Q3 2023 Mondelez International Inc Earnings Call

Good day and welcome to the <unk> International third quarter 2023 earnings Conference call.

Today's call is scheduled to last about one hour, including remarks by mindless management and the question and answer session in order to ask a question. Please press the Starkey followed by the number one on your Touchtone phone at anytime during the call now.

Now like to turn the call over to Mister step Dunlap Senior Vice President Investor Relations, Vermont at least please go ahead Sir.

Good afternoon, and thank you for joining us with me today, a dark band to put our chairman and CEO Lucas Arabella are CFO earlier.

Today, we sent out our press release presentation slides, which are available on our website.

During this call will make forward looking statements about the company's performance.

These statements are based on how we see things today.

Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our 10-K. Thank U K filings for more details on a forward looking statements as we can.

Discuss the results today unless noted this reported will be referencing or non-GAAP financial measures would you guys for certain items included in our GAAP results.

In addition, we provide our year over year growth on a constant currency basis, unless otherwise noted.

Find a comparable GAAP measures.

Reconciliations within our earnings release at the back of a slide presentation.

Today, Dark will provide a business and strategy update followed by review of our financial results and outlook by Luka.

Close with Q&A.

Now turn the call over to dark thanks ship and thanks to everyone for joining the call today I will start on July 4th.

A strong third quarter results.

<unk> for the future confirmed that we are positioned for high quality sustainable growth.

Remain confident in to do the ability of our categories.

The strength of our iconic brands.

The consistency of our execution.

[noise] delivered strong profitable volume growth with a healthy share performance.

Yeah, but Africa region skills double digits in boat revenue and profitability.

To manage cost inflation and enable robust reinvestments, we continue to leverage our our G M capabilities.

G. M is an area, where we believe that a significant drove to do more over the next several years.

It continues to reshape our portfolio to focus on our core categories of chocolate biscuits and baked snacks. We just successful divestiture of a developed market gum business generating additional V investment opportunities.

A strong yesterday performance the continued strength of our categories.

Ongoing focus on strong commercial plans and execution.

Provide the confidence to again raise both our organic rattling your outlook, 214% to 15%.

<unk> E P S growth outlook, two approximately 16%.

Turning to slight five you.

You can see that in the third quarter, we delivered both top and bottom line strength.

Billing us to continue substantial reinvestments in our branch.

We delivered organic net revenue growth of 15.7% for the quarters.

Two days revenue ease up 17% nearly $4 billion ahead of last year.

We also delivered adjusted gross profit dollar growth of 22.3% for the quarter again, we get ahead of last year's space, which 20 per cent growth year to date at $1.7 billion.

The strong performance enables us to reinvest in our branch and capabilities.

Attractive growth in future periods.

<unk> is up to 28.5% for the quarter and 21.5% for the years, which demonstrates our commitment to continue to build the strength of our brands.

These results translated into strong adjusted ally grows up 24.5% for the quarter and close to $900 million for the year.

As you can see on slide six five third quarter growth was driven by strong volume mix up to nearly four points.

Especially pleased that our European pricing actions, which were implemented earlier this year <unk>.

Successfully behind us.

We view this quarter strong volume mixed performance as evidence that we are taking the right actions to continue delivering sustainable growth and share gains.

Consumers continue to choose our trusted and beloved brands. Despite significant pricing you do ongoing inflation.

More broadly we view our strong performance in the third quarter as evidence that our long term strategy continues to pay off.

Since the launch of our growth plan in 2018, we have consistently delivered gross profit dollar growth, which allows for a virtuous cycle of yearly increasing high return investments.

Remain confident that this strategy will continue to consistently deliver attractive crooks.

Turning to slide seven we continue to see evidence that consumer demand for our snacking categories remains resilient.

Consumers continue to prefer are widely loves brands over private label alternatives.

In North America, the biscuit categories experiencing some softness in scanners data, most notably among lower income families. However.

Note that these families are increasing their purchases in the Nonmeasured club store channel.

Total you as biscuits volume was up more than 3% in Q3, showcasing the continued strength of our brands and investments in both measures and no measures channels.

We are seeing particularly strong growth in unmeasured channels like clubs stores.

Commerce and food service.

Meanwhile, in Europe consumer confidence is improving with a significant step up versus 2022 and remains broadly stable throughout the Q3 <unk>.

We have seen positive volume growth and biscuits and chocolate <unk>.

Has accelerated over the last three months and is outpacing brought her food driven by solid elasticity and lapping of 2022 disruptions.

In Q3 are European chocolate and biscuits business delivered solid volume growth of 2.6%, which again shows the resilience of our categories and the strength of our brands.

And emerging markets consumer confidence remains strong we continued to see resilience underlying demand and lower price sensitivity than in developed markets.

During Q3, we delivered strong growth in terms of both volume and value at 4% in 2004% respectively.

Confidence that we have strong opportunities to continue to drive expanded distribution and creating new snacking locations.

On slide eight you can see a few examples of our growth acceleration strategy inaction.

We continued to invest in our brands and connect closely with consumers to stay in line, we changing consumer tastes and snacking locations.

We are also driving growth in a broader range of channels, while accelerating our focus on premium segments and harnessing the power of recent acquisitions to advance geographic expansion.

For example, audio continues to grow with a strong position as the world's favorite cookie.

Sure performance here in North America has grown nicely.

A recent partnership with Super Mario Brothers executed both online and in store is just one example of the many creative campaigns that leverage personalization and local relevance to reinforce the brands playful persona.

Along with continuous reinvestment in our branch. We're also investing in growth channels. For example are velveeta business is up nearly a full sharepoint in the U S club channel driven by growing shopper interesting convenient tasty and better for you options for morning Snacking on the go.

Told in individual portions facts and delivering more than 14 grams of whole grains per serving velveeta offers a great solution for consumers, who are too busy to eat a traditional breakfast.

We are continuing to grow this business with a new customized and digitally targeted social and digital media campaign celebrating the ritual of build Vita and coffee in the morning.

Another important element of our growth strategy is investing in the fast growing premium chocolates space we.

We have relaunched toblerone with a robust campaign inspired by luxury fresh and brand positioning eighth as a jewel.

We are supporting this launch with a strengthened brand persona never squares and substantial investments in Nancy.

Bringing these dual concept to life or New Orleans called Toblerone Truffles recently debuted in the United Kingdom, Switzerland, and Australia as well as airport duty free stores in key markets.

They will expand to additional markets next year.

Finally, we continue driving geographic expansion of a recently acquired brands for example, Rico Leno headquartered in Mexico is now the number one Hispanic confectionery brands in the United States growing well and in line with our expectations.

Turning to slide nine let's zoom in closer on the snack bar business to highlight the strong progress.

We are excited about the opportunities in this space and we believe there is significant runway ahead.

Led by the strong and growing branch of Clif bar grenade and perfect Snacked, we expect our snack bar business to exceed $1.2 billion net revenue this year.

Let's start with Cliff, where we are excited about our current results in the long term opportunity to broaden distribution expand into new formats and increase our geographical reach.

Year to date Cliff is up double digit in top line growth and within that the Cliff Z-bar has been a particular standout z-bar is a delicious organic non GMO soft baked whole-grain energy snack for kids with zero trans-fat or artificial flavors.

Z berries growing at twice the rate of the total bars category with consumption dollar growth up 19% versus last year.

Grenade also continues to exceed our expectations.

<unk> is performing very well in the sports nutrition space with signature bars that are high in protein and low insured.

Since our acquisition a bit more than two years ago, we have doubled the business. Thanks to strong core growth in the UK and distribution expansion in Ireland, Nordics and the Benelux.

Perfect Snacks also is experiencing continued double digit value growth strengthening its position as the number one refrigerated protein bar in the United States.

We have a great portfolio and strong conviction in the growth potential of our snack bar business and we will continue investing to drive leadership in the statement.

Turning to slides 10, I'd like to take a moment to share progress on an important element of our sustainability strategy.

Just two years after joining the science based targets initiative.

Net zero carbon ambition, we have submitted that tying balanced plan laying out how we aim to achieve our target of net zero greenhouse gas emissions across our full value chain by 2050.

To reach this critical milestone we have completed a detailed process of rebaselining, providing documentation of our carbon accounting and the lining to new standards.

Putting this plan into action in the near term, we're making solid progress to work 2025 goal of reducing and two n's carbon emissions by 10%.

We are working hard to transform our business operations and supply chains.

Over the past two years, we have scaled regenerative agriculture practices across our signature sourcing programs for cocoa and wheat.

Achieved renewable energy at manufacturing sites across every region and.

And reduce C O two emissions through plans and logistical efficiencies.

We continue to believe that helping to drive positive change it scale, including through reducing our climate impact is an integral part of value creation with positive returns for our stakeholders we.

We encourage you to read or Snacking made Ryan report for additional details and context on a broader sustainability goals and progress.

With that I'll turn it over to Luka to share additional insights on our financials. Thank you Dear and good afternoon.

Q3 was strong only crossed our business with high quality top and bottom line called healthy body Niques profit dollar increases and substantial Bryan reinvestment, we deliver double digit organically typing you are 15.7% withdrawal to cross each Legion underpinned by volume mixed up.

Almost 4% as well as by some pricing of around 12%.

Our business is proving to be the caelian, Bolton emerging market, which grew 19% with strong performance virtually everywhere.

In in developed markets, which grew more than 13% with balance from both North America and Europe, turning to portfolio for muscles lie 13.

Our chocolate biscuits gum and candy business is all posts the double digit increases in Q3 <unk>.

<unk> increased plus 12.4%.

Oreo Luke <unk> talk seven days and deliver double digit calls and robust volumes chocolate group last 14, 49% with double digit growth in both developed and emerging markets.

Daily Neil Neil <unk> I'll post the double digit increases coming candy grew more than 30% with 30 dollar signs coming from emerging markets.

Now, let's review market and Sherpa for muscle Slide 14, we had a share in 65% of our revenue base driven by brand building investments as well as solid North America supply chain for four months and strong sales execution, particularly in emerging markets.

Moving to decent after four muscles like 15.

As far as Q3 calls we deliver double digit revenue growth in every single region with a significant contribution from healthy volume each call, including Europe, <unk>, which has rebounded after lending price in December and is now in a much stronger position.

This robust growth in volume for four months translated into operating leverage across the business now.

Not withstanding materia marketing investment property grow delivery has been very strong in all regions.

Europe Grove plus.

15.4%, we nearly 30 per cent to I'd call that was driven by pricing in volume mix.

<unk> <unk> with the UK, Germany and cross among those policy strong results cat.

<unk> seven days and grenade were among friends with double digit growth European unless dct's remain stable in both chocolate and biscuits.

North America group, plus 11.4%, we do aidala call for more than 24% driven by higher price and value because of 4.6 per cent Oreo.

Oreo Cleef pace and sour patch all do double digit.

<unk> posted high single digit increases in the quarter.

Profitability the base business remain strong while acquired businesses such as <unk> post a strong double digit profit dollar calls.

This is an important to point showing how a creative hour M&A agenda N b.

Profitability continuously improve and as I said last quarter, we still have some synergies opportunities as we have now integrated the plot coming to S. A P.

Who plus 11.9% with volume mix growth of more than 3% White increased slash 18.1%.

India, and Australia crude double digits, while China increase high single digits in the quarter Latin America grew more than 35% with weidler growth of nearly plus 57%.

L. A top line grew more than 60%, except in Tina Mexico. The western countries and proceed once again deliberate Grace results <unk> grew high single digits and remains on track in terms of integration work moving to page 16, we delivered nearly $650 million in gross profit dollar <unk>.

<unk> or more than 22% driven by top line growth volume leverage on productivity you have to date G. P dollars royalties now more than 1.7 billion. This provide <unk> funding touring bashful future call and flow to the net earnings line.

Why dollar growth towards more than $300 million for the quarter are up more than 24% versus last year, driven by solid cost discipline effective pricing and volume leverage year to date wide dollars have gone 880 million or almost sent 4%.

E. P. S. On slide 17 year to date EPS group Morten at 18% in constant currency or more than 13% at $40 driven primarily by strangled pricing gains.

Turning to slide 18 free cash flow is 2.4 billion yesterday, which represents an increase of <unk> yeah over a year.

You have to date capital return is 2.2 billion.

Moving to our outlook on page 20, given this plans of our Q3 and yesterday performance strong volume Niques momentum a cross our brands and overall demand resilience. We are now raising our full year outlook for both for Avenue <unk>.

We now expect top line growth of 14% to 15% versus our regional output of 5% to 7% and most recent outlook of 12 per cent plus EPS.

<unk> is also expected to be approximately 16% versus our try your outlook of 12 per cent class and the regional outlook of high single digit.

In terms of the assumptions no change to our double digit inflation. We also expect interest expenses of approximately 325 million for the year leverage is expected to be in the meat to offer tools trained by year end.

With respect to currency. We now expect 15 science are vps headwinds related to forks impact for the year versus 11 cents an hour tie your outlook of week 12 cents.

B materialize arising deacetylate.

On the gum divestitures that became effective as of the beginning of October. This current outlook reflects the loss of the business for the entirety of two four.

We are not providing yet restate the financials S teams or walk into the definition of Deepak and importantly, the removal of stranded costs.

We will provide the full up to eight in the next we'll need cycle, we do not expect any material EPS dilution as we will remove majority of stranded costs in 2004.

The outlook religion reflects our increased confidence in the ongoing resilience of consumer consumption in our categories relatively benign unless dct's continued primary investments and completion of pricing Europe on the health of our emerging markets.

There is a lot of volatility around the world and it is important to note that discount outlook does not reflect a material deterioration of the geopolitical environment and.

And xxxx rounding summers of the business.

Finally award on Chatty purchases now that we have received the proceeds of our <unk>. Our balance sheet is the strongest deep has ever been with long tenured that at very compelling interest rate relative.

To the Comcast environment.

We decided to post buybacks in Q3, and we're in our traditional black how P. As late in the quarter and the month, leading up to earnings however.

However, we expect to see their buybacks for the remainder of the year and into next given the current stock price versus our view of intrinsic value in long term potential of our company.

We realize we have on the spam versus our original outlook of 2 billion for the year and that provides the opportunity to take advantage of current low stock price levels.

Additionally, we could pull forward from our 24 shattered purchases if an appropriate opportunity presented itself, we will be flexible and opportunistic in our county, depending on device factors. We believe this is the right thing to do given the current context importantly, this does not represent the change.

And our ability to pursue our well-defined copytele location strategies as our priorities remain the same in terms of reinvesting in the business and you can select a strategically and financially attractive Multan mayonnaise as.

As well as strong dividend calls with that let's open the lines for question.

At this time, if you would like to ask a question. Please press the star and one on your telephone keypad, you may remove yourself from queue at any time by pressing start to once again that is star one to ask a question.

Operator: Good day, and welcome to the Mondelez International 3rd quarter 2023 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Mondelez Management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your touchstone phone at any time during the call.

Our first question comes from Andrew Bizarre Barclays.

Okay. Thanks, so much good afternoon.

There are clearly pricing as you went through was very strong in the quarter.

But despite this volume came in better than our forecasts in every region as well and we know price sort of comes and goes I really like your thoughts more on how you feel about the sustainability volume growth going forward, particularly in the context of sort of a state of the consumers you see it.

Shep Dunlap: I now let you turn the call over to Mr. Shep Dunlap, Senior Vice President, Investor Relations for Mondelez.

Shep Dunlap: Please go ahead, sir. Good afternoon, and thank you for joining us.

Shep Dunlap: With me today, our dark band-a-put, our chairman and CEO, and Luca Zaramella, our CFO. Earlier today, we sent out our press release and presentation slides, which were available on our website. During this call, we'll make forward-looking statements about the company's performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our 10K, 10Q, and 8K filings for more details on our forward-looking statements.

Yes, Thank you Andrew Angelo.

First of all yes, maybe reached.

Restating correctly, what is driving the volume growth in the different regions to give a clarification around that and yes. We are constructive as it relates to volume for the remainder of this year and next year, and then talk a little bit about the consumer.

So we have a strong volume mix across all our regions and overall Bureau, almost 4%.

Shep Dunlap: As we discuss our results today, unless noted is reported, we'll be referencing our non-gap financial measures, which adjust for certain items included in our gap results. In addition, we provide our year-to-year growth on a constant currency basis unless otherwise noted. You can find the comparable gap measures and gap to non-gap reconciliation within our earnings release at the back of the slide presentation.

If I start with North America, there were up $4 six per cent of yesterday, 3% in volume mix.

The categories are experiencing a little bit of softness there but.

<unk> business performing significantly better and delivering some significant volume shared games. So bulbs, one two points in the last three months.

Shep Dunlap: Today, Dirk will provide a business and strategy update followed by a review of our financial results and Outlaw by Luca. We will close with Q&A.

We also have that from unmeasured channels, which are performing well.

Dirk Put: I'll now turn the call over to Dirk. Thanks, Chip, and thanks to everyone for joining the call today. I will start on slide four.

The club channels online.

Because consumers are shifting their because that gives them better pricing.

Dirk Put: Our strong third quarter results and our prospects for the future confirm that we are positioned for high-quality, sustainable growth. We remain confident in the durability of our categories, the strength of our iconic grants, and the consistency of our execution. We delivered strong, profitable volume growth, with a healthy share performance. All our geographic regions grew double digits in both revenue and profitability. To manage cost inflation and enable robust reinvestment, we continue to leverage our RGM capabilities.

Opportunities.

Switching to Europe, there, we see at three three volume mixed increase a year to data is flat screen and disruption that we had in the beginning of the year.

Sea biscuit sent chocolates volumes being quite resilient and in Q3, we saw the volume mixed growth accelerating outpacing the rest of the food.

The reason there is that the <unk> are quite solid and we have to also take into account that we are laughing 2022 disruptions in Europe and.

And then the emerging markets is up 3.4 in volume mix a.

Year to date also $3 four but we have certain markets like India, and Mexico double digit volume growth.

Dirk Put: RGM is an area where we believe there is significant room to do more of the next several years. We continue to reshape our portfolio to focus on our core categories of chocolate, biscuits, and baked snacks, with the successful divestiture of our developed market gum business, generating additional reinvestment opportunities.

It's quite remarkable goes to these markets have quite significant pricing all the emerging markets and the reason being is that the consumer confidence is quite good.

The mantis resilience received a consumer in places like India, China.

Dirk Put: Our strong year-to-date performance, the continued strength of our categories, and our ongoing focus on strong commercial plans and execution, provide the confidence to again raise both our organic net revenue outlook to 14-15% and adjust the EPS growth outlook to approximately 16%. Turning to slide 5, you can see that in the third quarter, we delivered both top and bottom line strength, enabling us to continue substantial reinvestment in our brand. We delivered organic net revenue growth of 15.7% for the quarter.

Mexico or in a four year high and that is clearly having any effect on demand. We also are gaining in these markets by expanding our distribution. That's all based on extra benefits that we have.

We've been doing smart downsizing one of the things we do in this market <unk> fees are lower.

Unit price, we tried to keep that price constant.

We have the entry into the category not being affected.

Going forward.

We expect the recovery in Europe to continue.

Because pricing has landed then we are back on the shelf February running full force and all.

Dirk Put: Year-to-date revenue is up 17% nearly $4 billion ahead of last year. We also delivered adjusted growth profit dollar growth of 22.3% for the quarter. Again, we are ahead of last year's pace, which 20% growth year-to-date up $1.7 billion. The strong performance enables us to reinvest in our brands and capabilities to drive attractive growth in future periods. Our entry investment is up 28.5% for the quarter and 21.5% for the year, which demonstrates our commitment to continue to build the strength of our brands.

Commercial activity.

Our inventory levels around the world are very healthy, including in North America. So we don't see any effects their their elasticity remain relatively benign bits here and there are some modest uptick.

But all the dynamics are included in our outlook.

We think that the expansion of volume in emerging markets is going to continue.

And in fact, it's a it's a good problem to have but in India and Mexico. The key challenges through how to keep up with a heavy volume increase that receipt.

And then.

We believe that everything we're doing for a long term strategy as the things we are focused on and.

Dirk Put: These results translated into strong adjusted OI growth up 24.5% for the quarter and close to $900 million for the year. As you can see on slide six, our third quarter growth was driven by strong volume mix up nearly four points. We are especially pleased that our European pricing actions, which were implemented earlier this year, are successfully behind us. We view this quarter's strong volume mix performance as evidence that we are taking the right actions to continue delivering sustainable growth and share gains. Consumers continue to choose are trusted and beloved brands, despite significant pricing due to ongoing inflation.

Different activities that we have planned confirmation that that it's working for us.

Particularly also for instance, the reinvestment we're doing maybe quickly on the consumer because that is probably the biggest factors to keep in mind as you think about volumes going forward.

We find that consumer demand remains very resilient in our key market.

Consumers.

Venue to prioritize spending on grocery and branded products.

And we see the consumer confidence outlook for twenty-four stable for developed markets in North America, and Europe, but very positive for emerging markets.

So if.

If I could weekly thing these through modest improvement probably in consumer confidence in Europe, and Australia, why because the inflation is clearly easing there they see the real disposable income go up.

Dirk Put: More broadly, we view our strong performance in the third quarter as evidence that our long-term strategy continues to pay off. Spins the launch of our growth plan in 2018, we have consistently delivered growth profit dollar growth, which allowed for a virtuous cycle of yearly, increasing high return investments. We remain confident that this strategy will continue to consistently deliver attractive growth.

There is some shifting to smaller facts in places like France, and the UK and two discounters, because they're looking still for value for money, but overall, we feel pretty good about the consumer in Europe and Australia.

In the U S and Canada we.

Dirk Put: Turning to slide seven, we continue to see evidence that consumer demands for our snacking categories remains resilient, and that consumers continue to prefer our widely loved brands over private label alternatives. In North America, the biscuit categories experiencing some softness in scanner data, most notably among lower income families. However, I would note that these families are increasing their purchases in the non-measured club store channel. Our total US biscuits volume was up more than 3% in Q3, showcasing the continued strength of our brands and investments in both measures and non-measured channels.

We think the consumer confidence will be holding but we have to monitor the trends quite closely because.

See shifts to Nonmeasured channels as I said to such as E. Commerce Fame and clubs received buying of more multi effects, we see lower income families pulled back on the amount of the the frequency of their trips to the store and we also have the delayed unwinding of the pantry loading from.

Due to the phasing out of the snap benefits and then emerging markets. We continue to see steady improvement with those fortier highest that I was talking about consumer is very optimistic about the future even in China consumer confidence is improving but slower, but we still have like 60% of all Chinese families expect there in.

Dirk Put: We are seeing particularly strong growth in unmeasured channels like club stores, e-commerce and food service. Meanwhile, in Europe, consumer confidence is improving, with a significant step up versus 2022, and remains broadly stable throughout Q3. We are seeing positive volume growth in biscuits and chocolates, which has accelerated over the last three months and is outpacing broader food, driven by solid elasticity and lapping of 2022 disrupt. Inc. 3 are European chocolate and biscuit business delivered solid volume growth of 2.6% which again shows the resilience of our categories and the strength of our brands.

Come to improve.

Private label, maybe private label.

He is losing share in the U S and Canada.

A bit of a watch out in Europe, because brands have been taking pricing, but overall I would say we feel very good about the outlook for the rest of the <unk> next year.

Great. Thank thank you for all of that color really helpful and very quick follow up just for Lucre I think just regarding what the implications are for four Q based on your updated full year guidance and maybe more importantly, any high level thoughts to consider for 2004 at this point. Thanks again.

Thank you Andrew So our revised that top line estimates of 14, or 15% implies that Avenue Gulf or Q for which is on the about 7% to 10%.

Dirk Put: An emerging markets, consumer confidence remains strong. We continue to see resilience underlying demand and lower price sensitivity than in developed markets. During Q3 we delivered strong growth in terms of both volume and value and 4% and 24% respectively. And we are confident that we have strong opportunities to continue to drive expanded distribution and creating new snacking occasions.

Which considering we are lapping a 15.5% top line growth last year <unk> comparable to you have to date.

Numbers and so I think that should give you a sense of what we have on a line that you for keep in mind that we also want to keep it tight control on that data inventory as we enter next year, because obviously there is potentially some pricing we won't meet waiter with a strong ma'am.

Dirk Put: On slide 8 you can see a few examples of our growth acceleration strategy in action. We continue to invest in our brands and connect closely with consumers to stay in line with changing consumer taste and snacking occasions. We are also driving growth in a broader range of channels while accelerating our focus on premium segments and harnessing the power of recent acquisitions to advance geographic expansion. For example, Oreo continues to grow its strong position as the world's favorite cookie and its share performance here in North America has grown nicely.

<unk> two into Q1.

Only P S at the expected growth of.

About 16% for the year in size and moderate increase in constant cursing Q4.

Reason for that is.

Again, the heightened investment in AMC and in addition, as I said in a deeply Patty Marx there is some xxxx volatility, particularly around certain markets like Argentina, Nigeria, Pakistan, and Egypt, and it is quite difficult to predict what the exchange rates will be in the course of the cortisol quite frankly, I've been a little bit.

Dirk Put: A recent partnership with Super Mario Brothers executed both online and in store. It's just one example of the many creative campaigns that leverage personalization and local relevance to reinforce the brand's playful persona. Along with continuous reinvestment in our brands, we're also investing in growth channels. For example, our Belvita businesses up nearly a full share point in the US club channel driven by growing shopper interest in convenient, tasty and better for you options for morning snacking on the go.

<unk> with our assumption is I don't want to surprise anyone also remember dummies completely remote from this number so this.

This is not really a like for like and I think that you have on a like in real life.

So I continued profit expansion, Inc. In queue for I also want to reassure you that the emerging markets I'm doing very well and we don't.

Study disclosed numbers, but EBIT is up more than 20 per cent in emerging markets on the debate basis in real dollar terms.

Dirk Put: Told in individual portion packs and delivering more than 14 grams of whole grains per serving, Belvita offers a great solution for consumers who are too busy to eat a traditional breakfast. We're continuing to grow this business with a new customized and digitally targeted social and digital media campaign celebrating the reachable of Belvita and coffee in the morning.

Terms salt DSR again market that can be volatile, but in the end they deliver advil profit for us on 24.

We are clearly in the process of finalizing.

Our plan, but I can give you a little bit of the sound bites around 24 first of all I think it is undeniable that the business is having good momentum and that momentum from where we see today will continue as we went our into as we go into 24, both in terms of top and bottom line.

Dirk Put: Another important element of our growth strategy is investing in the fast growing premium chocolate space. We have relaunched Toblerone with a robust campaign inspired by luxury fresh and brand positioning into as a jewel. We're supporting this launch with a strengthened brand persona, never square and substantial investments in ANC. Bringing this jewel concept to life, our new Perleans called Toblerone Truffles recently debuted in the United Kingdom, Switzerland and Australia, as well as airport duty free stores in key markets.

Pricing contribution will be clearly lessing Fulton that this year, but we still see pricing contributing more than an average year, particularly as we need to price for cocoa sugar and other commodities.

A good portion as we went through the plans with the majority of the business and it's a good portion of golf in Bolton developed and emerging markets will be coming through distribution expansion and that will help preserve volume momentum into <unk> before and I think you know that are Catholic or using that in emerging markets around that for the.

Dirk Put: They will expand to additional markets next year. Finally, we continue driving geographic expansion of our recently acquired brands. For example, Ricolino, headquartered in Mexico, is now the number one Hispanic Confectury brand in the United States, growing well and in line with our expectate.

Then we have made investment so really continue to evolve.

Platforms that we acquire the indecent month like gleefully Colino are progressing very well and they will deliver more soon as as as we go into into tight before and while I have a number one that the gum divestiture to disclose to you. The idea that we have is ready to get rid of all the fund it cost.

Dirk Put: Turning to slide 9, let's zoom in closer on the snack bar business to highlight the strong progress. We are excited about the opportunities in this space and we believe there is significant runway ahead.

<unk> with the divestiture of gum in developed markets.

So I can't be more precise but ah so far so good in terms of 24 expected financials that will say.

Dirk Put: Led by the strong and growing brands of cliff par, grenade and perfect snack, we expect our snack bar business to exceed 1.2 billion dollars net revenue in you this year. Let's start with cliff, where we are excited about our current results and the long-term opportunity to broaden distribution, expand into new formats and increase our geographical reach. Here to date, cliff is up double digit in top line growth and within that the cliff kids Zbar has been a particular standout.

Our next question comes from Ken Goldman J P. Morgan.

Hey, Thank you.

I just wanted to get a clearer sense.

<unk> of the messaging around share repo.

You're positive three Q you reduce your outlook for the year, but at the same time, you're saying Hey, if there is an opportunity you know maybe you can pull forward. Some of your planned repo for 24, if I heard that right. So I just wanted to make sure I heard that right that I can reconcile these comments and maybe it's just as simple as you pivoted a bit toward debt paydown.

Dirk Put: Zbar is a delicious, organic, non-ZMO, soft bait, whole grain, energy snack for kids with zero transfer or artificial flavors. Zbar is growing at twice the rate of the total bars category with consumption dollar growth up 19% versus last year.

Earlier this year you weren't 100 per cent sure when gum would close now. These factors are somewhat behind you. So you can forge ahead on buybacks I just wasn't sure it's a little bit of a whipsaw effect. There in terms of how we are seeing her I'm seeing.

The commentary and just wanted to make sure I can clarify that.

Dirk Put: Grenade also continues to exceed our expectations. Grenade is performing very well in the sports nutrition space with signature bars that are high in protein and low in sugar. Since our acquisition a bit more than two years ago, we have doubled the business thanks to strong core growth in the UK and distribution expansion in Ireland, Nordics and the Benelux.

Thank you can.

Now you are absolutely correct and and write the error analysis.

We continue to see tabby purchases S. As a key driver potash that hold the return.

I do analysis regularly on that bike backs that we do historically at.

Present them, while we're both as well I mean, it's fair to say that all the purchases we have done since the creation of <unk> believes at yielded good very good return swelling excess of our cost of capital our ability to buy back stock at this point in time is.

Dirk Put: Perfect snacks also is experiencing continued double digit value growth, strengthening its position as the number one refrigerated protein bar in the United States. We have a great portfolio and strong conviction in the growth potential of our snack bar business, and we will continue investing to drive leadership in the segments.

Meaningful considering what we have both so far this year and.

And we will remain flexible indiscipline.

Dirk Put: Turning to slide 10, I'd like to take a moment to share progress on an important element of our sustainability strategy. Just two years after joining the science-based target initiative, Net Zero Carbon Ambition, we have submitted a time-bound plan laying out how we aim to achieve our target of net zero greenhouse gas emissions across our full value chain by 2050. To reach this critical milestone, we have completed a detailed process of rebase lining, providing documentation of our carbon accounting and aligning to new standards.

Biographies I also believe that our stock is a bit undervalued at this point in time and and saw we will be tactical in the way. We approach these but I don't really much sweat versus walk you correctly said.

Question.

I also want to make sure that it is clear that this doesn't imply anything in terms of changes from Iowa capital allocation framework I mentioned cleef in that area <unk> very much I'm very pleased with the numbers that I see coming through I think those were great.

Opportunity for us to deploy capital D.

Dirk Put: Putting this plan into action in the near-term, we are making solid progress towards our 2025 goal of reducing end-to-end carbon emissions by 10%. We are working hard to transform our business operations and supply chains. Over the past two years, we have scaled regenerative agriculture practices across our signature sourcing programs for cocoa and wheat, achieved renewable energy at manufacturing sites across every region, and reduced CO2 emissions through plans and logistical efficiencies. We continue to believe that helping to drive positive change at scale, including through reducing our climate impact, is an integral part of value creation, with positive returns for our state, holders.

The information that we have some capacity constraints there is nothing better in my mind that investing in Bryan that are proven like orrell <unk> milk.

Proven proposition distribution gain success, there are really making the return on those investments quite quite good and finally, David as we are committed.

We will continue to waste dividends in the foreseeable future. So strong cash flow I think you might have seen off the beaten wallet app versus last year.

Everything is going fine in terms of capital location I would say.

And then quickly just at the risk of I guess.

Listening some groans, maybe by dredging up last month's topic, just curious where you are in your research about G. L. P ones, even on a broad level. If you don't have specifics is there a reason to think that you.

Dirk Put: We encourage you to read our snacking made right report for additional details and context on our broader sustainability goals and progress.

You're snacking categories won't be affected just assuming there's any impact at all just wanted to kind of pick around for your initial thoughts there.

Luca Zaramella: With that, I'll turn it over to Luca to share additional insights on our financials.

Luca Zaramella: Thank you, Dirk and good afternoon. Q3 was strong all across our business with high quality top and bottom line growth, healthy volume leaks, record profit, dollar increases, and substantial brand reinvest. We delivered double digit organic revenue of 15.7%, we'd grow across each region underpinned by volume leaks of almost 4%, as well as by sound pricing of around 12%. Our business is proving to be resilient, both in emerging markets, which grew 19%, with strong performance virtually everywhere, and in developed markets, which grew more than 13% with balanced sales from both North America and Europe.

Yes, Thanks, again, well first of all.

Think the.

The whole topic has been overblown and I think it's important to put it in perspective and look at the data.

At this stage, we see absolutely no short term impact on our results.

We don't see it in our business.

We are of course monitoring and we have a special work stream.

To stay close to the topic, we we do estimates video projections, we talked to pharmaceutical companies, we talked to consumers and show up.

She'll be staying close to the subject.

But long term, even using the most optimistic forecast reba.

<unk> believes the impact will be very modest two large volumes and our categories.

Luca Zaramella: Turning to portfolio performance was like 13. Our chocolate biscuits, gum and candy businesses all post the double digit increases in Q3. Biscuits increased plus 12.4%. Oreo, luke, biscuit, tak, seven days, and cleave, delivered double digit growth and robust volumes. Chocolate grew plus 14.9%, with double digit growth in both developed and emerging markets. Cadbury, Dairy Milk, Milka, Tobor, and Latta all posted double digit increases. Come and candy grew more than 30%, with particular trends coming from emerging markets.

Talking about half a percent to 1% volume effect 10 years down the road.

That's based on what we know today and projections that are not hours, but that'll be used by several different sources and that assumes quite significant adoption rates of the drug.

Uhm.

Even if the impact would be bigger than that I think over a 10 year period.

It will be manageable and we will have adequate lead time to adjust.

I'm prepared.

For any changes that we see.

Luca Zaramella: Now, let's review market and share performance of slide 14. We held or gained share in 65% of our revenue base, driven by brand building investments, as well as solid North America supply chain performance, and strong sales execution, particularly in emerging markets.

Having said all that if you think about it obesity rates around the world.

Are very different than we have one of the lowest exposure seeing 75 per cent of our sales come from outside of the U S.

40 per cent of our sales are in emerging markets and so the average bmi's in all those countries are much lower than than in the U S. O R exposure is significantly lower than than some of the other food companies.

Luca Zaramella: Moving to regional performance on slide 15. As far as Q3 goes, we delivered double digit revenue growth in every single region, with a significant contribution from healthy volume mixed growth, including Europe, which has rebounded after lending pricing this summer, and is now in a much stronger position. This robust growth and volume performance translated into operating leverage across the business.

On top of that I believe that our portfolio is really well positioned we constantly innovate and adapt our products. We do that all the time to adapt to changing consumer tastes and behaviors.

Portion control is a big part of our strategy. So 20 per cent of our sales are already.

Luca Zaramella: Now we stand in material marketing investments, profit growth delivery has been very strong in all regions. Europe grew plus 15.4%, with nearly 30% of our growth that was driven by pricing and volume mix. Top line strength was proposed with the UK, Germany, and France among those posting strong results. Cadbury, Dairy Milk, Milka, all of a sudden days in Grenade were among brands with double digit growth. European elasticity 3 main stable in both chocolate and biscuits.

In.

Snacks that are less than 200 calories.

We have a large part of our portfolio that is chocolates, which is not hunger satisfaction, but it's a small indulgence.

And we have a healthier alternative select for the breakfast occasion, velveeta, which is a replacement.

Snack or some of our snack box, which are meal replacement and it fit perfectly into the diet of a GOP one <unk>.

<unk>. So if I go through all of that and if I'm honest at this stage isn't really into our top.

Luca Zaramella: North America grew plus 11.4%, with a $1 growth of more than 24%, driven by high pricing and volume mix growth of 4.6%. Oreo, cleaf, tates, and sour patch all grew double digit. Wild recent, Melvita posted high single digit increases in the quarter. Profitability in the base business remains strong, while acquired businesses such as cleaf and tates posted strong double digit profit dollar growth. This is an important truth point, showing how a creative our M&A agenda can be, cleave profitability continues to improve, and as I said last quarter, we still have some synergies opportunities, as we have now integrated the platform into SAP.

Areas that we are focused on is that we are trying to to manage we monitor it but it's really not a big concern for us at this stage.

Our next question comes from Brian Spillane.

Bank of America.

Alright, thanks have greater scrutiny guys.

All right I guess I had one follow up question is another question in terms of the follow up to can in terms of capital allocation.

Okay. You had opposite you are opportunistic right in terms of paying down commercial paper. He paid off term loan. This year, you know kind of attacking <unk>.

Some of those.

Either variable rate or avoiding sort of swapping out of low interest the high interest so.

It is you're looking over the next year or two like are there even many opportunities to where you would opportunistically pay down debt or again, not changing your cap allocation.

Luca Zaramella: While China increased high single digits in the quarter, Latin America grew more than 35%, with the $1.00 growth of nearly plus 37%. L.A, top line grew more than 16% ex-Argentina, Mexico, the western and the countries and Brazil once again deliver great results. Ricolino grew high single digits and remains on track in terms of integration work.

Sort of philosophy, but just.

It doesn't seem it doesn't appear that that paying down debt would necessarily be at the top of the top of the list is given what you've done over the past year and then a follow up.

No I think that's that's absolutely correct. We are very happy with the long tenure that we had the average cost of <unk> that is very compelling.

Luca Zaramella: Moving to page 16, we delivered nearly $650 million in gross profit, growth, or more than 22%. Driven by top line growth, volume leverage and productivity, yet to date, GDP dollar growth is now more than 1.7 billion.

It was a series of decisions that we took over the last few months, including the cell down all five of K D. P.

Luca Zaramella: This provides ample funding to reinvest for future growth and flow to the net earnings line. Why dollar growth was more than $300 million for the quarter, or up more than 24% versus last year, driven by solid cost discipline, effective pricing and volume leverage? Year to date, why dollars have grown 880 million, or almost 24%.

Really goin' strengthen the balance sheet that making sure that.

We were not facing materia pressure in the interest cost line I think in hindsight that.

It's proven to be quite a good decision.

Fees I still see our staff has sat on their value then so.

When you look at the the cash flow <unk>.

And your <unk> for the coffee taxes that are really one time in nature. I mean, you start talking about $3 $73.8 billion, all cash flow generation and I think if you take that and a continuous growth of dividend. We have all the states really to manage the business very well and so I don't feel.

Luca Zaramella: EPS on slide 17, year to date, EPS grew more than 18% in constant currency, or more than 13% at the $40, driven primarily by strong operating gains. Turning to slide 18, free cash flow is 2.4 billion years to date, which represents an increase of half a billion dollars, year old. Year to date, capital return is 2.2 billion.

Really compelled at this point in time to go and not pay down more more but we have some that coming due next year. It is absolutely manageable and now when that comes to do hopefully.

Luca Zaramella: Moving to our outlook on page 20, given the strengths of our Q3 and yesterday performance, strong volume, mixed momentum across our brands and overall demands resilience, we are now raising our full year outlook for both revenue and EPS. We now expect top-line growth of 14-15% versus our original outlook of 5-7%, and most recent outlook of 12% class. EPS growth is also expected to be approximately 16%, versus our trial outlook of 12% class and original outlook of a high single digit.

Interest costs will be lower than today, but again not really a major concern for me at this point.

Okay, Great and then just just to to follow ups on some of the commentaries made about 24 and I might have missed this but I think you said previously did single digit cost of goods inflation for 24 suggest is that still something.

We should work with and then as.

We're thinking about organic sales growth.

And in this quarter or it could take Argentina and.

In gum collectively they contributed about 500 basis points the organic sales <unk>. So just I don't know as we're thinking about.

Not extrapolating too much right <unk>.

Luca Zaramella: In terms of key assumptions, no change to our double digit inflation. We also expect interest expenses of approximately 325 million for the year. Leverage is expected to be in the mid-to-oper tools range by event. We respect to currency, we now expect 15% of EPS at wins, related to forks impact for the year, versus 11% in our prior outlook, of which 12% have been materialized already in the years to late. On the Gambe Investiture that became effective as of the beginning of October, this current outlook reflects the loss of the business for the entirety of Q4.

Just how we should think about some of the other puts and takes on on organic sales growth and understanding you gave me some comments about volume and price, but just just just want to get your perspective on that those two items.

Yeah, maybe I'll look that transpired Lee <unk> noted that both on the pages of the prepared remarks in in my <expletive> scrape.

Argentina I think in total for the company accounted for a little bit more than than two points and all that much more than that if you strip out them completely from the up to date numbers and not for the.

Both volume and revenue I would say there is no material change to either volume or net revenue. So in terms of growth rates I would say Argentina is clear.

Luca Zaramella: We are not providing yet restated financials, as themes are working through the definition of impact, and importantly, the removal of funded costs. While we will provide a full update in the next learning cycle, we do not expect any materially-PS dilution, as we will remove majority of funded costs in 24. The outlook revision reflects our increased confidence in the year, ongoing resilience of consumer consumption in our categories, relatively benign elasticity, continued brand reinvestments, and completion of pricing in Europe and the health of our emerging markets. There is a lot of volatility around the world, and it is important to note that this kind outlook does not reflect a material deterioration of the geopolitical environment, and forex rounding summaries of the business.

But it has always been in that range of old sale will be hiring Q3 in terms of gum no material impact to the top line dynamics on both volume and revenue.

I think as you go into next year or.

Or as we go into next year, the inflation that you're going to see if.

<unk> <unk> nah mid single digit I think it is going to be towards the end of <unk>.

5% to 10% at this point in time.

Cocoa lately has a heche.

Materials fight.

Reason being the pulp count coming out of.

Luca Zaramella: Finally, award on charity purchases. Now that we have received the proceeds of our sales outcome, our balance sheet is the strongest it has ever been, we long tenure that at very compelling interest rates, relative to the current cost environment. We decided to post buybacks into free, and were in our traditional blackout years late in the quarter, and the month leading up to earnings. However, we expect to consider buybacks for the remainder of the year, and into next.

I recall and and.

And Africa as being.

Materially different than what people expected I would say so there is pressure on cocoa.

<unk>, we are covert for a good portion of the first staff next we have protected that's wild for the remainder of the assault I'm now going to give you a lot of the <unk> Ah you would expect inflation in general dwarf and lately I think you'll know energy costs have been going up a little bit more crude.

Luca Zaramella: Given the current stock price, versus our view of intrinsic value, and long-term potential of our company, we realize we have understand versus our original outlook of 2 billion for the year, and that provides the opportunity to take advantage of current low stock price levels. Additionally, we could pull forward from our 24 charity purchases if an appropriate opportunity presented itself. We will be flexible and opportunistic in our timing, depending on the various use of factors.

Particularly so I would say we are no bun I believe in terms of inflation at this point in time, there still could be by ability exchange rates is the other one that comes into play.

But the might be a little bit higher than the mid single digits. We <unk>, we are going to be flexible for sure as we go through the plans we had a sensitivity analysis and we make sure that we have never gonna be cole by surprise here Uhm, our coverage is favorable but we will be.

Luca Zaramella: We believe this is the right thing to do, given the current context. Importantly, this does not represent a change in our ability to pursue our well-defined capital allocation strategies, as our priorities remain the same, in terms of reinvesting in the business, and in selective, strategically, and financially attractive, bolt-on, and mayonnaise, as well as from dividend growth.

Pricing at the replacement costing 224.

Our next question comes from David Palmer Evercore ISI.

Thanks, just first day follow up on interest 2024 question. It it seems like we should be thinking at least I'll go year for profit, but maybe a little bit higher than normal on on revenue.

Operator: With that, let's open the line for question. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question.

Largely because of the pricing side.

Correct me, if I'm wrong on that thinking, but digging deeper I just wanted to ask you you mentioned some things that we're giving you confidence about next year, such as a distribution gains in emerging markets and what are some of the hurdles or watch out that you are really thinking about specifically for your business. This earlier this year was about getting through pricing in Europe.

Andrew Lazar: Our first question comes from Andrew Lazar, Barclays. Thanks so much, good afternoon. Derek, clearly, pricing as you went through is very strong on the quarter, but despite this, volume came in better than our forecast in every region as well, and we know price sort of comes and goes.

What are some things you are really watching out for as you go into this next year.

Yeah, well, thank you David I don't want to spoil.

The 34 guidance to mate.

Dirk Put: I'd really like your thoughts more on how you feel about the sustainability of volume growth going forward, particularly in the context of sort of the state of the consumer as you see it. Yes, thank you, Andrew, and hello. First of all, yes, maybe restating quickly what is driving the volume growth in the different regions to give a clarification around that, and yes, we are constructive as it relates to volume for the remainder of this year and next year, and then talk a little bit about the consumer.

No you you really want to get the sense of Westland before he's going to be looked at this point.

We have made material investments in the business. This year, we believe our categories are very sound across across the world. I think we you solve the set of numbers, we haven't been boasting we're happy with overall business momentum.

I don't want to say exactly how next year is gonna play out at this point I think your assertion.

Dirk Put: So we have a strong volume mix across all our regions, and overall we're up almost 4%. If I start with North America, there we're up 4.6% in yesterday, 3% in volume mix. The categories are experiencing a little bit of softness there, but our biscuit business performing significantly better and delivering some significant volume share gains about. 1.2 points in the last three months. We also have that from unmeasured channels, which are performing well, the club channels online because consumers are shifting there because they give them better pricing opportunities.

Assertion on top line and bottom line is more or less correct. I said, we are working through the implications all five gum in the.

Pack of it and find it costs I'll give you a little bit more color.

In the next four as far as distribution goals look, particularly in emerging markets. There is a reason as to why we have fairly new China for us equal pay or India is okay or Mexico. He's okay and the reason is that our categories in general are Underpenetrated and the second reason I would say.

Is there is a meaningful amount of coal bolting develop in emerging markets that is coming out of distribution games I think in the U S. For a series of regional soon all supply chain related we lost on Pdc's along the way we are reinstating dose cdc's, we're going into alternate channels, where our share.

Dirk Put: Switching to Europe, there we see a 3.3 volume mixing increase, a year-to-date that is flat in the disruption that we had in the beginning of the year. We see biscuit and chocolate volumes being quite resilient, and in Q3 we saw the volume mix growth accelerating, outpacing the rest of food. The reason there is that the elasticity are quite solid, and we also take into account that we are laughing at 2022 disruptions in Europe.

Is a little bit lower so at this point in time I think good that you are going to see a good quality top line in 2004.

Hopefully that that slot that transfer will it much more than that [laughter].

That's helpful. Just a quick question on the U S.

There was another player out there that we're seeing some reduced merchandising activity and shelf presence because.

Dirk Put: And then emerging markets is up 3.4 in volume mix, a year-to-date, also 3.4, but we have certain markets like Indian, Mexico, where we have double-digit volume growth. It's quite remarkable because these markets have quite significant pricing, all the emerging markets. And the reason being is that the consumer confidence is quite good, the demand is resilient, we feel the consumer in places like India, China, Mexico are in a 4-year high, and that is clearly having effect on demand.

Clean store initiative in a major retailer.

You guys are pretty good at getting merchandising.

Is that gonna affect your business in the near term and the U S.

No no we are in good shape as it relates to shelf availability in stock levels.

The shelf availability is higher than it was last year. The stock levels are wherever they should be they're not I in our sales are higher or units are high we have more displace we have more items scary with that retailer.

Dirk Put: We also are gaining in these markets by expanding our distribution, that's always an extra benefit that we have. And we've been doing smart downsizing, one of the things we do in these markets is our LUPs, our lower unit price. We try to keep that price constant, that we have the entry into the category not being affected. Going forward, we expect the recovery in Europe to continue, because pricing has landed, and we are back on the shelf and we are running full force in our commercial activities.

So we see no effective want to point out that we do have a D. As the system that covers the stores and that is always very helpful and driving in store execution in finding the necessary extra space and presence.

And so we are also making sure that we have the right level of staffing at floor level, but no I cannot confirm that received the same effect, we feel very good about how things are playing out at the moment.

Okay.

Dirk Put: Our inventory levels around the world are very healthy, including in North America, so we don't have any effect there. The elasticity remains relatively benign, which here and there are some modest optics, but all the dynamics are included in our outlook. We think that the expansion of volume in emerging markets is going to continue. In fact, it's a good problem to have, but in India and Mexico the key challenge is to how to keep up with the heavy volume increase that we're seeing.

Our next question comes from Michael Lavery Piper Sandler.

Thank you have a good afternoon.

Alright.

I just wanted to check on <unk>, you've said that the integration is progressing well that's a case, where you have a revenue synergy opportunity just given their distribution footprint.

How quickly is that ramping up is it can you give an update on just how it is progressing and if that's coming along with your expectations.

The expectation was it would give a lift your legacy brands as well how's that coming along.

Dirk Put: And then we believe that everything we're doing for our long-term strategy is the things we are focused on and different activities that we have planned, confirmation that is working for us, particularly also, for instance, the reinvestment we're doing.

Yeah, so talking about the top line synergy Sir.

First.

What well how are we gonna get those is that we are integrating the two distribution systems.

And that will for our side of the equation triple the amount of distribution points that we will have so pretty important topline synergies there, but the first step is to get that integration growing weary in the middle of testing.

Dirk Put: Maybe quickly on the consumer, because that is probably the biggest factor to keep in mind, as you think about volumes going forward, we find that consumer demand remains very resilient in our key markets. Consumers continue to prioritize spending on grocery and branded products, and we see the consumer confidence outlook for 24 stable for developed markets in North America and Europe, but very positive for emerging markets. So if I quickly think this through, modest improvement probably in consumer confidence in Europe and Australia.

We have to carve out the distribution system out of Bimbo and for Rico, Lina and set up a new system, which is bigger than that we currently having the company. So we asked to open about 100 distribution centers in Mexico.

Three quarters, along the way with that and that is going very well on thymus plans <unk> started the testing of the combined droughts.

Dirk Put: Why? Because the inflation is clearly easing there. They see the real disposable income go up. There is some shifting to smaller packs in places like France and the UK and to these counters, because they're looking still for value for money, but overall we feel pretty good about the consumer in Europe and In the US and Canada, we think the consumer confidence will be holding, but we have to monitor the trends quite closely because we see shifts to non-measure channels, as I said to such as e-commerce and club, we see buying of more multi-packs, we see lower income families, pull back on the amount of the frequency of their trips to the store, and we also have the delayed unwinding of the pantry loading from due to the phasing out of the snapped benefits.

In the several of those distribution center. So the the effects will start to take place from now going forward for the next 18 months I would say that we get the benefits to sort of work out for us. So far everything is working out exactly as planned and so we have.

Hi hope that.

You will see the the significant benefit from that next year.

Okay, great. Thanks, so much.

Thank you. Thank you.

Our next question comes from Matt Smith, Steve.

Hi, Thank you just wanted to follow up on the commentary about the channel shift in the U S with club and e-commerce growing much faster than measure channels and the biscuit business can you talk about how that's impacting your your share performance and if there's a margin difference for you between the channels and maybe just as a follow up are you seeing or hearing for.

Dirk Put: And then emerging markets, we continue to see steady improvements with those four-year highs that I was talking about, consumer is very optimistic about the future, even in China, consumer confidence is improving but slower, but we still have like 60% of all Chinese families expect their income to improve. Private label, maybe private label is losing share in the US and Canada, there is a bit of a watch out in Europe because brands have been taking pricing, but overall I would say we feel very good about the outlook for the rest of the year and for next year.

Retailers and the measure channels that they're adjusting for the consumer behavior shift.

Yeah. So.

The the shift is noticeable largely because those channels offer larger facts, both online and in the in the.

Club channels and that's what consumers are looking for we.

C R volume sure growing up or overall due to the shared that we are gaining although those channels are not always measure.

Luca Zaramella: Great, thank you for all of that color, really helpful, and a very quick follow-up just for Luke, I think, just regarding what the implications are for 4Q based on your updated, full-year guidance, and maybe more importantly, any high-level thoughts to consider for 24 at this point. Thanks again. Thank you, Andrew. So our revised top line estimate of 14 to 15% implies a revenue growth for Q4 which is on about 7 to 10%, which considering we are lapping a 15 and a half percent of line growth last year, makes really the two-year stock comparable to year-to-date numbers. So I think that should give you a sense of where we are going to land at Q4.

You mentioned, because we know that our shares are going up there. So we feel pretty good about.

What's going on there.

The margin for US is about the same so we don't see a significant margin effect.

And as it relates to some of the consumer benefits, we see for instance, a brand like velveeta. He says.

Benefiting from that shift because it has a bigger presence in those channels. So overall I would say clearly a volume effect of volume and a share effect for us no effect on the margins and no real necessary adaptation from our side.

Thank you for that person.

Okay.

Luca Zaramella: Keep in mind that we also want to keep a tight control on retailer inventory as we enter next year because obviously there is potentially some pricing and we want to enter with a strong momentum into Q1. On EPS, the expected growth of around about 16% for the year implies a moderate increase in constant currency in Q4. The reason for that is again the heightened investment in ANC, and in addition, as I said in the prepared remarks, there is some volatility particularly around certain markets like Argentina, Nigeria, Pakistan, and Egypt.

Our final question comes from John Baumgarner Missoula Securities.

Good afternoon, thanks for a minute.

Hi, John.

Hi, there I'd like to ask about reinvestment.

Overhead expenses were up double digits in Q3, there also a double digits here today as well I think can you just update us on the progress there where you've made the biggest improvements and capabilities for this year spending what capabilities you plan to build next with with future investments into or you know through 2024, and then maybe how you're thinking about.

January operating leverage on that spending as we move forward.

Luca Zaramella: And it is quite difficult to predict what exchange rates will be in the course of the course. So quite frankly, I have been a little bit cautious with our assumption and as I don't want to surprise anyone.

Yeah.

So the numbers are somewhat impacted by the acquisitions as well solve the acquisitions are clear.

Clearly incremental year on year and they make their way into the <unk> call Center.

Luca Zaramella: Also remember, GAM is completely removed from this number, so this is not really a like for like and I think you are going to like in real life the EPS and continue profit expansion in Q4. I also want to reassure you that emerging markets are doing very, very well and we don't necessarily disclose numbers, but if it is up more than 20% in emerging markets on a year-to-date basis in real dollar terms. So these are again markets that can be volatile, but in the end they deliver a good profit for us.

And particularly sore the way you have to think about power over its policies.

Use the following.

We have been managing inflation quite effectively as a company.

<unk>, particularly neighbor related inflation has been a little bit higher.

These numbers threes.

There is a cost associated with our management incentive plan and long term incentive plan. The company you sound very well and that's resulted in.

Some incremental falls.

Luca Zaramella: On 24, we are clearly in the process of finalizing our plan, but I can give you a little bit of the sound bites around 24. First of all, I think it is undeniable that the business is having good momentum. And that momentum from where we see today will continue as we enter into, as we go into 24 both in terms of top and bottom line. Pricing contribution will be really less important that is here, but we still see pricing contributing more than an average year, particularly as we need to price for cocoa sugar and other commodities.

<unk> asked in terms of corporate calls and other functions we have been investing.

E three area selectively <unk> digital capabilities and city is the biggest bump you've seen cohort cause we have been investing in faith and we have been investing in marketing all the other functions S manage.

Inflation that is below.

Of the revenue growth in their respective markets and functions like sinus, particularly haven't been sleeping much I would say.

Elizabeth higher than flat in terms of <unk>. So we have been selectively investing in three areas.

Luca Zaramella: A good portion, as we went through the plans with the majority of the business units, a good portion of growth in both in developed and emerging markets will be coming through distribution expansion and that will help preserve volume momentum into 24. And I think you know that our categories in emerging markets are under predicated and we have made investments to really continue to grow platforms that we have acquired in recent months like Lyf and the Collino are progressing very well and they will deliver more synergies as we go into into 24.

Our services faith in marketing and that will continue into next year old. The rest is being kept absolutely in control and then there is a cost associated with your physicians and management the incentive plan that the simple way you have to think about it.

Where do we stand in terms of investments, we will continue investing in safe capabilities, particularly in emerging markets.

We will continue to invest in marketing both people and a N C as we call it.

And in terms of <unk> that is going to be unaccented Asian, we're looking into S. A piano S. As a major investment that is coming our way and that these both capital and.

Luca Zaramella: And while I don't have a number on the gamma investiture to disclose to you, the idea that we have is really to get rid of all these funded costs associated with the divestiture of gum in developed markets and so I can't be more precise, but so far so good in terms of 24 expected financials, I would say.

<unk> two early to talk about that so hopefully.

Hopefully that provide you with some call around our hope that all of our calls.

Yep, that's great and then and then Dirk just just coming back to the adjacent categories. The package croissants to snack bars, I think you referred to it as being in a test and <unk> and I'm curious, there's a lot going on right now with innovation synergies and the assets, what what sort of stands out to you. Thus far in terms of surprises, we're having a greater appreciation for these assets.

Ken Goldman: Our next question comes from Ken Goldman, JP Morgan. Hey, thank you. I just wanted to get a clearer sense of the messaging around share repo. You paused in 3Q, you reduced your outlook for the year, but at the same time you're saying, hey, if there's an opportunity, you know, maybe you can pull forward some of your planned repo for 24 if I heard that right. So I just wanted to maybe sure I heard that right that I can reconcile these comments and you know maybe it's just as simple as you pivoted a bit toward debt paydown earlier this year, you weren't 100% sure when gum would close.

What are you what are you learning from past them at this point.

Yeah, I wouldn't say, it's all test and learn so it's a mixture of just reinforcing the businesses that we have more launches from from our own range doing some geographical expansion doing some distribution expansion. So it's it's a lot more than this and learn.

Ken Goldman: Now these factors are somewhat behind you so you can forge ahead on buybacks. I just wasn't sure it's a little bit of a you know a whipsaw effect there in terms of how we're seeing or I'm seeing the commentary just wanted to make sure I can clarify that. Thank you, Ken. No, you're absolutely correct and right in your analysis. We continue to see the purchases as a key driver of total shareholder return.

If I start with snack bars, I think we are discovering the power of snack bar. That's why we highlighted in in the in the.

Prepared remarks.

Doing, particularly well with cliff and also with a brand like a grenade in the U K and in Europe, which is really growing very fast. So first conclusion would be snackbar are going to be a real strength for us.

Ken Goldman: I do analysis regularly on the buybacks that we do historically and we present them to our board as well. I mean, it's fair to say that all the repurchases we have done since the creation of Mondaleese. Have yielded good very good returns well in excess of of our cost of capital. Our ability to buy back stock at this point in time is meaningful considering what we have both so far this year.

Big opportunity and the rest of the World. If you look at the development of the snack bar markets in U S. It's far ahead of the rest of the world. So we see a huge opportunity desk in the in the years to come and particularly in the Anglo Saxon countries. We think that's going to happen first.

As it relates to cakes and phase III.

There is a segment, which is in store bakery.

Ken Goldman: And look, we will remain flexible and discipline. Varialities I also believe that our stock is a bit undervalued at this point in time and so we will be tactical in the way we approach this but I don't have really much to add versus what you correctly said in your question.

Giving go that's not a test and learn anymore does not one 900 million dollar business, but.

That has been very incremental to us we've seen some very significant growth.

It's a segment that is growing very fast and we're thinking sure. So our expectation is that going forward, giving go will continue to big drove because clients like target or Walmart or moving from made in stores towards freeze and thaw, which.

Luca Zaramella: I also want to make sure that it is clear that this doesn't imply anything in terms of changes from our capital allocation framework. I mentioned Cliff and Rickolino in the prepare remarks. I'm very pleased with the numbers that I see coming to I think those were great opportunity for us to deploy capital. Dave mentioned that we have some capacity constraints. There is nothing better in my mind that investing in brands that are proven like Oreo, milk, Cadbury, dairy milk, proven propositions distribution gains etc are really making the return on those investments quite quite good.

But given goes or offering their so thick in conclusion the in.

In store bakery segment is going to be very interesting interesting for us going forward.

And then the third one that is important for us is the expansion.

Of our current brands into the gate some phase III market. So we've launched <unk> in you in the U S or we have launched every cake in China on their audio both.

Luca Zaramella: And finally, dividends were committed and we will continue to raise dividends in the foreseeable future. So strong cash flow I think you might have seen after billion dollar up versus last year. Everything is going fine in terms of capital allocation I would say.

Very big successes.

Things that are clearly an indication that our branch have the potential to play in this case in phase III space and it's a very nice addition, and really extends the footprint in the consumers that we have.

And then lastly, there is <unk>, which is the package the crush off.

Ken Goldman: and then quickly just at the risk of, I guess, you know, eliciting some groans maybe by dredging up last month's topic. Just curious where you are in your research about GLP ones, even on a broad level if you don't have specific, because there are reason to think that you were snacking categories won't be affected, you know, just assuming there's any impact at all, just wanted to kind of pick around for your initial thoughts there. Yes, thanks, Ken.

We're doing tests and learns in three.

Free markets at the moment the around the world not all the results are in but we've seen for instance in a country like Brazil that there is a real interest the segment is really not that established but.

And learn was very positive and we are now gearing up for for a launch in the in the country I'm expecting in the other countries that we are doing some tests.

Dirk Put: Well, first of all, I think the whole topic has been overblown and I think it's important to put it in perspective and look at the data. At this stage, we see absolutely no short term impact on our results. We don't see it in our business. We are of course monitoring and we have a special work stream. To stay close to the topic, we, we do estimates, we do projections, we talk to pharmaceutical companies, we talk to construction companies.

We will get similar results.

Because if you think about giving go was already very successful in places like Mexico or in the Middle East.

Dirk Put: And so on. So we stay in close to the subject. But long term, even using the most optimistic forecast, we believe the impact will be very modest to our volumes in our categories, we're talking about a half a percent to 1% volume effect 10 years down the road. That's based on what we know today and projections that are not hours, but are being used by several different sources and that assumes quite significant adoption rates of the drug. Even if the impact would be bigger than that, I think over a 10 year period, it will be manageable and we will have adequate lead time to adjust and prepare for any changes that we see.

So it's a real real sort of emerging markets proposition meal replacement that is a very affordable price.

Reasonable quantity of product. So I think there's going to be a real opportunity to make that a worldwide business for us. So those would be the big ones at the moment from the Adjacencies. So.

So far so very good I would say we will keep on informing you, but everything is going in line on in fact develop off plan in this area.

I think that is all with that.

Okay. Thank you read that we've come to the end of our call.

We feel good about the quarter, if we feel good about the next quarter and about next year. Thank you for your interest and so your next door.

Thank you everyone.

This does conclude today's program. Thank you for your participation may disconnect at anytime.

Uh-huh [music].

Dirk Put: Having said all that, if you think about it, obesity rates around the world are very different and we have one of the lowest exposures since 75% of our sales come from outside of the US. 40% of our sales are in emerging markets. And so the average BMI in all those countries are much lower than in the US. So our exposures is significantly lower than some of the other food companies.

Dirk Put: On top of that, I believe that our portfolios really well positioned, we constantly innovate and adapt to our products. We do that all the time to adapt to changing consumer taste and behaviors. Portion control is a big part of our strategy. So 20% of our sales are already in snacks that are less than 200 calories. We have a large part of our portfolio that is chocolate, which is not hunger satisfaction, but it is small indulgence.

Dirk Put: And we have healthier alternatives like for the breakfast occasion, Belvita, which is a replacement snack or some of our snack bars, which are meal replacement and that fit perfectly into the diet of a GOP1 patient. So if I go through all that, if I'm honest at this stage, this isn't really into our top areas that we are focused on and that we are trying to manage. We monitor it, but it's really not a big concern for us at this stage.

Bryan Spillane: Our next question comes from Bryan Spillane, Bank of America. Hey, thanks, operator. Good evening, guys. So I guess I had one follow-up to Ken's question and another question. In terms of the follow-up to Ken, in terms of capital allocation, Luca, you had opportunistic right in terms of paying down commercial paper, you paid off the term loan this year, you know kind of attacking some of those, you know, either variable rate or, you know, avoiding, you know, sort of swapping out of low interest to high interest.

Bryan Spillane: So as we, as you're looking over the next year or two, like, are there even many opportunities to where you would opportunistically pay down debt? Or, again, not changing your capital allocation, you know, sort of philosophy, but just, you know, it doesn't seem, doesn't appear that paying down debt would necessarily be at the top of the list just given, you know, what you've done over the past year. No, I think that's absolutely correct.

Bryan Spillane: We are very happy with the loan tenure that we have. The average cost of that is very compelling. It was a series of decisions that we took over the last few months, including the sell-down of KDP to really go and strengthen the balance sheet and making sure that, you know, we were not facing material pressure in the interest cost line, I think in hindsight, that has proven to be quite a good decision.

Bryan Spillane: Priorities, I still see our stock as as undervalued. And so, you know, when you look at the cash flow this year, and you adjust for the coffee taxes that are really one time in nature. I mean, you start talking about $3.3.8 billion of cash flow generation. And I think if you take that and continuous growth of dividends, we have what it takes really to manage the business very well. And so, I don't feel really compelled at this point in time to go and pay down more debt.

Bryan Spillane: We have some debt coming due next year. It is absolutely manageable. And when that comes, you hopefully interest cost will be lower than today, but again, not really a major concern for me at this point. Okay. Great.

Luca Zaramella: And then just two follow-ups on some of the commentaries made about 24. And I might have missed this, but I think you said previously mid single digit cost of good inflation for 24. So just is that still something we should work with. And then as we're thinking about organic sales growth, you know, I think even in this quarter, if you take Argentina and gum, collectively, they contributed about 500 basis points to the organic sales comp.

Luca Zaramella: So just, I don't know, as we're thinking about not extrapolating too much, right? Just how we should think about some of the other puts and takes on on organic sales worth and understanding you gave some comments about volume and price, but just just just want to get your perspective on those two items. Yeah, maybe I look transparently as and it is noted both on the pages of the prepared remarks and in my script.

Luca Zaramella: Argentina, I think in total for the company accounted for a little bit more than than two points, not much more than that. If you strip out gum completely from the year to date numbers and for the bulk volume and revenue, I would say there is no material change to either volume or net revenue. So in terms of growth rate, I would say Argentina is clear, but it has always been in that range.

Luca Zaramella: I would say a little bit higher in Q3 in terms of gum, no material impact to the top line dynamics on both volume and revenue. I think as you go into next year, or as we go into next year, the inflation that you're going to see is higher than mid single digit, I think it is going to be towards the higher end of five to 10% at this point in time. Coco lately has had a material spike.

Luca Zaramella: The reason being the pot count coming out of ivory coat and and Africa has been materially different than what people expected, I would say. So there is pressure on Coco. The good news is we are covered for a good portion of the first half next year and we are protected as well for the remainder of the year. So I'm not going to give you a lot of details here, but you would expect inflation in general to go up.

Luca Zaramella: And lately, I think you know, energy costs have been going up a little bit. More crude oil, particularly. So I would say we are not done. I believe in terms of inflation at this point in time, there still could be variability exchange rates is the other one that comes into play, but it might be a little bit higher than the mid single digits we told you, but we are going to be flexible for sure.

Luca Zaramella: As we go through the plans, we have sensitivity analysis and we make sure that we are never going to be called by surprise here. Our coverage is favorable, but we will be pricing at replacement cost in 24.

David Palmer: Our next question comes from David Palmer, Evercore, ISI. Thanks. Just a first day. I follow up on Andrew's 2024 question. It seems like we should be thinking at least an algo year for profit, but maybe a little bit higher than normal on revenue. Largely because of the pricing side is correct me if I'm on wrong on that thinking, but digging deeper, I just wanted to ask you, you mentioned some things that were giving you confidence about next year, such as the distribution gains and emerging markets.

David Palmer: What are some of the hurdles or watchouts that you're really thinking about specifically for your business this earlier this year was about getting through pricing in Europe. And what are some things you're really watching out for as you go into this next year?

Dirk Put: Yeah, thank you David. I don't want to spoil the 34 guidance too much. I know you really want to get a sense of where 24 is going to be. Look, at this point, we have made material investment in the business this year. We believe our categories are very sound across across the world. I think we you saw the shared numbers we haven't been posting. We are happy with overall business momentum. I don't want to say exactly how next year is going to play out at this point.

Dirk Put: I think your assertion on top line and bottom line is more or less correct. I said we are walking through the implications of gum and the EPS impact of it and send it costs. I'll give you a little bit more color in the next quarter. As far as distribution goes, look, particularly in emerging markets, there is a reason as to why we are fairly you China for us is okay or India is okay or Mexico is okay.

Dirk Put: The reason is that our categories in general are under penetrated and the second reason I would say is there is a meaningful amount of growth both in development and emerging markets that is coming out of distribution games. I think in the US for a series of reasons you know supply chain related we lost some TDPs around the way. We are reinstating those TDPs. We are going into alternate channels where our share is a little bit lower. So at this point in time I feel good that you are going to see a good quality top line into 24. Hopefully that helps, but I can't spoil it much more than that.

Dirk Put: Now that's helpful. Just a quick question on the US. There was another player out there that was seeing some reduced merchandising activity and shelf presence because of clean store initiative and a major retailer. You guys are pretty good at getting merchandising. Is that going to affect your business in the near term in the US? No, no. We are in good shape as it relates to shelf availability and stock level. The shelf availability is higher than it was last year.

Dirk Put: The stock levels are where they should be. They're not high in our sales are higher, our units are higher. We have more displays. We have more items carried with that retailer. So we see no effect. We want to point out that we do have a DSD system that covers the stores and that is always very helpful in driving in store execution and finding the necessary extra space and presence. And so we are also making sure that we have the right level of staffing at store level. But no, I cannot confirm that we see the same effect. We feel very good about how things are playing out at the moment.

Michael Lavery: Our next question comes from Michael Labory, Piper Sandler. Thank you, good afternoon. I just wanted to check on Rick Alino. You said that the integration is progressing well. That's a case where you have a revenue synergy opportunity just given there distribution footprint. How quickly is that ramping up? Can you give an update on just how that's progressing and if that's coming along with your expectations? I think the expectation was it would give a lift to some of your legacy brands as well. How is that coming along?

Dirk Put: Yeah, so talk about the top line synergies. First, how are we going to get those is that we are integrating the true distribution systems and that will for our site of the equation triple the amount of distribution points that we will have. So pretty important top line synergies there. But the first step is to get that integration going. We're in the middle of testing. We had to carve out the distribution system out of Bimbo and for Rikolino and set up a new system, which is bigger than what we currently have in the company.

Dirk Put: So we have to open about 100 distribution centers in Mexico. We are three quarters along the way with that and that is going very well on time and planned. And we have started the testing of the combined routes in several of those distribution centers. So the effects will start to take place from now going forward for the next 18 months. I would say that we get the benefits to sort of work out for us so far. Everything is working out exactly as planned. And so we have high hopes that you will see the significant benefits from that next.

Matt Smith: Thank you. Our next question comes from Matt Smith. Hi, thank you.

Dirk Put: I just wanted to follow up on the commentary about the channel ship in the U.S, with club and e-commerce growing much faster than measure channels in the biscuit business. Can you talk about how that's impacting your share performance and if there's a margin difference for you between the channels? And maybe just as a follow-up, are you seeing or hearing from retailers in the measured channels that they're adjusting for the consumer behavior shift?

Dirk Put: Yes, so the shift is noticeable largely because those channels offer larger packs both online and in the club channels and that's what consumers are looking for. We see our volume share going up overall due to the share that we are gaining although those channels are not always measured but we know that our shares are going up there. So we feel pretty good about what's going on there. The margin for us is about the same so we don't see a significant margin effect.

Dirk Put: And as it relates to some of the consumer benefits we see for instance a brand like Belvita is benefiting from that shift because it has a bigger presence in those channels. So overall I would say clearly a volume effect, a volume and a share effect for us, no effect on the margins and no real necessary adaptation from our side.

Matt Smith: Thank you for that, I'll pass it on.

John Baumgartner: Our final question comes from John Baumgarner, the Zua Securities. Good afternoon, thanks for sitting in. Hi John.

Dirk Put: I like to ask about reinvestment. Overhead expenses are up double digits in Q3. There are also double digits here today as well I think. Can you just update us on the progress there where you've made the biggest improvements and capabilities for this year's spending? What capabilities you plan to build next with future investments into or through 2024? And then maybe how you're thinking about generating operating leverage on that spending as we move forward.

Dirk Put: Yeah, so the numbers are somewhat impacted by the acquisitions as well. So the acquisitions are clearly incremental year on year and they make their way into the overhead cost and and particularly. So the way you have to think about our overhead cost is the following. We have been managing inflation quite effectively as a company. Inflation though, particularly in labor related inflation has been a little bit higher. In these numbers, there is a cost associated with our management incentive plan and long-term incentive plan. The company is done very well and that has resulted in some incremental costs.

Dirk Put: All the right in terms of corporate costs and other functions, we have been investing in three areas selectively. One, it is digital capabilities and it is the biggest part you see in corporate costs. We have been investing in sales and we have been investing in marketing. All the other functions as managed inflation that is below half of the revenue growth in their respective market. And functions like finance, particularly have been pretty much I would say a little bit higher than flat in terms of cost.

Dirk Put: So we have been selectively investing in three areas, digital services, sales and marketing and that will continue into next year. All the rest has been kept absolutely in control and then there is the cost associated with the acquisitions and management incentive plans. That's a simple way you have to think about it.

Dirk Put: Where do we stand in terms of investments? We will continue investing in sales capabilities, particularly in emerging markets. We will continue to invest in marketing both people and A and C as we call it and in terms of digital, there is going to be an acceleration. We are looking into SAP HANA as a major investment that is coming our way and that is both capital and running costs, but it is too early to talk about that. So hopefully that provides you with some call around our total over cost. Yep, that's great.

Dirk Put: And then Dirk, just coming back to the adjacent categories, the package croissants, the snack bars, I think you refer to it as being a test and learn phase. And I'm curious, there is a lot going on right now with innovation, synergies and the assets. What sort of stands out to you thus far in terms of surprises or having a greater appreciation for these assets? What are you learning from test and learner at this point?

Dirk Put: Yeah, I wouldn't say it's all test and learn, so it's a mixture of just reinforcing the businesses that we have, more launches from our own range, doing some geographical expansion, doing some distribution expansion, so it's a lot more than test and learn. If I start with snack bars, I think we are discovering the power of snack bars, that's why we highlighted it in the repair three marks. We're doing particularly well with cliff and also with a brand like Grenade in the UK and in Europe, which is really growing very fast.

Dirk Put: So first conclusion would be snack bars are going to be a real strength for us. There's a big opportunity in the rest of the world. If you look at the development of the snack bar market in the US, it's far ahead of the rest of the world. So we see a huge opportunity there in the years to come. And particularly in the Anglo-Saxon countries, we think that's going to happen first.

Dirk Put: As it relates to cakes and pastries, there is this segment which is in store bakery, given gold, that's not a test and learn anymore, that's now a $900 million business. But that has been very incremental to us. We've seen some very significant growth. It's a segment that is growing very fast and we're taking shares. So our expectation is that going forward, giving Google will continue to see big growth because clients like Target or Walmart are moving from made in stores towards Freeze and Tall, which is what giving go is offering there. So second conclusion, the in store bakery segment is going to be very interesting for us going forward.

Dirk Put: And then the third one that is important for us is the expansion of our current brands into the cakes and pastries markets. So we've launched cakes in US or we have launched every cake in China under Oreo, both very big successes. Things that are clearly an indication that our brands have the potential to play in these cakes and pastries space. And it's a very nice addition and really extends the footprint and the consumers that we have.

Dirk Put: And then lastly there is a Chebita which is the packaged croissants. We're doing test and learns in three markets at a month around the world. Not all the results are in but we've seen currencies in the country like Brazil that there is a real interest. The segment is really not that established but our test and learn was very positive and we are now gearing up for for a launch in the in the country.

Dirk Put: I'm expecting in the other countries that we are doing some tests that we will get similar results because if you think about it, giving go was already very successful in places like Mexico or in the Middle East. So it's a real sort of emerging markets proposition, meal replacement at a very affordable price, reasonable quantity of product. So I think there's going to be a real opportunity to make that a worldwide business for us.

Dirk Put: So those would be the four big ones at the moment from the adjacencies so far, so very good I would say. We'll keep on informing you but everything is going in line or in fact develop a plan in this area.

Dirk Put: I think that is all with that. We've come to the end of our call. We feel good about the quarter, we feel good about the next quarter and about next year. Thank you for your interest, and see you next quarter. Thank you, everyone. This does conclude today's program. Thank you for your participation. You may disconnect at any time.