Q1 2025 Mondelez International Inc Earnings Call
Okay.
[music].
Speaker Change: Please standby your program is about to begin if you need assistance during your conference today. Please press Star zero.
Speaker Change: Good day and welcome to the motto leaves International first quarter 2025 earnings Conference call.
Speaker Change: Today's conference is scheduled to last about one hour, including remarks from by my beliefs of management and the question and answer session.
Speaker Change: In order to ask a question. Please press the star key followed by the number one on your Touchtone phone at any time during the call.
Speaker Change: I would now like to turn the call over to Mr. Shep Dunlap Senior Vice President of Investor Relations for model S. Please go ahead Sir.
Speaker Change: Yeah.
Speaker Change: Good afternoon, and thank you for joining US with me today are Dirk van de put our chairman and CEO and Luke is there a miller our CFO.
Speaker Change: Earlier today, we sent out our press release and presentation slides, which are available on our website.
Speaker Change: During this call we will make forward looking statements about the company's performance.
Speaker Change: Statements are based on how we see things today.
Speaker Change: Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our 10-K, Q and 8-K filings for more details on our forward looking statements as we discuss our results today unless noted as reported we'll be referencing our non-GAAP financial measures, which adjust for certain items.
Speaker Change: Our GAAP results. In addition, we provide our year over year growth on a constant currency basis, unless otherwise noted.
Speaker Change: You can find the comparable GAAP measures.
Speaker Change: GAAP to non-GAAP reconciliations within our earnings release and at the back of the slide presentation.
Speaker Change: Today, Dirk will provide a business and strategy update followed by a review of our financial results and outlook by Luca.
Speaker Change: Those with Q&A.
Luca: Now I'll turn the call over to Derek.
Derek: Thanks, Chip and thanks to everyone for joining the call today.
Derek: I will start on slide four.
Derek: I'm pleased to share that we delivered solid results for the first quarter.
Derek: Banks sound execution.
Derek: Find significant external volatility.
Derek: Our top line grew three 1% behind strong pricing execution across our chocolate business.
Derek: Two unprecedented input cost serco cool.
Derek: We also delivered strong profit dollar generation and free cash flow.
Derek: These results along with solid category growth reinforces our continued confidence in our full year outlook.
Derek: We remain committed to delivering against our strategic agenda, focusing on the controllable and staying agile in this challenging macro environment.
Derek: We are continuing to execute with excellence against our chocolate strategy and our cost savings program.
Derek: Both of these initiatives are on track and we will provide additional color throughout today's call.
Derek: Turning to slide five you can see that organic net revenue.
Derek: Three 1%.
Derek: Volume mix was down three five points due to elasticity consistent with our expectations.
Derek: We also implemented plant activities in our chocolate business.
Derek: And a few onetime factors also affected volume mix, which included eastern phasing and retailer inventory destocking.
Luca: Which luca will describe in more detail later.
Speaker Change: Crashing execution related to cocoa inflation was strong.
Speaker Change: We have now implemented planned pricing across many key markets with minimal disruption.
Speaker Change: We also saw a successful start to the Easter season.
Speaker Change: As expected adjusted gross profit was significantly impacted by record cocoa costs and consequently, this also affected our EPS.
Speaker Change: We also generated $800 million free cash flow in the quarter.
Speaker Change: On slide six you can see that consumers enduring precedent for our snacking categories remains solid.
Speaker Change: Despite continuing economic and political concerns in many markets.
Speaker Change: In North America continued frustration with day to day pricing and cost of living challenges continues to drive value seeking behaviors.
Speaker Change: As a result growth in the biscuit category is soft, but it continues to hold up better than many other snacking categories.
Speaker Change: Despite the overall decline in consumer confidence.
Speaker Change: Loyalty to our strong brands like Oreo chips, Ahoy and risks remains solid and our investment in price pack architecture are helping to drive continued share gains.
Speaker Change: Meanwhile, in Europe, consumer confidence and track say elasticities remained stable, we continue to see solid category value growth in both biscuits and chocolate and our brands continue to resonate with consumers.
Speaker Change: And lastly city also remained stable in emerging markets.
Speaker Change: Consumer confidence is soft in Brazil, Mexico, and China from economic uncertainty, while confidence in India remains solid.
Speaker Change: Overall, we're seeing solid category growth in both volume and value across our combined emerging markets. Among the least share is improving in both biscuits and chocolates.
Speaker Change: Turning to slide seven it is important to reinforce that we are continuing to make progress against our strategic growth agenda.
Speaker Change: Investing in our brands expanding distribution strengthening our marketing and sales capabilities and scaling our long standing commitment to sustainability.
Speaker Change: Just a few highlights of our strategy in action.
Speaker Change: Alright, gentlemen, global brands, including Oreo and Cadbury dairy milk continues to drive creative on trend Activations that resonates strongly with consumers and help stinking, our strategic partnerships with retailers.
Speaker Change: For example, audio collaboration with post Malone, Mark the first time, a pop culture figures.
Speaker Change: Suddenly involved in building a recipe for audio nearly from scratch, resulting in our first ever twisted cream.
Speaker Change: Meanwhile, in the U K, we rolled out our first of many chocolate collaborations resulting from the partnership with Lotus bakeries.
Speaker Change: The Cadbury dairy milk Discos bought featuring the signature Bischoff based and cringe.
Speaker Change: It's only the beginning of our innovation platform.
Speaker Change: Our other chocolate brands rolling out similar Bischoff crumbles and flavors across Europe in the coming months.
Speaker Change: Along with these creative brand three investments, we continued to expand distribution around the world. We added more than 100000 stores in emerging markets in Q1.
Speaker Change: We also are making significant progress in strengthening our partnerships with retailers around the world for.
Speaker Change: For the first time in our history, we achieved a top tier ranking on the global advantage survey.
Speaker Change: Additionally, we continued to make strong progress towards building a more sustainable snacking company.
Speaker Change: We delivered on all our 24 sustainability targets.
Speaker Change: Earlier this month, we published our animals Snacking made right report, providing stakeholders an in depth view of our sustainability strategy goals and performance data.
Speaker Change: Among other highlights we expanded cocoa life, our signature sustainability program to source, 91% of cocoa volume for our chocolate business.
Speaker Change: We also made meaningful strides in combating climate change, reducing end to end carbon emissions by 12% versus our 2018 baseline.
Speaker Change: We continue to believe that helping to drive positive change at scale across the communities. Our business touches is an integral part of value creation.
Speaker Change: Simply put we believe that more sustainable businesses and all of these will be is good business.
Speaker Change: I encourage you to take a few minutes to review our report in more detail.
Speaker Change: Before I turn the microphone over to Luca.
Luca: I'd like to reinforce their dark chocolate strategy remains on track and performance to date is broadly in line with our expectations.
Luca: Our teams started planning for the challenges created by our record cocoa input cost inflation more than a year ago, and we are confident that the robust clear strategy rebuilt to navigate these conditions is paying off.
Luca: We have reconfigured our chocolate portfolio to offer consumers an array.
Luca: Ray of pack sizes appropriate for each snacking occasion from bike side streets offering a delicious taste of me time to family size is designed for sharing with family and friends.
Luca: At the same time, we continue to maintain entry level pricing to drive consumption.
Luca: We also have successfully implemented most of our planned pricing in Europe with minimal customer disruption.
Luca: As a result elasticity is in line with expectations.
Luca: It also drilling sharing chocolate across markets.
Luca: Up 0.4 points year to date.
Luca: We continue to innovate with new flavors and formats and brand activations year in and year out to consumers around the world show us that our iconic chocolates are an essential part of their seasonable celebrations like Valentine's day and Easter.
Luca: We are continuing to stay a step ahead of the changing taste with exciting new products, including the delicious co branded tablets I've mentioned before featuring unique caramelized disc of flavor and crunch.
Luca: In short we remain confident that our strong chocolate franchise is positioned for long term success.
Luca: A robust playbook is working and we remain convinced that it will enable us to not only navigate the current cocoa cost challenge, but more importantly to drive category helped for the long term.
Luca: And with that I'll turn it over to Luca to share additional insights on our financials.
Luca: Thank you <unk> good afternoon.
Luca: Q1 marked another quarter of topline growth for our business. Despite some external challenges and lower consumer confidence for Q1, we delivered solid revenue growth while profit dollar generation was better than expected.
Luca: Free cash flow continued to be strong.
Luca: Revenue grew three 1% behind strong pricing execution across our tablet business.
Luca: Volume mix was down three 5% due to elasticity from chocolate pricing transitory trade destocking with flat consumption in the U S plant out sizing activities in chocolate to protect price points as well as some Easter phasing.
Luca: Developed markets grew two 6%.
Luca: Primarily due to strong pricing execution.
Luca: The volume mix decline of three 3% on the back of retailer Destocking and some chocolate E. S. P. C P.
Luca: Total revenue for emerging markets grew three 9% with the volume mix decline of three 7% yeah.
Luca: <unk> results were driven by strength in Brazil, China, and the majority of the Middle East and Africa businesses.
Luca: We experienced some salt plants in India and Southeast Asia.
Luca: Moving to portfolio performance on slide 11.
Luca: These skits and baked snack drew zero up one 3% for the quarter.
Luca: Brands delivering call concluded lose seven days premiums club's social perfect snacks and donate however.
Luca: However, we saw softer than expected results in our U S biscuit business driven by retailer Destocking, which resulted in approximately 60 basis points volume headwind to the total company and 250 basis points of total North American volumes.
Luca: Additionally, our U S biscuit business experienced lower consumption, driven by ongoing consumer confidence declines, resulting in lower frequency and value seeking behavior.
Luca: Chocolate grew by 10, 1% with significant growth across both developed and emerging market.
Luca: Volume mix was down five 7% driven by E. S. D. C piece that were in line with our expectation.
Luca: Along with our G N and product outside think activities across the chocolate portfolio that accounted for almost three points of decline.
Luca: Rent growth was broad based across global and local brands with Cadbury dairy.
Luca: Mediocre locked tackled door <unk> and strong results.
Luca: Gum, and Candy grew 1%, Devon by gum in China, and Mexico, as well as bulk gum and candy and Western MDM.
Luca: Volume mix was challenged because of trade destocking in the U S as well as some issues in Mexico last.
Luca: Lets review market share performance on slide 12.
Luca: We held or gained share in approximately 7% of our revenue base with strength in both chocolate and biscuits.
Luca: Category growth numbers are clearly underestimated because of chocolate Easter phasing versus last year, a more normalized number with total category growth at around 3% cap.
Luca: Category growth is due to accelerate as more pricing for chocolate kicks in.
Luca: Turning to regional performance on slide 13.
Luca: Europe grew eight 9% in Q1.
Luca: Execution and growth were excellent in the quarter and several key countries, including the UK, France, and Germany delivered robust growth.
Luca: Pricing execution related to cocoa inflation was strong coupled with the successful start to the Easter season and share gains.
Luca: Volume declines were driven by elasticity levels, consistent with our expectation and Nancy M activities associated with our chocolate strategy.
Luca: We have successfully landed chocolate pricing for the key alliances in line with our expectation. We can now focus on driving demand and expect positive developments in Europe for the remainder of the year.
Luca: Well I dollars were down approximately 26% due to unprecedented levels of local inflation.
Luca: North America declined three 6% due primarily to retailer destocking in the U S.
Luca: As well as softer consumer demand, most notably within the food and mass channel.
Luca: This dynamic remains consistent we do overall market and is driven primarily by less frequency from lower income households.
Luca: <unk>, we gained share our total consumption was pretty much flat.
We are continuing to sharpen our offers such as recently introduced fresh start which have shown good momentum along with improved in store execution and increase distribution to drive improved results as we move to the.
Luca: North America, why decreased by 18% due to lower volume and cocoa inflation from our Canadian chocolate business, but also for the U S biscuits.
Luca: EMEA grew one 8% for the quarter, China delivered another strong quarter with mid single digit volume led growth driven by focused initiatives around audio chips are Holly inside.
Luca: India declined high single digits lapping a strong prior year as overall consumption was challenged by inflationary pressures and wage growth, we do expect to improve the trajectory of the India business beginning in Q2, two targeted activation distribution gains and an improving macro backdrop.
Resulting from income tax relief and recently enacted the interest rate cuts.
Luca: Australia, New Zealand and Japan believe another strong quarter with mid single digit top line growth due to strong Easter execution enticing EMEA ally dollars declined eight 3% due to materially higher copper prices that were partially offset by pricing and cost discipline.
Luca: Latin America grew three 9% with solid pricing execution and the volume mix decline of two 5%, Brazil posted mid single digit growth with strong chocolate and biscuit that was partially offset by weaker powdered beverage results.
Luca: Mexico grew low single digits with broken biscuits, chocolate and gum, while Canada was down.
Luca: The Mexican economy is showing signs of slowing which we are continuing to monitor and factor into our plans Latin America Oi declined 12, 4% July.
Luca: Due largely to increased pulp inflation.
Luca: Turning to page 14.
Luca: A few notes on volume mix dynamics in Q1 <unk>.
Luca: Although overall volume mix was down <unk>, 5%. It is important to separate with these one time or plan versus underlying.
Luca: U S trade Destocking ncsoft phasing ground lease that account for roughly one three percentage points.
Luca: Roughly 40% of that design wild package downsizing accounted for another point of lower volume on the flipside, you customer disruption was lower than plan and last year, bringing us closer to an underlying decline of approximately 2%.
Luca: We expect the U S destocking dynamic to partially continue into Q2, while Easter phasing will be favorable next quarter.
Turning to page 15 in Q1, we saw a decline of 12% and gross profit dollar terms.
Luca: Solid top line growth and cost efficiency, partially offset significant cocoa inflation.
Luca: Our view of pulp inflation it hasn't changed for the remainder of the year and is embedded into our full year outlook.
Luca: Next to EPS on Slide 16, Q1, EPS declined 18% in constant currency.
Luca: Turning to slide 17 in cash flow and capital return, we deliver $800 million of free cash flow for the quarter, we repurchased $1 $5 billion installed at an average price of $57 90.
Luca: <unk> 91.
Luca: Before moving to our outlook, let me provide few thoughts on coal.
Luca: Although cocoa prices remain quite elevated relative to historical averages bolt spot trace and future curves had decline since our Q4 call.
Luca: We continue to expect that multiple plus for the year. In addition, we continue to see volume declines from an industry perspective, due to elasticity associated with inflation, driven pricing and downsizing activities, while non chocolate players, who traditionally used coco as an ingredient continue to.
Luca: We formulate with that ill turn updated components at the fraction of the cost.
Luca: We believe at this levels meaningful demand declines I expect double and will accelerate and that eventually will reflect on local prices, having said that we remain confident in our pricing and non CRM strategy and we'll continue to stay agile as the situation demands.
Turning to our outlook on slide 20.
Luca: Our outlook for 25 remains unchanged for organic revenue earnings per share and free cash flow.
Luca: This includes approximately 5% revenue growth.
Luca: Which reflect successful customer negotiation and pricing in Europe, as well as a softer demand environment in the U S.
Luca: Most of our key assumptions remain consistent with what we shared with you on our last call. We are reaffirming inflation levels interest and tax costs as well as share repurchases.
Luca: Translation Forex impacts have changed and we are now expecting no impact to net revenue and EPS from foreign currency for the year.
Luca: This reflects the dollar weakening against several currencies since our last call, including the Euro and Sterling. However, given dollar volatility this could rapidly change.
Luca: With respect to <unk> the vast majority of U S. Production is sourced from the U S or U S MCA compliant.
Luca: However, there is some sourcing of finished goods and ingredients that are subject to tavis as things stand today, although not particularly large these are incremental to our last call and have been factored into our current outlook.
Luca: Before Q&A a few words on 2006, we remain focused on running the ballast scan at 425, while continuing to maintain a sound chocolate business and category for the long term.
Luca: Early results have been positive as it relates to our chocolate strategy, we continued to invest behind our business while cost saving initiatives remain on target.
Luca: It is early to provide specifics on 2026, but we still expect EPS growth for next year, although cocoa prices have come down recently they remain elevated. It is also important to note that if we do see further improvement in Copel, we will likely invest a portion of that savings back into the business.
Luca: With that let's open the line for questions.
Luca: Thank you at this time, if he would like to ask a question. Please press star one on your telephone keypad.
Luca: You may remove yourself from the queue at any time by pressing star two.
Luca: Once again that is star one to ask a question.
Andrew Lazar: We'll go first to Andrew Lazar with Barclays.
Andrew Lazar: Great. Thanks, so much appreciate it.
Speaker Change: Maybe just to start it off it would be great to get a maybe a bit more detail on sort of trends in some key regions.
Andrew Lazar: We think about sort of a year to go from here.
Yep Yep, Thanks, Andrew.
Andrew Lazar: Well I would say that.
Andrew Lazar: First of all these five.
Andrew Lazar: Changes that we see in the external environment.
Andrew Lazar: Feel pretty good about the start of the year and our results.
Andrew Lazar: I would note a few positives, which will impact the rest of the year.
Andrew Lazar: That's happened during Q1 first of all we had some.
Major negotiations to do in Europe to announced the price increases and get approved for approval for the price increases on our chocolate business and they've fab.
Andrew Lazar: Fast.
Andrew Lazar: Really all of them.
Andrew Lazar: Minimal disruption this year.
Andrew Lazar: Then if you look at our chocolate business is doing particularly in Europe.
Andrew Lazar: We the pricing is on track as I just said we have some very good activations, we've implemented a number of our GM activities Easter came through quite as well so.
Andrew Lazar: Eastern we will see more into Q2 results but.
Andrew Lazar: In Q1 was affected because of the Easter phasing, which was late this year, but we can already see that Easter will be very good for us.
Andrew Lazar: <unk> has no debt, we had some strong share gains in the U K.
Andrew Lazar: Our emerging markets continue to perform well, particularly I would mentioned is China, and Brazil and in times like this where is the north American market.
Andrew Lazar: <unk> is probably the most affected market. It's good to have this says geographical diversification.
Andrew Lazar: And on top we are gaining share in many markets around the world.
Andrew Lazar: Having said all that I think the one thing that you've seen probably from many companies is that North America is clearly softer than what we would've expected.
Andrew Lazar: I think many people have thought about the retail destocking destocking, we expect that that will be less in Q2.
Andrew Lazar: The biscuit category.
Andrew Lazar: Soft, we see consumers switching to more essentials in grocery and snacking categories are suffering as a consequence of that the biscuits overall compares to other snacking categories is doing better.
Andrew Lazar: And on top of gaining share in the category.
Andrew Lazar: So we've got a number of good put sensation in the in the quarter, we feel very good about our full year outlook.
Andrew Lazar: If I look a little bit of what's going on.
Andrew Lazar: Around the World I would say the consumer sentiment is quite mixed.
Andrew Lazar: And that's driven by overall global macroeconomic uncertainty.
Andrew Lazar: Probably where we saw the biggest effect on the consumer was in the U S where the consumer confidence declined sharply in Q1 it.
Andrew Lazar: <unk> declined another 11% in a in April that's all driven by inflation fears people see their income slowing.
Andrew Lazar: We see that.
Andrew Lazar: The pressurized or the prioritizing of essentials, which is pressurizing snacking, we see a shift to value club and E com channels, we seeing more promotional pressures.
Andrew Lazar: And largely lower income consumers are shifting to smaller fax, while higher income consumers are shifting to larger fracs for value.
Andrew Lazar: In the middle of all that the biscuit category declined one 5% in value.
Andrew Lazar: But he has outperformed other snack categories I've said cookie.
Andrew Lazar: Cookies is doing better than crackers private label grew a little bit.
Andrew Lazar: We gained about three points.
Andrew Lazar: Points of share.
Andrew Lazar: I think that was driven largely by the fact that we launched a number of affordable.
Andrew Lazar: Formats.
Andrew Lazar: It should be called fresh stacks, which are under $3.
Andrew Lazar: And we are I think.
Andrew Lazar: We are seeing debt offering compelling value to consumers really matters at this stage.
Andrew Lazar: I have to say that I really do not expect to see a significant significant improvement in the consumers' confidence in the nearest term.
Andrew Lazar: In the U S that is in Europe, I would say consumer confidence is just in general stable.
Andrew Lazar: They are aware of the global trade volatility and it's impacting their purchasing behavior.
Andrew Lazar: They probably switching to more frugal spending and also prioritizing essentials.
We see a bit more shopping frequency going to smaller pack sizes.
Andrew Lazar: And also a shifting channels in Europe that is more to discounters and e-commerce, NBC and increasing promotions.
Andrew Lazar: In the middle of all that with the price increases we're implementing chocolate is performing in line to expectations.
Andrew Lazar: E. The elasticity that we're seeing are in line around <unk> five.
Andrew Lazar: There was Easter was later this year so.
Andrew Lazar: If you.
Andrew Lazar: Included in Q2, I think we see we will see a nice Q2, and biscuits is performing well, particularly in France for us.
Andrew Lazar: So we feel pretty confident about our European business, we see a resilient consumers we landed the negotiations we've had a good Easter biscuits are doing well. So we expect our European business to continue to do well and on the emerging market I would say the consumer is softer because they they are.
Andrew Lazar: Suffering from inflation.
Andrew Lazar: See the trade volatility.
Andrew Lazar: The Chinese consumer remains quite subdued 20 year low I would say.
Andrew Lazar: Our business is doing well the Indian consumer is stable there is more optimism this year people see income growth jobs.
Andrew Lazar: And then Brazil, and Mexico, clearly in both places to consume any softer more outspoken in Mexico than in Brazil.
Andrew Lazar: Of course, because of the economic uncertainty and persistent inflation.
Andrew Lazar: I would say our categories and emerging markets are stable, we have gained shares but we have to remain agile in all regions of the world. So I would say so far so good but it's still a long year and we will need to stay very vigilant about shifts that we see at the level of the consumer.
Andrew Lazar: Great that's really.
Speaker Change: Really helpful detail. Thanks, so much for that and then maybe Luca just briefly just keep puts and takes to keep in mind for the year to go, particularly around North America and pricing in Europe. Thanks, So much.
Speaker Change: Yeah, Hi, Andrea So I think that's 525 guidance goals.
Andrea: For us it's a very thin that we are reaffirming our plan we feel quite good at this point in time, but as you said there are puts and takes I think the correct dimension among deposit base, the customer negotiation, which I would say is a pure upside.
Andrea: This last year because last year, we have some disruption D. C are we done.
Andrea: But in general I would also say that pricing across the board whether it is chocolate in developed and emerging markets biscuits in emerging markets. Specifically it is absolutely on track and our <unk> is clearly improving.
Andrea: Improving the situation on an elasticity in both chocolate and biscuit as we said elasticity as are quite good at this point in time, and so thats an assumption that is key for us to be able to deliver on and potentially over deliver on the top line in the year two goal importantly.
Andrea: The Easter season was quite strong.
Dave: Dave mentioned Europe, but.
Dave: To report that we gained meaningful share in Brazil, and in Australia, and so we are very happy there.
Dave: <unk> is holding up well outside of North America, we have positive volume mix in the category and clearly there are some cost upsides versus versus our original plan and as we mentioned the overall Todd it is causing a small and manageable impact.
Dave: So those are I would say the positives that we see continuing into the.
Dave: Second part of the year and in Q2 as well.
Dave: All the things that didn't play out as we planned it is clearly the consumer sentiment in the U S impacting our categories.
Dave: <unk> as a category despite being soft is faring better than other snacks and we are winning share when you put both the market dynamics and the share actually our consumption in Q1 was slightly down so I think that given some of the numbers we have seen.
Published by others I think at these sites and develop the stick in terms of a good thing.
Stocking is a one time impact you sold that it is meaningful it is $2 five three points of volume mixing in the U S and we assumed that these non recoverable in the year to go I think particularly as we enter into Q2, you will see an acceleration of top line and volume mix and I think that.
Dave: That's clearly to the testament of what the teams are doing.
Dave: All can see that.
Dave: You might not expect anything differently at this point in time, but we are retaining some flexibility within the plants. All should think Watson in the U S. I think we have what it takes to deliver both top and bottom line.
Dave: But also bear in mind that if we had earnings upside we will be reinvesting in the business as we are trying to enter our 26 from a stronger position.
Dave: We remain disciplined capital allocation, we will continue to buy back stock in <unk>.
Dave: Stable manner as you might have seen we were active buyers in.
Dave: In Q1.
Dave: I believe are very compelling prices solve very happy on that also.
Dave: Thanks, so much appreciate it.
Andrew Lazar: Thank you Andrew.
Ken Goldman: Well go next to Ken Goldman with J P. Morgan.
Ken Goldman: Hi, Thank you.
Speaker Change: Just wanted to ask about your strategy to mitigate cocoa inflation, it's obviously multifaceted right productivity in <unk>.
Speaker Change: Of course pricing and you touched on your success in these elements during your prepared remarks, but what I really wanted to dig in a little bit on is the balance between them ahead and I guess the question in particular is with pricing, having gone I don't want to say better than expected, but it sure seems like it and elasticity in line is there a possibility you.
Speaker Change: Can maybe be a little bit less aggressive on RG M or maybe some other actions than you were planning or is really the message just hey, our overall mitigation efforts are going quite well and it's full steam ahead in all areas I just wanted to get a better sense of all of those.
Speaker Change: Yes, yes, yes.
Ken Goldman: Good question Ken.
Speaker Change: So yeah.
Speaker Change: Phrased it right. So our strategy basically was.
Speaker Change: Of course first of all have a great execution of about three.
Speaker Change: Designs, but we designed at the core are very aggressive <unk> strategy and that doesn't necessarily all mean, all downsizing. It means that we will offer a whole range of pack sizes to the consumers.
Speaker Change: And so the consumer suddenly has many more options as it relates to the price points, they would like to buy our products.
Speaker Change: And then we are trying to get some very strong activation. So Easter was the first step of this theres a number of others to come during the year Easter I would say it was a success. That's the second leg of our chocolate spreads in the third leg is to come up with new products, new and unique products that they're all of the consumer.
Speaker Change: Into the into the category and the launching in this first quarter was let's say of the Cadbury biscuits.
Speaker Change: Product that is at the.
Speaker Change: A moment on our number one selling SKU in the U K.
Speaker Change: More is to come in that front. So we were launching several more markets in the coming months that risk of varietal and then later in the year, we will have a number of new innovations under that.
Speaker Change: Cadbury biscuits or Milka biscuits franchise.
Speaker Change: The other thing we're doing as part of that strategy strategic key price points. So if there is a low unit price points in India. For instance, we are maintaining that at five and 10 rupees.
Speaker Change: We are also very carefully making sure that we don't break any thresholds in developed markets.
Speaker Change: So the big question is what's going to happen the ones that all hits the market pricing has gone well in the sense that we finish the negotiations with our clients and we have implemented pricing I E. The consumer is seeing the pricing in a number of markets, but it's very early days.
Speaker Change: See a little bit morning, Scandinavia for instance, or in the UK, where we went ahead earlier with the pricing, but countries like Germany, or France is now hitting the market Australia did some at the end of last year, but he is doing more in may so.
Speaker Change: Is it still to be seen what the reaction is going to be but I can say so far from a consumer perspective is that the elasticity is around 0.5, which is exactly in line with what we would've expected, but we want to continue to monitor very closely and we don't want to start saying, Okay. This work great.
Speaker Change: We will have to see how the consumer is.
Speaker Change: Reacting the good news of all of this is that regained share in volume and value share overall.
Speaker Change: Our tablets are up of course double digit as you can imagine with some of the pricing and Easter and as I said is very good so.
Speaker Change: The word that I would use is so far so good but we are not done yet so we have a long road ahead.
Speaker Change: The macro conditions are very volatile as I said, the European consumer is stable at the moment, but that could change.
Speaker Change: And we still have to very carefully monitor the consumer reactions, which by the way are very different from country to country and we need to.
Speaker Change: Sort of direct or our reactions, depending on what we see happening.
Speaker Change: On the long term I think we are seeing the signs that we have that we believe in the chocolate market, which is that Indian consumers love chocolate, they will probably grapple a little bit with the current price increases but over the long term I think the high penetration of chocolates will continue I think we will continue to see.
Speaker Change: Very strong brand loyalty.
Speaker Change: We have the taste of the nation brands in many markets I don't think consumer will walk away from that and there is very very low cross substitution happening. If you don't have your chocolate there is not really that many other products. You can go through that gives you the same satisfaction and indulgence I would say.
Speaker Change: We also as Luca mentioned, we want to take a long term approach here. So if you have any upsides, we want to reinvest in.
Speaker Change: Particularly in our chocolate business, we don't want to take any shortcuts for short term gains we were very focused on the long term health of the category, that's where all of our business.
Speaker Change: And.
Speaker Change: It's all going to defense, where cocoa goes in the rest of the year in anyway, a coker will be next year, but if it stays at the high level. It currently is we might need to implement more RG I mean, the second half of the year or the beginning of next year. So agility is going to be key going forward, but so far so good as I said.
Speaker Change: Thank you so much I'll pass it on.
Ken Goldman: Thank you Ken.
Speaker Change: We'll go next to Peter Galbo with Bank of America.
Peter Galbo: Hey, guys good afternoon Luca.
Speaker Change: Luca Thanks for.
Speaker Change: The clarity on on tariffs I think one of the wire services, maybe picked up your commentary wrong. So I appreciate the clarification there.
Speaker Change: Luca maybe maybe just to start I wanted to ask.
Speaker Change: The slide you gave I believe it's 11 and 12 that kind of show the Easter timing shift and chocolate.
Speaker Change: I guess, if we had accounted for that it would even imply that maybe elasticity was.
Speaker Change: A bit better than you even planned for just taking into account that shift. So I just wanted to understand if that's a fair way to think about it.
Speaker Change: Given you had kind of a volume push out with the pricing you put in maybe versus first glance that the elasticity in chocolate might actually be more favorable than you had planned.
Speaker Change: I think in Q1.
Speaker Change: It's been a little bit more favorable having said that.
Speaker Change: <unk> seen that is getting into effect.
Speaker Change: In Europe, Brazil, India is kicking in.
Speaker Change: As of April May June and that is the moment I think.
Speaker Change: We will be able to tell you for sure that elasticity is in line with our expectations. So Easter was priced up compared to last year, but there is more pricing coming into effect into the P&L in Q2, and so you will see an acceleration of the revenue growth in Q2.
Speaker Change: I can tell you that Easter year on year is a meaningful driver of growth for us as I mentioned, we were quite happy despite the price increases that.
Speaker Change: Easter volume held up well in three major countries, namely owning cycle countries, namely Europe with the UK a clear standout in terms of share, but also Brazil and Australia. So so far so good I would say hopefully we got positively surprised it's important to say that in both big countries.
Speaker Change: Like Brazil, and India, we are protecting.
Speaker Change: Key price points and soulfully deal as TCT will be minimal also going forward.
Andrew Lazar: Got it Okay. That's helpful and Dirk maybe just as a follow up one question. We got on the North America Destocking, just given that you do operate a DSD system.
Andrew Lazar: In the U S. It would be I guess less common that we would expect that to happen. So just curious if you can give more color either whether it's by channel was it club where you maybe in more of a warehouse model, where the Destocking is happening just any additional thoughts on kind of what the real driver is just relative to what we would maybe see historically thanks very much.
Andrew Lazar: Yes, yes, I would say, we'd see it mostly in food and mass even if we have DSD there.
Andrew Lazar: The retailers still work with some stocking in the back of the store and they have an influence on how.
Andrew Lazar: What the level is in and manage that through their or their show.
Andrew Lazar: Benefiting the execution that we do DSD, but.
Speaker Change: Thanks, Phil.
Andrew Lazar: It's.
Andrew Lazar: Quite the directed by the centralized approach so.
Andrew Lazar: I would say.
Andrew Lazar: It's more pronounced in truth en masse.
Andrew Lazar: And the DSD really doesn't help us because of the reasons that I just gave you.
Andrew Lazar: Got it thanks very much.
Speaker Change: Okay. Thank you.
Speaker Change: We will go next to Megan Clark with Morgan Stanley.
Megan Clark: Hey, good afternoon. Thanks, so much.
Speaker Change: First question look I think you mentioned in your prepared remarks, the profit dollar generation in the quarter was a bit better than you expected. So.
Speaker Change: Just wondering if you could expand a bit on what drove that and part b a bit related last time on your fourth quarter call I think you mentioned <unk>.
Speaker Change: Yes, it would be borne pressured in lung with sequential improvement just wanted to clarify is that still the case. It does seem like there's some incremental tariff costs and while you mentioned not large just wanted to see if it changes how we should think about the cadence for the rest of the year. Thank you.
Speaker Change: Yes. Thank you for your question.
Speaker Change: The upside case.
Speaker Change: Essentially through three lines I would say that was a little bit of better pricing, excluding the U S. Where we you saw that pricing was slightly negative we have to reinvest some trade deals.
Speaker Change: But in general our pricing is a little bit better than what we had planned so not an impact I would say in the quarters to come but the little bit of an upside in Q1. The second element is productivity is we are delivering on our productivity and we are ahead of schedule that also comprehends.
Speaker Change: The pipeline specifically around that procurement related productivity is and I think the team has done.
Speaker Change: Good job in delivering those productivity is ahead of schedule again, not a material upside in the quarters to come but certainly a timing upside as we have accelerated the accelerated the delivery and the third element to easily a bit on the commodity side.
Speaker Change: We were able to obtain some commodities at favorable prices and that's resulted in some margin upside.
Speaker Change: In terms of cadence we are clearly happy where we are at this point in time Eikon rollout the fact that.
Speaker Change: That will be maybe a little bit more pressure going forward from <unk>. The direct impact on Billy's is really minimal and manageable and you can imagine that we are at this point in time not only stopped.
Speaker Change: Talk to most likely go through Q2 and Q3 in terms of those ingredients that are impacted but importantly, we're sitting down with suppliers and trying to negotiate.
Speaker Change: Benign impact and then we see that impact is going to get into the P&L in Q4, specifically in North America as I say it.
Speaker Change: But in the big scheme of things I would say not a major deal and something that most likely we will be able to manage.
Speaker Change: Through several things that we are working on.
Speaker Change: Cadence wise.
Speaker Change: I remind you that percentage margins in this context is quite misleading I think you saw that pricing in chocolate.
Speaker Change: Is up meaningfully.
Speaker Change: <unk> revenue was up 10% so percentage margins as we price away absolute dollars will get diluted but importantly, as we mentioned many many times, we will be looking at chocolate margin per kilo as we exit 2025, and if we had done a good job in managing elastic.
Speaker Change: It is I think we will have a very good situation in terms of profitability at the end of the year in terms of GP dollars and that will put us in a good position to grow earnings in 2026.
Speaker Change: Great. That's really helpful and maybe just a follow up for you Derek on biscuits in the U S.
Speaker Change: Clearly.
A theme that we've heard and we will continue to hear throughout throughout the earnings season as it relates to softness in the U S.
Speaker Change: You did you have made a lot of progress over the last couple of quarters on your share there.
Speaker Change: At the same time you are category leaders. So just wondering if you could expand a bit about how you saw the quarter play out in the U S.
Speaker Change: Maybe what you've seen is it moved through Easter and whether you think there is further things you need to do to address just the category softness in particular, thank you.
Speaker Change: Yes, yes so.
Speaker Change: I think.
Speaker Change: What's going on is that the consumer feels very uncertain about the future.
Speaker Change: And as a consequence, they're trying to prioritize.
Speaker Change: Essential items.
Speaker Change: Food those are the essential food items like meat vegetables eggs and so on.
Speaker Change: And the more indulgent categories or the less essential categories that would include.
Speaker Change: Personal care items that would include alcohol beverages I would include snacking categories.
Speaker Change: Generating less.
Speaker Change: Interest at the moment, so we saw that certainly play out.
Speaker Change: In the first quarter.
Speaker Change: And you if you look at the snacking categories, I think almost all of them except for yogurt are down versus last year in volume.
Speaker Change: Within those however, biscuits is doing relatively speaking better it's not is not down as much as we saw and as Luc I explained for us as a company if you exclude the destocking effect.
Speaker Change: We're slightly down in consumption, but almost flat in consumption.
Speaker Change: The way we are thinking about it is that.
Speaker Change: First of all we need to hit the right price points, and while two or three years ago consumers with easily pay above $4 for the effect of biscuits, we now seeing that we need to be below four and ideally below $3 and so we've launched a number of facts that hit that $3 price point below.
Speaker Change: $3 price point that certainly is having a.
Speaker Change: In effect for us.
Speaker Change: The other one.
Speaker Change: We see is that if we can run good activations and get extra displays.
Speaker Change: That also makes a difference and so going forward we are planning on.
Speaker Change: Things like July before Labor day.
Speaker Change: Really drive activation, because some interesting Oreo activations coming up for instance, we will launch a global Selena Gomez promotion.
Speaker Change: In the coming months, and we think that will also make a difference.
Speaker Change: We did post Malone at the beginning of the year and that worked very well for us.
Speaker Change: The third thing I would say that we are trying to do in biscuits is push our multi packs harder that that is for the consumer.
Speaker Change: Consumer tries to buy bigger packs to get a better value and that is working also quite well for us.
Speaker Change: The Destocking dynamics will subside, so that will help.
Speaker Change: And then I think.
Speaker Change: We have a bit of a chance that in the in the second half of the year, we will probably see more positive volume growth environment in the biscuits category and for our business.
Speaker Change: Focusing on the execution of the factors that I've said and make sure we control the controllable and.
Speaker Change: I think we will see a gradually improving trajectory in the U S.
Speaker Change: Great. Thank you so much.
Megan Clark: Thank you Megan.
Speaker Change: We'll go next to Chris Carey with Wells Fargo.
Chris Carey: Hi, everyone. Thanks, so much.
Speaker Change: Luca you made you made a comment around.
Chris Carey: Procuring commodities.
Speaker Change: Yes, slightly more favorable rates than what you thought that struck me in the context of the commodity.
Speaker Change: The input inflation number in the quarter coming in a bit better than I expected for your filings.
Speaker Change: Do you think you're tracking better than youre going.
Speaker Change: Inflation expectations are there are there more opportunities to procure commodity a bit better than what you thought I wonder if you could just.
Speaker Change: Spanned a bit more on that.
Speaker Change: I think you saw overall D mark to market being negative and there have been adjustments not only.
Speaker Change: For cocoa about for other commodities.
Speaker Change: I would say we have been opportunistic.
Speaker Change: Particularly in the way we have been locking in.
Speaker Change: Some minor commodities I would say at this point in time, though we are pretty much done with coverage for the so the prices are locked in.
You might also imagine that given the exposure we have two currencies given the.
Speaker Change: Europe and the GBP.
Speaker Change: PDL changes, we had been operating even India.
Speaker Change: Exchange Forex exchange market, then taken advantage, particularly as that there is a positive carry into 2026 and beyond with some of these condensate. So we have not only the operators.
Speaker Change: Or some minor commodities, taking advantages, but also extending coverage of some of the Forex Fas Inc to equal 25%. So I think when there is volatility.
Speaker Change: Usually very good at grabbing.
Speaker Change: Some of the opportunities.
Speaker Change: Perfect and then just just one one follow up would be.
Speaker Change: You did mention that you would look to reinvest perhaps some.
Speaker Change: Back into your chocolate business I don't know if that was a.
Speaker Change: Comment on pricing or other such investment of cocoa were to come down.
Speaker Change: Derek talked about more rgs.
Speaker Change: I guess.
Speaker Change: This is cocoa, probably stays very volatile and it's sort of a core driver of your of your underlying business.
Speaker Change: But as this trends over time.
Speaker Change: What are kind of the key.
Speaker Change: Watch out.
If cocoa.
Speaker Change: To go down and that's going to help your margins a lot would you gave some of that back in pricing.
Speaker Change: You mentioned this this concept of gross profit for a kilo and if it does do you continue to kind of leaning in on RG <unk> and perhaps re formulations. So I know this is a topic that gets discussed quite a bit but I would just love your latest thoughts in the context of kind of where we are in this in this cycle.
Speaker Change: Thanks, so much.
Speaker Change: Thank you, Chris So I will start by talking a little bit about the.
Speaker Change: Coal market.
Speaker Change: Some of the fundamentals I think we land do you see with.
Speaker Change: A total supply increase compared to last year, but it is in the tune of 10.
Speaker Change: 10%.
Speaker Change: Think on the flip side, though.
Speaker Change: And if you look at the salt brine being switch as a proxy for consumption I think Q1 guiding swept down 3% to 4%, but I think the market is a little bit underestimating the true impact that is going to happen to be.
Speaker Change: Demand side of things, particularly as the biggest chocolate market, which is the U S is facing higher elasticity I took a look couple of days ago to the evolution of the market in the states.
Speaker Change: Including Easter I think there is.
Speaker Change: There is a little bit of volume pressure and importantly.
Speaker Change: While we are seeing we travel to few countries and we see that those categories that you see like chocolate as a secondary ingredients are in formulating and downsizing heavily I think you saw.
Speaker Change: The impact that.
Speaker Change: <unk> had on our top line, so I expect really the demand side too.
Speaker Change: To impact positively the future cost of Copel.
Speaker Change: Our goal is to exit the year with minimal elasticity or elasticity is in line with what we expected and with the GP dollar that makes sense, because we truly believe that.
Speaker Change: Even if coal comes down that will allow us eight to expand gross profit dollar in absolute terms and be to reinvest materially back in in in the catheter. So if coca comes down I think quite frankly, it is nevada for us because the level of we will be price too.
Speaker Change: And the ability that Qualcomm lower prices will give us to reinvest in the business considering that our share is up and that we're holding the line in terms of price points, particularly in emerging market I think will position us well for years to come.
Speaker Change: Stays high.
Speaker Change: Quite frankly, I would say, we don't expect at this point in time, <unk> PDL headwind into 2026.
Speaker Change: We talked to you about cocoa prices, but if I look for instance, cocoa butter, which is what we buy the malls as opposed to cocoa powder cocoa butter prices are already coming down for 2026, and so I think the market is anticipating some.
Speaker Change: Some pressure on the volume side and so a long answer to say that in either case. The plan is non regrettable actions into 2025, and very well positioned at the end of 2025 to expand top and bottom line in 2026 for the chocolate category.
Luca: Thanks Luca.
Luca: Thank you Chris.
Luca: Yes.
Speaker Change: We will take our final question from David Palmer with Evercore ISI.
Luca: Thanks.
David Palmer: For squeezing me in.
David Palmer: The underperformance of snacks in the U S. Just even broader than your biscuits business and what youre involved in.
David Palmer: It seems like it's a pretty large underperformance of the U S market versus other markets around the world and even.
David Palmer: In the U S today versus past.
David Palmer: Choppy economic environment.
David Palmer: Do you think there is anything else.
David Palmer: <unk> the U S snacking market today other than.
Speaker Change: Consumer confidence in the low income consumer and I have a quick follow up.
David Palmer: No I don't necessarily think that.
The reason being.
David Palmer: Well, yeah, the reason being that it's across all categories in snacking and there's many categories. There is theres theres ice cream there is.
David Palmer: Kids there is.
David Palmer: Packaged bakery their solvent snack nuts, and so on you go on and on there's about there's about there's a chocolate theres about 12 13 categories in there except for yogurt it all down.
David Palmer: And I think thats largely driven by.
David Palmer: By the overall consumer uncertainty about the future and the fact that they feel that when you really need to focus on.
David Palmer: On the key things at this moment until we feel better about the future I think we will see similar moves in less eating out of home lesson.
David Palmer: Less entertainments less travel you can see the consumers not only in food, but across the board really being very very frugal and very careful.
David Palmer: As things improve hopefully that I think we will see that change maybe the other thing I would say is that it is true that there is a bit more of a pronounced health and wellness approach I would say the categories that our health and wellness within snacking.
David Palmer: That could be things like yogurt or protein bars for instance, or within the normal categories, gluten free or less sugar or things like that those are doing doing better than the rest of the category. So that would be on top of consumer confidence is the only other trends that I see at the moment.
David Palmer: That is reflective of the snacking category.
Speaker Change: Okay. Thanks, and then just wanted to ask you a follow up on an emerging markets. There was a bit of a slowdown this quarter to.
Speaker Change: 4% I'm wondering how youre thinking about emerging markets broadly for the rest of the year could we return to high single digit growth in what markets would you highlight that are maybe getting your attention more than others. Thanks.
Speaker Change: Yes so.
Speaker Change: I would say.
Speaker Change: If you look quickly where we are in our four main emerging market. So China is up high single digits in Q1, India is down.
Speaker Change: High single digit in Q1.
Speaker Change: But because of a number of reasons, we expect a strong we had a strong prior year base. We have some we did some pricing in chocolate we have some elasticity impact there.
Speaker Change: We do have a bit of a muted biscuit consumption, where we play in the premium segment of the market and the consumers switching we expect India in the remainder of the year to start to grow faster.
Speaker Change: <unk>, China, which I mentioned first to remain at high single digits for the rest of the year.
Speaker Change: In both countries, we have a large distribution runway. So we can complement what happens in the in the same store sales with extra stores and that makes it makes a difference for us.
<unk> was mid single digit growth in Q1.
Speaker Change: We will be doing more pricing in chocolate, we are doing a number of new activities in.
Speaker Change: In our biscuit business and in our candy and gum business. So I am expecting that Brazil will remain there maybe accelerate a little bit and then Mexico is gradually getting better you have to keep in mind as we lap there a bit of a difficulty with the integration of recall Reno last year, we were low single digits in Q1.
Speaker Change: But we see.
Speaker Change: Good movement on Oreo recall Reno in Philadelphia in Mexico, So I think.
Speaker Change: There we will also see an acceleration.
Speaker Change: Wouldn't say that our total off.
Speaker Change: Emerging markets will get to double digit, but certainly we see and we will see an acceleration in the second half from where we are today.
Speaker Change: Great. That's helpful. Thank you.
Speaker Change: Okay that concludes the Gulf for today Q1 down so far so good and we'll see you for Q2.
Speaker Change: Thank you everyone.
Speaker Change: Yes.
Speaker Change: Thank you, ladies and gentlemen that will conclude today's program. We thank you for your participation you may disconnect at this time.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Alright.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].