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Snack giant Mondelēz International is adding new “value” options to its product lineup as rising consumer prices change the way shoppers define the term.
Mondelez CEO Dirk van der Put told Wall Street analysts that for some consumers, value has shifted away from per-pack pricing — which the company favors for family and party-sized offerings — to the size of the entire basket a shopper can purchase.
This is especially true among low-income consumers. Van de Putt said that if biscuits (cookies and crackers) are priced appropriately, people will buy them. Otherwise, shoppers won't put them in their shopping carts.
On Tuesday, during the Oreo and Ritz maker's earnings call, he said Mondelēz was implementing “a new targeted promotion that will probably give us a slightly higher price point” for brands like Chips Ahoy! that have been affected by “a kind of hesitation” from lower-income consumers.
The Chicago-based packaged foods maker plans to add more Oreo, Chips Ahoy! and Ritz packs in the $3 to $4 price range later this year.
“More promotions, smaller pack sizes to offer, faster distribution, that’s the solution we’re planning,” Van de Put said. “We’re already seeing the benefits.”
He said Chips Ahoy! is “recovering pretty well,” and Oreo and Ritz are gaining market share.
Where consumers shop is also changing, Van de Put told analysts. He noted that the biscuit category is seeing the most growth at places like Walmart, while grocery stores are losing share.
Mondelez said Tuesday that its net sales fell 1.9% in the second quarter. Product volumes fell 2.2 percentage points, with a 1.9 percentage point drop in North America.
Food and beverage companies have warned that consumers are rejecting higher prices, which often leads to lower volumes and lower sales. Earlier this month, PepsiCo said sales at its Frito-Lay North America business fell 4 percent in its most recent quarter. The maker of Doritos and Sun Chips also cited the growing importance of value.
“There are certainly consumers who are struggling more, and there are consumers who are saying they want to put more value on our brands in certain parts of their portfolio,” PepsiCo CEO Ramon Laguarta told Wall Street. “We’ve been using a variety of strategies to give the consumer what they want, and we think that’s working.”
LaGuarda said prices for certain products, such as unsalted potato chips or tortilla chips, may need to be adjusted to make them more attractive to consumers. Some products will have to be more aggressively marketed. At the same time, other acceptable products, such as SunChips and Popcorners, are growing, and consumers who buy these brands are not as concerned about value.
