Mondelēz Says Premium Brands Like Oreo, Ritz, Cadbury Will Avoid Consumer Trade-Down

Snack and candy giant Mondelēz International says its portfolio of premium food and beverage (F&B) brands will be protected from the worst of the trade-down trend even as rising prices continue to affect consumer behavior.

This, as the parent company of Oreo, Cadbury, Ritz, Philadelphia Cream Cheese and three dozen other brands told analysts Tuesday (Nov. 1) that it expects consumers will hang on to simple, affordable luxuries while they belt-tighten elsewhere.

“We see consumers saying that chocolate is really something they cannot live without,” CEO Dirk Van de Put told analysts while discussing the company’s third quarter results. “We believe that the spending decrease that we will see from consumers eventually, as inflation keeps hitting them, is going to probably be more in the big-ticket items,” he added, noting that grocery items seemed to be doing pretty well overall.

That’s especially true in Europe, he said, where shoppers “continue to prioritize grocery spending” over “other discretionary items.”

His remarks run counter to consumers’ self-reports of their behavior, at least in the United States. Research from the August edition of PYMNTS’ Consumer Inflation Sentiment study “Consumer Inflation Sentiment: Inflation Slowly Ebbs, But Consumer Outlook Remains Gloomy,” which draws from a survey of more than 2,100 consumers, finds that 62% have been cutting back on nonessential grocery expenses. Plus, 37% reported that they have been reducing the quality of the items they are buying at the grocery store.

Get the report: Consumer Inflation Sentiment: Inflation Slowly Ebbs, But Consumer Outlook Remains Gloomy

Indeed, Mondelēz’s unconcerned attitude about trade-down may come from consumers’ strong loyalty to its products relative to other F&B brands.

“Because of [our customers’] enduring brand loyalty, private label share is either flat or down in the vast majority of our markets,” Van de Put said. “Shoppers continue to say they are much less likely to switch to private label in chocolate and biscuits compared to other categories.”

Van de Put attributes the lack of trade-down relative to other brands to the company’s marketing spending to maintain “trust in our brands.” Regarding this spending, he espoused an if-it-ain’t-broke approach, noting that, as soon as there is evidence that the marketing spending is not yielding revenue growth, the company will change its tack.

Additionally, given the strong performance of chocolate and biscuits in the face of economic headwinds, Mondelēz noted in a presentation accompanying the earnings release that the company is increasing its focus on these categories with plans to have these segments represent 90% of total business down the line.