Oreo maker Mondelez sees cookie troubles in China
Oreo maker Mondelez is struggling to boost cookie sales in China.
The Deerfield-based global snack food company on Wednesday reported a higher quarterly profit and raised its earnings outlook for the year, citing plans to improve productivity in its operations.
But Mondelez, which also owns Cadbury chocolates, Ritz crackers and Trident gum, trimmed its full-year sales expectations, in part because of its disappointing cookie sales in China.
In a call with analysts, CEO Irene Rosenfeld largely blamed a double-digit sales decline in the China business on the country's broader economic slowdown. She said the company was working to address the issues through a variety of measures, such as finding the right package sizes and prices that appeal to customers.
“The economy and biscuit category will recover,” Rosenfeld said, expressing confidence in the region for the long term and noting that the company just needed time to make adjustments.
There was a bright spot for the company in China: gum. Even as the Mondelez fights to stop declining gum purchases in developed markets — sales are down 16 percent so far this year — the category is performing well in China.
“Gum in China has been a phenomenal success,” Rosenfeld said.
Later in the call, Rosenfeld acknowledged that Mondelez is facing new challenges as a company focused more heavily on emerging markets than it was in the past.
The remark was a reference to the company's split last year from Kraft Foods Group Inc., which kept North American grocery brands such as Miracle Whip and Jell-O. Mondelez took the snacks that have a bigger global presence.
The company has found itself under pressure after stumbling in its first few quarters as an independent company. Activist investor Nelson Peltz of Trian Fund Management has been pushing for PepsiCo to spin off its beverage business, then merge its remaining snack food business with Mondelez.
For the quarter, Mondelez said net sales rose because of stronger results in countries including Brazil, Russia and India. Organic revenue, which strips out the impact of acquisitions, and other factors, rose 5.3 percent.
In North America, the company said strong results for its cookies and chocolate were offset somewhat by persistent weakness in gum sales.
Adjusted operating income margin was down from a year ago, but improved sequentially from the previous quarter.
Mondelez earned $1.02 billion, or 57 cents per share, for the period ended Sept. 30. Not including one-time items, it earned 41 cents per share, or a penny more than Wall Street expected. A year ago, it earned $652 million, or 36 cents per share.
Revenue rose to $8.47 billion but was shy of the $8.58 billion analysts expected.
Mondelez now expect organic sales to increase 4 percent for 2013. Previously, it had said it expected it to be on the low end of a 5 percent to 7 percent increase.
For 2014, Mondelez forecast sales growth of 4 percent to 5 percent.
It raised its adjusted earnings forecast for 2013 by 2 cents to $1.57 to $1.62 per share.
Shares of Mondelez were down a penny at $33.43 in after-hours trading.