Mondelez targets high single-digit EPS growth for 2026 amid pricing actions and channel expansion

Earnings Call Insights: Mondelez International (MDLZ) Q3 2025

MANAGEMENT VIEW

* CEO Dirk Van de Put highlighted ongoing market challenges in Europe, noting, "the chocolate business is fine, but we are clearly seeing a couple of pockets of pressure that we need to address... caused sometimes by competitive situations where our competitors did not increase their pricing as much as we did... and in certain markets, the retailers also suddenly took more margin." He described the effects of a recent heatwave and product downsizing on volumes, particularly in the U.K. and Germany, but expressed optimism that "from here going forward, we expect a significant improvement."
* Van de Put explained that elasticity in Europe is "around 0.7, 0.8, it's higher than we would have expected where -- our thinking was more like 0.4, 0.5," and outlined actions including innovation, investment in advertising, and promotional effectiveness.
* CFO Luca Zaramella addressed guidance revisions, stating, "on the '25 guidance, we had a series of impacts that clearly we weren't anticipating... tariffs and related uncertainty... material destocking that happened in the U.S.... and the unprecedented heatwave in Europe." He added, "4% is year-to-date organic net revenue growth, we are guiding you at more than 4%." For 2026, Zaramella stated, "we are really targeting a high single-digit EPS growth for 2026, even after the material investments that we're going to put into the business."

OUTLOOK

* Zaramella reiterated, "our goal is clear in terms of EPS growth for next year... targeting a high single-digit EPS growth for 2026."
* Management indicated that Q4 will see "a step-up in the top line" and a "volume step-up in Europe," driven by seasonal activations and refined pricing strategies.
* Plans for 2026 depend on cocoa price trends, with Zaramella noting, "should cocoa go even lower, we will take advantage of that."

FINANCIAL RESULTS

* The company reported "4% is year-to-date organic net revenue growth," with guidance for "more than 4%."
* Management referenced an $0.08 impact in the tax line last year that is nonrecurring in 2025.
* Volume in the U.S. was "down 4% versus 2.8% average year-to-date," driven by economic pressures and consumer value-seeking behavior.
* In emerging markets, "volume was down 4.7%" primarily due to Argentina and India, with adjustments for downsizing and macroeconomic factors.

Q&A

* Andrew Lazar, Barclays: Asked about European pricing and Q4 guidance, focusing on elasticity and confidence in organic sales growth for next year. Zaramella responded, "with incremental softening of the U.S. biscuit market at the end of Q3, and we saw the market declining in volume terms a little bit more than the previous quarters, and the higher chocolate elasticities in Europe. Clearly, that caused a volume/mix impact that at this point in time, we don't want to offset by cutting costs and potential growth into next year."
* Peter Galbo, Bank of America: Sought more detail on the U.S. business path to growth. Van de Put explained, "the volume was down 4% versus 2.8% average year-to-date... the main concern is the U.S. biscuits category." He outlined channel and pack-size strategies to reach value-focused consumers.
* Megan Christine Alexander, Morgan Stanley: Asked about Q4 organic sales drivers and North America supply chain program. Zaramella confirmed, "there is going to be a big activation around Christmas... you will see a little bit of a volume step-up in Europe," and described a new U.S. supply chain program aimed at cost reduction and automation, with major impacts expected as of 2027.
* Thomas Palmer, JPMorgan: Inquired about SG&A and elasticity in Europe. Zaramella stated, "there are three key components... working media... non-working media... and overhead," and projected a "big step-up of that line into 2026."
* Christopher Carey, Wells Fargo: Asked about pricing vs. value strategies in North America. Van de Put replied, "our experience with the value strategy hasn't been that great... we have launched a range of products that are at lower price points... but those products come still at very good margins."

SENTIMENT ANALYSIS

* Analysts' tone was neutral to slightly negative, pressing for details on elasticity, pricing strategies, and North American growth prospects. Questions focused on the impact of pricing, consumer behavior, and confidence in guidance.
* Management's tone during prepared remarks was cautiously optimistic, shifting to more defensive and detailed explanations during Q&A, particularly when discussing volume declines and elasticity: "As I said before, about a 30% price increase... elasticity has been around 0.4, 0.5. It is higher, as I said, 0.7, 0.8, but that's not yet dramatic."
* Compared to last quarter, management acknowledged more headwinds and provided expanded detail on mitigation strategies, while analysts maintained a similar level of skepticism.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from maintaining the outlook in Q2 to acknowledging "impacts that clearly we weren't anticipating" in Q3, including tariffs, U.S. destocking, and the European heatwave.
* The focus moved from resilience in Europe and emerging markets in Q2 to addressing volume declines and higher elasticity in Q3, especially in the U.S. and Europe.
* Management's confidence in future EPS growth remains, but there is more emphasis on the need for strategic pricing, channel expansion, and cost control.
* Analysts continued to probe for clarity on growth drivers, elasticity, and the effectiveness of value strategies, mirroring the prior quarter's focus but with heightened attention to execution and outlook changes.

RISKS AND CONCERNS

* Management cited "tariffs and related uncertainty affecting the overall consumer confidence," "material destocking" in the U.S., and the "unprecedented heatwave in Europe" as key challenges.
* Van de Put and Zaramella discussed rising elasticity in Europe, volume pressures in North America, and macroeconomic headwinds in emerging markets, particularly Argentina and China.
* Mitigation strategies include adjusting price points, investing in innovation, increasing advertising and promotion, and launching a new U.S. supply chain program.

FINAL TAKEAWAY

Mondelez management emphasized their commitment to restoring growth through targeted pricing strategies, channel expansion, and increased investment in brands and productivity. Despite near-term volume and elasticity challenges in Europe and North America, management expressed confidence in achieving high single-digit EPS growth in 2026, supported by a more favorable cocoa environment and continued strength in emerging markets.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mdlz/earnings/transcripts]

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