(Adds CEO quotes)
By Anjali Athavaley
Aug 6 Mondelez International Inc, the
maker of Cadbury chocolate and Oreo cookies, cut its 2014 sales
target on Wednesday after price hikes to cover commodity costs
sparked a backlash by consumers and retailers in some European
Mondelez also reported higher net income in the second
quarter, topping Wall Street estimates.
Mondelez said higher cocoa and dairy prices this year
prompted the price increases to customers, especially in places
like Venezuela and Argentina with high inflation.
Since competitors have been slow to follow, the company
said, some retailers have stopped selling Mondelez products
"While we anticipated that this would be disruptive in the
short term, it has been even more challenging than we expected,"
Irene Rosenfeld, chairman and chief executive officer, said on
the quarterly earnings conference call. She added that she
expected the impact to be temporary as competitors catch up with
price hikes and the gap closes.
The company said it was reducing its 2014 net organic
revenue growth target to a range of 2 percent to 2.5 percent. In
May, it forecast growth of about 3 percent. Organic revenue
excludes changes in foreign currency, takeovers and
"In Europe, some large retailers reacted badly to the price
increases, and temporarily removed products from the shelves,"
Alexia Howard, an analyst at Sanford Bernstein, said in a
research note. "It sounds as though this is now behind them and
so we believe this was a temporary hit to sales this quarter."
Mondelez shares were down 0.7 percent at $35.71.
Organic revenue in emerging markets rose 4.7 percent, below
company forecasts. Sales in developed markets, like Europe, were
down 1.2 percent.
"Some customers, especially in Europe, most notably in
France, have reacted quite severely to our price increases,"
Mondelez isn't the only company to feel the pain from
raising prices. Kraft Foods Group Inc, spun off from
Mondelez in 2012, said in July its second-quarter revenue barely
rose as price hikes hurt customer demand.
PROFIT TOPS ESTIMATES
Other chocolate makers like Hershey Co and Mars
Chocolate North America, the maker of M&M's and Snickers and a
subsidiary of Mars Inc, have raised prices for the first time in
three years due to the higher costs of cocoa and in particular
Cocoa futures prices have soared more than 30 percent in the
past year and hit three-year highs this week.
Higher dairy costs have also played a role in the increase
in chocolate prices.
Net income at Mondelez increased to $622 million, or 36
cents per share, from $601 million, or 33 cents per share, a
Revenue declined 1.8 percent to $8.4 billion. Organic
revenue was up 1.2 percent.
Bernstein's Howard said organic sales growth was
"particularly disappointing," given that the Easter holiday,
which typically boosts growth, came out in the second quarter
Organic sales in North America rose 2.7 percent on share
gains in biscuits and candy.
Excluding the effects from recalculating assets in Venezuela
and other items, earnings were 40 cents per share. Analysts, on
average, expected 39 cents, according to Thomson Reuters
(Additional reporting by Marcy Nicholson in New York; Editing
by Jeffrey Benkoe and Lisa Von Ahn)