Mondelez slashes growth targets as marketing changes begin

Pressure is on for Mondelez’s switch from a local to regional marketing to drive short-term growth after its ploy to raise wholesale prices knocked market share and sales volumes in its latest quarter.

Mondelez pricing woes in Europe has hit sales volumes for brands such as Trident in Europe.

The snacks maker said the price increases scared off some customers, forcing it to slash its growth targets for the year.

A 1.8 per cent revenue drop to $8.4bn (£4.9bn) for the three months to the end of June was short of analyst expectations with the company citing retailer pressure in Europe as the “single biggest” driver of the gloomy outlook for the rest of the year. Sales for the region fell 1.9 per cent as retailers pushed back at the company’s high prices charged in order to offset its own rising input costs.

Mondelez expects market share to stabilise over the next quarter, predicting demand for power brands such as Oreo and Cadbury will convince customers of “the importance of having them back on shelves”.  But the upturn will not be supported by increased promotions. Mondelez said its media spending was “where it needed to be” to protect its market position and instead backed internal changes to its marketing divisions worldwide to reverse the decline.

The shift refers to efforts to accelerate the exchange of “good ideas from one side of the world to another” through regional brand teams. Mondelez has already switched from local to regional initiatives in Europe and North America ahead of a wider rollout to its Latin America, Asia Pacific and EEMEA regions over the next year.

The company’s poor financial performance also highlights the importance of the chief growth officer, a newly-created role it says will deliver efficiencies spanning campaigns and innovations to agency relations and technology. Former Mondelez North American president Mark Clouse has taken on the position that while more long-term orientated, will likely come under pressure to seek short-term wins given the declining market share.

Irene Rosenfield, president and chief executive of Mondelez, told analysts on a conference call today (6 August): “Our categories may have softened but they are still outperforming other food categories around the world. Pricing is always a difficult proposition. One that we don’t take lightly but it was critical for us to recover the costs that we’re experiencing. The single biggest opportunity for us is through growth and speed.”

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