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Mondelez's Pricing Strategies Bodes Well, Input Costs a Woe

Zacks Equity Research
·4 min read

Mondelez International, Inc. MDLZ is benefitting from rising organic sales, prudent pricing and savings efforts. Moreover, the company’s focus on brand building through innovation and acquisitions bode well. However, rising input costs and adverse currency fluctuation impacts are headwinds.

Factors Aiding Mondelez

Mondelez’s strategic pricing initiatives have been yielding results. During the first quarter of 2020, the company’s organic revenues rose 6.4% on balanced pricing and volume/mix. In fact, the company’s organic sales have been rising for a while. Impressively, a strong brand position combined with yielding strategies has been boosting organic sales. Management continues to strike a balance between volume and profit through disciplined pricing.

The company is refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. In this regard, the company introduced an innovation platform — Joy Fills in 2018. The platform, which was launched in Europe, is designed to meet growth across brands such as Oreo, Cadbury and Milka. Further, Mondelez’s continued product innovation under the SnackFutures platform bodes well. In fact, management plans to enhance the snacking portfolio, an area which is growing rapidly across the globe.


Speaking of brand building efforts, Mondelez has been increasing investments in in-store execution and advertising to support the Power Brands and innovation funded by cost savings. Such investments are helping the company witness growth in two of its most globally renowned brands — Cadbury Dairy Milk and Oreo.

Apart from these, Mondelez has always been keen on expanding its business through acquisitions. The company recently acquired majority interest in Give & Go, which is a pioneer in fully-finished sweet baked goods. In previous developments, the company made investments in Hu Master Holdings and Uplift Foods (in April 2019) as part of the SnackFutures platform. In July last year, it acquired minority stakes in Perfect Snacks. These investments indicate management’s efforts to boost healthy offerings.

Hurdles on Way

Due to international market exposure, Mondelez is prone to currency fluctuations. In fact, adverse currency movements have been hurting the company’s performance for a while. During the first quarter, adverse impacts from currency rates dented the company’s top line. Volatility in exchange rates is a threat to the company’s performance. Apart from this, the company’s margins were strained in first-quarter 2020, thanks to increased raw material costs, unfavorable currency and disruptions caused by coronavirus outbreak. We note that, shares of this Zacks Rank #3 (Hold) company have lost 7.8% year to date compared with the industry’s decline of 6.4%.

Nevertheless, the company has been undertaking some major steps to enhance savings with an aim to fuel margins and cash flow. Moreover, such savings are being invested in brand-building endeavors. We note that management is on track with savings initiatives such as zero-based budgeting. It is also on track with eliminating other unnecessary costs from supply chain.

Other Solid Consumer Staple Bets

Church Dwight CHD, with a Zacks Rank #2, has a long-term earnings growth rate of 8.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Campbell Soup Company CPB, with a Zacks Rank #2, has a long-term earnings growth rate of 8.3%.

Nu Skin Enterprises NUS, with a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.

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