The Ritz and Oreo maker acquired Clif in 2022, and is working on the integration.
Clif Bar. (Photo by Flickr user Like_the_Grand_Canyon, used under a Creative Commons license.)
Months after the close of one of the highest-profile consumer goods acquisitions of 2022, Clif Bar is already contributing to growth at Mondelēz International.
The Ritz and Oreo maker acquired Clif in a $2.9 billion deal that wrapped up in August.
With the deal, Mondelēz brought a $1 billion snacking platform into its fold.
Since the deal closed, results have been positive, Mondelēz CEO Dirk Van de Put told investors on the company’s earnings call to recap the fourth quarter. Van de Put didn’t share exact numbers on the division.
“We have strong results driven by good demand and good pricing, we had strong double-digit revenue growth, and we had high double-digit EBIT growth in the fourth quarter,” Van de Put said. It also has gross margins that are above average for the company in North America.
Integration is not a straight and narrow path. The acquisition came at a time of 40-year-high inflation. So, as it has with many brands, Mondelēz raised prices on Clif Bar products. This was “not normal” for Clif Bar, Van de Put said.
“We've done two pricing actions last year, and we've seen minimal volume elasticity,” he said.
For Clif, joining a larger company can bring beneficial change. The full integration into Mondelēz is still ongoing. The company is prioritizing certain Clif SKUs where it sees opportunity, and working to make improvements in the supply chain.
“We are seeing good supply recovery through Q3, and now we're starting with the integration of the businesses and [to] find the cost and the revenue synergies,” Van de Put said. “We have a full integration team in place.”
There are also changes underway in the ranks. According to Forbes, a number of executives including CEO Sally Grimes are set to leave the company at the end of the month. Alexandre Zigliara, a Mondelēz executive who has been leading the integration, will serve as president going forward.
For Mondelēz, acquiring Clif afforded the company with expansion into the $16 billion protein and energy bar market.
“It's ESG-focused, so it's right on the money as it relates to consumer interest,” Van de Put said. “But even in North America, we think that Clif has a huge opportunity for expansion, better distribution, and we are going to complement that with the international opportunity.”
The Clif acquisition comes amid a flurry of M&A activity for Mondelēz in recent years. In 2022, it also acquired Mexican candy business Ricolino and baked snacks brand Chipita, while divesting a gum portfolio that included Trident. That came on the heels of the acquisition of Tate’s Bake Shop, Give & Go Prepared Foods and Grenade in recent years.
It all adds up to a strategy that puts a focus on chocolate and biscuits.
“Our long-term vision is to generate 90% of revenue through these two core categories,” Van de Put said. “Our acquisitions of Chipita and Clif Bar helped us expand our footprint in the growing Baked Snacks segment, while our acquisition of Ricolino helped us fill an important geographic white space, establishing a strong foothold in a priority emerging market of Mexico.”
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.
