What We Know About Chocolate and Consumer Trends From Mondelez, Kraft Heinz and Hershey Q2 Earnings

As the consumer packaged goods (CPG) industry grapples with complex economic and consumer trends, three major players — Mondelez International, Kraft Heinz and Hershey — are steering their ships through turbulent waters with distinct strategies and adaptive approaches.

From surging cocoa prices to evolving consumer preferences and regional market dynamics, these companies demonstrated resilience and innovation in their recent Q2 2024 earnings reports. Their performances highlighted their abilities to adapt to immediate challenges and illustrated their commitment to long-term growth, sustainability and market leadership.

Mondelez International

Mondelez’s portfolio of brands, including Cadbury, Oreo, and Chips Ahoy, benefits from strong consumer loyalty and innovative marketing strategies. CEO Dirk Van de Put emphasized the company’s focus on core categories such as chocolate, biscuits and baked snacks, which remain resilient despite economic pressures.

Regional performance has shown distinct patterns: North America demonstrates strong stability, Europe displays cautious optimism, and emerging markets yield mixed results. Mondelez is also making strides in sustainability, with a carbon-neutral biscuit plant in China and a new partnership with Lotus Bakeries to enhance its presence in India and the sweet biscuit market.

In the second quarter, Mondelez reported a 2.5% increase in organic net revenue while net revenue fell by 1.9%. It recorded an 11.3% rise in adjusted gross profit, driven by strategic cost management and effective pricing.

Mondelez is driving growth by expanding distribution and launching innovative promotions, like Star Wars Oreo and lower-priced pack sizes. Despite recent cocoa price hikes, the company is optimistic about maintaining chocolate growth through strategic investments and its Revenue Growth Management playbook.

“We continue to play for the long term in chocolate, biscuits and baked snacks because these core categories remain strong consumer favorites with very high loyalty to our iconic brand portfolio,” Van de Put said during the Q2 earnings call. “Within these great categories, our advantaged geographic footprint provides additional confidence that we are well positioned to compound long-term sustainable growth.” 

Kraft Heinz

Meanwhile, Kraft Heinz is navigating a challenging consumer environment by concentrating on delivering high-quality, value-driven products. The company has managed to keep prices below inflation through operational efficiency and strategic investments in innovation and marketing.

Despite facing headwinds in various markets, including the U.K., China and Brazil, Kraft Heinz’s strategy revolves around selective promotions and targeted trade investments to address price gaps with competitors.

The company’s emphasis on innovation is reflected in new product developments and collaborations, such as those with Taco Bell, aimed at offering consumers exciting and diverse options. With a focus on sustainable value and operational efficiency, Kraft Heinz is poised to gradually improve its revenue and volume, particularly in emerging markets.

Kraft Heinz CEO Carlos Abrams-Rivera acknowledged the ongoing challenges in the consumer environment but expressed pride in the company’s ability to offer high-quality, convenient products at good value. 

Net sales decreased 3.6%, to $6.5 billion.

Chief Financial Officer Andre Maciel said, the company plans to increase trade investments selectively to address price gaps with competitors, focusing on long-term growth rather than short-term promotions. He noted that price gaps in about 30% to 40% of its U.S. portfolio may require additional investments.

In China, the industry remains weak, but Kraft Heinz is gaining share in modern trade. In North America, the company is focused on balancing innovation and pricing strategies. Abrams-Rivera highlighted the importance of providing value through product innovation and accessibility across different price points. Efforts to enhance brands like Lunchables and Capri Sun are expected to drive improvements.

“Our teams have been relentless in unlocking efficiencies with a mindset of continuous improvements,” Abrams-Rivera said. “And as a result of greater productivity and efficiencies, we have been able to hold prices below inflation this year while continuing to invest in innovation, marketing, and R&D.” 

Hershey

Hershey is tackling high cocoa prices with a 6%-7% price increase, aiming to balance value and profitability. The company’s Q2 results showed a return to normal inventory patterns, with a strong third-quarter anticipated due to seasonal shipments and new product launches.

Second-quarter consolidated net sales decreased 16.7%, to $2.074 billion while net income sank 55.15%, to $180.9 million.

“Today’s operating environment remains dynamic, with consumers pulling back on discretionary spending,” Michele Buck, The Hershey Company President and CEO, stated. “Our business has been impacted by these trends, but we are pleased to see continued growth in the confection category and momentum building in our Salty Snacks portfolio. Our second-half innovation is expected to bring energy to our categories, and we are confident our evolving strategies will meet consumers’ changing needs and drive long-term success.”

Despite challenges in the popcorn category, Hershey officials remain confident, with Dot’s Pretzels continuing to show significant growth and innovation potential, including new flavors like Parmesan Garlic. The company is optimistic about stabilizing market conditions and sees opportunities for product and marketing innovation.

Company officials remain cautiously optimistic about how consumers will respond, anticipating some price sensitivity but adopting a conservative strategy. Buck stated that the company is employing a “measured approach” to pricing.

“We’ve absorbed a lot of inflation already, but we do believe we need to pass some of it on,” she explained. “And we’re seeing the category hold up fairly well in this tougher environment. We think it’s historically been very rational. We think it will continue to be. So, overall, we are not going to price the entire portfolio. We do have a robust internal process where we take a lot of factors into consideration to determine what our approach will be, but that’s what gives us confidence.”

Overall, Mondelez, Kraft Heinz and Hershey are navigating a changing market by leveraging core strengths and innovation, demonstrating resilience and adaptability in the consumer packaged goods sector.

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