Previously known as Kraft Foods, Mondelez International (NASDAQ: MDLZ ) spun off Kraft Foods Group (NASDAQ: KRFT ) last year. Kraft Foods Group was granted the North American grocery business while Mondelez retained the global snack-foods business. Mondelez reported first-quarter earnings after the market closed on Tuesday. Let's take a closer look at Mondelez's most recent results, notably three areas that investors shouldn't overlook.
1. Coffee pricing still a drag on sales
Fourth-quarter 2012 sales missed forecasts because Mondelez lowered coffee prices in Europe to keep up with rivals. The company is still struggling in this segment. Even though organic net revenues increased 3.8% for the most recent quarter, lower coffee commodity costs softened the company's overall top-line growth by 1.3%.
Mondelez reaffirmed its 2013 organic net revenue growth outlook of 5% to 7%. Yet the company predicts it'll come in closer to the low end of the growth target, in large part because of a predicted continued slide in coffee prices .
2. Developing markets drive growth
Mondelez currently obtains roughly 40% of its revenues from emerging nations, and these markets embody the company's key growth driver. Last quarter, revenues from emerging markets grew 9.3%, led by significant gains in China, Brazil, India, and Russia. Mondelez bolstered revenues derived from of its "Power Brands," which include chocolates under the Milka, Cadbury, and Lacta brands.
Rival chocolatier Hershey (NYSE: HSY ) claims more than 40% of the U.S. chocolate market. However, the maker of Twizzlers, Reese's, and Kit Kat is also increasing its presence in emerging markets. Aggregate revenues from Mexico, China, and Brazil were up 20% during the past year, further endorsing Hershey's strategy of investing in key international markets.
3. Private labels increase pressure on branded goods
A recent Deloitte study shows that more people are ditching higher-priced branded products and instead switching to private-label goods. Consumers are "finding value in store brands" and "limiting their loyalty to a narrower assortment of brands."
This fact may prove a real challenge for Mondelez going forward. As private labels become more accepted, Mondelez may have trouble keeping consumers brand-loyal. ConAgra's (NYSE: CAG ) acquisition of Ralcorp made it the world's largest private label food company. It and other large manufacturers of private-label goods may soon eat into a bigger piece of Mondelez's pie.
Foolish final thoughts
Despite the near-term challenges Mondelez faces, the snack food giant still boasts plenty of attractive growth opportunities. For the patient, long-term investor, Mondelez encompasses a great deal to be optimistic about.
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