Mondelēz International, the owner of brands such as Cadbury and Oreo, has become the latest consumer goods firm to post weaker-than-expected sales figures after budget-conscious consumers continued to opt for lower-priced own-label alternatives.
The group’s net revenues slipped 1.9% in its second quarter, with growth of 2.5% on an organic basis. However, volumes fell 2.2% after a 4.7 percentage points increase in prices took its toll on demand.
Over the last week, Nestlé and Unilever have reported sales growth below expectations after struggling to tempt back consumers who had switched to cheaper own-label products during the cost of living crisis.
Mondelēz International’s CEO Dirk Van De Put noted that the company had been implementing new targeted promotions as well as rolling out new pack sizes to drive brand loyalty and value.
Higher costs of transport and consumer promotions, as well as the impact from the 2023 divestiture of its gum business, pushed Mondelēz’s gross profit margins down by 590 basis points to 33.5%.
Despite the difficulties, Van De Put remained upbeat: “We are well positioned for the second half of the year with the completion of European pricing, the addition of new value offerings in the U.S. and significant distribution runway across key emerging markets. Our teams remain focused on delivering our long-term growth agenda while remaining agile in this dynamic operating environment.”
NAM Implications:
- Brand loyal consumers have been tempted to try own-label alternatives…
- …and to their surprise, found that the difference vs branded equivalents did not justify the premium.
- Meaning brands needed to reduce that price difference to a point where ‘loyals’ return to the brand.
- Hopefully…
