Mondelēz’s first quarter (Q1) net revenues were $6.5bn, down 16.8%, compared to the same period last year, the company announced yesterday. However, its organic net revenues grew 2.1%.
CEO Irene Rosenfeld believes Mondelēz had a promising start to the year.
"We significantly expanded margins by continuing to reduce supply chain and overhead costs. In addition, we delivered improved volume/mix in developed markets, while effectively managing through the volatile operating environment in emerging markets,” she said in a statement.
COO Clouse to depart
Mondelēz announced chief commercial officer (COO) Mark Clouse will leave the company in late May to become CEO of Pinnacle Foods. He has been at the company 20 years and was appointed COO in early 2016. The company does not plan to appoint a new CCO.
The company predicts its organic net revenue will grow at least 2% this year.
‘More brands are likely to be sold off’
Euromonitor’s food analyst Jack Skelly warns Mondelēz’s cost-cutting strategies in recent years could prove self-destructive.
"Certainly, there is a lot of flab that can be clipped at the company, but Mondelēz risks cutting off its nose to spite its face," he said.
The Oreo maker plans to lay off 600 employees from its Nabsico plant in the Southside of Chicago this year, moving production to Mexico. Mondelēz said the move could save it $46m a year.
Mondelēz also plans to sell multiple brands such as Terry's and Carambar and five production sites in France to French investment firm Eurazeo, which could reduce 10% of its European manufacturing capacity.
“The company has made moves to shift production from Western Europe to Eastern Europe, again as part of cost-cutting targets,” he said, adding that disposing of the Terry’s brand, which accounts for around $172m in annual sales, makes sense for Mondelēz.
Skelly added that constantly launching SKUs under the Cadury and Milka monikers may eventually be detrimental to the brands.
“More brands are likely to be sold off, but the company must also develop a more coherent long-term strategy for growth,” he continued.
Looking for new strategies to tackle sliding confectionery sales
Issues in China, Russia and Brazil are among several factors that contributed to Mondelēz’s net revenue declines, according to Mintel analyst Marcia Mogelonsky.
In addition, in developed markets, such as North America and Europe, consumers are moving to a healthier platform when choosing snacks and sweets, which Mogelonskly believes is likely to have hit company sales in some categories and markets.
“Currency exchange issues and global pressures in some of the company’s bigger markets have had an impact on Mondelēz in Q1… In some markets, such as Brazil and Russia, issues go beyond currency to geo-political uncertainties.” she said. “So has the major coffee deal the company undertook during the year.”
Rival Hershey this week acquired chocolate snacking brand barkTHINS to adapt to the changing US consumer. Mondelēz should explore similar avenues, according to Mongelonsky.
“Mondelēz is already expanding its line of better-for-you products with its Good Thins crackers and its Oreo Thins cookies, but it will have to look for ways of translating the ‘thin’ concept to its chocolate confectionery as well,” she said.
Rosenfeld said the company would implement "turnaround plan" for its Stride gum brand later this year after losing continued US gum market share declines.
[Additional reporting by Oliver Nieburg]