Mondelez International, Inc.

Good day, and welcome to the Mondelez International Third Quarter 2023 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 the number one on your touchstone phone at any time during the call. I'd now like to turn the call over to Mr. Shep Dunlap, Senior Vice President, Investor Relations for Mondelez. Please go ahead, sir.

Good afternoon, and thank you 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. 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, 10-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. 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. Today, Dirk will provide a business and strategy update, followed by a review of our financial results and outlook by Luca. We will close with Q&A. I'll now turn the call over to Dirk.

Thanks, Shep, and thanks to everyone for joining the call today. I will start on slide four. Our strong third quarter results and our prospects for the future confirm that we are positioned for high-quality, sustainable growth. We remain confident in the durability of our categories, the strength of our iconic brands, and the consistency of our execution. We delivered strong, profitable volume growth with a healthy share performance. All our geographic regions grew double-digit in both revenue and profitability. To manage cost inflation and enable robust reinvestment, we continue to leverage our RGM capabilities. RGM is an area where we believe there is significant room to do more over the next several years. We continue to reshape our portfolio to focus on our core categories of chocolate, biscuits, and baked snacks with the successful divestiture of our developed market gum business, generating additional reinvestment opportunities. Our strong year-to-date performance, the continued strength of our categories, and our ongoing focus on strong commercial plans and execution provide the confidence to again raise both our organic net revenue outlook to 14% to 15% and adjusted EPS growth outlook to approximately 16%. Turning to slide five, you can see that in the third quarter, we delivered both top and bottom line strength. enabling us to continue substantial reinvestment in our brands. We delivered organic net revenue growth of 15.7% for the quarter. Year-to-date revenue is up 17%, nearly $4 billion ahead of last year. We also delivered adjusted gross profit dollar growth of 22.3% for the quarter. Again, we are ahead of last year's pace, with 20% growth year-to-date, up $1.7 billion. The strong performance enables us to reinvest in our brands and capabilities to drive attractive growth in future periods. Our NC investment is up 28.5% for the quarter and 21.5% for the year, which demonstrates our commitment to continue to build the strength of our brands. These results translated into strong adjusted OI growth up 24.5% for the quarter and close to $900 million for the year. As you can see on slide six, our third quarter growth was driven by strong volume mix up nearly four points. We are especially pleased that our European pricing actions, which were implemented earlier this year, are successfully behind us. We view this quarter's strong volume mix performance as evidence that we are taking the right actions to continue delivering sustainable growth and share gains. Consumers continue to choose our trusted and beloved brands despite significant pricing due to ongoing inflation. More broadly, we view our strong performance in the third quarter as evidence that our long-term strategy continues to pay off. Since the launch of our growth plan in 2018, we have consistently delivered gross profit dollar growth, which allowed for a virtuous cycle of yearly increasing high return investments. We remain confident that this strategy will continue to consistently deliver attractive growth. Turning to slide seven, we continue to see evidence that consumer demand for our snacking categories remains resilient, and that consumers continue to prefer our widely loved brands over private label alternatives. In North America, the biscuit category is experiencing some softness in scanner data, most notably among lower income families. However, I would note that these families are increasing their purchases in the non-measured club store channel. Our total U.S. biscuits volume was up more than 3% in Q3, showcasing the continued strength of our brands and investments in both measured and non-measured channels. We are seeing particularly strong growth in unmeasured channels like club stores, e-commerce, and food service. Meanwhile, in Europe, consumer confidence is improving with a significant step up versus 2022 and remains broadly stable throughout Q3. We're seeing positive volume growth in biscuits and chocolate, which has accelerated over the last three months and is outpacing broader foods. driven by solid elasticities and lapping of 2022 disruptions. In Q3, our European chocolate and biscuit business delivered solid volume growth of 2.6%, which again shows the resilience of our categories and the strength of our brands. In emerging markets, consumer confidence remains strong. We continue to see resilient underlying demand and lower price sensitivity than in developed markets. During Q3, we delivered strong growth in terms of both volume and value at 4% and 24% respectively. And we're confident that we have strong opportunities to continue to drive expanded distribution and creating new snacking occasions. On slide eight, you can see a few examples of our growth acceleration strategy in action. We continue to invest in our brands, and connect closely with consumers to stay in line with changing consumer tastes and snacking occasions. We are also driving growth in a broader range of channels while accelerating our focus on premium segments and harnessing the power of recent acquisitions to advance geographic expansion. For example, Oreo continues to grow its strong position as the world's favorite cookie, and its share performance here in North America has grown nicely. Our recent partnership with Super Mario Brothers, executed both online and in-store, is just one example of the many creative campaigns that leverage personalization and local relevance to reinforce the brand's playful persona. Along with continuous reinvestment in our brands, we're also investing in growth channels. For example, our Belvita business is up nearly a full share point in the U.S. Club channel. driven by growing shopper interest in convenient, tasty, and better-for-you options for morning snacking on the go. Sold in individual portion packs and delivering more than 14 grams of whole grains per serving, Belvita offers a great solution for consumers who are too busy to eat a traditional breakfast. We're continuing to grow this business with a new, customized, and digitally targeted social and digital media campaign celebrating the ritual of Belvita and coffee in the morning. Another important element of our growth strategy is investing in the fast-growing premium chocolate space. We have relaunched Toblerone with a robust campaign inspired by luxury fashion brands, positioning it as a jewel. We're supporting this launch with a strengthened brand persona, Never Square, and substantial investments in A&C, Bringing this jewel concept to life are new pralines called Toblerone Truffles, recently debuted in the United Kingdom, Switzerland, and Australia, as well as airport duty-free stores in key markets. They will expand to additional markets next year. Finally, we continue driving geographic expansion of our recently acquired brands. For example, Ricolino, headquartered in Mexico, is now the number one Hispanic confectionery brand in the United States, growing well and in line with our expectations. Turning to slide nine, let's zoom in closer on the snack bar business to highlight the strong progress. We're excited about the opportunities in this space, and we believe there is significant runway ahead. led by the strong and growing brands of Clif Bar, Grenade, and Perfect Snack, we expect our snack bar business to exceed $1.2 billion net revenue this year. Let's start with Clif, where we are excited about our current results and the long-term opportunity to broaden distribution, expand into new formats, and increase our geographical reach. Year-to-date, Cliff is up double-digit in top-line growth, and within that, the Cliff Kids Z-Bar has been a particular standout. Z-Bar is a delicious, organic, non-GMO, soft-baked, whole-grain energy snack for kids with zero trans fat or artificial flavors. Z-Bar is growing at twice the rate of the total bars category, with consumption dollar growth up 19% versus last year. Grenade also continues to exceed our expectations. Grenade is performing very well in the sports nutrition space with signature bars that are high in protein and low in sugar. Since our acquisition a bit more than two years ago, we have doubled the business thanks to strong core growth in the UK and distribution expansion in Ireland, Nordics, and the Benelux. Perfect Snacks also is experiencing continued double-digit value growth. strengthening its position as the number one refrigerated protein bar in the United States. We have a great portfolio and strong conviction in the growth potential of our snack bar business, and we will continue investing to drive leadership in the segment. Turning to slide 10, I'd like to take a moment to share progress on an important element of our sustainability strategy. Just two years after joining the Science-Based Targets Initiative, net-zero carbon ambition, we have submitted a time-bound plan laying out how we aim to achieve our target of net-zero greenhouse gas emissions across our full value chain by 2050. To reach this critical milestone, we have completed a detailed process of re-baselining, providing documentation of our carbon accounting and aligning to new standards. Putting this plan into action in the near term we are making solid progress towards our 2025 goal of reducing end-to-end carbon emissions by 10%. We are working hard to transform our business operations and supply chains. Over the past two years, we have scaled regenerative agriculture practices across our signature sourcing programs for cocoa and wheat, achieved renewable energy at manufacturing sites across every region, and reduce CO2 emissions through plants and logistical efficiencies. We continue to believe that helping to drive positive change at scale, including through reducing our climate impact, is an integral part of value creation, with positive returns for our stakeholders. We encourage you to read our Snacking Made Right report for additional details and context on our broader sustainability goals and progress. With that, I'll turn it over to Luca to share additional insights on our financials.