Q2 2025 Mondelez International Inc Earnings Call

Please stand by your program is about to begin if you need assistance during your conference today, please press star zero.

Good day and welcome to the maunder international 2025 second quarter. Earnings question and answer session.

Your lines have been placed on listen-only until it's your turn to ask a question.

In order to ask a question, please press the star key followed by the number 1 on your touchtone phone at any time.

To remove yourself from the queue, press the star and 2 keys.

On our on today's call are Derk vandeput, chairman and CEO, Luca zaramella CFO, and Chef Dunlap, SCP of investor relations.

Earlier this afternoon, the company posted a press release and prepared remarks, both of which are available on its website.

During this call, the company will make forward-looking statements about performance. These statements are based on how the company sees things today. Actual results May differ materially due to the risks and uncertainties,

Please refer to the cautionary statements and risk factors contained in the company's 10-K, 10-Q, and 8-K filings for more details on forward-looking statements.

As the company discusses results today. Unless noted as reported, it will be referencing non-gaap Financial measures.

Which adjusts for certain items included in the company's Gap results.

In addition, the company provides year-over-year growth on a constant currency basis unless otherwise noted.

You can find the comparable, gaap measures and gaap to non-gaap reconciliation within the company's earnings release at the back of the site slide presentation.

We will now move to our first question.

Our first question comes from Andrew Lazar with Barclays. Your line is now open. Please go ahead.

Great, thanks. Thanks very much and and thanks, uh, also for putting out the prepared remarks as time is this time around, uh, very helpful. Um, D could be great. If maybe you could do a brief walkthrough of the, the key geographies, and how you see it all playing out in the second half. And then Luca given the additional weakness in North America. What incremental actions, can the company take whether they be on the cost side or maybe more importantly, we have the demand driving side to accelerate growth there even in the context of a weaker category. Thanks so much.

Uh, thanks Andrew. Um, yeah, yeah, maybe quickly. Um, overall we think the, the cute 2 results are, are, are quite good. We had some good pricing if you discount for the downsizing, we're flattish. As it relates to volume mix. Um and our bottom line is slightly better than uh than expected. Um, I I think what also is clear is that we are very good Global balance in the sense that, uh, we see a continued weakness in North America, but we had a strong quarter in the rest of the world. And uh, since our our sales are well balanced between the different continents. That really helps us uh the other 1 that's important for us, is that chocolate and

Um, and we are maintaining our full year outlook. So, overall, we feel good about the quarter, if I go a little bit around, uh, the world, um,

Maybe starting in Europe, uh, a good quarter in Europe. Um, with good numbers, strong share gains. Clearly the business is very resilient.

The consumer is um more confident in Europe, uh still quite fragile. Uh and Frugal spending but snacking continues to outpace food. Um, and overall I would say, uh, we we feel pretty good about our European business. Uh, consumers are are not exactly bullish but and they're focused on Essentials, but they keep, they keep on buying our category. Even this point, the uh, uh, significant price increases that we have to do in uh uh in chocolate.

If I go to the US um, a little bit more of a difficult situation there, the there's a lot of consumer anxiety. Uh they look at a quite uncertain Outlook as it relates to their uh personal finances job expectations inflation. So they tend to focus more on essential on essential items. Uh, the size of the basket is getting very important absolute price points.

Uh, this channel shifting going on, there's more promotions and some back shifting too. So overall we see a pretty soft biscuits, uh, category. Probably performing a little bit better than other snacking categories. We uh, holding share uh but overall the volume is is declining

Um, switching to the Emerging Markets. We feel very good. Uh, double digit growth. Uh, we have a sustained, volume and value growth. We have very good share. Gains in Brazil and India and Mexico.

Consumer confidence is softer in these markets. Um, they are worried about their personal finances, job security inflation. So we see the same channel shifts, mainly into bulk and discount in places like China. We also see the pack shift, um, but Emerging Markets continue to be an attractive growth engine for us. And if you look at our 4, major markets, we feel good about China. India Brazil Mexico has been softer but overall, I would say, clearly a strength to this quarter in Emerging Markets,

Okay, yeah, thank you for your question. So as far as North America goes, first of all,

Uh, there is clearly a, a consumer sentiment that is impacting uh, consumption the board.

We have not planned for a material rebound of the category in the rest of the year. So, uh, I want to reassure you that in the guidance, uh, we have given, uh, we have the aim. There is no material improvement of, uh, the U.S. uh, general, uh, sentiment in terms of, uh, placing the plan up. Uh, what we have done is, uh, first of all, uh, we have announced, uh, incremental pricing that is going to take effect in, uh, a few weeks in North America. I won't elaborate much, but, uh, we are clearly, uh, at the point in time where we see inflation going up. Uh, our cost base is higher, particularly because of, uh, cocoa, but not only. Uh, and I think that will boost revenue and, uh, the top line. We have done quite a bit of work in terms of, uh, being very selective. Um, instead of picking the items, for instance, like, where most impacted by,

Um outstanding uh and uh we have again deep opportunity to get to our fair share of closer to our fair share in those alternate channels. So quite a bit of uh actions that are planned for the second half. But again uh we are not putting out wishful thinking in terms of uh category uh rebounds Etc. I I think it is a fair assumption and Safe 1.

Thank you.

Okay, next tip. Peter Galba with Bank of America.

Hey, good afternoon, sir and Luca. Thanks for the question. Um, I I I wanted maybe to put a finer point on on the prior previous question. Um, particularly around the the lack of of change in guidance, um, for the second half clearly you had a, you know, a strong delivery on on the first half. So

There. Maybe you can just put a bit of a finer point on on the puts and takes in the second half. It, it seems like, you know, maybe the US is a bit weaker than you thought, but then there's other pieces that are holding it up.

Any other considerations that we should really think about as we contemplate that?

Um, yeah, so, um, yeah, we're trying to be vigilant and make sure that we can execute against our agenda.

Um,

I think that we have accounted in our outlook for um the tougher areas uh as Luka was pointing out. So the ones that we are keeping an eye on first 1 would be chocolate. Uh what we've seen in with chocolate in Europe is very good Easter. Um we execute it well in our rgm and pricing strategy that's in the market.

Then in June and July. There was quite a heat wave in Europe and so volumes were lower than expected in the last 2 weeks. Uh, the temperature have gone down and we see the volumes come back. So we are quite Vigilant on on chocolate elasticity for the second half of the year but it's difficult to read at this stage with this heat heat wave in Europe. Um as it relates to the us we we really don't see an immediate change. If anything I think the consumer will see the full effect of the tariffs in the second half and so we will see where the consumer confidence and the consumer spending will go and so we have to be careful of that. And um um I would say those are the 2 big factors that make us

Keep our, our current Outlook, uh, there. Like Luca said we've included. Um, I think a realistic view on what is going to happen in those 2, um, and that seems that this stage for me, the best stance that, uh, that we can take.

Okay, thanks. Thanks for that. And, and Luca, maybe just as a as a follow-up, um, there's obviously been a lot of discussion around, you know, the the move in cocoa and and cocoa butter and particular, which I think has moved in a pretty favorable, um, Direction. So maybe you could just talk about how we should extrapolate that. How you're thinking about it as as you begin to contemplate hedging for 26. Thanks very much.

I think, when you look at the, uh, cocoa Market fundamentals, uh, they're going, uh, in the right direction. Uh, there has been, uh, clearly a pressure point in terms of demand, I think you saw the grinding numbers being down 78% and that drove, uh, a couple of weeks ago, uh, a low level of cocoa price below, you know, the 5,000 gbt per tonne Mark. Um, clearly we took advantage of that, uh, and it is what we said to you many times, which is, uh, many adjacent categories are reformulating out of, uh, real chocolate and moving into, uh, what we call, uh, compound, the pop count in West Africa is very promising. The weather has been, um, cooperating and uh, look no. We stand in the

Which is, uh, the most noble part of, uh, uh, cocoa. And it is the 1, we use the most, um, around the world. And, uh, that is what allows you to call chocolate chocolate. For instance, in places like, uh, like Europe. It has come down, uh, dramatically. I would say versus, uh, last year. Uh, it is usually traded as a ratio to the overall cocoa prices, uh, last year. It was, um, most likely at a certain point in time, even higher than, uh, than 3. Uh, and it went almost to 4 and today it, I I think we can strike contract with supplier, uh, for most likely

Half of that, uh, of that price and ratio. And so there is a material benefit coming, uh, which obviously, um, is offsetting, you know, the cost we have seen as of, uh, as of late. But in general, we feel like cocoa prices will have, uh, will have to come down.

All right. Next question.

We'll go next to make and clap with Morgan Stanley.

Hi, good evening, thanks so much. Um, maybe another follow-up on the second, half Outlook there. There was a comment in the prepared remarks, just about some of these, headwinds reducing your flexibility. And I guess, if I were to look at what's implied in the second half in terms of organic sales growth, it's it's roughly similar to what you reported in the second quarter and just wondered if we could talk a little bit more about about the regions and how to bridge from the second quarter to the second half, it does seem like you have good momentum and Emerging Markets, you'll have more pricing coming through in Europe, understand maybe elasticity is a bit higher North America's a week, but Luca, if I, if I understood you correctly, maybe North America can get a little bit better. So what are kind of the offsets that I'm missing? Um, that, you know, reduce the flexibility in your minds as it relates to the the second half. Thank you.

Uh, thank you, Megan. So, uh, you know, as far as Outlook goes, uh, in the prepared remarks, uh, we make a comment about, uh, a little bit less flexibility. What we mean by that is really that the unprecedented heatwave that impacted chocolate in Europe.

um,

is, uh, clearly something we couldn't predict, as well as, uh, you know, the impact we had particularly, uh, in the US because of, uh, the, uh, trade stocking.

Uh so that what we really mean by uh a little bit less uh flexibility.

You might imagine we try to keep always a little bit of a buffer, particularly as, uh, as we give guidance because things, uh, can happen. I think, uh, what we see in the last couple of weeks in Europe, is the weather being more collaborative with us, and, uh, we see chocolate consumption coming up. And you might imagine it is a little bit hard to distinguish between, uh, elasticities and, uh, and whether consumption. But, uh, the latest indication is that, uh, the, uh, volume impact on chocolate, is more benign than we have seen, uh, in the last. Uh, I would say, couple of months now, uh, you know that I implications in terms of shipments in Europe in uh in Q3 uh and so we are a little bit uh um prudent in terms of projecting Europe, particularly in uh in Q3 North America.

Uh, the pure fact is that the major Market uh, category wise uh is at this point down, volume wise, uh, minus 3%, the category started going south. Uh, in Q4 and even into 3, uh, last year. So we are lapping, but we are projecting our category. Volume wise to be down, uh, still, uh, 3%. Now there is pricing. So Revenue should go up uh from uh the uh, what you have seen particularly in this quarter on the positive side and uh and clearly top bottom line should go up uh, as well from what you have seen in this quarter in Emerging Markets. Um we have implemented multiple waves of pricing. We are out with a new price both in India and and Brazil that are the main. The main markets, we have in emerging markets. And so again we need to stay quite prudent and see what happens to uh elasticities. We don't have

Our biscuit business continues to do well, excluding North America actually yesterday. Uh revenue is up um a little bit more than 7% and uh again we project a a continuation of that. Uh so we really want to be on the prudent side. I would say, uh I'm not suggesting that uh the guidance is slam dunk at this point in time. You know, that in the US most likely there is a wave of inflation coming up. And so we have to be uh, we have to stay prudent and uh, and uh, execute with Excellence, as I think we have done in most of the cases in the first half.

Okay, great, super thorough and helpful. Thank you. And then maybe just a follow-up on on Coco. Um you know when we came into the year you you said there's essentially 2 scenarios in terms of 26 1 is Coco comes down and you have higher earnings upside potential too as it stays elevated and you have to take a bit more pricing and you know you mentioned you took advantage of the recent drop in Cocoa prices but how are you thinking about you know, whether or not you might have to do a little bit more, pricing some more rgm. And I guess how how are you thinking about that into the back half of this year?

So I I think look, uh, this is 1 of the unknowns of the plan I think. Um, but I might be proven wrong I believe that uh, with the new crop data,

We will know which direction Koko is going to pay particularly for 2026. And I think uh, there are possibly 2 scenarios 1. It is it stays elevated. But the other 1 is, it might go down um, quite uh, rapidly because if there is a supply uh, between supply and demand, I I I think uh, there will be uh, material cocoa. Availability that will drive prices down.

In the first case.

I think, uh, we might need or not uh additional pricing based on where cocoa uh is if it stays where it is. I think all the actions that that we are about to take from now to the end of the year, in some of the markets, I I think will put us in a, in a good spot. I said many times that, uh, when I look at the underlying per kilo of cocoa, uh, or the chocolate business, gross profit dollars. I see a number that, that I like, as we exit, uh, the year, remember that, uh, pricing,

As a carryover as well into next year. And so, if Koko stays elevated, there might be additional pricing, but I think in all in all, we should be in a, in a good spot at the end of the year, if Koko comes down, the question becomes,

what do we do to protect demand? What do we do to face potentially some competitive, uh, actions Etc? But in the end, I think the pnl will try because if I apply elasticity as seen on the way up, to the way down, there is, uh, either material price upside, or there is a potential volume rebound. Also, remember 1 critical thing, which we said many times, The Virtuous model of this company has been in the last few years to protect, you know, gross profit dollar growth

As opposed to percentages. But it has also been investing particularly in working media and in good to Market, and we will continue to do so, and potentially in 2026, will step it up depending on the level of cocoa to the point where we really reestablish a virtual cycle, which is volume growth, share growth, generation of uh, GP dollars and um, again good cash for the company.

Great. Thank you.

And just a reminder, it was star 1 if you had a question.

We will go next to Robert Moscow, with TD Cowen.

Hi. Um, thanks for the question and and maybe just a couple of things to clarify Luca, um, the the comment that you need to invest in working media in 2026, you know a lot of other companies do that when they've reduced uh, media in a given year. So it doesn't sound like, that's what what you're doing. Um, so maybe you could you could explain whether that's like a catch up uh, in 26 or not. And uh, and then I'll ask a quick follow-up.

Yes, Rob, I'll take that. Um, so the way I would describe it is that we will have a chocolate category whereby the price will have gone up 3% to 50% in the last 2 years.

Their frequency and their diminishing, the quantity bought. So we expect that after all the price increases and even if cocoa comes down, I'm not expecting that. It will come down enough for us to see significant, uh, price reductions in chocolate. Um, we will have to support our Brands and make sure that the volume in the category, uh, uh, remains or goes back to where it historically has been. I don't know where we will end the year, but you could expect, uh, chocolate volumes around the world to be down so far, we see it down. 67%, uh, that's the latest news on on grinding for Cocoa. So that's the main reason. Why we think we will have to reinvest

On top of that, as it relates to to biscuits, particularly the us, we see a very anxious and, and weak consumer situation. I'm not expecting that, that immediately will be better next year. So, I'm expecting that we will have to increase our investment in our brands also in in North America. Uh, next year, those are the 2 main reasons why why we believe that it is uh appropriate to increase our media investment next year. And now you're right. We have protected work in media. This year, what we have got is the non-working car

And, uh, and, uh, and so, I wouldn't say the Baseline is, uh, terrible. But this year, unlike other years, we haven't increased walking media much.

Okay? And and my follow-up is I noticed Luka that you said, you know, category volume down about 3% in biscuits and first half you expected to be similar in the second half but then you're also raising prices in the US. And, and you've mentioned that the consumer is under a lot of pressure is this 1 of the, you know, the the, the Flex Points, that, that might go the wrong way, you know, and how much pricing do you think you'll you'll raise in the US?

Look, I'm not going to comment specifically on the amount of, uh, pricing, um, yet, uh, but...

I, as I said,

The price increase that we are about to pay.

Has been quite surgical. Um, we mentioned to you a few times that, uh, we are beeping $3 and $4 per pack. It is the magic of, uh, you know, being there and, uh, attracting consumers. And that's what really, uh, we are about to, uh, not to touch. Uh, we will protect those price points. I, I, we mentioned to you that, uh, there are specific pack sizes that, uh, are very relevant to consumers, like, uh, the multipacks. We are keeping those price points.

Points. Uh there are brands that uh are not our top brands necessarily where we're going to go with higher prices and uh that over time has proven to us that elasticity is not is not Material. Um, and then there is a whole host of, uh, ideas. As to what we have to do to boost consumption in in the second half particularly as it boils down to rgm. And uh, and uh, promotions. I think the team has as late of actions that, uh, hopefully will lead to, uh, much better driving results. So, you're right in saying, how do you reconcile? The fact that consumers are price sensitive to a price increase. But, uh, we have done our homework and we believe, there is no going to be a material volume repercussion on consumption. In our case,

Got it. Thank you.

We'll go next to Alexia Howard with Bernstein.

Good evening, everyone.

Hi Alexia. Hi. Hi. Um, can we start with a question on use of the cash? Um, it seems as though you are, um, taking on a bit more debt, in order to repurchase shares, I think you put a a 900 uh, Sherry purchase approval over the next 3 years out. At the end of last year, uh, should we expect that? Um,

That dynamic continues. How are you thinking about the trade-off between taking on debt and continuing to repurchase shares at this point?

Look, the number one ticket item.

Uh, between the balance of cash flow and, uh, the Chevy purchase and dividend.

Is actually the Forex impact on our debt, our debt composition.

Time. And we believe that these, that I, uh, action to take the second thing, which is not capturing, that is, uh, we have meaningful net investment hedges that.

Hedge the composition of of the, uh, balance sheet and the variety of currencies that we have functionally around the world. So looking at the debt that is impacted by Forex and, uh, and not looking at, uh, the overall balance sheet and the gains, the material gains, we are making on the net investment. Ages is a little bit misleading. But to your point about share, I stick to what I said in, uh, in dq1 call we have been buying back quite a bit of, uh, shares at a very compelling price, uh, which was below, uh, $60 per share on average. Um, we are going to be very pragmatic, uh, should the stock for any reasons and quite frankly, I have to say

When I fast forward, when I see Google coming down, when I see them on the list in the context where many companies are challenged, uh, you know, printing a number on Top Line which is, uh, which is quite good as I look at the plans around the world. I, I believe we are setting ourselves up for, um, a decent 2026. I don't believe necessarily the stock price is, is going to go down, um, much I hope from uh, from here but in

In case it does, we are going to be pragmatic and, uh, and um, you know, buy back, uh, more stock. And I think in hindsight as cocoa normalizes and we look at our normalized earnings, this would be one of the best, uh, deployment of capital decisions we have made.

Great. Thank you and, and there's a follow-up. Um, the weakness in North American volumes, I, I know you've attributed it to, um, uh, weakness value seeking behavior on the part of consumers. How are you thinking about the glp1 impact on these indulgent snacking categories? Um, particularly, um, as we think about pill versions coming out. Next year, is there a danger that North America sees continued pressure? Obviously your other regions are doing fine, which is great. Uh, but I'm just thinking about how? How you prepare for that eventuality next year. Thank you. And I'll pass it on.

Yes. Um,

Well, I, I, I, I mean, from our perspective, there is...

Currently, no, real impact on, on our volumes coming from glp1. We, we did an in-depth analysis in North America and, um, most of the negative volume that we're seeing and, and the the changing in consumer buying is all driven, uh, economically. The anxiety about the future, the frustration with the inflation and so on. Um, if we look at the

Numbers at this stage, the penetration of the drug in the adult penetrate and in the adult population is about 4%.

Um, the reduction in calorie intake at this stage is about 11% in consumers who are staying about 9 months on the drug. Um, the penetration is not going up at this stage, and so if you think about it, 4% of the population reducing their calorie intake by 11%, that is a 0.4% effect on the total population of the total calorie intake. Sorry. And so that is an almost invisible effect for us. Even if we extrapolate that for 26% of GLP-1s happening. And so, I think, even in 2026, and to be honest, when we even extrapolate it for 10 years, we do not think that the effect will be significant. So, um, we don't think that the current weakness that we see in the snacking categories is driven by GLP-1s.

Nor will it be in Q2 2026?

Helpful, thank you so much. I'll pass it on.

No ma'am now.

Hey, thanks for the question. Just sticking on North America, I wanted to get a better sense for the retailer. The stocking that you saw, I'm hoping to get more color on what drove it and how you think it plays out or recovers from here. Thank you.

Yes, I, I mean it’s sometimes difficult for us to put ourselves in the place of the retailers. But we believe that, um,

Place probably the retailers um wanting to manage their cash flow. Um, if you think about it, there's an overall slowdown in consumption tariffs were coming. They probably wanted to import more from the countries that were going to be affected. So they increase the Imports and increase their inventories in certain items and wanted to offset that by reducing other items. Um, the second reason I think is there's an overall slowdown in food consumption and also in snacking. So there's a need for them to have less inventory at this, uh, at this stage.

For me, those are the 2 main reasons. Um, as we said, um, we still have, uh, significant opportunity in other channels. So, 1 of our strategies is to shift more of our pressure into, uh, channels like, uh, the the value channels or e-commerce or the Discounters. And that is, is giving us a, an opportunity to offset some of that, uh, uh, these stocking that we've seen in the retailers. But overall, I think those were the factors that drove it. We were a bit surprised to still see some of that in Q2, but I think we now have that behind us and Q3 should be clean as it relates to, uh, in retail or inventory.

Alright, thanks very much. I'll leave it there.

Okay, thank you.

That will conclude the question-and-answer session. I will now turn the program back over to Dirk Vandeput for any additional or closing remarks.

Well, I want to thank everybody for their interest and their attendance to the call. You can always follow up with our IR group for more questions. Um, I’ll see you for the call a quarter from now. Thank you. Thank you, everyone.

Thank you. This does conclude today's call. We thank you for your participation.

Just connect at any time.