Daily Briefing (Insiders Only): Snack Time Earnings
Snack Sector Remains Strong As Brands Steal Private Label Share
Halloween isn’t the only holiday this week… It’s also time for many publicly traded CPG companies to report Q3 earnings! Don’t be spooked by the arcane financial documents from Mondelēz, Kellanova and Utz, though: we’ve done the heavy lifting for you, and siphoned out some bite-sized insights to snack on.
Overall, the snack sector remains strong: each company posted organic net sales gains, driven by volume/mix growth. Utz saw organic net sales growth of 1.9%, while Kellanova posted a 6% gain and Mondelēz came in at 5.4%.
The deal space around snacks also remains robust. See Mars’ pending acquisition of Kellanova as a key indicator that there is still plenty of interest and runway for the sector. Not to mention privately-held Our Home’s salty snack M&A blitz this year or yesterday’s formation of UpSnack Brands, spearheaded by the likes of Spudsy and Pipcorn.
Back to the public sector… Utz emphasized that the company’s sales gains were largely led by volume growth among its branded business. That comes after a nearly two-year streak of consumers trading down to private label as grocery prices remained elevated. Whether consumers have simply begun to accept bigger bills at checkout, or they just couldn’t resist their Boulder Canyon brand chips any longer, we’ll leave that for you all to decide. Either way, the news means consumers may be going back to impulse purchases like branded snacks.
Mondelēz also reported a sales and volume boost among its branded products, including Chips Ahoy, Ritz and Oreos, emphasizing that these items are winning in comparison to private label counterparts.
“Biscuit category volume is improving to flat to slightly up over the last three months in the U.S., private label volume share is declining, demonstrating that consumers remain loyal to their favorite brands… As a result our two largest U.S. brands, Oreo and Ritz, are gaining share year to date,” said CEO Dirk Van de Put, during a call with shareholders.
The Mondelēz chief executive also shared details on its new approach to price-pack architecture, noting in the past few months the company has noticed lower-income consumers have become more concerned about the cost of their total basket size rather than individual unit costs. Mondelēz will introduce smaller formats of both Oreos and Chips Ahoy on the belief that offering packs priced below $3 will help reduce some of the burden for these shoppers.
Kellanova shared its first financial update since announcing its pending acquisition by Mars. The company will hold a shareholder vote tomorrow on the deal and highlighted the strength of its portfolio since separating from WK Kellogg to focus primarily on snacks.
“Our strong third-quarter results reflect once again our strategy and more growth-oriented and profitable portfolio as Kellanova. This performance is also a testament to the talent and engagement of a Kellanova organization that is executing at a high level as we prepare for our exciting next chapter as part of a global snacking powerhouse with Mars,” said Steve Cahillane, Kellanova chairman, president and CEO.
