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Mondelez explains why chewing gum was 'severely impacted' by coronavirus lockdowns

·Former Correspondent
·2 min read

If you're looking for a quirky economic indicator, look no further than chewing gum sales.

Snacking giant Mondelez (MDLZ), the maker of Oreos and Sour Patch Kids and Trident chewing gum, reported its second-quarter earnings results last week, in the process revealing a double-digit decline in chewing gum sales.

During lockdowns, consumers stocked up on cookies and crackers. Yet chewing gum, which tends to skew toward on-the-go consumption and benefits from world travel retail, slowed significantly. Collectively, the gum and candy category declined 33.3% in the quarter, with most of that weakness attributed to chewing gum.

In an interview with Yahoo Finance's "The First Trade," CFO Luca Zaramella said the gum category was "severely impacted" because of fewer on-the-go occasions and the slowdown in travel.

"We have a little bit of a problem in the gum category that's more prone to the global consumption, which is heavily impacted," Zaramella added.

‘Toughest quarter’ for gum

CEO Dirk Van de Put told analysts on a call last week that even though candies like Sour Patch Kids and Swedish Fish were solid, “it's gum that suffers in a recession in our case, as we currently are seeing, but that's more driven by the fact that gum is an on-the-go product and that a lot of these channels have been closed.”

He added: “But also in a recession since, again, there's more in-home consumption, gum suffers."

To be sure, Mondelez sees signs of the gum category "improving a little bit,” Zaramella told Yahoo Finance. He is hopeful there will be "meaningful improvement" by the end of the year, he added.

"It was clearly the toughest quarter for a category like gum,” the CFO said.

“We sell gum around the world, not only in the U.S. but also in developing markets where there are mom and pop shops, as we call them, and it is difficult for people to access those stores. And, importantly, I would say chewing with a mask is not necessarily a pleasant experience," Zaramella added.

Meanwhile, biscuits (i.e. Oreos and Chips Ahoy) and chocolate "tend to be quite durable in a downturn" in both developed and emerging markets, Van de Put said on the earnings call.

"[Biscuits], in general, are not affected by the recession, and actually sometimes accelerated during the recession because, again, there is this switch to more in-home consumption which biscuits benefit from," Van de Put said.

He also noted that chocolate is "more of a mixed picture" across markets, but is also "quite resilient with a very fast recovery as the recession starts to fade away."

Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.