Company Reports

Since taking the helm at Mondelez more than six years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing the agility with which it brings innovation to market (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has prudently made acquisitions of niche brands to build out its category and geographic exposure, and we anticipate it will continue to pursue inorganic targets when the opportunity arises.

Mondelez posted solid first-quarter results—4.2% organic sales growth and 160 basis points of adjusted operating gains to 18.5%. However, this took a back seat to the looming impact of rising cocoa costs (which have tripled since the start of 2024) amid a waning consumer spending environment. Against this challenging backdrop, we think Mondelez is well positioned to blunt a material demise in profits. For one, the firm has locked in its entire cocoa needs for 2024 and into 2025, implying it may never be subject to elevated price levels if the recent spike proves transitory. Further, management suggested they will continue to raise prices surgically, while also pursuing cost-saving initiatives, which we see as pragmatic. Despite facing mounting cost pressures (with inflation pegged at a high-single-digit increase in fiscal 2024), we don’t posit it will siphon spending away from its brands, with ad spending up by a high-single-digit percentage clip in the quarter. This aligns with our forecast for Mondelez to direct 6%-7% of sales annually to research, development, and marketing over our explicit forecast. This strikes us as supportive of its brand and retail relationships.

Since taking the helm at Mondelez more than six years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing the agility with which it brings innovation to market (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has prudently made acquisitions of niche brands to build out its category and geographic exposure, and we anticipate it will continue to pursue inorganic targets when the opportunity arises.

Mondelez posted solid fourth-quarter marks, including nearly 10% organic sales growth (on top of more than 15% growth last year), a 230-basis-point uptick in adjusted gross margin to 38%, and a 40-basis-point lift in adjusted operating margin to 15.1%. This result suggests to us that the firm’s strategic playbook—anchored in extending the distribution of its fare, investing in its brands, empowering local leaders, and bringing consumer-valued innovation to market expeditiously—is sound, regardless of the economic cycle and competitive landscape.

Since taking the helm at Mondelez about six years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing the agility with which it brings innovation to market (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has prudently pursued acquisitions of niche brands to build out its category and geographic exposure, and we anticipate it will continue to bolt-on tie-ups when the opportunity arises.

We posit wide-moat Mondelez boasts the right ingredients for growth throughout economic cycles. In this context, the firm has been working to extend the distribution of its fare, invest in its brands, empower local leaders, and innovate nimbly. We believe the prudence of these initiatives can be seen in stout third-quarter results that included a 15.7% increase in organic sales growth (on top of 12% a year ago), a 120-basis-point gain in the adjusted gross margin to 38.6%, and a 60-basis-point bump in the adjusted operating margin to 16.7%.

Much consternation has centered on the financial health of the consumer, but this has failed to impede Mondelez’s top-line trajectory, up 16% on an organic basis (entirely a byproduct of higher prices as consolidated volumes held flat). In our view, the performance is attributable to the firm’s unwavering commitment to bring localized innovation to each of its global markets and to tout the value of this fare (with advertising and consumer spending up 17% in the quarter), while also extending the distribution of its mix into new channels across its footprint. This aligns with our forecast for research, development, and marketing around 6% of sales ($2.6 billion) annually on average through fiscal 2032. We think this serves to not only keep its fare top of mind with consumers, but to also ensure it remains an entrenched operator in the eyes of its retail partners, supporting its wide moat.

Since taking the helm at Mondelez more than five years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing its innovation agility (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has prudently pursued acquisitions of niche brands to build out its category and geographic exposure, and we anticipate it will continue to bolt-on tie-ups when the opportunity arises.

The strength of wide-moat Mondelez’s brand mix was on display in the first quarter, as organic sales shot up 19.4% (even as it lapped 9% growth last year) due to a 16.2% benefit from higher prices and a 3.2% contribution from increased volumes and favorable mix. Impressively, growth was broad-based across categories (biscuits and chocolate sales were up 17% and 18%, respectively) and geographies (emerging markets jumped 25%, outpacing lofty 16% growth in developed markets), which we attribute to initiatives to extend the distribution of its fare and empower its local leaders to ensure products hit the mark with evolving consumer trends.

Since taking the helm at Mondelez more than five years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing its innovation agility (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has looked to acquire niche brands to build out its category and geographic exposure, which we think has been prudent.

Our $66 fair value estimate for Mondelez should edge up by a low-single-digit percentage after the wide-moat packaged food operator closed the book on another solid quarter. This increase is generally in line with the response in after-market trading, rendering shares fairly valued. Its top-line mark was particularly impressive, as sales rose more than 15% on an organic basis in the fourth quarter on almost 14% higher prices and a nearly 2% contribution from higher volumes and favorable mix. We believe this performance is a byproduct of efforts to extend the distribution of its stout brand portfolio, its unrelenting commitment to funnel resources behind its brands—with advertising and consumer spending up high-single-digit percentages in the period, qualitatively referenced, and its decision to empower local leaders to ensure its fare aligns with evolving consumer trends. We don’t expect the firm to back down from these investments (in line with the nearly 7% of sales we forecast it to expend on research, development, and advertising annually over the next 10 years), which we think will help cement its position with retail partners and consumers, irrespective of the competitive landscape.

After shopping its developed-market gum business for the past 18 months, wide-moat Mondelez finally announced it has inked a deal to sell its North American and European gum brands to Perfetti Van Melle (owner of the Mentos brand, among others) for $1.35 billion. This price tag equates to around 3 times the unit’s sales and about 15 times EBITDA, by our estimates, which strikes us as a reasonable valuation for a segment that has been struggling for some time. While the transaction isn’t slated to close until the fourth quarter of 2023, we think that parting ways with a business that has fallen out of favor with consumers should be an advantageous undertaking, enabling the firm to focus its resources on its highest return opportunities (particularly within its core chocolate, biscuit, and baked goods aisles). These categories are core to Mondelez, boasting attractive growth prospects, with annual sales growing by mid-single-digit percentages, outpacing the low-single-digit marks that tend to characterize packaged food more broadly.

Since taking the helm at Mondelez nearly five years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing its innovation agility (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has looked to acquire niche brands to build out its category and geographic exposure, which we think has been prudent.

Mondelez is living up to its mandate—to be a growth engine in the mature packaged food realm—with organic sales that shot up 12.1% in the third quarter, due to 11% higher prices and a 1% benefit from increased volumes and favorable mix. Beyond its portfolio in the attractive snacking enclave with outsize exposure to faster-growing emerging markets, we think this evidences Mondelez has crafted the right recipe (extending its distribution, investing in its brands, empowering local leaders, and innovating agilely) to deliver stellar growth metrics even amid a challenging macro and competitive backdrop.

Since taking the helm at Mondelez more than four years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing its innovation agility (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has looked to acquire niche brands to build out its category and geographic exposure, which we think has been prudent.

Since taking the helm at Mondelez more than four years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing its innovation agility (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-5% sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has looked to acquire niche brands to build out its category and geographic exposure, which we think has been prudent.

In our view, wide-moat Mondelez’s second-quarter results evidence the prowess of its brand mix and its ability to withstand a slew of headwinds. This was underscored by the outsize revenue gains chalked up, 13.1% on an organic basis, which we perceive as especially impressive given the firm was lapping around 6% growth in the year-ago period. Moreover, we find the composition of the growth as particularly illustrative of Mondelez’s pricing power as price contributed 8% of the growth, with volume and mix accounting for the rest.

On June 20, wide-moat Mondelez struck a $2.9 billion deal to acquire Clif Bar, beefing up its presence in the fast-growing well-being and sustainable snacking aisle (with the targeted firm boasting a 9% compound annual growth rate over the past 10 years). At 3.6 times sales, we think Mondelez is paying a fair price for a business that leverages its category expertise and vast resources, and we think opportunities for distribution expansion should manifest at home and abroad. However, representing just a low-single-digit percentage of sales, this tie-up fails to move the needle on our $63 fair value estimate; we suggest investors wait for a larger margin of safety before snacking on shares. We’ve not wavered on our thinking that Mondelez boasts a sound investment track record and solid balance sheet worthy of a Standard capital allocation rating.

It has been nearly three years since CEO Dirk Van de Put disseminated a revamped recipe to incite profitable growth at wide-moat Mondelez, centered on extending its distribution, fueling investments behind local and global brands, empowering local leaders, and increasing innovation agility. By all accounts, this has been a tasty endeavor, with 4% organic sales growth on average since fiscal 2018 and 110 basis points of adjusted operating margins expansion to nearly 17% in fiscal 2021.

Since taking the helm at Mondelez more than four years ago, CEO Dirk Van de Put has orchestrated a plan to drive balanced sales and profit growth by extending the distribution of its fare, fueling investments behind its local and global brands, empowering its local leaders, and increasing its innovation agility (aims that are hitting the mark). Against this backdrop, Mondelez targets 3%-plus sales growth long term as it works to sell its wares in more channels and reinvests in new products aligned with consumer trends at home and abroad. Further, it has looked to acquire niche brands to build out its category and geographic exposure, which we think has been prudent.