Mondelez International, the largest food company in the world by sales, is expecting a recovery in its European business following difficult pricing negotiations with Continental grocers. This comes after the company released its Q2, 2023 results, which showed positive performance overall, but with slightly lower figures for Europe compared to other regions.
In Q2, European revenue increased by 11.4% year-on-year, but fell behind North America (22.7%), emerging markets (17.8%), Latin America (40.2%), and the overall group average of 17.0%. Mondelez also experienced a volume decline in Europe, with a 4.5-point decrease in volume/mix.
The company faced challenging negotiations with grocers across Europe who resisted Mondelez’s desired price increases to offset inflation in its supply chain. However, recent agreements, such as the one with Belgian food retailer Colruyt, have resolved these pricing disputes.
CEO Dirk Van de Put acknowledged the disruption caused by retailer negotiations but expressed confidence in the remainder of the year in Europe. He stated, “We successfully implemented our planned price increases in Europe, closing our customer negotiations in line with expectations.”
CFO Luca Zaramella added that Mondelez expects improvements in Europe now that pricing has been implemented. Furthermore, the company emphasized that consumers have not been deterred by the price increases, as elasticity remains relatively stable in the chocolate and biscuit categories.
In the second quarter, Mondelez recorded revenues of $8.50 billion, a 17% year-on-year increase, with operating income rising by 53.7% to $1.42 billion. These results have led the company to raise its full-year 2023 revenue forecast, now expecting organic net revenue growth of 12% compared to previous guidance of 10%.
Analyst John Baumgartner praised Mondelez’s performance, stating, “Another high-quality beat, despite jitters regarding Europe, continues to reflect the upside potential versus Mondelez’s long-term growth targets.”
