Mondelez International Aktie

Good afternoon, and welcome to the Mondelez International First Quarter 2026 Earnings Question-and-Answer Session. [Operator Instructions]

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-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, 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. We'll take our first question from Andrew Lazar with Barclays.

Dirk, I was hoping you could walk us through a bit more around the key drivers and climate in emerging markets as well as where you're seeing improvement in some of the key developed markets. I think in the prepared remarks, you mentioned returning to volume share growth in European chocolate while in U.S. biscuit, I think there was a positive inflection in March. And both of these are areas where there's been more pressure and in large part, why some flexibility was built into guidance to start the year for fiscal '26?

Andrew, yes, let me maybe start with developed markets. We're pleased with our improving performance in the developed markets. It's in line, maybe even slightly better than our expectations. If I first look at Europe, consumer confidence there is stable, but it's fragile as you would expect from the Middle East conflict. Snacking value growth is holding up quite well, and the penetration of biscuits and chocolate categories, for instance, is holding up also. So we had a good start of the year. The retailer negotiations are generally complete, and they are in line with our planning. We had a very robust Easter season, which share improvements in several of our markets. Our Biscoff partnership continues to do really well. So happy with the European performance.

Linked to that, the chocolate in Australia and New Zealand had very strong growth, again, driven by strong Easter. Biscoff there is on to an incredible start, and we have some very strong share gains. The U.S., the consumer confidence there remains quite low. We expect it to further deteriorate as the Middle East conflict continues. Purchasing power is up, but the consumer remains very concerned about affordability, economic outlook and job security.

Our main category, biscuits, the value is flattish. And where there is growth that's usually in the value club channels and in better-for-you and premium. We feel that we had a good first quarter with slightly positive net revenue growth in North America, driven by that momentum in the growth channels that I was saying. We gained some share in crackers led by strong performance of REITs. And also our candy business is doing quite well as well as our North American ventures, particularly, Perfect Bar and -- they continue to grow well.

Oreo was a little bit less, but we had a limited time offer this year that didn't perform as well as last year's, but we have strong plans in place to improve Oreo in the year to go. I think we will continue to see a gradual improvement of our North American business because we are increasing our brand reinvestments. We're trying to sharpen our PPA and hit the right price points as well as in Europe, of course. We have the growth channels and the new occasions, and we've got some strong good innovations that are in flight. So on developed markets, I would say, a good performance.

Then emerging markets, we are very pleased with our performance in emerging markets. It remains very strong. It's about 40% of our business, as you know. We grew 6.3% in Q1. If I first go to the consumers, of our 4 key markets, the only place where the consumer is softer is in China, although it improved versus the last quarter, the confidence. And we remain positive that, that consumer confidence in China will continue to improve. We see a very positive confidence in India. And also Mexico and Brazil, we feel the consumer is in a good place. Of course, everywhere the consumer is quite cautious as it relates to the conflict and what that could mean for inflation and their energy cost.

Snacking categories remain quite resilient across all those emerging markets, also in other geographies on top of the top 4. Value growth is holding up really well, and particularly, biscuits and chocolates are doing quite well.

So if I look at the results of our business, this will -- they were all driven by strong Easter. So overall, a 6.3% growth. Volume mix in the emerging markets was up 0.5%. If I take Argentina out, it's almost 1% volume growth. China was mid-single digit. We had a strong Chinese New Year. Ever, the acquisition there in -- High single-digit growth and we continue to increase our distribution.

India, we had a strong double-digit growth in Q1 in chocolate and in biscuits. There, we launched Biscoff biscuits and our line is already sold out. So very strong launch there, too. And then, of course, there was a GST change in India that is helping consumption in quite a way.

Brazil, we have high single digit very strong execution across biscuits, chocolate and gum in candy. Mexico was flat in Q1. But overall, we feel good about our gum biscuits, chocolate and meals business, but we had some softness in our candy and powdered beverages there.

We continue to see emerging markets as a sustainable growth engine, and we are quite optimistic for the long term. Our categories are still underpenetrated. We are reinvesting quite strongly this year. We have a long runway on distribution. We continue to build our global brands, and we can start doing some RGM in these markets. So we feel very good about the start in the emerging markets. That would be it, Andrew.

We'll move on now to Peter Galbo with Bank of America.

Dirk, there was a -- in the prepared remarks, you talked a lot about reinvestment. Obviously, a strong start to the year here, but there was a decision kind of made to reaffirm the guidance. Obviously, you mentioned some of the parameters around consumer confidence globally. But maybe you can just expand a little bit on, given the strong start to Q1, the decision to only reaffirm EPS, a little bit more around the reinvestment. And then I believe there's a line in the slides about strong earnings growth for 2027. Off the back of that, I know it's probably too early, but if there's any parameters you can put around that as well.

Thank you, Peter. I'll take the question, given it is on EPS and overall broader outlook, I presume. So look, we feel quite good about the start of the year. I think you saw the emerging market numbers. They are performing well. I would bet maybe a little bit of color saying that the growth is really broad-based across categories and across geographies. Clearly encouraged by developed markets where having addressed some chocolate price caps in Europe and having fine-tuned the promo strategy in the U.S. is yielding good results. And importantly, I think we have some new product launches that are performing well above all, we mentioned Biscoff.

So look, I think it's fair to say we are ahead of expectations in Q1. But on the remainder of the year, while we continue to be cautiously optimistic, we need also to address some headwinds that we didn't have in our original forecast, particularly as they stem out of the Middle East crisis. The team is managing that situation quite well, finding alternative routes to produce our brands and to deliver our brand. But that is coming at an extra cost. And clearly, the oil cost albeit we are covered for the year is having a little bit of an impact on the profitability. So look, we were ahead. We are ahead. We are optimistic about the remainder of the year. We have the Middle East situation in terms of extra costs under control. But at this point in time, to be able to swallow it, we had to confirm guidance on the bottom line.

Clearly, we are confident. But as I said also, quite a few times given there is quite a bit of momentum, particularly in emerging markets and in some brands, both in Europe and in the U.S., if EPS upsides materializes, we would like -- most likely to invest it back in the business and really continued momentum ahead of clearly what we committed to, which is a strong 2027 EPS growth. hope that makes sense.

Yes. And Luca, maybe just as a follow-up. You said you're through most of the European negotiations at this point kind of in line with expectations. Just -- maybe you can give us a little bit more color like where are you still left to go? Are there certain geographies that are wrapping up still just as we think about kind of goal post getting through 2Q and wrapping up negotiations in Europe?

No, we are almost entirely done. I mean we are talking about a couple of small customers here and there, but nothing really material. Importantly, we executed well in Easter, and we have promotions lined up for the remainder of the year. So we feel quite good that relationship with retailers in Europe is in good terms and in good territory in terms of the remainder of the year.

We'll move on to Megan Clapp with Morgan Stanley.

Maybe we could pick up there on Europe and Luca or Dirk, maybe you could just talk a little bit about what you're seeing in the competitive environment today? Clearly, it's been a big focus. And you talked about when we were sitting here 2 months ago, some questions as to how the competitive environment could evolve given the volatility in cocoa. So just maybe you could give us an update on what you're seeing in the competitive environment and how you're kind of thinking about the rest of the year?

Yes, yes. Thank you, Megan. So like I said, overall, so far, things are going well in Europe. There were some questions as we entered the year, how the customer negotiations with coal. I think at this stage, yes, cocoa has improved. But most of the industry still covered for the year. And we still have to see what the main crop is going to bring us in cocoa. So at this stage, customer negotiations have gone, as we said quite well. We had a very strong Easter campaign, which includes the U.K., we have that success with Biscoff I was talking about. We have Toblerone, -- doing well. So overall, I would say our business in the chocolate category is off to a good start in Europe. And that, I think, has sort of calmed down the situation a little bit. We don't see any movements in price happening at the moment. I believe that everybody understands that we have to wait and see what's going to happen here to Cocoa in the second half of the year. And that at this stage, since the chocolate market is doing quite well, that everybody is quite pleased with what's going on.

For our business itself, like I said, very strong Easter. Our share trends are improving. Our base business -- if I take Easter out turn from a share loss into slightly positive over the last month, our volume trends are improving sequentially and -- that was originally driven the volume trends for influenced by, of course, elasticities, which still continues in this year. We also did a lot of downsizing, and we had a plant outage last year. So we're starting to lap that. And we are focused on execution for the rest of the year, but we feel good about '26 and particularly about '27. We will continue to do strong activations. We are significantly stepping up investment in working media and our brands. We're doing PPA. We have reset a number of price points, which were off in certain markets, and we're starting to see a positive effect from that. And we continue to make sure that we do strong activations to drive consumers in the category. So overall, I would say we feel good about where the chocolate market is, where the reaction of the clients and the competition has been, and we expect that the year will continue quite strongly.

Great. That's really helpful. And then maybe just a related follow-up. You said we kind of have to wait and see what's going to happen for Cocoa in the second half of the year, prices obviously fell pretty quickly at the beginning of the year but seemed to have kind of stabilized in a range. So as you look at kind of the cocoa market and the dynamics, what's your kind of assessment of of Cocoa as we sit here today?

Yes. I think the -- nothing has really fundamentally changed. The mid-crop was quite positive. We are encouraged by what we see as it relates to next year crop as well. I think you know that supply, particularly out of Latin America and other places that are not the Ivory cost of Ghana, the supply is quite positive. So I feel that from a fundamental standpoint, nothing has really changed. There is effect that has happened over the last few months, I would say, since cocoa, heat one of the lowest levels in 2, 3 years. And it is the fact that the industry overall has gone a little bit longer. In fact, if we look at the average coverage of the industry at this point in time, it exceeds around about 10 months, which is the highest we have seen in a while. And so to say that what you saw in terms of price increases in the cocoa market compared to the lowest levels that we saw earlier this year, it has been due to the fact that the industry has been going longer. So fundamentally, nothing has changed. We believe 2,500, which is the level we see at this moment is a much better representation of what supply and demand would say. And look, I think most likely, we will be headed for another year of surplus in terms of supply and demand, you saw the grinding numbers. They were a little bit better than anticipated, but still negative. And particularly in Europe, demand of cocoa is quite subdued. So I feel overall 2,500 is a fair representation and potentially there might be a little bit of a lower level lying ahead.

We'll move next to David Palmer with Evercore ISI.

Great. Just wanted to follow up on Europe. More on the consumer and what you're seeing by market out there, organic sales down only 0.5% or so. And you talked in your prepared remarks about how volume would improve -- our volume trends would improve through the year. And some of that makes sense given the comparisons, but it sounds pretty constructive. Are you seeing -- what are you seeing from a price elasticity standpoint out there? You talked about a fragile consumer, but at the same time, it doesn't seem like you're seeing much slippage so far. So anything you're really watching out there from a market perspective, where maybe you're seeing a little bit more trade down here or there? Anything you're watching? And I have a quick follow-up.

Yes. At this stage, I would say we don't see anything in the consumer that would be something that preoccupies us in their sales or in their buying patterns. But we know from the fact that the Middle East conflict will affect energy prices, which are very sensitive in Europe, that's one -- the one thing to watch. I think the after effects of the Middle Eastern conflict, if it continues, it's going to show in many areas like fertilizers, packaging, oil prices and so on. And the consumer will start to feel that probably with increased inflation. So they're aware of that. They've seen these sort of situations. So that's what I meant when I said it's very fragile in the sense that they are vigilant. But so far, I would say from a categories perspective, there's nothing there that we feel is starting to show that there's a slowdown or something like that. No, like I said, we feel pretty good about how particularly chocolate has been behaving in the first quarter of the year.

And then gross margins were better than what we had thought. We were thinking there might be something like $350 million in inventory phasing drag to the quarter, and gross margins were down only 270 basis points. So I don't know if we were thinking about that inventory phasing right, correctly in the quarter, but how should we be thinking about gross margins going forward?

So yes, the headwind for the quarter is around about $350 million, a little bit more than that. So we got it right and we guided you to the right number. I mean, as we said, excluding on sizing, volume mix was slightly positive. So there was leverage into the P&L. We had some upsides in specific countries that are quite profitable. China in the quarter, for instance, grew 5%, and that's a quite profitable business. And so there was a little bit of additional leverage coming into the P&L. The supply chain folks are doing quite an amazing job between procurement and manufacturing. We are delivering year-on-year benefit to the P&L. So whether it was the usual high-performance supply chains of Latin America and EMEA, we added quite a bit of upside even in places like North America this quarter. So all in all, I think between the volume mix, as pricing in line with expectations, costs coming a little bit better due to productivity. I mean all of that resulted in the upside now. That upside would have resulted in a benefit to the year, quite frankly. But at this point in time, as I said, there is a little bit of cost that will coming out of the Middle East situation. We are well covered for oil and packaging costs for the remainder of the year. And quite frankly, also into 2027, but some regulated markets do not allow us to do anything in terms of protecting ourselves, and that's the constant win that will materialize in the remainder of the year, for which we have to account and that's where we decided to guide for clear EPS in line with what we said the last time. .

We have also unlocked additional investments in a couple of places. As we look around, we see that there are things that work extremely well that are gaining momentum, and we still believe there is upside in there. So that's where we decided to invest more in A&C and other things.

We'll now move on to Michael Lavery with Piper Sandler.

Could you just maybe elaborate a little bit on your innovation strategy? And it seems like now with COVID in the rearview and the supply disruptions that kind of changed some of the thinking of that for a few years. It's focus again. Can you maybe point to where you've got a particular focus or maybe key consumer insights that are considerations and just how you're thinking about that?

Yes, yes. So yes, after COVID, there was a lot of in-home consumption and then the beginning of the higher inflationary period where the consumer was still sitting on a lot of savings. We are now into a situation, as we all know where the consumer is a lot more anxious about how and where they are spending their money. Their basket is not going up. So we believe that the way to approach that is, in the first place, you need to hit the right price points on your core range and that has become quite important, be it with chocolate in Europe or with biscuits in the U.S. you need to make sure that you are where the consumer really can afford you. So that's a big focus that we have at the moment.

Then in-store activations, big activations around teams that consumers really are interested in are also very important. And then the third one is to present them with innovations that stand out and that are really breaking through the normal mold. So we've been doing this for a while, but I would say we're seeing some of the traction coming from that. So we've been focused on doing a lot of bigger and fewer beds, particularly improvement platforms. So if you think about innovation in the company, there is what I would call the base renovation of our products, like improving the normal mass of chocolate or the biscuits, launching new flavors, doing PPA, getting the seasonals right. But on top of that, we are trying to come with some new news in the different categories. And at this stage, we feel that we have a number of launches that are starting to do really well for us.

So if I go through the big subjects that we have there, of course, there's first -- the well-being acceleration that we're seeing, and that's really on two fronts for us. First of all, there is the whole protein fiber, which we are working on. So we've got perfect bar, really doing well with the protein range. Builders bar in the cliff range doing quite well. We are now also having a builder's bar with low sugar and a perfect bar with 20 grams of protein. So that's an important part of our innovation.

At the same time, we are launching a number of products within our global brands like Oreo that go into sort of added benefits like gluten-free or zero added sugar, which is a gluten-free is doing well in the U.S. Zero average sugar is doing well in China and has been launched in U.S. So that's I would call the well-being acceleration. Then there is, of course, cakes and pistories, where we've done a number of acquisitions but we are also launching products under our brands in cakes and pastries. So in Europe, the Milka Crosson is really off to a very strong start, and we're expanding that geographically. We've taken 7 days, the acquisition we did in Europe, and we launched it in Brazil. And then we've launched cakes under Oreo in China and in the U.S. and that is doing -- both are doing quite well for us.

The third big area where we are trying to innovate is in premium and indulgent chocolate or to go through -- or we have 3 access there. One is Toblerone. We are really developing Toblerone into our premium brand around the world. We are upgrading with unique innovations and very hard to get innovations under the main range, but also the Pralines are really starting to take off for us, not the Toblerone

Then second big act there is in premium under our normal brands, we're launching this range called Cadbury and More, which is an indulgent range under Cadbury in the U.K. and in Australia. And then we've got that also under Milka called Milka MAX in Europe, which has been in the market for a while and is doing quite well. And then in the U.S., we have a vegan brand, you. Also a premium chocolate brand, and that is starting to show some real traction for us and growing quite fast at this stage. So those are the 3 initiatives in premium chocolate for us.

And then I would say the last one that we really are very happy with is the whole partnership that we have with Biscoff. I've explained this a few times, this will be really quite big for them and for us in the coming years. We're off to a very strong start. As you know, we launched -- Biscoff in certain emerging markets. And we launched also our chocolate range, which has Biscoff cream or Biscoff crumbs into our chocolate. And so that collaboration will keep on expanding over the years, and I expect that we will come up with a few more in the coming years. So those are the sort of the four areas that I would highlight as our main innovation focus at the moment. We're also doing a lot in munching and on the go. So we launched Ritz Drizzle. And Ritz Bite is doing quite well also. So we think that's also an interesting innovation act for us. Those would be the ones I mentioned, but we're very pleased with how these innovations are behaving at the moment.

We'll now move on to Robert Moskow with TD Cowen.

Dirk, I was hoping you could reconcile for me your comment about the consumer in the U.S. I think you said you expect consumer spending to weaken or confidence to weaken because of the impact of the Middle East war. But I think you also said that you expect your own North American business to continue to improve during the year. I think consensus has North America flat for the year. Do you think North America can get back to like a normal kind of low single-digit growth this year?

Yes. Let me talk a little bit about the consumer and then let Luca talk a little bit about our business within that consumer context. So I think consumption in the U.S. for a number of reasons will remain subdued in general. I think the consumer is quite concerned about their financial situation. Most food categories and snacking categories remain soft in general, I would say. We can look at the basket -- the shopping basket, which has not increased in dollar value for 3 years now. But at the same time, the items in that basket have gone quite up in price. And so consumers need to take more conscious decisions.

We see a shift where hiring from consumers, yes, by premium products as the K-shape economy. But then we also see lower income consumers really focused on lower unit prices and being very selective when and what exactly they buy. We see the channel shifts that we talked about from food and mass to Value club and online. For instance, Walmart, the value channel and Costco, so biscuits grew over 4% versus the total U.S. biscuit market, which was only 0.3% up. So I would say, yes, the consumer, to my opinion, will remain quite anxious. I think as the conflict continues and they see the effect of oil prices, and they will start to see in some of the other things they buy, I believe that, that is not going to help with the overall consumer confidence. But that doesn't mean that our business is not going to continue to improve, but I'll let Luca talk about that.

Yes. So look, I think the comments of -- they are mostly related, I would say, to category dynamics and some of the snacking categories. And quite frankly, we haven't projected for the remainder of the year a better category number. Having said that, you're going to see a volume and revenue inflection as we go into the second part of the year in the U.S. There are already quite a few things that are working well. We are very pleased with the share of Savory. We are gaining quite a bit of share, remarkably through and some of the platforms that Dirk was referring to, namely bids and resell. But not only that, it is a really fresh stack and some propositions in that are delivering quite nice share growth.

We are extremely pleased with the performance of sour patch kids. It is a brand that most likely for the year is going to grow double digit, and we have still plenty of opportunities and chose has been an amazing innovation that is incremental. And importantly, the sales team is executing very well in channels that are growing fast, namely Club, but also, I would say, value. And so you are going to see a sequential improvement of the U.S. market specifically, particularly as we continue to execute well in the areas I've talked about. It is certainly a share gain plan because -- at this point in time, we don't see really the category improving much.

I would also say that the ventures are delivering material growth. Besides the examples there gave you, we are very pleased with taste, which is gaining share. And then as we said, the bars, including Cliff, are really delivering share growth. And for instance, the bar continues to grow close to double digits. So there are quite a few things that we feel are working well. We are investing in those. And I guess you're going to see volume and revenue turning around positively for the remainder of the year in the North American business. I admitted to talk about Canada, which in the big scheme of things, maybe is not the biggest, but they had a terrific Q1 as well. So hope that Canada will continue growing as well.

We'll move next to John Baumgartner with Mizuho Securities.

Wondering if you could elaborate a little bit on the supply chain program in North America biscuits that was touched on in CAGNY. I'm curious, over the past 10, 15 years, you've already consolidated manufacturing. You had the big modernization some time with the spin-off from Kraft. I guess, what does this new modernization entail resulting growth opportunities, route to market changes from here? How do we think about the opportunities there?

Yes. No, thank you for the question. I would start by saying that around about 60% of the network we have in the U.S. is really state-of-the-art. So the overwhelming majority of the network is in good shape. It is a competitive advantage. I think you know most likely the amount of profit we generate in the U.S. and the cash that we generate in the U.S. And I believe the competitive advantage we have besides DSD is really part of the network. So we feel quite good about that. Having said that, some plants in the U.S. still run on high waste, still run on the level of productivity that is below expectations. And so we will have to bring this network up to speed. We have come to terms that some of the plants will have to deal with much simpler lines as opposed to having complex rate of-the-art lines. And so we will play to the strengths of the plan. And importantly, we have proven lines of business that are at the moment manufactured through manufacturers. And we want to bring those in-house. So those are proven volume platform things that really work well from a consumer standpoint. And reality is by bringing them in-house, we will save quite a bit of money. We will invest in some packaging capabilities. One of the things that we are realizing is that consumers are shifting through channels to different pack sizes. So if you want to compete in clubs, you need to have specific format types, if you want to have an appeal to certain consumers, you need to invest in what we call multipacks, which are mixed bags of our cookies and crackers. And some of these, we don't have in-house at the moment, and the supply chain is fairly inefficient and quite rigid. And so we will invest in flexibility, bringing in-house some of these propositions.

Finally, one of the things that we're going to touch is the DSD network, which, at this point in time, relies upon, I would say, 4, 5 distribution centers, but 55 branches that allow us to reach the point of sale that we service, in general, I would say, 2, 3 times a week at least. And by automating those centers and by creating automation and AI fulfillment centers, we'll be able to achieve the point of sales in a much faster way and importantly, to reduce our stock and reduce our cost in those branches. So that's really the idea.

I think we can leave it at this for the time being. Thank you again for connecting. I hope we explained that the quarter was pretty good. We're looking forward to the rest of the year. And -- if any other questions, our IR team is available to help you out. Thank you.

Thank you, everyone.

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

If we could just find our seats, we'll kick off our next presentation. We're thrilled to welcome Mondelez International back to the CAGNY stage. Please join me in thanking the company for again [indiscernible] following this presentation.

Let's be careful out there. [indiscernible] special dynamic environment [indiscernible] so we're excited to have a company to go into more detailed. Its initiatives to improve top line growth in North America [indiscernible] CFO. Thanks for being here. Over to you, Dirk.

[indiscernible]. These categories remain resilient and durable even during challenging times [indiscernible]. The average consumer snacking more than 3.5x a day. About half of consumers believe that snacking helps their well-being and about 60% constantly wants to try new flavors and taste combinations. We are confident that we are well positioned to take advantage of these growing trends.

Our global position across our core categories provides a great starting point, and we're well positioned to capture significant headroom. In our categories, we currently hold a clear #1 global position in Biscuits with 17% share in a market that's valued at $128 billion. We have a very close #2 global position in Chocolate with 12.4% share in a market valued at $147 billion. We have the #3 global position in Cakes and Pastries, with 3.9 share in a market value at $100 billion. And the #3 global position in Snack Bars with 8.6% share in a market of nearly $20 billion.

These core snacking categories are continuing to grow at 1.4x faster than other food categories. Despite several headwinds, including a soft U.S. consumer and global chocolate price increases, core snacks per capita consumption stayed flat. There is still huge potential per capita consumption growth over time leading to a forecasted 5% value CAGR for our categories.

Along with our category focus, our geographic footprint represents an important growth driver and competitive advantage. About 40% of our 2025 revenues came from high-growth emerging markets, growing at a CAGR of 13.4% over the last 5 years. At the same time, our developed markets, primarily in Europe and North America delivered a strong 5% revenue growth CAGR over the last 5 years. Our stable of iconic brands possess strong equity among our consumers. In almost every market around the world, they stand out with above-market equity and their strength is increasing.

Oreo stands out particularly with a dominant equity score. So in almost every market around the world, our brands stand out with above market.

All right. In almost every market around the world, our brands still stand out with above-market equity and their strength is increasing. Oreo particularly stands out with a dominant equity score more than 2x higher than the average. The same is true for Cadbury, which is also one of the most valuable global food and beverage brands. Over the past several years, we have significantly invested in scaling our capabilities to accelerate growth. We have achieved critical mass in emerging markets, not only in terms of geography, but also in terms of locally and culturally nuanced relationships and know-how.

Similarly, our localized supply chain enables real consumer connection and speed to market while benefiting from local costs. Our local critical mass and expertise enables strong marketing and sales execution, both in-store and through digital commerce. We also invested in building specialized research and development capabilities focused on next-generation biscuits and chocolate product development. Taken together, these capabilities form the backbone of our growth system.

Behind this strong foundation is perhaps our most compelling strategic advantage, our great people. Our local teams are empowered and incentivized to stay close to our consumers and customers to rapidly adapt to changing local trends. At the same time, our local teams receive robust support from our relatively lean global center. We truly believe that our unique culture represents a critical strategic advantage. The combination of these enduring competitive advantages positions us well for consistent delivery of our long-term algorithm. Our leadership in the attractive and resilient core categories of chocolate, biscuits and baked snacks combined with our truly global footprint offers substantial growth runway.

Our iconic brands drive tremendous consumer loyalty and win-win partnerships with retailers. Our advanced marketing and sales capabilities, alongside growing investments in new channels, make our snacks increasingly visible and accessible, meeting our consumers where they are. Finally, and perhaps most importantly, our winning culture enables us to attract, retain and motivate the very best talent. This virtuous circle gives us strong confidence that we will continue to deliver our long-term growth algorithm, 3% to 5% organic net revenue growth reinvesting half of our gross profit growth, high single-digit adjusted EPS growth and more than $3 billion in free cash flow.

So now let's dive deeper in the North American market, where we have strong plans to strengthen our business and growth trajectory. Our North American business delivered solid growth of about 4% CAGR over the past 5 years, with 2025 net revenue of about $11 billion. U.S. biscuits account for about 63% of revenue with about a 42% share anchored by the iconic Oreo brand, delivering $2 billion in net revenue. Additionally, we have 14 brands with more than $200 million in revenue. And despite an anxious and frugal consumer, our penetration grew by more than 1 million households in 2025. Our strong direct store delivery network drives consistent visibility and availability while ensuring strong partnerships with retailers.

Despite broad economic uncertainty, American consumers still love snacking, and they're still looking for ways to fit their favorite snacks into their daily budgets. Biscuit category penetration remained strong at 94% of households and Mondelez penetration stands at 82%. While penetration is constant because of higher prices, and flat spendable income, purchase frequency is declining slightly. Our brands remain healthy with Oreo significantly increasing its #1 position in consumer awareness and our second brand, Chips Ahoy!, increasing its penetration by approximately 1 percentage point versus prior year. While we have a very strong North American business, it is well known that U.S. consumer behaviors are changing during this period of economic uncertainty.

The 6 key trends we need to address are the following: flat grocery basket sizes unease with current prices, channel shifts in search of greater value, higher income consumers seeking new premium options as well health-conscious functional snacks and increase in on-the-go consumption. With biscuit basket sizes virtually flat over the last 2 years, it is critical that our brands stand out more than others. The first step is increasing our investments to boost share of voice and increase awareness.

In store, we are aiming for a more standout presence and bigger, more exciting activations. And we are continuing to reconfigure our price pack architecture to ensure a broad range of offers to meet critical price points. Second, many consumers are uneasy with the current average price levels of snacks. U.S. wage increases are being outpaced by total snack inflation. To meet consumers' desire for more affordability, we will significantly expand offerings at the right price points.

For example, our portable fresh snack packs priced under $3 will be expanded to more of our brands. We're leveraging our direct store delivery system through its continuous in-store presence to drive greater visibility of affordable offerings via increased displays and we are activating a comprehensive supply chain improvement program to optimize costs. Consumers continue to shift to new channels, looking for better value so we're investing aggressively to expand total distribution points in club, value and convenience stores as well as, of course, e-commerce. Our refreshed price pack architecture will address unmet needs through single-serve variety and club packs. At the same time, we are increasing our capacity for these value packs in our supply chain.

We also have strong plans to meet the evolving needs of higher income cohorts. These consumers increasingly are choosing premium indulgence options. For example, premium indulgence cookies are growing 2.4% in an overall flat total cookie category. To benefit from this trend, we are increasing our investments and ambitions for our premium brands and ranges. For example, our Tate's Bake Shop portfolio offers a strong heritage of high-quality fresh cookie tastes and textures on the East Coast.

In 2026, we're investing significantly in expanding Tate's national awareness and visibility. Similarly, we are continuing to scale premium versions of our core Oreo platform. Oreo Thins is helping to drive growth among adults seeking indulgent evening snacks. We're also launching new premium offerings such as Sargento Cheese Bakes by Nabisco. More consumers increasingly are turning to better-for-use snacking profiles, seeking cleaner labels, fewer ingredients and higher protein content. Growth in these segments continues to outpace the broader biscuits and bars categories. We are prioritizing strategic actions to improve growth in these segments including launching Oreo Zero Sugar and increasing awareness of Oreo gluten-free. We're also scaling GOOD THiNS crackers and driving our healthy belVita morning brand. Additionally, we are significantly expanding our protein bar offerings, mainly under the Perfect Bar, BUILDERS and Zbar brands. Our protein-rich range is already showing healthy double-digit growth.

Finally, On-The-Go consumption is on the rise with 1 out of 4 of every snacks eaten away from home. Consumers are looking for convenience, meal replacement and quick energy or indulgence. Our Oreo Minis or Ritz Bits portfolio is perfectly suited for these occasions, offering fuel, comfort and social connection. Another way we are stepping into these new snacking occasions is with a broad range of new multipacks, portable packages and immediate consumption formats. We're also investing significantly in portable morning snacks like belVita Bites and 7Days Croissants.

To support these 6 growth platforms, we've launched a robust multiyear supply chain capability improvement program designed to upgrade our U.S. biscuits operations, increased capacity on key biscuits, cakes and pastries, modernize our route to market and packaging capabilities and increase our network flexibility. All of this is meant to optimize working capital, increase margins and improve customer service. We expect to realize the benefits of these supply chain enhancements in the beginning of 2027.

In summary, we are strongly committed to improving the performance of our North American business, and we're investing in a robust strategic plan to deliver it. Our plan focuses on accelerating consumer-centric product offerings increasing investments in working media and in-store presence and activating a robust supply chain optimization program. We are already starting to see the first effects with strong growth over the last 3 months in both our largest mass retail partner and in the value chain. All in all, we are confident in the execution capabilities of our team and the long-term prospects of our categories here in North America.

Now let's take a closer look and our plan to drive long-term growth in Europe. Our European business has delivered robust growth of about 8% over the past 5 years with 2025 net revenue of about $15 billion. Mondelez is the #1 snacking player in Europe with about 20% share. We hold the leading position in our core categories in 19 markets, and we have 13 brands with more than $200 billion in net revenue. Chocolate accounts for about half of our European business anchored by the Cadbury and Milka brands each delivering $3 billion in net revenue. Chocolate remains a great category. It is continuing to grow with volume resiliency, posting a CAGR of 7% over the past 5 years.

Within this category, our iconic brands are strong leaders, often representing the taste of the nation. Consumers across Europe are intensely loyal to the chocolate brands they grow upwards, not just Cadbury and Milka but also Côte d'Or in France, in Belgium, Marabou in Sweden, Freia in Norway and so on. These beloved brands represent core cultural touch points. As a result, consumers rarely consider switching brands. Against this strong heritage of brand loyalty and historically low elasticity, the past few years of record cocoa input cost inflation have posed significant challenges.

Let's take a closer look at our key challenges impacting our recent performance and our plans to address them. First, cocoa-led pricing and pack resizing impacted short-term volumes more significantly than expected, although elasticity remains at an acceptable 0.7. Second, pricing tactics among companies less dependent on cocoa unfavorably impacted us in 2025. Third, we saw elevated volume declines in select market segments and geographies. And finally, we found that some price pack innovations did not fully address consumer expectations.

To overcome these challenges, we have identified 5 key strategic actions. Hitting the right price points and increasing connection to our brands, broadening our offerings across chocolate segments, scaling up our premium chocolate, increasing presence in under-indexed channels and strengthening resilience across our cocoa supply chain.

Our performance in chocolate has been strong historically with robust volume growth prior to the recent super cycle of pricing driven by cocoa cost volatility. The value of our business has grown significantly. Today, with last year's cocoa disruption behind us, and the strong actions we're putting in place, we remain confident that the future prospect of the European chocolate market is great. We are continuing to refine our pack formats to deliver the right value to consumers, ensuring that we meet critical price points. To support this enhanced portfolio, we're stepping up investments in working media to grow brand awareness and purchase interest. And at the same time, we are expanding in-store activations and rolling out disruptive innovations with new experiences.

For example, we are rapidly expanding new offerings developed through our partnership with Lotus Bakeries, the Biscoff brand, with the delicious range of co-branded chocolate bars and prolenes combining the unique caramelized crispy Biscoff taste with our iconic brands. Second, we are investing in new formats and offerings with reduced cocoa content to mitigate the impact of elevated commodity costs. We're expanding our bars portfolio while growing our range of tablets filled with nougat, caramel, nuts and fruits and other delicious flavors. We're continuing to grow Choco Bakery with both new innovation and expanded distribution. And in cakes and pastries, our Milka croissants is performing very well, offering consumers a new occasion to enjoy Milka chocolate. We will be handing out the Milka croissant later on. This innovation alone has helped deliver about 1 point of share gain in Europe cakes and pastries.

Third, we are expanding our offerings in the premium chocolate segment where consumers consistently seek innovative indulgence and are willing to pay more for it. The premium segment RSV per kilo is double the RSV per kilo in the mainstream segment. Our Toblerone brand is a strong vehicle for premium growth. We accelerate penetration through creative personalization, celebrations and gifting. Toblerone anchors our strong presence in the world travel retail channel, where we recently ranked #1 in the Advantage survey across all travel retail categories. At the same time, our expanded indulgence range, Milka MMMAX and Cadbury and more is driving growth among consumers seeking a next-level chocolate experience.

Fourth, we are leveraging our full price pack architecture playbook to grow our presence in under-indexed channels. We are particularly expanding category occasions across channels with more convenient on-the-go products at affordable price points. We're also starting to grow our away-from-home channel at an accelerated speed.

The fifth and final pillar of our chocolate growth strategy is improving the resilience and stability of the cocoa supply chain. To more effectively manage risk, we are aiming to improve crop forecasting while maintaining our robust hedging frameworks. Additionally, we are expanding sourcing to additional regions, including Latin America, while helping to scale up best practices in cocoa farming in West Africa. We're also partnering with suppliers to help transition to large-scale farming, while enhancing processing practices and technologies to get more cocoa out of a single beam.

And finally, we are investing in alternative technologies, including cell cultured and fermented cocoa as well as plant-based alternatives. While still early, we view these investments in next-generation cocoa as a strategic insurance policy against traditional sourcing risk.

In recent weeks, cocoa prices have decreased quite rapidly, driven by the prospect of oversupply in the current year. In the short term, this rapid rate of decline is causing a discrepancy between industry coverage and market prices. As a result, we may need to respond to possible competitive action or client disruption, which might require some price reinvestment ahead of our actual pipeline costs. But over the long term, increasing stabilization of cocoa prices will enable a return to normal category health with consumption growth, increased investments and restored profit.

In summary, we are confident in our plans to deliver sustained growth in European chocolate. In recent months, we have seen a stabilization of our chocolate performance, underpinned by increased investments and hitting the right price points in specific market segments. At the same time, we are expanding into new chocolate segments, adjacencies and under-indexed channels. And we are executing against a robust plan to ensure long-term supply chain stability and resiliency. We remain confident that we have the right brands and the right playbook to deliver sustained growth.

With that, I'll turn the microphone over to Luca to walk you through our plans for growth in emerging markets and wrap up with an update on our cash generation and capital allocation priorities. Luca?

Hello, everyone, and thank you, Dirk. Today, I will discuss our opportunities and capabilities as well as initiatives to build upon what is already a strong emerging market business. And I'll close by covering cash generation and capital allocation.

Today, our emerging market represents a strong $15 billion-plus business with fast growth, superior scale, strong capabilities and significant white space runway. Emerging market total snacking, including our core categories, is a $350 billion market and is expected to achieve or to reach $530 billion by 2030. Emerging market growth has significantly outpaced developed growth over the past 5 years. This trend is expected to continue. We compounded annual growth of 9% over the next 5 years, fueled by robust disposable income growth, both from a widening middle class and favorable demographics, including younger population and urbanization.

Our winning recipe in emerging markets revolves around the strong unmatched competitive position, underpinned by a local first operating model. This position includes highly aspirational industry-leading brands supported by significant marketing investments made available both at affordable price points and in more premium forms, well-established route-to-market capabilities with critical mass and scale. Advantaged and localized supply chains that are built to optimize efficiencies in both cost and service delivery and strong local market expertise with an entrepreneurial spirit and approach to growth.

We believe these competitive advantages will help us deliver strong results over the next 5 years. We expect sustained volume-led growth in the mid- to high single digits, increasing scale in China, India, Brazil and Mexico, which represent about $7 billion of revenue today and strong presence in the next wave of emerging growth markets, including Southeast Asia, sub-Saharan Africa, the Western Andean region and Central America. We remain focused on both establishing and expanding our scale presence in the core categories of biscuit, chocolate and cakes and pastries, leveraging clear playbooks, including bolt-on acquisitions. Our aspiration is to be the category leaders across emerging markets.

Now let's take a closer look at our top 4 markets, which represent about half of our revenue in emerging markets with growth of low double digits over the past 5 years. Let's start with China. China is, for us, a $2 billion business with a history of attractive growth, strong market position and favorable growth ahead of market. We have a great local team that drives growth through superior brands like Oreo, distribution gains and investing in both marketing and supply chain capabilities. As an example, Oreo share is about 18% in China biscuit, the highest share in the world for Oreo, a clear aspiration for across all our markets.

We have 3 clear initiatives in China to drive volume led driven growth over the next 5 years. This includes continuing to accelerate our availability in all physical channel, winning digital commerce by strengthening social commerce and quick commerce with right packs and last mile capabilities and scaling our cakes and pastries business through our recent Evirth acquisition and continued innovation with an ambition to $1 billion revenue by 2030. This ambition is underpinned by a massive package cakes and pastries category in China. That is about $15 billion and growing. The category remains highly fragmented, and there is significant opportunity for us in branding and innovation.

Let's double-click on our offline distribution opportunities. There is a meaningful runway as we currently cover 3 million stores with an addressable universe of $6 million. We plan to add more than 60,000 stores per year as we broaden our coverage through wholesalers and eB2B. We are focused on increasing assortment with low unit price offerings and digitization while capturing the growing channel opportunities within the club and snack chains.

Now over to India, which represents one of our most compelling opportunities. India is a $1.7 billion revenue market with an impressive track record of growth and cash generation. This performance is underpinned by a talented employee base of over 1,000 and 4 localized manufacturing facilities, catering to about 4.5 million stores. Like China, India has tremendous runway and favorable demographics, significant per capita headroom and long-term growth potential. Our plans to drive continued growth in India center around expanding reach of our route to market, scaling our biscuit business through premium leadership, including Oreo and Biscoff. And recruiting new consumers and occasions with continued innovation led by chocolate, but also in biscuits, and cakes and pastries.

Focusing on our first initiative of route-to-market expansion, we have strong direct coverage in India at 2.5 million stores. However, there is a vast runway given more than 9 million stores in total. We expect to add 100,000 stores per year by tapping into advanced store analytics and machine learning in order to optimize orders on a store-by-store basis. We are also moving quickly to address the emerging quick commerce and away from home opportunities, and we continue our rapid expansion of Visicoolers that provide a unique and advantage in store presence to showcase our great leading products such as Cadbury Daily Milk and Silk.

Moving from EMEA to Latin America, starting with Brazil, which represents our largest and most diversified emerging markets with strong multi-category leadership. Brazil is for us a $1.8 billion business with a leading position in chocolate, biscuits, and gum and candy alongside vast opportunities in cakes and pastries. It has a large young population, consistent economic growth and significant room for per capita consumption increases in both chocolate and biscuits. The growth agenda in Brazil includes bolstering iconic brands like Lacta and Oreo, expanding distribution and penetration and building out a scaled cakes and pastry platform.

Focusing on Lacta and Oreo growth for a moment. Today, we have a leading position in Brazil chocolate behind the strength of our Lacta brand, which is #1 in the market. However, substantial opportunities lie ahead. To broaden our presence by further elevating taste profiles, covering a wider range of price points and expanding on shelf presence through new occasions. Brazil is also an Oreo priority market as we build awareness and localize appeal through tailor marketing and taste profiles to drive numerical distribution and assortment.

The last key priority market is Mexico. Mexico is a strong franchise with attractive long-term growth fundamentals and critical mass with the recent addition of the Ricolino business. Our plans to accelerate growth in Mexico are grounded in solidifying our biscuit presence through Oreo expansion, growing traditional trade presence on recently acquired BSD House and building out a scaled chocolate platform, while continuing to bolster our great gum and candy brand portfolio.

Our plans to drive a leading biscuit position in Oreo are rooted in substantial brand investments to highlight the cultural relevance of the brand, key consumption occasions and superior taste credentials. Whether it is China, India, Brazil or Mexico, the outcomes of our strategic initiatives should be consistent, driving deeper and digitized distribution in traditional and modern trade. Increasing brand penetration to establish or further consolidated leadership positions, innovating around new consumer occasions and building out multi-category scale with leading positions in chocolate, biscuits, cakes and pastries, and gum and candy.

Altogether, we believe that our emerging markets will be a sustainable volume-led growth engine for years to come. We have iconic global and local brands that are continuing to grow and innovate. Our route-to-market and supply chain scale is unrivaled. Our 4 priority markets of China, India, Brazil and Mexico are large with clear playbooks, long growth runways and plans to win. And these components will provide confidence that we can deliver mid- to high single-digit organic net revenue growth, led by volumes with attractive profitability.

To close our presentation, I'll share a few thoughts with respect to cash generation, capital allocation and balance sheet. We remain committed to increasing free cash flow through strong profit dollar growth and cash conversion. Although record cocoa inflation put pressure on 2025 free cash flow, we still managed to deliver strong results. Moving forward, as we drive our growth agenda that you heard from both developed and emerging markets, coupled with more opportunities to streamline this inventory. We are targeting a $4 billion plus in free cash flow generation.

Moving to capital return. We continue to prioritize return of capital to shareholders. This includes double-digit dividend growth in 9 of the last 10 years and approximately $15 billion in share repurchase which has resulted in nearly a 20% reduction in each account. Altogether, we have returned more than $30 billion over the past 8 years.

Bolt-on acquisitions are the other pillar of our capital allocation strategies. We have made 10 such acquisitions since 2018, with the vast majority delivering strong growth and value. Specifically, key acquisitions in cakes and pastries like Chipita and Give & Go have grown since acquisition, high single digit and low double digits, respectively. Others like Tate's and Processed Snacks have grown mid-teens and our latest acquisition Evirth has grown in the low 20s.

We evaluate our acquisitions on numerous metrics, including ROI, cash-on-cash return, but at a high level, we believe we have been successful at strengthening our core, expanding into attractive adjacencies, while realizing revenue and value accretion on or above plan in most cases. While we have delivered significant value through capital return on M&A, we continue to be very focused on maintaining a strong balance sheet and remain in a solid position.

Turning to our '26 outlook. There is no change from what we discussed 2 weeks ago. We remain optimistic for 2027 with strong EPS growth driven by improving performance in developed markets, continued strong growth in emerging markets, productivities across supply chain and SG&A and continued stabilization of cocoa.

To close, we believe the company remains well positioned to generate significant and lasting value. Our long-term fundamentals remain strong, categories, geography brands and capital allocations. We have clear action plans to drive improved volumes and return our developed markets to the normal cadence of profitable growth while continuing to maintain the momentum in our emerging markets business.

Thank you all for your time.

We've got time for probably one and we're going to go to the break out. We're going to go to the breakout then.

Good afternoon, and welcome to the Mondelez International 2025 Fourth Quarter and Full Year Earnings Question-and-Answer session.

[Operator Instructions]

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-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, the company provides 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 earning 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.

Dirk, maybe to start us off. Clearly, significant interest in, obviously, the chocolate category and how the presides 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 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, seen the rather important price increases that took place that the category overall has shown a lot of resilience despite all the volatility. In that, we had a playbook for our chocolate strategy, which was largely to price -- list price or do revenue growth management largely through price pack architecture.

And we've executed well against that chocolate playbook in '25. 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, we have done quite well. And also in Europe, in about half of the market, things played out exactly as expected. However, I would say, in the more northern markets in Europe, Germany, the Nordics, the U.K., we saw a higher-than-expected elasticity. And so we have to take adjustments in '26. We have learned that certain price points are very important. And so we have adjusted already to put our products at the right price point. Some of the PPA worked, others didn't. So we are adjusting also some of the PPA we have in the market.

We are planning to increase our investments behind our brand because in this year, our cocoa coverage is at a better cost than it was in '25 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 the quantity of consumption did. We are also investing in price. As I mentioned, to hit those right price points and as well in new PPA. We're going to push hard on innovation. We have our collaboration with Biscoff which was very successful in '25, but it really is going to go to the next level in '26.

So I think we've got a very strong innovation agenda led by Biscoff with a number of other things in Europe. And then we are going to some important activations in store. However, as you probably have seen in the last 2 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 have an industry or the largest players in industry that already are covered for '26 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 '26.

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 '27. As I said, we've already covered for '26. There's not a lot we can do anymore, but '27 certainly will benefit from this. So we see our chocolate business in '27 increase its margin in a considerable way.

As it relates to '26, like I said, we're going to remain very agile. We're going to do all the things that we set and then make sure we enter '27 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, you can arrange and 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? And what are your updated thoughts on sort of the cocoa environment, if you will, from here.

Thank you, Andrew. So before commenting on the '26 guidance, maybe a brief comment about how we ended the year. And I think, as we said, we are quite happy with our emerging markets momentum. And quite frankly, also happy because we saw sequential improvement in developed markets, albeit we are not fully there yet. On '26, the guiding principle of the guidance was to be prudent, particularly as we see some short-term pressure points like in the U.S. You know that the biscuits category is still subdued. And 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 plan 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 adjustments and flexibility depending on how competition will react to those prices and where cocoa eventually will stabilize.

As we said, our pipeline cost for 26 is determined at this point in time, and it is clearly at higher than current cocoa spot. So this is something that we hadn't anticipated before. And as we said, we 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 marketplace. And that's one of the reasons why we are investing substantially behind our brands. And hopefully, the goal is to have 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 by reality is that in our minds, Cocoa as it stands out is a fatter presentation of supply and demand. That's why we believe this level is important for us to realize as we look at profitability, particularly going forward into 2017 and beyond.

We'll now move on to Peter Galbo with Bank of America.

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, in the first quarter. But maybe you can just talk us through a bit more the cost phasing on cocoa to '26 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 '26. As you might imagine, at this level, we are not going to price cocoa further necessarily, 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 '25.

And albeit the pipeline cost is coming down in we need to keep a level of pricing that is pretty much the same as we had in '25. 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 costs that we see in 2026 versus how we exited the year in 2025. And that is a onetime adjustment that takes place on the inventory, and that is causing in the first 2 quarters, but predominantly in Q1, an impact that is $0.5 billion. And that gives you an idea of the dislocation of cost that we see throughout the 2 years.

So in terms of top line, I would say, in chocolate specifically, flat pricing in terms of volume, some implications as the risk of a disruption 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 phasing.

In all of these investments in A&C is equally spaced throughout the quarter, so no material changes, I would say, quarter-on-quarter in absolute terms of our A&C investment.

Great. And Dirk, maybe to pivot to North America, I mean I know it continues to kind of be a difficult operating environment. 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 packing category. I would just love to get your perspective on the North America market where you stand on that to be? And again, on the pricing front, kind of what the go-forward actions might look like there.

Okay, Peter. Well, first of all, I think the thing in North America is the consumer. The consumer confidence is near historic low. 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 about job security -- so what we are seeing is that the average shopping basket of the consumer in the U.S., whether you're in the higher or in the lower social economic classes has not increased for the last 2, 3 years.

Within that basket, they spent more money on the basics, milk, meat, bread and so on. And as a consequence, snacking is being affected. And you can see that in all of the snacking categories. You talked about the K-shaped economy. There is clearly a group of consumers, the more wealthy consumers that do spend differently in the sense that you can see that things like premium and better for you are growing within the snacking market, also some under go -- but the bulk of the consumers, they are really into value seeking.

So what they do is they look for lower unit prices. They look for deals. If they have a bit more money, they will look for build packs or multipacks and they also shift channels in -- from food and mass into value, club and online. As you said, the biscuit category is showing a soft volume. It was the last 3 months, it's down 4% in volume, 3% for the year, '25.

So overall, we don't necessarily see an immediate change as it relates to where the consumer is. And as a consequence, we need to adapt to the circumstances. So what we do, we are going to invest more to drive awareness. We see the same as in chocolate in Europe, penetration of our brands is not decreasing or sometimes just a little bit. It's largely the frequency and the quantity but that is being affected.

So we're going to invest in improving the frequency and the quantity bot. We're going to use PPA to address some of the affordability. We are expanding in some of these channels that I was mentioning. We are under-indexed, so we are pushing harder and we are increasing our market share. And we have offerings that are doing well. I'm thinking about the perfect bar, which is a protein offer or it dates a premium biscuit or a premium in chocolate or builders bar in the cliff range, which is also protein, they are all doing well, growing double digits.

So we're going to push harder on those brands. And then lastly, I would say, we are activating a supply chain program, which is meant to run over the next 3, 4 years. It's largely to modernize our operations, but it also will improve our efficiency and our costs. We will give us more network flexibility.

So overall, I would say we are entering a year in North America, we are stronger in the sense that we will do more investments that we've understood better what works and what doesn't work and that we have quite an extensive plan on things we want to do.

As it relates to pricing itself, we started off 25%, and we're quite aggressive on promotions and on deals, working on price. I have to say it didn't give us a return on our investment. So in the second half of '25, we changed our strategy. We did a lot less promotion and pricing. As a consequence, our price realization went up -- and I would say, overall, our P&L improved in North America, but we lost some market share because our volume performance wasn't the same.

But overall, I would say that probably it was better for us. So the way forward for us is better activations, interest to consumer more, make sure that they feel compelled to rice by snacks, 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.

We'll now move on to Megan Clapp with Morgan Stanley.

I wanted to just maybe Luca follow up on the answer to Pete's first question just to make sure I fully understand kind of the message you're talking about is there are a lot of moving parts with cocoa and pricing. So when you talk about flat chocolate pricing in '26, that's the expectation, cocoa should be down, I think, significantly. But should we think about the net price cost relationship embedded in the guide is roughly neutral to the year because of the inventory accounting and the elevated hedges flowing through? Or is it still a net positive? I'm just trying to kind of understand the dynamics there.

And then is the idea that if pricing can kind of stabilize in '26, cocoa resets lower in '27. So that's really when the real profit recovery starts to show up.

Yes. 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 in general, used to 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. And then just to come back to the organic sales outlook, 0% to 2%. You've got some nice momentum in emerging markets, I think, finished the year around high single digits. So is that the expectation for 2026 that emerging markets can kind of be in that high single-digit range? And if so, I think mathematically would imply kind of developed markets decline in the low to mid-single-digit range. So is that math fair? And just any way to kind of think about the U.S. versus Europe and relation to that?

The emerging markets will continue growing. And hopefully, they will do even better than what is embedded, quite frankly, in the guidance. We are happy with the momentum we are seeing in both Latin America and EMEA now -- in both segments, we have a meaningful presence in chocolate. And if you look at how much we price -- that contribution is not going to be there for 2026.

But on the flip side, there should be less elasticity now, I would say, majority of the volume declines that you see, particularly in EMEA, but also in Latin America are due to PPA. So the volume momentum is really there when you take out the PPA impact.

The idea for 2026 is again, to grow this market pretty much at the same level, but there will be a little bit less contribution from pricing and more contribution from volume mix.

We'll now move on to Michael Lavery with Piper Sandler.

You touched on the advertising spend of the tailwind in 4Q, but you've talked about stepping up investments next year. Can you give a sense of order of magnitude? And would 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 SG&A line, it was clearly down year-on-year, '25 on '24 . One of the drivers there is continued over savings, but we had to a little bit into ASC 2. We said many times that we didn't touch the working media line, but we touch the nonworking media predominantly. The idea is to continue with lower nonworking media, but to clearly step up in the working part. And if you look over a couple of years, between '24 and '26, we will more than recover what we have to pull back in '25 into the overall line.

On the other part of SG&A, go the overhead part, we will continue with cost savings, but we will have to step up a little bit the annual incentive plan. So all in all, the investments in AMC over 2 years. I think it's going to be substantial. If you take '24 to '26, 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 now 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 the simple answer there is that in LatAm, there is Argentina, which went through quite a bit of economic turmoil and there were material issues in the country. And on top of that, we decided to protect working capital and not to extend payment terms to anybody, and we did quite, I believe, a good work in keeping the business in accordance to our operating principles that are protect cash in Argentina and bringing the cash flow. That's what we did. When you strip out Argentina and you look around Clearly, Brazil got a little bit impacted by elasticity in chocolate, but Brazil is 1 of the best-performing markets that we have top and bottom line. They did an amazing job in terms of 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. And so the 2 major markets LatAm are doing quite well. It is Argentina masking a little bit the performance of the region.

We'll now move on to Chris Carey with Wells Fargo Securities.

I wanted to start with this comment on the company's goal to demonstrate 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 or comps in Europe get quite a bit easier into the back half of the year. You mentioned the piece with PPA impacting emerging market volumes, a touch, and elasticity is getting better. Just give us a sense of what significant volume trajectory improvement looks like and contextualizing a bit where that's coming from and why?

Yes. I mean, if I go through the regions, we clearly expect EMEA overall, if you look at how we're doing in India, in Australia, China, coming back. So we see EMEA as being a big source of volume growth for us. So that's certainly a region that -- where we will see some good performance. If you then look to Latin America, as Luca was saying, there also, we think that it's going to be quite a good year for us.

North America, as I was explaining, the consumer confidence is in there, the biscuit category is soft. We expect that the the volume decline that you see in the category of 4% will ease, but we are not exactly counting on volume growth in North America. And then in Europe, what I expect there is that First of all, in our other categories, we had a pretty good year already in '25. We expect that to continue and talking about biscuits, cases and bases and meals.

And in chocolate, the price increase as we discussed, is going to ease. In fact, we are readjusting some of our pricing in certain markets. So all that we expect also will have a positive effect of volumes as compared to '25. So hopefully, that gives you an idea 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 gradually to be better and also the lapping effect will help us over the year.

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 2016, the rebasing of media, the rebasing of comp, the investments into channel expansion strategy 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 lower cocoa price and more operating leverage to SG&A? Or is there multiyear investments that we'll 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 get a bit more context on that.

Yes. So as we explained. So in 2016, we are taking a step forward and significantly increase our investment in working media as compared to 25%. Taking into account that 25%, we took a step down largely in nonworking media, but also a little bit in working media. For 2017, 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. And 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. So that's our thinking. As it relates to margins, we feel that overall, from a commodity perspective that things will ease, particularly in cocoa. And so we can see a significant uplift in our chocolate margins in which will be divided by reinvesting part of it and part flowing to the bottom line. And so we will -- we are aiming for a strong EPS growth in 2017. But at the same time, we want to keep on investing in our brands.

So we are not planning to flow everything to the bottom line if that would be the thinking.

Thank you all. Appreciate it.

And we'll go next to David Palmer with Evercore ISI.

Sort of a big picture question on European chocolate in your division there. I wonder how are you thinking about the path to a profitability recovery there to sort of a pre-25 levels that we saw for a few years, if you think that is even the norm that where we saw profitability there. And I wonder with prices having come down, is 27% the beginning of a recovery.

And what is there a path back to pre-25 levels of profitability? And how do you think that would play out? And I have a follow-up.

So the IDA, 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. And quite frankly, -- we still have to invest quite a bit of AMC and expand both in the developed part of Europe but also in the developing part of Europe.

We still have plenty of opportunities in terms of price point, channel segment within chocolate and our goal is to grow the chocolate business in Europe after the meaningful price increases we have taken in '25 if cocoa ranges at around 3,000, our goal is to get into '27 with a much improved situation. and to really be able to get back to the all profit pool. And if we have to make some selective price investments, we will make them. I think if you look at the way the '26 plan is structured in Europe, there are more promotions. We are going to offer more value to some of the consumers. And all in all, I think while '26 can be a new base, 27% 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 will 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, as we said a couple of times already.

We'll now move on to Scott Marks with Jefferies.

First 1 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. So 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.

Yes. Well, we model it out every quarter basically based on the latest information. And we have noted the fact that -- the price of some of it has come down. We have noted that there is a oral being approved -- we've taken into account the estimates as it relates to that. And I have to say that up to our opinion that will not significantly change the estimates that we've had so far.

And the estimates we have 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 reduction is relatively benign that we see. But if we expand 10 year, and we take an adoption rate in the U.S., which would be somewhere between 10% and 20%. And 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 10 years.

So at this stage, I can't say that we feel that it is having a major impact on our business.

I appreciate the color there. Maybe next question for me. You made some comments in the prepared remarks about continued investments in cocoa growing 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 kind of the traditional cocoa-growing regions?

Yes. I think it's just 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, Indonesia, -- in Latin America, the countries that are stepping up are largely Ecuador and Brazil, different farming models.

In Brazil, we see some large farms coming up, and we we are having long-term agreements with them to suppliers. And then in Ecuador, it's smaller farmers, but who are getting together, and we see those countries significantly increase their output. And so over time, that might not give the best cocoa price, but we think the current price that we see should be sustainable, but it will significantly decrease the risk of events like a bad crop or a disease that affects the crop in a country that, that is going to have a big impact on the overall cocoa market as we currently see whereby Ghana and Ivory Coast have close to 60%, 65% of the global cocoa supply.

The other one I would say that is worthwhile is that, I think over time, there will be more and more lab-grown cocoa that will become available, not GMO but lab grown, and we think that there will be an interest from the European Commission and the U.S. government to approve that sort of cocoa. Why? Because it has significant beneficial effect in the sense that all the negatives that surround the Cocoa supply chain would not be there as it relates to climate and other social effects.

So in that sense, that's also a direction that we are investing in and supporting.

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're planning to tackle it. We'll also go deeper in our North American situation and what our plans are there. And we will cover the emerging markets and, of course, our financial outlook.

So we're looking forward to see you there to spend some more time explaining our business to you. Thank you.

Thank you, everyone.

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

Good afternoon, and welcome to the Mondelez International 2025 Third Quarter Earnings Question-and-Answer session. [Operator Instructions]

On today's call are Dirk Van de Put, Chairman and CEO; Luca Zaramella, 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-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, 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.

Dirk, maybe to start off, I was hoping you could talk a bit more in depth about Europe, how you're seeing things as you sort of close the year and into next, particularly when it comes to pricing that's been landed and movements sort of that you deem that you need to make, as you mentioned, price gap management in certain European markets.

Yes, Andrew. So I would say, if I start with the consumer in Europe, I would say the consumer confidence remains, in general, stable, unchanged versus the last quarter. If I look at our biscuits, cakes and pastries and meals business, they're all performing well, where we have share growth and volume/mix growth. And if I look at it from an overall euro perspective, I would say the category is performing generally in line -- the chocolate categories in general, in line with expectations.

We've seen the cocoa situation. As you know, we had to do quite substantial price increases in the order of about 30%. And so broadly speaking, I would say the chocolate business is fine, but we are clearly seeing a couple of pockets of pressure that we need to address. These are caused sometimes by competitive situations where our competitors did not increase their pricing as much as we did, largely because they are private companies.

And the other thing I would say is that in certain markets, the retailers also suddenly took more margin than they have historically done. So we're fixing these problems. I wouldn't say it's a structural issue, but we need to be -- deal with, and that has caused a difference in what we were expecting for this quarter in Europe.

I would also mention that as you look at the European situation, there was a heatwave in July, which has affected our volumes, plus we have done some significant downsizing also, which affects our volumes. The two markets where we have these situations are the U.K. and Germany. We are starting to see a reaction to the repositioning of the price points in certain areas of the portfolio that we have done. And so we are seeing the volume and the share improve as a consequence of that. We've also seen that competition has started to price recently. So that also will help the situation going forward.

Overall, I would say, as I see how the pricing is landing in Europe, elasticity is around 0.7, 0.8, it's higher than we would have expected where -- our thinking was more like 0.4, 0.5. And so we are taking on top of what I already explained to a number of other actions in the sense that we are innovating with new flavors and new formats. We are investing more in A&C. We're driving the seasonals very hard. We're working on promo effectiveness because that's also not playing out sometimes the way we would have expected. And largely our main focus is on hitting the right price points where in certain cases, like on our 300-gram range in chocolate, we passed 2 key price points, and that was probably a little bit more than the consumer can accept at the moment.

We are, of course, accompanying that with a lot of productivity and cost savings. But overall, I would say, seen the fact that this was the heaviest cocoa cost that we would have in the year from here going forward, we expect a significant improvement. We expect to see a significant improvement in Europe. I hope that helps, Andrew.

Yes, really thorough. Really appreciate that. And I guess, lastly, with respect to guidance, maybe you could talk briefly about the implied Q4 guidance change, just as I would assume, cocoa is largely been locked in at this point.

And then what's the key reason behind, I guess, the cut? And then as it relates to '26, you make reference to being an algorithm and EPS. I was hoping you could add a bit more color on your confidence around this. And I guess, more importantly, the sort of the key puts and takes that we should think about when thinking about organic sales growth next year in light of the planned investments that you're making and some of the elasticity concerns?

Thank you, Andrew. I will start by saying that on the 25% guidance we had a series of impacts that clearly, we weren't anticipating at the time of us giving guidance for 2025. The three main ones are the tariffs and related uncertainty affecting the overall consumer confidence. The second one is the material destocking that happened in the U.S. due to retailers lowering their working capital. And the third one clearly was the unprecedented heatwave in Europe. .

Those elements lowered already, when we talked to you for Q2, our flexibility for the year. With incremental softening of the U.S. biscuit market at the end of Q3, and we saw the market declining in volume terms a little bit more than the previous quarters, and the higher chocolate elasticities in Europe. Clearly, that caused a volume/mix impact that at this point in time, we don't want to offset by cutting costs and potential growth into next year.

I think importantly, in the prepared remarks, we give you a sense of all the actions we are taking to improve the volume trend that we see specifically in the U.S. and in Europe. And importantly, we have taken additional pricing in the U.S. We have confidence in all the plants that we are putting in place around seasonals. I think we call out clear elements of growth in the U.S. like Tate's, the Ventures and Give and Go. And I think when you really look at what the new guidance means in terms of implied Q4 you see a step-up in the top line. 4 is year-to-date organic net revenue growth, we are guiding you at more than 4. And importantly, last year, below the line, we had an $0.08 impact in the tax line that is nonrecurring this year.

And so the implied EPS growth will translate in an over delivery compared to last year of the EBIT that will be quite good in terms of growth.

Obviously, as far as '26 goes, it is a little bit premature to put all the pieces together for you at this point in time. We are literally going through the plants. And you might imagine that the big question we are asking ourselves is, what cocoa level are we going to have into next year? As I mentioned a few times, we are well protected and covered. But reality is we have put in place a series of coverage strategies that would allow us to participate cocoa further potential declines. And so we need to understand a little bit better, and we will have a better sense of what the real cocoa impact is going to be for next year. It's certainly going to be positive even if cocoa is trading at a level that is quite higher compared to historical norms.

We feel quite good about the plans we have been reviewing with all the business units in terms of chocolate. We are clearly optimizing GP dollars into next year, in line with our guidelines and how we want to manage the business. The commercial approach to chocolate is quite good. We are doubling down on things that are working really well for us. And obviously, we want to build share, drive consumer value and protecting penetration.

And I don't have to tell you again that we have big opportunities in all emerging markets. I mean, adjacencies like cakes and pasteries [indiscernible] bar and premium. So cocoa will be deflationary in 26, and we wanted you to hear that our goal is clear in terms of EPS growth for next year. And so we are really targeting a high single-digit EPS growth for 2026 even after the material investments that we're going to put into the business to really protect the long-term growth of our categories.

We'll move next to Peter Galbo with Bank of America.

Dirk, I was hoping maybe you could give us a similar walk around the U.S. in terms of the path forward maybe to getting back to growth? I know you gave kind of a very detailed answer around Europe, but would appreciate kind of a similar level of detail on the U.S., please.

Yes, yes. Well, so as Luca already said, we saw the category slowing down more in the last quarter versus what we saw in the first half, which is obviously not good. If you look at it, the volume was down 4% versus 2.8% average year-to-date. That is driven obviously by a consumer that is very concerned in general about the economy, frustrated with the pricing they're seeing. And we're seeing the same behavior that we've been seeing before in the sense that they are really seeking for value, that means different things for the lower-income consumers, that means going to smaller packs at the right price points. For the higher income consumer that usually goes for bigger packs and buying when they're own promotion.

We see that the basket size of the consumer is really not increasing over the last 3 years. And as you can imagine, as prices have gone up, they're being more squeezed on what they can buy within that basket. And they are tending to focus on what are the essentials. And as a consequence, snacking categories are not that essential for them, and we're seeing that in our volumes.

And on top of that, promos are not necessarily delivering the expected ROI. What else are they doing? They're shifting channels and format. So we see a big shift from food and mass to value, club and online. We see more multipacks being sold.

There's also some good news in the sense that some of the premium segments are doing well, like take for us is doing well and some of the better-for-you offerings, particularly protein related, that is for us a Builder's Bar under the Clif range, or a Perfect bar. They're doing well. We have You, which is our vegan chocolate is doing well. So we can see that there are areas that are connecting with the consumer for instance, also a Give and Go is doing quite well.

The main concern is the U.S. biscuits category. And of course, the government shop shutdown going forward will not help with the confidence of the consumer.

If I look at the OI, the reason why the OI is negative in North America is largely driven also by cocoa. It might not immediately be clear, but Oreo or chips or Tate's also have quite a bit of chocolate in them. And so they are affected by them. At the moment, it's not easy to price in the U.S.

So what are we doing about all this is the big question, of course. I would say in the first place, the one thing that's important to realize is that our presence in those channels that are benefiting, club, value and e-commerce is good, but we don't have the same market share as we have in food and mass. So we've been working very hard to increase our presence there over the past more than 1 year. And every quarter, our market share in those channels is increasing, and we will continue to do so. That means we have to adapt our PPA. We have to increase the number of displays we have in these channels, and we need to do some route-to-market investments.

The other channel that we are pushing very hard is on the go. And on the go, you can reach the consumer on the go with multipacks. If you think about a big multipack, and mom has to put a snack in the lunch basket, if you buy a multipack, that can cover several days or more than a week. And so we see a big opportunity in multipacks. Of course, we are working very hard on C stores because that's the other big area where on the go is happening.

Overall, price points are critical, so we're doing a lot of RGM work on hitting the right price points. And that means really PPA at both ends of the spectrum. On one hand, the lower price. And so we've been talking about in previous calls that we need to get really to that $3 price point with some of our packs and then also the big pack as I was starting about before.

The other thing, as I said, better for you, particularly protein is doing well. So we're driving our protein range quite hard. We're seeing 20%-plus growth there in Perfect bar and in Builders. So that is something that we will continue to double down on.

And then as it relates to premium, particularly brands like Tate's, belVita and You are the other ones that we are going to double down on. As it relates to health and wellness, we also see a little bit of movement in overall health and wellness. We are working on expanding the Zero Oreo range and also the gluten-free Oreo and Tate's range.

So maybe the last thing I would mention there on how we are trying to get back to growth is that we are studying very carefully how our promotions are working, and we've seen that we have to shift the way we do certain promotions. We need a lot more activation, not just a price decrease, but activation featuring special events, things like that.

So those -- all those activities combined at this stage, make us believe that we can get to positive growth next year in U.S.

Great. And Luca, maybe just on the prior question, maybe a bit more directly, you seem to have the visibility on, on-algorithm EPS growth for next year. I mean, should we be expecting that on top line, you'd have some visibility to algorithm top line, even if it's at the low end, just I know it's a bit more of a direct question, but would be helpful just from a modeling standpoint.

As I said, Peter, we need to put together our thinking at this point in time on what type of cocoa levels we are going to have into 2026. As I mentioned, we are well protected, but should cocoa go even lower, we will take advantage of that.

I think the way you have to think about the top line is in three key components. One, it is Europe, where clearly, chocolate pricing might be deflationary. But as a consequence, the elasticity that we saw on the way up, should happen on the way down as well. And importantly, I think we will be seeing volume growth in the chocolate business for 2026 in Europe.

The other component is developing markets where I think you're going to see continuous growth, volume and price-driven at this point in time. And the third component is really the U.S. where we are not projecting an improvement of the market situation, but where we will have material benefits coming out of channel expansion, us investing more in our brands and importantly, going after things that are really working well for us and doubling down on those. I think in the prepared remarks, for instance, we mentioned Oreo with Reese's.

So it's really impossible for us at this point in time to give you exactly the range of top line growth of 2026. But rest assured that we are driving for volume growth in chocolate in Europe, we are going to restore top line and bottom line in the U.S. And third, emerging markets will continue growing for us.

We'll move next to David Palmer with Evercore ISI.

I just want to circle back to Europe. You mentioned the price elasticity up to 0.7 or so. And you also talked about there's some price gap issues and some competitors that have lagged on pricing. I'm curious how you're thinking about the outlook for price elasticity going forward, maybe some of the gives and takes since we don't deal with that market quite as much. One scenario would be that you're making adjustments right now. And that price elasticity could come back down.

And then you mentioned the historically high prices, and we've seen categories where there's a little bit of fatigue after a series of prices and that price elasticity can continue to be stubborn and rising. So I wanted to get your sense on that. And I have a quick follow-up.

Yes. Well, the type of price increases we had to implement our kind of unprecedented if you think about it. We are players that are largely in the tablet market. We are also in the other segments of chocolate, which is gifting or [indiscernible] lines. But largely tablet players, which has the biggest content of cocoa. So as a consequence, we had to do, as I said before, about a 30% price increase. And historically, the elasticity has been around 0.4, 0.5. It is higher, as I said, 0.7, 0.8, but that's not yet dramatic in the scheme of things, I would say that's pretty good as long as you're below 1, I don't think there's many categories that would have such a limited price elasticity.

But the main thing is, if you think about a 30% price increase on a 300-gram chocolate bar, for instance, you start to really get into quite high euros per bar. And I think as an example, that one, that's the one where we believe that we need to do something going forward.

That doesn't necessarily mean elasticity needs to improve. What we need to do is get that bar to a price point, which is much more acceptable for the consumer. Short term, we can do that by reducing the price. Long term, we have to see if we reduce it to for instance, a 250-gram bar or something like that. So it is really adapting to very specific circumstances where we knew that we were taking a risk by passing certain price points, and in some cases, that worked quite well. In other cases, it didn't turn out so well. So that's one movement we are doing right now.

That movement is helped a little bit by some of the more benign cocoa environment. I wouldn't say cocoa is getting extremely cheap, but it's still much higher than it used to be, but at least it's come down from the high that we saw during this year.

The other one is probably that we need to adapt certain formats and look at where our competition is placed and make sure that we are in a much more competitive level. That would be the second big movement that we need to make.

So these two movements, we believe, will solve some of the issues that we're seeing. And again, I want to emphasize that, yes, things are different than we expected, but it's not that they're often a major way of what we would have expected to happen in Europe, but we do need to make a number of adjustments of which I just gave you two.

And when you look at your emerging markets, do you -- I don't want to make a big deal of the type of price elasticities that it looked like in the third quarter, they were still not bad. Your volume was down, the price elasticity would be sub-0.5, even if you take that quarter in isolation. But are you seeing certain markets where you're seeing a little bit of fatigue or maybe price gap issues? Or is that is that playing out just as you would think there, and I'll pass it on.

Yes. I would say, in the emerging markets, I would say it's playing out largely the way that we would expect. The first thing I would say is there is more downsizing that has an effect on our volume.

So if you think about it, our emerging markets, volume was down 4.7%. And first of all, Argentina, where everything has been going on. I probably assume that you're aware of that. So there, we saw hyperinflation, very negative macros and so our volumes were significantly affected in the quarter in Argentina. I guess with the recent elections that will start to improve going forward.

And then the other big market for us is India, where we decided not to increase our prices that much, but to downsize quite a bit. So if you take out those two, the 4.7% becomes a 3% volume decline. So there's a number of effects in there that are driven by downsizing or the economy in two markets.

If I then go a little bit around, I would say, the one market that we are experiencing more pressure is China, where we had low single-digit growth, a negative low single-digit growth in Q3, which is a new thing for us. Year-to-date, we are positive in our growth. We do see some short-term pressure. But overall, we believe that things will be okay going forward. And as you know, we still have a big distribution runway. It's clear that the consumer there is still not in the same confidence and probably still at a low for the last 20 years, and we're starting to see some signs of that. But we do believe gradually, the consumer confidence will come back.

India, I mentioned, India in fact is doing quite well in the movement that we had to make. So performing better than we expected, mid-single-digit growth in Q3, low single digit year-to-date. And then if I go to Brazil, double-digit growth in Q3, excellent execution in biscuits, chocolate and gum and candy. And then Mexico, also improving. I wouldn't say that the consumer in Mexico is in a good place. Clearly, very concerned about the economy and overall job opportunities, but our business is recuperating from some of the issues that we had before. We're seeing good mid-single-digit growth in Q3.

So I would say, overall, we feel pretty good. Maybe looking at the volume, you might say that there is -- or it might look like there's a big elasticity effect, but that's really not the case from our perspective. And on our four big markets, we feel quite good at the moment.

We'll take our next question from Megan Clapp with Morgan Stanley.

Luca, maybe just a quick follow-up. I think in one of your answers, you said the guide does imply a step-up in the fourth quarter from an organic sales perspective. It sounds like that's mostly driven by Europe. I guess, is that fair?

And then just the second part of the question, I think you had anticipated some rebound in North America just as the pricing flowed through. So can you just help us understand a little bit more about what you're expecting for North America in the fourth quarter, just given [indiscernible] data has been a little bit softer recently.

Thank you, Megan. Yes, we expect a bit of a rebound in Europe. Definitely, there is going to be a big activation around Christmas, so the team is full steam ahead in terms of delivering the season and -- so you will see a little bit of a volume step-up in Europe, and that's one of the drivers.

I think you see emerging markets despite the numbers that on the face of it are in terms of volume/mix, maybe a little bit lower than you would have expected. As Dirk mentioned, there is a big impact of Argentina, but the chocolate elasticity in emerging markets is just on [ 0.3x ] as of Q3. And we expect that not to improve, but not worsen either in Q4. And importantly, in places like Mexico, China, India, Brazil, et cetera. I think the top line will continue to be good. So yes, there will be a better top line going into Q4.

In the U.S. we are projecting a market that is in line with the minus 4% volume wise that we have been talking. But as we said, we are fine-tuning our pricing strategies and our promos, and so you will see a little bit of more pricing kicking in, and that will have a positive impact on both the top and the bottom line. And so that's where we are at this point in time.

Okay. Great. And then maybe just as a follow-up. You talked about in the prepared remarks, the new multiyear North America supply chain program. Maybe you can just spend a little bit of time helping us understand what's different about this from prior productivity programs and any early targets you can share today?

Yes, it is a plan that we have been reviewing with the team for the last, I would say, 6 to 9 months. It is leveraging the competitive advantages that we have in terms of supply chain already. I think if you look at our profitability in the U.S. in biscuits and compare it to other players, it is obvious that we have quite a few good things to -- that help us deliver good profitability of the business.

The new program will be intended to address mostly cost in some of the U.S. bakeries. I think we still have opportunities in terms of putting down lines that are more automated and address, a, some capacity constraints that we have, but importantly, our overall cost structure, and I think it will be a meaningful impact, again, that you will start seeing most likely as of 2027.

And the second big element that we are addressing at this point in time is our DSD system. We stand by it, it is a competitive advantage. And so we're not talking about the front-face delivery of our great brands to retailers, but we are rather talking about the logistics system that is in the back of all of that. And having potentially fewer distribution centers and branches and automating those will result, a, in much better cost from a logistics standpoint, but second, in a much better service level and inventory for retailers.

And so let's stay tuned. We'll talk a little bit more about it in the next few months. And all of this will be done within the envelope of the cash flow goals that we have.

We'll move next to Tom Palmer with JPMorgan.

You noted the planned reinvestment for 2026 just when kind of talking about earnings, SG&A has been running down quite a bit this year. I guess any framing of how much of the reduction we've seen this year is more persistent cost reductions versus items that kind of come back next year?

So in terms of SG&A, I would say there are three key components of it. The #1 is clearly the working media and working media is a little bit in decline compared to last year, but we didn't touch structurally the amount of spending investments we have been making in that P&L line in 2025. Going forward, you will see a big step-up of that line into 2026, and we firmly believe that the virtuous cycle that has delivered great results for us will have to be put back in place in 2026, particularly as there is cocoa coming down and there is a cost favorability due to that.

The second element is non-working media that has been managed in a declining mode for 2025 and that will continue into 2026. Obviously, we'll have to make some specific investments, but we expect the non-working media line to be cutting control.

And the third element is the overhead. This year, specifically, there is a positive impact due to our incentive plan that is not as high as we had it last year. But importantly, as we go forward, I think the team is working on initiatives that will deliver further SG&A savings. And so we expect that line to be in level to 2025 in 2026, with the exception, obviously, of the incentive that will be planned at 100% for 2026.

Okay. And I apologize for asking again on Europe. But I do just want to clarify on elasticity because I think there's kind of two pieces you discussed. This 0.7 to 0.8, that's effectively like non-seasonal products where you're seeing that elasticity and the belief is that will not change for the quarter. But as you shift more to seasonal, you'll effectively see better volume trends because those items we'll have less elasticity?

Yes. That's basically the correct assumption in the sense that the 0.7, 0.8, unless we start to do major movements, and what I said is we are adapting in certain areas, that means it's not an across the board sort of adjustment of our pricing. It's only in those specific cases where we think we need to bring it back to the right price point.

And so the 0.7, 0.8 roughly will be maintained on the normal range. And just historically, we noticed that the seasonal range, the consumer is not that clear on what the right price point is and also is inclined to pay a little bit more. So the seasonal range will have less elasticity.

We will take our next question from Chris Carey with Wells Fargo Securities.

So I wanted to ask about North America strategy. Some of your competitors in North America or peers maybe better said, have taken the approach of investing into value, into pricing, so as to establish a foundation from which to grow volume longer term and have effectively accepted the consequences over a 12-month time horizon. I think you certainly dabbled with this strategy in the front half of the year, and it impacted your profitability and there's been some shift towards, I suppose, protecting the profit pool.

Can you just talk about your, I suppose, level of confidence is the right way to put this, that a strategy that's a bit more focused on value and protecting the profit pool is the right strategy as we exit this cycle over the next 6 to 12 months? And maybe just if you could highlight a bit more whether you don't see these as mutually exclusive items, you can both protect the profit pool with pricing, but also offer value with some of the innovations and pack changes. So a little bit of detail on the strategy evolution in North America regarding pricing and volume.

Yes. Well, I would start with saying it's a particular year for us in the sense that you have on one hand, the whole chocolate, cocoa movement that we have to deal with. And on top of that, you've got North America, particularly U.S. market that is slower than we've seen in quite a while. And so at a certain stage, we need to, yes, protect our overall profit pool, and we cannot try to solve for all problems at the same time. And so that would be one reflection that we had.

The other one, I would say, as we started off the year, and we had a certain promotional strategy, what we noticed in North America is that, that promotional strategy was not giving us the volume effect that we were hoping for. And as a consequence, that started to affect our margins more than what we have thought or our profit pool, if you want.

And so the shift that you've seen with now some price increases and some changes in the way we promote are really not driven necessarily by protecting the profit pool but are really driven by seeing how can we optimize our situation. And so going forward, as you look into next year, on one hand, as we explained, we think that the chocolate situation will significantly improve and that will allow us also to invest more into North America.

If we would use that extra investment for a value play at the moment, I'm not convinced that, that is the best solution. As I said before, consumers don't seem to necessarily just react to value. They seem to be much more in a situation where they say, "Well, I can buy in my basket today what I can afford. I'm not planning to increase my spending. Within that, I need to cover my essentials. And yes, sometimes I will buy my biscuits, sometimes I won't." But even if the biscuits are a very cheap price, it doesn't necessarily mean that they will buy them. So our experience with the value strategy hasn't been that great.

What we do, do is in our PPA strategy, we have launched a range of products that are at lower price points, you get less product for it, but at least it's available at the $3 or the $4 price point where about 1.5 years ago, 70% of our range or so was above the $4 price point. And we've significantly moved that in a way, that is a value strategy, but those products come still at very good margins. So that's the way I see the movements that we are going to do. And I hope this clarifies it a little bit.

Yes. Helpful. One quick follow-up on the investment a little bit around this SG&A buckets. Is there any pull forward of investment that you had planned for 2026 coming into Q4 as you see some opportunities to lean in to achieve some of those outcomes that you're looking for?

And then just as it pertains to this 2026 earnings outlook, does that embed a full spending, a replenishment of spending that you would expect to be sufficient so as not to need to do that again going into 2027?

Look, I think the -- at this point in time, the Q4 plans for A&C investments are locked in. So there is -- the guidance we gave you is in line with the level of spending. And clearly, we allocated money in the places where we saw opportunities. And as I said, we pulled back, particularly on nonworking media. But in general, pricing a lot, and they are contemplated in guidance.

The virtuous model of this company is continuous investments in our brands, in our franchises and execution at point of sales and activation at point of sales. For instance, if you take some of the plans we have for next year, particularly around our chocolate with Biscoff or the fact that we are launching Biscoff in India. I think that will be meaningful spending and incremental cost due to activation at point of sales.

I don't think it's possible to assume in a growth company like the one we want to be that we have done in 2026 with the investment. If you look at the amount of working media we have put into the system in the last few years, it is quite meaningful. But I think that is one of the reasons why we see our categories doing well. We have seen the company delivering good top line, volume-driven and price driven in a balanced way, and we want to continue that algorithm.

I think importantly, you will see us in the years to come to go more deliberately after key incremental spaces like snack bars and cakes and pastries. We have just launched 7 Days in Brazil, we want to make sure there is efficiency of spending behind all these incremental initiatives. And so we don't want to play necessarily on a model that is launched, see how it does and then invest A&C, we want to go all in at both in terms of execution at point of sales and support to our brands.

And this does conclude our question-and-answer session. I would now like to hand it back to Dirk Van de Put for any additional or closing remarks.

Well, thank you for attending our Q3 earnings call. Obviously, if you have any further questions, our IR team, Shep and Ron are available to answer anything else that you would like to discuss. Thank you.

Thank you, everybody.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful evening.

Great. Good morning, everybody. Welcome back to day 2 of our Global Staples Conference. Hopefully, everyone had a productive first day, no shortage of headlines and news to process without question, and I'm sure there's a lot more to come. We're really thrilled to have Mondelez International here with us again today. With us, we've got Chairman and CEO, Dirk Van de Put; CFO, Luca Zaramella. Welcome, gentlemen. Thank you.

Yes. Thanks so much for being here.

Maybe a good way to start it off is with you, Dirk. A lot of topics to cover, obviously, including cocoa, U.S. cookie and biscuit trends, pricing elasticities is in Europe and the overall health of the consumer and whatnot. But maybe starting a little bit bigger picture first.

I think if we take a step back and you think back to the company's strategic launch in 2018, you've managed to deliver through lots of volatility, very consistent results, at least in line with your long-term algorithm. And I'm curious if the shifts over the past year or so in consumer behavior and input cost volatility require a different strategic approach now or just more tactical moves as you continue to sort of work through it?

Yes. Good question. In fact, we have asked ourselves the same question, obviously as we saw the different trends around the world emerge because the strategy that we had put in place in 2018 had worked very well. So we asked an outside-in opinion. And the conclusion of that opinion was in line with what we were thinking that the strategy -- long-term strategy is still very valid.

The slowdown that we, for instance, see in the snacking consumption in the U.S., we went quite deep to understand what's going on with the consumer. And we believe that for our categories, 90% of the slowdown is driven by the economic circumstances of the consumer.

There's a little bit about protein that could be having an effect on our categories, but there is nothing structural to our opinion. We still believe that our strategy of building presence in the 3, 4 categories that we want to be really present around the world, supporting our brands, driving distribution, reinvesting in the business and so on is still very, very valid.

However, on the short term, it is clear to us that '25 and potentially '26, we need to play a little bit different, more short-term oriented. So in '25, our way of thinking about it is, particularly in chocolate, we want to deliver what we would call a reasonable P&L, which is a reasonable top line growth, as we have said, sort of 4%, 5% and then a bottom line, which is a 10% EPS decline. That's not great. But seeing the circumstances with cocoa, we thought that was an acceptable P&L, and we still have sight to deliver that, while at the same time trying to protect the category and making sure that consumers do not exit the category and so far, so good, I would say.

For next year, what we are planning to do is we think, first of all, that cocoa will help and that cocoa costs will come down versus where they are this year. That will give us some extra margin of which we will reinvest part and flow a part to the bottom line, delivering an on-algorithm year.

So I would say in '26, we're kind of back on our strategy. We will continue to monitor what's happening to the consumer because there is many things going on. But at this stage, we don't think that there's a structural change in our categories that would require a change of strategy.

Great. Okay. Thank you for that. And then, Luca, I think it makes sense maybe to dig in a little bit to the company's recent second quarter earnings in late July a bit more, where you reaffirmed your full year '25 organic sales growth guidance of about 5%.

Also noted that U.S. retailer destocking, which was a headwind in each of the year's first 2 quarters along with the impact of hotter weather in Europe that led to softer chocolate demand for a short period of time, have resulted in sort of additional headwinds to the year maybe that have reduced the company's flexibility, I think, as you termed it, for the full year outlook. Maybe you can expand a little bit on what you've seen in August as it pertains to sort of retailer destocking and whether the weather in Europe has sort of normalized over the past month or so?

Yes. Thank you, Andrew, for the question. So as we look at the first half, it is without any doubt that the couple of headwinds you mentioned were not contemplated in our original thinking for 2025 plus. So they came a little bit unexpected. I have to say the trade destocking in the U.S. is behind us because actually, we run now at a quite low level and going lower would put most likely at risk service levels. And I would say all things considered and considering that we are increasing prices in the U.S., that was not a bad thing at all, but it is for the most part behind us.

As far as the hot weather went, I think you saw the temperatures by yourself in Europe, Chocolate consumption is impacted and was impacted by hot weather, particularly in the U.K., Germany that are the biggest markets that we have in Europe.

And so the headwind partly materialized in Q2 but importantly, the high level of stock we enter Q3 with is going to have a little bit of an impact in revenues in Q3.

As far as elasticities go, we started the year in Europe with very benign elasticities. The price was implemented. It hit the shelves and we didn't see material dislocation in terms of volume. In Q2, it is tough to discern what is hot weather and what is real elasticity. But as we enter Q3, I think elasticities are a little bit higher than what we would have expected. But quite frankly, the big activation that is happening in back-to-school and importantly, the preparation for the Christmas season is going to tell us what elasticities really are.

We still believe that our brands are quite strong. As we mentioned a few times, we have implemented PPA as well, Price Pack Architecture in Europe specifically to protect specific price points. There is a plan in terms of promo activities to stimulate consumption. And so we'll have to see how Q3 plays out. But importantly, I believe Christmas is going to be a strong season for chocolate in Europe.

Dirk, organic sales in North America declined about 3.5% year-over-year in the first half. Some of it, as we just discussed, was a result of retailer destocking. But I think even underlying trends have been a bit softer than you had anticipated and really across the broader packaged food space, we've been hearing from companies that the return to volume growth has, of course, been longer and more expensive than initially expected. What's your view on what's going on in North America? How do you expect the next 6 to 12 months to look. I guess, both from a consumer standpoint and for Mondelez more specifically?

Yes. Sort of -- first of all, if we go to the consumer, and I had some conversations with colleagues in other categories in food and drinks, and we're all seeing the same thing. The basket of the consumer, the money they spend, when they do their shopping trips, and it doesn't depend on which social class they're in. In the last 24 to 30 months has not gone up. So the consumer is spending exactly, almost exactly the same amount of money now for 2.5 years.

If you think about it, in those 2.5 years, prices of everything have gone up. The consequence of that is that the quantities they bought overall have come down, and that they have mixed a little bit in what they buy. They go first to their basic necessities, bread, milk and so on.

And then there's a part of the basket that they will use on things like snacking. And so what we're seeing is this is a reflection of what the consumer is doing. They have no inclination to increase their spending. They're very aware that they need to be careful. They're unsure about what's going to happen when those tariff effects really are going to hit them.

And so they -- I think for the foreseeable next 6 to 12 months, until they will start to feel different about the future, they're not going to change the way they shop. If anything, they could become even more careful. Now they're doing a number of things. They're switching channels, trying to go where things are cheaper. They are going for different pack sizes. They might decide on certain shopping trips, not to buy certain items and so on.

So for us, the name of the game is really to see how can we optimize those shopping trips and how can we maximize our chances of being in that basket. What we, for instance, see is on Oreo in the U.S. the yearly penetration is going up.

So more families are buying Oreo on a yearly basis. However, if you then start to drill down, the frequency at which they buy is going down and the quantity they buy is going down. So they're still in the brand, but not as frequent as before. So the way we're trying to react to that is to offer for sure, the product at the right price point. So we know we have to be below $4. That's typically what they want to spend for a pack of Oreo. We also know that they're very interested in multipacks. I would say the less than $4 packs, it's more for the lower social classes. The multipacks we see the higher social classes going to those.

We also know that your typical price promotion, 30% off is not necessarily cutting it anymore. So what we need is promotions that have the price off but I'd also have a big team around them that gets big presence in store and will make the consumer even if they were not planning to buy Oreo on that trip, they will still do it. So that's why we do OREO Reese's or we did OREO Coca-Cola. We have Selena OREO at the moment. So we're trying to create events that will draw in the consumer.

So long story short, I think we will manage it as well as we can from a top line perspective. We're doing the things that I was explaining. We are also, for instance, shifting more of our focus on the channels where the consumer is shifting to. But overall, I'm expecting another 6 to 12 months of tough sledding in North America.

Dirk, I guess sticking with you and on the theme you just talked about, over the last couple of years, you really upped the level of engagement with other large companies in this space through partnerships, right, whether it be the Coke Oreo piece that you debuted here last year, Milka Biscoff activations over the past year. And then more recently, obviously, the Reese's Oreo, the one, which look delicious.

I guess, can you talk a bit about why you're excited about these sorts of collaborations, and maybe what's important for investors to know here? Like how can these be a win-win given that some of these like with Biscoff, it's a biscuit player globally as well, a competitor, but yet also, potentially can bring more for both in these types of arrangements.

Yes. Well, the collaboration has kind of emerged through conversations with the different companies. Sometimes they initiated it, sometimes we initiated it. And it basically was starting with what you were saying, is there a win-win here, which we can have? And it's most basic format, which would be the Reese's example or the Coca-Cola example, we find a way that we can launch a very exciting innovation in our product range, and they do the same on Reese's, they will have Reese's with Oreo included, which is also available here somewhere.

And so that was to same with Coca-Cola, they launched Coca-Cola product with Oreo taste. We had our Oreo with Coca-Cola. The Biscoff is different, in the sense that there, we are really looking, can we find a way where potentially we are competitors. But if you start to look a little bit deeper, we are not really stepping into each other's territory. I think the Biscoff consumption moment is very different from, for instance, the Oreo consumption moment.

And we don't really have cookie that we particularly position with coffee. And yesterday, we were talking about the Biscoff. For those that don't know means, biscuit and coffee. And it's particularly developed to eat with a coffee effect from Belgium. So I know how it should be done. You have to dip it in the coffee and then eat it.

So I was yesterday years old when I actually learned that's what that meant, by the way. So I should have known that.

So Biscoff in a good market will reach a 2%, 3% market share. Oreo in a good market can reach 20% market share. Now of course, Biscoff wants to increase their market share. We want to increase ours. But we're not in the same territories. I think Biscoff wants to be globally present, but they accept that emerging markets are going to be difficult for them. We are good in the emerging markets. So there's certainly an opportunity there. In a country like India, you really want to produce in India for them to put down manufacturing assets is a real big deal.

So I think there's a win-win in developing emerging markets with them. And then on the other side, I think our chocolate with Biscoff, which is the other example that we have here is a really exciting chocolate innovation. And so if you look at -- and then we're also doing ice cream together. So that's a much wider collaboration.

My personal guess is that between the 2 companies, the net revenue, we will generate 5, 10 years down, let's say, 10 years down the road, could be easily around $1 billion. So that's a completely different collaboration.

I think in a world where M&A is more difficult and very expensive, these collaborations are a way to get the excitement without having to go to M&A, and every company feels good with what we're doing. So I'm seeing us doing more of these in the future.

Luca, maybe we touched on this a little bit earlier, but in Europe, obviously, you put through a significant amount of pricing recently. I mean at least through the second quarter, right, elasticity has remained pretty in line with what your expectations were, if not even a little bit better. You called out obviously hotter than typical temperatures and then hampered chocolate volumes in the region a bit.

I guess what makes you confident that it was sort of higher temperatures and not the higher prices, I guess, that resulted in sort of the softer demand. And you're talking about elasticity maybe creeping up a little bit of late. Where -- what kind of range are we talking about? Originally, we're looking for maybe the 0.4, 0.5. Where are we today? And how do we think that makes the sort of the full year end up at this stage?

So it's clearly very hard to discern what was weather driven versus what was elasticity-driven. The facts are that as we enter the year and we implemented prices, we were looking at elasticity levels that were around about 0.3x. So quite in line even better than what we had anticipated. But as we said, we did a great job activating Easter. And we know that particularly around big seasons like Easter and Christmas, the propensity for consumers to pay is relatively higher.

I think as we look at what happened in Q2, the volume declines were a little bit more severe. And obviously, there is a weather component. As we enter Q3, we started looking at elasticities that are around about 0.6, 0.7x around Europe overall. So they are a little bit higher compared to the norm that we had in mind at 0.4x. And I think the question becomes as consumers get used to these new price levels and as consumers start engaging even more with back-to-school and Christmas with the category. What we will be looking at is maybe a little bit different.

And then look, I think quite frankly, if cocoa starts coming down, we might have to adjust certain price points. And remember that as a company, I mean, we have a chocolate intensity compared to other players in Europe that is a little bit higher. So that's the other element that comes into play because some other players that are private have a portfolio that is not as chocolate intense as us. So I think it is a little bit too early to draw conclusions. But I would say elasticities at this point are higher than what we had anticipated. But again, we believe that going into Christmas, particularly with the engagement with the consumers will have better elasticities than today.

Right. And Luca, sticking with you here, I mean you've been pretty consistent in your messaging, right, that you do not view sort of current cocoa levels as sustainable, right, based on what your view of sort of industry supply dynamics looks like. I guess what's your most current view on cocoa fundamentals? And are you taking any specific actions and try and reduce that cocoa risk going forward with alternative sourcing and things of that nature?

Yes. So when you really look closely at the fundamentals of cocoa, what drove the cocoa spikes that we have seen in the last few months, it is actually the fact that the biggest cocoa producer, which is West Africa, declined supply last year quite dramatically. And that drove a panic in the market. The market at the beginning, didn't believe in certain cocoa level prices. The industry overall went very short in terms of coverage. And then panic really drove prices up.

As we stand today, we do pod counts in West Africa fairly consistently every 3, 4 weeks. The latest top counts point in a direction that supply of cocoa at this point in time with pods still not yet fully mature to be able to say that will translate into real cocoa supply, the cocoa pod count in Africa is up 7% versus the last 5-year norm. And so materially higher versus last year crop.

We know that the soil moisture is quite good at this point in time, and that is essential for the next phase of pod development and cocoa supply. We also know that as we close Q2, grindings, which is cocoa processing and a proxy for cocoa consumption, was down 7% to 8%. And so that leads us to believe that with a given supply that is up most likely more than 5% compared to the last 5-year norm and a demand that is going down by 7%, 8% in the latest reading. We believe there is going to be a surplus in the market. And that will determine most likely cocoa prices to come down.

The rest of the world, which is around about 30% of the total cocoa production keeps on growing in terms of supply at 5% per annum and that's the forecast for next year. And you might imagine that at these price levels, there is clearly an element of increasing supply outside of West Africa. And so that leads us to believe that cocoa prices will have to adjust.

Now to your question, we are very excited about the fact that there are at least 2, 3 opportunities in terms of long-term supply. Clearly, West Africa with current prices has incentive to invest more in cocoa productions, unlike what they have done in the last few years. And so with agronomical practices, better practices, hopefully, supply will continue to grow. I think the rest of the world clearly is well attracted by the current cocoa levels. And even if there was a decline in cocoa prices of 30%, the economic around cocoa would be very compelling.

And finally, as you said, there is cocoa grown labs, which is fermented cocoa that can be grown in a lab that is something we are closely monitoring. We made some investments. And so hopefully, that will evolve over time and will allow for a more steady, more reliable supply of cocoa over time.

Great. Maybe, Dirk, shifting to emerging markets. One of the main things that sets Mondelez apart, obviously, from many other domestic packaged food companies is not only your exposure to emerging markets but the scale you've been able to build in many of these markets like Mexico, India, Brazil, China, you've set some pretty lofty targets for growth across these markets.

And I guess the question is, what will it take to sort of make good on those expectations, both in terms of time and incremental investment? And how do you think about prioritizing each of these markets and initiatives such as expanding Oreo globally and things of that nature? And then how are things looking in a lot of these emerging markets more currently?

Yes, yes. So if you take a look at the growth of our categories in volume terms for the next 10 years, a very big percentage will come from emerging markets. Now of course, there's always a discussion, will that come at the right dollar value? Yes or no. But if you look over the longer term, even in Latin America but certainly in places like India and China, that has been a very solid growth. You cannot look at it on a year-by-year basis but if you take, let's say, 10 years, you will see that the benefit is quite big.

So for us as a company, it is important to be there on the long term because that's where the growth is going to come from. If you then start to look at the markets, there's a few that are very important, and you mentioned the 4 that at this stage for us are quite important. The name of the game there is to build strong brands.

So we invest quite heavily in A&C. China has the biggest percentage of A&C of any of our markets in the world. As an example, India is also quite high. And so we try to build over time strong brands at Cadbury in India or in Oreo in China are really powerhouse brands. We try to do the same in Latin America. So that certainly is an investment.

The other one is driving distribution. And so we go mostly to market through local distributors. So the capital investment is relatively limited for us. It's not our trucks. What we do is visi-coolers in the hot climate for the chocolate. So that certainly is a capital investment every year. But I would say that is a reasonable capital investment that we have to make.

There is a limit to the speed of how fast you can do that. You need to stay on top of things. You go city by city, you need to monitor very carefully. Is it paying back? Is it not paying back. So you count, for instance, in China, we're at the moment in 3 million or 6 million stores. We cannot say, okay, 1 year, we're going to add another 2 million stores. That would be not -- so you have to go at a certain speed. The speed at the moment is somewhere for India and for China, around 100,000 stores per year. That is the way. So we still have a runway -- quite a long runway.

The second name of the game is not only more stores, it's more items per store. That's the second area of growth. And so we look at the number of SKUs available on average in a store, in a country. If you look at the brand building and the distribution building, so the 2 avenues of growth for us in these markets, we should be close to double digit. We get to high single digit usually, sometimes double digit. And of course, in the current circumstance, that's a bit slower also in China and in India and also in Mexico but overall, I would say the idea of what I just explained, once the consumer will feel a little bit better, we think we will get back to the algorithm for those countries.

And sort of current trends as you see them in key emerging markets at this point?

Yes, quickly, China, consumer is still very sort of very careful. We see them diminishing their consumption through the fact that we are doing quite well in our categories, gaining market share and the fact that we're building distribution, we are seeing positive growth in China.

India, for us, the consumer clearly was slowing down, particularly in a category like biscuits, which is a very basic category in India. We start diminishing of the [concentration of Oreo], which is a premium. Chocolate continued reasonably well, I would say, despite the fact that we increased some prices. But overall, we saw a slowdown in India but we're still solid single-digit growth.

Brazil is doing quite well. We will have good single-digit growth this year in Brazil, and we're developing well. And then in Mexico, we see a slowdown in the consumer offtake in general. But since we've had 2 years that we were underperforming, we will look good because we lap something that was not so great, basically.

Perfect. And Dirk, historically, Mondelez has chosen to invest some of the upside, right, in order to maintain the solid top line of volume momentum and keep the flywheel going, which sort of sets you apart from a lot of your peers. That strategy has worked well. Obviously, we're in a bit of an anomalous situation when thinking about next year, just given the magnitude, right, of cocoa inflation being absorbed this year. I guess, should investors expect or still expect Mondelez to sort of adhere to this reinvestment strategy going forward, even if there is, let's say, potential for more upside should cocoa moderate significantly. Just given how much justified pricing has been needed really the past couple of years. And are there a few areas where you would likely reinvest for '26, if that were the case?

Yes. So our algorithm has always been that we look at gross profit dollars as the key driver of our performance. And the thinking has always been, we drive gross profit dollar growth. We have had that conversation many times. We are not obsessed by the percentage. The percentage needs to be healthy but we're not managing towards a percentage of the business. And so what we always did in the last 7, 8 years was the gross profit dollars go up.

The difference that we get extra every year, about half of it flows to the bottom line, about half gets reinvested. This year is an abnormal year. The gross profit dollars go down because of the issue with the cocoa prices. So we did the same. We reduced our A&C largely in nonworking media, and we took a hit on our bottom line.

For next year, I'm expecting our gross profit to start increasing again. And we would normally do the same and reinvest, but also flow to the bottom line. Now at a certain stage, cocoa could come down quite a bit, let's say, and then it could be in those years that we decide that we're not going to be do the rough 50-50 but that we are going to flow more to the bottom line.

Our first concern is, do we get a return on the investment? Do we drive our categories? Do we drive our gross profit dollars? And there could be a moment that we say, well, that's not going to be giving us the right return, it's better to put it in the bottom line. But in general, I think next year, we are aiming for a non-algorithm year which is high single-digit EPS growth. And then after that, I'm expecting a certain year that cocoa really will come down, that might be the year that we decide to put more.

Got it. Got it. Helpful. Luca, maybe turning to capital allocation and M&A. There are obviously some speculation earlier in the year about your potential interest in another large U.S. chocolate player. And you've kind of put those rumors to rest since. But maybe you can remind investors what your strategy around M&A looks like, whether it's changed at all in the context of sort of the current environment where there's a lot of news. And how you think about M&A versus sort of share buybacks as well?

We continue to be very disciplined in terms of assessing potential targets out there. And we said it many times, few assets came our way, and we passed on them because the value proposition for us wasn't right. As we put together business propositions, we are fairly thorough. We have an M&A department that conduct very thorough due diligence. So we know pretty much what are the issues and the opportunities as we go into any type of M&A.

At this point in time, I wouldn't rule anything out. But quite frankly, if you ask me, it is very likely that if we do M&A, it is more on the bolt-on areas. Assets that have a size of $0.5 billion, $1 billion, $2 billion max, I would say, assets that play in the categories we like chocolate biscuits and importantly, baked snacks, whether it is cakes and pastries, fresh or non-fresh, I would say.

And assets, in some cases that are out of these categories but would give us the opportunity like Ricolino in Mexico to really establish ourselves as a key player in snacking through our core brands like Oreo or chocolate brands like Milk and Cadbury in case, again, the asset provides distribution opportunity. That's really where we are, very disciplined, strategically sound asset. Assets that are, I would say, $0.5 billion to $1 billion in general in terms of revenue.

When you look at share buybacks, it is undoubtful that we have been quite pragmatic in the way we have done share buybacks in the last few years. Clearly, with cost of capital going up, there is a different trade-offs, which makes us be a little bit more cautious in terms of share buybacks. But we have done share buybacks this year, I think, at very compelling prices. And again, should cocoa come down, I think we will look at an earnings power that is materially higher. And if we compound that earning power with fewer staff, fewer shares being out there. Obviously, the earnings power will be even further amplified.

So at this point in time, we are more pragmatic in terms of share buybacks. But obviously, between share buybacks and M&A, it seems to us at this point in time, the share buybacks is a more compelling opportunity given the current stock price.

Right. Great. Thanks for that. And then I think we've got time for one more before we head to the breakout. So maybe, Dirk, one area that you've been much more vocal about, right of late has been the opportunity you believe you still have in sort of the growing and still very fragmented cakes and pastry space, I think you've talked about. You're currently the third largest global player with only about a 4% share. You recently acquired Evirth in China, which operates in this space. So I guess if we were to look 5 to 10 years sort of down the road, what do you expect the cake and pastries category to look like versus where it is today? And sort of how do you see Mondelez's position within that evolving?

Yes. So cakes and pastries at the moment is about $95 billion global category. So not too far away from the size of the biscuit's category. We expect about a 4% growth of that revenue. So probably going to be about $125 billion by 2030.

It's a very fragmented category, which has different segments in there. And we think there is really an opportunity to offer higher quality products with known brands. And so that's what we believe is our opportunity. So we've been trying to position ourselves in the cakes and pastries category in a number of ways. So if there's one segment in cakes and pastry, which is the fresh part in store, that's where Give & Go comes in play, but also Evirth. And so that's an experience for a consumer where they take it home and then consume it. It's delivered frozen into the store.

We think you can have high-quality products where the consumer is prepared to -- per kilo to pay a very nice price. And for them, it's a different experience from the packaged cakes and pastries. So that's one segment we see ourselves developing in globally.

The other one, I think, is more sophisticated packaged products like the Oreo cakes that we have at the moment in China and in the U.S., which I think stands above what is generally available in the market. And so we see, for instance, the soft cake version of Oreo stands very well next to the biscuit version, globally. That's the second area where we're trying to develop in.

And then the third one is what we call Choco bakery, where we use our chocolate brands to bring the chocolate experience into the cakes and pastries. We do it in biscuits also, but we believe there's a huge opportunity. So the biggest example of those are the Milka products that we have in Europe, the soft cake Milka products. Or recently, with the acquisition of Chipita, we now have Milka croissant that is being offered.

So those, I would say, are the 3 big segments that we believe in cakes and pastry. We don't try to be in all segments for everybody. We try to be in high-quality, high net revenue per kilo products and bring our own brands into that market.

Super. All right. Very helpful. We covered a lot of ground. So really appreciate you both being here. Please join us in the breakout. And please join me in thanking Dirk and Luca for being here.

Thanks, Andrew.

Good day, and welcome to the Mondelez International 2025 Second Quarter Earnings Question-and-Answer session. [Operator Instructions] On today's call are Dirk Van de Put, Chairman and CEO; Luca Zaramella, 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 the 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, 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 reconciliation 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 Andrew Lazar with Barclays.

Great. Thanks very much, and thanks also for putting out the prepared remarks this time around, very helpful. Dirk, would be great if maybe you could do a brief walk-through of the key geographies and how you see it all playing out in the second half? And then Luca, given the additional weakness in North America, what incremental actions can the company take, whether they be on the cost side or maybe more importantly, on the demand driving side to accelerate growth there even in the context of a weaker category?

Thanks, Andrew. Yes, yes, maybe quickly, overall, we think the Q2 results are quite good. We had some good pricing if you discount for the downsizing, we're flattish as it relates to volume mix and our bottom line is slightly better than expected. I think what also is clear is that we have a very good global balance in the sense that we see a continued weakness in North America, but we had a strong quarter in the rest of the world. And since our sales are well balanced between the different continents, that really helps us.

The other one that's important for us is that chocolate and the significant pricing increases in RGM actions that we've done are playing out in line with expectations. So that's good. Our categories are showing continued strength and we are maintaining our full year outlook. So overall, we feel good about the quarter.

If I go a little bit around the world. Maybe starting in Europe, a good quarter in Europe with good numbers, strong share gains. Clearly, the business is very resilient. The consumer is more confident in Europe, still quite fragile, approval spending, but snacking continues to outpace food and overall, I would say, we feel pretty good about our European business. Consumers are not exactly bullish, but -- and they're focused on essentials, but they keep they keep on buying our category even despite the significant price increases that we have to do in chocolate.

If I go to the U.S., a little bit more of a difficult situation there. There's a lot of consumer anxiety. They look at a quite uncertain outlook as it relates to their personal finances, job expectations, inflation. So they tend to focus more on essential items, the size of the basket is getting very important, absolute price points, there's channel shifting going on, there's more promotions and some pack shifting too. So overall, we see a pretty soft biscuits category, probably performing a little bit better than other snacking categories with holding share, but overall, the volume is declining.

Switching to the emerging markets, we feel very good, double-digit growth. We have a sustained volume and volume growth. We have very good share gains in Brazil, in India and Mexico. Consumer confidence is softer in these markets. They are worried about their personal finances, job security, inflation. So we see the same channel shifts mainly into bulk and discount in places like China. We also see the pack shift, but emerging markets continue to be an attractive growth engine for us. And if you look at our 4 major markets, we feel good about China, India, Brazil, Mexico has been softer but overall, I would say, clearly a strength this quarter in emerging markets.

Okay. Thank you for your question, Andrew. So as far as North America goes, first of all, there is clearly a consumer sentiment that is impacting consumption across the board. We have not planned for a material rebound of the category in the rest of the year. So I want to reassure you that in the guidance we have given, we have the affirmed there is no material improvement of the U.S. general sentiment.

In terms of plusing the plant up, what we have done is, first of all, we have announced incremental pricing that is going to take effect in a few weeks in North America. I won't elaborate much, but we are clearly at a point in time where we see inflation going up. Our cost base is higher, particularly because of cocoa but not only and I think that will boost revenue and top line. We have done quite a bit of work in terms of being very selective instead of picking the items, for instance, that were most impacted by cocoa we went pretty much across the board with more limited price increases. We had protected certain points where we see consumers going. We also had protected specific format that consumers favor in -- during their buying habits.

We had a plant that aims at boosting productivities in the second part of the year, and the team has done a very good job in terms of ensuring cost control. And I think you're going to see a rebound of the North American profitability, particularly in Q4. The team continues to pursue incremental opportunities, particularly in alternate channels. We mentioned a few times that our share gains in China like club and dollar in dollar and value. They are clearly outstanding.

And we have, again, deep opportunity to get our fair share or closer to our fair share in those alternate channels. So quite a bit of actions that are planned for the second half. But again, we are not putting out wishful thinking in terms of category rebounds, et cetera. I think it is a fair assumption and safe one.

We'll go next to Peter Galbo with Bank of America.

Dirk and Luca, I wanted maybe to put a finer point on the previous question, particularly around the lack of change in guidance for the second half. Clearly, you had a strong delivery on the first half. So Dirk, maybe you can just put a bit of a finer point on the puts and takes in the second half. It seems like maybe the U.S. is a bit weaker than you thought, but then there's other pieces that are holding it up. Any other considerations that we should really think about as we contemplate that?

Yes. So we're trying to be vigilant and make sure that we can execute against our agenda. I think that we have accounted in our outlook for the tougher areas, as Luca was pointing out. So the ones that we are keeping an eye on -- first one would be chocolate. What we've seen in -- with chocolate in Europe is a very good Easter. We executed well in our RGM and pricing strategy that's in the market. Then in June and July, there was quite a heat wave in Europe. And so volumes were lower than expected. In the last 2 weeks, the temperatures have gone down, and we see the volumes come back. So we are quite vigilant on chocolate elasticity for the second half of the year. But it's difficult to read at this stage with the heat wave in Europe.

As it relates to the U.S., we really don't see an immediate change. If anything, I think the consumer will see the full effect of the tariffs in the second half. And so we will see where the consumer confidence and the consumer spending will go. And so we have to be careful of that. And I would say those are the 2 big factors that make us keep our current outlook. Like Luca said, we've included, I think, a realistic view on what is going to happen in those 2. And that seems at this stage for me the best stance that we can take.

Okay. And Luca, maybe just as a follow-up, there's obviously been a lot of discussion around the move in cocoa and cocoa butter in particular, which I think has moved in a pretty favorable direction. So maybe you could just talk about how we should extrapolate that, how you're thinking about it as you begin to contemplate hedging for '26?

I think when you look at the cocoa market fundamentals, they are going in the right direction. There has been clearly a pressure point in terms of demand. I think you saw the grinding numbers being down 7%, 8% and that drove a couple of weeks ago, a low level of cocoa price below the 5,000 GBT per ton mark. Clearly, we took advantage of that. And it is what we said to you many times, which is many adjacent categories, are we formulating out of real chocolate and moving into what we call compound.

The pulp count in West Africa is very promising. The weather has been cooperating and look, notwithstanding the fact that there is still a long way to go. Today, with the 50% confidence level, we can say that the season is going to be good in terms of the crop. And so potentially, there is a material and meaningful upside between supply and demand into the 2026 season. The level of the industry stock is still low. So many are on the watch out still. And so I believe the sentiment, the overall sentiment is that sooner or later, cocoa prices will have to come down.

On the cocoa butter, which is the most novel part of cocoa and it is the one we use the most around the world, and that is what allows you to call chocolate, chocolate for instance, in places like Europe. It has come down dramatically, I would say, versus last year. It is usually traded as a ratio to the overall cocoa prices. Last year, it was most likely at a certain point in time, even higher than 3, and it went almost to 4. And today, I think we can strike a contract with supplier for most likely half of that price and ratio. And so there is a material benefit coming, which obviously is offsetting the cost we have seen as of late. But in general, we feel like cocoa prices will have to come down.

We'll go next to Megan Clapp with Morgan Stanley.

Maybe another follow-up on the second half outlook. There was a comment in the prepared remarks just about some of these headwinds, reducing your flexibility. And I guess if I were to look at what's implied in the second half in terms of organic sales growth, it's roughly similar to what you reported in the second quarter. And just wondered if we could talk a little bit more about the regions and how to bridge from the second quarter to the second half. It does seem like you have good momentum in emerging markets. You'll have more pricing coming through in Europe, understand maybe elasticity is a bit higher, North America is weak but Luca, if I understood you correctly, maybe North America could get a little bit better. So what are kind of the offsets that I'm missing that reduce the flexibility in your minds as it relates to the second half?

Thank you, Megan. So as far as outlook goes, in the prepared remarks, we make a comment about a little bit less flexibility. What we mean by that is really that the unprecedented heat wave that impacted chocolate in Europe, is clearly something we couldn't predict as well as the impact we had, particularly in the U.S. because of the trade destocking. So that's what we really mean by a little bit less flexibility. You might imagine we try to keep always a little bit of a buffer, particularly as we did guidance because things can happen.

I think what we see in the last couple of weeks in Europe is the weather being more collaborative with us. And we see chocolate consumption coming up. And you might imagine, it is a little bit hard to distinguish between elasticities and weather consumption. But the latest indication is that the volume impact on chocolate is more benign than we have seen in the last, I would say, a couple of months now. That has implications in terms of shipments in Europe in Q3. And so we are a little bit prudent in terms of projecting Europe, particularly in Q3.

North America, the pure fact is that the major market category wise is, at this point, down volume-wise minus 3%. The category started going south in Q4 and even in Q3 last year. So we are lapping but we are projecting our category volume-wise to be down still 3%. Now there is pricing. So revenue should go up from the -- what you have seen, particularly this quarter on the positive side. And clearly, bottom line should go up as well from what we have seen this quarter.

In emerging markets, we have implemented multiple waves of pricing. We are out with a new price both in India and Brazil that are the main markets we have in emerging markets. And so again, we need to stay quite prudent and see what happens to elasticities. We don't have reasons to believe that if this city is going to be worse than what we planned for at this point in time. But again, we want to be on the cautious side.

Our biscuits business continues to do well. Excluding North America, actually, year-to-date, revenue is up a little bit more than 7%. And again, we project a continuation of that. So we really want to be on the prudent side, I would say. I'm not suggesting that the guidance is a slum dunk at this point in time. You know that in the U.S. most likely, there is a wave of inflation coming up. And so we have to be -- we have to stay prudent and execute with action as I think we have done in most of the cases in the first half.

Okay. Great. Super thorough and helpful. And then maybe just a follow-up on cocoa. When we came into the year, you said there's essentially 2 scenarios in terms of '26. One is cocoa comes down and you have higher earnings upside potential; two, as it is elevated, and you have to take a bit more pricing. And you mentioned you took advantage of the recent drop in cocoa prices. But how are you thinking about whether or not you might have to do a little bit more pricing, some more GM? And I guess how are you thinking about that into the back half of this year?

So I think, look, this is one of the unknowns of the plan, I think, but I might be proven wrong. I believe that with the new crop data, we will know which direction cocoa is going to pay particularly for 2026. And I think there are possibly 2 scenarios. One, if this stays elevated, but the other one is it might go down quite rapidly because if there is a surplus between supply and demand, I think there will be material co availability that will drive prices down.

In the first case, I think we might need or not additional pricing based on where cocoa is. If it stays where it is, I think all the actions that we are about to take from now to the end of the year in some of the markets, I think, will put us in a good spot. I said many times that when I look at the underlying per kilo of cocoa, or the chocolate business, gross profit dollars, I see a number that I like as we exit the year. Remember that pricing as a carryover as well into next year. And so if cocoa stays elevated, there might be additional pricing. But I think all in all, we should be in a good spot at the end of the year.

If cocoa comes down, the question becomes what do we do to protect demand, what do we do to face potentially some competitive actions, et cetera. But in the end, I think the P&L will try because if I apply the elasticity we have seen on the way up to the way down, there is either material price upside or there is a potential volume rebound. Also remember one critical thing which we said many times, the virtuous model of this company has been in the last few years to protect gross profit dollar growth as opposed to percentages, but it has also been investing, particularly in working media and in route to market. And we will continue to do so and potentially in 2026, we'll step it up depending on the level of cohort to a point where we really reestablished a virtual cycle, which is volume growth, share growth, generation of GP dollars and again, good cash for the company.

[Operator Instructions] We will go next to Robert Moskow with TD Cowen.

And maybe just a couple of things to clarify, Luca. The comment that you need to invest in working media in 2026, a lot of other companies do that when they reduced media in a given year. So it doesn't sound like that's what you're doing. So maybe you could explain whether that's like a catch-up in 2016 or not? And then I'll ask a quick follow-up.

Yes, Rob, I'll take that. So the way I would describe it is that we will have a chocolate category whereby the price will have gone up 30% to 50% in the last 2 years. And what we see is consumers are staying in the category but they're diminishing their frequency and they're diminishing the quantity bought. So we expect that after all the price increases. And even if cocoa comes down, I'm not expecting that it will come down enough for us to see significant price reductions in chocolate, we will have to support our brands and make sure that the volume in the category remains or it goes back to where it historically has been.

I don't know where we will end the year, but you could expect chocolate volumes around the world to be down. So far, we see it down 6%, 7%. That's the latest news on grinding for cocoa. So that's the main reason why we think we will have to reinvest. On top of that, as it relates to biscuits, particularly in the U.S., we see very anxious and weak consumer situation. I'm not expecting that, that immediately will be better next year. So I'm expecting that we will have to increase our investment in our brands also in North America next year. Those are the 2 main reasons why we believe that it is appropriate to increase our media investment next year.

And you're right, we have protected work in media this year, what we have cut is the nonworking bar. And so I wouldn't say the baseline is variable. But this year, unlike other years, we haven't increased booking Media March.

Okay. And my follow-up is, I noticed Luca, that you said category volume down about 3% in biscuits in first half, you expect it to be similar in the second half but then you're also raising prices in the U.S., and you've mentioned that the consumer is under a lot of pressure. Is this one of the flex points that might go the wrong way? And how much pricing do you think you'll raise in the U.S.?

Look, I'm not going to comment specifically on the amount of pricing yet. But as I said, the price increase that we are about to take has been quite surgical. We mentioned to you a few times that between $3 and $4 per pack, it is the magic of being there and attracting consumers. And that's what really we are about to not to touch. We will protect those price points. We mentioned to you that there are specific pack sizes that are very relevant to consumers like the multipacks. We are keeping those price points.

There are brands that are not our top brands necessarily where we're going to go with higher prices. And that over time has proven to us that elasticity is not material. And then there is a whole host of ideas as to what we have to do to boost consumption in the second half, particularly as it boils down to RGM and promotions. I think the team has a slate of actions that hopefully will lead to a much better revenue results. So you are right in saying how do you reconcile the fact that consumers are price sensitive to a price increase. But we have done our homework, and we believe there is not going to be a material volume repercussion on consumption in our case.

We'll go next to Alexia Howard with Bernstein.

Can I start with a question on uses of cash? It seems as though you are taking on a bit more debt in order to repurchase shares. I think you put a $9 billion share repurchase approval over the next 3 years out at the end of last year. Should we expect that dynamic to continue? How are you thinking about the trade-off between taking on debt and continuing to repurchase shares at this point?

Look, the #1 ticket item between the balance of cash flow and share repurchase and dividend is actually the ForEx impact on our debt. Our debt composition is made up of obviously, a dollarized base, but importantly, of a euro of a GBT, of -- you call it. We have diversified the currency nature of our debt over time and we believe that this is the right action to take.

The second thing which is not capturing that is we have meaningful net investment hedges that hedge the composition of the balance sheet and the variety of currencies that we had functionally around the world. So looking at the debt that is impacted by and now looking at the overall balance sheet and the gains, the material gains we are making on the net investment hedges is a little bit misleading.

But to your point about share, I stick to what I said in the Q1 call, we have been buying back quite a bit of shares at a very compelling price, which was below $60 per share on average. We are going to be very pragmatic should the stop for any reasons. And quite frankly, I have to say when I fast forward and I see cocoa coming down, when I see Mondelez in a context where many companies are challenged printing a number on top line, which is quite good.

As I look at the plans around the world, I believe we are setting ourselves up for a decent 2026. I don't believe necessarily the stock price is going to go down much, I hope, from here. But in case it does, we are going to be pragmatic and buy back more stock. And I think in hindsight, as cocoa normalizes and we look at our normalized earnings, this will be one of the best deployment of capital decisions we have made.

Great. And as a follow-up, the weakness in North American volumes, I know you've attributed it to weakness about your seeking behavior on the part of consumers. How are you thinking about the GLP-1 impact on these indulgent snacking categories, particularly as we think about pill versions coming out next year, is there a danger that North America sees continued pressure? Obviously, your other regions are doing fine, which is great, but I'm just thinking about how you prepare for that eventuality next year?

Yes. Well, I mean, from our perspective, there is currently no real impact on our volumes coming from GLP-1. We did an in-depth analysis in North America, and most of the negative volume that we're seeing and the change in consumer buying is all driven economically, the anxiety about the future, the frustration with the inflation and so on. If we look at the numbers at this stage, the penetration of the drug in the adult in population is about 4%. The reduction in calorie intake at this stage is about 11% and consumers are staying about 9 months on the drug.

The penetration is not going up at this stage. And so if you think about it, 4% of the population, reducing their calorie intake by 11%, that is 0.4 effect on the total population -- of the total calorie intake, sorry. And so that is an almost invisible effect for us. Even if we extrapolate that for '26, we do not see a major increase in the penetration of GLP-1s happening. And so I think even in '26 -- and to be honest, when we even extrapolated for 10 years, we do not think that the effect will be significant. So we don't think that the current weakness that we see in the snacking categories driven by GLP-1s, nor will it be in '26.

We will now move to our final question from Max Gumport with BNP Paribas.

Just sticking on North America. I wanted to get a better sense for the retailer destocking that you saw. I'm hoping to get more color on what drove it and how you think it plays out or recovers from here?

Yes. I mean, it's sometimes difficult for us to put ourselves in the place of the retailers. But we believe that this is driven by a number of things. But in the first place, probably the retailers wanting to manage their cash flow. If you think about it, there's an overall slowdown in consumption, tariffs were coming. They probably wanted to import more from the countries that were going to be affected. So they increased the imports and increased their inventories in certain items and wanted to offset that by reducing other items.

The second reason, I think, is there's an overall slowdown in food consumption and also in snacking. So there's a need for them to have less inventory at this stage. For me, those are the 2 main reasons. As we said, we still have significant opportunity in other channels. So one of our strategies is to shift more of our pressure into channels like the value channels or e-commerce or the discounters. And that is giving us an opportunity to offset some of that destocking that we've seen in the retailers. But overall, I think those were the factors that drove it. We were a bit surprised to still see some of that in Q2 I think we now have that behind us, and Q3 should be clean as it relates to retailer inventory.

That will conclude the question-and-answer session. I will now turn the program back over to Dirk van de Put for any additional or closing remarks.

Well, I want to thank everybody for their interest, for their attendance to the call. can always follow up on more questions with our IR group. And I'll see you for the call a quarter from now. Thank you.

Thank you, everyone.

Thank you. This does conclude today's call. We thank you for your participation. You may disconnect at any time.