Sales of cakes and pastries have a “significant impact,” according to Mondelez.
The chairman and CEO, Dirk Van de Put, stated during a conference call on July 27 to go over second-quarter financial results, “Cakes and pastries is not a small category.” “It’s not quite biscuit size, but it’s in the ballpark. Therefore, there is a lot of opportunity worldwide.
Mr. Van de Put stated that cakes and pastries are a category that is “fragmented” but has “relatively commoditized products,” meaning that there is room for strong brands and premium goods. In order to achieve this, Mondelez has worked hard to increase the range of products it offers. Oreo Airy Cake in China, Cakesters in the US, and prepackaged croissants in Europe under the Chipita brand are just a few of the recent product launches.
According to Mr. Van de Put, “the (cakes and pastries) category itself has been growing quite nicely over the past three years.” It is a category that is present in every market. They find it very interesting because it covers occasions other than the ones we usually associate with chocolate and biscuits. We believe we can have a big impact with these new, high-quality products and our brands. And while I won’t provide a precise figure, we anticipate that our cake and pastry business will grow by two or three times in the upcoming year, bringing us very near to a ten percent market share. It will, in our opinion, have a big impact on the company’s expansion.
The remarks made by Mr. Van de Put regarding the cakes and pastry category were made in the context of Mondelez’s impressive financial performance. The company’s net income increased by 26% to $944 million, or 69¢ per share on common stock, in the second quarter that ended on June 30. This is in comparison to $747 million, or 54¢ per share, in the same period last year.
Mr. Van de Put stated, “It goes without saying that we are happy with the performance of our portfolio.” “We have increased sales for the majority of our brands in the various categories and geographical areas. In comparison to others, I would say the pricing was strong and it went through rather well. In three of the four regions, our volume/mix growth is excellent. Only Europe experienced disruption, and that was because of a disruption in customer behavior. Furthermore, we anticipate that Europe will see strong volume growth in the second half.
He declared that the company is gaining market share in the AMEA and that North America has finally recovered. According to him, emerging markets are also performing well overall in both the top and bottom lines.
He declared, “We can continue to invest strongly in our brands and our capabilities because we are generating good gross profit.” “The purchases are performing admirably. I’d gesture to Clif. Indeed, both adjusted and real EPS are growing by double digits. Therefore, we think the overall image is rather good.
Throughout the quarter, sales in North America increased 12.4%, mostly due to stronger performance from Give & Go, Perfect Snacks, Tate’s Bake Shop, and the base biscuit business. Other contributing factors included higher pricing and volume/mix.
According to chief financial officer Luca Zaramella, “Tate’s also posted robust growth and delivered another operating margin increase of double-digit in percentage points in Q2 versus last year.” “We are now getting close to North America’s level of profitability, but we still need to create significant cost and revenue line synergies. Clif is a company that is expanding, has some margins right now, and still has a lot of potential for meaningful synergies.
Later in the conference call, Mr. Van de Put gave additional details regarding the Clif business.
“In the initial half, there has been a robust double-digit increase in revenue, and in comparison to the previous year, the operating income margin has increased by over 1,000 basis points,” the speaker stated. “.. We’ve raised prices more dramatically than Clif would have in the past. August was one of our price increases, along with those in January and Q1. Thus, I would say that we see low elasticity. Thus, it’s having a significant effect.
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“Our second major initiative is to enhance the quality of service. We cut back on stock-keeping units, or SKUs. Additionally, we began to run the plants a little bit more efficiently, which contributed to a notable rise in the quality of service. Next, we modified the marketing strategy. That has started off successfully. The fourth point is that we purchase media more effectively than they do. That also allowed us to gain some advantages.
These are a few of the things we have accomplished. There are several steps involved in the integration process. The systems integration later in the year is one example. However, everything is going well so far in terms of streamlining the teams and increasing clarity on how we wish to run the company.
The management increased its organic net revenue growth projection from 10% to 12% in response to the company’s robust top-line growth. Additionally, the company raised its forecast for adjusted EPS growth from 10% to 12%.
“It’s likely that we’ll surpass the 12% plus guidance, but I’d rather finish the quarter strong and then provide more specific guidance for Q4” stated Mr. Zaramella. If everything goes as planned, as I mentioned, there’s a good chance we’ll surpass the guidance. Remember that we want to get off to a great start in 2024. Therefore, in the event that profitability and EPS increase, we may choose to reinvest a portion of the increase in order to obtain a rapid start through 2024 as well.