Mondelez International, Inc. (MDLZ) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Solid First Half Performance

  Mondelez reported strong profit dollar growth, driven by effective cost management and pricing, alongside a successful annual pricing in Europe.

• Momentum in Emerging Markets

  The company continues to see growth in emerging markets, investing significantly in brands and capabilities for sustainable long-term growth.

• Strong Free Cash Flow

  Mondelez generated $1.5 billion in free cash flow, highlighting its financial health and operational efficiency.

• Investment in Brands and Distribution

  The company is increasing distribution points and launching new pack sizes priced in the $3 to $4 range to drive brand loyalty and value for key products.

• Strategic Partnership with Lotus Bakeries

  Mondelez announced a partnership with Lotus Bakeries to develop co-branded chocolate products and distribute the Lotus Biscoff brand in India, aiming to scale its sweet biscuit business.

Pessimistic Highlights

• Volume Declines in North America

  North America experienced volume declines, impacted by consumers seeking products with lower absolute price points, affecting brands like Chips Ahoy!.

• Elasticities Moving Slightly Higher in Europe

  Although modest, elasticities in Europe are increasing, indicating a potential challenge in maintaining volume growth amidst pricing actions.

• Consumer Caution in India

  In India, there's a pullback in spending and some down trading in biscuits, particularly affecting lower and middle-income households due to food inflation.

Company Outlook

• Accelerated Growth Strategy

  Mondelez remains focused on accelerating its long-term growth strategy, reinvesting in brands, expanding distribution, driving M&A, and scaling sustainable snacking.

• Cocoa Cost Headwinds

  The company anticipates cocoa cost headwinds in the second half of the year but remains confident in navigating these challenges through its proven RGM playbook and cost management strategies.

• Positive Volume Growth Expected

  Mondelez expects to improve volumes in North America in the second half of the year and is positioned for sustainable long-term growth in chocolate.

Q & A Highlights

• Q: Can you elaborate on the consumer situation in North America and the need for a more aggressive price reset? (Andrew Lazar, Barclays)

  A: Dirk Van de Put explained that the category remains soft but is stabilizing. Mondelez plans to drive more distribution and displays, implement targeted promotions, and launch smaller packs to address consumer needs without a full price reset.

• Q: Could you provide more details on the expected volume growth in Europe despite pricing actions and slightly higher elasticities? (Ken Goldman, JPMorgan)

  A: Dirk Van de Put highlighted that consumer confidence is cautiously optimistic in Europe, and despite some uptick in elasticities, the expectations for volume growth in the second half are solid, supported by strong execution and seasonal activities.

• Q: How will the ERP transition impact the business, particularly in 2025? (Alexia Howard, Bernstein)

  A: Luca Zaramella mentioned that the ERP transition is planned over four years with a staggered approach to minimize potential issues, expecting a successful execution with minimal impact on the business.

• Q: Can you unpack the performance and outlook for Mexico, considering the subsidy timing mentioned? (Peter Galbo, Bank of America)

  A: Dirk Van de Put described the economic backdrop in Mexico as healthy, with a temporary impact from lower public subsidies expected to normalize in the second half, maintaining a positive outlook for growth.

• Q: Could you discuss the coverage and strategy for cocoa costs heading into 2025? (Michael Lavery, Piper Sandler)

  A: Luca Zaramella explained that Mondelez has secured a quarter of its 2025 cocoa positions through futures and derivatives, allowing participation in potential market corrections while protecting against price increases.