By Sanskriti Shekhar
Oct 29 (Reuters) – Cadbury parent Mondelez International beat Wall Street expectations for third-quarter profit on Thursday, supported by favorable cocoa prices and higher pricing across key regions, including North America.
Shares of the Oreo maker rose 6.5% in extended trading.
The company, which pushed through multiple rounds of price increases when cocoa prices rallied in past few years, has since benefited from a global surplus that drove down its costs, giving Mondelez more room to lure shoppers with promotions and value packs.
The Toblerone maker said pricing increased by 0.3 percentage points for the quarter, while volumes rose 1.8 percentage points. Volumes in its North American segment were flat, compared to a 1.8 percentage point dip last year.
“A year ago, record cocoa costs forced price increases that pushed volumes down. Now, while still absorbing those costs, they’ve returned to volume growth, and brand creativity is part of the reason,” said Daniel Binns, CeO of brand consultancy firm Elmwood.
Still, CEO Dirk Van de Put said consumer confidence in North America remained pressured by higher energy prices and it does not expect this to improve anytime soon.
“The company’s reliance on pricing to drive growth in North America could soon produce diminishing returns, as cash-strapped shoppers spend a larger share of their budgets on gas and less on snacks like Oreos,” eMarketer analyst Rachel Wolff said.
Earlier on Thursday, rival Hershey also warned high inflation and elevated energy prices could hit consumers’ spending on candy this Halloween.
Mondelez also announced it would buy Undercover Snacks, which makes chocolate-coated quinoa crisps, as it looks to expand in the fast-growing “permissible indulgence” category.
“Mondelez’s acquisition of Undercover Snacks could improve the company’s positioning in the better-for-you space, and attract spending from consumers willing to pay more for items with perceived health benefits,” Wolff said.
The company posted an adjusted profit of 78 cents per share for the quarter ended September 30, above analysts’ average estimate of 71 cents per share. However, its quarterly revenue of $9.97 billion fell short of analysts’ expectations of $9.98 billion, according to data compiled by LSEG.
(Reporting by Sanskriti Shekhar in Bengaluru; Editing by Diti Pujara)
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