so many of Mondelēz's categories focus on indulgence, and because of the company's broad global appeal, those challenges are somewhat magnified.”

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