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Mondelez International CFO Luca Zaramella sits down with Yahoo Finance's Brian Sozzi, Emily McCormick, and Brooke DiPalma to discuss the snack food and beverage brand's pricing strategy across all products lines, expected labor and supply struggles in 2022, and consumer products focused on well-being.
- Mondelez says it's seeing a recovery in demand for gum and other candies as mobility picks up around the world, but it's also seeing a good deal of inflation just like other large multinationals and is lifting prices to offset any profit pinch. Mondelez CFO Luca Zaramella joins us now. Yahoo Finance's food reporter, Brooke DiPalma Palma is here as well. Good morning to you both here. Luca, so I'm listening to your earnings call last night, and one thing stood out to me outside of inflation is Oreos. And you had a big target out there on the earnings call looking for the Oreos brand to grow to $1 billion by 2023. How did you get there? And how did Oreos do in the most recent quarter?
LUCA ZARAMELLA: Thank you, Brian. Oreo is doing extremely well across the board. We are very happy. We have tremendous opportunities outside of the two big countries where Oreo is sold, which is the US and China. And those two continue to do extremely well, high single digit growth, so very happy with that. But importantly wherever we invest in Oreo, wherever we put it in front of consumers wherever consumers have the opportunity to buy they buy it and we are very happy. Latin America is a place where Oreo is growing in a terrific manner. Armenia, which is the other region in emerging markets that we have as well and Russia and Europe in general, very happy with the outcomes we see there as well.
- Brooke, I think you're on mute. There you go.
- Apologies up. You noted that the US portfolio could see a price increase of roughly 6% to 7% starting in Q1 of 2022. When can consumers expect to see that spike and what categories can consumers expect to see higher costs?
LUCA ZARAMELLA: So the price is going to go into effect as of January 1st. So I think as as Q1 plays out, they will see but quite honestly we have been somewhat implementing already some pricing. We have been fine tuning our promotional strategies et cetera. I think for consumers though, it is important to notice that as a company we are very thoughtful as we pass price. This is really inflationary pressures that we face across the whole supply chain. And you know, in the end we believe that supporting a brand, making sure the quality is there, and having the right prices is absolutely the right strategy for us. And we have been implementing prices in general across the board in all our operations. We have always done it thoughtfully. We use what we call revenue growth management, which is a sophisticated set of techniques in order for us to be able to pass price in the right way and optimizing consumers value. And we believe this is the right thing, and obviously there is inflationary pressure everywhere. We see it, and we believe also that volume will hold up quite well.
EMILY MCCORMICK: Luca this Emily McCormick. Your company also on your earnings call called out labor and truck shortages, I'm wondering how long do you expect these pressures to continue, and have they started to get any better in these early months of the current quarter?
LUCA ZARAMELLA: Qiute frankly they haven't got any better, and I think when we look at supply chains across the world, there are inflationary pressures that are mostly due to the fact that there are several bottlenecks in supply chains that are globally interlinked. So I expect this to continue into 2022 for the entire 2022. I think the holiday season ahead of us will put even more strains on, on global supply chains. And I think that we might see some things changing maybe into 2023, but quite honestly 2022, I believe is going to be a tough situation for global supply chains.
EMILY MCCORMICK: Luca, some innovation happening as well in the third quarter the company released two being products, including a new Cadbury plant bar in the UK and Oreo zero sugar in China, which I don't know how that would taste, but how are consumers responding to these releases? And is consumer demand shifting to perhaps more healthy alternatives?
LUCA ZARAMELLA: I would say that in general chocolate and biscuits as categories are growing extremely well. So I believe the concept of consumers wanting indulgent categories and, and consuming products that give them that mental positive state and, and the fact that they look for comfort and great brands like ours, it is there and it will stay there. I mean, categories like chocolate and biscuits have been growing consistently, and our business is growing 6, 7% in chocolate and biscuits. Having said that, the concept of well-being for consumers is shifting a bit and, and they not necessarily want something that is sugar free or fat free, they want something that is better for them in terms of functional benefits, et cetera. So we keep on adapting our portfolio through options like as you said Oreo zero in, in China or Cadbury Vegan because we believe those are important offerings for consumers that, that might want to have a vegan option of their best chocolate. But in reality, I keep on saying our categories are doing extremely well and people still want to indulge themselves with a piece of chocolate or a great Oreo cookie. And I think that is there to stay there.
- I am among that group. Luca, I noticed this is the first time I think we've talked to you with you appearing, I would imagine back in the office, is that right? And what is your return to work plan look like for you and your team?
LUCA ZARAMELLA: We are at the moment to what we call a soft opening. So people that are vaccinated can come to the office on a voluntary basis, and as you might see there are not many people around it these days. But as of January 10th, we will reopen the office. We are making for all our offices in the US vaccination mandatory for people. And so I think you will see me hopefully in January with our Q4 earnings with more people around me, but that's, that's really the plan.
- All right. Good to see you back in there. Mondelez CFO Luca Zaramella, always appreciate you giving us some time. Yahoo Finance food reporter, Rick de Palma, always good to see you as well check on Slack.