Mondelez International, Inc. (MDLZ) Earnings Call Transcript & Summary

Thanks, everybody, if you could just find your seats. Our next presenting company is Mondelez International. Please join me in thanking Mondelez for the -- sponsoring the snack breaks out front all day. You'll be happy to know there have been no confirmed injuries out front there. Safety first at CAGNY, so let's keep our eyes open. Basically, CEO, Dirk Van de Put; and CFO, Luca Zaramella are coming to us after the first full year of their new strategy, which is more focused on growth and some significant changes in terms of culture. Mondelez has made major shifts in how the company is organized commercially. It's focused on gross profit dollars versus solely margin percentage as well as significant changes in the incentive structure to better align with strategic goals. These changes, along with reinvestment efforts clearly have led to a material acceleration in sales growth at a time when many companies are still looking for reinvestment to pay off. Looking ahead, 2020 is all about keeping the top line momentum going, while showing the flow-through more powerfully in earnings and cash flow. With that, I'll hand it over to you, Dirk, to expand on all of this for us. Thanks, again, for being here.

Thank you, Andrew. Good afternoon. Today, we would like to talk about how in the first full year after the launch of our strategy, we delivered strong results, then share the opportunities we see to sustain this high-quality performance, followed by how our strategy positions us to seize further growth. And finally, Luca will share more about our long-term algorithm and how we deliver sustainable value. Our mission at Mondelez International is to lead the future of snacking through 3 simple strategies: accelerating consumer-centric growth, drive operational excellence and build a winning growth culture. These strategies should enable us to deliver our long-term financial targets of 3%-plus organic net revenue growth, high single-digit adjusted EPS growth, dividend growth higher than EPS growth and more than $3 billion of free cash flow per year. Mondelez, today, is fundamentally a very different company than it was 2 years ago. Our main focus is to deliver volume-driven, profitable growth. To do so, we're increasing investments behind our global and our local brands. We have moved from a centralized to a local-first commercial approach, which has improved accountability, and it also has made us much more agile and consumer-centric than in the past. And to assure clarity of expectations, we've aligned our incentives and changed the metrics by which we measure success. And our teams have bought in, they are engaged, and we are set up to drive more growth. These strategic changes have led to a step-up in our financial performance in 2019. We met or exceeded our targets across the board. Organic net revenue growth accelerated to 4.1% and was volume-driven. We continue to accelerate gross profit dollar growth, reaching 4% despite significant headwinds in Brazil. EPS grew in line with our long-term algorithm of high single-digit growth and we improved our free cash flow to $3 billion. Investing behind our global and our local brands also delivered good results. Historically, our global brands were growing faster than our categories, but our local jewels were a significant drag. With our new strategy, we increased overall brand investment and rebalanced our investment between global and local brands. Not only did we accelerate growth in our 9 global brands, but also transformed the growth rate of our 60-plus local jewels, which grew close to category levels. Growing net revenue through a healthy mix of volume and pricing is a key objective of our strategy. Not only does it provide operating leverage to grow profitability. It's also a sign that consumers are eating more of our products. In contrast, in the past, we relied mainly on pricing to drive our results. As a consequence, volume and overall top line growth suffers. In the past 2 years, by focusing on gross profit dollar growth, we have balanced the equation, so price and volume go hand in hand, leading to higher net revenue growth. The change in strategy translated also in improved market share performance. In 2019, we hit a new high of gaining or holding share in 75% of our revenue basis. While we have some work to do in Gum & Candy, share performance was particularly strong in Chocolate and Biscuits. So now let's turn to the reasons why we believe this growth will continue. We see 4 compelling areas of opportunity that position us well for sustained growth: one, our categories are strong and snacking is a growing behavior around the world; two, we are a market leader, but still a significant headroom in our categories; three, we have growth potential in both developed and developing markets; and four, we see opportunities in high-value adjacent categories. On top, we have plenty of balance sheet flexibility to pursue the right acquisitions. Our first growth opportunity comes from the core snacks categories in which we are present. Growth in these categories has been robust, 3.6% in 2019, an acceleration versus prior years. Long term, we expect approximately 3% category growth, which is above many food categories. This category growth is underpinned by the fact that snacking is a growing behavior. The number of snacking occasions per day has risen by nearly 20% in recent years. Nearly 2/3 of adults prefer more smaller meals over larger ones; and among younger consumers, the snacking trend is even stronger. To reinforce the point even more, the categories we are focused on will represent 50% of the growth in packaged snacks in the next 3 years. Overall packaged snacks is around a $700 billion market. Our core snacking categories and the close-in adjacencies represent $400 billion of that $700 billion and will grow another $50 billion by 2022. Traditionally, healthier categories, like yogurt, nuts and fruit snacks, are still relatively small at 14% of the total snacking market. So even at higher percentage growth rates, absolute dollar growth will be substantially lower. In the end, our priority categories will grow 2x plus the value of well-being categories. Also, as I will discuss later, consumers today define well-being in a completely different way, meaning, that there is a clear opportunity for health and wellness-driven growth within our core categories. We enjoy a market leadership position in our core categories. However, given the size of these categories, there is still significant headroom to grow. There are markets which have significant populations, where we are not particularly present and where we expand or we aspire to expand significantly. There are also markets where we have a high share in one category, but a lower share in another. Take India, we have a 2% share in biscuits and a 66% share in chocolate. Our geographical footprint is broad. 63% of revenues come from developed markets and 37% from emerging markets. Both accelerated in 2019, and we continue to see further opportunities. As it relates to developed markets, we turned around our largest market, North America, with improved service levels, share gains in Biscuits and a significant step-up in top and bottom line growth. In the U.K., our second biggest market, growth accelerated dramatically, and we gained a material amount of share in our largest category, Chocolate. I think that our ability to win in our 2 largest markets points to the strength of our brands and our capabilities and give us confidence for the future. We have strong emerging market positions and we see potential for continued high rates of growth as snacks consumption continues to increase. In Russia, India and China, 3 key markets for us, we grew at double-digit or high single-digit rates in 2019, and we held or gained share in all 3. And there is still huge potential in terms of per capita consumption, which is at a fraction of the U.S. Our ability to capture further growth in these markets is based on our local-first culture, empowered teams making decisions locally, a unique blend of global and local brands, strong local manufacturing and distribution capabilities and locally relevant marketing. Finally, in this section, I want to talk about high-value growth opportunities in adjacencies. We will aggressively pursue opportunities, such as pastries, bakery and bars, which are a natural fit with our core portfolio and where our brands have the right to win. We've done this already with the ongoing expansion of our chocobakery portfolio. Beyond these close-in opportunities, we will continue to use licensing to grow further in other snacking areas. We've talked about our progress and our future potential. Let me now turn to how our strategy should position us for continued success. Within each of our strategies, we have clear initiatives to deliver results. We will drive growth by reinforcing our core business and expanding into new consumer segments and channels. We will lead operational excellence through the best-in-class marketing and sales execution and sustainability, and we will create a winning growth culture through more accountability at the local level, more targeted incentives and a more agile culture. So first, let's talk about our key growth initiatives: strengthening the core, new consumer segments and channel expansion. Our core business has big potential to grow, and by changing the way we market our products, we are unlocking it. These days, brands need to stand for something. They need to have a purpose to really connect with consumers. So for example, Cadbury's purpose is generosity and Oreo's is staying playful. As explained before, we activate and invest in a mix of global and local brands that is locally relevant. We make sure all our core products will remain contemporary and differentiated through quality. We are adopting agile ways of working and test-and-learn approaches to innovation in order to get ideas to market in less than 6 months as we overhauled our agency model to deliver consistently high-quality output, and all of this is underpinned by a major step-up in our consumer insights. Well-being is one growth segment, where new insight has given us a much better understanding. Consumers, particularly Generation Z, have a much broader view of well-being than in the past. We are developing our brands to answer to these new and differing needs. Some consumers want permissible treats with inclusions, like fruit and nuts, or they want less sweet chocolates or even their favorite treats, but in smaller portions. Others want better-for-you options, like gluten-free or the reduced sugar, like 30% less Cadbury we sell in the U.K. and in India. And then for many, well-being also comes through a story around provenance and sourcing, like our organic Cote d'Or chocolate or our non-GMO Triscuit. And finally, some consumers are looking for functional benefits, like high-protein, super foods or fortification. Our Perfect Bars are a good example of this one. Other growth areas or growth segments are adjacencies and licensing. Our iconic brands can play in multiple close-in adjacencies. For instance, Milka has expanded into cakes from chocolates; belVita is expanding into snack bars as well as biscuits. And our brands can extend beyond immediate adjacencies into other spaces, like Oreo, for instance, which is now in ice cream, frozen desserts, yogurt, chilled snacks and cereal. Our licensing business grew double-digit in 2019 from a combination of royalties and ingredient sales. Finally, we will continue to access fast-growing snacking segments through M&A. We have a clear and disciplined approach. We are selective and look for solid returns. Premium and well-being are attractive from a growth and incrementality perspective. Perfect Snacks and Tate's are good examples of recent acquisitions in these spaces, both growing at strong double digits. We are also interested in other fast-growing snacking businesses, like fresh or digital. And in the newer, more emerging areas of snacking, we will continue to use our venturing approach, like we've done with Hu and Uplift Food. The third growth driver for us is channel expansion. We're committed to capturing opportunities in high-growth channels, where our products are currently under-represented. High-growth channels make up about 50% of all retail snacking opportunities. They also grow about 50% faster than traditional supermarket channels. Convenience stores are a logical focus for incremental growth as well as cash-and-carry stores and discounters. While we are still under-indexed in these channels, we are making progress and grew our share in 2019. This is a multiyear journey, which requires dedicated resources to develop the right packs and the right routes to market in several key countries around the world. Turning to one of those new channels, e-commerce, our 2 biggest markets, the U.S. and China are performing very well. U.S. e-commerce grew 63% on a reported basis with strong share gains, thanks to successful activations with Sour Patch Kids and Oreo. In our #2 market, China, we grew by nearly 20% as we develop channel- or platform-specific bundles and build our capabilities in personalization. Globally, we grew about 28% in e-commerce, and we're gaining share in our key markets. In addition to the U.S. and China, we're seeing strong growth in France, the U.K., Australia and in India. So this was a quick overview of our key growth strategies, but let me use our 2 largest global brands and our local jewels to show how these 3 priorities: core growth, new segments and high-growth channels, can create sustainable growth into the future. Oreo is the #1 cookie around the world, and it's our single largest brand. With accelerated double-digit growth, Oreo broke the barrier of $3 billion net revenue in 2019. In the U.S., the #1 Oreo market, we activated the brand strongly by keeping it contemporary through high-impact events, like our Game of Thrones partnership. And in China, the #2 Oreo market, we continue to increase the local relevance of the brand through unique activations like the iconic Forbidden City Oreos. 2019 was a great year, but we've got plans to keep growing. We will strengthen the core by communicating the brand's playful purpose through on-target activations, like the Oreo Music Box. We'll attract new consumers by entering new segments, like the more permissible thins platform or the more indulgent enrobed Oreos platform. We also intend to grow Oreo strongly beyond U.S. and China as well as increase the brand's reach through licensing. While Oreo is already the world's cookie, we have a huge opportunity to grow it further without reinventing the wheel. In order to get a feel of how we grow Oreo around the world and make it locally relevant, I invite you to take a look at our World of Oreo display just outside of the room. But if I understand it, most of you have already visited it. The second global brand I'd like to highlight is Cadbury Dairy Milk, which posted another great year with accelerated high single-digit growth and sales of $2 billion. The Generosity campaign has driven very strong growth in the U.K. And our second Cadbury country, India, also grew strongly by localizing successful ideas from the U.K. and developing their own locally relevant campaigns. Our growth strategy gives us confidence we can sustain this performance. We'll scale the generosity equity campaign in markets around the world. We'll double down on the brand's sustainable credentials with Cocoa Life, and we'll capitalize on Cadbury's seasonal appeal. We are also expanding into new segments, like Cadbury enrobed biscuits or towards consumers who prefer a slightly less sweet taste with our Dark Milk offering. And to assure the next generation loves Cadbury just as much, we have continued to drive our parents-to-kids offerings, all of which are already less than 100 calories per portion in the U.K. Lastly, we are expanding our e-commerce and gifting offers as well as increasing the brand's reach through licensing. This same strategy applies to our local jewels. They represent 7 -- sorry, 47% of our revenues, but have been historically underfunded, but they are often Taste of the Nation brands just waiting to be activated. Through renewed activation, we have seen some strong high single-digit and double-digit growth on even our biggest local brands, like Jubilee in Russia or Ritz in the U.S. For some of the local brands, we have rejuvenated their purpose, which has strengthened the equity and which, in turn, then led to a renovated, more healthy product range. LU in France or Pacific in China, for instance, are bringing this more authentic well-being focused story to life. Overall, from a position where we were losing share, our local jewels are now growing at 3.2%, close to the category growth. But to bring a local brand story to life, let's take a look at how we have rejuvenated LU, one of our biggest local brands. [Presentation]

I never knew there was [ broth ] in every biscuit of LU, but apparently there is. Switching to our second strategy. I hope that this previous section has shown that a clear consumer-centric growth model applied to our global and local jewels can drive sustained growth and market share gains in the years to come. A great growth strategy, however, only succeeds with outstanding execution. I will focus on 2 critical areas for our success: marketing and sales excellence and sustainability. Luca will later speak to you about supply chain and continuous cost improvement. We are making good progress on improving our marketing and sales excellence, all of which is made possible through new digital solutions. There are 5 priority areas that will help fuel our growth: first, driving efficiency in media spend and return on investment; next, scaling up our direct-to-consumer offers to increase efficiency; third, continuing to enhance our e-commerce performance and capabilities; fourth, optimizing revenue management; and finally, improving sales execution in-store with mobile technology and artificial intelligence. Our approach is to keep it simple, using test-and-learns around the world before scaling up. Maybe a quick highlight on revenue growth management, which will provide fuel to drive our top line and profit and a major focus in the coming years. Besides line pricing, which we have done and which we'll continue to do, we are focused on active mix management, price pack architecture and promotional efficiency. On mix, there are opportunities to better balance the range of products sold in the different channels, aiming to increase dollars per pound. On price pack architecture, we've been successfully focused on upsizing to family and party size in recent years. And on promotion, artificial intelligence and other digital solutions make it possible to optimize the frequency and the depth of our promotions, leading to more sales for less cost. My last example for execution is seasonals. This is really all about getting the right assortment in the right stores at high-impact moments. We're making great progress here, but I think we can do a lot more. Seasonals are an important part of our categories. They are fast-growing, offer incremental sales and command a price premium. We are market leaders in some markets, and in some, we can still improve. Easter and Christmas in Europe and Chinese New Year are a great example of our successes. But the calendar is full of opportunities, both culturally and geographically, where we can activate better and generate more sales, be that Diwali in India or Halloween in the U.S., just 2 of many examples around the world where we can do better. I also want to talk briefly about sustainability. We've seen quite rightly more attention from consumers and investors in this space. And we have 3 simple priorities: essential ingredients being grown in a sustainable way; efficient use of our resources for minimal or 0 environmental impact; and promoting the mindful consumption of our products. In sustainable sourcing, our first priority is Cocoa. We are scaling our Cocoa Life sustainability program even further. By 2025, Cocoa Life will produce 100% of the cocoa volume required for our global cocoa brands -- for our global chocolate brands, sorry. On environmental impact, we plan to cut emissions across our operations by 10% by 2025. And as well, we will make all our packaging recyclable. In mindful consumption, by 2025, 20% of our snacks' net revenues will be from portion-controlled offerings. They are all less than 200 calories. So we've set bold ambitions and we are making great progress. I will share with you later in the year, more on this as we provide an update on our sustainability action and our sustainability metrics. So I've spoken to you about growth and execution. So let me turn to our third strategy, building a winning growth culture. This is about shifting our mindset from costs to growth and from globally controlled to locally driven. When you change the way a team is going to play, it is often difficult to do that with players who were used to the same old playbook. So since arriving, I've refreshed the Mondelez leadership team. 3/4 of the key leaders are now in new roles since 2017. We've combined internal and external talents to create a highly experienced team with very diverse backgrounds. These leaders are delivering on our culture shift to a local-first approach with clear accountabilities, simplifying processes to enable faster decision-making, letting local teams decide what is best for their consumers, encouraging smaller tests-and-learns before making big bets. And these changes have not only empowered our local business units, but also increased their engagement and commitment. In order to make sure everybody is clear on our strategies and our priorities, we've also changed our incentives, which are balanced between growth and profit and now include things, like volume growth, gross profit dollars and market share. I'm proud, very proud, of how the teams have embraced this new culture. I think you can see their commitment in our 2019 financial results. I strongly believe that this new model and strategy provides the basis for sustained long-term growth of Mondelez. And now to reflect on how all this translates into financial results, over to Luca.

Thank you, Dirk, and good afternoon, everyone. Today, I'll spend some time talking about our 2019 financial results, our key growth and earnings drivers as we move forward into next years, free cash flow, capital returns, and I will close with a brief review of our outlook for 2020. Let's start with 2019. We met or exceeded all financial targets, and these results were especially notable in terms of top line acceleration, volume growth and share gains, but also in terms of gross profit dollar delivery, both through volume and effective price cost management. In turn, this has allowed us to make significant growth investments that begin to set us up for future years, including increasing our working media spend by a rate that was almost double that of our revenue growth and to deliver solid OI and EPS growth that we converted into the highest free cash flow since the creation of Mondelez. Dirk talked about cultural change, and although I will not repeat most of that, I think it is undeniable that we have driven a fundamental change in the way we run our business. We have simplified and created clarity around P&L ownership with empowerment and accountability of decision-making. And this is supported by a more impactful and better-aligned incentive structure that drives the right behavior. Our model is now predicated on driving volume growth and winning in the market in order to drive more absolute profit dollar growth. The company is no longer overly fixated on margin percentages. This has helped to unlock some of the potential around our local brands and our channels. The higher absolute profit dollars that we generate are reinvested back into the business to continue the cycle, while flowing the remainder to the bottom line to drive sustainable high single-digit EPS and free cash flow. We do this in a local-first commercial approach, while tapping into our global scale and infrastructure to ensure we are creating operating leverage and investing in the business, alongside continued cost discipline. We saw this come together in 2019 with high-quality, broad-based growth with a good balance of volume and pricing and importantly, share momentum. We posted growth across all single region, ending 12 out of our 13 business units with strong growth in emerging markets, while delivering solid results in developed markets. And one of the biggest changes came at the brand level, as our local jewels made significant progress, growing much closer to category rates after years of underinvestment and underperformance. Now I would like to turn to growth and earnings drivers. One of the areas that we expect to positively drive both the top and the bottom line is supply chain. We have made good progress since 2014 as we have reinvented our supply chain through supplier base consolidation, SKU reduction and simplification, consolidating 170 manufacturing sites into less than 115, while opening 3 new greenfields and delivering good productivity. But whereas historically, we were more focused on pure cost reduction, standardization and economies of scale to deliver efficiencies, we will now be evolving our approach and have translated our strategy into a number of key work streams, including supplier collaboration, where we will build deeper partnerships with suppliers; understanding their cost and processes, we can help them drive productivity; design to value, which is an effort to more efficiently design products to reduce total cost, while maintaining customer value; and end-to-end planning, which is about planning simplification and automation that drives growth with better responsiveness to demand signals and reduce cash through improved or lower inventory levels. While we are happy, overall, with our network, we will also continue making selective changes to optimize our cost and enhance flexibility. Bottom line, we are creating end-to-end value for our customers and our consumers by focusing holistically on the interdependent metrics of a well-run supply chain: service, quality, cost, cash, safety and sustainability. Overhead is another area where we still have runway to improve cost and deliver more savings. Zero-based budgeting, when done right, is still an effective tool, and we are continuing to make it work for us, refining and standardizing key cost areas by leveraging our global scale and challenging all of our cost packages versus best-in-class benchmarks. However, we will not compromise on the fundamental cultural values of the company and we will protect areas, such as marketing, people and capabilities, sales and R&D. This is about moderation and practicality. We are also doing a lot of work on predictive analytics to improve the accuracy of our forecast, demand levels, promotions. It is early, but there are a lot of exciting opportunities in these areas. Shared services remain an opportunity for us as we continue to benchmark well, but believe we can push further and improve our scope and reliability. One example would be HR, through the application of Workday, where we can improve efficiency and employee experience, while leveraging delivering centers to optimize our cost. I'd now like to spend a moment on where we are making investments to sustain attractive growth. The 2 big areas of incremental spend in '19 and in our plan for 2020 are A&C and route to market. We have a clear strategy in place in each business unit with well-defined investment prioritizations. We will invest more A&C in both global and local brands, while ensuring we get more out of our spend by simplifying and significantly consolidating our marketing partner ecosystem and implementing a new media model. In route to market, building capabilities and platform across 3 key areas where we believe the payback is attractive and relatively quick. These include examples, like reaching more points of sales in high-growth markets, like China, India, Southeast Asia and Russia. It also includes more resources and capabilities in areas, such as alternative channels or e-commerce. As we said many times, 2019 was the first investment year, and we will continue to spend money behind our brands and route to market. Gross profit is a particularly important focus for the company and our strategy. We believe gross profit to dollar, that is more than just a single numerical output of profit. Rather, it reflects the combination of volume, pricing, productivity, executed in a balanced and disciplined way. And that allows us to reinvest in both A&C and marketing, sales and R&D. When done right, we believe it is an important measure of quality as it is a strong indicator of sustainable profit delivery through reinvestment and overall earnings growth. Turning to our coffee and beverage JV platforms. These are great businesses, and many of you know that they have created substantial value over the past few years. They are well-run, well-positioned and focused businesses that have strong management teams. We also have a seat at the table in the form of Board seats with both companies. They also provide an attractive income stream for us. Over time, we believe there might be opportunities to utilize these assets to fund additions to our snacking portfolio. As you have most probably heard, JDE Peet's is exploring a potential IPO. The JDE Peet's business has good growth rates, a global platform, a premium portfolio and a strong #2 worldwide position in coffee as a focused pure play. Of course, as we know more and the process plays out, we will keep you updated. Now let me turn to cash flow and capital return. In the past, free cash flow generation was an area where we trade expectations. However, over the past 2 years, we have made significant progress. You should know it is a big priority for our business and leadership and it is a component of our annual incentive plan. It starts with the P&L and our financial algorithm, which puts us on a course to deliver increased earnings. In addition, we have room to further improve working capital through better demand planning and lower inventory levels, coupled with a relatively capital-light model and lower restructuring in the next several years. Capital allocation has been a strength of the company since inception, and we have returned more than $24 billion to shareholders. We have been disciplined with how we deploy and invest the cash we generate. We have utilized buybacks as a way to return capital. Dividends are also an important component of capital return for us, demonstrated by growth of more than 30% over the last 3 years, and a target growth rate moving forward, that is in excess of adjusted EPS growth. This underscores our confidence in our ability to grow top line and generate attractive free cash flow for the years to come. We have also been working to maintain a balance sheet that is well optimized, while preserving appropriate levels of flexibility. The most important thing to know about our overall philosophy on capital allocation is that we will be disciplined. Now more than ever, our first priority is to reinvest in our core business as we believe the opportunities and returns on those dollars are very attractive. Our second priority is to add selectively to the portfolio where we see additional opportunity. We have been consistent in terms of preferences around well-being, premium adjacencies and high-growth markets or capabilities as target areas. And of course, any potential acquisition needs to meet the fit test on a strategic, financial, cultural level. Our third priority is to returning cash to shareholders through share buybacks and dividends, which I discussed. And we will also ensure that, that repayment is a priority in order to maintain our investment grade and appropriate levels of flexibility. Moving to our outlook. There is no change from what we discussed recently with you on our earning call. We expect 2020 that is on algorithm. We expect relatively light impact from currency in 2020, which is a bit different with the years that have passed. One update for you is relative to the situation in China with the coronavirus. Our plants have opened back up. Our people are back at work, and we are working hard to restore things back to normal. Given the timing of the situation during Chinese New Year, we do believe there will be some impact on demand and margins of China. However, barring a more dramatic impact that spills into global growth, at this stage, we feel our outlook is still the best guidance we can give you. We will continue to monitor the situation and keep you updated as appropriately. To close, we believe our global strengths and scale in attractive categories, our significant runway of growth opportunities, highly engaged people and high-performing culture and an attractive growth algorithm put us in a strong position to compound growth and earnings over a multiyear period. Thank you for your time.

Dirk, in the time that -- since Mondelez and many in the food group have reported their fourth quarter and full year earnings, we have had some incremental developments such as, you just mentioned, the coronavirus in China and some challenging scanner data for the industry as a whole, partially on account of some of the lapping of some of the SNAP data last year or the benefit from last year in January. I was hoping maybe you could just add a bit of context around each of these as it is more specific to Mondelez.

Maybe what I'll do is I'll talk about the overall situation in both cases, and then Luca can talk about what it means for our guidance. As it relates to China, our first objective, obviously, was to make sure that our people, our consumers, our customers are safe and that we are behaving and executing things in line with the government prescriptions. I'm happy to say that, until today, there's nobody from our company that has been infected. And as Luca mentioned, that most of our people are back to work. When they cannot, that usually has to see because there are restrictions in place or they were not able yet to get back to their place of work because of some of the travel restrictions. Our plants, we have 4 plants in China. They have reopened. They are not running at full capacity yet, but they're getting better every day. Most of our distribution centers are open, and we've started to ship back to clients. Not all clients are open. The shelves are pretty empty, and obviously, snacking in the Chinese New Year is a pretty important category. But so far, it looks like, for instance, our Chinese team, we were on the line with them this morning. They see the number of new cases reduce and they expect every day that we will have a better presence in the store. The consumer remains interested in buying our products. There's a shift going on of trying to buy more online and going less to the store. But we are suffering just like anybody else -- or the e-commerce operators, just like anybody else, are suffering from a shortage of trucks and a shortage of drivers. So it is not immediately reflecting in the sales, but we know the demand is there. So that's China, and Luca can comment on what that means financially. As it relates to the U.S., we saw a very strong year in 2019, first in the year, but particularly, the fourth quarter was very good. We did see the slowdown in January, which was caused by the SNAP program. We've seen sales come back in the -- in February. So overall, we -- since we are very early in the year, we do not see a reason yet to be overly preoccupied with the situation in the U.S., and in fact, the consumption we're seeing today is in line with the high consumption we saw in Q4.