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Mondelez's (MDLZ) Core Category Strength Aids Amid High Costs
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Mondelez International, Inc.’s (MDLZ - Free Report) growth strategy centers around continuous innovation, strategic acquisitions and efficient pricing strategies to navigate through cost challenges. The company has been making smart moves to bolster its growth trajectory, with a primary focus on expanding its snacking category, particularly in chocolates and biscuits.
These upsides continued to drive performance in the fourth quarter of 2023, wherein the top and bottom lines increased year over year and came ahead of the respective Zacks Consensus Estimate. Robust results reflected the strength of the company’s categories, brands and geographies. Organic net revenues jumped 9.8% due to favorable pricing (up 10.2 percentage points or pp).
Management expects 2024 organic net revenue growth in the upper range of 3-5%. It anticipates seeing higher pricing in various markets with notable chocolate portfolios like Europe. Adjusted earnings per share (EPS) growth is likely to come in the high single digits on a constant currency basis in 2024.
Image Source: Zacks Investment Research
Focus on Core Categories
Mondelez has been expanding its snacking category in particular. As consumers prefer snacking over traditional meals, the company’s core categories — chocolates and biscuits — have historically depicted resilience to economic downturns and pricing actions. Consumers in developed countries consider chocolates and biscuits as affordable indulgences and one of the most-valued snacking products.
Both these categories registered double-digit growth during the full year 2023, including an 11.9% surge in biscuits and a 14.5% increase in chocolates. In the fourth quarter, the biscuit and chocolate categories registered sales growth of 5.5% and 11.2%, respectively. Management is focused on expanding its chocolate, biscuit and baked snacks categories as they present opportunities for solid growth and profitability. The company is on track to generate around 90% of its revenues through these categories in the long run.
Efforts to Reshape Portfolio
Mondelez's growth strategy also entails strategic acquisitions to broaden its portfolio and geographical footprint. Recent acquisitions such as Ricolino, Clif Bar, Chipita S.A., Grenade, Gourmet Food Holdings, and Hu Master Holdings have significantly contributed to revenue growth. These acquisitions have not only expanded Mondelez's product offerings but also strengthened its market presence in key regions.
Mondelez is committed to increasing focus on areas with higher growth potential. During the fourth quarter of 2022, the company announced the sale of its developed market gum business to Perfetti Van Melle. This move will help fund its recent buyouts and streamline its portfolio.
Inflation Lingers
Mondelez has been battling cost inflation for a while now. Although offset by pricing and lower manufacturing expenses, the company’s adjusted gross margin was affected by escalated raw material and transportation costs in the fourth quarter of 2023. The adjusted operating margin was also partially hurt by input cost inflation.
For 2024, Mondelez expects inflation to increase by a high single digit due to escalated cocoa and sugar prices and higher labor costs. On its fourth-quarter earnings call, management stated that it is closely monitoring various immediate concerns, including ongoing inflation, evolving consumer behaviors, geopolitical complexities and the escalation in cocoa prices, among others.
Wrapping Up
Continuous reinvestments in its brands and capabilities — along with impressive portfolio reshaping efforts — place Mondelez well for future growth. By focusing on core categories such as chocolate, biscuits and baked snacks, enhancing brand appeal, prioritizing operational efficiency and cost management and empowering team members, Mondelez is poised to deliver strong performance for years to come.
Shares of this Zacks Rank #3 (Hold) company have risen 2.3% in the past six months against the industry’s decline of 0.9%.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings indicates growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.
Lamb Weston (LW - Free Report) , a frozen potato product company, currently carries a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the year-ago period numbers.
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Mondelez's (MDLZ) Core Category Strength Aids Amid High Costs
Mondelez International, Inc.’s (MDLZ - Free Report) growth strategy centers around continuous innovation, strategic acquisitions and efficient pricing strategies to navigate through cost challenges. The company has been making smart moves to bolster its growth trajectory, with a primary focus on expanding its snacking category, particularly in chocolates and biscuits.
These upsides continued to drive performance in the fourth quarter of 2023, wherein the top and bottom lines increased year over year and came ahead of the respective Zacks Consensus Estimate. Robust results reflected the strength of the company’s categories, brands and geographies. Organic net revenues jumped 9.8% due to favorable pricing (up 10.2 percentage points or pp).
Management expects 2024 organic net revenue growth in the upper range of 3-5%. It anticipates seeing higher pricing in various markets with notable chocolate portfolios like Europe. Adjusted earnings per share (EPS) growth is likely to come in the high single digits on a constant currency basis in 2024.
Image Source: Zacks Investment Research
Focus on Core Categories
Mondelez has been expanding its snacking category in particular. As consumers prefer snacking over traditional meals, the company’s core categories — chocolates and biscuits — have historically depicted resilience to economic downturns and pricing actions. Consumers in developed countries consider chocolates and biscuits as affordable indulgences and one of the most-valued snacking products.
Both these categories registered double-digit growth during the full year 2023, including an 11.9% surge in biscuits and a 14.5% increase in chocolates. In the fourth quarter, the biscuit and chocolate categories registered sales growth of 5.5% and 11.2%, respectively. Management is focused on expanding its chocolate, biscuit and baked snacks categories as they present opportunities for solid growth and profitability. The company is on track to generate around 90% of its revenues through these categories in the long run.
Efforts to Reshape Portfolio
Mondelez's growth strategy also entails strategic acquisitions to broaden its portfolio and geographical footprint. Recent acquisitions such as Ricolino, Clif Bar, Chipita S.A., Grenade, Gourmet Food Holdings, and Hu Master Holdings have significantly contributed to revenue growth. These acquisitions have not only expanded Mondelez's product offerings but also strengthened its market presence in key regions.
Mondelez is committed to increasing focus on areas with higher growth potential. During the fourth quarter of 2022, the company announced the sale of its developed market gum business to Perfetti Van Melle. This move will help fund its recent buyouts and streamline its portfolio.
Inflation Lingers
Mondelez has been battling cost inflation for a while now. Although offset by pricing and lower manufacturing expenses, the company’s adjusted gross margin was affected by escalated raw material and transportation costs in the fourth quarter of 2023. The adjusted operating margin was also partially hurt by input cost inflation.
For 2024, Mondelez expects inflation to increase by a high single digit due to escalated cocoa and sugar prices and higher labor costs. On its fourth-quarter earnings call, management stated that it is closely monitoring various immediate concerns, including ongoing inflation, evolving consumer behaviors, geopolitical complexities and the escalation in cocoa prices, among others.
Wrapping Up
Continuous reinvestments in its brands and capabilities — along with impressive portfolio reshaping efforts — place Mondelez well for future growth. By focusing on core categories such as chocolate, biscuits and baked snacks, enhancing brand appeal, prioritizing operational efficiency and cost management and empowering team members, Mondelez is poised to deliver strong performance for years to come.
Shares of this Zacks Rank #3 (Hold) company have risen 2.3% in the past six months against the industry’s decline of 0.9%.
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Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 52.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings indicates growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.
Lamb Weston (LW - Free Report) , a frozen potato product company, currently carries a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the year-ago period numbers.