Consumer staples companies are emerging from a challenging earnings season as inflation-fueled price increases crimped consumption, but the CEO of
Mondelez
says the global snack maker is continuing to execute during a tricky time for the industry.
This week, Mondelez and its peers are presenting at the Consumer Analyst Group of New York, or CAGNY, annual conference. Many are taking the chance to leave investors with a more upbeat outlook—particularly after earnings showed the impact of sticker shock on shoppers and continued cost pressures for these companies.
Earlier this month,
PepsiCo
noted people were snacking less at home, and
Coca-Cola
reported slowing sales growth—both companies had lifted prices (again) in the most recent quarter. Mondelez International saw a similar pattern play out across its global business in its latest quarter. J.P. Morgan analyst Andrea Teixeira warned this week that eventful earnings seasons likely will be “the new normal” for the group.
The sectors’ struggles are showing up in stock performance, too. The Consumer Staples Select Sector SPDR ended 2023 in negative territory, while the S&P 500 rallied 24%. The sector has underperformed again so far in 2024; Mondelez stock is up 0.9% year to date compared with the
S&P 500
‘s 4% gain.
Mondelez, however, seems to be hitting the right notes so far at the conference, which kicked off Monday. The stock is up 1.2% in recent trading Tuesday—along with other companies presenting at CAGNY today, like
General Mills
and
Conagra.
Chief Executive Dirk Van de Put told Barron’s that Mondelez is seeing growth in volumes, organic net revenue, adjusted earnings, and free cash flow that are all consistent with the company’s long-term expectations.
“Our strategy is working well, 2023 was a record year, and the future looks very bright for us, as we’re in the right categories with the right global footprint, selling brands that have been resilient through price increases,” he said in an interview.
Mondelez is seeing consumer behavior consistent with what other companies have reported, the CEO noted.
“Lower-income consumers are very careful shoppers at the moment, and they’re looking for ways to optimize their dollars,” he says, whether that means buying online, holding out for promotions, or buying smaller packs.
However, Van de Put notes that consumer confidence is at a 2.5 year high in the U.S., and that consumers in Europe and Australia are also feeling similarly optimistic—all of which bodes well for his company’s sales. In addition, with the exception of China, emerging markets have been particularly strong. Sales have been bolstered by those consumers’ introduction to global brands and the company’s installation of air-conditioned coolers to keep chocolate from melting in hot climates.
Reinvestment in dominant brands is another theme Mondelez stresses, in terms of keeping its growth ahead of the industry average, even during periods of inflation.
Van de Put also says that although some investors may be concerned about consumers pulling back, Mondelez’s research shows that even price-sensitive shoppers are still prioritizing snacks—a category that has been rapidly growing in recent years and benefits from high levels of brand loyalty.
“Since the pandemic we’ve seen that consumers see snacking as an affordable indulgence and something they deserve and need on a daily basis,” he said. “Our brands fit perfectly with that theme.”
Mondelez’s stable of popular brands means company comments on pricing power might not reflect the entirety of broader industry’s struggle with the issue. Nonetheless, it’s good news for the stock.
Mondelez brands also a favorite among CAGNY attendees as well. Jefferies’ analyst Kaumil Gajrawala nominated the company as his pick in term of which presenters would provide the best giveaway at the conference. “Toblerone, Cadbury, Milka, Oreo…say no more.”
Write to Teresa Rivas at [email protected]
Read the full article here