Mondelez International, Inc. Price & Performance (MDLZ)

With me today are Dirk Vandaput, our Chairman and CEO Luca Zaremela, our CFO. Earlier today, we sent out our press release and presentation slides which are available on our website this call, we'll make forward looking statements about the company's performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties. 10 Q and eight ks filings for more details on our forward looking statements. We discuss our results today, unless noted as reported, we'll be referencing our non GAAP financial measures. Adjust for certain items included in our GAAP results. In addition, we provide year over year growth on a constant currency basis unless otherwise noted. You can find the comparable GAAP measures and GAAP to non GAAP reconciliations within our earnings release and at the back of the slide presentation.

Today, Dirk will provide a business strategy update followed by a review of our financial results and outlook by Luca. We will close with Q and A. I'll now turn the call over to Dirk. Thank you, Shep, and thanks to everyone for joining the call today. I will start on Slide four. [indiscernible] I'm pleased to share that 2024 was another strong year for Mondelez.

We delivered balanced top line growth, strong earnings and robust free cash flow generation while returning significant capital back to shareholders.

Our top line grew mid single digit with balanced performance across both developed and emerging markets. And we delivered positive volume mix in the second half of the year with improved share performance. Despite continuing input cost inflation, we achieved gross profit dollar growth in the mid single digits driven by ongoing cost discipline and sound pricing. This allowed us to continue to increase our investments in brands, distribution and organizational capabilities. We also continued our track record of strong free cash flow generating $3,500,000,000 which includes our settlement with the EU We also continue to prioritize capital return, delivering $4,700,000,000 to shareholders through buybacks and dividends. And as we transition into 2025, we remain focused on executing with excellence against our long term growth strategy. Will enable us to successfully navigate unprecedented cocoa cost inflation. And we'll share additional color later in today's call. Perhaps most importantly, I remain convinced that Team Mondelez represents the very best people in the consumer packaged goods business and I'm proud of our team for staying focused and agile in a challenging operating environment. With the right strategy, the right brands, the right geographic footprint and the right people I'm confident that we continue to be solidly positioned for attractive long term growth.

Turning to Slide five, you can see that 2024 was a strong year on both the top and bottom lines. Despite the impact of cocoa cost phasing in the fourth quarter. Luca will provide some additional perspectives on our cocoa cost strategy in a few minutes. We delivered organic net revenue growth of 4.3% and adjusted gross profit dollar growth of 5.1% for the year. Our volume mix results demonstrate that consumers continue to prioritize our brands and our categories. It is important to underscore that we continued reinvesting in our to drive faster growth. Our high single digit investment increase in A and C continues to strengthen consumer and customer loyalty to our brands. Adjusted EPS grew 13% on top of strong growth in the past several years. And we delivered free cash flow of $3,500,000,000 We remain confident that our commitment to executing with excellence while reinvesting in our strong brands, capabilities and talent will enable us to continue delivering attractive long term value for our stakeholders. On Slide six, you can see that our continued confidence is grounded in evidence of consumers enduring preference for snacking. All over the world, snacks remain an important part of people's lives.

At home, At work, or school and on the go. We're proud that consumers continue to prioritize our strong brands Even in challenging times, In North America, consumer confidence has improved slightly following the U. S. Election despite continuing concern about the economic outlook. While biscuit category volume remained relatively flat over the last three months, private label continues to decline Demonstrating that consumers remain loyal to their favorite brands, and that our price pack architecture initiatives are showing promising signs. As a result, Oreo, Chips Ahoy and Ritz all are regaining share. Meanwhile, in Europe, consumer confidence and also price elasticities remained stable Despite ongoing uncertainty in the economic and political environment, We continue to see solid category value growth in both biscuits and chocolate. And our brands are steadily gaining share following disruption during the first half of the year. Elasticities also remained stable in emerging markets with solid consumer confidence in India, Brazil and Mexico, amidst continued softness in China. Overall, we're seeing solid category growth in both volume and value across our combined emerging markets. And Mondelez share is improving in both biscuits and chocolate. Turning to Slide seven, we are continuing to make progress against our strategic growth agenda.

Reinvesting in our brands, expanding distribution, strengthening our capabilities and continuing to transform our portfolio. Here are just a few highlights of our strategy in action. Our iconic global brands including Oreo and Cadbury Dairy Milk, executed award winning activations that resonated strongly with consumers driving incremental lift. For example, Oreo's space dunk campaign and our innovative global collaboration with Coca Cola helped strengthen partnerships with key retailers around the world. Similarly, Cadbury's yearlong celebration of its two hundredth anniversary delivered groundbreaking creative and strong return on investment. Looking ahead, we're excited about the potential of our just announced Oreo partnership with Post Malone, which will hit U. S. Store shelves later this week. Capturing the current cultural vibe this limited edition features our first twisted green. Along with these creative brand reinvestments, we continue to expand distribution around the world which includes a special focus on accelerating digital channels. Our e commerce business grew double digits in 2024 and we continue investing in new capabilities to accelerate our leadership in digital snacking. In fact, our next year markets grew approximately 35 as a result of our continued investments. We are also making significant progress on growing our We launched new FreshTax during Q4 across our largest U. S. Brands including Oreo, Rich These new offerings provide products our consumers love in smaller hold fresh packs at an attractive everyday price.

And in chocolate, we are launching an array of pack sizes at several new price points around the world. Additionally, we continue to advance our portfolio reshaping strategy. In 2024, we purchased a majority stake in Evert, the leader in China's fast growing frozen to chilled baked snacks category. We have worked with evert for several years develop manufacture, market and sell cakes and pastries featuring some of our iconic brands including Oreo and Philadelphia. Our expanded partnerships enables us to further accelerate growth through continuous innovation leveraging the combination of our high value brands, with Evertz advanced R and D and technical expertise. We also liquidated our investment in JDP speeds providing another important source of funding for reinvestment that can be used to buy our stock as well as further advancing our brands talent and capabilities. On Slide eight, along with our financial performance and strategic growth priorities, I'm pleased to share that we made significant progress towards our sustainability objectives 2024. First, we continue to advance our leadership in more sustainably sourcing critical ingredients. About 90% of the cocoa volume used in our chocolate brands now is sourced through Cocoa Live. Our signature Cocoa sourcing program which works to lift up the people and restore landscapes where cocoa is grown.

We also made continued progress in helping to combat climate change. We reduced carbon emissions across our manufacturing operations by about 38% versus our baseline in 2018. Additionally, we continued advancing our light and right packaging strategy, Approximately 96% of our packaging is recyclable. We also continue investing in ways to empower consumers to make more mindful snacking choices that fit into their healthy active lifestyles. Approximately 80% of our snacks revenue comes from mindful portion snacks. That is snacks that are packaged in individually wrapped mindful portion serving sizes or with clear mindful portion recommendations on the pack. These are just a few preliminary highlights of our continuing progress towards building a more sustainable snacking company. Continue to believe that helping to drive positive change at scale is an integral part of value creation. With positive returns for our stakeholders. We encourage you to watch [indiscernible] which will be published in April to view our full year sustainability data. Turning to Slide nine, I'd like to reinforce our conviction that Mondelez remains well positioned to navigate through a very dynamic operating environment. Like many other companies, we are closely tracking and planning around several near term teams including variations in consumer confidence, foreign exchange volatility, potential changes in trade policy, and pricing negotiations.

All against the backdrop of record cocoa prices. By focusing on our strengths and controlling our controllables, we're confident that we have the right strategy the right execution and the right people to effectively navigate these headwinds. Our teams have undertaken extensive planning since last spring for the challenges created by record cocoa inputs costs. We have a clear and sound strategy to navigate these conditions. Which Luca will describe in more detail in a few minutes. At the same time, our categories remain resilient. And consumers continue to prioritize our iconic snacking brands. We remain committed to reinvesting in our brands and capabilities to continue accelerating this momentum. We also continue to focus on expanding distribution opportunities in both developed and emerging markets. And our disciplined approach to capital allocation gives us confidence that we will continue to generate strong free cash flow. In conclusion, I'm pleased to reiterate that 2024 was another strong year and that we are well positioned to continue driving attractive growth. While the road ahead will not be without challenges, our team is at its best when we are united and clear about what we need to do. By continuing to double down our attractive core categories of chocolate, biscuits and baked snacks, investing in our widely loved brands, Focusing on operational execution and cost discipline, and empowering our great people.

I am confident that we can deliver strong performance for years to come. With that, I'll turn it over to Luca to share additional insights on our financials. In 2024, we delivered strong results. From top to bottom, We posted balanced growth across developed and emerging markets, we grew gross profit dollars by mid single digits. Adjusted EPS growth was double digit. And free cash flow was once again quite good. This was a continuation of our virtual cycle which enables us to maintain strong growth important reinvestments and strong return of capital back to shareholders. Revenue growth was 4.3% in the year. With volume mix down one point For the quarter, growth was more than 5%. With a slight increase in volume mix.

Emerging markets grew by 6.2% for the and 6.7% for the quarter, with trends coming from a substantial number of key countries, including China, Brazil, South Africa, the Western Andean and Central And Eastern Europe. Developed markets grew 3.2% for the year and 4.3% for the quarter including strong growth from Europe and solid results from The U. S. Moving to portfolio performance on Slide 12. Our chocolate and biscuit businesses both delivered good growth for the year. Also, gum and candy continued to perform well. Biscuits grew 1.7% for the year and 2.1% for the quarter. Several brands delivered attractive growth for 2024 including Oreo, Ritz, Velveeta, Pate, Seven Days, Club Social and Perfect Snacks. Chocolate grew 7.4% for the year and 8.9% for the quarter, with significant growth across both developed and emerging markets. Volumes mix declined 2% for the year and 2.3% in the quarter Our two flagship global brands Cabrudelli, Milka and Milka delivered outstanding growth. While we also delivered strong growth with our local including Lacta, Cordero, Fraya and Marabu. Gum and Candy grew more than 7% for the year and nearly 9% for quarter.

Key markets including China, Brazil and Western Andean all performed well. Let's review market share performance on Slide 13.

We held or gained share in 50% of our revenue base. With strong results in both chocolate and biscuits. Although there is more work to do, we made strong progress in the back half of the year including the last three months, as approximately 17% of revenue had or gained share due to improvements in North America biscuits. Strong brand reinvestment revenue growth management initiative and solid execution had tried recent improvements. Moving to regional performance on Slide 14. Europe grew 5.7% for the year and 7.4 Strong execution, including pricing, led to attractive growth despite significant customer disruption in F1. $5 in 2024 were up 8.8% for the year, and down more than 40% in Q4. The sharp decline in European Q4 profit was driven by the dramatic in our cocoa cost pipeline, which without the benefit of additional pricing and cost measures that are expected in 2025. North America grew 1.5% for the full year, while Q4 grew 0.4%. Full year growth was driven by solid performance across a number of brands and growth channels. In Q4, volume mix grew 1.3 percentage points driven by growth in our new fresh tax price packs as well as trends from Bates and Perfect Snacks.

Overall, we saw a good start with the rollout of the new price packs in Oryochip Sahoi and Reed's. We entered 25 encouraged by our new price packs, expectations for category growth, and initiatives around growth channel, trade programs and new distribution growth. North America increased 0.4% for the year. For the quarter, OI decreased 11.5%. This decline was a result of higher trade spend, some cost pressure, particularly as we ramp up production of the newly launched price point SKU and a settlement of a legal case. EMEA grew 6.2% for the year and 8.6% for the quarter. With solid volume mix growth to finish the year. China grew high single digits for the year end quarter. Australia posted strong growth for both the year and quarter as well as Southeast Asia returned to growth in Q4. India delivered low single digit growth for the year and quarter. As strength in chocolate was offset by soft biscuits results. We are encouraged by work being done in India and in the biscuits business specifically around smaller packs and lower price points as we head into 2025. EMEA increased OI dollars by 13.4% for the year, while OI declined 28% in Q4.

Resulting from unfavorable COCO phasing.

Latin America grew 4.6% for the year and 4.9% for the quarter, behind solid performance from Brazil and the Western Andean group of countries. Latin America delivered another strong year of profitability. OI grew 10.7% for the year while declining 5.7% for Q4. Profitability was lower in the quarter driven by COCO. Turning to Page 15. For the year, we delivered strong high single digit high dollar growth. This growth enables significant level of reinvestment in our brands and capabilities for 2025 and beyond.

In Q4, we saw a notable decline in OI dollars growth.

This decline was primarily a result of unfavorable COCO pipeline that we noted in our Q3 call. [indiscernible] pricing or overheads reduction which we expect to initiate in 2025. Next, to EPS on Slide 16. Full year EPS grew 13% in constant currency. The significant majority of this growth was driven by operating gains. And despite currency headwinds, we we grew adjusted EPS at reported ForEx by more than 9%. Q4 EPS growth declined due to previously mentioned spike in the cost [indiscernible] Turning to Slide 17. We delivered $3,500,000,000 of free cash flow for the full year, including the settlement of the EU Commission matter of nearly $400,000,000 We returned $4,700,000,000 in cash to shareholders through dividends and share repurchase. With nearly half of our share repurchase coming in Q4. Consistent with our capital allocation priorities, we announced a new $9,000,000,000 share repurchase authorization in December. Which runs from '25 through '27. We continue to be opportunistic buyers of our stock. At depressed levels given our view of the intrinsic value. Before we get into the details of our outlook, let me provide additional thoughts on Cocoa. The market continues to show signs of volatility. And has reverted to elevated levels during much of the past three months.

Despite a good main crop, several factors have contributed to this situation, including concerns about the meat crop in the Ivory Coast, ongoing low liquidity and low industry coverage. This backdrop has created more pressure on our P and L for 2025 it relates to the portion that was still unhedged or protected through flexible structures at the time we spoke to you back, in the Q3 call.

Although we cannot predict specific timing, we continue to believe that the inverted nature of the market combined with over demand levels due to higher pricing and elasticity will eventually bring cocoa to a more sustainable price level. As Dave mentioned, we have been planning our 25 business for some time [indiscernible] in advance on our elevated levels of cocoa. And we have developed a clear and comprehensive chocolate strategy. This includes leveraging a robust RGM playbook, strong marketing and sales execution, remaining agile, with the right incentives and targeted cost savings. A few words on twenty twenty five. And key planning assumptions.

On Slide 20.

For the current year, we expect to deliver on our long term algorithm for revenue. We currently expect top line to be approximately 5%. We have planned for higher levels of elasticity in chocolate but we need to remain agile and assess the situation as new prices get implemented. We expect an adjusted EPS decline this year given the [indiscernible] This decline is expected to be approximately 10%. Versus the base of 3.36% in 2024, That excludes JDE feeds from the equity income. This outlook does not include the impact of the potentially significant new executive orders imposing 25% tariffs on U. S. Imports from Mexico and Canada. This would create an additional headwind to the business but given the fluid and rapidly changing nature of timing, is difficult to provide a reliable estimate of impact for the full year at this time. Overall, we believe this outlook is a prudent planning stance based on our visibility to cocoa costs in 2025. Is substantially protected and hedged at this point. This assumption is based on the principles I just discussed. Based on our view of earnings, we are planning for free cash flow of $3,000,000,000 plus. In terms of other key assumptions, for inflation, we expect a double digit increase for twenty point five percent twenty twenty four.

Driven almost entirely by Cocoa as well as some labor costs. In terms of interest expense, we expect approximately $350,000,000 We expect an adjusted effective tax rate in the mid-20s. Note that our cash tax rate is expected to run approximately two points lower than this rate. And for share repurchase, we are expecting at least $3,000,000,000 with the flexibility to go higher depending on stock price. We are expecting approximately $12 of EPS headwind related to ForEx for the year. Before opening up for Q and A, a few comments on 2026. In 2025, we are trying to strike the right balance by running a reasonable P and L. While taking a responsible and thoughtful approach to maintaining the health of the chocolate category. In that context, we continue to scrutinize every dollar we spend, including A and C, [indiscernible] where we'll continue to prioritize brand investments. And properly support brands as long as we believe the return is sufficient. We do expect EPS growth in 2026 based on cocoa levels staying elevated but stable. Cocoa futures might come down, but we're not there yet. So we will continue to plan various scenarios with the base case for a combination of elevated levels.

If cocoa stays high, we would expect to gradually price more. If cocoa starts to come down, then we would expect earnings delivery to be higher. Regardless, we expect EPS growth in 2026. With that, let's open the line for questions. Thank you. At this time, if you would like to ask your question, please press We'll take our first question from Andrew Lazar with Barclays.

Great. Thanks so much. Appreciate it.

Maybe to start, given where COCO has gone in the past few months, maybe you can talk about how that, if at all, sort of changes your approach and chocolate strategy? And with that, the state of the European business, given your largest chocolate market and it seems like even more price will likely be necessary even into '26. Yes, yes. Well, hello, Andrew, and thanks for the question. Well, as it relates to cocoa and chocolate, The first thing I would say that In our eyes, chocolate remains a great snacking category So far, it's been remarkably durable. It's been quite robust in 2024 already with some significant pricing but still healthy volumes.

That's driven by the fact that there is iconic brands, iconic brands that we have and other chefs that are taste of the nation. High brand loyalty, there's very little private label, Consumers [indiscernible] chocolate, that's one of their indulgences that they cannot live without. So we continue to feel that this is a great snacking category. Our view is that despite the short term volatility, [indiscernible] our approach needs to be to protect the category health to protect our share in the category and to protect our brand investment We are seeing some structural change to the cocoa pricing in the cocoa market but we don't think that will continue to the current magnitude. For sure, cocoa prices will remain higher than they've been in the past. But they will come down eventually from the current high to our opinion The other thing I would say is that from our view, we need to protect key price points and thresholds so that consumers can continue to enjoy their chocolate. So that means in emerging markets, we continue to hold The price points of our low unit pricing and in the developed markets, we try to make sure that we have the right entry level We accompany that in 2025 with very strong revenue growth management plans and PPA plans to make sure that the consumers can have consumption at all different price points.

We are going to continue to invest in the category we are optimizing that investment, but we will continue to support our brand strongly Of course, we will do some additional cost measures to protect the bottom line So as I said, we're trying to optimize our A and C investment We're looking at zero overhead or negative overhead growth We have the highest supply chain productivity program in the history of the company for 2025. And we will continue to hedge our chocolate we don't see a reason to change our strategy [indiscernible] So for 2025, we have a very strong agenda. We have an enormous revenue growth management program We have changed the price pack architecture on more than $5,000,000,000 of our net revenue. We have to do significant line pricing, which we are implementing as we speak. If cocoa prices remain elevated where they are today, that might require more pricing in the second half this year and in 2026. But as I said, we think eventually cocoa prices will start to come down There already has been some significant pricing around the world in chocolate and I'm happy to report that the Elasticity sale has held up well So we're looking at a 0.4 elasticity And so far what we've seen even in the places where we've had 15% price increase that holds We are also of course looking at optimizing our promotions We're doing active portfolio management Elasticities, we have estimated around 0.4% I was mentioning.

We will need to remain agile and adapt to the circumstances, but overall, we do believe that we have the right strategy We have very strong activations and innovations also planned. We are launching new flavors, new experiences. We have the biggest seasonal agenda in chocolate. We are starting and launching products in our Biscoff So that also we think will drive consumer interest We are monitoring consumers very closely and that gives us reason for optimism. So far, we don't see any major shifts And if you then look at the P and L of chocolate for '25 our main objective is to protect the category, protect our share And we think we can do that with a reasonable P and L and I'm sure that Luca will talk a little bit more about that. Which includes significant investments and robust activations. And we are not taking any shortcuts for short term gains.

So that's a little bit the way we look at the chocolate. If I translate that to Europe, at this stage, consumer confidence in Europe is pretty [indiscernible] The purchasing power is soft. There is ongoing economic and political uncertainty, of course.

But overall, we feel that the consumer is in a good place, probably in better place as the consumer is in The U. S. The category consumption in chocolate is pretty good. We have very solid value growth, We have good volume growth. We seeing a little bit of deceleration in the last three months, that's because pricing is starting to come And as I said, the elasticities are as expected. For instance, in The UK, we're looking at a 0.37 so far and we've already increased prices by about 15% [indiscernible] I think after we had client disruption in the beginning of the year, we saw a very good business continuation in Europe. We had broad based growth across the region. Chocolate was growing 8% in value over the last three months for us. We had the highest Christmas net revenue in chocolate. Double digit growth We're seeing very nice growth across channels from discounters to world travel retail, and we had a great share performance. So everything so far in Europe is good. And as you can see from the numbers the core and the year looks pretty good. Except of course for the cocoa effect [indiscernible] over time will start to go down as our pricing takes hold.

So for 2025, we have this big RGM agenda We have the activations and promotions. We do assume in our estimate at the moment client disruption the chocolate P and L will gradually improve as pricing takes hold And we still have some significant pricing and PPA to do. But we do believe that we we have the right estimates in our forecast. So [indiscernible] optimistic about the chocolate category. And we do feel that our European business is well prepared to [indiscernible] That's awesome. Thanks so much for that very fulsome answer. And then Luca, just quickly, can you walk us through some of the puts and takes for the 2025 outlook in terms of like phasing around EPS and margins? And although early, how do we think about the key considerations for 2026 that you kind of got into briefly the prepared remarks?

Yes.

Thank you, Andrew.

As far as the 2025 guidance goes, I think we have to start by saying that we feel good about how we ended the year in terms of revenue and growth momentum. As we just said, we feel quite good with the benign elasticities in chop total growth of the categories where we compete was good and importantly I think we were happy to see share momentum picking up. So this is good news given that 70% of the business is non chocolate and we expect a normal year in terms of biscuit, bakeries and other categories. Chocolate profitability is clearly the main concern of the plan. And as I said, in the prepared remarks, the choppered spikes in the last few months have given us a little bit of a headwind compared to what we thought you and we anticipated back in October. So we have beefed up the plan in terms of pricing actions in RGM. And as we just said, we need to continue to strike a good balance, especially in emerging markets between price and volume. To offset some of the profit pressure we have, unprecedented cost measures, I would say, particularly in the productivity area of our manufacturing network.

But we also have reduced overheads and the non working media spending. So our goal is to deliver a plan that is executing well in all non chocolate category. And for chocolate, I think the key will be to minimize the volume implications together with ensuring that we 2025 with a reasonable profit per kilo as a key measure for us to monitor The profit gating throughout 2025 will be more pressured in Q1 given the fact that we are in the midst of negotiations with customer and we haven't implemented the price yet. We feel quite good at this point given the progress we have made and I think you will start seeing profit improvements in terms of sequential improvement versus Q1 and Q4, as we progress throughout the year. And again, the clear goal for us is to end 2025 in a place where to deliver EPS growth in 2026. Clearly, it is quite premature to talk about 2026 but we wanted you to hear very clearly that our goal is to grow EPS for 2026. At this point in time, we see a bifurcation of scenarios into 2026. I believe the most likely scenario is that cocoa prices will come down.

In which case we will have higher earnings upside potential. But if Cocoa stays elevated, we will have to take a little bit more pricing. And our approach over the last few years and in '24 as well is to take multiple pricing actions and to allow consumers to get accustomed to higher levels of pricing. And so we believe that in either case, whether cocoa comes down or stays high, we have a path to delivering EPS growth into 2026.

Thanks so much. Thank you, Andrew.

We'll move next to Ken Goldman with JPMorgan.

Hi, thank you.

In North America, both price and volume mix came in below the street in the fourth quarter. I'm curious can you maybe expand on how you view the general health of the biscuit category here in The U. S. And also your expectations roughly for both volume and price in 2025. In North America in light of how you think about that category and your within. Yes, yes, hi Ken. Well, the consumer in The U. S. Is still quite concerned. The economy, the political situation, and of course inflation. And as we've talked in the past, the value definition has clearly changed in most categories, I would say, but also in the biscuit category. Basically, higher income consumers are trying to buy bigger packs filed lower income consumers are focused on lower unit prices. And also the channel shopping behavior has significantly changed. Would say at this stage, the The U. S. Biscuit category is softer The elasticities are in increasing to a certain degree the category growth in the last three months was 0.6% We did improve our share during that period, but overall, I would call that soft The good news is that the penetration and the volume per trip is holding up There's a number of reasons for that.

First of all, prices have stopped [indiscernible] In fact, prices have probably come down and that's part of what you see in Q4. Because we launched a number of packs at lower price points. And the promo intensity is also increasing. I would say within the category cookies are performing in line with brawler snacking, while crackers are softer. Q4, well, maybe below the market estimates was to our opinion, a solid quarter We had a net revenue growth of 0.4%, volume mix was 1.3%, OI was lower The reasons for that was first of all, we were lapping a lower trade spend last year and we were also lapping some SG and A one timers.

But the good news for us was that we grew biscuit share with more than 30 basis points in Q4. We did a number of innovations. As I mentioned, fresh tax and launched for instance the Chips Ahoy chewing cookie We had very good channel results also The one that was a bit of a decline was give and go. That had to see with the fact that our kids business declined to pre COVID levels. If I look at 25 for the category, I would say, sorry, the pricing possibilities are limited We'll have a little bit We will continue to do PPA for lower price points.

We will have some very strong activations. You'll see the first one with Post Malone on Oreo as as is currently going on. I do think that we will have a good volume growth next year because of those lower price points and the fact that we have underdeveloped channels plus we can drive more penetration of some of our brands. So I think we will combine a good volume growth with lower pricing So maybe our percentage gross profit will come down, but we do think that the dollars that we will generate will be quite strong. So expecting a solid P and L in North America in 2025.

That's helpful. And then quickly, Luca, just on Coco, I think you and Dirk have been using the word eventually. More than usual today. It may be fair, maybe not, but seems like you're incrementally less confident today that Coco is bound to fall in the near term. So I'm curious has anything structurally changed in your view of supply and demand? Or is this just a situation where you have to sort of at least partially just kind of accept the current reality, whether it's justified or not.

Look, I think it is tough for us quite frankly to make sense of the current elevated prices. Yes, it is through the mid crop, which I remind you accounts for 30% of the total year production of [indiscernible] is subdued and there was a little bit of a drier weather than than was anticipated. But reality is as of today, the port arrivals are up almost 25% And I believe even in the worst case scenario of the meat crop being so far we foresee most likely a supply increase compared to last year that is around about 10%. The latest grinding numbers have been quite good and so demand doesn't factor yet major changes, but we start seeing signs, particularly in parts of the world like North America where cocoa consumption is is coming down. And so that should provide, I believe, on a longer term perspective, a little bit of a relief in terms of also demand I think the market is very thin. If you look at the industry is covered by shortly. If you look at volume that ex cat traded daily, it is very, very small. And obviously, in this environment, we see we see particularly speculators to drive cost prices that are elevated.

So look, I think I was really hoping that by now with the main crop behind us and the good numbers, cocoa would be more benign But it isn't. [indiscernible] we have assumed a cocoa price that stays elevated for [indiscernible] it is elevated for $20.26 as well in the sense that we prefer planning that way rather than assuming and having an assumption that drives CPS growth simply because of cocoa coming down We are committing to you that EPS in 2026 will grow either way and we want to be ready for the worst. But quite frankly, given that I believe there will be a surplus between supply and demand in 2025 I believe eventually, Coco will have to come down.

Thank you very much. Thank you, Ken. We'll move next to David Palmer with Evercore ISI.

Thanks. [indiscernible] follow-up on that. You mentioned that you believe that that cocoa prices would return to a more sustainable price level on that. Wondering, whatever that level is, it might not be 3,000 where we were not that long ago and might not be the 10,000 where we're at now, but it let's say 5,000, 6,000, whatever it is, and we get to that place one or two years is it your belief that you will have the ability and that you will ultimately to a point where you're pricing away the dollar Input inflation, and that essentially over a multiyear period, your algorithm will normalize. Is that still your belief?

Yes.

I think what you have to assume is that just picking the numbers that you have quoted, 3,000 and I don't know if you were talking about dollars or GBP, but call it GBP. We will be priced at the level that is higher than that. And so I think the question becomes at that level of cocoa how quickly are we going to Just if any, adjustment is made [indiscernible] And I think as much as there is friction going up, And as much as we have never priced throughout, I would say, the next couple of quarters at the right level of cocoa. It is fine to assume that as COCO starts coming down, our price too will be better than the 3,000 you quoted. And so in that context, our profitability will be quite good and would allow us to have a P and L that makes more than sense. And so I think if COCO comes down, [indiscernible] power is there If copper stays high, which again we don't control, we will have to price a little bit more in 2026. And as I said, in previous question, this approach of multiple pricing waves is the best in terms of getting consumers accustomed to look to new price levels and minimizing elasticity and volume losses.

And then thank you for that. And then just as you're sort of reviewing cocoa prices, and the I would imagine that the visibility on the pass crop is behind us. I'm wondering what are you going to be watching and when will you make up your mind about the need for additional pricing? Like what what sort of timeframes are you kind of under are we under review here? Is this something that you're going to make a decision to pivot by the time we get to the second half of this year? How will that work?

So I think for '25 we are pretty much done in terms of coverage. And what we have assumed at this point is that we will have to take multiple price waves. And there are situations where we have two other situations where we're going to take three price increases As Dirk said, we have an unprecedented amount of RGM, which is come to fruition throughout the year. And so we planning for the current levels of cocoa a series of actions that we will take throughout 2025. Now if we realize that the main profit numbers we we're going to start getting a sense towards September, October If we realize that demand of cocoa in general is coming down and the number of will be coming out throughout the year. But the first half will give us an indication of how much global demand is subdued and in and we will try to understand the price implication on cocoa. We will decide as we go what is best to do for the second part of the year in light of a plausible COCO level for 2026. Quite frankly, we have to remain quite open to understanding what COCO is going to do in 2026.

And as a consequence, we will act accordingly, particularly in the second part of the year.

The first pricing waves according to the level of cocoa that we have today had been taken between October and December in few paces. We are under European negotiations literally as [indiscernible] There might be other pricing waves that will take in the second part of the year depending on our view on 2026 COCO levels.

Thank you. We'll move next to Tom Palmer with Citi.

Hi, thanks for the question.

I wanted to ask a little more on the expected cadence of both earnings and COGS inflation. And specifically on cost inflation, it looks like 4Q 'twenty four we saw a bigger step up Will we then, I guess, thinking through 1Q to 3Q, see a more normal rate then inflation starts to ease based on current futures? And then just given kind of the outsized earnings pressure in 1Q, might be then the main offset be 4Q. I'm just want to make sure we're kind of taking through those moving pieces between cost and pricing. Over the course of the year?

Yes. So the pressure that you saw on profitability in Q4.

It is the fact that COCO WallSpendly high into our P and L in Q4. Your assumption should be that, that level of cocoa keeps until for the full 2025 at this level at this point in time. That's our assumption. So I think you should assume that that level of COCO is equally spread throughout the remaining quarters of 2025. Now the differential in terms of gating profitability of 2025 is that we will have more pricing coming into the P and L. The elevated inflation is going to keep on hitting Q1, Q2, Q3. Obviously, Q4 will be different because there is already elevated level of cocoa in the baseline. The difference is you're going to see sequential price improvement throughout the year, particularly as of Q2, Q3 and Q4. And that will provide benefits to the profitability of the company.

All right. Thanks for that. And I just on the elasticity, you mentioned so far that elasticity was 0.4.

Just any color on what's embedded in guidance at this point?

Thanks.

That is the guidance number. We have seen a elasticities that are a little bit lower than that. We monitor elasticities very closely. I can tell you that In Q3 and Q4, the elasticities for chocolate that we saw was a little bit lower. The current planning assumption 2025 is that elasticity on average is 0.4, point five times And that number is higher than what we have seen in 2020 Thank you. We'll move next to Max Gunport with BNP Paribas.

Hey, thanks for the question.

You mentioned a number of times in this call that you have one of the highest supply chain productivity programs in your history coming up in '25. I was hoping you could just put a bit of a finer point on just how big that program might be? Thanks very much. [indiscernible] The typical targets that we have is about 4% [indiscernible] productivity on our supply chain. And then depending on inflation rates and some other investments we might do, we try translate that into into a net productivity. In the past three, four years, it has been very difficult to reach that 4%, but we are planning to reach that in '25. So gives you an idea. Great. Thanks very much. And then turning back to North America and what you're seeing within your biscuit and cracker categories and I understand your share performance is improving. Consumers still feeling some financial pressure. In The U. S. I didn't hear you speak much to whether or not you think there is a shift away from snacking that's going on due to a consumer that's more focused on health and wellness or a consumer that's more and more likely to be on a GLP-one drug.

So just curious on your view on the broader staffing category. In The U. S. And whether or not there is some headwind to you to consider because of the shift to healthy wellness.

Yes.

Thank you. I would say to our view at the moment, no, we do not necessarily snacking diminishing because there is a shift to health and wellness or there is a decreased consumption in snacking because of GLP-one We've monitored that very carefully and so far there is really no effect that we can tell Within snacking, there might be a shift to more healthier products. But that has been going on for years. And I wouldn't say that in recent years there has been a shift there. In fact, since COVID, the indulgent part in snacking is growing just as fast as the healthy part. So that was different before COVID. So if anything, the indulgent part remains as it was before.

Very much.

We'll now move to our final question from Peter Galbo with Bank of America.

Hey, good afternoon Dirk and Luca. Thanks for the question. I'll keep it relatively short or to one question, but maybe with two parts. So Luca, if I could just kind of hone in on the earnings per share, the actual guidance roughly $2.9 for 2025. And with the clean numbers without JDE, you were three zero eight in 'twenty three and three thirty six in 'twenty four.

I guess the question A, is 2023 probably the right high watermark to use from an earnings per share perspective just given this past year you had some cost favorability at least through the first nine months relative to to price relative to Coco. And so as we're thinking about growing off that $2.90 base, over whatever timeframe, right, '23 is maybe a better high watermark.

Then the second part of that is just what is the path back to that? Can you get to that high watermark with Coco where it is? Currently does that need to come down obviously to hit the number? Not looking to put a timeframe around it, but just if you can kind of unpack what the path back to that is would be helpful. Thanks very much.

So just to be clear, it is not that COCO in 2024 is lower than 2023. It is that cocoa was higher and we price somewhat replacement cost in the first part of the year. And we have been taken advantage of the favorable pipeline compared to market, not compared to 2023. So arguably, the base EPS might be what you saw in the first three quarters of the year provided that COCO comes down to the levels of the first three years and that we hold on to the pricing that we have implemented. So if you're trying to understand by when we can be back on track with a reasonable level of EPS I think the question really becomes at what level of pricing, are we going to be priced particularly in 2026 and what level of cocoa are we going to have into the base P and L of 2026? What I wanted to say, particularly in the previous answers and in the prepared remarks is that either way, are committing to an EPS growth in 2026. If COCO comes down in 2027, in 2026. The earning upside potential that we have will put us back to levels that most likely you saw in the first few quarters of twenty twenty four.

Again, I don't know if Coco will come down at all and that's where our commitment to you is that EPS will grow in 2026. And that's where we are telling you that regardless of the level of COCO, there two options here. Either we price more and we will get there or if Coco retrenches and comes down the earnings power is within our canal.

Great. Thanks very much.

I will now turn the conference back to Mr. Dirk Vandaput for any additional or closing remarks.

Yes. Well, thank you very much. Thank you for attending this call. Looking forward to update you at the end of the first quarter when I assume that we will have much clearer look already at how cocoa is evolving and how the pricing is landing in the markets. And until then, obviously, we're always available to answer any of your questions.

Thank you, everyone.

Thank you. Ladies and gentlemen, this does conclude today's program. Thank you for your participation.