02 November 2023
If you are covering the latest financial results from Haleon and/or Mondelez, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
Haleon
“Haleon will have slightly disappointed investors this morning with a marginally negative trading update. Sales are growing, but all of this is being driven by price rises, with volumes declining worse than expected. Haleon will point to a few one offs and Covid normalisation for this decline, but it speaks volumes for the consumer healthcare industry where you see some other consumer goods companies managing to pass on price rises without suffering a drop off in the number of products sold. Unlike the snacking and soft drinks market, consumer healthcare suffers from a relative lack of brand loyalty.
“Haleon still has a good long-term story behind it and that should assure investors for now, but that doesn’t get away from the fact this was a tough quarter for it. The lack of an upgrade to guidance is a worry and a business of this size should have good sight of what is happening in Q4. There also remains the overhang from the GSK shareholding and spin off, which will take time to resolve itself. It is worth remembering that Haleon is still a relatively ‘new’ company, so there will be growing pains attached with it, especially in this tough environment, but the structural drivers remain in place for it to win out over the long-term.”
Mondelez
“One company that is beating off any sign of consumer sluggishness is Mondelez, the maker of Cadbury. The fact it is getting 4% volume growth during a period where prices have risen significantly is very impressive and it shouldn’t be underestimated how hard that is to achieve. The snack giant is also not seeing any negative effects of anti-obesity drugs on its sales, so it is no surprise to see upgrades to its guidance and a positive outlook for the future.
“Globally sales were strong, but perhaps most significant is the fact that Europe saw good growth, despite the weakening economic picture over there and the likes of Unilever struggling in that region. Retailers tried to push back on the prices rises Mondelez implemented, but soon capitulated due to the company’s strength and scale. Consumers want branded goods when it comes to snacks, be that Cadburys, Oreo or Milka. The supermarkets just cannot resist price increases and thus can’t avoid stocking them.
“With this strong growth potential of already established brands, Mondelez is firing on all cylinders.”
