Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Start off here talking about some of the growth rates
Speaker 2: that we saw in the most recent quarter. We did
Speaker 2: see pretty decent revenue growth, particularly on the organic side.
Speaker 2: We have decent growth and margins and of course decent
Speaker 2: growth on the bottom lines. Invest as though, we're raising
Speaker 2: a lot of questions here about what the cost structure
Speaker 2: is going to look like for the quarters going forward
Speaker 2: and whether you can maintain that for your outlook.
Speaker 1: Yes, well, this stage, the costs that are really sort
Speaker 1: of causing us to pay very close attention is in
Speaker 1: the first place, of course, Coco. There's a lot of discussion.
Speaker 1: There's also some sugar and some labor costs. But as
Speaker 1: it relates to the year, I would say on Coco, we're.
Speaker 3: Fully edged now.
Speaker 1: We have a pretty good idea of the sugar costs,
Speaker 1: and labor is also pretty clear to us. So we
Speaker 1: feel that our forecast for the year, staying in line
Speaker 1: with our financial algorithm, is going to be sustainable and
Speaker 1: that we will deliver a year as originally announced.
Speaker 2: On the point though, of cocoa prices, even though you
Speaker 2: may have locked in your prices for the year, if
Speaker 2: we do see prices remain elevated, and most folks in
Speaker 2: the market seem to think that coco's going to kind
Speaker 2: of stay where it is right now for the next
Speaker 2: few months. When does that become an issue for you
Speaker 2: as you start the plan for twenty twenty five and beyond.
Speaker 3: Well, it is already an issue.
Speaker 1: The big question, of course, is how to hedge for
Speaker 1: twenty twenty five. We have a number of different techniques
Speaker 1: that we use. We monitor the market very carefully, and
Speaker 1: then we will lock in the right moments. It is
Speaker 1: expected that coco will come down eventually.
Speaker 3: That's probably going to.
Speaker 1: Be more around the September October timeframe. Why because that's
Speaker 1: when the main cocoa crop will be become clearer and
Speaker 1: people will have an idea what it's going to look like.
Speaker 3: There is a mid crop. There's two crops of coco
Speaker 3: in Africa.
Speaker 1: The mid crop looks like it's pretty good, which we
Speaker 1: are having data around now. That's why you've seen cocoa
Speaker 1: come down a little bit in recent weeks or days,
Speaker 1: and so the big moment is September Oclober.
Speaker 3: In the meantime, coco will go up and down.
Speaker 1: There's not a lot of trading taking place, there's a
Speaker 1: number of traders exiting, so at those moments we will
Speaker 1: take the necessary steps for next year.
Speaker 4: So Derek, is that been that you're hedged throughout the
Speaker 4: rest of this year, Yes, but not in.
Speaker 3: Twenty twenty five. Yeah, already a part of it.
Speaker 1: I can't go into our hedging strategy, of course, but yes,
Speaker 1: we have already taken some positions for.
Speaker 4: Next year based though on the volatility. And I'm assuming
Speaker 4: it's very complicated to hedgemo prices are so whippy like this,
Speaker 4: is that why you're increasing your non chocolate offerings, like
Speaker 4: you need to put more money into that.
Speaker 3: Yeah, well, we will need to continue to support chocolate.
Speaker 1: As you can imagine, even if we hedge well and
Speaker 1: so on, where our cocoa prices this year versus last
Speaker 1: year and where it will be next year.
Speaker 3: Versus this year, there will be an increase.
Speaker 1: So chocolate crisis will continue to increase at least for
Speaker 1: the remainder of this year in twenty five, and so
Speaker 1: we will have to advertise, we will have to promote,
Speaker 1: we will have to support our chocolate business. At the
Speaker 1: same time, seventy percent of our business is not chocolate,
Speaker 1: and that of course, is an opportunity to offset whatever
Speaker 1: could potentially happen with our chocolate business, and so yes,
Speaker 1: pushing that, having new offers, innovative promoting that is going
Speaker 1: to be quite crucial for us to balance the whole equation.
Speaker 2: Well, those are some of the input costs. Let's talk
Speaker 2: about the consumer side of this, Derek. As you know,
Speaker 2: there's been a lot of concern that a lot of
Speaker 2: consumers are scaling back, spending their trading down to slightly
Speaker 2: cheaper brands. And I know that Mandal's had to do
Speaker 2: quite a few promotions. It's not just on the chocolate side,
Speaker 2: but on some of the cookies and biscuits and other
Speaker 2: things out there as well. Is that promotional and those discounts.
Speaker 2: Are those going to continue throughout the rest of the year.
Speaker 3: Yeah, Let me talk with the consumer.
Speaker 1: If you look at the global consumer, I think the
Speaker 1: consumer is gradually getting into a better place. We clearly
Speaker 1: see the consumer confidence in Europe, for instance, going up.
Speaker 1: In the emerging markets, remarkably, consumer confidence is strong and
Speaker 1: off take is strong too. So it's really about the
Speaker 1: US consumer and the US consumer the ones that are
Speaker 1: decreasing their frequency in the category is the lower income consumers,
Speaker 1: they have seen a gradual erosion of their available income,
Speaker 1: and so they need to be very careful about what
Speaker 1: they spend on, when do they spend it, at which
Speaker 1: price level are they going to spend it? And so
Speaker 1: that is clearly the group of consumers that we need
Speaker 1: to pay attention to. And yes, that means we need
Speaker 1: to have our packet right prices, do the right promotions,
Speaker 1: advertise our brands and so on, and it's really all
Speaker 1: about how do we make sure that these consumers stay
Speaker 1: in our categories, in our brands, and that they do
Speaker 1: that with the right frequency.
Speaker 3: So, yes, that seems so fast.
Speaker 4: Yeah, Derek, that seems a lot like we're going to
Speaker 4: get into a value war. Is that what we're going
Speaker 4: to wind up getting into here, Well.
Speaker 1: We're going to remain clever about that.
Speaker 3: We don't want a value war.
Speaker 1: Again, just like between chocolate and the rest of our business,
Speaker 1: seventy five percent of our businesses outside of the US
Speaker 1: where things are very different, So we.
Speaker 3: Don't need to go into a value war in the US.
Speaker 1: It's not necessarily about getting into a war about against
Speaker 1: our competition. It's about the fact that the consumer as
Speaker 1: soon as you surpass a certain price point, they switch off,
Speaker 1: and it's going to be about hitting those price points
Speaker 1: and making sure that that generation of interest for them.
Speaker 2: In order to maintain that interest and generate that interest
Speaker 2: going beyond just price. There's a question of availability, and
Speaker 2: I know last year you guys had to make some
Speaker 2: changes with your distribution points to make sure that people
Speaker 2: who wanted your snacks actually had the ability to get them.
Speaker 2: Are you still expanding those distribution points out this year?
Speaker 1: Yes, we are, and in fact we're doing that in
Speaker 1: most of our markets.
Speaker 3: Even in the US.
Speaker 1: Last year we lost some what we call TDPs, that
Speaker 1: is distribution points, so we're getting those back in these
Speaker 1: months as we are right now, and at the same
Speaker 1: time around the world, but mainly in the big emerging markets.
Speaker 1: The opportunity for us to complement our same store sales
Speaker 1: and growth that we have with news stores is a
Speaker 1: huge opportunity for us. So for in just in this
Speaker 1: first quarter, we've added one hundred thousand news stores globally
Speaker 1: to our range of our products are being sold.
Speaker 2: All right, Derek, we only have time for one more question.
Speaker 2: I have to ask you the question that I think
Speaker 2: every food maker, snack maker is being asked, and that
Speaker 2: is about the rise of weight loss drugs. These GLP
Speaker 2: one inhibitors that at least for a certain cohort of
Speaker 2: people out there, are reducing their appetites and theory the
Speaker 2: amount of money that they're spending on products like yours.
Speaker 2: Are you seeing an impact?
Speaker 1: No, we're not seeing an impact, as you can imagine.
Speaker 1: We monitor this quite carefully. We have models, we discuss
Speaker 1: with the drug makers. We follow very carefully the consumers
Speaker 1: that are on the drugs, how do their habits change?
Speaker 3: And for us, knowing the things that we.
Speaker 1: Know today and the curve that we see of adoption
Speaker 1: of the drug, everything is in line with our models,
Speaker 1: and those models predict that in ten years time it
Speaker 1: will have an effect of between zero point five to
Speaker 1: one percent of our volume, which is basically a margin
Speaker 1: of error for us. So now things can change, But
Speaker 1: so far we've been monitoring this for the last year.
Speaker 1: We do it every quarter. Things have not been different
Speaker 1: than what we have been forecasting.