Q3 2024 Earnings Summary
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Net Revenue Growth | Q3 2024 | Upper end of 3% to 5% | +1.94% year-over-year (from 9,029In Q3 2023 to 9,204In Q3 2024) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Rising cocoa prices and hedging strategies | Recognized as a major headwind across Q2, Q1, Q4; coverage through physical and derivatives with expectations of eventual normalization. | **Peak cocoa costs still weigh on profits, though prices down from all-time highs. Hedged ~50% of 2025 needs with collars; Q4 2024 locked at peak. ** | Consistent across periods |
Challenges in achieving EPS growth due to higher input costs | Persistent caution in Q2, Q1, Q4 about input inflation (especially cocoa) impacting EPS. | **Hard to see 2025 EPS growth unless cocoa costs drop or elasticities remain benign. ** | Consistent across periods |
Emerging markets expansion (particularly China and India) | Notable expansions each quarter (Q2, Q1, Q4) with distribution gains and brand building in both markets. | **Strong results in China (HSD revenue); majority stake in Evirth for pastries. India biscuits down, chocolate stable. ** | Consistent across periods |
U.S. biscuits market softness and lower-income consumer frequency | Recurrent focus on affordable price points and lower-income consumer pressure in Q2, Q1, Q4. | **Slight softness offset by gains. Emphasis on $2.99 packs for budget-conscious shoppers. ** | Consistent across periods |
Pricing strategies and elasticity management | Ongoing price actions in Q2, Q1, Q4 with modest elasticity, especially in Europe. | **Utilizing RGM to protect volumes, flexible pricing if cocoa costs shift. ** | Consistent across periods |
Volume declines in key markets (Mexico, North America) | Volume softness observed in Q2, Q1, Q4 from inflationary pressures and supply chain constraints. | **Mexico volume pressures tied to pricing. North America volumes stabilizing. ** | Consistent across periods |
M&A and expansions into new product categories (cakes, pastries) | Lotus Bakeries partnership in Q2; no mention in Q1; expansions in Q4 via pastries (e.g., Chipita). | **Acquisition of Evirth in China to grow cakes/pastries; leveraging R&D. ** | Introduced in Q2, expanded in Q3 |
Distribution expansion opportunities in emerging markets | Continuous expansions in Q2, Q1, Q4, with substantial store additions in China, India, Brazil. | **Focus on expanding in Brazil’s convenience channel, faster distribution in China, addressing challenges in India. ** | Consistent across periods |
Innovations in product offerings (gluten-free, zero sugar) | No mention in Q2/Q1; Q4 focus on bigger innovations, including OREO Gluten Free and Zero Sugar. | **Launch of Coke-flavored OREO and OREO-flavored zero-sugar Coke collaboration. ** | Discussed in Q4 and Q3; no mention in Q2/Q1 |
European performance, pricing negotiations, and potential disruptions | Similar themes across Q2, Q1, Q4 with annual renegotiations and some customer disruptions. | **Europe up ~8%. Pricing nearly complete; slight uptick in elasticity but stable sentiment. ** | Consistent across periods |
Shifts in consumer behavior (price sensitivity, promotional intensity) | Observed in Q2, Q1, Q4: increased promotional activity, smaller packs, channel shifts. | **Lower-income shoppers focus on total basket; $3-$4 price points remain crucial. ** | Consistent across periods |
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2025 EPS Outlook
Q: Is EPS growth expected in 2025?
A: Management stated that it's hard to see a path to EPS growth in 2025 unless cocoa prices adjust materially or elasticities are more favorable, allowing for more pricing. They have scrutinized costs and plan to remove sizable overhead and nonproductive media expenses, but cocoa costs remain a significant challenge. -
Cocoa Costs Impact
Q: How will cocoa prices affect performance?
A: Elevated cocoa costs, especially in Q4 when prices were locked at peak values, will impact margins. Pricing actions won't flow through immediately in 2025, so profit improvements are expected more in the second half. Management is monitoring cocoa market developments closely and expects clarity on prices in the coming months. -
Pricing and Elasticity
Q: Can pricing offset cocoa cost increases?
A: Management plans to implement additional pricing in 2025, but it won't take effect immediately. They've observed benign elasticities following recent price increases, which may allow them to push prices further to offset cocoa impacts. They will protect key price points, especially for entry-level products. -
Portfolio Growth Targets
Q: Which parts of the portfolio will meet growth targets?
A: 70% of the portfolio, primarily non-chocolate products, is expected to perform in line with their normal growth algorithm on the bottom line. The chocolate segment, affected by higher cocoa costs, will not be on algorithm. -
North America Performance
Q: Why is North America outperforming in snacking?
A: Despite high food prices affecting consumers, Mondelēz is outperforming by focusing on key price points like $3 to $4 and launching new packs of Chips Ahoy and Oreo at $2.99. This strategy aligns their products with consumers' shopping baskets and is helping gain market share. -
Cocoa Price Flexibility
Q: How flexible is Mondelēz in managing cocoa price volatility?
A: Mondelēz has coverage strategies, including futures and collars, covering about half of their 2025 cocoa needs. This approach allows them to benefit from potential price declines while protecting against increases. They've built flexibility into pricing plans to adjust based on market conditions and elasticity. -
Latin America and China Outlook
Q: What is the outlook for Latin America and China?
A: In Latin America, performance remains solid overall, with strong results in Brazil, though Mexico has seen some volume decline due to pricing adjustments. In China, Mondelēz is optimistic due to mid-single-digit volume/mix growth and high single-digit net revenue growth. Government economic boosting policies are expected to positively impact consumer sentiment. -
Cakes and Pastries Expansion
Q: What are the growth plans for cakes and pastries?
A: Mondelēz sees significant opportunity in the $95 billion packaged cakes and pastries category, growing at 7% CAGR. They are leveraging brands like Oreo to enter this fragmented market. In China, through the acquisition of Evirth, they focus on high-quality products with potential to expand globally. -
Q4 Sales Expectations
Q: What are the expectations for Q4 sales growth?
A: Management expects an acceleration in organic sales growth in Q4, with strong performance in North America and EMEA. No additional pricing is coming into effect in Q4, so growth will be volume-driven. They anticipate Q4 growth to be slightly higher than Q3. -
Pipeline Sales in Europe
Q: How did pipeline sales impact Europe results?
A: Pipeline building for back-to-school activities in Europe was not material. Some planned shipments, like Christmas products in the U.K., were delayed from Q3 to Q4, but overall pipelining effects are insignificant. -
U.S. Confectionery Market
Q: Why is U.S. confectionery weak compared to Europe?
A: Mondelēz has limited participation in the U.S. chocolate market, so they refrained from detailed comments. In Europe and emerging markets, consistent investment in brands, marketing, and distribution has strengthened their position over the years.