As CPG brands debate whether inflation is easing or intensifying, Mondelēz expects more challenges ahead.
Snack and candy giant Mondelēz International, parent company of a wide range of popular brands including Cadbury, Oreo, and Trident spoke to this outlook on a call with analysts Tuesday (Jan. 31) discussing the company’s fourth quarter 2022 financial results.
“We are not in a situation where we can say that costs are coming down,” Mondelēz CEO Dirk Van de Put said on the call. “If anything, they’re up versus last year.”
The company recently raised prices in the United States and is in the process of doing so in Europe, even as price-sensitive consumers cut back on indulgences such as cookies and chocolate. Van de Put noted that sales of these items are down in Europe, attributing this decrease to “the consumer feeling some recession.”
The company’s price increases come as grocers reportedly push back on brands, trying to reverse these increases. Whole Foods Market, for instance, Amazon’s premium grocery retailer, recently asked suppliers to lower their wholesale prices so that the chain could reduce prices for consumers, The Wall Street Journal reported Tuesday (Jan. 31).
Brands are split on whether inflation is easing, prompting consumers to adjust their shopping behavior accordingly, or whether 2023 will be as or more challenging, and as such continue to tighten their belts.
Regarding the former, spices and flavorings giant McCormick said on an earnings call Thursday (Jan. 26) that shoppers are returning to name brands. CEO Lawrence Kurzius said the company has seen trade-down “moderate” and that the company’s lower-priced Lawry’s line has had consumers “trading up from private label.”
Conversely, consumer packaged goods (CPG) giant Colgate-Palmolive is seeing trade-down flatlining in some categories and continuing to grow in others, as the company shared on its fourth quarter earnings call on Friday (Jan. 27). CEO Noel Wallace noted that, as toothpaste sales held strong against lower-priced store brands, many of the company’s home care products still faced increasing competition.
Similarly, Procter & Gamble said say earlier this month that trade-down is neither on the rise nor are consumers reverting back to name brands, but rather store brands’ market share held constant throughout the back half of 2022.
Either way, consumers’ price anxieties certainly remain top of mind. PYMNTS’ December study “Consumer Inflation Sentiment: In It For The Long Haul,” for which we surveyed more than 2,300 U.S. adults, finds that consumers on average believe it will take another 20 months before inflation returns to 2021 levels. Moreover, about three-quarters of those surveyed are very or extremely worried about the U.S. economic situation.
Indeed, the retailers stocking these name brands (whose private-label offerings represent the competition) maintain that consumers’ shopping behavior continues to be highly influenced by elevated prices.
“We’ve been trending the same question of, ‘How concerned are you with inflation?’ for over a year, and it’s still sitting at two-thirds of shoppers that are highly concerned,” Barbara Connors, vice president of commercial insights at 84.51°, the marketing insights subsidiary of grocery giant Kroger, noted in a recent interview with PYMNTS.
“The mindset around having a constrained budget and needing to make choices about what you put in a basket is one that is going to be sustained throughout this year.”