Mondelez International Inc.’s
finance chief is reallocating funds to boost the snack maker’s marketing, and the company for the first time will spend the majority of its advertising dollars on digital channels instead of on television commercials.
The Chicago, Ill.-based food manufacturer, which owns the Oreo cookie, Cadbury chocolate and Ritz cracker brands, cut its marketing spending at the start of the coronavirus pandemic to bring down costs. Now, Mondelez is reversing course, aiming to hold on to recent sales gains in North America and stimulate demand in other markets, Chief Financial Officer Luca Zaramella said.
Sales in North America rose 17.3% in the second quarter from a year earlier to $2.02 billion. Revenue in developed markets overall grew in the second quarter from a year earlier, by 5.4%. By contrast, sales in emerging markets over the same period fell by 15.6%, Mondelez said in its latest earnings report. Mondelez generates the majority of its sales outside of the U.S.
“We want to retain them,” Mr. Zaramella said, referring to new customers attracted in the second quarter, adding, “We want to invest more in our communication to consumers.”
Some funds originally allocated for travel, consulting and real estate will be shifted toward marketing, Mr. Zaramella said, noting, “The first question I ask is ‘Where is the money coming from?’” He declined to detail how much Mondelez will dedicate to online and television advertising, but said it would be “more than ever.”
Mondelez booked $1.21 billion in advertising expenses in 2019, up from $1.17 billion in 2018, according to its latest annual report. The company in 2018 told investors it would increase spending on marketing through 2022.
Other food manufacturers also are bringing back advertising spending after shrinking it in the spring, said David Palmer, a senior managing director at Evercore ISI, the research unit of investment bank Evercore. “Virtually all food and restaurant companies…reduced advertising spending in the beginning of the pandemic,” Mr. Palmer said.
Mondelez and other food companies need to make sure their brands stay on consumers’ minds as restaurants reopen, said Rob Dickerson, a managing director at Jefferies LLC, a financial services firm. “There is a need for all these companies to support their products and brands,” he said.
Overall, advertising budgets are expected to decline year-over-year, despite the recent increase in spending, according to the Interactive Advertising Bureau, an industry association that represents more than 600 media and advertising firms. Digital advertising budgets are growing while those for traditional media are shrinking, according to IAB.
“Brands…seem to swing in one of two directions—either they assume there is less need for advertising because their vertical is in high demand, or they recognize that high consumer demand…means they need to place brand awareness in the front of minds,” said Sue Hogan, senior vice president for research and analytics at the IAB.
Write to Nina Trentmann at [email protected]
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