Mondelez International, Inc.

Good day and welcome to the Mondelez International Third Quarter 2019 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Mondelez management in the question and answer session. In order to ask a question, please press the star key followed by the number one on your touch-tone phone at any time during the call. I'd now like to turn the call over to Mr. Shep Denlap, Vice President, Investor Relations for Mondelez. Please go ahead, sir.

Good afternoon, and thanks for joining us. With me today are Dirk Vandeput, our chairman and CEO, and Luca Zaramella, our CFO. Earlier today, we sent out our press release and presentation slides, which are available on our website, mondeliseinternational.com forward slash investors. During this call, we'll make forward-looking statements about the company's performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties, Please refer to the cautionary statements and risk factors contained in our 10-K and 10-Q filings for more details on our forward-looking statements. As we discuss our results today, unless otherwise noted, we'll be referencing our non-GAAP financial measures, which adjust for certain items included in our GAAP results. In addition, we provide our year-over-year growth on a constant currency basis, unless otherwise noted. You can find the comparable GAAP measures and GAAP to non-GAAP reconciliations within our earnings release and at the back of the slide presentation. In today's call, Dirk will give you an overview of our results as well as a progress update against our strategic priorities. Then Luca will take you through the financials and our outlook. We'll close with Q&A. With that, I'll now turn the call over to Dirk.

Thank you, Shep, and good afternoon, everybody. We are pleased to to report another quarter of strong top-line growth, continuing the momentum of the first half of the year. As you know, a year ago we launched our new strategy, which intended to accelerate our growth by focusing on the consumer, driving operational excellence, and building a winning growth culture. Today's results are proof that this strategy is working well and that we're making progress against our goal to create attractive, long-term, sustainable growth. So let's take a look at the quarter in more detail. We reported revenue growth of 4.2% in the third quarter, which confirms the strength of our snacking fundamentals around the world, as well as the leadership role that our portfolio of global and local brands plays in snacking. The growth was high quality and driven by a good balance of volume mix and pricing. It was also broad-based geographically. Our emerging markets grew 6.6% or 5% ex-Argentina, and we are encouraged by what we are seeing in markets such as Russia, India, China, as well as Southeast Asia. Our developed markets grew 2.9%. Europe reported strong volume-driven growth in key markets like Germany and the UK. And in the U.S., we saw continued revenue growth and share gains, which was driven primarily by biscuits. Our strategy to invest more in our growth initiatives is paying off, resulting in solid operating income growth. Our adjusted EPS growth was 10% for the quarter, And we're also pleased with our year-to-date cash flow of $1.2 billion. As we look across our business units, we're seeing evidence that our strategy is creating the basis for sustainable future growth. This is driven by a renewed focus on the consumer, which is informing everything we do, and it inspires and also motivates our teams. So while the entire organization is focused on driving top-line growth, we remain true to our culture of cost discipline so that we can ensure that top-line growth generates attractive OI dollar growth. This focus is leading to impactful growth initiatives across our business in key markets and key channels, as well as on our local and global brands. For instance, we're winning in growth channels in both developed and developing markets. In the U.S., this means capitalizing on growth opportunities like discount and club outlets. While in China, we achieved new distribution milestones this quarter. We reached 1.5 million outlets with our biscuit products and 1 million outlets for our gum. And in e-commerce, another example, this means a continued growth global expansion through our partnerships with e-tailers and online platforms. Our reported growth in e-commerce for the quarter was 25%. Another area to highlight are our local jewels, local brands that are also contributing to our growth. A few examples that stood out in Q3 are the Jubilee biscuit brand in Russia, the iconic Prince Polo brand in Poland, and, for instance, Biscat in Indonesia. All these are performing well thanks to renewed investment and focus. A big priority for us this year has been to reinvigorate our marketing approach. One manifestation of that focus is what we call our new marketing playbook that gets to the roots of what makes our brand special. Our intention is to drive clarity in brand positioning and consistency in execution. We've applied this playbook to many of our global brands, and we'll be rolling it out across more brands in the future. As a result of this renewed focus, we're seeing some good examples of brand equity campaigns that enhance our connection with consumers. In the UK, for instance, where our growth was particularly strong this quarter, our latest edition of the Cadbury Dairy Milk Generosity Campaign is performing really well. While we are driving growth, we remain very focused on our operational excellence. For instance, in marketing, we've seen solid improvements in our return on investment in digital, while in our supply chain, we continue to focus on productivity and process improvements. Good examples here would be the digitalization of our procurement function, as well as the reduction of waste in our North American network. Around the world in our different business units, we are trying to reach best-in-class execution. In AMIA, for instance, we are leveraging our significant sales and distribution capability in key markets like India and Southeast Asia to win in seasonals. As an example, our seasonal gifting offerings performed well during the Hindu celebration of Raki in India. Or as another example, this year's mid-autumn mooncake season was particularly successful across Southeast Asia with Kindle and even Oreo-branded mooncakes selling really well. Local adaptations of our global brands or the success we're having with culturally relevant seasonal offerings underscore the power of our more locally-oriented model. Another strong example of this is the work we are doing in China with our Stride gum brand. Here our approach is to personalize our marketing to Chinese consumers and it is working well, helping us win with Gen Z consumers through mainly digital spend. Finally, we continue to make good progress with our more agile innovation approach and our Snack Futures initiative. Our focus is on emerging trends and technologies in well-being and premium products. As an example, we've recently reached an agreement with a key supplier to explore the use of cocoa fruit by introducing those parts of the fruit into the food chain that have thus far been discarded. A product using this ingredient was developed in record time and put into the market in a very limited distribution to see how it will perform. This sort of an approach is very different from the innovation approach that we had in the past. I'm also very proud of the progress we are continuing to make on our sustainable and mindful snacking strategies. Creating durable growth also means looking after our planet and the people who contribute and consume our products. This quarter, we were again recognized by the Dow Jones Sustainability Index and improved our rating for environmental reporting. This is just one example of how we're bringing to life our sustainable snacking strategy, which is our commitment to grow our business the right way. Another example is how we are using a new methodology focused on science-based targets to help us further reduce our end-to-end CO2 emissions. Finally, I want to mention the work we're doing to respond to the well-being needs of our consumers. We're working on offering the consumer the right snacks, which can mean different things to different consumers. The options are ranging from smaller portion size formats, what you could call permissible indulgence, to better-for-you products, which are made with authentic and simple ingredients or with a particular functional nutrition characteristic. A good proof point was our recent commitment in the UK to ensure that all our products that are made for parents to offer to their children are less than 100 calories per serving. I'm quite proud of this move and know that we'll have more to share in the future. And with that, I will hand it over to Luca.