WEBVTT - Mondelez International CEO Talks Cocoa Prices, Weight Loss Drugs

0:00:02.400 --> 0:00:07.200
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:07.120 --> 0:00:09.280
<v Speaker 2>Start off here talking about some of the growth rates

0:00:09.280 --> 0:00:11.440
<v Speaker 2>that we saw in the most recent quarter. We did

0:00:11.440 --> 0:00:14.840
<v Speaker 2>see pretty decent revenue growth, particularly on the organic side.

0:00:14.960 --> 0:00:17.160
<v Speaker 2>We have decent growth and margins and of course decent

0:00:17.239 --> 0:00:19.840
<v Speaker 2>growth on the bottom lines. Invest as though, we're raising

0:00:19.840 --> 0:00:22.040
<v Speaker 2>a lot of questions here about what the cost structure

0:00:22.400 --> 0:00:24.880
<v Speaker 2>is going to look like for the quarters going forward

0:00:25.120 --> 0:00:28.000
<v Speaker 2>and whether you can maintain that for your outlook.

0:00:29.760 --> 0:00:36.080
<v Speaker 1>Yes, well, this stage, the costs that are really sort

0:00:36.120 --> 0:00:40.199
<v Speaker 1>of causing us to pay very close attention is in

0:00:40.240 --> 0:00:42.919
<v Speaker 1>the first place, of course, Coco. There's a lot of discussion.

0:00:42.960 --> 0:00:46.360
<v Speaker 1>There's also some sugar and some labor costs. But as

0:00:46.400 --> 0:00:49.960
<v Speaker 1>it relates to the year, I would say on Coco, we're.

0:00:49.920 --> 0:00:51.160
<v Speaker 3>Fully edged now.

0:00:52.240 --> 0:00:54.720
<v Speaker 1>We have a pretty good idea of the sugar costs,

0:00:54.840 --> 0:00:58.120
<v Speaker 1>and labor is also pretty clear to us. So we

0:00:58.240 --> 0:01:01.920
<v Speaker 1>feel that our forecast for the year, staying in line

0:01:01.960 --> 0:01:06.880
<v Speaker 1>with our financial algorithm, is going to be sustainable and

0:01:06.920 --> 0:01:09.720
<v Speaker 1>that we will deliver a year as originally announced.

0:01:10.040 --> 0:01:12.319
<v Speaker 2>On the point though, of cocoa prices, even though you

0:01:12.400 --> 0:01:15.040
<v Speaker 2>may have locked in your prices for the year, if

0:01:15.080 --> 0:01:19.200
<v Speaker 2>we do see prices remain elevated, and most folks in

0:01:19.200 --> 0:01:21.160
<v Speaker 2>the market seem to think that coco's going to kind

0:01:21.200 --> 0:01:22.760
<v Speaker 2>of stay where it is right now for the next

0:01:22.760 --> 0:01:25.600
<v Speaker 2>few months. When does that become an issue for you

0:01:25.640 --> 0:01:28.200
<v Speaker 2>as you start the plan for twenty twenty five and beyond.

0:01:29.520 --> 0:01:32.320
<v Speaker 3>Well, it is already an issue.

0:01:32.600 --> 0:01:35.880
<v Speaker 1>The big question, of course, is how to hedge for

0:01:36.000 --> 0:01:39.760
<v Speaker 1>twenty twenty five. We have a number of different techniques

0:01:39.800 --> 0:01:45.120
<v Speaker 1>that we use. We monitor the market very carefully, and

0:01:45.200 --> 0:01:48.440
<v Speaker 1>then we will lock in the right moments. It is

0:01:48.520 --> 0:01:52.040
<v Speaker 1>expected that coco will come down eventually.

0:01:52.440 --> 0:01:53.600
<v Speaker 3>That's probably going to.

0:01:53.560 --> 0:01:58.120
<v Speaker 1>Be more around the September October timeframe. Why because that's

0:01:58.160 --> 0:02:01.240
<v Speaker 1>when the main cocoa crop will be become clearer and

0:02:01.240 --> 0:02:03.080
<v Speaker 1>people will have an idea what it's going to look like.

0:02:03.120 --> 0:02:05.160
<v Speaker 3>There is a mid crop. There's two crops of coco

0:02:05.280 --> 0:02:05.840
<v Speaker 3>in Africa.

0:02:06.280 --> 0:02:09.120
<v Speaker 1>The mid crop looks like it's pretty good, which we

0:02:09.200 --> 0:02:12.440
<v Speaker 1>are having data around now. That's why you've seen cocoa

0:02:12.440 --> 0:02:15.240
<v Speaker 1>come down a little bit in recent weeks or days,

0:02:15.760 --> 0:02:18.720
<v Speaker 1>and so the big moment is September Oclober.

0:02:18.760 --> 0:02:21.040
<v Speaker 3>In the meantime, coco will go up and down.

0:02:21.080 --> 0:02:24.560
<v Speaker 1>There's not a lot of trading taking place, there's a

0:02:24.639 --> 0:02:28.320
<v Speaker 1>number of traders exiting, so at those moments we will

0:02:28.480 --> 0:02:30.560
<v Speaker 1>take the necessary steps for next year.

0:02:31.320 --> 0:02:33.560
<v Speaker 4>So Derek, is that been that you're hedged throughout the

0:02:33.600 --> 0:02:37.040
<v Speaker 4>rest of this year, Yes, but not in.

0:02:37.080 --> 0:02:42.120
<v Speaker 3>Twenty twenty five. Yeah, already a part of it.

0:02:42.200 --> 0:02:44.600
<v Speaker 1>I can't go into our hedging strategy, of course, but yes,

0:02:44.639 --> 0:02:47.240
<v Speaker 1>we have already taken some positions for.

0:02:47.240 --> 0:02:50.760
<v Speaker 4>Next year based though on the volatility. And I'm assuming

0:02:50.800 --> 0:02:53.679
<v Speaker 4>it's very complicated to hedgemo prices are so whippy like this,

0:02:54.720 --> 0:02:57.480
<v Speaker 4>is that why you're increasing your non chocolate offerings, like

0:02:57.520 --> 0:02:59.519
<v Speaker 4>you need to put more money into that.

0:03:01.400 --> 0:03:05.000
<v Speaker 3>Yeah, well, we will need to continue to support chocolate.

0:03:05.040 --> 0:03:07.840
<v Speaker 1>As you can imagine, even if we hedge well and

0:03:07.880 --> 0:03:11.400
<v Speaker 1>so on, where our cocoa prices this year versus last

0:03:11.440 --> 0:03:13.519
<v Speaker 1>year and where it will be next year.

0:03:13.480 --> 0:03:15.360
<v Speaker 3>Versus this year, there will be an increase.

0:03:15.400 --> 0:03:20.000
<v Speaker 1>So chocolate crisis will continue to increase at least for

0:03:20.320 --> 0:03:22.480
<v Speaker 1>the remainder of this year in twenty five, and so

0:03:22.560 --> 0:03:25.400
<v Speaker 1>we will have to advertise, we will have to promote,

0:03:25.480 --> 0:03:27.760
<v Speaker 1>we will have to support our chocolate business. At the

0:03:27.840 --> 0:03:30.760
<v Speaker 1>same time, seventy percent of our business is not chocolate,

0:03:31.120 --> 0:03:34.640
<v Speaker 1>and that of course, is an opportunity to offset whatever

0:03:35.040 --> 0:03:38.320
<v Speaker 1>could potentially happen with our chocolate business, and so yes,

0:03:38.840 --> 0:03:43.200
<v Speaker 1>pushing that, having new offers, innovative promoting that is going

0:03:43.280 --> 0:03:46.800
<v Speaker 1>to be quite crucial for us to balance the whole equation.

0:03:47.120 --> 0:03:49.040
<v Speaker 2>Well, those are some of the input costs. Let's talk

0:03:49.080 --> 0:03:51.240
<v Speaker 2>about the consumer side of this, Derek. As you know,

0:03:51.320 --> 0:03:53.200
<v Speaker 2>there's been a lot of concern that a lot of

0:03:53.200 --> 0:03:56.680
<v Speaker 2>consumers are scaling back, spending their trading down to slightly

0:03:56.760 --> 0:03:59.120
<v Speaker 2>cheaper brands. And I know that Mandal's had to do

0:03:59.200 --> 0:04:01.440
<v Speaker 2>quite a few promotions. It's not just on the chocolate side,

0:04:01.440 --> 0:04:03.560
<v Speaker 2>but on some of the cookies and biscuits and other

0:04:03.560 --> 0:04:07.320
<v Speaker 2>things out there as well. Is that promotional and those discounts.

0:04:07.320 --> 0:04:09.200
<v Speaker 2>Are those going to continue throughout the rest of the year.

0:04:11.240 --> 0:04:13.360
<v Speaker 3>Yeah, Let me talk with the consumer.

0:04:13.400 --> 0:04:16.000
<v Speaker 1>If you look at the global consumer, I think the

0:04:16.000 --> 0:04:19.440
<v Speaker 1>consumer is gradually getting into a better place. We clearly

0:04:19.480 --> 0:04:22.240
<v Speaker 1>see the consumer confidence in Europe, for instance, going up.

0:04:23.200 --> 0:04:28.080
<v Speaker 1>In the emerging markets, remarkably, consumer confidence is strong and

0:04:28.120 --> 0:04:30.560
<v Speaker 1>off take is strong too. So it's really about the

0:04:30.640 --> 0:04:34.800
<v Speaker 1>US consumer and the US consumer the ones that are

0:04:35.520 --> 0:04:40.080
<v Speaker 1>decreasing their frequency in the category is the lower income consumers,

0:04:40.120 --> 0:04:44.920
<v Speaker 1>they have seen a gradual erosion of their available income,

0:04:45.600 --> 0:04:48.120
<v Speaker 1>and so they need to be very careful about what

0:04:48.160 --> 0:04:50.560
<v Speaker 1>they spend on, when do they spend it, at which

0:04:50.600 --> 0:04:53.000
<v Speaker 1>price level are they going to spend it? And so

0:04:53.279 --> 0:04:55.800
<v Speaker 1>that is clearly the group of consumers that we need

0:04:55.800 --> 0:04:58.440
<v Speaker 1>to pay attention to. And yes, that means we need

0:04:58.480 --> 0:05:02.360
<v Speaker 1>to have our packet right prices, do the right promotions,

0:05:03.160 --> 0:05:06.000
<v Speaker 1>advertise our brands and so on, and it's really all

0:05:06.040 --> 0:05:08.520
<v Speaker 1>about how do we make sure that these consumers stay

0:05:08.560 --> 0:05:11.200
<v Speaker 1>in our categories, in our brands, and that they do

0:05:11.279 --> 0:05:12.560
<v Speaker 1>that with the right frequency.

0:05:13.320 --> 0:05:15.000
<v Speaker 3>So, yes, that seems so fast.

0:05:15.120 --> 0:05:17.039
<v Speaker 4>Yeah, Derek, that seems a lot like we're going to

0:05:17.040 --> 0:05:19.320
<v Speaker 4>get into a value war. Is that what we're going

0:05:19.360 --> 0:05:22.839
<v Speaker 4>to wind up getting into here, Well.

0:05:22.440 --> 0:05:27.760
<v Speaker 1>We're going to remain clever about that.

0:05:27.920 --> 0:05:29.799
<v Speaker 3>We don't want a value war.

0:05:30.400 --> 0:05:33.480
<v Speaker 1>Again, just like between chocolate and the rest of our business,

0:05:34.160 --> 0:05:37.120
<v Speaker 1>seventy five percent of our businesses outside of the US

0:05:37.160 --> 0:05:39.360
<v Speaker 1>where things are very different, So we.

0:05:39.360 --> 0:05:42.279
<v Speaker 3>Don't need to go into a value war in the US.

0:05:42.880 --> 0:05:46.960
<v Speaker 1>It's not necessarily about getting into a war about against

0:05:46.960 --> 0:05:50.160
<v Speaker 1>our competition. It's about the fact that the consumer as

0:05:50.160 --> 0:05:54.080
<v Speaker 1>soon as you surpass a certain price point, they switch off,

0:05:54.360 --> 0:05:56.760
<v Speaker 1>and it's going to be about hitting those price points

0:05:56.760 --> 0:06:00.120
<v Speaker 1>and making sure that that generation of interest for them.

0:06:00.240 --> 0:06:02.800
<v Speaker 2>In order to maintain that interest and generate that interest

0:06:02.839 --> 0:06:05.919
<v Speaker 2>going beyond just price. There's a question of availability, and

0:06:06.000 --> 0:06:07.680
<v Speaker 2>I know last year you guys had to make some

0:06:07.760 --> 0:06:11.040
<v Speaker 2>changes with your distribution points to make sure that people

0:06:11.040 --> 0:06:13.880
<v Speaker 2>who wanted your snacks actually had the ability to get them.

0:06:13.920 --> 0:06:17.000
<v Speaker 2>Are you still expanding those distribution points out this year?

0:06:18.720 --> 0:06:20.920
<v Speaker 1>Yes, we are, and in fact we're doing that in

0:06:21.000 --> 0:06:21.960
<v Speaker 1>most of our markets.

0:06:22.000 --> 0:06:22.840
<v Speaker 3>Even in the US.

0:06:23.160 --> 0:06:25.560
<v Speaker 1>Last year we lost some what we call TDPs, that

0:06:25.680 --> 0:06:29.520
<v Speaker 1>is distribution points, so we're getting those back in these

0:06:29.720 --> 0:06:33.280
<v Speaker 1>months as we are right now, and at the same

0:06:33.360 --> 0:06:36.800
<v Speaker 1>time around the world, but mainly in the big emerging markets.

0:06:36.839 --> 0:06:41.039
<v Speaker 1>The opportunity for us to complement our same store sales

0:06:41.080 --> 0:06:43.720
<v Speaker 1>and growth that we have with news stores is a

0:06:43.800 --> 0:06:46.279
<v Speaker 1>huge opportunity for us. So for in just in this

0:06:46.400 --> 0:06:50.240
<v Speaker 1>first quarter, we've added one hundred thousand news stores globally

0:06:50.360 --> 0:06:52.880
<v Speaker 1>to our range of our products are being sold.

0:06:52.960 --> 0:06:54.800
<v Speaker 2>All right, Derek, we only have time for one more question.

0:06:54.880 --> 0:06:56.400
<v Speaker 2>I have to ask you the question that I think

0:06:56.440 --> 0:06:59.359
<v Speaker 2>every food maker, snack maker is being asked, and that

0:06:59.480 --> 0:07:02.320
<v Speaker 2>is about the rise of weight loss drugs. These GLP

0:07:02.520 --> 0:07:05.520
<v Speaker 2>one inhibitors that at least for a certain cohort of

0:07:05.560 --> 0:07:08.920
<v Speaker 2>people out there, are reducing their appetites and theory the

0:07:08.960 --> 0:07:11.720
<v Speaker 2>amount of money that they're spending on products like yours.

0:07:11.760 --> 0:07:12.920
<v Speaker 2>Are you seeing an impact?

0:07:14.400 --> 0:07:17.720
<v Speaker 1>No, we're not seeing an impact, as you can imagine.

0:07:17.760 --> 0:07:22.520
<v Speaker 1>We monitor this quite carefully. We have models, we discuss

0:07:22.880 --> 0:07:27.080
<v Speaker 1>with the drug makers. We follow very carefully the consumers

0:07:27.080 --> 0:07:29.840
<v Speaker 1>that are on the drugs, how do their habits change?

0:07:30.320 --> 0:07:33.080
<v Speaker 3>And for us, knowing the things that we.

0:07:32.960 --> 0:07:35.880
<v Speaker 1>Know today and the curve that we see of adoption

0:07:36.000 --> 0:07:38.360
<v Speaker 1>of the drug, everything is in line with our models,

0:07:38.720 --> 0:07:41.360
<v Speaker 1>and those models predict that in ten years time it

0:07:41.440 --> 0:07:44.120
<v Speaker 1>will have an effect of between zero point five to

0:07:44.240 --> 0:07:47.600
<v Speaker 1>one percent of our volume, which is basically a margin

0:07:47.680 --> 0:07:51.280
<v Speaker 1>of error for us. So now things can change, But

0:07:51.440 --> 0:07:53.800
<v Speaker 1>so far we've been monitoring this for the last year.

0:07:53.800 --> 0:07:56.440
<v Speaker 1>We do it every quarter. Things have not been different

0:07:56.440 --> 0:07:58.040
<v Speaker 1>than what we have been forecasting.