Shares of Mondelez International Inc. have risen following the snack company increasing its sales and profit outlook; this is due to higher prices helping offset the smaller gains in products sold. Mondelez, known for Oreo cookies and Ritz crackers, has now boosted its forecast for organic sales growth, or sales excluding the impacts of elements such as acquisitions and currency fluctuations, to 10% or more. This is up from a previous outlook of growth of 5% to 7%. Furthermore, Mondelez has forecast an adjusted earnings per share growth of 10% or more, in comparison to an earlier outlook for gains in the “high single digits”. Consequently, shares rose 2% after hours.
The growth in organic net revenue is expected to be driven by higher prices, which could help in offsetting the rise in input costs. The guidance comes on the back of solid results delivered so far this year, the successful execution of the business strategy and an optimistic view of the potential of the company’s global brands, emerging markets, and advantaged categories. These are categories where Mondelez enjoys significant scale and high growth, such as chocolate, biscuits, and gum and candy.
Looking ahead, Mondelez aims to grow organic net revenue faster than its peers by expanding its distribution and increasing its power brands. The company plans to build upon the strong foundation laid so far and stay focused on areas offering growth opportunities. Moreover, Mondelez plans to reinvest productivity savings in the business going forward or return cash to shareholders.
Analysts also believe that Mondelez is expected to gain from inflation and increasing demand in emerging markets. They think the company is well positioned to cope with increasing cost pressures due to its flexible pricing power. Mondelez is said to be yielding benefits from its pricing power, which is already aiding its top and bottom-line performance. The higher prices, along with productivity and cost-saving initiatives, are driving margin growth, which is expected to continue as circumstances unfold.
However, Mondelez still needs to combat a few challenges to maintain its growth momentum, particularly in North America, where category and consumer trends remain weak. Although the company has embarked on a cost-saving journey, near-term margin compression cannot be ruled out. The company’s large exposure to the emerging markets, particularly Latin America and Asia, Pacific, Middle East and Africa, exposes it to foreign exchange headwinds. Meanwhile, most of 2021 has seen a price-sensitive consumer environment, and with the resurgence of the pandemic and concerns around supply chain issues, Mondelez is facing short-term uncertainties which might disrupt its supply chain, especially in India.
Mondelez boasts a strong portfolio of well-known brands such as Cadbury, Chips Ahoy!, Halls, and Trident, among others. It has also expanded its well-being brands portfolio via acquisitions and product innovation, leading to a more diversified portfolio. This solid brand portfolio, combined with the expansion and increasing global footprint, has enabled the company to significantly grow its market share.
Moreover, the company’s aggressive cost-saving programs remain a major growth driver, following the separation from Kraft Foods Group Inc. The company’s restructuring program aims to simplify its supply chain by reducing the asset base, increasing production flow and optimizing distribution networks. This has resulted in significant improvement in operational efficiency and cash generation.
In conclusion, Mondelez is well poised to maintain its growth momentum with its strong brand portfolio, strategic initiatives, and solid emerging market presence, despite the persistent weakness in the North American market and uncertainties surrounding the pandemic. With the company’s focus on tapping into the growth opportunities and driving value for shareholders, Mondelez remains an attractive long-term investment option.
