Mondelēz blames Brexit for £2.9bn drop in revenue

By Gwen Ridler

- Last updated on GMT

Cadbury owner Mondelēz International said Brexit and weak demand had impacted revenues
Cadbury owner Mondelēz International said Brexit and weak demand had impacted revenues

Related tags United kingdom Marketing Uk

Snack foods giant Mondelēz International’s revenues fell by £2.9bn ($3.7bn) last year, as the firm grappled with the impact of Brexit and weaker UK demand.

The company’s revenue dropped by 12.5% to £20.7bn, while revenues in Europe fell 16.4% to £7.8bn. In the fourth quarter of 2016 Mondelēz saw its revenues fall by 8.1% to £5.3bn.

Gross profit for the year fell 12% to £8bn – a decrease of £1bn. It saw a 8.7% decline to £2bn in the fourth quarter.   

Chief executive Irene Rosenfield said the UK market had good momentum through the first half of the year, but blamed Brexit for hindering progress in the second.

‘Disruption and uncertainty’

“As you read news from around the world these days, it's clear that an unprecedented number of economies are facing significant disruption and uncertainty,”​ she said.

“Slower GDP ​[gross domestic product] growth, currency and commodity volatility, the uncertain impact of the Brexit vote, market shocks like the recent demonetization in India and complex developments in the political landscape – including a backlash against globalisation.”

The Cadbury owner claimed the falls in global revenue had also been affected by the volatile Venezuelan market, which the company no longer recorded sales.

Rosenfeld also highlighted an increased spend on marketing to defend market share in both the UK and US.

Defend market share

“There's a lot of trade spending dollars,”​ she said. “It didn't do very much to drive the category and, in fact, all it did was sort of margin down the business. We chose to participate in that to defend our shares, but that's not the right way to build the business for the long term.

“And I think as our customers experience the reality of that spending, we're going to be able to get back to a more disciplined focus on innovation and brand marketing and price pack architecture.”

Meanwhile, Mondelēz has blamed increased costs for the expected 20% price rise of its Freddo chocolate bars​ to 30p this spring.

Analyst comment – Jack Skelly

Comments were made before Mondelēz released its full year results.

Food analyst Jack Skelly of Euromonitor International said: “Chocolate confectionery makes up 58% of Mondelēz’s total confectionery sales, and 32% of the company’s total packaged food sales.

“It is also outperforming the company’s overall packaged food sales, thanks to continuing success in emerging markets, such as India, and the launch of a number of successful new products in Australia and UK. Over one third of Mondelēz’s confectionery sales come from Western Europe.

“As the largest market for chocolate confectionery globally, Western Europe will remain Mondelēz’s powerhouse; however, it should look towards Australasia, the Middle East and Africa and Asia Pacific for stronger growth opportunities.”

“Cocoa prices decreased by something like 36% between June and December 2016 - so whilst there’s some truth that in the past decade they rose significantly, I’m not sure if that fully explains why prices has risen now – there may be some increase in other commodity costs, but cocoa is the most expensive.

“I think Mondelēz are fairly committed to a strengthening profit margins and raising costs is a sure-fire way of doing that.

“There may be some increase in cost of doing business in the UK which would likely mean most manufacturers could increase their prices.

“However, I think Mondelēz is probably the most rigorous when it comes to bolstering its margins and, given how iconic their brands are to UK shoppers, it may be noticed more than other brands.”

Related topics Ambient foods Confectionery

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