Cadbury owner tightens belt

Cadbury-owner Mondelez New Zealand is tightening its belt as it braces for the coming downturn, despite coming through the Covid-19 lockdown in good heart.

The Kiwi arm of the food giant raced around the clock to keep supermarkets stocked during the five-week lockdown, getting a strong sales boost in the June quarter. However, it's got one eye on the looming recession, and is putting off projects and cutting expenses in preparation.

"What we had to do was take a look at our back-half plan, and make a choice to simplify," Cara Liebrock, managing director of Mondelez NZ told BusinessDesk.

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Mondelez NZ, whose local brands include Cadbury, Pascalls, Oreo, Ritz, BelVita and Philadelphia cream cheese, didn't take the wage subsidy and was classified as an essential service during the April lockdown.

Liebrock said sales were strong in that period as consumers bought bigger blocks rather than individual bars. The company has a 37 per cent share of the chocolate market and 32 per cent of lollies.

She wouldn't provide details, but grocery sales have been strong across the country, with Countdown supermarket sales up 15.1 per cent in the 10 weeks ended June 14 from the same period last year.

Even Easter was well celebrated, with $20.7 million worth of chocolate sold in the two weeks to Easter Sunday, just 0.5 per cent lower than in 2019, according to Nielsen Scantrack data.

Mondelez New Zealand Investments' financials show the company is back in the black after two years of losses. In calendar 2019, it reported a net profit of $2.5m, turning around a loss of $6.3m in 2018.

That was achieved despite a revenue decline of 3.4 per cent to $204.5m.

But Liebrock is coy about how the current year is shaping up.

"I'm cautious to quote a number, but it's fair to say we've had some really good growth coming out of quarter two despite a mix across channels and, in the balance of the year, we have to manage costs," she said.

Mondelez's local unit is deferring major projects and cutting expenses in preparation for the upcoming downturn, although it hasn't made any redundancies.

The firm recently brought merchandising back in house, adding 100 new roles and following on from 12 more call-centre staff it added last year.

Still, in 2017 it pulled out of manufacturing in Dunedin and laid off 350 people.

Projects deferred

"Even though we don't have manufacturing, we are still for the local market and have to drive the bigger innovations," Liebrock said.

The company was preparing to announce its local SnackFutures innovation before Christmas, but that has now been put off until the start of next year.

The SnackFutures programme is a global initiative which Mondelez International wants to grow to $100m by 2022. It has three mandates: inventing new brands, reinvesting in old ones and venturing with start-ups.

In the US, it has invested in firms that produce probiotics and paleo snacks.

Liebrock isn't commenting on which is being implemented here, but said Mondelez will introduce a healthy food product.

This year it will still roll out Kiwi innovations, such as new iterations of the Caramilk chocolate bar.

The company has just four people in its local marketing team, but is well supported by Australia. Nielsen figures show it spends much more on ads than its rivals, reporting a $34.7m marketing cost last calendar year, up from $26.7m in 2018.

Nielsen Ad Intel Ratecard data in the chocolate category shows Cadbury spends three-times more than nearest rival Ferrero Australia, with $14.5m spent on ads in the 12 months through May, compared with $4.6m for the Kinder Surprise and TicTac owner.

The ad spend is 54.6 per cent higher than the year earlier, when the value of its advertising came to $9.4m.