Mondelez's Smart Acquisitions Drive Strong Financial Results in Q2

Smart acquisitions, including Clif Bar and Give & Go, helped the company grow revenues by 17%.

Photo by Arturo Esparza on Unsplash

Mondelez, the global snack giant, reported robust financial results for the second quarter, with total revenue reaching $8.5 billion, marking a 17% increase. As I’ve covered before, the company made several smart acquisitions now paying dividends.

In 2022, the company acquired Clif Bar for $2.9 billion, bolstering its position in the snack bar category. Since then, the company has made three separate price increases, each with limited elasticity impact. But the growth isn’t just through price increases. The company streamlined SKUs and developed a new promotional plan. “It's close to a $1 billion business,” CEO Dirk Van de Put told investors.

The most significant acquisition may have been the 2020 $1.1 billion purchase of Give & Go. The move flew somewhat under the radar then, giving the Chicago-based company a global foothold in private-label bakeries. With growing consumer fascination with fresh bakery items, Mondelez offers retailers an avenue to offer it while limited labor costs.  “That drives a big interest from the retailer,” Van de Put said.

“I would certainly confirm that there is a growing interest around the world for fresh bakery.”

Mondelez raised revenue guidance for the year.

• First-half organic net revenue grew by $2.7 billion (18% YoY) and surpassed the strong 2022 full-year growth of 12%, with a 15.8% growth for the quarter.

• Adjusted gross profit dollar growth exceeded $1 billion (18.9% YoY) and saw adjusted operating growth of nearly $600 million (23% YoY).

• Boosted revenue guidance from 10% to 12%.

Mondelez eyes branded cake and pastry category expansion

• Considers cake and pasty as a fragmented market with potential for strong brands and high-quality products (read: Oreo)

• Management expects its cake and pastry business to double or triple, aiming for a 10% market share.

• Open to M&A opportunities and potential gum divestment.

• Plans to manage around cocoa and sugar prices.

The Consumer is Strong in Chocolate and Biscuits

• Elasticities at Mondelez remain low; despite price increases of 10% in North America, no significant change was observed.

• Consumers seek deals but maintain similar bag quantities per trip. This is shown with consumer shopping around.

• Shopping frequency slightly reduced but not concerning.

Promotional Update

• Promo levels slightly up in biscuits, mostly flat or down elsewhere.

• Promo prices rising faster than non-promo prices in percentage.

They said it:

CEO Dirk Van de Put on potential cake and pastry expansion:

Yes. So well, first of all, cakes and pastries is not a small category. **It's not the size of biscuits, but it's not too far away from it. And so it's a big opportunity around the world. It's a very fragmented category with sometimes relatively commoditized products in there. But there is a real opportunity to bring strong brands with high-quality products.** And so that's really the play that we're going forward through an Oreo Airy Cake in China or Cakesters here in the U.S. or Give & Go in the fresh section or a Chipita in Europe with prepackaged croissants for instance.

So we think that there is a whole play for us there. At the moment, we're around the 3%, 4% market share of the whole category, so plenty of room to go. With that, we are already the #2 player, and so that indicates how fragmented it is. The category itself has been growing quite nicely over the past 3 years. It is a category that exists across all markets. It covers different occasions than our typical biscuits and chocolate, so that makes it very interesting for them.

And so we think with these new quality products and our brands, we can really make a significant impact. And I'm not going to give an exact number, but we would expect that our cakes and pastry business in the coming year should double or triple and lift us up to close to a 10% market share. So for us, it's going to be a significant contribution to the growth of the company.