Executive Summary / Key Takeaways

• Strategic Resilience Amidst Headwinds: Mondelēz International ($MDLZ) is demonstrating robust resilience, leveraging its iconic global snacking brands and strategic operational enhancements to counter significant macroeconomic pressures and unprecedented cocoa inflation. The company's proactive revenue growth management (RGM) and price pack architecture (PPA) strategies are proving effective in maintaining market share and managing elasticities.
• Operational and Technological Transformation: A multi-year, $1.2 billion ERP system implementation and a new North America supply chain program are foundational to driving long-term operational excellence and cost efficiencies. These technological investments are critical differentiators, enhancing agility and responsiveness across its global operations.
• Mixed Regional Performance with Emerging Market Strength: While North America faces consumer anxiety and a softer biscuit market, Europe is showing signs of improvement after initial elasticity challenges. Emerging markets, particularly Brazil and China, continue to be strong growth engines, underscoring the benefits of MDLZ's diversified global footprint.
• Outlook for 2026: High Single-Digit EPS Growth Targeted: Despite an anticipated Adjusted EPS decline of approximately 15% (constant currency) in 2025 due to cocoa costs, management is targeting high single-digit EPS growth for 2026. This confidence is underpinned by expected cocoa deflation, continued strategic investments, and a disciplined capital allocation strategy, including substantial share repurchases.
• Key Risks and Opportunities: Persistent inflation, geopolitical uncertainties, and potential trade tariffs remain notable risks. However, MDLZ's focus on brand investment, product innovation (including healthier options), and expanding digital and value channels presents significant opportunities for sustained market leadership and value creation.

The Global Snacking Powerhouse: A Foundation for Growth

Mondelēz International, Inc. stands as a global leader in the snack food and beverage industry, built upon a rich history of strategic acquisitions and continuous brand development. Originating as Kraft Foods Inc. in 2000 and rebranding to Mondelēz International in 2012, the company has meticulously curated a portfolio of iconic brands such as Oreo, Ritz, LU, Cadbury Dairy Milk, and Milka. This foundation, strengthened by key acquisitions like Nabisco, Groupe Danone's LU biscuit business, and Cadbury Limited, positions Mondelēz at the forefront of the global snacking landscape.

The company's overarching strategy centers on accelerating consumer-centric growth, driving operational excellence, fostering a winning growth culture, and scaling sustainable snacking initiatives. This approach leverages its attractive global footprint, a strong core of beloved brands, and sophisticated marketing, sales, and distribution capabilities. In a dynamic global market characterized by fluctuating consumer demand, inflationary pressures, and geopolitical uncertainties, Mondelēz's diversified portfolio and strategic agility are crucial. The company's historical journey, including the multi-year "Simplify to Grow Program" which concluded in December 2024, and recent acquisitions like Evirth Shanghai Industrial Co., Ltd. in China, underscore its commitment to adapting and expanding its core categories of chocolate, biscuits, and baked snacks.

Competitive Landscape and Strategic Positioning

Mondelēz operates within a highly competitive global food and beverage industry, facing direct competition from diversified giants like Nestle S.A. (NSRGY) and PepsiCo, Inc. (PEP), as well as specialized confectionery players such as The Hershey Company (HSY), and packaged food companies like The Kraft Heinz Company (KHC). Mondelēz's market positioning is largely defined by its strong global brand portfolio and extensive distribution networks, which serve as significant competitive advantages.

Compared to Nestle, Mondelēz excels in brand affinity within confectionery, emphasizing enjoyment over Nestle's broader health and wellness focus. This allows Mondelēz to command strong customer loyalty and pricing power for its indulgent treats. Against PepsiCo, while both engage in digital marketing, Mondelēz differentiates through its heritage brands and specialized snack offerings, carving out a unique value proposition in the confectionery market. In the chocolate segment, Mondelēz's global reach with brands like Milka provides a superior market positioning compared to Hershey's more U.S.-centric approach. However, Mondelēz faces vulnerabilities, particularly its exposure to raw material price fluctuations, which can impact profitability more acutely than for highly diversified players. Furthermore, while it is adapting, Mondelēz may lag behind some competitors in the speed of health-focused innovation, potentially limiting growth in wellness-driven segments where rivals like Nestle lead. The company's strategic response involves leveraging its brand strength and distribution to maintain market share, while also addressing cost efficiencies and expanding into new product areas.

Technological Differentiation and Operational Excellence

Mondelēz's competitive edge is increasingly underpinned by significant investments in operational technology and data-driven capabilities, rather than a single proprietary product technology. A cornerstone of this is the multi-year ERP System Implementation, a $1.2 billion program approved in July 2024, designed to upgrade global ERP and supply chain systems. This initiative, expected to conclude by year-end 2028, aims to streamline operations, enhance data visibility, and improve decision-making across the enterprise. The operating expenses associated with this program represent incremental transformational costs, signaling a substantial commitment to modernizing its technological backbone.

Further bolstering its operational prowess is a new multi-year North America supply chain program. This program focuses on automating bakeries and optimizing the direct-store-delivery (DSD) logistics system through fewer distribution centers and increased automation. This initiative is projected to yield meaningful impacts by 2027, addressing capacity constraints, reducing costs, and significantly improving service levels and inventory management for retailers. These investments in supply chain and ERP systems are critical for driving efficiency, reducing operational costs, and enhancing responsiveness to market demands, thereby strengthening Mondelēz's competitive moat.

The company also leverages advanced Revenue Growth Management (RGM) capabilities to optimize pricing and promotional strategies. This data-driven approach allows Mondelēz to make surgical adjustments to price points and pack architecture (PPA), as evidenced by the introduction of new "fresh stacks" price packs in the U.S. in 2024 to hit lower price points (e.g., below $3). This RGM sophistication helps manage price elasticity and maximize profitability across diverse market conditions. In the digital realm, Mondelēz is actively investing in e-commerce capabilities, achieving double-digit growth in its e-commerce business in 2024 and seeing approximately 35% growth in its next-tier markets, demonstrating its commitment to leading in digital snacking.

Product innovation, often a result of R&D and technological application, is another key differentiator. Recent examples include the launch of the Cadbury Dairy Milk Biscoff bar in the UK in Q1 2025, and collaborations like Oreo with Post Malone and REESE'S with OREO® in July 2025. The company is also expanding into healthier options, such as Zero Oreo, gluten-free Oreo and Tate's, and protein-related bars like Builder's and Perfect Bar, alongside its Hu vegan chocolate brand. These innovations cater to evolving consumer preferences and expand market reach.

Finally, Mondelēz is scaling sustainable snacking initiatives through programs like Cocoa Life, which sourced 91% of its cocoa volume by Q1 2025. The company has also reduced end-to-end carbon emissions by 12% against a 2018 baseline and achieved a 38% reduction in manufacturing operations emissions. Its "Light and Right" packaging strategy ensures approximately 96% of its packaging is recyclable. These sustainability efforts, including its partnership with the 100+ Accelerator, not only address environmental and social responsibilities but also enhance brand reputation and operational efficiency, contributing to long-term value creation.

Financial Performance and Operational Highlights (Q3 2025)

Mondelēz International's recent financial performance reflects a mixed but strategically managed landscape. For the third quarter ended September 30, 2025, the company reported net revenues of $9,744 million, an increase of 5.90% compared to the prior year. Organic Net Revenue, a key non-GAAP measure, grew 3.40% to $9,520 million, primarily driven by higher net pricing, partially offset by unfavorable volume/mix.

However, profitability metrics showed pressure. Operating income decreased by 35.50% to $744 million in Q3 2025, with the operating income margin declining from 12.50% in Q3 2024 to 7.60% in Q3 2025. Adjusted Operating Income margin also saw a notable decrease, from 18.90% in Q3 2024 to 12.00% in Q3 2025. This decline was largely attributed to significantly higher raw material costs, particularly cocoa, and an unfavorable product mix, despite benefits from higher net pricing, reduced advertising and consumer promotion costs, and improved manufacturing productivity.

Net earnings attributable to Mondelēz International fell 12.90% to $743 million, resulting in diluted earnings per share (EPS) of $0.57, down 9.50% from $0.63 in Q3 2024. Adjusted EPS on a constant currency basis decreased 24.20% to $0.72. The effective tax rate for Q3 2025 was 19.70%, a favorable decrease from 28.80% in the prior year, driven by a beneficial jurisdictional mix of earnings and tax benefits from 2024 tax return filings.

Cash flow from operations for the nine months ended September 30, 2025, was $2,117 million, a reduction from $3,451 million in the comparable prior-year period, primarily due to lower cash-basis net earnings and higher working capital movements. The company's debt-to-capitalization ratio increased to 0.45 at September 30, 2025, from 0.40 at December 31, 2024.

Segment Performance:

• Latin America: Net revenues increased 2.80% in Q3 2025 to $1,238 million, driven by higher net pricing, but volume/mix was unfavorable due to pricing elasticity, particularly in Argentina. Segment operating income grew 17.60% to $147 million, benefiting from pricing and lower advertising costs.
• AMEA (Asia, Middle East, and Africa): Net revenues rose 9.00% to $2,017 million in Q3 2025, supported by pricing and the Evirth acquisition. However, segment operating income decreased 40.60% to $199 million, impacted by higher raw material costs and acquisition-related items.
• Europe: This segment saw net revenues increase 10.60% to $3,674 million in Q3 2025, driven by higher net pricing and favorable currency. Despite this, segment operating income declined significantly by 54.50% to $275 million, primarily due to higher raw material costs and unfavorable volume/mix. Management noted that price elasticity in Europe is currently around 0.7-0.8, higher than the expected 0.4-0.5, impacting volumes more than anticipated.
• North America: Net revenues decreased 0.40% to $2,815 million in Q3 2025, with unfavorable volume/mix and currency impacts partially offset by pricing. Segment operating income fell 40.40% to $547 million, affected by lower contingent consideration benefits from Clif Bar, higher raw material costs (including cocoa impacting Oreo and Tate's), and increased ERP system implementation costs. The U.S. biscuit market experienced a 4% volume decline in Q3 2025, reflecting broader consumer anxiety.

Strategic Outlook and Future Growth Drivers

Mondelēz is actively responding to current market dynamics with a clear forward-looking strategy. For the full year 2025, the company has adjusted its outlook to anticipate organic net revenue growth of 4%+ and an Adjusted EPS decline of approximately 15% on a constant currency basis. This revised guidance reflects the ongoing impact of cocoa cost inflation and challenging macroeconomic conditions, particularly in North America. Despite these headwinds, Mondelēz maintains its expectation for Free Cash Flow of $3+ billion in 2025.

Looking further ahead, management is targeting high single-digit EPS growth for 2026. This confidence is rooted in several strategic assumptions and initiatives. Luca Zaramella, CFO, anticipates that cocoa will be deflationary in 2026, which should alleviate significant cost pressures experienced in 2025. The company plans a "big step-up" in working media investments in 2026 to re-establish a virtuous cycle of volume and share growth, while maintaining control over non-working media and overheads.

In Europe, a "significant improvement" is expected from Q4 2025 onwards, driven by seasonal activations and adjustments to pricing strategies to address higher-than-expected elasticities. This includes innovating with new flavors and formats, increasing advertising and consumer promotion (A&C) investments, and enhancing promotional effectiveness. For North America, while the market is projected to remain soft with a 4% volume decline in Q4 2025, targeted pricing strategies and promotions are expected to positively impact both top and bottom lines. The new North America supply chain program is also poised to deliver meaningful operational benefits by 2027. Emerging markets are expected to deliver "continuous growth, volume and price-driven," reinforcing their role as key growth engines.

Mondelēz's capital allocation strategy remains disciplined, with a new $9 billion share repurchase authorization through 2027. The company repurchased approximately $1.8 billion in shares during the first nine months of 2025 and plans at least $3 billion in repurchases for the full year, with flexibility for more depending on stock price. This opportunistic approach to buybacks underscores management's belief in the intrinsic value of the stock.

Risks and Challenges

Despite a robust strategy, Mondelēz faces several pertinent risks. The macroeconomic environment remains volatile, characterized by fluctuating consumer demand, persistent inflation, and geopolitical uncertainties. Elevated cocoa costs are a significant near-term challenge, impacting profitability, particularly in the chocolate segment. While cocoa is expected to be deflationary in 2026, the timing and magnitude of this decline remain uncertain.

Pricing elasticity has proven higher than anticipated in some markets, notably Europe, where it reached 0.7-0.8 compared to an expected 0.4-0.5, leading to unfavorable volume/mix. This necessitates continuous RGM adjustments and careful price gap management against competitors, especially private companies that may not have increased pricing as aggressively. Retailer destocking in the U.S. and a general softening of the U.S. biscuit market also present headwinds, driven by consumer anxiety and a shift towards essential items. Geopolitical risks, including the war in Ukraine and developments in the Middle East, introduce uncertainty regarding operations and sales in affected regions. Furthermore, the company identified five brand intangibles with an aggregate book value of $1.5 billion where fair value exceeded book value by less than 10%, indicating a potential risk of intangible asset impairment if market conditions or performance expectations deteriorate. While management currently views the impact of GLP-1 drugs on snacking volumes as immaterial, this remains a long-term trend to monitor.

Conclusion

Mondelēz International is a resilient snacking leader, strategically positioned to navigate a complex global environment through its iconic brands, operational excellence, and technological investments. Despite facing significant headwinds from cocoa inflation and a cautious consumer in key markets, the company's proactive RGM, PPA, and supply chain initiatives are foundational to its ability to maintain market share and drive efficiency. The commitment to a multi-year ERP system implementation and a new North America supply chain program highlights a deep-seated focus on leveraging technology to enhance competitive advantage and long-term profitability.

While 2025 presents a challenging earnings picture due to unprecedented cocoa costs, the targeted high single-digit EPS growth for 2026, supported by anticipated cocoa deflation and increased brand investments, underscores a clear path to recovery and sustained value creation. The company's diversified geographic footprint, with strong performance in emerging markets offsetting softness in North America, further bolsters its stability. Investors should recognize Mondelēz's strategic agility, its disciplined capital allocation, and its continuous pursuit of innovation and operational efficiency as critical drivers for long-term growth in the dynamic global snacking industry.