Mondelez International Q2 FY26 earnings call MDLZ

Emerging markets continued their strong performance, driven by distribution expansion with 100,000 new stores added in India and Brazil reaching 1 million stores. Snacking categories are performing well, supported by multi-year reinvestment and a balanced portfolio of global and local brands. Consumer confidence is stable, with India, Mexico, and Brazil showing strength, while China is softer but expected to improve, indicating a structural rather than cyclical growth trend.

North America delivered strong net revenue growth and positive volume mix, accelerating sequentially from Q1. The company gained share across all categories, with ventures like Perfect Snacks, Tate's, and Hu performing well. Growth was particularly robust in value channels (high single digits) and away-from-home (mid-single digits), supported by disciplined promotional execution, effective innovation (Ritz Drizzled, Sour Patch Kids Chews), and increased A&C investment. Management expects this strong performance to be sustainable through H2.

Europe's chocolate business is on a positive volume mix trajectory, with volumes expected to improve in H2 as the company laps prior year pricing. Share is moving in the right direction, and new channels are being pursued, alongside increased A&C investment. However, a Q2 heatwave impacted chocolate consumption, leading to lower-than-expected A&C investment and trade stock control, which is expected to rebound in H2, setting the stage for continued growth into 2027.

Despite recent run-ups, the cocoa market is fundamentally different from 2024, characterized by a significant surplus of 0.5 million metric tons (10% of total demand) and industry coverage at 10 months. While early pod counts are below average and El Nino is a factor, the market is already pricing in some downside risk. Management expresses confidence in 2027 earnings, expecting them to be strong and insulated from commodity volatility due to volume mix, productivity, AI efficiencies, and portfolio strategy.

Mondelez is focusing on fewer, bigger innovation bets based on proven platforms, combining breakthrough innovation with renovation. Key areas of traction include health and wellness (snack bars, gluten-free, zero sugar), cakes and pastries (Give & Go, Evirth), and premium indulgent chocolate (Toblerone Pralines, Cadbury &More, Hu Bites). The company aims for innovation to contribute 15% of net revenue, up from the current 10%, indicating a strong pipeline and focus on new product development.

The Biscoff collaboration with Lotus Bakeries is expanding across three main layers: launching Biscoff-filled chocolate ranges globally (e.g., Scandinavia, Australia), representing Biscoff biscuits in emerging markets (India, Brazil), and developing Biscoff ice cream products. A potential fourth leg involves integrating Biscoff into other product categories like croissants or Oreo fillings. This collaboration is projected to be worth $500 million to $1 billion in the coming years, demonstrating significant growth potential.

The company is consistently increasing Advertising & Consumer (A&C) investment in dollar terms, with a focus on improving the quality of spending through clear guidelines for communication, digital, and point-of-sale activation. AI is expected to further enhance efficiency in creative media and targeting specific consumer cohorts, ensuring better execution and support for brands. This strategic investment is seen as crucial for driving sustained performance.

Distribution expansion remains a significant growth driver, especially in emerging markets where approximately 50% of revenue growth often comes from new stores. In developed markets like North America, value channels, away-from-home, and convenience channels offer substantial untapped opportunities. The company is adapting product ranges and distribution strategies, including direct coverage in some convenience channels, to capture this growth, which is expected to provide a significant runway for years to come.