Mondelez Snack Sales Suffer From Measures to Fight Virus Overseas -- WSJ
July 29 2020 - 3:02AM
Dow Jones News
By Annie Gasparro
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 29, 2020).
Mondelez International Inc. said tough lockdowns to fight the
coronavirus in emerging markets hurt sales of its cookies and other
snacks in the second quarter.
Comparable sales for the maker of Oreo cookies, Toblerone
chocolate and Ritz crackers rose 11% in North America, but in Latin
America, where coronavirus cases have multiplied rapidly, sales by
that metric fell 11%. In its Asia, Middle East and Africa division,
where some countries have imposed stricter social-distancing
regulations than in North America, comparable sales decreased 3%,
the company said Tuesday.
Mondelez Chief Executive Dirk Van de Put said the company's
emerging-markets business improved in June and July as store
closures eased and more consumers were able to access its snacks.
"The majority of these markets are on better footing," he said.
Mondelez said the surge in snacking in North America has
continued while sales in India, China and Southeast Asia have
returned to growth, likely leading to stronger revenue in the
second half of the year.
Still, executives said Latin America will be a continuing
struggle. Mondelez's business in countries such as Brazil is
concentrated more in gum and candy -- categories that have been hit
harder by the pandemic and economic fallout as people go to
convenience stores less often and cut back on indulgences. Mondelez
said that overall, the global business environment remains volatile
and susceptible to a second wave of lockdowns.
"We are now clearly talking about this change to our lives
continuing well into 2021," Mr. Van de Put said.
Mondelez shares were flat in after-hours trading at $55.64.
Food companies in the U.S. have been inundated with orders from
grocery stores since the pandemic exploded in March. In a country
where a lot of people are staying home and can afford to stock up
on food, the coronavirus has buoyed sales for the food
industry.
But Mondelez has benefited less than its U.S.-centric rivals
such as Campbell Soup Co. and Conagra Brands Inc.
Mondelez has also spent more to boost production to meet the
unprecedented demand in regions such as North America. The company
said Covid-19-related costs, higher prices for raw materials and
unfavorable exchange rates contributed to a lower profit margin in
the latest period.
Mondelez said it is removing 25% of the varieties to simplify
its supply chain and innovation process and reduce inventories. The
cost-saving move will also help meet higher demand for core
products such as Oreos.
In the latest quarter, Mondelez said it gained market share in
many segments, such as cookies in the U.S. and China, and chocolate
in India and the U.K.
Mr. Van de Put said he is investing more in its brands to
leverage the momentum furthered by the pandemic. He also is
investing in e-commerce, and figuring out how to best handle
pricing and sizes of snacks to weather the recession. For instance,
he said, Mondelez can work with product developers and packaging
designers in India to find ways to reduce the cost of its chocolate
for consumers.
Mondelez's total revenue fell 2.5% from last year's second
quarter to $5.9 billion, in line with analysts' estimates,
according to FactSet. Adjusted profit of 63 cents a share marked a
16% increase from the prior year excluding currency fluctuations
and topped analysts' projection of 56 cents a share.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
July 29, 2020 02:47 ET (06:47 GMT)
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