Cadbury owner Mondelēz International missed expectations for second-quarter revenue on Tuesday as budget-conscious customers opted for lower-priced alternatives.
While consumer packaged goods companies like Mondelēz and Hershey have hiked prices to counter the high costs of raw materials such as sugar and cocoa, demand for their products has faltered.
Mondelēz’s sales volumes declined as lower-income consumers preferred cheaper private label brands over its more expensive products including Oreo cookies.
The company’s quarterly volumes dell 2.2 percentage points, while its prices rose 4.7 percentage points.
Chief executive of the company Dirk Van De Put said on a post-earnings call, “We are implementing new targeted promotions as well as a new pack size priced in the $3 to $4 range to drive brand loyalty and value for Oreo, Chips Ahoy! and Ritz in North America.”
Higher costs of transport, consumer promotions, as well as impact from 2023 divestiture of the developed market gum business have pushed Mondelēz’s gross profit margins down by 590 basis points to 33.5%.
Larger industry peer General Mills also saw quarterly sales drop and warned of macroeconomic uncertainty leading to “value-seeking” behaviours of consumers.
However, consecutive price hikes as well as easing manufacturing helped the company surpass quarterly profit estimates.
On an adjusted basis, Mondelēz earned a profit of 86 cents per share, topping estimates of 79 cents per share, according to data from the London Stock Exchange Group.
The company posted new revenue of $8.34 billion for the quarter ending 30 June, compared with analysts’ estimate of $8.45 billion.
The US-based company also maintained its annual organic net revenue and profit forecasts.
