The Mondelez International Second Quarter 2024 Earnings Conference Call began with an introduction from the operator, followed by remarks from Mondelez management, including Chairman and CEO Dirk Van de Put and CFO Luca Zaramella. The company's press release and presentation slides were made available on their website. Forward-looking statements were made, and non-GAAP financial measures were used. Dirk Van de Put provided a business strategy update and highlighted the company's strong profit dollar growth in the first half of the year. Effective cost management and pricing were credited for this success.

The company successfully completed their annual pricing in Europe and saw momentum in emerging markets. They continue to invest in their brands and generate strong free cash flow. Despite a challenging operating environment, they remain focused on their long-term growth strategy in their core categories of chocolate, biscuits, and baked snacks. Organic net revenue and adjusted EPS both saw growth, and the company is investing in advertising and promotions to drive loyalty to their brands. Snacking remains a relatively durable segment, with volume growth starting to rebound as inflation cools. Private label growth is slowing down while branded share growth is improving. In North America, consumers are seeking snacking options at specific price points and are also looking for multipacks for value, variety, and convenience.

The company's successful price pack architecture allows them to offer a variety of options to meet different consumers' definitions of value. This has led to an increase in share for their top US brands, Oreo and Ritz. In Europe, elasticities are slightly higher and consumer confidence is cautiously optimistic. Biscuits and chocolates are seeing positive value growth. In emerging markets, elasticities remain modest but there is strong growth in online and social commerce in China. In Brazil and Mexico, the consumer and economy remain resilient. In India, there is some food inflation impacting lower and middle income households, leading to down trading in biscuits. Overall, the company's emerging markets share in biscuits and chocolate is improving. In North America, the company is focused on improving volumes and has already seen an increase in value share for Oreo and Ritz. They are also increasing distribution points to further accelerate growth.

The company is implementing new promotions and pack sizes to meet the right price points for their products. They are also launching exciting activations to drive incremental lift. Despite recent spikes in cocoa prices, the company remains confident in their ability to deliver sustainable long-term growth in the chocolate category. They have strong, iconic chocolate brands and are investing in advertising and promotions to drive loyalty and growth. The company is also focused on accelerating their long-term growth strategy through reinvesting in their brands, expanding distribution, and scaling sustainable snacking. They aim to generate 90% of their revenue from core categories by 2030.

The company is making strong progress on their strategic agenda, with their Oreo marketing team driving incremental lift through creative activations such as a collaboration with Lucasfilm to launch a special edition Star Wars cookie. They are also focusing on strengthening store availability and execution, harnessing the power of recent acquisitions, and making progress on their environmental and social sustainability agenda.

The company's biscuit manufacturing plant in China has been certified as carbon neutral and has reduced carbon emissions through new technology solutions. The company has also announced a strategic partnership with Lotus Bakeries to develop co-branded chocolate products and to enter the Indian market with the Lotus Biscoff cookie brand. M&A and ventures are important for the company's growth strategy and they continue to explore opportunities. Luca will now provide further financial insights.

In the second quarter, the company experienced strong organic net revenue growth, profit dollar growth, and free cash flow generation. Revenue increased by 2.5%, with some disruptions in Europe and a boycott in the AMIA region. The Biscuits and baked snacks category grew by 0.8%, with Oreo, Ritz, 7Days, Club Social, and TUC showing strong growth. Chocolate grew by 5.6%, with Cadbury Dairy Milk, Lacta, Freia, Marabou, and Milka all performing well. Gum and candy also saw growth, driven by key markets like China, Brazil, and Western India. The company gained market share in 40% of its revenue base, with strong performance in chocolate and gum and candy.

In the second quarter, the company saw strong growth in Europe, but softer results in the US biscuit business and disruption in key markets in Europe. In North America, there was a slight increase in growth but overall volume mix declined due to consumers seeking lower-priced products. The company has a plan to address this by adding more core packs at a lower price range. In China, there was high single-digit growth due to brand enhancements and distribution gains, while India was flat due to competitive intensity and down-trading in biscuits.

In the second quarter, our India team has plans to introduce new pack sizes and pricing for Oreo to improve growth and share. The Middle East and Southeast Asia continue to be a challenge, but overall the region saw a 2% growth. AMIA had a 46% increase in OI dollars, driven by strong ANC increases and favorable currency losses. Latin America grew by 4.5%, with solid pricing execution and a decline in volume mix. Argentina's pricing has been capped at 26%, unlike last year where it contributed 15 points to growth. Brazil and Western Andean region had mid-single-digit growth, while Mexico's growth was modest due to lower public subsidies. Latin America saw a 24% growth in OI, supported by strong pricing. In the second quarter, there was double-digit OI and gross profit dollar growth, driven by top line strength, pricing execution, and cost discipline. However, the favorable cocoa pipeline compared to current market prices will be a headwind in the second half. Adjusted EPS grew by 25% in constant currency, driven by operating gains, favorable cocoa costs, and coverage strategies, despite currency headwinds.

The company is holding their EPS call for the year despite gains, as cocoa prices will be a challenge in the second half. They have strong free cash flow and have repurchased stock, and are raising their dividend. They are closely monitoring the cocoa market and have flexible structures in place to protect themselves. They will use RGM and implement pricing in less elastic segments to limit volume losses and protect gross profit. They will also implement cost measures to protect their bottom line and ability to invest. Specifics for 2025 are not yet available, but the mid-crop and early signs for the main crop are positive, with a clearer indication in September.

The company expects to provide more information on demand, market liquidity, and costs in the third quarter earnings report. The outlook for 2024 remains unchanged, with expected growth in revenue, earnings per share, and cash flow. However, there may be higher costs related to cocoa in the second half of the year. Questions were raised about the need for better value for consumers in North America and the expected growth in volume and organic sales.

The biscuit category in the US is stabilizing but remains soft, and consumers are feeling the impact of inflation on their purchasing power. However, their confidence is growing as wages increase and grocery prices stabilize. Consumers have also changed their shopping habits, with more growth seen in discount chains like Value Club at Walmart. The definition of value has also shifted for many consumers, with a focus on affordability rather than unit price. The company's strategy is to focus on improving sales and share through increased distribution and displays, rather than a full price reset. Overall, the company's operating income and cash generation are strong.

The company plans to continue driving sales through targeted promotions and smaller pack sizes. They are already seeing success with Chips Ahoy! and expect to see growth in Oreo and Ritz. They also have impactful activations planned for the second half, including a big one for Oreo. The company is on track for their expected revenue and profit for the first half, but they will need to see growth in Europe in order to meet their guidance for the second half. Plans are in place to activate around key consumer activities like back to school and Christmas.

The author discusses three key elements that are contributing to positive outcomes for their business. These include the trade stock pipeline in Europe, positive volume in the US biscuit market, and the discontinuation of certain product lines last year. They also mention that they have line of sight to meet their revenue guidance for the year and that they have locked in their commodity costs. They will continue to invest in working media and optimize non-working media for further opportunities.

The company will continue to focus on cost measures and productivity, and has reaffirmed its guidance. They are seeing positive results in July, but there is still work to be done, especially in the US. In Europe, they are seeing cautious optimism from consumers and improvements in economic indicators, but there is also an increase in elasticities and promotions. Overall, they are confident in their volume growth for the second half of the year.

The company is seeing an increase in promo intensity and a shift towards discounters and affordable packs in Europe. Biscuits and baked snacks are performing well, while chocolate is seeing strong momentum with seasonal shapes, tablets, bars, and pralines. Despite some disruptions, the company expects solid growth in the second half of the year, with investments in back-to-school and Christmas. The ERP transition may have some impact in 2025, but the company remains confident in its performance.

The speaker, Luca Zaramella, discusses a four-year program that will be implemented in stages and will involve the use of resources from different regions. He also mentions the company's preparations for successful execution and the resources they have secured through partnerships. In regards to long-term free cash flow, Zaramella states that there may be potential for it to be raised in the future, but there are currently some one-time impacts affecting it. However, the company's cash flow is still running at over $4 billion.

The company's cash conversion cycle remains strong and they are implementing new platforms to improve inventory management. They believe there will be a correction in cocoa prices and have already secured coverage for next year, but are also increasing coverage for 2025.

The speaker discusses their company's strategy for taking advantage of an inverted curve in the market, using derivatives to protect their positions and securing physical forward positions. They also announce a partnership with BISCOFF to co-brand chocolate products, starting in Europe and potentially expanding globally. The speaker expects this partnership to be successful and hopes to extend it to other chocolate brands in the future.

The company plans to launch a new product in early 2025 to generate excitement in the chocolate market. They are also focusing on global distribution, with India being the first country to receive the product in the second half of 2025. This will complement their existing biscuit business in India, which is currently centered around Oreo. The company is also considering expanding to other countries, and their partnership with BISCOFF is a cross-licensing agreement rather than a joint venture. In regards to volume, the company expects it to be flat in 2024 and there were some non-recurring factors, such as disruptions in Europe and subsidy timing in Mexico, that may have affected volumes in the second quarter.

The company expects a flattish volume mix for the year, with 1.3 points of disruption in Q2 and 4 points of volume mix in Europe due to customer disruption. The Middle East conflict also had a 3 percentage point impact on the quarter. The impact of give and go and last year's carryover of first half disruption in Europe also affected revenue. However, the company expects volume mix and revenue to improve in the second half, especially with the actions being taken in the US. On the A&C side, there may be some upside in the second half due to a deeper look at non-working media, but this is not expected to have a material impact on the P&L.

The speaker is discussing the performance of the company in Mexico. They mention that the market conditions are healthy and that there has been a mid-single-digit increase in value for biscuits and chocolate. They also mention that the economy is doing well and there is good employment. However, they note that there was a lower flow of public subsidies due to the recent elections, which they believe will normalize in the second half of the year. They also mention that there was low single-digit growth in the second quarter, mostly due to candy and chocolate, but gum and meals performed well. They plan to work on price points for candy and chocolate and ensure they are well positioned for the Christmas season.

The Oreo distribution in Mexico, which is important due to the Ricolino partnership, is growing well. The company remains positive about a gradual recovery in the second half of the year and sees a significant long-term opportunity for growth. The integration with Ricolino is going well and their route to market will help increase market share. The US business related to Ricolino is also important as it establishes them as the leader in the Hispanic candy market. The company believes the current issue with subsidies in Mexico is temporary and expects a good recovery in the second half of the year. There have been questions about the over-delivery on gross margin in the first half, but the company has moved away from giving specific guidance on this and is focused on delivering strong growth in gross profit dollars. The amount of pricing implemented and planned for the future will be important in light of cocoa inflation in the second half of 2024.

The company's profitability in the first part of the year has been affected by the high cocoa prices and they may have to invest in certain activities. They are being cautious about future profits due to the current market conditions. In India, they have seen flat growth in the second quarter and are focusing on expanding distribution in the market despite competition and a dip in consumption.

Dirk Van de Put, CEO of the company, discusses the success of their biscuit business, particularly with their premium brand Oreo in the Indian market. They have made significant progress in expanding their distribution, adding 700,000 visi coolers since 2019 and planning to add more in the future. Despite a slight slowdown in consumer consumption due to inflation, they remain confident in their distribution strategy and expect improved results in the second half of the year. They also mention the success of their chocolate business. The call concludes with Dirk thanking everyone for attending and looking forward to the end of Q3.

This summary was generated with AI and may contain some inaccuracies.