Good afternoon, and welcome to the Mondelēz International third quarter 2026 earnings question and answer session. Your lines are in place in a listen only until it is your turn to ask a question. In order to ask a question, please press the star key followed by the one key on your touchtone phone at any time. To remove yourself from the queue, press star two. On today's call are Dirk Van de Put, Chairman and CEO, Luca Zaramella, COO, Amit Banati, CFO, and Shep Dunlap, Senior Vice President of Investor Relations. Earlier this afternoon, the company posted a press release and prepared remarks, both of which are available on its website. During the call, the company will make forward-looking statements about performance. These statements are based on how the company sees things today. Actual results may differ materially due to risks and uncertainties.
Please refer to the cautionary statements and risk factors contained in the company's 10-K, 10-Q, and 8-K filings for more details on forward-looking statements. As the company discusses results today, unless noted as reported, it will be referencing non-GAAP financial measures, which adjust for certain items included in the company's GAAP results. In addition to the company's year-over-year growth on a constant currency basis, unless otherwise noted, you can find comparable GAAP measures and GAAP to non-GAAP reconciliations within the company's earnings release at the back of the slide presentation. We will now move to our first question. Our first question comes from the line of Andrew Lazar with Barclays. Please go ahead. Your line is open.
Great. Thanks so much, and good afternoon, everybody.
Hi, Andrew.
Hi there. Dirk, I was hoping we could start, as we often do, with some of your current thinking around the state of the consumer in some of your key regions. I have a follow-up from Amit. Thanks so much.
Thank you, Andrew. I think that makes sense. If I start with emerging markets, I would say that the consumer overall, the confidence is resilient. There is a difference. India is very positive. I would say Latin America with Mexico and Brazil is solid. China is softer, but overall, we remain constructive on China. If you look at it, we have good volume growth. We have strong top-line growth. Snacking continues to perform well across all the major emerging markets. I am particularly pleased that the categories in value are holding up very well, particularly in biscuits and chocolate. As you know, we continue to increase our distribution. Year to date, I think we have added about 130,000 outlets in India. Brazil, we are now over 1 million stores, and in China, we still have a very long runway, so we keep on doing that.
Of course, there is inflation driven by the conflict in the Middle East, and that is a concern with consumers, for instance, in India. Overall, we feel good about the consumer in emerging markets at this stage. Switching to Europe, I would say the consumer there, the confidence is generally stable, maybe a little bit better than in the last quarter, but very cautious. You have seen some of the things that are going on due to the energy prices and the cost of living increases. Clearly inflation is high on the minds of consumers. The other thing, seeing all the heavy price increases last year, most players in our markets are behaving very rationally. I think the good news is that we have positive volume mix growth of 1.6 percentage points in Europe, was very broad-based. On top, our share dynamics are improving.
You have to take into account that on top we had unseasonably hot weather, which had a 1% negative effect on our growth in Europe. We are very focused on execution. We are doing very strong A&C reinvestment. We are also focused on strong activations. We have some innovations like Biscoff or the Milka Croissant that are landing very well. We think that the positive volume growth is going to continue for the rest of the year. Lastly, North America, I would say consumer confidence remains soft, also driven by energy and fuel prices. To be honest, I do not think it is going to improve anytime soon. The K-shaped economy continues, where the growth is really coming from the higher income households. We feel good about our results in Q3 and year to date. We expect them to continue with solid growth in North America.
That is driven by promo discipline, us growing more in the under-indexed channels, and some of the innovation and activations doing particularly well. Overall, I would say a pretty solid picture in the quarter.
Great. That's really helpful. Thanks for that. Amit, Mondelēz today reiterated its forecast for strong EPS growth in 2027. I'd really like it if you can maybe just work through some of the key puts and takes for next year, particularly around visibility into maintaining positive volume momentum and how we should think about price, particularly in the key European region. Thanks so much.
Yeah. I'll start from a 2026 standpoint, Andrew, I think we're maintaining our top-line outlook. As Dirk mentioned, emerging markets, we are performing well. They remain a strong engine of volume and top-line growth for us. We feel good about where we are on developed markets as well, performing well in North America despite a soft consumer. You saw this quarter we grew share as well as top line. We're executing well in North America and Europe, we continue to progress well. This quarter, you saw us grow volume as we lapped prices, and carried forward some selective price investments that we had made earlier in the year. From an EPS standpoint for this year, we're maintaining our outlook. I think we've been consistent that we're going to reinvest any upside back into the business, into areas that are working, innovation like Biscoff, emerging markets.
In the quarter, we continued to invest back into A&C as well. Of course, we are continuing to absorb the costs related to the Middle East war. We are absorbing that within our outlook. From a 2027 standpoint, I think despite increased volatility in the macros as well as headwinds from an inflation standpoint, I think we remain confident that we are going to drive a strong EPS growth in 2027. I think that's going to be on the back of volume-led growth into the year. I think we continue to expect strength in the emerging markets, increased stabilization in Europe, continued momentum in the U.S. Then, of course, we feel very good about our productivity program, and the savings that we expect into next year.
We feel confident despite the inflation that we are seeing in freight and some other commodities, we feel good and confident about our ability to drive strong EPS growth in 2027.
Great. Thanks so much for all the color.
Thank you. We will take our next question from Peter Galbo with Bank of America. Please go ahead.
Hey, good afternoon. Thanks for taking the question. Dirk, I just wanted to follow up, maybe starting in North America. You are one of the few packaged food companies that is posting positive organic sales growth in North America. You are doing that through a combination of volume and price, at least year-to-date. If I go back to the start of the year, you were pretty emphatic in your views that cutting price in North America was not the right strategy, whereas some of your competitors maybe were moving in that direction. I think that has proved true. Now we are just seeing the pendulum swing the other way, where we are hearing more of your peers talk about taking pricing up. Maybe you can just comment on how you see the environment evolving there, particularly from a price standpoint, as we get into 2027.
Yeah. Thank you, Peter. I'll hand it over to Luca to talk about the North American business.
Yeah. So, hi, Peter. First of all, I think it was a solid Q3 performance. What underpinned the performance once again is the outcomes of our shares that have been improving and consistently gaining traction throughout the year. Very happy with biscuits overall, particularly Savory is really on a roll. Also candy and clearly in some cases, even in bars, we are gaining share through Zbar, which is really an outstanding brand. As you said, the promotions tactics have changed for us, and they are yielding good results. I think we are well executing around the depth of those promotions, the frequency, and those are clearly delivering a good level of incrementality to our business. That's one thing that we have fixed and that is paying off. We didn't reduce prices, but we have become, I think, more precise as to what we do when.
Importantly, we have increased A&C. GP dollar in the U.S. was up, in North America was up, but it was partially offset by A&C spending, and definitely happy with the incrementality related to some innovation launches we have made. So, I think we are still cautious in terms of what type of pricing we have to take, and we are assessing carefully as we go into 2027 what we have to do. But in a nutshell, I think if you look at the volume mix momentum, which we believe is going to accelerate—
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Peter, I do not know where you lost me, but I gave quite an articulated answer. Let me repeat what I said. As it boils down to the U.S. and North America in general, we are quite pleased with the performance of the U.S. As you said, the share performance, I believe in general is quite positive. We are very pleased with Savory that is really on a roll in terms of share gains, reach, and innovation we launched is really resulting in incrementality and delivering volume mix and share gains. We are very pleased with Candy. Sour Patch Kids is an outstanding brand that is delivering quite a bit of growth. As I mentioned a few times, the bigger change we made since, I would say, Q4 last year, it has been around promotions.
As it boils down to promotions, we have really fine-tuned our strategies in a way that results in quite a bit of incrementality as opposed to last year, where there was quite a bit of switching between regular prices and promo prices. We saw a significant increase in A&C, and that is clearly helping us. Finally, launches that we have made around Oreo Zero, Ritz Minis, Clif High Protein are clearly resulting in positive momentum for the business. As we look at the shape of the P&L, there is clearly some inflationary pressure coming our way. But the reality is we want to protect share and volume mix momentum. So we will be very selective on the pricing actions that we will take, and the majority of them will be most likely through PPA. We have some plans as we walk into 2027.
I think you are going to see quite good numbers in terms of share and volume momentum in Q4, and that momentum is critical to be kept into the P&L for 2027, as North America has quite good leverage coming out of it. A combination of volume mix, PPA, selective pricing, and the fact that we will continue pushing hard on productivity and supply chain in North America is delivering good outcome. We believe that we have what it takes to keep on investing in the business and delivering positive income in North America for next year.
Great. Thanks for that, Luca. Apologies on the technical. Maybe just as a quick follow-up on Europe, I think it is kind of the opposite question, but I think the pricing was maybe a bit light of expectations or down a bit more. Maybe just comment on how you see that shaping up in Q4 and into next year as we think about exit rate. Thanks very much.
Look, I think, again, we are quite pleased with the way Europe is turning the P&Ls in. Despite the hot summer, clearly things are moving in the right direction. You saw positive volume mix. You saw the impact of both chocolate and the other categories. It is positive across both chocolate and biscuit. Reality is, as I said consistently since the Q1 earnings, we made some selective price adjustments in Europe. As we start lapping higher pricing in the second part of last year, those clearly are impacting through pricing, particularly the chocolate category. I would say nothing really to worry about. Those are decisions that we made at the beginning of the year in terms of adjustments of pricing that we decided was the right thing to do.
I think you have to say that the volume mix and the share numbers that we are seeing are clearly a reflection of those decisions were sound. Importantly, as I mentioned many times, we are looking at GP dollars growth.
Our goal has been consistently to deliver the right pricing level for our consumers. It has been consistently in restoring the profit pool of chocolate across the board, and it is in the end, something that we believe is paying off because I believe those pricing actions are actually allowing us to have a much more sound and sustainable business because in the end, what matters to us is to keep the penetration of our brand and the loyalty of our consumers into our brand. As we look at penetration numbers, as we look at share results Clearly, for me at least, that was the right decision to be made.
Great. Thanks so much.
Thank you, Peter.
Thank you. We'll take our next question from Rob Dickerson with U.S. Bancorp. Please go in.
Great. Thanks so much. Maybe just a question on the acquisition. I know you said you acquired a majority stake in Undercover Snacks. Maybe you just kind of walk through rationale, distribution potential, kind of how it fits in the portfolio, and really kind of why you like the brand.
Yes. Basically, it's a crispy quinoa snack with quite a unique crunchy texture. It's usually chocolate-covered or frosted. The brand is called Undercover because the founder wanted to give her kids who were diagnosed with celiac disease healthy ingredients in disguise. It's a healthy product, but with a great taste. It's very simple. It has better-for-you ingredients. It's gluten free. It's allergy friendly. If you've flown United Airlines, you probably have had the snack. On the plate since 2021 and in the main cabin also as a complimentary snack since 2023, or they're in Whole Foods, Target, Walmart, and so on. Overall, I would say the reason why we like it's highly incremental to our portfolio. I think it's going to capture growing demand spaces, particularly the better-for-you moments, the permissible indulgence. We think that's a complementary consumer base.
We believe that over time, our portfolio needs to evolve towards healthier snacks, and this is one step in that direction, basically. I think that as consumers age, younger consumers, they will be looking for great tasting, better-for-you snacks, that support the more active lifestyle. The opportunity is quite big. At the moment, it's a small business, growing very fast, though. Still a very big distribution opportunity, which of course, that's one of the areas where we can help. We will also provide them with help in procurement. We will sharpen their positioning through our consumers' insight and our marketing expertise. We will help the team at Undercover to accelerate their growth.
Diana Levy, who's the CEO, will remain the CEO, and we will integrate the business as a standalone unit within our North American ventures where we have other brands just like Perfect Snacks, Tate's, or Hu vegan chocolate. We think that the deal will close by early 2027, of course, subject to closing conditions, regulatory approval. Overall, we're quite excited and I think it's really building for the future here. It won't make a big difference in 2027, but I think we're moving our portfolio in the right direction with the acquisition.
Sorry. Great. Interesting. Then maybe if I just a question around cacao. Clearly, right, we are in the period of West African crop, and we have seen the price of cacao, at least in spot or near-term futures increase. Feel like investors are talking about that a fair amount. But at the same time, we did hear from another company this morning kind of speaking for a number of reasons to kind of how that cost should come down, at least, I guess, over time. I do not know if it is near term. But you usually provide a lot of detailed perspective that I appreciate. So maybe any perspective you can give on, kind of view on cacao right now would be helpful. Thank you.
Yeah, sure. I think it is important to understand that the market is fundamentally in a different position than the spike that we saw in 2024. I think if you look at the 2025, 2026 cycle, we expect to be ending this year with a surplus of almost half a million tons, so 500,000 tons, which is a record level of surplus. So I think if you look at the level of inventories that are there in the market right now, they are very good. I think from a 2026, 2027 standpoint, right now, if you look at the estimate, it is projected to be a deficit of, call it, around 190,000 tons. I think driven by poor initial setting of the main crop in Ivory Coast and Ghana, as well as expectations of a strong El Niño.
Even if that deficit were to eventuate, there is plenty of supply from the surplus this year, to absorb that deficit. So I think, we feel pretty good about the fundamentals of the market. It is very different from what it was in 2024. You look at the coverage levels of the industry, they are at around nine months. Again, different position than where it was in 2024. And if you look at the cacao prices itself, they remained largely range-bound, as the concerns of the El Niño have been priced in. So net-net, that is our view, and I think the fundamentals are in a much stronger position than in the previous crisis.
Thanks, Amit. I will pass it on
Thank you. We'll take our next question from Chris Carey with Wells Fargo Securities. Please go ahead.
Hi, everyone.
Hi.
I'd like to ask about Latin America, please. The volumes here have flattened out and turned slightly positive past couple quarters for the first time in a little over two years, which is certainly nice to see. Can you give us a bit of context on why have volumes been under pressure in Latin America? What is the evolution that has brought us to this point, and how should we think about the durability of positive volume growth in the region and the concept of pricing versus affordability here as we go into next year?
Yeah. Look, the number one drag in terms of volume for Latin America, it is Argentina, which we manage for cash and where we have been pricing very diligently over the quarters. When you strip that out and you look at the volume mix performance of Latin America, it has actually been okay, I would say. Remember that in Brazil, we have quite a material and sizable chocolate business, which again, we price diligently, and part of the pricing actions that we took were through RGM, and so we downsized some of the portfolio. Reality is, chocolate in Brazil is turning the corner in terms of volume mix, and importantly, we have been gaining share consistently in the last few quarters. I think there, the situation is absolutely under control.
We kept penetration, we have been gaining share, and in general, we have been delivering good revenue growth for the business. When you step back and you look at the business all across, excluding Argentina, you actually see that in Latin America, the volume mix for the non-chocolate business has been at about 4%-5% in the last quarter. I think it is quite a remarkable number. We are extremely pleased with the performance of gum and candy. Particularly Trident is delivering amazing numbers across the board. We have record high share, record high penetration. We are investing materially in the business, gaining distribution, and delivering profit out of it. Then, clearly, all the regions, Mexico, Brazil, and WACAM, are delivering, in general, positive volume mix. The exception is really, as I said, the chocolate business in Brazil.
As we start lapping the pricing action and the PPA that we took last year, you're going to see accelerated volume mix coming out of Brazil too. A long, articulated answer, but I would say Argentina is the number one driver, and then clearly some of the pricing and decisions that we took about chocolate in Brazil have been resulting in lower volume mix than maybe you had in mind.
That's very helpful. Thank you. Just on Q4, it could imply a wide range for profit outcomes if you take the full-year guidance. I'm sure your own internal expectations are not so wide. Can you give us a sense of maybe where you might be landing in the range or just a way to frame how to think about Q4 so as to get a sense of exit rate on, that could be top line margins, earnings trajectory, but just conscious it's a wide range all the Q4, so any additional color you could provide, I think, would be helpful. Thank you.
I think, like I said, we are maintaining our EPS outlook for the year. I think in the quarter, without getting into specific quarterly guidance, I think you can expect to see us continue to grow volume mix into the quarter. I think the upside that we've seen in quarter three, we'd reinvest back into the business. I think you'll see strong gross profit and OI dollar growth in the quarter.
Okay. All right. Fair enough. Thank you so much.
Thank you. Our next question will come from Max Gumport with BNP. Please go ahead.
Hey, thanks very much for the question. Very strong gross profit delivery in the quarter, which helped to fund some reinvestment in advertising and brand support. I was hoping you could give us a bit more color on what drove the gross profit delivery, given it came in much better than the street was modeling, and it helped to drive the EPS beat. Thanks very much.
Yeah, I think strong volume growth, so obviously operating leverage coming through. I think, very pleased with the productivity program that our supply chain colleagues are delivering through the supply chain in procurement, in conversion. That clearly helped in the quarter. Of course, as we discussed, timing of cacao. We saw that the benefits of a low cacao cost come through in the quarter as well. Those are the main drivers from a gross profit standpoint. I think, like I mentioned, we should continue to see that into quarter four as well.
Great. Then on the emerging markets, can you just give us a sense for where we are in the distribution runway? You talked about adding, I think it was 130,000 outlets year-to-date in India. In Brazil, you are now at more than 1 million stores. But can you just help frame how much more upside there is in some of these emerging markets from expanding your distribution?
Look, the universe is much bigger than our current distribution. I think what is also important for you to know is that the universe of points of sales, particularly in places like India, Southeast Asia, and in other places in Latin America, the universe is growing consistently. So it is most likely a point-in-time type of number that we can give you. But reality is, the universe is growing. The other big opportunity that we have is around the number of listed items that we have on the store. I think what you have to consider at this point in time is that the runway that we have in places like China, India, Brazil, it is most likely we still have 25% numeric distribution to go.
Clearly, the 25% numeric distribution is a number that implies smaller opportunities as you go and grab it, but it is still a sizable number to be gotten. There is also an opportunity that we have, particularly in places like India, which is to upgrade the current universe in the sense that you know that we have these coolers in India, and the size of these coolers depend upon the evolution of the points of sales. So between the incremental points of sales, the upgrade that we have on the current universe, the fact that we can increase the number of items that are carried by those stores, I think the opportunity is quite sizable.
I think it is not by coincidence that you see us delivering numbers that are north of 20% growth in India or for that matter, in China, numbers that have quite frankly defeated the odds of the market, particularly if you compare us to other companies. The reason why those numbers are being delivered is because we pursue incremental distribution opportunities quite rigorously.
Thank you.
Hello?
We'll take our next question from Tom Palmer with JP Morgan. Please go ahead.
Good evening, and thanks for the question. I wanted to maybe ask a little bit more on the cost environment. There's obviously the call-outs that we've heard today from you and certainly from others on freight and fuel pressures in North America. Maybe a little framing on what you're seeing overseas today, and then as we start to roll into 2027, I think one of the key drivers of earnings was kind of this more favorable cost environment, especially in raw ingredients like cacao. To what extent that kind of still holds. I do not mean the earnings growth, I mean kind of the cost environment when we balance it against some of these other costs that seem to be escalating.
Yeah. I'll start by saying that overall, from a 2027 standpoint, we remain confident on delivering strong EPS growth in 2027. I think, like you mentioned, we are seeing increases in commodities like dairy, oil, packaging. We are seeing inflation in that. Obviously, we have productivity programs, strong productivity programs that are delivering this year, and we continue to accelerate that into next year as well. But if you kind of look at the overall mix, I think we have plenty of levers to drive the earnings growth into 2027.
Okay. Understood. On the M&A front, obviously the smaller acquisition here today in terms of Undercover Snacks that has a lot of growth opportunity. What's your appetite as you kind of shift into maybe a more favorable environment for growth, at least what you guys are showing, maybe not everyone, to take on something a little bit bigger when it comes to M&A?
In general, as we stated several times, our strategy is bolt-ons. There's bolt-ons and there's bolt-ons. This one of today is on the smaller side. There are bolt-ons, which could be in the half a billion, sometimes even close to $1 billion in sales. That would be sort of the order of magnitude, I would say, that we have in mind. We are not necessarily pursuing something bigger. Largely because we have a very targeted strategy of trying to find the geographical areas around the world where we have gaps or the segments in our categories where we have gaps and surgically, if you want to call it like that, trying to reinforce our portfolio. That has worked well for us.
Usually, those are the opportunities that come with the least baggage, if I can call it, because if you go bigger, you might like a part of the company really well, but there might be a part that you don't like so much. So far, we are planning to continue on that course.
Understood. Thank you.
Thank you. We'll take our next question from Alexia Howard with Bernstein. Please go ahead, your line is open.
Good evening, everyone. Thank you for the question. You sound very confident about the strong EPS growth in 2027, but little has been said about the outlook for sales growth. Obviously, this year was at least 2%, so that's below algorithm. What are the big puts and takes, and could we get back onto algorithm next year, or is that still TBD? Then I have a follow-up.
Yeah, I think it's premature to talk about 2027. We'll obviously talk that when we give guidance for the year. I would say that we're very focused on driving volume. You've seen us reinvest back in this quarter, and reinvest back. You'd expect us to reinvest back in quarter four as well, to really drive volume and growth into 2027.
Thank you. Then just a quick follow-up. Oh, sorry.
Just to give you a little bit more color, we would expect continued strength in the emerging markets. I think you should see increasing stabilization in Europe, continued momentum in North America, and Luca talked a little bit about some of the drivers that we are seeing from a North America performance standpoint. So you should expect to see us continue to drive that.
Thank you very much. Then could I just ask, should we expect the negative price growth driven presumably by chocolate in Europe, to continue over the next couple of quarters? When do we start to lap all of that?
I think the straight answer is yes. Again, I think you need to bear in mind that pricing last year ramped up throughout the quarter. So I urge you to take a look at the combined cumulative pricing across the two years. I think you will have a good sense of what type of pricing to expect for the couple of quarters to come.
Great. Thank you very much. I'll pass it on.
Thank you, Alexia . I think with this, that concludes the Q&A for today. Thank you very much for assisting through the call. Good quarter. We feel good about Q4 also, and we'll talk to you next quarter. Thank you.
Thank you.
Thank you.
Bye.
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.