8. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Investors In Q1 2024: 62
Mondelez International, Inc. (NASDAQ:MDLZ) is a confectionery company known for some of the best known brands in the world such as Oreo and Dairy Milk. However, while its products are not high end (like Estee Launder’s), the firm is facing similar troubles from inflation despite its heft. Mondelez International, Inc. (NASDAQ:MDLZ)’s problems are further complicated by the fact that a large portion of its products are dependent on cocoa. Cocoa prices crossed $10,000 per ton in March 2024, and while it did not directly impact Mondelez International, Inc. (NASDAQ:MDLZ) due to hedging, the trends have created worries about the future. Additionally, the firm is also battling the impact of high inflation on its consumers, and to offset high costs, it has had to raise prices right when consumers are also feeling the inflationary pinch.
Mondelez International, Inc. (NASDAQ:MDLZ)’s first quarter earnings were all about cocoa too, with management explaining in detail its plans to not only deal with the changes but also its belief that they are ‘transitory.’ What this means is that the full impact might not pass on to customers, and while this could bode well for Mondelez International, Inc. (NASDAQ:MDLZ)’s market share, it might eat into its margins as a result and depress earnings. One relevant snippet from the earnings call is as follows:
Yes. I believe it’s absolutely critical for us to get ready for potentially cocoa staying at these levels. I just want though to call out one thing, which is, the forward curve for cocoa is heavily inverted. And that means in general that even today we could potentially get physical coverage into 2025 at cheaper prices than the current spot price that we see today. But rest assured that as a Company, we are looking at all possible scenarios. And as a matter of fact, we are taking a fresher look at some of the costs we have, making sure that we try to understand the level of flexibility that we have. We are looking thoroughly into additional RGM. We will stay absolutely true to the concept of protecting price point, particularly in emerging markets.
We are not going to move the LUP, low unit price points in India, for instance. But we will be looking into potential RGM in terms of promo, in terms of downsizing, etc. So to say that we will have to make sure that elasticity stays in control. In the end, we are going to be managing 2025 in light of what we think a more plausible cocoa level is, despite the fact that it might feel very high, because we fundamentally believe that in a couple of years’ time tops, the cocoa price will correct. And at that point in time, we will have to have retained our volume, our share, our competitive advantage both in developed and in emerging markets. And that’s the way we are looking at this. But rest assured, we are looking at all possible scenarios. And we’re going to be sitting down soon with the teams to make sure that we put in place already all the possible actions that would allow us to go through a potential worst-case scenario in 2025.
