Mondelēz Grows Q1 Revenue, Profits Despite Challenging Operating Environment

Mondelēz posted “solid top-line” results in Q1 2024 with net revenue up 1.4% and organic net growing 4.2%; however the multinational chocolate, candy and snack producer saw volume/mix decline 2.1%. The results come as cocoa prices have reached record highs and consumers across all grocery categories have begun trading down to private label brands due to lingering inflation.

“While our operating environment remains challenging and dynamic, our teams are focused and agile in dealing with the short term as well as executing against our long-term growth strategy,” said Dirk Van de Put, chairman and CEO. “While surprising but temporary, the cocoa inflation does not affect the fact that our categories remain durable and our growth opportunities remain sizable.”

Top-line growth was driven by price increases, cost management initiatives and emerging market momentum, the latter segment of which reported 3.8% revenue growth in Q1. Gross profit increased by more than $1.3 billion, and gross profit margin increased by approximately 1,350 basis points.

Diluted EPS came in at $1.04, a 31.6% decline due to a non-cash impairment charge. Adjusted EPS was $0.95, up 16.3% on a constant currency basis. Mondelēz attributed the momentum to strong operating gains and lower interest expense.

Operating income rose by about $1.2 billion, and operating income margin was 29.4%. Van de Put noted the company continues to increase marketing investments, currently growing in “high single digits.” The company’s full-year guidance remained unchanged following the report.

On a category basis, the company’s Chocolate, Biscuit, and Baked Snacks remained resilient with low elasticity compared to the broader food landscape. Emerging markets have helped sustain momentum in the category, but price points are pushing them toward smaller pack sizes in both Biscuits and Chocolates, added Luca Zaramella, EVP and CFO.

While Van de Put emphasized its snack set has enjoyed strong consumer loyalty, volume growth has slowed with Biscuits and Baked Snacks revenue growing 0.6%. Chocolate grew 5.8%, and Gum and Candy grew 12.9%, the latter of which was driven by strong sales in China, Mexico and Western India.

As for the cocoa supply chain, Van de Put said the company is “playing for the long term” and believes current prices are a near-term headwind; he expects to see the market begin to normalize around the September/October harvest season and emphasized that chocolate volume continues to grow.

“Chocolate has shown strong growth over the past several years with very durable volume and elasticity, despite significant pricing, particularly as we have some of the strongest brands in the category,” added Zaramella. “However, we will remain agile in our approach to pricing in order to balance the need to offset inflation with the need to maintain solid volume dynamics.”

On the long-term headwind front, a range of factors since the pandemic have contributed to significant shifts in consumer shopping habits, pushing Mondelēz to focus on its ecommerce and club business, as well as pack-size architecture, amid continued softness in grocery and mass channels.

In order to generate continued volume growth, Mondelēz is leaning into increasing its total distribution points globally, including adding 100,000 directly served stores in emerging markets during Q1 alone, Van de Put highlighted. In response to consumer price sensitivity, for example, the company is shrinking the size of its Clif Bar multipacks from six to five bars, and from 12 to 10 bars, “which will help the price point we’re selling at,” Van de Put said.

“There is the persistent inflation. There is the high interest rate. There is the loss of the SNAP. And there’s also the recent not-so-great job market,” Van de Put said in response to a shareholder question. “Consumer confidence, which was so-and-so up to today, [is] now as we just learned, it took a real dive this month. We see in our categories the elasticity is really going up. Penetration is still pretty good, but people are much more conscious about price points.”