Mondelez International announced a rise in fourth-quarter sales on Tuesday, yet faced a setback as price hikes impacted volumes, particularly affecting demand for its Cadbury chocolates and salty crackers. Consequently, the company’s shares experienced a more than 2% decline after the bell.
While price increases have contributed to Mondelez’s profit margin improvement throughout fiscal 2023, softer demand is now becoming evident as budget-conscious consumers tighten their spending habits.
In the North America segment, Mondelez (NASDAQ:MDLZ) witnessed a 5.5 percentage point volume decline in the fourth quarter, attributed to weaker biscuit sales and inventory management, compared to a 4.6 percentage point rise in the previous quarter. Product prices in the region increased by 7.4 percentage points.
The company also anticipates customer disruption in Europe during the first and potentially second quarters due to persistently high inflation.
Despite reporting an overall volume decline of 0.4 percentage points in the quarter, in line with trends observed in other consumer staples firms like McCormick (NYSE:MKC), Mondelez had managed to grow its volumes earlier in Q3. However, the impact of Mondelez’s price hikes is now becoming more pronounced.
While Mondelez’s gross profit margin of 37.3% exceeded market expectations of 36.7%, it was lower than the 38.7% recorded in the prior quarter.
Net revenue climbed 7.1% to approximately $9.31 billion in the quarter ended December 31, meeting analysts’ average estimate. Mondelez also acknowledged potential business disruptions due to the Israel-Hamas conflict, echoing concerns raised by Starbucks (NASDAQ:SBUX).
Looking ahead to 2024, Mondelez anticipates organic net revenue growth of 3% to 5% and a high single-digit increase in adjusted profit per share on a constant currency basis.