Mondelēz sales crumble after Chinese biscuit slowdown

Oreo maker falls below expectations. Photo Credit: rachellynnae©

Mondelēz International said it is “disappointed” with its first full year results as a global snack company.

Underlying the shortcoming was a significant slowdown in China’s biscuit category and ongoing difficulties within the global gum market.

The multinational reported relatively flat net revenues of $35.3bn, up just 0.8% from the previous year when the food titan, Kraft, split to form Kraft Foods Group and the newly christened global snack company, Mondelēz International. The company's original guidance for the full year was 5-7% sales growth.

In an investor call, Irene Rosenfeld, chairman and CEO for the firm, said: “Frankly, we are very disappointed that our performance was below what we and our shareholders originally expected. But it turned out to be quite a challenging year as we faced slower category growth and volatility in some of our key markets. In the context of this macroeconomic environment, we delivered solid results.”

Global biscuit demand

She said Mondelēz had grown 9% in emerging markets despite being disproportionately affected by the category slowdown. “As we entered 2014, four of our five regions have strong underlying momentum with Asia-Pacific being the lone outlier,” she said.

Mondelēz reported growth of around 10% in its BRIC markets, with Brazil, Russia and India each posting double digit growth. However, China was up only low single-digits reflecting a significant slowdown in its biscuit category. 

But globally the firm said its biscuit category performed well, with Oreo and belVita generating annual revenues of $2.5bn and $0.5bn respectively. It said the belVita brand had more than doubled in size since 2010.

Gum 'soft spot'

Rosenfield said gum remained the “only soft spot” in the conglomerate's snacks portfolio, with increases in candy revenue propping up gum decreases within the joint category.

This year's  net revenues for gum and candy at $5bn, down from $5.33bn in 2012. 

Rosenfeld said the company had made moves to counter this continuing weakness and rejuvenate the category.  

'Stellar year' for Cadbury

However, growing chocolate demand in India and strong performances from power brands like Cadbury’s shone through. “Cadbury Dairy Milk had a stellar year growing low double digits overall including more than 20% in India,” Rosenfield told investors.

‘Power brands’ like Cadbury Dairy Milk, Lacta, Oreo, belVita, TUC, Club Social and Barni represent around 60% of Mondelēz’s total revenue. The firm reported 6.5% growth from these flagship brands.

“They continue to fuel both our growth and our margins as we distort our spending to these brands,” she said. 

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