All right, thanks, everybody. Welcome back. I'm Steve Powers. I'm the head of Deutsche Bank's U.S. Consumer Packaged Goods Franchise, and I am thrilled to welcome back Mondelēz to our conference. With us today, our Chairman and Chief Executive Officer, Dirk Van de Put, and Chief Financial Officer, Luca Zaramella. We're gonna devote the entirety of our conversation to conversation, and thanks again for joining us. Thank you, Steve. Pleasure to be here. Dirk, let me start with you. There are a lot of topics du jour, cocoa, U.S. biscuit trends and pricing, et cetera. But I wanna start bigger picture. I think if you take a step back, and you think back to the company's new strategic launch back in 2018, you've managed to deliver through lots of volatility, very consistent results, at least in line with your long-term algo. While also reporting solid progress against Snacking Made Right objectives. I guess, very simply, to what do you credit the success, and can you keep it going? Yeah, well, I think the biggest change was that the company was coming out of a cost phase when I arrived, and it was necessary to refocus the organization on growth, which is what we did. The way we did that is by changing the organization, changing the incentive system, putting the consumer at the center of everything we do, revamping the marketing in the company, focusing more on distribution, sort of getting the basics right, and then sticking the long-term course. And so without going into the details, that's really what is at the base of it. There was also some portfolio changes in the sense that we, before, were only focused on global brands. We started to focus more on our global and our local brands. That certainly boosted growth. And so we were able to deliver, in fact, I would say, well above the financial algorithm, also driven by inflation in the recent years. But overall, the way we started to generate growth really worked out for us. Going forward, apart from the cocoa, and I'm sure we're gonna talk about that- Yes. There's no reason to believe that that cannot continue. Our categories are very vibrant. They will continue to grow. We have a runway of growth opportunities. I always say our issue is not having growth opportunities, which is a luxury compared to many other companies. Mm-hmm. It is which ones to bet on, execute right against them, and make sure you get the right returns, which is a different problem from, "I don't know how to grow. Mm-hmm. If you think about the future, we have geographical expansion. Mm-hmm. We still can get a lot stronger in the areas of the world where the growth will start to happen. We have execution that we can lift to the next level, which will generate top line, but also, bottom line growth. We have a strong balance sheet. We've been doing bolt-on acquisitions- Mm-hmm ... which was another part that contributed to the growth, so we're planning to continue that. And we are making good progress. If you see where we are from our marketing perspective, we really now entered into the top-class companies from a marketing perspective, but I do think we can do a lot more. And if I look through all these years, innovation has not yet played the role that it should play for us, so there is an opportunity for us to step up in innovation. So if you look through that, I really would not doubt for a second that we can deliver against our financial algorithm. So it, it's looking great. Good. There's been a lot of focus on the health of the consumer generally. You probably got the question in your meetings. Yeah, what will... What is your sense of sort of the health of the consumer, broadly, if you think about it around the world, and then specifically in your categories? Yeah, it's clear that after COVID and during COVID, our categories got a boost because consumers were sitting at home, and they were snacking more. Mm-hmm. Then we came out of COVID, the mobility came back, so there was less in-home consumption, but more on-the-go consumption. And then inflation came, and we started to price, and for two years, we've been able to price without really having any volume effect on what we were doing. So you got some great growth with an excellent bottom line to go with it. And if you look, for instance, I use chocolate as an example. Chocolate, our chocolate business, we increased prices 30% over the last two years. Volume kept on growing at 2%. So, it has been a bit of a surprise, to be honest, but now the situation has changed, I would say mainly in the U.S., in the first place. Why? The consumer finds themselves into a completely different situation. SNAP has been reduced. They have to start paying back the college loans. The benefit payments they got during COVID are gone. Savings have been depleted. Mm-hmm. Credit card debt is going up. So suddenly, there is a group of consumers in the U.S. that needs... or families that need to really ask themselves: How am I gonna spend my money? And they need to think that through. And at the same time, they find them confronted suddenly with the realization, Wow, I used to think this costed so much, and now it costs a lot more. And they start to think a lot more what to do. So it's clearly a change with the consumer in the U.S. Europe is not that pronounced. I would say the categories are not necessarily growing more but the consumer is less shocked, I would say, by the inflationary period. In emerging markets where, because the way we implement pricing, which is a lot of price pack architecture, so playing with the sizing of the packs, consumer doesn't necessarily have this elasticity. Take, I used to buy my chocolate at INR five in India, still buying my chocolate. Mm-hmm. It's smaller, but it's still... And so there, I think it's more a feeling of, yeah, is the economic situation worsening? How does the consumer feel? But it's not as pronounced, again, as in the U.S., basically. Okay. And in the U.S., I mean, I think this leads to, you know, what I was alluding to at the open in terms of just the, sort of, I guess, downside surprise for the U.S. biscuit category as we've gone this year. You started the year with a good amount of investment into the category and in your brands. The response in general just hasn't been, I think, what was anticipated. It goes to those that price sensitivity to... You alluded to. So maybe just a little bit more on what you're doing about it and any early signs of stabilization and how you're thinking about progress over the rest of the year. Yeah. So, there's a big difference between the higher social level consumers and the lower social level consumer. What we see them do in the U.S. is, they start shifting channels. So instead of buying in your normal grocery store or in a convenience store, you start to shift to discounters. Mm-hmm. They start to buy more on promotion, so the frequency is changing. So the channel where they buy, the frequency is changing, and also the quantity they buy is coming down, and they're looking a little bit more to private label. Those are shifts that weren't so obvious in the previous year. Mm-hmm. You have to take into account, we came off years where things were going well, we increased prices, volume followed. So most companies find themselves now at price points, which certainly for the consumer, are not acceptable anymore, and that has become evident over the last six-nine months, I would say. So what's the reaction to that? Is bringing back your range to the right price point. As an example, in the U.S., three years ago, our range, 70%, 60 to 70% of our range was sold below the $3 price point. Today, 60%-70% is sold above the $4 price point. It's clear we need to bring it back down below the $4 price point. The way we do that is, on the short term, run different promotions that make it interesting for the consumer. On the longer term, is launching packs that are sold at $3, at $4, at the right margins, for us. While we do that, I think interest in the category will. The category is down 1% in volume at the moment. The interest in the category will go up. I think the overall economic situation will get better, because the strange thing is that consumers express optimism about the future, but what they do on a day-to-day basis is clearly a shift- Yes ... in what they feel today. So the economic situation will be better. They will find products at better price points, not only in our, but you've seen all the restaurant moves and the fast food moves. Yes. Yep. Yep. Certainly, I think, it will become more interesting for the consumer, and consumption will pick back up. Okay. Is that something that you have optimism that can show itself, and you can implement sort of corrective actions within the fiscal year? Or is that something that's gonna go into bleed into or take, you know, an- The promotions is short term. Yep. But that's not how we run this long term. So the pack changes I'm talking about, that's gonna happen around Q4. Yep. We see the effect into next year. We're also planning to do that within the current financial picture that we have, because we believe that in, particularly in our ANC line, we have ways to optimize. There's a lot of production cost, research cost, consultants, and so bring that down for the shorter term, and use that money to do the promotions and the pack changes that I was talking about. Okay. Luca, in this market, we've been talking about price negotiations, you know, as we often do in the first half of every fiscal year. It's been, you know, there have been more intensive price negotiations or more intensive price asks the last couple of years. You prepared for some disruption this year. You know, at least through the first quarter, the level of disruption that we had seen has been relatively benign, relative to what you had allowed for. But there were still some, you know, laggard negotiations to play out. Have those played out? Where are we in that process, and what's the net coming out of those first half negotiations? I'm very happy to report that in the last few weeks, we landed the last alliance, so we are now completely done with our pricing plans in Europe. We priced all the retailers, all the alliances, inclusive of discounters. So we are where we expected to be in terms of- Mm ... pricing implementation. Clearly keeping in mind that, cocoa, in the meantime, has gone a little bit higher than what we anticipated as we implemented prices, at the beginning of the year. So we are absolutely done. I think disruption, as we call it, was better than we anticipated. Pricing is exactly in line, and importantly, we didn't miss a beat, particularly in some important markets around big seasons, that are particularly important for chocolate. In fact, our chocolate Easter business was the highest it has ever been. And I think we are very happy with the execution. So now that we are approaching-... You know, the summer holidays, I think we are gonna have more presence, particularly in France and Germany, so we will be repiping the trade, and so we expect a normalization of volume in Europe. Great. You know, I glean from all of that, that your long-term optimism in the categories that you're focused on, chocolate, sweet and savory biscuits, baked snacks, has not diminished through this all. Mm-hmm. Maybe you've talked about this before, but for those who maybe haven't heard it in full, why are those categories so, so, attractive to you? How do you frame the long-term opportunity? Yeah, so the consumer is changing. If you look at... I'm a dinosaur. I'm a baby boomer, and I grew up in three set meals. Don't snack in between meals. Some of us still remember that, probably. If you look at Millennials and Generation Z, who have parents who think completely different about eating, the whole snacking, and grazing, and eating several times a day, eating much more on the go, is really growing very fast. So we publish every year, the State of Snacking report, which is a summary of what's going on around the world, and you can clearly see that the number of consumers who snack regularly around the world, how many times a day they snack, is increasing quite a bit. Being in snacking is, yeah, that's, I think, the most interesting part of food these days. Mm-hmm. And then, as it relates to our categories, they're clearly on the sweeter side of things. Mm-hmm. It's more of an indulgent type of occasion. The growth historically has been around the three, four, sometimes 5% mark. There was a time that saltier snacks were growing faster. These days, these two categories are almost growing at the same time, so sweet is sort of catching up. And if you think about the per capita consumption, for instance, chocolate is, at best, the UK, Belgium, we're talking about 10 kilograms per capita, which in my... If I think about daily chocolate consumption, it's still very, very low. Mm-hmm. You go to India, where our chocolate business is very big already. You're talking about 100, 200 grams per capita per year. The opportunity to drive our categories in per capita consumption through more penetra-- Oreo in the US is a huge brand. Mm-hmm. Family penetration is 50%. Mm-hmm. So there is huge opportunity in getting more consumers in the categories, who will snack more on a daily basis, and that makes these categories so interesting. On top, if you look at us, we have a world global footprint. Yep. We have brands that are leaders in many countries. Many countries, we are the drivers of the category because we have the highest market share. In chocolate, we are neck and neck to be number one. In biscuits, we have four times the market share of the number two, and so not only are these categories interesting, but we are best positioned to win in those. We've recently entered new categories, cakes and pastries and bars. So the whole bar phenomenon, healthier bars, started in the U.S. More than 50% today is in the U.S., but the phenomenon is starting to come to Europe. The bar market in the U.K. is already quite big. It's entering other European countries. It's starting in Australia, it's starting in Latin America, so that's why we've entered the bar market. Mm-hmm. Why is the bar market so interesting? Because it's considered healthy, and so in the sweet snacking categories, if you think about snacking healthy, you, you tend to go towards bars. Mm-hmm. So that's why we believe this is a category that will grow and will sort of grow on the healthy trend. And cakes and pastries, why are we there? Cakes and pastries, in many countries, is the natural extension. Think about the biscuit being harder. This is the softer side of things, if I can explain it like that. Mm-hmm. So, our brands have the right to play there. We have Oreo now that's available in the typical Oreo format, but you have it in a soft cake. Mm-hmm. Same form, but it's softer. And so I think it's a natural extension for our brands. It's a very disorganized, fragmented category with not a lot of branding- Mm-hmm ... so we think we can do a lot, which we have done in the biscuit market. Yeah, great. One of the ways I know you've thought about developing those opportunities is through incremental distribution, right? You know, in the emerging markets, Luca, maybe for you. You've set a target to add, I think it's three million new stores by 2030, which is about a 25% increase over 2023 levels. Correct me if that's not precisely right, but I think it's close. I guess what will it take to make good on those gains, you know, both in terms of time and incremental investment? And how do you think about prioritizing individual markets? Where are those doors most likely to be prioritized? Yeah, I think you're talking specifically about India, which is one of the most successful markets we have. It's a market that has grown tremendously, which has a truly virtuous cycle, both in chocolate- Mm-hmm ... which has a portfolio that spans across entry-level price points, but also very premium chocolate. So we play across the entire chocolate market, and on top we added Oreo, which is now a sizable, $200 million, roundabout million-dollar business. Distribution is the name of the game in some of these markets, but it's not everything. Mm-hmm. The way you have to think about these emerging markets is that, in general, in high potential markets like China, India, Brazil, et cetera, we want to grow at least high single digit, if not double digit. The overwhelming majority of the growth in some of these markets is volume-driven, because, again, we protect key entry price points, which is a way to attract consumers to our brands and to our chocolate and cookies. And then we grow also through I would say, mindful pricing, because there is inflation in this market, but again, we never take an approach where we price across the board, everything, by vacating, for instance, some key price points. I think that's a crucial part of our algorithm. Half of the growth is, in general, driven by the distribution gains, but it is also fair to say that we have the opportunity to grow same stores sales. And again, if you take a closer look at our successful story in our emerging market, it is a combination, which I would say is equally important, of same store growth and distribution gains. We are getting more and more sophisticated. If you ask, for instance, how many items do we distribute on average in India or in Brazil or in China, we are still limited. So there is an element of increasing the assortment, and it is becoming very scientific in the way we go after it, and it is a gain in terms of distribution. We are having opportunities not only in India. I don't want to leave you with the idea that it is only India. China is a key success story. Brazil is a huge opportunity. Our representation in Brazil is predominantly in the south. Mm-hmm. We sell on average two-three items in the north part of Brazil, and we have the products, we have the brands, we have the price points, and I think the team is becoming more and more deliberate as to how to go after these distribution gains. So reality is, if you look at our P&L over the last five years of emerging market, I think emerging market, it is really a strength of Mondelēz. Mm-hmm. Obviously, we think about locally driven decisions, and so we mind about competition, about price point in local currency. But reality is, this P&L has generated tremendous value in reported dollars, too, because it has been a clear success story in terms of volumetric. And again, the model of expanding distribution, growing your volume, creating efficiencies in the factory, is a critical one, and our presence in some of these markets is really difficult to match. Whoever wants to enter India faces the reality of having not enough scale, of having a distribution system that is fairly complex, particularly in traditional trade. And so we have the, I think, what it takes to continue to succeed. I think there is an up-and-coming set of emerging markets that is becoming very relevant, Southeast Asia being one, some parts of Africa being others. And so we are far from being done on exploiting opportunities in emerging markets. Great. There's also been, I mean, pretty consistent discussion about distribution opportunities in the developed markets. We talked about the kind of under-indexing to C stores in the U.S. or under-indexing discounters here in, in Europe. What's the scorecard on your ability, on your progress towards righting those variations? And I guess in, especially in the U.S., with the incremental focus on price point and really immediate consumption being, at the moment, diminished a bit across many categories, has that taken a little bit of a half step back in the near term? Not really- Okay. because it's a big opportunity. If you think about it, in the U.S., as an example, consumers are shifting channels. Mm-hmm. Maybe not immediately more in convenience store, but certainly more in discounters, and we are underrepresented in discounters. So, it's a non-measured channel, so you don't see it in our Nielsen result, but, it is clearly a channel where we are growing, faster than the rest of the business, because we're catching up on where we are. So, it helps us with the short term also, to focus on these channels. Convenience stores, we're working on changing the way we service them. We're working on changing the assortment that we sell. We're going through a number of tests. If those are successful, it's gonna be a new, new, sort of, growth, area for us. We think that over time, the opportunity for us in convenience stores in the U.S. alone is probably $1 billion. Yeah. European discounters, our relationship with them is getting better and better. We are understanding how to service the consumer with our brands there without affecting the relationship with our other clients. So that continues to be... And we're making good progress in those discounters also. Apart from that, I would say that we still have a huge opportunity optimizing the range that we sell in the channels where we are already there. Sometimes we have had, in the U.S., particularly, supply chain issues, so we've lost some distribution. So we are recuperating this year also, some of the distribution that we lost there. Okay. We've gone 25+ minutes without talking about cocoa. It's pretty good. It's pretty good, yeah. All right. Yeah, we still didn't explain this. So Luca, you've given a lot of detail on cocoa coming out of the last quarter. I think right now we've got 25 contract price or, you know, forecast futures prices about 25% up off their highs, which is good, but still up 100+% versus where we were a year ago. Maybe a quick synopsis of kind of how you see the cocoa market and cocoa price playing out from here. What portion of the inflation we've seen do you view as structural versus temporary? And then we can build from there. The market has been fairly volatile. There has been, there have been ups and downs. Obviously, I think, today we're starting at the cost, at the GBP 7,400-7,500 per ton. It has been as low as GBP 6,000. Mm-hmm. We usually take advantage of these high and lows to really restructure our positions. Fundamentally, I believe, and I use I because it is my belief, and I think we have been looking at this from every possible angle. The situation at the moment on cocoa is very coincidental and coincides with few things that happened all at the same time. First and foremost, clearly, there was Africa, whose production went down quite materially. We looked very closely at what happened, and, quite frankly, the reason why the crop was below expectations, it is because of excessive rainfalls. I think there is an element of structural issues, particularly in Ghana, but I don't believe in the big scheme of things. It is such as to justify a material cocoa price increase, as we have seen in these days. We, as a principle, tend to be covered quite long in cocoa, and when I say covered, I mean covered and protected, and so we don't take gambles on the cocoa price. We don't take views. We try to manage the P&L in light of what expected competitive activities might be or our ability to price in some places. So we have been blessed with long coverage. We could stay put in the market as cocoa started going up, but some of the competitors had shorter positions than us. As they stayed put for the first couple of months and prices didn't come down, I think there was some panic buying, as I call it, and that provided support to the market price. I think speculative positions have been coming down. They are not nonexistent. There are some open interest positions in the marketplace, but, again, I don't think structurally that has driven a material change in, in the cocoa price. I think in the end of the day, if we will be looking at a 2024-2025 crop that is normalized in terms of levels in Africa, we're gonna be looking at the cocoa price that is materially lower than today. Now, for that to happen, what has to become true is that the pod will materialize, and as far as we know at this point in time, the pod counts both on the mid crop and for the main crop into this year. We see that reality is the trees are having as many flowers and as many potential pods as high as the last five-year average. So we don't expect, from a supply standpoint, for what we know today, a material decline compared to the average of the last five years, and so to say we expect an average crop. If that realizes in terms of what we expect, I believe we will be staring at a cocoa price that is materially lower than today. I think the market is somewhat expecting that- Mm-hmm. because if you look at potential positions into 2025, today, you could buy Q4 position at GBP 4,700, compared to the price that I said before is- Yeah Today's spot, $7,400. So there is a material decline. I think in the end, what is gonna happen is, prices will come down. I don't know how quickly they will adjust, but the market is clearly overdoing it at this point in time. Our role within this context is to protect the P&L as much as possible, but reality is one key thing we need to do is to buy well. I personally have targeted the team to ensure that whatever we buy into next year, it is mostly through options at this point in time, or through structures that are flexible, that would allow us to protect against the current high levels or even a run-up, but simultaneously to take advantage of a correction of cocoa prices. So reality is, by September, October, we should know much more. Reality is, as we walk into 2025, I think there is gonna be some cost pressure on our P&L, particularly as we have covered 2024 at very good prices. But it is also true that we are looking at the business in terms of long term, and as I said, particularly in emerging markets, we are not going to vacate entry-level price points because we love chocolate. It's a great category. It's a very loyal category where consumers are bound to a specific taste that, in many cases, majority of the cases, it is our chocolate. And so we will try to manage the P&L as best as we can, but reality is we'll have to look at the P&L- Yeah -through the lenses of a normalized cocoa price, which might not be what we see in 2025. Can we talk about some of the mechanisms by which you can manage the P&L? I mean, there's obviously productivity. You've mentioned revenue growth management already, and I know that that's a discipline that you've honed over the last several years. How much... As you think about the range of likely outcomes in terms of where cocoa lands, you know, net of all your buying, you know, how should investors think about your ability to protect the near term, even as you invest for the medium to long term? ... I mean, look, we are not going to give guidance at this point in time on 2025. I think the biggest question mark is: what is the level of cost that we're going to see into next year? I think you have to, I rely upon years and years of experience in our buying team. I think we have top-notch professionals that have done consistently, great work. And so on that side, I feel quite good. I think our teams are very deliberate. I mean, this company, at its best, is when there is a crisis. I've been consistently amazed as we went through COVID and as we went through inflation, of the ingenuity of our people. I think we will be in tune with our consumers. I think we'll be in tune with our competition, and we will do some cost tightening, but we're not going to change recipes or, you know, do things that are not necessarily the right thing for the business in the long run. I mentioned before, India is one key case study for us in terms of distribution. I can guarantee you, we're going to expand our Visi-Cooler, which is this fridge, it's where we put our chocolate next year, by as much as we have done in the last three years. So let's stay tuned, but I think we feel that we have a way out of this, and importantly, we're going to look at the business through the lenses of our long-term strategy. Very good. Dirk, we haven't talked about M&A and portfolio shaping. We've alluded to certain things, but in terms of the move into sweet baked goods. But there's been a number of recent, you know, successful acquisitions, where you know, Give & Go, et cetera, Clif. How do you think about or how do you assess the organization's sort of M&A muscle? Is it a competitive advantage at this point, and is the organization, you know, ready to take on incremental M&A if the opportunity presented itself? Those are two different things. Two different questions. So if I talk about the muscle, I think we're growing a strong muscle because we've done quite a bit. If you think about it as a muscle, the first thing is, can we get deals done better than anybody else? I think we've got a way of approaching other companies, building up a relationship and then making things happen. Several of these, I think, people thought it was not going to be feasible. Mm-hmm. Because they were not for sale, but we were able to make it happen. Secondly, we remained very disciplined from a financial perspective. So recently, there was a number of deals that we are interested in, but we thought the price ticket was just way too high, and we stepped out. So we remain very disciplined, and it needs to fit our framework of what we expect from M&A. At the same time, we also don't want to chase anything that is available, so we have a very clear objective, which are the companies we are interested in, and we try to build up a relationship with them. If you then think on the other side, and then I think we're very good at finding ways to make a deal happen, trying to find a win-win for both parties, and we are creative in the way we make deals. On the other side is the integration part. How good are we at integration? We do a lot of bolt-ons, which means that every integration is different- Mm. and is done by a different team. So we've been building up muscle at the centers that can help around the world, these different teams that need to do the integration. But it's not like the same team is doing it over and over again. So it goes probably a little bit slower than I would hope to get this muscle build up around the world. But we've seen many things. We understand, how do we integrate systems? How do we bring them onto our quality system? How do we drive benefits or the cost savings? How do we get top-line synergies? We've done a lot of that. Mm-hmm. So I think there is a certain muscle that we are building up. As it relates to readiness, there's a number of our areas around the world who are, in the first place, confronted with a short-term situation- Mm. -that they need to deal with. Second, some of them, I'm thinking Mexico, I'm thinking, the U.S., are integrating acquisitions that were done recently. So it is, I think, understandable that we are not going to be interested to pile on to that. But there's other parts of the world where the chocolate business is small. Those are business units that are largely biscuits or baked snacks or, yeah, basically those two. They have not done a recent acquisition. Their financial situation is looking good, so we could consider an acquisition there. But it's clear that during the cocoa period and in the business units where we've acquired, we're going to step a little bit more careful. And on top, I didn't mention that, assets have become more expensive. We often get the question: Did they come down? In reality, the cost has gone up, so. Okay, great. We're about out of time. I'll leave you with the last word. As investors are looking at Mondelēz as a potential incremental opportunity, what do you think they should keep most top of mind? I think the categories. Mm-hmm. We are in the right categories. I think in our global presence, the strength of our brands, and the fact that we've been delivering above expectations for the last years. We've dealt with a lot of crisis. So I do think everything is set up to keep on going. Very good. With that, Dirk, Luca, thank you so much. Thank you all for joining us. Thank you to Mondelēz. Thank you, sir.