Mondelēz: Consumers Remain Loyal to Brands, Clif Reports Strong Financial Improvement

Mondelēz reported strong top line, double-digit growth on its Q1 earnings call yesterday, resulting in executives raising the company’s revenue and adjusted earnings outlook to +10% for the year.

The company declared a gross profit increase of over $540 million, with organic net revenue growth up $1.5 billion over the year prior. Reporting 19.4% sequential growth from Q4 2022, executives said the company had its best quarter ever.

As part of its macro strategy, the global company has focused on chocolates, biscuits and baked snacks, a move that “continues to bear fruit with consumers gravitating to those categories,” Dirk Van de Put, Mondelēz Chairman and CEO, told analysts on the call.

“We continue to invest in our core categories of chocolate, biscuits and backed snacks with strong creative assets, digital personalization at scale, new product launches and great in-store execution. All this continues to strengthen our already strong brand loyalty,” Van de Put said. “It is clear that we’re playing in the right categories with attractive growth in volume and dollars, combined with solid profitability characteristics.”

Within the chocolate category, Van De Put said the focus is on “tablets,” or bars. Globally Mondelēz owns more than one-third of the options in the market, and is three times larger than the second player in the space. Easter also played a role in the category’s success, he said, with “a record sell-in” for the holiday season across markets.

Though the company had previously assumed greater elasticities of both chocolate and biscuits, Van de Put said they were “overall less negative than we anticipated.”

“Rather than cutting back significantly on the size of their basket, consumers are [looking for] attractive deals and trading up and down in terms of pack sizes based on their specific needs and consumer occasions,” he shared. “They remain loyal to branded products, particularly in chocolate. Having said that, our focus is now on lending the remaining part of the price increase.”

Van De Put was particularly pleased with the performance of Clif Bar, which was acquired less than a year ago for $2.9 billion. When asked during Q&A for the key two or three points the CEO would attribute the rise in guidance to, Van de Put pointed to U.S. top line and bottom lines, in part due to a “a very strong recovery of Clif Bar profitability since the acquisition.”

In the first quarter, he noted, Clif showed double-digit revenue growth and now reports a 20% margin. The company has been able to reduce its formerly “high level” of SG&A, he said, later noting the consolidation of Clif’s creative and advertising agencies under a single firm and “cost opportunities coming into the P&L in the area of selling and administration.” Next, he added, Mondelēz will focus on improving Clif’s COGS and expanding the brand internationally, a move Van De Put classified as the largest opportunity for revenue growth.