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    MDLZ
    Earnings call· Dec 2024(Q4 FY24)

    Mondelez International, Inc. MDLZ

    Feb 4, 2025 Source

    Executive summary

    Mondelez Q4 FY24 — Strong Performance Despite Cocoa Headwinds

    Mondelez delivered a strong Q4 FY24, marked by balanced top-line growth and robust free cash flow, despite significant cocoa cost inflation impacting profitability, particularly in Europe and AMEA. The company is implementing a comprehensive strategy, including aggressive revenue growth management and cost-saving measures, to navigate the challenging cocoa market in FY25, with a commitment to long-term EPS growth.

    Highlights

    5

    • Organic net revenue grew 4.3% for the full year 2024.

    • Adjusted EPS grew 13% in constant currency for FY24.

    • Generated $3.5 billion in free cash flow for FY24, including an EU Commission settlement.

    • Returned $4.7 billion to shareholders through buybacks and dividends in FY24.

    • Held or gained share in 70% of revenue base in the last 3 months of FY24, driven by North America biscuits.

    Concerns

    5

    • Anticipated adjusted EPS decline of approximately 10% for FY25 due to unprecedented cocoa costs.

    • Q4 FY24 operating income dollars declined significantly in Europe (>40%) and AMEA (28%) due to unfavorable cocoa phasing.

    • North America Q4 operating income decreased 11.5% due to higher trade spend, cost pressure from new SKU production, and a legal settlement.

    • Volume/mix declined 2% for FY24 and 2.3% in Q4 FY24.

    • Potential for significant new executive orders imposing 25% tariffs on U.S. imports from Mexico and Canada, creating additional headwinds.

    Guidance & targets

    10
    CategoryTargetConfidence
    Organic net revenue growth
    approximately 5%
    high materiality
    High
    Adjusted EPS growth
    approximately -10%
    high materiality
    High
    Free cash flow
    $3 billion-plus
    high materiality
    High
    Input cost inflation
    double-digit increase
    medium materiality
    High
    Interest expense
    approximately $350 million
    low materiality
    High
    Adjusted effective tax rate
    mid-20s
    low materiality
    High
    Cash tax rate
    approximately 2 points lower than adjusted effective tax rate
    low materiality
    High
    Share repurchase
    at least $3 billion
    high materiality
    High
    FX impact on EPS
    approximately $0.12 headwind
    medium materiality
    High
    Adjusted EPS growth
    growth
    high materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Emerging Markets
    Trends coming from a substantial number of key countries, including China, Brazil, South Africa, the Western Andean, and Central and Eastern Europe.
    		—6.2%6.7%—
    Developed Markets
    Including strong growth from Europe and solid results from the U.S.
    		—3.2%4.3%—
    Europe
    Strong execution, including pricing led to attractive growth despite significant customer disruption in half 1. Sharp decline in European Q4 profit driven by dramatic ramp in cocoa cost pipeline without benefit of additional pricing and cost measures expected in 2025.
    		—5.7%7.4%OI dollars up 8.8% (FY), down >40% (Q4)
    North America
    Full year growth driven by solid performance across a number of brands and growth channels. Q4 volume/mix driven by new fresh packs, price packs, and strengths from Tate's and Perfect Snacks. OI decline due to higher trade spend, cost pressure from new price point SKU production, and a legal case settlement.
    Volume/mix growth: 1.3% (Q4)
    		—1.5%0.4%OI increased 0.4% (FY), decreased 11.5% (Q4)
    AMEA
    Solid volume/mix growth. China grew high single digits for the year and quarter. Australia posted strong growth. Southeast Asia returned to growth in Q4. India delivered low single-digit growth for the year and quarter, with strength in chocolate offset by soft biscuits. Q4 OI decline from unfavorable cocoa phasing.
    		—6.2%8.6%OI dollars increased 13.4% (FY), declined 28% (Q4)
    Latin America
    Solid performance from Brazil and Western Andean group. Q4 profitability lower driven by cocoa.
    		—4.6%4.9%OI grew 10.7% (FY), declined 5.7% (Q4)

    Operational metrics

    19
    Organic net revenue growth
    4.3%
    FY24

    Delivered balanced top line growth, strong earnings and robust free cash flow generation.

    Adjusted gross profit dollar growth
    5.1%
    FY24

    Despite continuing input cost inflation, we achieved gross profit dollar growth in the mid-single digits driven by ongoing cost discipline and sound pricing.

    Adjusted EPS growth
    13%YoY (constant currency)
    FY24

    Adjusted EPS grew 13% on top of strong growth in the past several years, and we delivered free cash flow of $3.5 billion.

    Adjusted EPS growth (reported ForEx)
    more than 9%YoY
    FY24

    despite currency headwinds, we grew adjusted EPS at reported ForEx by more than 9%.

    Capital return to shareholders
    $4.7 billion
    FY24

    We also continue to prioritize capital return, delivering $4.7 billion to shareholders through buybacks and dividends.

    A&C investment increase
    high single-digit increaseYoY
    FY24

    It is important to underscore that we continued reinvesting in our brands to drive faster growth. Our high single-digit investment increase in A&C continues to strengthen consumer and customer loyalty to our brands.

    E-commerce business growth
    double digitsYoY
    FY24

    Our e-commerce business grew double digits in 2024, and we continue investing in new capabilities to accelerate our leadership in digital snacking.

    Next tier markets growth
    approximately 35%YoY
    FY24

    In fact, our next tier markets grew approximately 35% in 2024 as a result of our continued investments.

    Cocoa sourced through Cocoa Life
    90%
    FY24

    About 90% of the cocoa volume used in our chocolate brands now is sourced through Cocoa Life, our signature cocoa sourcing program.

    Carbon emissions reduction (manufacturing)
    38%vs 2018 baseline
    FY24

    We reduced carbon emissions across our manufacturing operations by about 38% versus our baseline in 2018.

    Packaging recyclability
    96%
    FY24

    Approximately 96% of our packaging is recyclable.

    Mindful portion snacks revenue
    80%
    FY24

    Approximately 80% of our snacks' revenue comes from mindful portion snacks, that is snacks that are packaged in individually wrapped mindful portion serving sizes or with clear mindful portion recommendations on the pack.

    Volume/mix growth
    -2%YoY
    FY24

    Volume/mix declined 2% for the year and 2.3% in the quarter.

    Revenue base holding/gaining share
    70%
    last 3 months of FY24

    approximately 70% of revenue held or gained share due to improvements in North America biscuits.

    Share repurchase authorization
    $9 billionnew authorization
    FY25-FY27

    Consistent with our capital allocation priorities, we announced a new $9 billion share repurchase authorization in December, which runs from '25 through '27.

    Adjusted EPS (ex-JDE equity income)
    $3.36
    FY24

    This decline is expected to be approximately 10% versus the base of $3.36 in 2024. That excludes JDE bids from the equity income.

    Adjusted EPS (ex-JDE equity income)
    $3.08
    FY23

    And with the clean numbers without JDE, you were $3.08 in '23 and $3.36 in '24.

    Cocoa elasticity
    0.4%
    current

    And I'm happy to report that the elasticity sales have held up well so we're looking at a 0.4% elasticity. And so far, what we've seen even in the places where we've had 10%, 15% price increase that, that holds.

    Supply chain gross productivity
    4%
    FY25

    The typical targets that we have is about a 4% gross productivity on our supply chain. In the past 3, 4 years, it has been very difficult to reach that 4%, but we are planning to reach that in '25.

    Industry KPIs

    8
    MetricValueDetails
    Gross marginMid-single digits%
    Brand platform growthAttractive growth
    Organic net revenue growth4.3%%
    Adjusted EPS operating income$3.36USD
    Retailer trade negotiation statusIn progress
    Volume mix vs pricing decompositionVolume/mix down 1 pointpercentage points
    Elasticity consumer response commentary0.4%%
    Category growth benchmark channel shift dataSolid category value growth

    Product announcements

    4
    ProductTypeDetails
    Oreo with Post Malone (Limited Edition)launch
    Biscoff partnership productslaunch
    Fresh snacks (Oreo, Ritz, Chips Ahoy!)launch
    Chocolate pack sizes and price pointslaunch

    Deals & partnerships

    2
    EvirthAcquisition of majority stake in China's frozen-to-chilled baked snacks leader.

    Mondelez had worked with Evirth for several years to develop, manufacture, market, and sell cakes and pastries featuring iconic brands like Oreo and Philadelphia.

    JDE Peet'sLiquidation of investment in JDE Peet's.

    This was an important source of funding.

    Capital programs

    1
    Supply Chain Productivity Programunderway

    Benefit: 4% gross productivity on supply chain

    Highest supply chain productivity program in company history for 2025. Aiming to reach 4% gross productivity, which has been difficult in past 3-4 years.

    Risks & headwinds

    5
    Record cocoa pricesFY25, FY26

    unprecedented levels

    Mitigation: Extensive planning since last spring, clear and sound strategy, robust RGM playbook, strong marketing/sales, agile incentives, targeted cost savings, highest supply chain productivity program in company history, reduced overheads, non-working media spending.

    Consumer confidence variationsNear-term

    U.S. consumer still quite concerned; Europe subdued but stable

    Mitigation: Focus on iconic snacking brands, reinvestment, expanding distribution, disciplined capital allocation.

    Foreign exchange volatilityFY25

    approximately $0.12 of EPS headwind related to ForEx for FY25

    Mitigation: Controlling controllables, hedging strategies.

    Trade policy changes and pricing negotiationsNear-term

    potential executive orders imposing 25% tariffs on U.S. imports from Mexico and Canada (impact difficult to estimate)

    Mitigation: Agile RGM playbook, ongoing negotiations with customers.

    Increased trade spend and cost pressure in North AmericaQ4 FY24

    North America OI decreased 11.5% (Q4)

    Mitigation: Rollout of new price packs, expectations for category growth, initiatives around growth channel, trade programs and new distribution growth.

    What to watch in Q1 FY25

    5

    Cocoa price evolution

    End of Q1 FY25
    CurrentElevated and volatile
    TargetClearer view on evolution, potential for stabilization or decline

    Why it matters

    Cocoa prices are the primary driver of FY25 EPS decline and future profitability.

    Looking forward to update you at the end of the first quarter when I assume that we will have a much clearer look already at how cocoa is evolving and how the pricing is landing in the markets.

    Q&A highlights

    9

    How has the cocoa price surge changed the chocolate strategy, especially for the European market, and what are the implications for future pricing?

    Dirk emphasized chocolate's durability as a snacking category, the need to protect category health, share, and brand investments. He noted structural changes in cocoa but expects prices to eventually come down from current highs. The strategy includes protecting key price points, strong RGM and PPA, optimizing A&C investment, and unprecedented supply chain productivity. Europe's consumer confidence is stable, and chocolate category growth is solid, with elasticities holding up well despite pricing.

    “Our view is that despite the short-term volatility, that our approach needs to be to protect the category health, to protect our share in the category, and to protect our brand investments.”

    asked by Andrew Lazar · answered by Dirk Van de Put

    2 min read5 chapters

    Detailed Narrative

    01

    Cocoa Cost Strategy and Market Outlook

    Mondelez has developed a clear and comprehensive chocolate strategy to navigate record cocoa prices, leveraging a robust revenue growth management (RGM) playbook, strong marketing, sales execution, agile incentives, and targeted cost savings. The company believes cocoa prices will eventually return to a more sustainable level, though higher than historical averages, and has planned for elevated prices in FY25 and FY26. Despite current volatility, management foresees a supply increase of about 10% for the year and observes initial signs of demand moderation in regions like North America.

    02

    North America Biscuit Performance and FY25 Outlook

    The U.S. biscuit category is currently softer, with 0.6% growth in the last 3 months of FY24, but Mondelez improved its share by over 30 basis points in Q4. Penetration and volume per trip are holding up, with prices stabilizing or slightly declining due to new lower price point packs and increased promotional intensity. For FY25, pricing possibilities are limited, but strong activations and lower price points are expected to drive good volume growth, leading to a solid P&L.

    03

    European Market Dynamics and Chocolate Resilience

    Consumer confidence in Europe is stable but subdued, with soft purchasing power and ongoing economic uncertainty. Despite this, the chocolate category shows solid value and volume growth, with elasticities holding as expected even after significant price increases (e.g., 0.37% elasticity in the UK after a 15% price hike). Mondelez saw broad-based growth and strong share performance in Europe, with Q4 chocolate net revenue up double digits, demonstrating the category's durability.

    04

    Strategic Growth Agenda Progress and Portfolio Reshaping

    Mondelez is actively reinvesting in brands, expanding distribution, strengthening capabilities, and transforming its portfolio. Key initiatives include award-winning activations for Oreo and Cadbury, double-digit e-commerce growth in FY24, and significant progress in revenue growth management with new fresh snack packs. The company also acquired a majority stake in Evirth in China to accelerate growth in baked snacks and liquidated its investment in JDE Peet's to fund reinvestment and share buybacks.

    05

    Sustainability Achievements and Mindful Snacking

    In 2024, Mondelez made significant strides in its sustainability objectives. Approximately 90% of the cocoa volume used in its chocolate brands is now sourced through Cocoa Life. The company reduced carbon emissions across manufacturing operations by about 38% versus its 2018 baseline and achieved 96% recyclable packaging. Furthermore, approximately 80% of snack revenue comes from mindful portion snacks, reflecting a commitment to empowering consumers to make more mindful choices.

    AI-generated summary of the company’s earnings call. Not investment advice.