Mondelez International, Inc. — 2024 Q1

Yes, Ken. I mean you see that the category is slowing down and that we are losing a little bit of share. 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. 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.

I don't think that's necessarily the case, Ken. I mean we feel good about reaffirming at this point our original guidance for 2024. And while it is true that the biscuit category in the U.S. is a little bit softer, we are overall happy with most of the dynamics we see around the world. Importantly, for us, Chinese New Year and Easter were quite good. And these are critical consumption events for us, but you should expect categories to continue their trends into Q2 and the latter part of the year.

Yes. Well, just to situate, about 40% of our sales growth in emerging markets was about 8% in Q1. We are seeing growth in reported dollars, top and bottom line, so solid, robust performance.

That's a very good question. So we truly believe that current cocoa prices are the results of a series of accidental circumstances that over time, we believe, should go away. I think you all know that the main crop last year was problematic. But as you might have read from multiple sources, the mid-crop is already looking much better. But also on the other side, on the demand side, the industry went a little bit shorter than usual on coverage and now, by out of necessity to replenish minimum stocks, really provide support to the current high prices. I think in this context, we truly believe that the current market structure does not warrant the current market prices. And so the question becomes when is the correction going to take place. And most likely, the answer is in September, October as the data for the new crop becomes available.

Yes. So of course, it does help in the sense that so far, the elasticity is relatively benign. We've got a good performance. Despite some disruptions, growth has been solid, I would say, and we have increased our market share. We do have to take into account that Easter came earlier. We had a very strong Easter from our side, but it came early. So some of the numbers you're seeing are influenced versus last year, we didn't have an earlier Easter. But overall, I would say that this certainly is better than you would have expected.

Yes. So as I said, both in the prepared remarks and in my first answer to Ken's question, we are very happy with the level of pricing we have taken so far. And so we are absolutely on plan. On the cost side, I commented about the fact that the cocoa price escalation will be more visible in the second part of the year. So I'm not sure you will continue seeing the type of gross profit dollar expansion and gross margin that you saw in Q1 into the second half because the cocoa prices will hit a little bit harder particularly in Q4.

Yes. I would say, first of all, as it relates to the client negotiations, they largely are going exactly as we would have expected. As we knew that we had increased prices, we foresee that in our forecast for the year. And at the moment, it's playing out as expected. As Luca mentioned, there's still one buying group that we need to finish. Hopefully, we will do that in the coming weeks. And then we should be done for a while.

Dirk, in the comments that you made around the consumer in North America, elasticity is picking up a little bit and some expectations into Q2 and the back half of the year. I guess I'm just trying to understand a couple of things. First, in Q1, is there anything within the portfolio that you would deem not elasticity related? You mentioned some competitive activity in CLIF that you're going to be responding to. Say, anything competitively or fundamentally that you would point to that you would see improving into Q2 where it gives you a little bit of confidence in North America?

Yes. Well, I would say that if you look at the market share evolution, the brand that's most affected is Chips Ahoy!, and Chips Ahoy! is the most susceptible to private label. And OREO or a belVita are gaining market share. And so I would say if there's anything that's pointing -- I wouldn't call it necessarily not susceptible to elasticity. We see some elasticity on those brands, too. But overall, the activations that we have and the interest we're getting from the consumer on those 2 brands offset the elasticity effect that we're having.

Okay. One quick follow-up on cocoa. Luca, you gave a lot of helpful commentary around some of the things that you're going to be doing or are doing now contractually and you also have an expectation in September and October. I guess the question is, what if cocoa sustains these really high levels and we don't see the fundamental break expected going into next year, is it still appropriate to think about pricing as the core mechanism to cover the inflation? Or given the lead time that you have to prepare, maybe there are other alternatives like accelerated savings, RGM, the sorts of things that you can do when you have many months to prepare for such cycles, if indeed, you believe that the cocoa prices at some point will eventually break. So it's just more game theory, but any context on that would be helpful.

Yes, I believe it's absolutely critical for us to get ready for potentially cocoa staying at these levels. I just want, though, to call out one thing, which is the forward curve for cocoa is heavily inverted. And that means in general that even today, we could potentially get physical coverage into '25 but at cheaper prices than the current spot price that we see today. But rest assured that as a company, we are looking at all possible scenarios. And as a matter of fact, we are taking a fresher look at some of the costs we have, making sure that we try to understand the level of flexibility that we have. We are looking thoroughly into additional RGM.

Yes.

Yes.

Yes, I think that's fair. I mean when you look closely at the numbers, Ivory Coast and Ghana, the main crop was down year-on-year about 20%. The total cocoa supply was positive as it were. In total, it was down minus 10%. Do I expect the main crop to be down 20% in Africa or 10% in total again? I don't think that's a plausible scenario at this point in time. But as I said, we will know more as we get closer to the main crop. But fundamentally, nothing has really happened that structurally impairs the production capability of Africa specifically to that level. So yes, I'm hopeful that there will be a better main crop, and I think you will see prices for cocoa adjusting.

Look, the volume piece is we expect volume to be flattish for the year. Reality is, as we gave guidance, we had a little bit of headroom, as you might expect. I think that headroom is still, for the most part, there. We'll have to see how a couple of ticket items play out for the remainder of the year, particularly the boycott in AMEA as it relates to some of our brands, how will that play out in the quarters to come.

Well, thank you for assisting in the call. I will conclude with saying that we had a solid first quarter, and we feel confident for the rest of the year that we will have an on-algorithm year. And looking forward, if you have any questions, our IR department will be happy to help you. And looking forward to see you next quarter for the results that we have then. Thank you.

Thank you, everyone.