CHICAGO — Pressure on lower-income consumers is adversely affecting snack purchasing frequency, is prompting changes in shoppers’ preferred channels and is weighing on certain Mondelez International, Inc. brands, company executives said. Softness in the US biscuit market was a significant drag on first-quarter financial performance.

Despite the difficulties the company is facing, together with a historic surge in cocoa prices, the North American business of Mondelez enjoyed higher first-quarter net sales and adjusted operating profit than the first quarter of 2023.

Adjusted operating income of the North American business of Mondelez in the first quarter ended March 31 was $579 million, up 2.1% from $567 million in the first quarter of 2023. Adjusted net revenues were $2.65 billion, up 2% from $2.62 billion. Volume/mix slipped 2.1 percentage points.

Consumer confidence globally in the quarter varied by region at Mondelez, and Dirk Van de Put, chairman and chief executive officer, said shoppers in many markets are “becoming increasingly sensitive to the absolute price point, driving them to choose smaller pack sizes in both biscuits and chocolate.” He added that brand loyalty generally has held up.

“In North America, we’re seeing increased promotional intensity combined with a significant shift in sales to non-tracked channels, including club stores, dollar stores and emerging e-commerce platforms,” he said. “Lower income consumers feel pressured, and we see that pressure weighing on their frequency in the category, especially among brands that skew more to that group.”

Luca Zaramella, executive vice president and chief financial officer, said brands including Oreo, Ritz and 7Days generated “solid growth” in the first quarter but cautioned that in North America, Mondelez encountered “increased promotional intensity combined with a significant shift in sales to non-tracked channels, including club stores, dollar stores and emerging e-commerce platforms.”

He said lower income consumers feel pressured, adversely affecting the frequency of their purchases in the category, “especially among brands that skew more to that group.” He cited Chips Ahoy! as an example, contributing to “the decline in volume/mix.”

Asked during questions and answers about challenges in the North American market, Van de Put conceded that Mondelez is losing “a bit of share” in a snacks category that is “slowing down.”

“I think everybody knows that the consumer is sort of seeing a number of things: the persistent inflation, there is the high interest rate, there is the loss of the SNAP, and there’s also the recent not-so-great job market,” he said. “So consumer confidence, which was so and so up to today, I think now we just learned that it took a real dive this month.

“We see in our categories, the elasticity is really going up. Penetration is still pretty good, but people are much more cautious about price points. The frequency is coming down, particularly with the lower income consumers and particularly the brands that are important for them like Chips Ahoy! We can see that they’re losing some market share to private label. There is, as I just said, some trade-down to private label.”

Later in the call, Van de Put said Oreo and belVita brands have been gaining share, showing less (but not zero) elasticity.

With major channel shifts taking place, Mondelez is increasing its number of total distribution points, previously a weakness for the company, Van de Put said.  

“For those lower income consumers who are buying very carefully and evaluating very carefully when and what and at which price they buy, we will need to become more agile in the promo mechanisms that we will play out, and we’re working hard on finding what works best for us. And this is kind of different, brand by brand and largely talking about what we do on our base packs here.”

Van de Put said Mondelez increased prices in March and also has boosted its investments in North American brands. The company is launching additional multipacks and is reducing the size of multipacks. He said the company is assuming consumer confidence will improve in the second half of the year and that the company will see improving volume and market share.

First-quarter net income of Mondelez International, Inc. was $1.41 billion, equal to $1.05 per share on the common stock, down 32% from $2.08 million, or $1.52 per share, the year before. Sales were $9.29 billion, up 1.4% from $9.17 billion. Adjusted net income was up 16%.

For the full year, Mondelez said it expects net revenue growth of 3% to 5% and high single-digit adjusted earnings per share growth.

“Outlook is provided in the context of greater than usual volatility as a result of geopolitical uncertainty,” Mondelez said.