Mondelez International, Inc.

Good day and welcome to Mondelez International first quarter 2021 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Mondelez management and the question and answer session. In order to ask a question, please press the star key followed by number one on your touchtone phone at any time during the call. I'd now like to turn the call over to Mr. Shep Dunlap. 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. It's available on our website. 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 the risk factors contained in our 10-K, Q, and 8-K filings for more details on our forward-looking statements. As we discuss our results today, unless noted as reported, 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. For first quarter results, we're also presenting growth on a two-year average basis to provide better comparability given the impact of COVID on 2020 results. You can find the comparable gap measures and gap to non-gap reconciliations within our earnings release and at the back of the slide presentation. Before I speak to the agenda, I'd like to notify everyone that we have an upcoming investor call on May 26th, which follows the publication of our annual Snacky Made Right ESG report on May 5th. Both Dirk and our Chief Impact Officer, Chris McGrath, will discuss key components of ESG. They'll talk more about our approach, our targets, and progress on this call, as well as answer your questions. In today's call, Dirk will provide a business and strategy update that Luca will take you through our financial results and outlook. We will close with Q&A. With that, I'll turn the call over to Dirk.

Thank you, Shep, and thanks to everyone for joining the call today. We had a strong start to the year despite lapping our highest growth quarter in 2020 and Q1 reconfirms that we are emerging from COVID even stronger. Our performance demonstrates that our strategy is working and that we have clear growth opportunities in front of us. We are driving a virtuous cycle and producing a consistent track record of growth. As we continue to deliver on our commitments, we are also strengthening our business by accelerating investments, reshaping our portfolio, and simplifying the business while maintaining cost discipline. We are well positioned to accelerate long-term revenue and earnings growth. On slide five, let me walk you through the headlines of our financial results. Top line growth was 3.8%. underpinned by broad-based share gains and excellent execution across all geographies, categories, and brands. Our teams around the world delivered amazing results, with events like Chinese New Year and Easter being clear standouts. In turn, this strong volume and price-driven top line translated into gross profit dollar growth of 5%, also aided by our emerged stronger cost initiatives. We continued to invest in our brands and sales and marketing capabilities to drive our categories. We also increased working media double digits to support further share gains. And a good business converts top-line results into cash, and for the quarter, we generated $700 million which is the best first quarter since the formation of the company, which continues to enable us for strong capital return to our investors. In summary, our first quarter results leave us well positioned to deliver on our full year 2021 outlook and provide increased confidence that we can accelerate our long-term growth rate. On slide six, let me spend a moment on our track record which we expect to continue. Q1 topline results mark another quarter at or above our long-term growth algorithm of 3% plus, now averaging 3.8% growth since late 2018. This is happening because we have fundamentally changed our approach to the business. From a focus on costs and profit margins, we have switched to topline growth and profit dollars, which has driven better and more consistent results. Our local-first commercial approach enables us to move faster and be more consumer-centric. We have entered a virtuous financial algorithm, which allows us to invest more in the business. And lastly, our incentives are better aligned with an ownership and growth mindset with increased accountability and high-quality outcomes. Beyond Q1 results and 2021 expected outcomes, as shown on slide seven, we believe we are uniquely well positioned to thrive in the years ahead with a long runway of growth opportunities and advantaged growth enablers. First, our core categories are attractive and resilient, demonstrating durable growth and significant headroom for future upside. Second, We believe our growth algorithm and our ability to continue to invest behind strong growth propositions is something that sets us apart from our competition and will continue to result in share gains over the years ahead. Third, we are seizing large opportunities in under-indexed channels like e-commerce and discounters. Fourth, we have significant opportunities to expand in high-growth segments, like well-being and premium, and in geographies where we have a strong share of one core category but a much lower share of another. And beyond our core categories, we are building strong platforms in high growth adjacencies such as cakes and pastries or bars. We believe we have distinct advantages that will enable us to seize these opportunities. These include our proven ability to price across the globe, more impactful and high return marketing, increased investments in our brands, ongoing portfolio reshaping to increase our exposure to incremental high growth areas of snacking, continued cost improvements to fuel investments, and increased business clarity and simplifications. On slide eight, you can see the strong progress we have made in Q1 against some of our biggest growth opportunities. Within our core business, we achieved double-digit growth in Cadbury dairy milk and high single growth in Oreo. Oreo has been growing at a double-digit cagger since 2018 as we activate our plant, Freiburg, and pursue a $1 billion opportunity over the next three years via geographical expansion and share gains. We also delivered mid-single-digit growth in our local jewels, including strong results from Chips Ahoy and Tate's in biscuit, as well as Cote d'Or and Lacta in chocolate. Continued efforts to revitalize brand messaging, packaging, and activations have created a growth engine within a substantial part of our portfolio. Looking at our channel opportunities, the consumer shift to e-commerce continues to accelerate, growing 77% on a reported basis in the first quarter, with share gains in the US, China, and the UK. E-commerce represented approximately 6% of our revenue in Q1. This has not come at the expense of brick and mortar, where we continue to drive distribution gains in key emerging markets like China, where we added 120,000 stores in the last quarter, or in India where we added 60,000. To put that China figure in context, in China biscuits, we are now in 3 million stores out of 6 million that form the Nielsen universe. So we have a huge headroom. And in gum, we are only in 1.9 million of 6 million stores and our leading competitor is in 4.2 million stores. As it relates to the opportunity in high growth segments, we significantly increased our presence in well-being and premium this quarter with the acquisitions of Grenade, Gourmet Food, and You. And finally, we continue to expand in close in adjacencies, becoming the lead manufacturer in the UK snack bars category with Grenade. Since the launch of our strategy, we have enhanced our portfolio by adding nearly $1 billion in revenue with a number of high-growth platforms, as you can see on slide 9. These acquisitions are driving accelerated growth and have a long runway. Our balance sheet provides a great flexibility and optionality, particularly through our coffee JVs. While we are very happy with the results and prospects of both KDP and JDE, our expectation is to increase our exposure to snacking over time. And in 2020, we sold down our stakes in both with 2 billion of net proceeds to convert into highly strategic snacking acquisitions. We are also evaluating our developed market gum business to determine the best way forward. Across these initiatives, we are driving clear outcomes in the form of accelerated growth. Next, I will share some additional colors on these recent acquisitions and how they align with our strategy on slide 10. Our focus has always been to increase our exposure to high growth segments like premium and well-being. enter geographic-wide spaces in our core categories, or expand into fast-growing adjacencies. Most recently, we acquired four fast-growing companies. Grenade, the UK energy protein bar, the leader that is allowing us to expand our snacking portfolio into active nutrition products. It was a missing piece to become the largest player in the 1.2 billion UK snack bar market gourmet foods which is a premium and well-being focused cracker portfolio in Australia this platform allows us to significantly increase our Australia biscuits business and share the brand has tremendous growth potential inside and outside of Australia and is a leader in a highly attractive segment you is a premium, well-being, chocolate-led lifestyle brand that has developed a very strong followership. It is the fastest-moving chocolate brand in whole foods, but currently has limited presence in more conventional retailers, which is a clear opportunity. And Giving Go is an undisputed leader in the large and high-growth in-store bakery segment in North America. It is highly incremental and spans across multiple product forms like cookies, muffins, brownies, and cupcakes. It has strong consumer appeal driven by high quality, freshness, and permissible indulgence. This platform is performing very well, and we believe it will yield good revenue and cost synergies. As we have seen with our prior acquisitions of dates and perfect snacks, These platforms provide leadership positions in new or adjacent categories of increasing relevance with our consumers. They represent large addressable markets, are financially attractive, and create new growth paths for us. Turning to slide 11 and our sustainability commitments and approach. We believe we can create value by building a sustainable snacking company that is focused on sustainably sourced ingredients, minimizing our climate and landscape impact, building a diverse, inclusive, and engaged workforce, selling products that meet the evolving snacking needs of consumers, and result in zero packaging waste. We are confident that our approach is effective as we prioritize according to where we have the largest impact. We focus on breakthrough solutions, and we collaborate where needed. In closing, our strong start to the year gives us increasing conviction that the steps we are taking to evolve our growth strategies are the right ones, and that they will continue to support consistent and profitable growth for many years to come. With that, I will hand to Luca for more details on our financial performance.