Snacking giant Mondelēz International is adding new “value” options to its lineup as the way shoppers define the term has changed amid a prolonged run-up in consumer prices.
Dirk Van de Put, Mondelēz’s CEO, told Wall Street analysts that value has evolved among some consumers from price per pack — which benefited the company’s family and party size offerings — to an overall basket size the shopper can afford.
This is particularly notable among lower income consumers. Van de Put said if biscuits (cookies and crackers) are at the right price point, people will buy them. Otherwise, shoppers won’t add the products to their carts.
During the Oreo and Ritz maker’s earnings call on Tuesday, he said Mondelēz is implementing new “targeted promotions that are probably going to offer a little bit more price” on brands like Chips Ahoy! that have been affected by the “sort of hesitation” from lower income consumers.
The Chicago-based packaged food manufacturer also plans to add more Oreo, Chips Ahoy! and Ritz packs later this year within the $3 to $4 price range.
“More promotions, smaller pack sizes that we will offer, driving distribution, those are the solutions we are planning for,” Van de Put said. “We’re already seeing the benefits.”
Chips Ahoy! is “recuperating quite nicely,” while Oreo and Ritz are increasing their market share, he noted.
Where consumers shop also is changing, Van de Put told analysts. He pointed out that the biscuit category is seeing the largest growth in places like Walmart, while in grocery they are seeing a share decline.
During its second quarter, Mondelez said Tuesday that net sales fell 1.9%. Product volumes declined 2.2 percentage points, including 1.9 percentage points in North America.
Food and beverage companies have warned that consumers are pushing back on higher prices, leading to a drop in product volumes and often a decline in sales. Earlier this month, PepsiCo noted that sales volume for its Frito-Lay North America business fell 4% in the latest quarter. The maker of Doritos and Sun Chips also noted the growing importance of value.
“There is clearly a consumer that is more challenged, and is a consumer that is telling us that in particular parts of the portfolio … they want more value to stay with our brands,” Ramon Laguarta, PepsiCo’s CEO told Wall Street. “We have been working different tactics to give the consumer what they want, and we see that is working.”
Laguarta said prices for certain products, like unsalted potato chips or tortilla chips, will likely need to be adjusted to make them more attractive to consumers. Some offerings also will see increased levels of marketing. At the same time, other permissible offerings, such as SunChips and PopCorners, are growing and consumers who purchase these brands aren’t concerned about value.
