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Commodities

Oreo maker Mondelez fights North America biscuit rivals

CHICAGO (Reuters) - Oreo maker Mondelez International Inc MDLZ.O is fighting back against aggressive rivals in North America after its share of the biscuit market there declined in the second quarter, the company said on Wednesday.

The logo of Mondelez International is pictured at the company's building in Zurich November 14, 2012. REUTERS/Michael Buholzer

It also said it would launch its Milka brand chocolate into China’s $2.8 billion market, sparking questions from analysts unsure about the timing of the move.

The announcement came as Mondelez reported that revenues had declined for the 11th consecutive quarter due to weakness outside of North America. Adjusted quarterly earnings still beat analysts’ expectations.

Mondelez shares fell 2.9 percent to close at $43.94.

“Mondelez has suffered from a general slowdown in consumer demand for snacks across the globe, in particular in those countries that were once shining beacons of hope - China, Brazil and India,” said Jack Skelly, food analyst for Euromonitor International.

Promotions from Mondelez’s biscuit rivals in North America during the quarter hurt financial results, Chief Executive Irene Rosenfeld told analysts on a conference call.

Investors keep a close eye on sales in the United States because it is the largest biscuit market, and in April, Mondelez warned that business had weakened as some of its biggest customers were changing their merchandising policies.

The company has faced a shift in consumer tastes to healthier foods that has prompted some retailers to provide less shelf space for processed and sugary snacks such as biscuits.

“Some very aggressive trade spending from some of our competition is not helping to grow the category, but we certainly are responding,” Rosenfeld said about Mondelez’s North American biscuit business.

Net income attributable to the company in the quarter rose 14.3 percent from a year earlier to $464 million, or 29 cents per share. Excluding items, Mondelez earned 44 cents, topping the average analyst estimate of 40 cents, according to Thomson Reuters I/B/E/S.

The company’s net revenue fell 17.7 percent to $6.3 billion, below the average analyst estimate of $6.33 billion. In North America, reported new revenues were nearly flat at $1.72 billion.

In China, Mondelez said its Milka chocolates and more than a dozen products would hit shelves from September.

“China saw a 3 percent decline in chocolate confectionery sales in 2015, a decline that is expected to continue in 2016, which means that the company could arguably be entering the market at the wrong time,” Skelly said.

Four years ago, Mondelez entered China’s gum market. Gum has since grown into a $200 million business for Mondelez in China, according to the company.

Additional reporting by Subrat Patnaik in Bengaluru; Editing by Kirti Pandey and Alan Crosby

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