Mondelez rebounds from note ban impact in Q4

CEO says the India business delivered high single-digit growth in the first quarter of CY17

Global snacks maker Mondelez rebounded from the impact of demonetisation faster than expected, delivering high single-digit growth in the first quarter of 2017, company chairman & chief executive Irene Rosenfeld said in an earnings call on Wednesday. The world’s second-largest confectionary company reported first quarter revenue of $6.4 billion, ahead of analysts' estimates, while net income came in at $630 million, prompting Rosenfeld to say that the company was off to a solid start in 2017.

“In the Asia, Middle East and Africa (AMEA) region, Cadbury chocolate grew double digits in India, supported by solid innovations and strong marketing, while our team worked with customers to manage through demonetisation,” she said.

Rosenfeld's comments are significant since demonetisation was among the key factors that hurt revenue growth of Mondelez in the fourth quarter of 2016. The firm had reported an 8.1% year-on-year decline in net revenue to $6.77 billion in the fourth quarter of 2016, with a net income of $93 million. 

Specifically, organic revenue growth, which is basically sales growth minus revenue growth from mergers, takeovers, acquisitions etc, declined 1.2% for the December 2016 quarter. The reasons included demonetisation impact, which was an approximate $40 million across all categories, Mondelez had said during its fourth quarter earnings call in February. 

In the March 2017 quarter, however, Mondelez's organic revenue growth was 0.6%, Rosenfeld said, led by key markets such as Russia, Germany, Southeast Asia, Mexico and India. “We’re also reaching more traditional trade outlets in second and third-tier cities in China and across rural areas in India,” she said, throwing light on how the firm was bouncing back in markets such as India.

The initiatives spelt out by Rosenfeld, said analysts, indicated the firm, the largest chocolate maker in India, was keen to return to the growth path in a market where it has spent close to Rs 2,000 crore in the past few years. The maker of Cadbury chocolates and Oreo biscuits in India reported its slowest growth in a decade for the financial year ended March 2016 with net sales at Rs 5,411 crore, a year-on-year growth of 4% only. Net profit fell to Rs 35 crore in the year ended March 2016, against Rs 98 crore in the previous year.

In August 2016, Mondelez India had appointed a new MD, Deepak Iyer, following the departure of Chandramouli Venkatesan. Iyer, who has worked in financial services (as CEO of Bharti AXA General  Insurance) and consumer goods (in PepsiCo, Marico and Wrigley's) was tasked specifically with bringing growth back to Mondelez. Under Iyer, Mondelez has focused on both price points as well as distribution. The firm, say industry sources, reaches over a million outlets in the country, with bulk of its distribution largely in urban areas.