Food & Beverage

Mondelez CEO: No across-the-board price increases to combat rising commodities costs

Key Points
  • Mondelez CEO Dirk Van de Put says the snack company isn't considering across-the-board price hikes to combat rising inflation.
  • Mondelez reaffirmed its forecast for the year and set one for next year.
  • Van de Put took over as CEO of the snack giant last fall after longtime CEO Irene Rosenfeld retired.
Mondelez CEO: Earnings growth will slow in 2019

Mondelez International CEO Dirk Van de Put said the snack food giant isn't considering any broad price hikes increases to combat rising commodity costs.

"You've all heard about the freight inflation and some of the other commodities. But overall, we are not looking at a sort of across-the-board price increase, no, no," he told CNBC in his first interview since taking the helm last year.

Van de Put rolled out a new strategy Friday at the company's annual investor day meeting in Boston. He said the maker of Oreos, Ritz crackers and Nabisco biscuits plans to expand its e-commerce platform as well as its reach into international markets. Van de Put also intends to give more attention to smaller snack foods the company has acquired in recent years, he said.

He took over as CEO of Mondelez last fall after longtime CEO Irene Rosenfeld retired. A former veterinarian, Van de Put started his business career in the public relations department of candy and pet food company Mars.

"We do have these big power brands, like you said, Oreos, Ritz, Milka, Cadbury," he told CNBC's Sara Eisen. But as we have grown through acquisitions, we have also acquired quite a lot of local brands, which are quite unique and quite linked to the culture. And I think they've been neglected a little bit."

Van de Put said Mondelez is undervalued. Shares slid 3 percent Friday. They've now dipped about 2 percent this year.

Van de Put said margin improvement, or making products more profitable, under Rosenfeld has been "quite impressive." It was one of her priorities and included cutting costs and boosting productivity.

Because of the improvements, Mondelez can now start focusing on top-line growth, or selling more products, Van de Put said.

"You don't have to constantly be obsessed about your margins because they're in the right place. So if you now get volume growth to kick in at these higher margins, that's a huge benefit for us," he said.

Packaged food as a whole has struggled as consumers ditch boxed and canned food in favor of more fresh foods and niche brands. Snacks are a growth opportunity, though, especially among younger consumers.

These days, consumers care about health benefits, naturalness and the sustainability of ingredients, Van de Put said. Mondelez will try to cater to those consumers. It will also give more attention to its local brands, which Van de Put says have "been neglected a little bit."

Mondelez also plans to focus on brands that can play in multiple categories. Van de Put used Oreo as an example of a brand that's available in ice cream, yogurt and brownies.

As consumer preferences change, so is where they're shopping. Van de Put said Mondelez will pursue opportunities in new channels, including e-commerce, convenience stores and discounters.

"The food space itself, I would say, is more exciting than ever," Van de Put said.

The snackmaker expects revenue this year to grow by 1 percent to 2 percent. It also plans to buy back approximately $2 billion in shares.

Next year, Mondelez anticipates revenue to rise by 2 percent to 3 percent and adjusted earnings per share to grow by 3 percent to 5 percent. The company is projecting approximately $2.8 billion in free cash flow.

Over the long term, Mondelez said it's targeting annual revenue growth of 3 percent or more, adjusted earnings per share in the "high-single" digits, free cash flow of $3 billion or more and dividend growth that outpaces adjusted earnings per share growth.

Its revenue forecasts are "organic," meaning they exclude fluctuations in sales from acquisitions or divestitures.

Mondelez gave its financial targets as it unveiled a new tagline, "snacking made right." The company said this builds on Mondelez's promise to offer consumers "the right snack, for the right moment, made the right way."