Chicago – Mondelez International’s acquisition of Clif Bar and Co. It checks many boxes on the snack maker’s acquisition criteria list — it focuses on snacking, provides synergies and value creation, and is a company Mondelez’s management believes will capitalize on the company’s competitive advantages.
“In terms of growth, we see significant opportunities for increased household penetration and distribution in e- and alternative commerce (channels) as well as existing niches,” said Dirk van de Putt, Chairman and CEO of Mondelez International, during July. 26 conference call to discuss second quarter results. “There is also an opportunity to unleash growth by managing revenue growth and improving in-store excellence. Outside the United States, there are clear opportunities to drive international growth.”
On June 21, Mondelez announced its intent to acquire Clif Bar & Co. Emeryville, California, for $2.9 billion. Prior to the announcement, Mondelez’s snack bar business had estimated sales of $300 million. With the addition of Clif Bar, the company’s bar business will exceed $1 billion in revenue.
“This gives us an attractive position in a US$16 billion market, where revenue is roughly split between the USA and international,” said Mr. Van de Putt. “We can say that the brand is very strong from our perspective across all age groups. It contains organic ingredients. It tastes great. When we look at the details, we think there is a great opportunity to expand distribution in existing and alternative channels, but also improve the quality of distribution in places where there is by Clif”.
The bar category experienced a slowdown in sales during the first few years of the pandemic as consumers limited mobility. Mr. Van de Putt said the category is recovering and Clif’s profitability last year did not represent its potential.
“We have a great opportunity to improve overheads and implement the (revenue growth management) strategy,” he said. They have experienced disruption in the supply chain. And we’re already seeing in the first two quarters of this year, a significant improvement in profitability for the business. Therefore, we feel that the work is completely back to normal, and then we can add many synergies that we see from our side.”
For the second quarter ended June 30, Mondelez International earned $747 million, or 54 per share of common stock, down from the same period a year earlier when the company earned $1.1 billion, or $77 per share.
Quarterly sales rose to $7.3 billion from $6.6 billion a year earlier.
“We delivered an overall profit growth of 9.7% as a result of healthy growth in volume and pricing action,” said Mr. Van de Putt.
Elements affecting profitability included input cost inflation in energy, transportation, packaging, wheat, dairy, and edible oils. To offset the increases, Mondelez is raising prices “across major markets”.
Mr. Van de Put added that while resilience has increased “slightly” it remains low by historical standards.
“Private brand is either flat or low in the vast majority of our markets, and shoppers say they are less likely to switch to private brands in chocolate and biscuits than other categories,” he said.
Positive territory for the company is in emerging markets, which have nearly recovered to pre-COVID levels.
“Our core category is showing strong growth in volume and penetration despite price increases,” said Mr. Van de Putt. “Compared to developed markets, emerging market consumers are less likely to reduce the overall consumption of our categories or switch when faced with price increases.”
Sales in North America increased 9.2% during the quarter, driven by higher biscuit prices and double-digit growth in gum and candy.
“Volume/mix decreased by 1% as a result of continued supply chain constraints,” said Luca Zaramella, Chief Financial Officer.
Mondelez’s net income for the first six months of fiscal 2022 was $1.6 billion, or $1.16 per share, and lower than the previous year when the company earned $2 billion, or $1.45 per share.
Sales rose to $15 billion from $13.8 billion a year earlier.
The company’s strong earnings growth prompted management to raise its organic net revenue growth forecast by 8%. The revised projection builds on first-half strength and higher prices, according to the company.
“Our mid-to-high single-digit EPS expectations remain unchanged, (and) risk adjusted for additional inflation from the Ukraine war, some customer disruptions with regard to pricing and higher levels of flexibility,” said Mr. Zaramella. “However, given the strength of our first half results and depending on the outcome of our pricing negotiations in Europe, we may finish the top of that range.”