Sour Patch Kids, Oreos, Ritz Demand Slides Across North America, Says Mondelez

A slowdown in economic activity, combined with growing tariff uncertainty, appears to be curbing consumer appetite for highly processed junk food. The latest trends show a declining demand for sweet snacks in North America as more shoppers shift their spending toward real food, such as meat, vegetables, and eggs. 

Mondelez International — the maker of Sour Patch Kids, Oreos, Ritz, Toblerone, Cadbury, and other highly processed food brands — reported slower-than-expected sales for the first quarter.

Organic revenue, which excludes currency fluctuations and one-time items, increased 3.1%, falling short of the Bloomberg consensus estimate of 3.5%. Notably, sales in North America declined during the quarter. 

On an earnings call, Mondelez CEO Dirk Van de Put told analysts: “I really do not expect to see a significant improvement in consumer confidence in the near term in the US.” 

“Two, three years ago consumers would easily pay above $4 for a pack of biscuits,” Van de Put said adding, “We’re now seeing that we need to be below $4 and ideally below $3.”

Mondelez noted that shoppers are beginning to prioritize real food — if that’s meat, vegetables, and eggs — over snacks, chips, and candy. Also, lower-income consumers are pivoting towards smaller packages, while higher-income consumers are searching for larger value bundles. 

Mondelez reiterated its full-year guidance and warned profit will slide 10% this year “due to unprecedented cocoa cost inflation.”

Weighing in on the North American junk food slowdown, Goldman analysts Leah Jordan and Eli Thompson offered clients their first take on Mondelez’s first-quarter results and its unchanged full-year outlook:

1. North America came in softer-than-expected on the back of retailer destocking and softer cracker demand as the consumer remains value-focused;

2. chocolate elasticity tracked in-line with expectations, although more pricing is still to come; and

3. MDLZ reiterated its FY25 guide in constant currency while potential upside is likely to be reinvested throughout the year to support potential growth in FY26

The key takeaway for the North American market:

• North America softer-than-expected: Organic net sales in North America came in softer-than-expected at -3.6% (vs GS/consensus of flat/+0.1%), largely due to retailer destocking (-250 bps), while segment profitability also missed. The destocking impact should be one time in nature, but we do not expect it to reverse as we have heard from retailers that this effort has been driven by efficiency gains. Additionally, MDLZ noted softer demand for crackers (vs cookies), although both categories are holding up relatively better than other parts of snacking, plus the company is holding share due to investments in price pack architecture and key activations. Additionally, management spoke to increasing promotional activity by peers in crackers, and we see greater private label competition in the category as well. Regarding consumer behavior, the company noted a shift to smaller pack sizes by the lower end and toward multi-packs for upper income cohorts, along with a shift in channels toward dollar stores, clubs, and value retailers.

Details about the cocoa market:

• Chocolate elasticity tracking in-line, although more pricing still to come: MDLZ indicated elasticity within chocolate tracked in-line with expectations at -0.5%, while it gained share in the category. However, more pricing will be implemented in the spring with management taking a wait and see approach while expressing confidence in its chocolate strategy with a range of price points. The company expects a top line acceleration throughout the year, supported by both pricing and volumes, with Easter strength noted for 2Q and pricing negotiations are now complete in Europe (vs a disruption last year). By region, management highlighted solid Easter chocolate demand for Europe/UK, Brazil, and Australia, with stable YTD elasticities noted for Europe and Emerging Markets. Notably, MDLZ indicated greater elasticity for chocolate in the U.S. vs ROW with volumes tracking down -5%, which is a negative read-through for HSY.

Notes on guidance:

• Reiterated FY25 guide with potential upside expected to be reinvested: MDLZ reiterated its FY25 guidance with an adj EPS decline of -10% (constant currency), noting potential upside would likely be reinvested (e.g., 1Q beat planned to be reinvested in marketing this year), while the tariff impact remains small. FY25 organic sales guidance was also reiterated at +5%, with sequential improvements supported by both volume and pricing. We also expect a gross margin improvement throughout the year tied to its pricing action. Regarding FY26, MDLZ expects EPS growth y/y, but management stopped short on the magnitude of potential ranges given cocoa uncertainty. For cocoa, the company still sees a supply/demand surplus with further demand destruction likely (as some will likely reformulate). Furthermore, the company sounded constructive on its position given lower cocoa butter prices y/y, its bigger input exposure.

Despite key downside risks, such as an economic slowdown, Goldman analysts remained “Buy” rated on Mondelez, with a 12-month price target of $71. 

Mondelez did not indicate that the slowdown in junk food demand was influenced by the “Make America Healthy Again” movement in any way (well at least not yet).