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Global uncertainty has rattled markets recently — from supply chain snags to the war in Ukraine to inflation that's hit a 40-year high. Meanwhile, the Fed has been raising interest rates, which strengthens the US dollar and ultimately hurts global companies based in the US.
On a recent episode of "Influencers with Andy Serwer," Mondelez International CEO Dirk Van de Put explained how volatility and the strong dollar make it difficult to run a US-based multinational business, especially one that's doing business with weaker foreign currencies.
“For us, the problem is sort of on two fronts. The first front is that it is a very volatile world. From an operational standpoint, supply chain disruptions, workforce issues, geopolitics, political issues,” said Van de Put, whose business is based in Chicago. “And so, it's not easy to run the business and supply products to the market. And then the second part for us is that we have 80% of our businesses outside of the US. And that is in foreign currency.”
While a strong US dollar helps companies that import goods from overseas, it hurts profits for US-based multinationals that sell their products globally. Companies like IBM and Salesforce have seen their businesses suffer due to the increasing strength of the US dollar.
Mondelez also faces challenges due to inflation and supply chain disruptions. The Ukraine war has caused the prices of ingredients Mondelez uses to skyrocket. For instance, the conflict has driven a sharp increase in the price of wheat. On Oct. 10, the day of an aggressive military offensive, Chicago SRW Wheat Futures leapt to $9.40 per bushel. That’s in contrast to roughly $7.00 per bushel in January before the invasion.
Meanwhile, the US dollar sits at a two-decade high, appreciating 13% against the Euro, according to the International Monetary Fund. That means businesses with a significant presence in Europe or other foreign countries make significantly less money in US dollars. The European market accounted for roughly 40% percent of Mondelez's total revenue in 2021.
“So, in every single country, we're doing really well,” Van de Put said. “But if you translate our profit that we make in those countries to US dollars, with the strength of the US dollar, that makes the results in US dollars, kind of flattish versus last year.”
Mondelez has passed some costs on to consumers — the company began 2022 by announcing a 7% price increase in the US on CNBC.
“Our volume growth is quite strong. Are they prepared to pay the higher prices for our products? Yes, they do,” Van de Put said. “Do we see a higher frequency of consumption? Yes. Do we see them eating more? Every day? Yes, more consumers. So, the fundamentals are really good.”
Though a stronger US dollar and global economic turmoil have proved challenging for Mondelez this year, Van de Put remains optimistic about the company’s future.
“That's one year out of a number of years. This the way the dollar is this year is not going to happen every single year,” Van de Put remarks. “So hopefully it's going to reset and he's going to help us going forward.”
Headquartered in Chicago, Mondelez International is a multinational food and snack company that operates in over 80 countries. Its global net revenues totaled $28.7 billion in 2021 and some of its subsidiaries include Oreo, Sour Patch Kids candy, Clif Bar & Company, and Toblerone.
Dirk Van de Put became CEO of Mondelez International in 2017 and Chairman in 2018. Previously, he was CEO of McCain Foods, a frozen food company and worked for Coca-Cola and Mars. Inc. He is a Belgium native.
Dylan Croll is a reporter and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.
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