MDLZ Mondelez International Inc

By Annie Gasparro 

Mondelez International Inc. said tough lockdowns to fight the coronavirus in emerging markets hurt sales of its cookies and other snacks in the second quarter.

Comparable sales for the maker of Oreo cookies, Toblerone chocolate and Ritz crackers rose 11% in North America, but in Latin America, where coronavirus cases have multiplied rapidly, sales by that metric fell 11%. In its Asia, Middle East and Africa division, where some countries have imposed stricter social-distancing regulations than in North America, comparable sales decreased 3%, the company said Tuesday.

Mondelez Chief Executive Dirk Van de Put said the company's emerging-markets business improved in June and July as store closures eased and more consumers were able to access its snacks. "The majority of these markets are on better footing," he said.

Mondelez said the surge in snacking in North America has continued while sales in India, China and Southeast Asia have returned to growth, likely leading to stronger revenue in the second half of the year.

Still, executives said Latin America will be a continuing struggle. Mondelez's business in countries such as Brazil is concentrated more in gum and candy -- categories that have been hit harder by the pandemic and economic fallout as people go to convenience stores less often and cut back on indulgences. Mondelez said that overall, the global business environment remains volatile and susceptible to a second wave of lockdowns.

"We are now clearly talking about this change to our lives continuing well into 2021," Mr. Van de Put said.

Mondelez shares were flat in after-hours trading at $55.64.

Food companies in the U.S. have been inundated with orders from grocery stores since the pandemic exploded in March. In a country where a lot of people are staying home and can afford to stock up on food, the coronavirus has buoyed sales for the food industry.

But Mondelez has benefited less than its U.S.-centric rivals such as Campbell Soup Co. and Conagra Brands Inc.

Mondelez has also spent more to boost production to meet the unprecedented demand in regions such as North America. The company said Covid-19-related costs, higher prices for raw materials and unfavorable exchange rates contributed to a lower profit margin in the latest period.

Mondelez said it is removing 25% of the varieties to simplify its supply chain and innovation process and reduce inventories. The cost-saving move will also help meet higher demand for core products such as Oreos.

In the latest quarter, Mondelez said it gained market share in many segments, such as cookies in the U.S. and China, and chocolate in India and the U.K.

Mr. Van de Put said he is investing more in its brands to leverage the momentum furthered by the pandemic. He also is investing in e-commerce, and figuring out how to best handle pricing and sizes of snacks to weather the recession. For instance, he said, Mondelez can work with product developers and packaging designers in India to find ways to reduce the cost of its chocolate for consumers.

Mondelez's total revenue fell 2.5% from last year's second quarter to $5.9 billion, in line with analysts' estimates, according to FactSet. Adjusted profit of 63 cents a share marked a 16% increase from the prior year excluding currency fluctuations and topped analysts' projection of 56 cents a share.

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

(END) Dow Jones Newswires

July 28, 2020 20:04 ET (00:04 GMT)

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