Mondelez International Inc (MDLZ) — Q4 2025 Earnings Call Transcript

Good afternoon, and welcome to the Mondelez International 2025 Fourth Quarter and Full Year Earnings Question and Answer Session. Your lines have been placed on listen-only until it's your turn to ask a question. In order to ask a question, please press the star key followed by the number one on your touch-tone phone at any time. To remove yourself from the queue, press star 2. On today's call are Dirk Van de Put, Chairman and CEO, Luca Zaramella, COO and CFO, and Shep Dunlap, SVP of Investor Relations. Earlier this afternoon, the company posted a press release and prepared remarks, both of which are available on its website. During this 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-Ks, 10-Q, and 8-Ks 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, the company provides 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 the company's earnings release and 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.

Great. Thanks very much. Good afternoon, everybody. Dirk, maybe to start us off, clearly, significant interest in, obviously, the chocolate category and how the precipitous fall in cocoa could impact the dynamic. Where is Mondelez currently on its chocolate strategy? How does it play out from here? Particularly as it relates to, you know, the potential for some price deflation in areas where obviously, significant pricing has been taken.

Yes. Thank you, Andrew. I would start off by saying that if you look at 2025, and the overall chocolate market in the world, it has shown a lot of resilience. Despite all the volatility and important price increases that took place, the category overall remained strong. We had a playbook for our chocolate strategy, which was largely to list prices or do revenue growth management largely through price pack architecture. And we've executed well against that chocolate playbook in 2025. If you then look at the markets around the world, I think places like India, Brazil, Australia, South Africa—some of our bigger chocolate markets—have done quite well. And also in Europe, in about half of the markets, things played out exactly as expected. However, I would say in the more northern markets in Europe, Germany, the Nordics, the UK, we saw higher than expected elasticity, so we have to make adjustments in 2026. We have learned that certain price points are very important. So we have adjusted already to put our products at the right price point. Some of the price pack architecture worked, others didn't, so we are adjusting also some of the pack architecture we have in the market. We are planning to increase our investments behind our brands because in this year, our cocoa coverage is at a better cost than it was in 2025. So we are able to increase substantially investment behind our brands, and we do that because we want to get back to the normal frequency and quantity of consumption that we've seen. Penetration hasn't gone down, but the frequency and quantity of consumption did. We are also investing in price. As I mentioned, to hit those right price points and as well in new price pack architecture. We're going to push hard on innovation. We have the collaboration with Biscoff, which was very successful in 2025, but it really is going to go to the next level in 2026. So I think we've got a very strong innovation agenda led by Biscoff with a number of other initiatives in Europe. And then we are going to have some important activations in store. However, as you probably have seen in the last two weeks, suddenly the cocoa price has declined more than anybody would have expected. And this will have some short-term pressures largely as it relates to probably having an industry or the largest players in the industry that have already covered for 2026 at a higher price than the current market price. And this could maybe give us some unexpected competitive reactions. And so we want to build in some flexibility in our guidance because we don't quite know how that is going to play out in the market in 2026. What is good in all of this is that cocoa now has returned to a level that is much more in line with the historic price that we've seen. And that bodes very well for 2027. As I said, we're already covered for 2026. There's not a lot we can do anymore, but 2027 certainly will benefit from this. So we see our chocolate business in 2027 increasing its margin in a considerable way. As it relates to 2026, like I said, we're going to remain very agile. We're going to do all the things that we said and then make sure we enter 2027 with a lot of strength. We are planning to go through a lot more detail on what our chocolate strategy is during the CAGNY conference, so I would certainly invite everybody to come and listen to us there.

Great. Really helpful. Hopefully, arrange to get some of the Biscoff stuff down there as well. That's just a personal favorite. And then, Luca, maybe shifting gears over to the Outlook. Maybe what's your thought process on the guidance range and sort of investment flexibility that Dirk mentioned in light of the fall in cocoa costs? What are your updated thoughts on sort of the cocoa environment from here? Thanks so much.

Yeah. Thank you, Andrew. So before commenting on the 2026 guidance, maybe a brief comment about how we ended the year. And I think, as we said, we are quite happy with our market's momentum. And quite frankly, happy because we saw sequential improvement in developed markets, albeit we are not fully there yet. On 2026, the guiding principle of the guidance was to be prudent, particularly as we see some short-term pressure points like in the US, you know that the biscuits category is still subdued, and, you know, the plan is that it will continue like that for the first half at least, with some marginal improvements in the second half. In Europe, we have planned for a chocolate category that is stable after the meaningful prices that were taken. But we also planned for some disruption due to the usual customer negotiation process that takes place in the first part of the year. The main reason for the guidance range is that recent and sudden cocoa dynamics might require some flexibility, depending on how competitions will react to those prices and where cocoa eventually will stabilize. As we said, our pipeline cost for 2026 is determined at this point in time, and it is clearly at a higher than the current cocoa spot. So this is something that we hadn't anticipated before. And, as we said, it just happened in the last couple of weeks. Our objectives are clear. We want to win with the consumers. We want to win in the market and that's one of the reasons why we are investing substantially behind our brands. And, hopefully, the goal is to have an improved volume trajectory, particularly as we move through the year. On the phasing, maybe just one word. I commented already on the customer disruption in Europe in the first part of the year, but on profit, given the way our inventory accounting works, we will face some headwinds, and we mentioned that in the prepared remarks. On cocoa, I said it a few times, and I believe fundamentally nothing has changed. If you look at supply and demand, the dynamics were clear well before the last couple of weeks. And so I believe what the market is recognizing now is maybe a little bit overdue. Obviously, we would have liked a little bit more of a balanced approach to the weigh-down of cocoa. It happened all of a sudden. But reality is that, in our mind, cocoa as it stands now is a better representation of supply and demand. And that's why we believe this level is important for us to realize as we look at profitability, particularly going forward into 2027 and beyond.

Thanks so much.

Thank you, Andrew.

We'll now move on to Peter Galbo with Bank of America. Your line is now open.

Hey, good afternoon, Dirk and Luca. Thanks. Thanks for the questions. Luca, maybe if I can actually pick up on the comments you just made around some of the phasing more on the cost side. I know that you mentioned, I think the lion's share of it comes in the first quarter. So maybe you can just talk us through a bit more of the cost phasing on cocoa through 2026. And then maybe how we would think about the phasing on potential price investments in chocolate over the balance of the year?

Thank you, Peter. So fundamentally, maybe I'll start with the top line because I think that's a clear component of how we think about the plan in 2026. As you might imagine, at this level, we are not going to price cocoa further, but it is also important to know that our profit took quite a material hit in 2025. And so we were not certainly fully priced at the level of cocoa in 2025. And, albeit the pipeline cost is coming down in 2026, we need to keep a level of pricing that is pretty much the same as we have in 2025. In terms of cost, the way our inventory accounting works is that we will have to adjust the level of inventory in the first day of the year to the actual pipeline cost that we see in 2026 versus how we exit the year in 2025. And that is a one-time adjustment that takes place on the inventory, and that is causing in the first February, but predominantly in Q1, an impact that is at a billion dollars. And that gives you an idea of the costs that we see throughout the two years. So in terms of top line, I would say in chocolate specifically, flat pricing, in terms of volume, some implications as there is customer disruption in Europe. And in terms of cost, higher cost in the first half versus the second half. And so as we move through the year, I think you're going to see a sequential improvement of volume and revenue, but most importantly, in terms of EBIT phasing. In all of these, investments in advertising and promotions are equally spaced throughout the quarter, so no material changes I would say, quarter on quarter in absolute terms of our advertising and consumer investments.

Great. Thanks for that, Luca. And, Dirk, maybe to pivot to North America. I mean, I know it continues to kind of be a difficult operating environment. You know, volume trends are still a bit weak. There's a view maybe that this is more k-shape or cyclical tide versus structural and maybe in the context of just one of your largest peers announcing price cuts today in the snacking category, would just love to get your perspective on, you know, the North American market, where you stand on that debate, and, on the pricing front, what the go-forward actions might look like there? Thanks very much.

Okay, Peter. Well, first of all, the key thing in North America is the consumer. Consumer confidence is near historic lows. They're worried about overall affordability. They are fed up with the price increases. They don't feel good about their personal economic outlook. They doubt their job security. So what we are seeing is that the average shopping basket of the consumer in the US, whether you're in the higher or in the lower social economic classes, has not increased for the last two to three years. Within that basket, they have spent more money on the basics such as milk, meat, and bread, and as a consequence, snacking is being affected. You can see that in all of the snacking categories. You talked about the K-shaped economy. There's clearly a group of consumers, more wealthy consumers, that do spend differently, in the sense that you can see that things like premium and better-for-you products are growing within the snacking markets, also some on-the-go items. But the bulk of consumers are really into value seeking. What they do is look for lower unit prices, deals, or, if they have a bit more money, they will seek bulk packs or multipacks. They also shift channels from food and mass into value, club, and online stores. As you said, the biscuit category is showing soft volume trends. It was down 4% in volume over the last three months and down 3% for the year in 2025. So overall, we don't necessarily see an immediate change in consumer behavior. As a consequence, we need to adapt to these circumstances. So what do we do? We are going to invest more to drive awareness. We see the same as in chocolate in Europe, and the penetration of our brands is not decreasing, or sometimes just a little bit. It's largely the frequency and the quantity bought that is being affected. So we're going to invest in improving that frequency and quantity bought. We're going to use price pack architecture to address some of the affordability. We are expanding in some of these channels that I mentioned. We are under-indexed, so we are pushing harder, and we are increasing our market share. We have offerings that are doing well, including the Perfect Bar, a protein-rich offer, or a premium biscuit, or Builders Bar in the Cliff range, which is also protein-based. They are all doing well, growing double digits. Lastly, I would say we are activating a supply chain program meant to run over the next three to four years. It's largely to modernize our operations, but it will improve our efficiency and costs, providing us with more network flexibility. So overall, I would say we are entering a year in North America stronger in the sense that we will do more investments, that we've understood better what works here, what doesn't work, and we have quite an extensive plan on things we want to do. Regarding pricing itself, we started off 2025 quite aggressively on promotions and deals, working on price. However, it didn't give us a return on our investment. So in 2025, we changed our strategy, did much less promotion and pricing, which in turn helped our price realization go up. Overall, our P&L improved in North America. However, we lost market share because our volume performance wasn't the same. But overall, I would say that was probably better for us. The way forward is better activations to interest the consumer more, ensuring they feel compelled to buy our snacks on every shopping trip, but we don't necessarily think that we need to decrease our prices to the magnitude that I heard from another company.

Great. Thanks very much.

Thank you, Peter.

Thank you. We'll now move on to Megan Clapp with Morgan Stanley. Your line is now open.

Hi. Good afternoon, Dirk, Luca. Thanks so much. I wanted to just maybe, Luca, follow up on the answer to Pete's first question just to make sure I fully understand the message you're talking about as there are a lot of moving parts with cocoa and pricing. So when you talk about flat chocolate pricing in 2026, that's the expectation. Cocoa should be down, I think, significantly. But should we think about the net price-cost relationship embedded in the guidance as roughly neutral for the year? Of the inventory accounting and the elevated hedges flowing through, or is it still a net positive? I'm just trying to understand the dynamics there. And then is the idea that if pricing can kind of stabilize in 2026, cocoa resets lower in 2027. So that's really when the real profit recovery starts to show up.

Yeah. Thank you, Megan. The idea is to have a neutral to positive balance in chocolate specifically between cost and pricing and albeit pricing is not going to move much. As I said, there is an element of cost that was locked for 2026. So generally, you should think about pricing net of cost as slightly positive to neutral for chocolate. That's the way we have prepared the plan.

Okay. That's super helpful. Thank you.

Thank you, Megan.

We'll now move on to Michael Lavery with Piper Sandler. Your line is now open.

Thank you. Yeah. You touched on the advertising spend as a tailwind in 4Q, but you've talked about stepping up investments next year. Can you give a sense of order of magnitude? And would next 2026 be basically back to normal? Is there any kind of push beyond that? How do we just think about what kind of investment level you've got in store for the year?

So, Michael, if you look at the advertising and consumer investments line, it was clearly down year on year, 25% on 2024. One of the drivers there is continued overhead savings, but we had to tap into A&C also. We said many times that we didn't touch the working media line, but we did touch the non-working media predominantly. The idea is to continue with lower non-working media but to clearly step up in the working part. If you look over a couple of years, between 2024 and 2026, we will more than recover what we have to pull back in 2025 into the overall line. On the other part of selling and administrative expenses, as of the overheads part, we will continue with cost savings, but we will have to step up a little bit the annual incentive plan. All in all, the investment in advertising and consumer investments over two years, I think it's going to be substantial if you take 2024 to 2026. It's up quite meaningfully.

Okay. That's helpful. And just back to emerging markets, maybe touch on that specifically, maybe LatAm. It's down a couple of years. What can you do to grow volumes there? And can you give any sense maybe of what kind of assumptions would be baked into the guidance?

Look. I think that the simple answer there is that in LatAm, there is Argentina, which went through quite a bit of country turmoil, and on top of that, economic turmoil; there were material issues. We decided to protect working capital and not to extend payment terms to anybody. I believe we did quite a good job in keeping the business in accordance with our operating principles that are to protect cash in Argentina and bring the cash home. That's what we did. When you strip out Argentina and you look around, Brazil was impacted a little bit by elasticity in chocolate. But Brazil is one of the best-performing markets we have top and bottom line. They did an amazing job in terms of price pack architecture and minimizing elasticity. We are growing quite well outside of chocolate. If you look at Mexico, there was a big comeback. The country is now in growth territory and doing fairly well. Hence, the two major markets in LatAm are performing quite well. It is Argentina masking a little bit the performance of the region.

Okay. That's helpful. Thanks so much.

Thank you. We'll now move on to Chris Carey with Wells Fargo Securities. Your line is now open.

Hi, everyone. Thank you for the question. I wanted to start with this comment on the company's goal to demonstrate the significant volume trajectory change over the course of 2026. Can you help us understand regionally where that change might be occurring? Some of the key drivers, for example, the channel strategies that you have in North America, are those expected to be material? European, comps in Europe get quite a bit easier into the back half of the year. You mentioned the piece with price pack architecture impacting emerging market volumes a bit and elasticity is getting better. Just give us a sense of what significant volume trajectory improvement looks like and context on where that's coming from and why.

Yes. I mean, if I go through the regions, we clearly expect AMEA overall. If you look at how we're doing in India, in Australia, and China, we are coming back. So we see EMEA as being a big source of volume growth for us. That’s certainly a region where we will see some good performance. In Latin America, as Luca was saying, we think it's going to be quite a good year for us. North America, as I was explaining, the consumer confidence there is a concern. The biscuit category is soft, and we expect that the volume decline you see in the category of 4% will ease, but we are not exactly counting on volume growth in North America. Then in Europe, what I expect there is that in our other categories, we had a pretty good year already in 2025. We expect that to continue, and I am referring to biscuits, cakes, pastries, and meals. In chocolate, the price increase as we discussed is going to ease. In fact, we are readjusting some of our pricing in certain markets. All of that is expected to have a positive effect on volumes compared to 2025. Hope that provides some clarity on where the volume growth is going to come from. The phasing during the year is as these different activities come to bear. We expect that to gradually improve, and the lapping effect will also aid us throughout the year.

That's great. And I know it's been broached a bit, but just to confirm, as we get into 2027 and really I’m asking just because it was included in the prepared remarks. Can you give us a sense of the investments that will have been lapped going into 2027? Should we expect the media investment to be done in 2026, the rebasing of media, the rebasing of comp, the investments into channel expansion strategies such that going into 2027, we’re really just thinking about an improved complexion of the top line gross margins, getting a bit more life against a lower cocoa price and more operating leverage to SG and A? Or are there multiyear investments that will be continuing to come into the model as we get into 2027? I realize we may get more information on this at CAGNY, but again, it was in the prepared remarks, so I figured I'd get a bit more context on that. Thanks.

As we explained, in 2026 we are taking a step forward and significantly increasing our investments in working media as compared to 2025, taking into account that in 2025, we took a step down largely in non-working media, but also a little bit in working media. For 2027, we expect that we will do another step up in investments. We believe that we have to continue to invest in our brands. The opportunity is big. We want to drive volume growth because that needs to be the first base of growth for the company, combined with hopefully, over time, a little bit of pricing. That’s our thinking. As it relates to margins, we feel that overall from a commodity perspective that things will ease, particularly in cocoa. Therefore, we can see a significant uplift in our chocolate margins in 2027. That will be divided by reinvesting part of it and part flowing to the bottom line. We aim for strong EPS growth in 2027, but at the same time, we want to keep investing in our brand. We are not planning to flow everything to the bottom line if that would be the case.

Thank you all. Appreciate it.

Thank you.

Thank you. And we'll go next to David Palmer with Evercore ISI. Your line is now open.

Thank you. Sort of a big picture question on European chocolate in your division there. I wonder, you know, how are you thinking about the path to profitability recovery there to sort of pre-2025 levels that we saw for a few years? If you think that is even the norm, you know, that we saw profitability there. I wonder with prices having come down, is 2027 the beginning of a recovery? And, you know, is there a path back to pre-2025 levels of profitability, and how do you think that would play out? I have a follow-up.

So, the idea David, is to go back to the profit pool as it used to be, and hopefully, even a little bit better because remember, we really have growth opportunities even in Europe. Quite frankly, we still have to invest quite a bit in advertising and consumer investments and expand both in the developed part of Europe and also in the developing part of Europe. We still have plenty of opportunities in terms of price points, channels, and segments within chocolate, and our goal is to grow the chocolate business in Europe after the meaningful price increases we have taken in 2025. If cocoa ranges at around 3,000, our goal is to enter 2027 with a much improved situation. To really be able to get back to the old profit pool and if we have to make some selective price investments, we will make them. I think if you look at how the 2026 plan is structured in Europe, we will have more promotions. We are going to offer more value to some consumers. Therefore, all in all, I think while 2026 can be a new base, 2027 can really be a step change for our chocolate market overall around the world, including Europe.

Are there any sort of milestones this year that you're going to be really watching for, whether it's perhaps how you see the retailer brand pricing works or your own price elasticity levels remaining better than a certain threshold? I mean, what are some things that you’re going to be looking for and that we could even look for in the data?

It is potential competitive reaction. Let's we said a couple of times already.

Got it.

Thank you. We'll now move on to Scott Marks with Jefferies. Your line is now open.

Hey. Good afternoon, all. Thank you for taking our questions. First one for me. I don't believe I've heard any discussion thus far about GLP-1 and some of the more recent developments in that market, especially with some of the newer oral medications. Just wondering if you can share a bit about how you're thinking about that and what you're expecting on that front for this year and beyond. Thanks.

Yes. Well, we model it out every quarter based on the latest information. We have noted the fact that the price of some of it has come down. We have noted that there is oral being approved. We've taken into account the estimates related to that. And I have to say that, in our opinion, that will not significantly change the estimates that we've had so far. So and the estimates we've had so far, first of all, we do not see a short-term impact on our business because there is a very modest adoption rate right now, and also the calorie reductions are relatively benign that we see. However, if we extend ten years and we take an adoption rate in the US, which would be somewhere between 10-20%, even then we do not see a significant effect on our overall business. We believe that over that period of time, it could have a 0.5% to 1.5% effect on our overall volumes. So almost negligible over a period of ten years. So at this stage, I can't say that we feel that it is having a major impact on our business.

Appreciate the color there. Maybe next question for me. You made some comments in the prepared remarks about continued investment in cocoa grown regions, maybe outside of West Africa. Just wondering if you can share an update on some of those investments and how you're thinking about those moving forward relative to the traditional cocoa growing regions. Thanks.

Yes. I think it's better from an overall long-term risk management perspective that we balance our supply of cocoa into different geographical regions. Those regions are largely Latin America, mainly, and also a little bit in Asia in places like India and Indonesia. In Latin America, the countries that are stepping up are largely Ecuador and Brazil. We see large farms emerging in Brazil and we are having long-term agreements with them for supply. In Ecuador, smaller farmers are getting together and we see these countries significantly increase their output. Over time these regions might not give the best cocoa price, but we think the current price should be sustainable. However, it will significantly decrease the risk of events like a bad crop or a disease that affects the crop in a country, which would have a big impact on the overall cocoa market, as we currently see whereby Ghana and Ivory Coast are close to 60-65% of the global cocoa supply. The other point worth noting is that I think over time, there will be more lab-grown cocoa that will become available. Not GMO, but lab-grown. We believe that there will be interest from the European Commission and then the US government to approve lab-grown cocoa, as it presents significant benefits in terms of climate and the other social effects. We are investing in and supporting this direction.

Appreciate it. Thanks. Pass it on.

Thank you.

I think that was the last question for today. I would like to thank you for your attention. I would like to reiterate the fact that we will be going deeper in CAGNY into the European chocolate situation and give you the details on how we are planning to tackle it. We'll also go deeper into our North American situation and what our plans are there. We will cover the emerging markets and, of course, our financial outlook. So we're looking forward to seeing you there to spend some more time explaining our business to you. Thank you.

Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.