Mondelez International reported an increase in sales for the fourth quarter; however, the impact of price hikes negatively affected volumes. The rise in prices led to reduced demand for Cadbury‘s chocolates and salty crackers, causing a decline of over 2% in the company’s shares after the market closed.
Although the Toblerone parent company experienced an improvement in its profit margin due to price increases throughout fiscal 2023, it is currently witnessing a decline in demand as financially constrained consumers reduce their spending.
In the North America segment, Mondelez observed a 5.5 percentage points (pp) decrease in volume during the fourth quarter, attributed to lower biscuit sales and inventory control. This is a shift from the 4.6 pp increase seen in the preceding quarter. Meanwhile, product prices in the region experienced a 7.4 pp rise.
The manufacturer of Ritz crackers mentioned that it anticipates customer disruption in Europe during the first quarter, potentially extending into the second quarter, due to persistent high inflation.
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The company disclosed a general volume decrease of 0.4 percentage points in the quarter, aligning with other consumer staples companies like McCormick, all grappling with the impact of substantial price hikes.
“While other CPG brands that leaned on price hikes to drive growth had seen volumes decline in Q3, Mondelez managed to grow its volumes. But now Mondelez’s price hikes are catching up to it,” said Insider Intelligence analyst Zak Stambor.
The gross profit margin, standing at 37.3%, surpassed market expectations of 36.7%, although it was slightly lower than the 38.7% recorded in the previous quarter.
In the quarter ending on December 31, net revenue increased by 7.1% to approximately $9.31 billion, in line with the average estimate of analysts, as per LSEG data. This compares to $8.70 billion reported a year ago.
Mondelez, along with Starbucks, highlighted the negative impact on its business resulting from the Israel-Hamas conflict.
“There is some tensions in the Middle East, and that has some effect on Western brands, and we have some of those Western brands,” Mondelez executives said in a post-earnings call.
For 2024, the company anticipates organic net revenue growth ranging from 3% to 5% and foresees a high single-digit rise in adjusted profit per share on a constant currency basis.
