‘Best year ever’: Mondelez sees cocoa inflation, political tensions as ongoing major challenges despite record profits

By Pearly Neo

- Last updated on GMT

Mondelez believes that inflation and ongoing political tensions in the Middle East are major challenges that it will need to overcome this year. ©Getty Images
Mondelez believes that inflation and ongoing political tensions in the Middle East are major challenges that it will need to overcome this year. ©Getty Images

Related tags Mondelez Inflation Politics

Confectionary giant Mondelez believes that inflation affecting cocoa and sugar, as well as ongoing political tensions in the Middle East are major challenges that it will need to overcome this year, despite having announced ‘record’ profits fror 2023.

Mondelez International recently announced its FY2023 full-year financial results, reporting 14.7% year-on-year net revenue growth to US$36.1bn and 18.8% year-on-year gross profit growth to US$13.3bn for the overall firm.

It also reported 11.7% yoy revenue growth to US$7.1bn for the Asia, Middle East and Africa (AMEA) region in particular – Mondelez classifies AMEA under its Emerging Markets portfolio, and deep diving into the numbers for this region have primarily been driven by price hikes.

Sales from AMEA made up 39% of Mondelez’s total revenue for the year, but growth was significantly higher than that of Developed Markets (such as North America, Australia, New Zealand, and much of Europe) at 20.4% vs 11.1% in the latter.

This was primarily because more price increases were applied to Emerging Markets, at 17.6 percentage points (versus 10.7 percentage points in Developed Markets), likely attributable to currency exchange as well as political reasons in the region.

“We can see that the strength of our brands in Emerging Markets continues, so we do feel good [about this region] as we enter 2024,”​ Mondelez CEO Dirk Van de Put told the floor at the company’s most recent financial results conference.

“[That said], there have been some tensions in the Middle East which has had some effect on Western brands which we of course carry a good number of.

“This will fade away with time, but is a crucial reason as to why volume/mix has not been as strong in AMEA as expected [and revenue has been primarily driven by pricing].”

Notably, Van der Put had highlighted the firm’s gross profits growth in 2023 as a ‘record’ achievement earlier in the conference.

“I am pleased to say that Mondelez has delivered our best year ever in 2023 [including the achievement of] a record gross profit dollar growth of US$2.2bn in FY2023,”​ he said.

“This was the result of ongoing cost discipline and pricing to offset cost inflation, and volume leverages.

“This achievement has enabled us to generate a strong free cash flow of US$3.6bn, as well as to reinvest significantly back into the brands and our capabilities to drive multi-year top and bottom-line strengths.”

Less rosy than hoped

The firm also described 2024 as an environment of ‘greater than usual volatility as a result of geopolitical uncertainty’​, with inflation continuing to be a major point of concern.

“Going into 2024, we expect to still see high single-digit inflation, driven by significant increases in cocoa and sugar as well as label costs,”​ Mondelez CFO Luca Zaramella added.

“Cocoa prices in particular are what is mainly on our mind given ongoing price negotiations with Europe – we are well-covered for the year, but definitely need to get prices agreed.

“The other matter to consider is consumer sentiment, and the fact that although consumers are certainly more positive now in terms of purchasing, data shows that consumer elasticity still sits at a level equal to or below historical norms.”

In particular, the firm has a clause in its Forward-Looking Statements stating that actual results or performance could differ materially from any predictions due to ‘weakness in macroeconomic conditions in our markets, including as a result of inflation’.

There is also a specific mention of geopolitical uncertainty, ‘including the impact of ongoing or new developments in Ukraine and the Middle East, related current and future sanctions imposed by governments and other authorities and related impacts’​.

Related news

Show more

Related products

show more

Elevate your snacks with novel cheese flavours

Elevate your snacks with novel cheese flavours

Content provided by Givaudan | 23-Feb-2024 | Product Brochure

Aside from conducting desk research to understand snacking preferences and taste profiles among consumers in the Asia Pacific, Givaudan also embarked on...

How Korean culture penetrated the APAC food industry?

How Korean culture penetrated the APAC food industry?

Content provided by BIOSPRINGER, natural Yeast ingredients | 17-Jan-2024 | White Paper

Korean food is on-trend in Asia. We mainly find Korean taste in noodles, sauces & dressings, pickled condiments, ready meals and savory snacks.

Empowering Women Through the Life Cycle

Empowering Women Through the Life Cycle

Content provided by Glanbia Nutritionals | 07-Nov-2023 | Product Brochure

As discussions around female empowerment widen, and advances in women’s health access and provision accelerate, the implications for business, healthcare,...

Unlock real chocolate indulgence with CBT Gold

Unlock real chocolate indulgence with CBT Gold

Content provided by Bunge | 20-Sep-2023 | Business Advice

As the chocolate industry evolves to meet the demands of cost-conscious consumers who refuse to compromise on quality, CBT Gold offers both delicious luxury...

Related suppliers

Follow us

Webinars

Food & Beverage Trailblazers

F&B Trailblazers Podcast