By Anuja Bharat Mistry
(Reuters) -Cadbury parent Mondelez (NASDAQ:MDLZ) International missed expectations for second-quarter revenue on Tuesday, as budget-conscious customers opted for lower-priced alternatives amid sticky inflation.
While consumer packaged goods companies like Mondelez International, Hershey have beefed up prices to counter higher costs of raw materials such as cocoa and sugar, demand for their products faltered.
Mondelez's sales volumes declined as lower-income consumers preferred cheaper private label brands over its more expensive products including Chip Ahoy! and Oreo cookies.
The company's quarterly volumes fell 2.2 percentage points, while its prices rose 4.7 percentage points.
"We are implementing new targeted promotions as well as a new pack size priced in the $3 to $4 range to drive brand loyalty and value for Oreo, Chips Ahoy! and Ritz in North America," CEO Dirk Van De Put said on a post earnings call.
Higher costs of transport, consumer promotions, as well as impact from 2023 divestiture of the developed market gum business have pushed Mondelez's gross profit margins down by 590 basis points to 33.5%.
Larger industry peer General Mills (NYSE:GIS) also saw quarterly sales drop and warned of macroeconomic uncertainty leading to "value-seeking" behaviors of consumers.
However, consecutive price hikes as well as easing manufacturing helped the company surpass quarterly profit estimates.
On adjusted basis, Mondelez earned a profit of 86 cents per share, topping estimates of 79 cents per share, according to LSEG data.
The company posted net revenue of $8.34 billion for the quarter ended June 30, compared with analysts' average estimate of $8.45 billion.
The Chicago, Illinois-based company also maintained its annual organic net revenue and profit forecasts.