Mondelez Will Raise Prices Next Year

By Annie Gasparro

Mondelez International Inc. will raise prices in North America next year, passing the burden of rising ingredient and transportation costs on to retailers and consumers.

Food and consumer-products companies have increased prices lately in response to record-high shipping costs. Earlier this year, retailers were pushing back on brands that wanted to raise prices, but now executives say they are more receptive to passing on higher costs.

"There has been more openness to price increases," chief executive Dirk Van de Put said in an interview.

Mondelez shares rose 2% after hours on Monday after the company reported stronger profit margins in the third quarter despite higher costs and tempered sales growth.

Hershey Co., Nestlé SA and Unilever PLC have also said they needed to charge more to cover greater expenses, and that they weren't able to push those higher prices onto retailers until recently.

Mondelez said Oreo cookies, Ritz crackers and other treats boosted revenue in its latest quarter, especially in emerging markets that are growing faster than the U.S. Comparable sales in emerging markets, which make up 37% of revenue, were up 6% in the quarter.

The Illinois-based company's comparable sales rose 1.2% globally in the latest quarter, helped by prices that averaged 1.6% higher.

Mr. Van de Put said Mondelez raised prices on some U.S.-focused brands over the summer. Those include Fig Newtons, Wheat Thins and Triscuits, as opposed to brands like Oreos that are popular around the world. He wouldn't say which brands would be subject to further price increases.

Mondelez plans the new round of price increases to take effect at the beginning of next year in the form of straight hikes, adjustments to promotional deals and smaller package sizes that earn a higher price per ounce, Mr. Van de Put said.

The company said comparable sales in North America fell 2% in the third quarter, despite higher prices for its snacks. Improving efficiency at Mondelez's factories and reorganizing its corporate structure will help reverse the decline, Mr. Van de Put said.

Mondelez has tried to follow the shift toward fresher, more natural foods in the U.S. by buying niche brands that offer healthier or gluten-free snacks, such as Enjoy Life Foods and Tate's Bake Shop cookies.

Mr. Van de Put, who joined Mondelez as chief last November, set a goal to boost the company's adjusted operating profit margin to 17% this year, from 16.3% in 2017. In the third quarter, that metric rose to 17.1%.

Mondelez's total sales for the quarter fell 3.7% to $6.29 billion, short of analysts' estimates for $6.32 billion in revenue, according to FactSet. Mondelez's profit, adjusted to exclude acquisitions, divestitures and foreign currency fluctuations, rose 18% to 62 cents per share, topping analysts' projection for 60 cents a share.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

October 29, 2018 18:52 ET (22:52 GMT)

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