Mondelez: More Price Hikes Planned Despite ‘Best Year Ever in 2023’

Despite touting fiscal year 2023 as its “best year ever” with record gross profit dollar growth of $2.2 billion, Mondelez International will continue raising prices on some of its products in 2024 to combat cocoa inflation.

During its FY 2023 earnings call yesterday, the Chicago-based producer of Oreo and Clif Bar reported a 14.7% year-over-year increase in organic net revenue to $36 billion, thanks to double-digit price increases and favorable volume/mix.

Here’s the top-level view:

• Overall growth in biscuits and baked snacks was up 11.9% in FY 2023, reflecting 49% of total revenue for the company.
• Chocolate, which makes up roughly 30% of the overall business, was up 14.5% in the year.
• Gum and candy, which accounts for 12% of revenue, was up 28.7%. In October, the brand completed the sale of its developed market gum business to Perfetti Van Melle Group for $1.4 billion, providing “another important source of reinvestment.”
• The company’s biggest global brands – Oreo, Milka and Cadbury – delivered more than $10 billion in revenue in FY 2023.

In North America, organic net revenue grew 9.5% in FY 2023 due to higher pricing. Despite a Q4 dip in volume in the segment primarily due to the Clif Bar system changeover, Mondelez expressed confidence that North America will return to a “good volume/mix” at the beginning of the year.

Over the past year, the company has been harnessing the powers of the newly-integrated Clif and Rigolino brands to strengthen its presence in the global snack bar and Mexican chocolate and candy segments. With its “overall business doing well,” CEO Dick Van De Put said the company can afford to place a bigger emphasis on innovation, especially in creating better-for-you versions of its mainstream products.

Thus far, Mondelez has found success with its Oreo Zero Sugar in China and Oreo Gluten Free in the U.S. The company is also pushing “quite hard” in chocolate, repositioning Toblerone as a premium product with the launch of its “Never Square” campaign.

Additionally, Mondelez outlined plans to continue developing its core categories of chocolate, biscuits and baked snacks – which account for over 90% of revenue – while maintaining consumer demand. Price hikes, Van De Put told investors, will be necessary too ffset the dollar impact of inflation on input costs.

“Pricing is a key component of this plan. Its contribution will be a bit less than we have seen in ‘23, but it is higher than an average year and particularly as we price our way through cocoa,” he said. “We’re not pricing for percentage margin, but offsetting that dollar impact.”

According to Van De Put, pricing has already been agreed upon in North America, and the company is “making solid progress” in its negotiations with Europe.

Looking ahead, Mondelez is forecasting slower growth in FY 2024, expecting organic net revenue to grow 3% to 5% based on non-GAAP measures.

“We continue to navigate through a dynamic operating environment,” Van De Put told investors. “We are closely tracking and planning around the number of near-term themes, including continuing inflation, shifting consumer habits, geopolitical challenges and rising cocoa prices.”