CEO of Mondelēz, Irene Rosenfeld, said: “Our third quarter results underscore our continued commitment to improve operational efficiency, expand margins and profitably grow volume while also investing in strategic growth initiatives for the longer term.
“In the face of challenging market conditions, we’re building a stronger, more streamlined company that is well positioned to deliver sustainable, profitable growth and attractive cash generation."
Mondelēz’s gum segment, which accounts for 12% of the company’s US sales, has declined 8.7% compared to industry decline of 2.5% during the same quarter, according to global analysts firm, SIG. Mondelēz’s sugarless gum is currently worth $848m.
Expanding US snack market or international chocolate space?
The results follow Mondelēz's decision in August to end its pursuit of Hershey nearly two months after the US chocolate giant allegedly rejected its two takeover bids.
Commenting on the M&A aspect of the business, SIG said it would have been helpful to have more 'color' on the company's rationale behind its bid to acquire Hershey.
“Was the company more interested in the US franchise, or on the export potential of Hershey?” SIG asked. “If the former, can Mondelēz find other ways in the snacks segment to increase its US distribution? The entry announced into high-end chocolate is unlikely to move the needle.”
“If the idea was to beef up its international presence, Mondelēz could still approach other chocolate companies overseas, like Ferrero or Lindt.”
Rosenfeld said about the acquisition attempt: “Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands.”
SIG continues to rate Mondelēz positive.
Narrow portfolio
Jack Skelly, food analyst at Euromonitor International, also commented on Mondelēz's results:
"Whilst overall volume growth saw sharp declines in some regions, the snack maker continues to hold third position in global packaged food. Mondelēz’s narrow portfolio which comprises mainly chocolate confectionery and biscuits, allows it to benefit immensely from strong synergies amongst brands. Indeed, Mondelēz's cross branding strategy, such as Cadbury’s with Oreo and Daim, has been very successful and will continue to be central to the company’s growth strategy."
The analyst said where before multinationals such as Unilever and Nestlé were focused on being present in every food type found in consumers’ shopping baskets, now the focus lies on streamlining the food portfolio to be the best in the company’s core business in order to maximize synergies and be more profitable.
But he said "Mondelēz’s relatively small share of chocolate confectionery in the US and China will inevitably shake up its global ranking if left unchanged. Indeed, in 2015, the company lost its leading position in confectionery to Mars. Although Mondelēz has strong brands globally, the lack of a significant chocolate confectionery brand in North America – due to Hershey’s manufacturing Cadbury’s in the region – is a significant omission. The company should focus on developing biscuit brands that will perform well in the market. There is scope for indulgent cookie products, which can be balanced with healthier products, such as Belvita, which have enjoyed enormous success over the past five years.”