Mondelez International, Inc. (MDLZ) Earnings

Management highlights

### Emerging Market Performance - Solid structural growth driven by sustained consumer demand for snacking, with stable overall consumer confidence; India and Mexico/Brazil are particularly strong, while China is softer but expected to gradually improve. - Continued aggressive distribution expansion: 100,000 new stores added in India in Q2, 1 million total stores in Brazil, ongoing expansion in China and Southeast Asia, with long runway from underpenetrated categories. - Multi-year reinvestment is paying off; the mix of global brands and local regional brands works across all price tiers, with strong revenue growth management (RGM) and channel buildout. ### North America Performance - Consumer confidence has rebounded from recent lows but remains subdued, with persistent pressure from inflation and energy prices; consumer demand follows a 'case-shaped' pattern, with strong growth in both value channels and premium/better-for-you options. - Sustainable growth supported by disciplined promotional execution, successful innovation (e.g., Ritz Drizzled, Sour Patch Kids Chews, growing Zbar, strong Give and Go performance), optimized price pack architecture across single/multi/variety/club packs, and double-digit growth in advertising and consumer promotion (ANC) reinvestment. - Management expects acceleration of this momentum to continue in the second half of 2026. ### Europe Performance - Chocolate is on a positive volume mix trajectory, with share improving in both volume and value over the past several months; Q2 2026 results were softer than planned due to deliberate inventory controls ahead of an unexpected early heat wave that impacted chocolate consumption. - Biscoff and Milka Croissant are driving strong growth; management is leaning into new channel growth and increasing ANC investment, expecting a top-line and profitability rebound in H2 2026 that sets up 2027 growth. ### Innovation and Strategic Partnerships - Mondelez has shifted to a 'fewer, bigger bets' innovation strategy, combining breakthrough innovation with ongoing product renovation and flavor/seasonal updates; around 10%+ of net revenue comes from innovations launched in the past three years, with management targeting further increases. - Key successful growth areas include health/wellness/functional snack bars, gluten-free and zero sugar offerings, cakes/pastries, and premium indulgent chocolate innovations. - The multi-layer Biscoff collaboration with Lotus Bakery is outperforming expectations: Biscoff-infused chocolate lines have captured 7% market share in Scandinavia and added 3% category growth in Australia, Biscoff biscuit launches in emerging markets (starting with India, which sold out its first production line) are highly successful, and additional extensions (ice cream, filled croissants, Oreo co-branded products) are in development; management expects total collaboration revenue to reach $500 million to $1 billion in the coming years. ### Distribution Expansion - In large emerging markets (India, China, Brazil), roughly 50% of net revenue growth comes from new store distribution expansion and 50% from same-store sales growth, with substantial remaining runway for additional store expansion. - In developed markets like North America, there is still significant untapped distribution opportunity in underpenetrated channels including value channels, convenience, and away-from-home, driven by shifting consumer shopping patterns and targeted product/pack development for these channels.

Guidance

- Full year 2026 organic top-line growth guidance is raised to at least 2%, driven by stronger-than-expected momentum in emerging markets and improving execution in North America; growth is expected to be balanced across Q3 and Q4 2026, with potential for modest upside above the 2% floor, though management is not guiding for a higher target at this time. - Full year 2026 EPS guidance is maintained, as all top-line upside is being reinvested into high-momentum growth areas (distribution expansion, innovation, Biscoff global rollout), and incremental costs from the ongoing Middle East conflict are absorbed into the existing outlook. - EPS in H2 2026 is expected to be back-weighted to Q4, driven by mechanical phasing of cocoa costs (unfavorable phasing in Q3 that reverses in Q4) and lapping of prior year interest and tax items in Q3; gross profit dollar growth is expected to accelerate in both H2 quarters, with EBIT growth in both Q3 and Q4. - Management reaffirms expectations for strong 2027 EPS growth, supported by positive volume mix, sustained emerging market momentum, stabilized European performance, accelerated productivity and cost savings (including AI-enabled overhead efficiencies), and insulation from near-term cocoa volatility. - Gross margin percentage guidance is not provided, but management confirms absolute gross profit dollar growth will accelerate in H2 2026.

Segment performance

The provided transcript does not break out full segment-level absolute financial results or revenue contribution percentages. Key regional performance highlights are shared: Emerging markets delivered 4.4% constant currency top-line growth with strong volume growth, driven by biscuits and chocolates. North America saw accelerating sequential net revenue growth versus Q1 2026, with positive volume mix, and share gains across all Mondelez categories, with high single-digit growth in the value channel and mid-single-digit growth in away-from-home channels. Europe saw soft Q2 results partially due to heat-related chocolate inventory controls, but share is moving positive, with volume growth expected to turn positive in the second half of 2026.

Risks & headwinds

- Persistent macroeconomic pressure in North America: consumer confidence remains subdued, with ongoing concern about affordability, economic outlook, and job security, even as purchasing power has modestly improved. - Cocoa price volatility driven by recent crop output below average, short covering by speculative market participants, and potential impacts of El Niño on 2027 cocoa crops; while management notes the structural cocoa market position is far stronger than 2024 (with a 10% demand surplus and 10 months of industry coverage versus 7 months in 2024), uncertainty around crop outcomes remains. - Unprecedented heat waves in Europe have negatively impacted Q3 2026 chocolate consumption, creating near-term top-line uncertainty for the region. - Ongoing Middle East conflict has created incremental costs and lost revenue, which is factored into the 2026 full year guidance.

Analyst Q&A

• Q: What factors drive sustained strong emerging market growth and what gives management confidence in H2 2026 performance? /

  A: Management attributes the strength to solid structural snacking demand, continued distribution expansion, long runway from underpenetrated categories, and a strong mix of global and local brands across price tiers. Stable overall consumer confidence across key markets (strong India/Mexico/Brazil, gradually improving China) supports the outlook, with growth not dependent on temporary cyclical factors.\n\nQ: Can you elaborate on the sustainability of improving North America performance in H2 2026? / A: North America’s sequential acceleration is driven by disciplined promotion, successful innovation, optimized price pack architecture, and double-digit growth in brand reinvestment. While consumer confidence remains subdued, the company is gaining share across all categories, with strong growth in underpenetrated value and away-from-home channels. Management expects the momentum to continue and accelerate in H2, as reinvestment will be further accelerated.\n\nQ: What explains the 2026 guidance dynamic of an upward revised top-line guide but maintained EPS guide? / A: The top-line upgrade reflects stronger-than-expected momentum across emerging markets, improving North America execution, and nascent volume improvement in Europe. All top-line upside is being reinvested into high-growth areas like Biscoff global distribution expansion and innovation, and the guide already accounts for incremental costs from the Middle East conflict. EPS phasing is back-weighted to Q4 due to mechanical cocoa cost phasing and tax/interest lapping, which is not a structural concern.\n\nQ: What is the current positioning around cocoa prices and 2027 cocoa risk? / A: While cocoa prices have risen recently due to below-average early crop counts, speculative short covering, and El Niño concerns, the structural market is far stronger than 2024. There is a 10% global supply surplus, industry inventory coverage is 10 months (up from 7 months in 2024), and there is still time for the 2026-27 crop to improve. Mondelez 2027 earnings are insulated from volatility via multiple levers, including productivity gains and a gradual shift to less cocoa-intensive portfolio offerings.\n\nQ: Why does a mature market like North America still have meaningful distribution growth opportunity, and what is Mondelez doing to capture it? / A: Historically, Mondelez prioritized traditional grocery channels over value, convenience, and away-from-home, but consumer migration to these channels has created new opportunity. The company has developed tailored packs and adjusted margin structures for value channels, shifted to direct coverage for convenience (versus historical broker coverage) to grow share, and made away-from-home a new global priority. Management expects this distribution expansion runway to last for multiple years.