Will Strategic Efforts Fuel Mondelez's (MDLZ) Growth in 2024?
Mondelez International, Inc.’s MDLZ growth story can be attributed to the company’s emphasis on expanding its snacking category, particularly in chocolates and biscuits. The company has been pursuing growth through regular innovation as well as strategic acquisitions. Apart from this, effective pricing strategies have enabled MDLZ to combat rising costs.
Management expects 2023 organic net revenue growth of 14-15% and adjusted earnings per share (EPS) growth on a cc basis of more than 16%. We believe that the abovementioned upsides are likely to keep Mondelez in a favorable position in 2024 as well. The Zacks Consensus Estimate for 2024 sales and earnings suggests growth of 3.5% and 7.4% from the year-ago period figure.
Focus on Core Categories
Mondelez has been actively broadening its focus on the snacking category. As consumers prefer snacking over traditional meals, the company’s core categories — chocolates and biscuits — have historically depicted resilience to economic downturns and pricing actions. Consumers in developed countries consider chocolates and biscuits as affordable indulgences and one of the most-valued snacking products.
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The company’s core chocolate and biscuit categories registered double-digit growth in the third quarter of 2023, including a 12.4% surge in biscuits and a 14.9% increase in chocolates. Mondelez earlier stated that it intends to generate around 90% of its revenues through these two core categories in the long run.
Acquisitions Boost Portfolio
Mondelez has consistently demonstrated a strategic commitment to expanding its operations through acquisitions. In the third quarter of 2022, the company unveiled that it had closed the Ricolino buyout, which is expected to double the size of its Mexico business. In August 2022, it closed the buyout of Clif Bar. Contributions from the Ricolino and Clif Bar buyouts boosted net revenues in the third quarter of 2023.
Mondelez acquired the Chipita S.A. business in January 2022, which is a major producer of sweet and salty snacks in Central and Eastern Europe. Prior to this, in 2021, Mondelez took over a renowned sports performance and active nutrition brand — Grenade.
Further, MDLZ acquired an Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category. Mondelez completed the acquisition of Hu Master Holdings, the parent company of Hu Products, on Jan 4, 2021.
Cost Inflation to be Countered?
Mondelez has been grappling with cost inflation. Despite this ongoing concern, the company has implemented various strategies to counteract the impact. These include adjusting pricing, optimizing product mix and reducing manufacturing expenses.
In the third quarter of 2023, while the adjusted gross margin was affected by increased raw material and transportation costs, Mondelez was able to partially mitigate these effects through the aforementioned measures. The company remains attentive to navigating the complexities of cost inflation. In its third-quarter 2023 earnings release, Mondelez stated that it still expects a double-digit increase in inflation.
However, the company's proactive approach to implementing mitigating measures is likely to keep providing support. In conclusion, Mondelez's consistent investments in brand development, digital capabilities and effective revenue growth management position it well for future success. Shares of this Zacks Rank #3 (Hold) company have risen 7.4% in the past year against the industry’s decline of 9.8%.
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