Mondelez CEO: Consumers got used to snacking, and 'they don't want to give that up'
Mondelez CEO explains the continued post-pandemic strength in the snacking business.
Leave it to the CEO of Mondelez, the maker of Oreo cookies and Toblerone chocolate, to explain why the country has turned into a nation of snackers.
"I think [the snacking strength] started during the pandemic, where the consumer, sitting at home, got used to having regularly a snack," Mondelez CEO Dirk Van de Put told Yahoo Finance Live at the 2023 Milken Institute Global Conference (video above). "They got used to the brands. They got used to the product. So now when the inflation comes and prices start to increase, it's clear that they are attached to it and that they don't want to give that up."
The business of snacking has been rather generous to Mondelez in recent quarters.
Mondelez said last week that first quarter sales and profits surged 18.1% and 17.3%, respectively, from a year ago. The gains reflect strong demand for Oreos and Chips Ahoy cookies despite price increases taken to offset high ingredient inflation.
The company also saw renewed profit momentum at Clif Bar, a nutritional snack bar business it plunked down $2.9 billion for as part of a portfolio reconstruction under Van de Put.
Van de Put didn't rule out making further deals but stressed his team will stay disciplined and focused on snacks.
The reimagination of Mondelez comes alongside clear snacking momentum more broadly.
Bank of America food analyst Bryan Spillane estimated that the US snacking industry clocked in a staggering $151 billion in sales last year. The total marks an 8% increase from 2021 and a 7% gain annually over the 2019-2022 peak COVID-19 pandemic period.
Excluding ice cream (which is more of a sit-down snack), the snack food category's sales rose a solid 9% year on year in 2022 to $132 billion.
And snacks accounted for 29% of total packaged food sales in 2022, Spillane estimated.
Analysts believe that Mondelez's sharper portfolio of snacks, cooling inflation, and strong industry consumption trends will finally lift the company's valuation more in line with peers.
"Like Hershey, Mondelez is building a track record of growth-accretive M&A," Evercore ISI analyst David Palmer wrote in a client note. "Clif Bar was perhaps the company’s most controversial acquisition in recent years. The pushback was understandable given the $2.9 billion price tag and stalling growth. However, 9-months later, Clif is thriving under Mondelez ownership — with high-single digit percentage sales growth and 1000 basis points of profit margin improvement to 20%."
Year to date Mondelez stock is up 15%, outperforming the S&P 500's 7% gain.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
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