Mondelēz International posts improved global results, as EU antitrust investigation looms

Global snacking group Mondelēz International has released its full-year results that show a 2.8% annual increase in net revenues to $26.6 billion despite operating amid the challenges of the ongoing pandemic, reports Neill Barston.

However, its positive momentum, which includes encouraging fourth quarter growth put at 5.6%, comes as the EU opened a formal antitrust investigation on whether the business restricted competition in a range of national markets including chocolate and biscuit segments between European countries – which the company confirmed it would offer a constructive response on.

Its positive results for 2020 had been driven largely by gains within its US operations, as consumers increased their intake of confectionery and sweet goods amid the ongoing coronavirus pandemic – which has seen America highest death toll in the world of nearly 450,000 people.

Despite challenging conditions, the company, which owns brands including Oreo, Cadbury and Milka, has engaged with a number of key initiatives over the past year, including evaluating the scale of sustainability work required in cocoa growing communities, with its studies revealing a $10 billion farmer income gap in West African producing nations. It also made notable moves on recycling plastics and appointing its first global diversity and inclusion officer.

“2020 was a successful year for Mondelēz International and I am proud of our performance, including record share gains, in a challenging operating environment. Our categories were resilient, with the exception of gum which represented 5% of our revenue in 2020. The strength of our brands was evident, as was the dedication of colleagues around the world who executed with excellence in difficult circumstances. We made meaningful progress with our strategic agenda in 2020, continuing to increase investment in brands and capabilities, simplifying our portfolio, expanding into adjacent categories and making acquisitions in high growth areas of snacking. We moved quickly to mitigate incremental COVID-related costs and delivered on our commitment to generate strong cash flow.

“We enter 2021 in a strong position financially and in the marketplace which gives us confidence that we can deliver on our long-term growth targets in 2021 and beyond,” said Dirk Van de Put, Chairman and Chief Executive Officer.

Investigation launched

Regarding the investigation into the company’s operations in Europe, the EU Commission noted, markets for the sales of these products are worth tens of billions of Euros each year, and stated that is concerned that Mondelez may have restricted the so-called ‘parallel trade’ of its ranges through agreements and unilateral practices.

The ruling European authority explained that traders and retailers try to procure products in the internal market where the prices are lower and trade them to markets where prices are higher. This generally leads to price decreases in countries where prices are higher. Restrictions to such parallel trade can lead to the isolation of a national market whereby the manufacturer or supplier can charge higher prices to the detriment of consumers. Restrictions to parallel trade can also lead to less product diversity.

As the authority added, if the case is proven, the agreements and practices under investigation may create anticompetitive obstacles to trade within the EU Internal Market in breach of Articles 101 and/or Article 102 of the Treaty on the Functioning of the European Union (TFEU). The Commission said it will now carry out its in-depth investigation as a matter of priority. The opening of a formal investigation does not prejudge its outcome.

A spokesperson for Mondelez commented: “We learned about the European Commission’s announcement that it has opened a formal investigation into Mondelez International’s practices related to the cross-border supply of products within the European Economic Area.  We will work constructively with the European Commission as it conducts its review.

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