Mondelez International, Inc. (MDLZ - Free Report) looks well positioned on the back of its robust growth endeavors that include lucrative acquisitions and efficient pricing strategies. Also, the company’s brand-building initiatives through innovation are noteworthy. Apart from this, the company’seffective cost-saving plans bode well.
Let’s take a closer look at the factors working in favor of Mondelez.
Factors Narrating Mondelez’s Growth Story
Mondelez has been keen on expanding its business through acquisitions. The company acquired majority interest in Give & Go (in April 2020), which is a pioneer in fully-finished sweet baked goods. In previous developments, it made investments in Hu Master Holdings and Uplift Foods (in April 2019) as part of the SnackFutures platform. In July last year, the company acquired minority stakes in Perfect Snacks. These investments indicate management’s efforts to boost its offerings.
Moreover, Mondelez is refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. In 2018, Mondelez introduced an innovation platform — Joy Fills. This platform, which was launched in Europe, is designed to meet growth across brands such as Oreo, Cadbury and Milka. Further, the company’s continued product innovation under the SnackFutures platform bodes well. In fact, management plans to focus on enhancing the snacking portfolio, an area which is growing rapidly across the globe.
Speaking of brand building efforts, Mondelez is increasing investments in in-store execution and advertising to support the Power Brands and innovation funded by cost savings. Such investments are helping the company witness growth in key brands. In fact, management expects to invest significantly in working media during the second half of 2020 to enhance its brands.
Further, Mondelez’s strategic pricing initiatives are yielding results. During the second quarter of 2020, favorable pricing drove the company’s organic revenues that inched up 0.7% year over year. In fact, the company’s organic sales have been rising for a while. Impressively, a strong brand position combined with yielding strategies has been boosting organic sales.
Apart from these, Mondelez has been undertaking some major steps to enhance savings. Moreover, such savings are being invested in brand-building endeavors. It is also on track with eliminating other unnecessary costs from the supply chain. During its second-quarter earnings call, management stated that it expects to remove 25% of SKUs to simplify supply chain, lower costs as well as inventory. Also, the company expects to improve its revenues and enhance its customer service by this move.
Will Hurdles be Countered?
Mondelez battled strained adjusted gross profit margin in the second quarter of 2020. Notably, the metric contracted 90 basis points to 39.7% in the quarter thanks to higher coronavirus-induced expenses and raw material costs. Apart from this, international market presence exposes the company to foreign currency fluctuations. In fact, adverse currency movements have been hurting Mondelez’s performance for a while.
Nevertheless, Mondelez’s aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company remain in investors’ good books. Notably, shares of the company have gained 3.5% on a year-to-date basis against the industry’s decline of 0.5%.
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