Tuesday, May 07, 2013 6:58 pm
Mondelez sells more Oreos but struggles with gum
By CANDICE CHOIAP Food Industry Writer
The company, which also makes Oreo cookies, Cadbury chocolates and Ritz crackers, on Tuesday reported a first-quarter profit in line with Wall Street expectations following its split with Kraft Foods Group last year.
Cookies like Chips Ahoy continued to grow more popular around the world, particularly in emerging markets such as China. But in key developed regions such as the U.S., Europe and Japan, gum sales continued to slide.
The results partly reflect an overall decline the U.S. gum market, which is down 6 percent since 2010 to $4.04 billion last year, according to Euromonitor International. Matthew Hudak, an analyst for the market research firm, attributes the pullback to a mix of factors, including a shift toward newer breath mints. Teenagers and people in their 20s and 30s are also being more careful about their spending, he said.
But Mondelez's struggles with gum were outsized in the quarter; market share was down and the percentage sales decline in the U.S. was in the "high teens." The company is the No. 2 gum maker in the country behind Mars Inc., which is privately held and makes Wrigley, Extra and Orbit.
Although gum only accounts for about 9 percent of overall revenue for Mondelez, it's considered an important category because of its higher profit margins.
In a conference call with analysts, CEO Irene Rosenfeld outlined various measures the company is taking to improve its gum results. She said the company will focus on underscoring the oral care benefits of gum in "hard-hitting" ads. Earlier this year, Rosenfeld had said the decline in the gum category is partly the result of the industry's failure to emphasize such functional benefits in recent years.
Rosenfeld noted that the company's measures, which also include new package sizes and prices, were starting to yield improvement for its gum category in April.
"We're not taking this sitting down," she said, but noted that the company wasn't counting on a significant turnaround this year.
For the year, Mondelez said it still expects revenue growth to be on the low end of its forecast of 5 to 7 percent. But it cited the benefit of tax items and raised its outlook for operating earnings to $1.55 to $1.60 per share, up from $1.52 to $1.57 per share.
Mondelez split from Kraft Foods Group Inc. last fall so that each of the companies could concentrate on a more focused stable of brands. Kraft held onto North American grocery staples such as Oscar Mayer, Jell-O and Maxwell House. Mondelez, based in Deerfield, Ill., took global snacks that are expected to grow at faster rate.
But Mondelez has stumbled in its first few quarters as an independent company, with sales growth falling short of its own forecast. In the latest quarter, organic sales - which exclude the impact of currency exchange rates and acquisitions - rose 3.8 percent. The company noted that lower coffee prices dragged down results for the period.
For the three months ended March 31, Mondelez International Inc. earned $568 million, or 32 cents per share. That's compared with $813 million, or 46 cents per share, a year ago when it was still combined with Kraft.
Operating earnings were 34 cents per share, in line with expectations, according to FactSet.
Net revenue rose 1 percent to $8.74 billion, above the $8.68 billion Wall Street expected.
Shares of Mondelez edged up 9 cents to $31.50 in after-hours trading.
Follow Candice Choi at www.twitter.com/candicechoi