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

Good day, and welcome to the Mondelez International Snacking Made Right Investor Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Mondelez management and the question-and-answer session. [Operator Instructions] I'd now like to turn the call over to Mr. Shep Dunlap, Vice President, Investor Relations for Mondelez. Please go ahead, sir.

Thank you, and welcome, and thanks for all of you joining us today. We've just published our Snacking Made Right report, which can be found on our website at mondelezinternational.com, which forms the basis for today's call. We have an excellent group of speakers demonstrating the commitment and focus we have on the topic from the Board level senior management across the organization. I'm joined today by our Chairman and CEO, Dirk Van de Put; and our Senior Sustainability and Well-being Leader, Chris McGrath, Vice President and Chief of Impact; and Jonathan Horrell, Director of Sustainability. We're pleased to be talking with you about topics that are very important to us and to our consumers, customers and investors. The focus of today's call is Environmental, Social and Governance topics, primarily the E&S component and how we approach them at Mondelez. You'll hear about our commitment to doing business the Right Way, our purpose to empower our people to snack right and then specifically, our sustainability and well-being initiatives, targets and progress. Finally, we'll close with Q&A. With that, I'll hand over to Dirk, starting from Page 5 of our presentation.

Thank you, Shep, and thanks for joining us today. I am proud to share with you more about Mondelez' approach to Snacking Made Right and the importance of sustainability and well-being to us as a company. This is even more true during the COVID-19 crisis. We believe that there will be an increased focus on how companies do business as a result of the crisis. And before I start, I want to talk about our response to COVID. Our top priority, as you can imagine, is protecting our employees and taking care of them. So let me begin by saying thank you to our colleagues for all that they are doing in our factories, facilities, distribution network, sales force. Our teams are working night and day to keep our business running. We have put in place strict health and safety procedures across our facilities, including temperature checks, mask wearing and social distancing. We are also offering enhanced benefits colleagues on the front lines, including extended sick leave. Next, we're also caring for our communities, supporting them with cash and also in-kind donations. We have donated over $20 million globally to organizations like Save the Children, CARE, the Red Cross and Feeding America. Our teams have found ways to repurpose some facilities to make health and safety gear, including hand sanitizers for our employees and face protection for caregivers. And we're also supporting the farmers who grow our raw materials through donations including farmer relief efforts in Western Africa. While many things have changed due to COVID-19, our ESG agenda and the issues we have committed to tackle remain the same. We hope today's call underscores our long-term commitment and our track record in these areas. Turning to Slide 6. Let me take a minute to explain how we think about the topics of environmental and social impact as well as governance. Successful companies do more than focus on financial results. They create value for the world at large and positively impact the lives of those around them. So our approach is clear. We believe that our scale is a strength that we can use to create meaningful lasting change for the better. And we are focused. We tackle the risks and opportunities that really matter to our business. By combining scale and focus like we do in cocoa, for instance, we've made great progress. Now more than ever, it is time for companies to do what's right. Simply put, ESG and Mondelez International is about doing business the Right Way in order to drive sustainable business growth. And as a global snacking leader, we have responsibility to reduce our impact on the environment, have a positive impact on society and conduct ourselves in an ethical efficient and inclusive manner. We outlined our ESG priorities on Page 7. Regarding the environment, we are guided by a data-driven life cycle assessment to focus on building sustainable ingredient supply chains, reducing our environmental footprint, and evolving our packaging to make it recyclable. Regarding society, we are guided by consumer and stakeholder expectations alongside third-party risk assessment to focus on advancing the well-being of our consumers, respecting the rights of all people our business touches and promoting the safety of our employees and consumers. And in the space of governance, we are guided by best practices and stakeholder expectations to focus on human capital management while remaining committed to compliance, and creating a workplace that is both diverse and inclusive. As you might expect, we have a Mondelez way of approaching this work. And you can see this on Slide 8. To be effective, we need to prioritize. We determine what is material to us and use that to guide our approach. As I mentioned, we use data and third-party assessments to identify and tackle the most significant risks and the most important opportunities. And we take a long-term view and aim to create lasting and sustainable change. This means investing in signature programs and partnerships that take a holistic approach to tackling root causes. It also means integrating sustainability and well-being into our strategic long-term planning, which I will move now to on Page 9 of the presentation. Doing what's right is ingrained in our purpose and strategy and has been a priority for our leadership team and our Board of Directors since the inception of our company and it's embedded across all levels of the organization. Each business unit is accountable for delivering on our Snacking Made Right goals. And I do hold my senior leaders accountable for delivering progress towards these goals by including it in our performance reviews and in our compensation framework. We're also increasing our focus and reaffirming our commitment to our ESG priorities. And that's one of the reasons why we're holding this call today. We will continue to enhance our disclosures by showing the alignment of our metrics and reporting to frameworks that investors and others are using. And we are evolving our engagement by having more dialogue on these topics with all our stakeholders, including our investors. On Slide 10, you will see that our mission is to lead the future of snacking by offering the Right Snack, for the Right Moment, made the Right Way. We call this Snacking Made Right. And Snacking Made Right is the lens through which we view ESG and a framework for our sustainability and well-being agendas. Offering the Right Snack means having a broad portfolio ranging from wholesome to indulgent that meets consumers snacking and well-being needs. The Right Moment means meeting consumers where they are, both physically and emotionally. That means easy access to our products and helping people to consume our products more mindfully. And made the Right Way means managing our supply chain sustainably in ways that minimize our impact on the planet as well as taking a stand to respect the rights and well-being of all people our business touches. I will speak now to Right Snack and Right Moment before handing it over to Chris to talk through the Right Way. And as I lead into the topic of well-being, starting on Page 12, I want to start by providing some context regarding snacking in our categories, revisiting some data we shared at CAGNY earlier this year. First, snacking is clearly a growing behavior that is true in both developed and emerging markets. The number of snacking occasions per day has risen by nearly 20% in recent years. Nearly 2/3 of adults prefer more small meals over fewer large ones. And among younger consumers, this snacking trend is even stronger. We published a report in November last year called the State of Snacking, where you can read more about today's consumer and the role snacking plays in their lives. Moving to Slide 13. You can see that the categories we are focused on will represent 50% of the growth in packaged snacks in the next 3 years. Overall, packaged snacks are around a $700 billion market and our core snacking categories and close in adjacencies represent $400 billion of that $700 billion and are expected to 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 a higher percentage growth rate, absolute dollar growth will be substantially lower for these categories. In the end, we expect that our priority categories will grow 2x the value of pure well-being categories. Importantly, consumers today define well-being differently than before, meaning there is a clear opportunity for health and wellness driven growth within our core categories. New insights have given us a better understanding of how consumers view well-being today. Consumers now have a more holistic view of well-being aligned to their values. That means, for instance, that sustainability plays a role in considering if a product is considered a positive well-being choice or not. We have defined consumer well-being needs as 4 key areas as they are shown here on Page 14. Some consumers want permissible treats, with inclusions like fruit and nuts or less sweet chocolates or their favorite treats but in smaller portions. Others want real better-for-you options like gluten-free or reduced sugar like a 30% less sugar Cadbury bar we launched in the U.K. and in India last year. And then for many, well-being also comes through a story around provenance and sourcing like our non-GMO Triscuit. And finally, some consumers are looking for functional benefits like high protein, superfoods or fortification, and our Perfect Snack bars are a good example of this. About 30% of our 2019 snacks revenue maps to these 4 well-being pillars. And the largest part of that is portion control. So we have an opportunity to align more of our portfolio to these pillars over time. Moving on to Page 15. We also believe we can help people have a healthy relationship with the snacks they love. Our priorities are to encourage consumption of our products in the right portion sizes and to educate consumers about how to snack mindfully. Mindful snacking is about helping people to focus on the enjoyment of their snacks so they will feel more satisfied and stay in balance at the same time. Our target is to have 20% of our global snacks revenue from portion-controlled snacks by 2025. We targeted 15% of revenue by 2020, and we are ahead of that, where we ended '19 already at 16% of our revenue. We're also working to include mindful snacking labeling and recommended portion amounts across all our products globally. We have developed a set of standardized global guidelines and are adding them to packs across our brands to help educate our consumers on mindful eating habits. So that was an overview of how we are thinking of well-being. And with that, I will hand it over to Chris to talk further about our impact on people and planet.

Thank you, Dirk. An important part of delivering on our purpose is making our snacks the right way. We know consumers are increasingly aware of the impact their snacking choices have on the world and what the companies behind those products stand for. To us, Right Way means 2 things: creating a future where people and planet thrive and standing up for what we believe in by doing business the right way. As Dirk mentioned, this next page explains how we focus our efforts where we can have the biggest positive impact and mitigate the most significant sustainability-related business risk. Our strategy has 4 priorities: building a sustainable and resilient supply of key raw materials, reducing our environmental impact by using less energy, water and waste, making all our packaging recyclable and tackling plastic solution and respecting the rights of all people across our business. This strategy delivers a holistic approach to managing the impact of our business on people and planet, and we're on track to deliver against and exceed our 2020 target, and we have set robust 2025 sustainability targets as well. And I'll spend some time discussing our signature sourcing program and leadership in sector-wide partnerships, which are key enablers to delivering against these targets. We evaluate material risks and opportunities by engaging with experts and conducting third-party data-driven assessments. We apply this approach to managing our environmental footprint through a life-cycle assessment, which shows raw materials are the biggest contributor to our environmental footprint driven largely by deforestation making it a clear priority. And we respond by developing signature sourcing programs, where we take a holistic approach to driving out risk like deforestation and climate change in our key raw materials. We have also long aligned our targets and programs to key external framework, including the United Nations Sustainable Development Goal, prioritizing those which are most relevant to our business. Finally, we listen to and are informed by the evolving expectations of our stakeholders. Consumers are at the heart of what we do as a company, and that includes sustainability, where we've been doing global research on the topic for a decade. We also take into consideration long-standing engagements with NGOs and advocacy groups and ongoing dialogue with our shareholders. There is heightened awareness and demand for more transparency and action to tackle climate change, protect forests and respect human rights. And these expectations inform our approach. Looking at the journey, our sustainability agenda has a long history that's detailed in this time line on Page 19. It's a journey we've been on since the inception of our company back in 2012. We're proud of the transformation we're leading in key sectors where we're helping to tackle systemic challenges like deforestation. For example, in 2015, we were the first company to raise the issue of deforestation in the cocoa sector at the UN Climate Summit in Paris and were a first signatory to a public-private partnership tackling deforestation in cocoa. And we continue to take important steps to advance our sustainability leadership including joining the science-based targets initiative last year to meaningfully contribute to combating climate change. Let me now walk you through a few of our key ingredients, starting with cocoa on Page 20. The cocoa supply chain faces a unique set of challenges, including systemic issues of poverty and inequality that lead to risks like deforestation and child labor. We launched our signature program, Cocoa Life back in 2012 and committed to a $400 million 10-year investment at that point. Cocoa Life is unique because it holistically tackles the root causes of the challenges cocoa farmers face. Improving productivity on farms and preventing deforestation depends on improving the economics of cocoa farming and empowering communities. We work directly with the farmers who grow our cocoa, 175,000 of them at the end of 2019. We work with them to co-create lasting solutions. And we have evidence confirming that Cocoa Life is having a positive impact. Farmer livelihoods are improving. We saw a 23% increase in 2019 of the farmers in our Cocoa Life program in Ghana compared to average farmers who are not in the program. We're tackling deforestation and helping farmers to grow more cocoa on less land. At the end of 2019, 86% of the Cocoa Life farms we work with, which is about 150,000 farms, are mapped and monitored, so we can confirm deforestation-free sources of our cocoa. And we tailor the good agricultural practices that farmers use to suit the conditions of each of their farms. And we saw that 90% of the Ghanaian farmers have changed their practices to reduce the impact of climate. And we're building empowered communities that can drive their own development. About 70% of them have secured public support from their local government for their community action plan. By tackling these interconnected challenges, we are leading the transformation to a thriving cocoa sector where farmers benefits, community benefits and our business benefits. Our goal is to source 100% of the cocoa volume for our chocolate brands sustainably through Cocoa Life by 2025, and we are well on our way at 63% today, a 20-point increase since last year and 2018. We are very proud of this progress. And our chocolate brands like Cadbury and Cote d'Or are integrating Cocoa Life into their consumer communications. For us, transparency is critical, and we have a steady drumbeat of news about Cocoa Life, which you can find on our website, cocoalife.org. Palm oil is another ingredient, where although we are a much smaller buyer relative to the total, we use our influence to drive positive change. When palm oil is sustainably sourced, it is a highly efficient ingredient in terms of the land that's needed to grow it, which is good for the environment and good for business. To advance the future where forests are protected, sustainably-sourced palm oil must be the universal standard. Universal sustainable palm oil is impossible without sector-wide partnerships. Therefore, our long-term ambition is focused on working with others across the sector and importantly, engaging our suppliers on collective actions, improved transparency and consistent policies. We require our suppliers to align to consistent sourcing practices across their entire supply chain, not just the portion of palm oil that they supply to us. We know 90% of our palm oil comes from suppliers that align to that. And we take action against who don't comply. In 2019, we suspended 89 mills in breach of our policies. Tackling the challenge of deforestation requires collaboration and public-private partnership. We co-chair the Consumer Goods Forum's Forest Positive Coalition and its palm oil group, where we are pioneering sector-wide approaches. And finally, wheat is a major contributor to deforestation worldwide, but it is a significant contributor to our carbon emissions from raw material. In fact, it's our third biggest. We have an opportunity to help farmers advance their agricultural practices for even more efficient farming to grow more high-quality wheat with fewer inputs like less fertilizer. Our signature program, Harmony Wheat, works in partnerships with thousands of farmers across Europe to provide locally-sourced sustainable wheat for our European biscuit brands. Our goal is to source 100% of our wheat for biscuits in Europe, sustainably through Harmony by 2022, and we're on track to meet this goal with 65% coming through the program already. Beyond sustainable ingredients, we set a number of a meaningful 2020 targets back in 2015 to reduce our environmental footprint. I'm pleased to report we have achieved or exceeded all of our 2020 environmental impact goals as outlined on Page 23. These include reducing our CO2 emissions by 15% across our manufacturing operations; reducing our water use by 27% in priority locations where water is most scarce; and reducing our total waste for manufacturing by 21%, which delivered cost savings of more than $87 million in 2019 alone. And we are expanding our ambition to further reduce our impact on the environment with new 2025 goals. We joined the science-based targets initiative to set science-based emissions reduction goals in line with what experts say it will take to keep global warming well below 2 degrees. This long-term goal is designed to address climate change in a meaningful way through an end-to-end approach to reduce our company's carbon footprint. End-to-end means minimizing our footprint beyond our own operations, from the farms producing our raw materials to the disposal of our packaging. This new target will result in a 10% emissions reduction by 2025 versus 2018 baseline across our entire value chain, and that is on top of the 15% reduction that we delivered in 2019 versus our 2013 baseline. We have also set 2025 goals for water and waste reductions, including a further 10% reduction in water usage, where water is most scarce and a further 15% reduction in food waste and manufacturing versus the 2018 baseline. On to another topic tied to reducing our environmental impact. We are on a journey to transform our packaging and increase recycling globally. We don't want the packaging that keeps our snacks safe and delicious to end up in the environment. But the issue of packaging waste goes beyond just making sure our packages are recyclable. The bigger problem is the lack of collection and recycling infrastructure around the world and consumer confusion about how to properly dispose the packaging so it can be effectively recycled. Investing in innovation and cost-effective scalable solutions for infrastructure and education is critical to success. We're well on our way to meet our goal of having 100% of our packaging designed to be recyclable and labeled with recycling information by 2025. Today, 93% of our packaging is designed to be recyclable. The evolving the remaining 7% requires innovation, which we are actively pursuing. For example, in New Zealand, we are trialing a sustainable new paper wrapper on our Cadbury chocolate. And starting in 2021, our Philadelphia Cream Cheese will use recycled plastic in tubs across Europe, piloting advanced recycling technology. But no single company can solve the challenge of plastic waste on its own. Industry-wide collaboration is critical to solve the larger recycling issue. Over the last year, we've joined a number of multi-stakeholder platform to tackle plastic waste and pollution. We are a signatory of the Ellen MacArthur Foundation's New Plastics Economy Global Commitment and the member of the U.K. Plastics Pact. These initiatives share a collective ambition to make important steps forward in addressing the issue of plastic waste. And finally, doing business the right way also means making sure we have a positive impact on the people and communities we touch. We aim to respect the rights of all people across our business, from the families of the farmers we source our raw materials from, to the employees who make our delicious snacks in our manufacturing facility. Identifying and mitigating human rights issues is part of this. As part of our annual human rights report, which has oversight from our Board of Directors and is informed by third-party auditing processes, we have identified forced and child labor as human rights risks in our cocoa and palm oil supply chain. Our signature sourcing programs are part of collective action needed to address these issues, by tackling the root causes with a holistic community-centric approach. Child labor has no place in cocoa. We're accelerating our plan to roll out child labor monitoring and remediation systems across 100% of our Cocoa Life communities in West Africa by 2025. The 76% of the Cocoa Life communities in Ghana were covered as of the end of 2019. Beyond cocoa, we are building capacity and strengthening monitoring systems across our own operations and our supply chain. We also play an active role in advancing industry-wide public-private partnerships and collaboration that's necessary for success. As you can see in the dashboard on Page 27, we're making really strong progress against both our short- and long-term goals. We've already exceeded or achieved all our 2020 targets in 2019, ahead of schedule. And we are well on our way to meet our ambitious 2025 targets, which provide us a clear road map to sustainable business growth.

Thanks, Chris. We hope today's discussion has demonstrated our commitment to the sustainable growth of our business. Today, we released our Snacking Made Right annual impact report. It's a one-stop resource for full visibility on our sustainability and well-being approach, targets and goals. Obviously, we welcome your questions and further dialogue on these topics. Appreciate everyone joining, now let's open it up for questions.

[Operator Instructions] The first question will come from John Baumgartner with Wells Fargo.

Thanks for the insights today, very informative, I think. My question, Dirk, is a number of larger multinational companies in consumer staples are also pursuing sustainability initiatives to varying degrees. And I'm curious, what do you think distinguishes you on this front?

Thanks, John. I would say that we're very focused in our approach, and we try to do that by having material information on where we can have the most impact. Probably second is that we try to have a holistic approach and then tackling root causes, and I'll go a little bit deeper in these points. And three is that we integrate it in our strategic planning. It's not a separate program that a group of people within the company does. This is part of the plan that everybody makes. It's part of our compensation system. So maybe quickly, a little bit deeper on all 3 of them. So we collect a lot of data. We do a lot of third-party assessments, and we do have an ongoing dialogue with stakeholders. And we've decided that in this area, we should focus instead of trying to do everything. And we focus on the areas that: A, are important for our business; but B, where we also can have a material impact where we can make a difference. And so I would say our agenda is quite limited or focused compared to other companies, but I do think we make bigger progress. And of course, we have quite some scale, so we can make a difference. On the second one, as it relates to a holistic approach to sustainability and well-being, we're trying to find the root causes and address those. And we do that through a collaborative approach, partnering with our peers as often or with suppliers or authorities. And for instance, cocoa is very important for us. And I think we can say we are the leaders as it relates to a sector-wide transformation by trying to really have programs that tackle the deforestation or the child labor that are underlying -- that are the real problems related to that. And we try to do that through education and investment and doing work with communities and building empowered communities versus more shortcut approaches, I would say. And then the last one about integrating this as in the core agenda of the company. They are an absolute priority for us, and we're very focused on this. They're embedded in our strategies. Every BU around the world has Snacking Made Right goals and they have to deliver it again and -- against them. And on top, our people have it all in their compensation targets. So I feel those are the 3 big areas where we probably are a little bit different from our colleagues.

Great. And then I guess maybe just a follow-up. In terms of the social component of the ESG platform. I think investors are frequently drawn to the nutritional profile and the more indulgent component of your core business, and you touched on the portion control targets in your comments. But how do you think about the ability to balance the demand for indulgence with, I guess, the parallel trend of health and wellness as a company and your ability to successfully navigate both?

Yes. Yes. And so as we said in the presentation, the first thing to sort of fully be aware of is that the largest dollar growth is going to come from the categories that we are focused on: chocolate, biscuits, gum and candy, which, by itself, as a category compared to fruit snacks or yogurt or nuts, are not considered as a healthy category. So you're already right with the question, how do you put 2 and 2 together if the big growth is going to come from those categories really. So the growth rates in those healthier categories, where we are less represented, we're not in yogurt and we're not in nuts and we have a little bit of fruit snacks, is important. But it's not going to offset that dollar growth. And so our focus is, okay, within those categories of biscuits, chocolate, and so, what can we do to really drive well-being within those categories. If the consumer is going to keep on eating them to a bigger and bigger degree, what do we need to do as a company to make sure that they make the right choices? And first of all, what is being defined as well-being by the consumer is very different these days. And I don't know, but sometimes I have these conversations with millennials, and they will link health of the planet to their personal health. And if a snack is not produced the right way with the right sustainable approach, even if it's a very healthy snack, they might not consider that as a healthy snack for themselves. And so that's just a small example of how the 2 get intertwined in today's consumers' minds. So it is possible that biscuit and chocolate are considered a well-being choice if, for instance, the ingredients are locally sort, the cocoa content is high, for example, sugar content is low. And so there are possibilities for us to make progress within our current categories. And as we have done a lot of work on trying to understand exactly what the consumer means when they mean well-being or when they talk about well-being, we have those 4 categories that we showed you. And about 30% of our current range is already mapping against those 4. So that -- we feel that we need to keep on doing that work there. Yes, Chris, go ahead.

Yes. And Dirk, what I might add is in addition to what we're doing with the portfolio, we also recognize that helping consumers cultivate -- addressing the behavioral side and helping them cultivate healthy eating habits as part of the equation, and that's why we're really pushing mindful snacking to help encourage balance. And we've been working on mindful snacking for about 6 years now to really understand the science behind it and how it can really help. It's a practice that can help consumers really focus on their snacks, savor them and be more satisfied. A big part of that, as Dirk mentioned, is portion control as well, which helps consumers focus on the right amount of snacks. And as we talk with consumers around the world, they -- there's a lot of receptivity to this approach in terms of it really addresses their need for -- they love their indulgence snacks and being able to enjoy them and stay in balance.

The next question will come from Alexia Howard with Bernstein.

So I guess my first question is around what evidence you have that consumers are really making choices with ESG factors in mind. How were you able to measure that? And are those concerns more prevalent in Europe than in the U.S., and if so, why do you think that might be? And I have a follow-up.

Okay. I wouldn't say that the consumer thinks in ESG terms. I think particularly millennials and generation Z are much more critical about what companies do. And so they want to, first of all, make their own choice. And so they are very interested in the values and the behaviors of the companies they buy from. And we know that by interviewing them and see the evidence that comes out of our research. And even the brands, they're quite interested. And before they associate with the brand, they want to make sure that, that brand is, yes, appropriate for them. Of course, price availability and taste for those younger consumers play a role. But the -- it's clear that the -- I would say, in the scale of how they make their decisions, they are more tilted towards those factors that I was mentioning. We try to do this or to make sure that we act responsibly and ethically because we think it's the right way to do. But it's -- I think if you want to really connect to those consumers, it's going to be critical for our business going future -- forward. I would say, as it relates to the consumer, yes, there is clearly a difference, not only in the consumer, but probably also in the stance of governments in Europe versus the U.S. I think that has to see (sic) [ do ] largely with the fact that -- and I can honestly not tell you why that is, but the consumer in Europe clearly has a much bigger interest in the environment and the effect of companies on the environment or on health and wellness. And we can clearly see a noted difference, like interest in Cocoa Life in Europe is quite big. But we don't have a big chocolate business in the U.S., but we are not sure that there would be a lot of questions from consumers surrounding that, for instance. So it is correct, Alexia, as you say, there is not a difference between consumers. I don't know, Chris, Jonathan, if you have something to add?

No, I think you -- the only other thing I would say is that as we talk with consumers, I think that they're increasingly aware of the connection. And I think we'll see this even more so with COVID coming out of it, the connection between their food choices and the environment. I think that, that's part of the increased focus on plant-based diets, et cetera. And I think that's -- from our research, particularly among the younger consumers, they understand that connection and then they make choices accordingly.

Great. And just one quick follow-up. And to follow up on John's question earlier about the indulgent snack. As you acknowledge, the majority of your portfolio is in more sweet indulgent snacking, and there are obviously issues of diabetes, obesity that have become bigger concerns in many developed markets in recent years. So how can you resolve that sort of cognitive disconnect between marketing those more indulgent sweet snacks, frankly, also having investors, who expect continued volume growth each and every year and that broader social impact? And I'm kind of wondering whether there might be a point down the road where you start following kind of what the soda companies have done, which is really focusing on price and mix growth perhaps at the expense of volume growth over time on that part of the portfolio, while obviously continuing to market the well-being side of things.

Yes, yes. I think that -- yes, you're kind of sort of hinting already on what the answer is here. I think there's a number of factors there. One is pricing and mix, and what do we push. And so for instance, portion control. We've taken the stance that we want portion control to really be a big part of our portfolio. Portion control, meaning less than 200 calories per sitting. And so we are going to push that very actively in our indulgent category. Also mindful snacking, sort of being very conscious about what you eat and how much you eat and really enjoy kind of the moment of the snacking. We want to push that quite hard because that helps consumers to understand it's about the enjoyment, not about the quantity. And then if you look at consumers looking at some of the data we have, 2/3 select food for health reasons but about 50% chooses (sic) [ choose ] food because of taste. And so you cannot neglect taste, and that's why you see some of these indulgent-type foods play such a big role. So I think one of our solutions, obviously, is to launch more healthy products, which we're doing and with some of the recent things like Perfect Bar, which is considered very healthy by consumers that helps us to tip the balance. But I personally believe that our biggest role is to do what we can within our categories. They will not go away. The consumer will keep on doing what they're doing. How can we help the consumer to make more balanced choices, if I can say it like that. And instead of having huge quantities in one sitting, have a little bit every day, things like that. And I do think that is not just to -- for us to do well as a company, I think that is the solution for the consumer. There's going to have to be balanced in their diet, and as consumers, we will need to learn how to do that. And that's the way forward, that's sustainable over the long term. So those would be the things that I see that can make a difference for us. I don't think you should expect us to make a big flip and suddenly have a whole healthy portfolio. But we can still, as I said, play the cards within our current portfolio of doing a lot more on the health environment side for our categories. Jonathan, Chris, anything to add? Thanks, Alexia. Go ahead, Chris.

Sure. I mean what I would add is that we have been focused on improving the nutrition and ingredient profile of our existing portfolio for many years, and we've been using our scale. For an example, sodium, we were down another 1.5% last year. And we've taken it down about 6% since 2012. Sat fat, we've taken it down by 4% since 2012. So one of the things that we work on is when we make -- to make those kinds of amount of changes across a global portfolio is pretty significant while still delivering taste that snacks -- snack that tastes great. But it has a massive impact, we believe, on people's health. And we continue to work on sugar. And this year, our Oreo in China, we have a 25% less sugar option. So we are -- with Cadbury Dairy Milk, we also had a 30% less sugar option that we launched last year in the U.K. and India. So we're continuing to push the improvement in our core portfolio. And I think that, that's in addition to portion control, a big way that we can help overall improve just the nutrition for consumers.

The next question will come from Steve Strycula with UBS.

Thanks, Dirk, and the broader team, for putting this on; very insightful. We don't always get a chance to talk about this piece of the business. I appreciate it. The first one, Dirk, would be, as you think about the branded approach or the toolkit, if you will, to meeting a lot of these customer needs and societal means longer term, how do you think about the opportunity to really build new brands versus using global brands that you already have in the marketplace and more modernize their packaging or nutritional attributes to kind of meet these needs? How do you think about both opportunity sets? And then I have a follow-up.

Yes. I think Steve, it's a good question. Because it's obviously, in a way, it's easier to connect to the consumer if you launch a new brand, which is much more positioned on a health positioning, let's say, and has a clear message to the consumer. But at the same time, it's expensive. And it takes a while before it has a certain size. On the other hand, if you have existing brands, they already have a certain image, and they have a connotation in the consumer's mind and to shift that image is a bit more difficult. And I think there's a certain balance that we will need to have. And the way we try to make those decisions is if you talk about launching a new brand, and I'm using the U.S. market size as an example, and very often, those brands come from an acquisition or we launch new brands ourselves. We believe that if the brand doesn't have the potential to reach about $200 million, $300 million in a 10- to maybe 15-year time period in the U.S. market, it's probably not very useful to spend the time and money on developing that brand for our categories because the returns are really not there. And so anything we consider, we need to see that pathway to that sort of size over that time period. Otherwise, we would prefer not to do it. As it relates to changing the image of our existing brands, you can do it with separate ranges, and that has been quite a successful approach. Probably the most successful we all know is things like diet beverages that have played a big role in the development of beverages over time. And so we have ranges around the world that are under the mother brand. For instance, we have a whole green range, which is an organic range under LU in Europe which has its own section, that is clear for the consumer. And I think that is the way to go, to my opinion, to have these ranges. And then the third area is what Chris was talking about, was constantly optimized the nutritional panel. But that is almost stakes to play. We have to do that, and it will not make a difference. It's sort of -- we have to do it because otherwise, the consumer might eventually not like our brands anymore. But it's important we keep on doing it. So if I would -- I don't know the numbers, I've not pulled together the numbers, but we're probably looking at a situation where I would say that 80% of what we're trying to do in health and wellness is on our existing brands and 20% would be with new brands.

No, that's very directionally helpful. And Dirk, how would you think about -- as we hear a lot of this messaging, how are governments or independent third-parties around the world working to maybe facilitate these emissions that you're trying to pursue, whether -- I'm not asking to get into specific numbers, but whether it's like tax incentives or grants, tariff exemptions. Is there anything that's -- like other organizations are coming together that really sets an easier bridge for all of your goals to be achieved?

Yes. And here, I certainly want Chris and Jonathan to jump in. They have a better view of what's going on around the world. But it's clear, to my opinion, that as an ingoing position for us as a company, we need a multi-stakeholder collaboration. If we really want to tackle these risks -- and let me use deforestation to not always use a health and wellness topic, these are very complex challenges and that really no company nor an industry or one sector can solve. But it is a fundamental issue. So for sure, industry has a role to play, but governments have to play a role also. And obviously, the farmers play a big role here, too. And so you need to get this multi-stakeholder collaboration. And depending on where you are around the world, that goes well or that goes not so well. And to continue on the example of deforestation, it has to go through a better living income for the farmer. So that they can be more informed, better dedicated, feel better about their lives. And as a consequence, do the right thing. That is happening. Ghana and Ivory Coast have just imposed on cocoa, the LID, which is the Living Income Differential, which will start to be charged at the end of this year and that will have an impact on cocoa prices, obviously, but it is the right thing to do. So we are supporters of doing this. Assuming that this will lead to a real income difference for the farmers in Ghana and Ivory Coast. So that's an example. I would say, in general, what I see -- and then I'll hand it over to Chris or Jonathan to chime in. We see things happening in those areas like deforestation, as I just mentioned, on health and wellness. We often see taxation which I think is really not helping. I think there's a lot of proof out there that shows that taxation doesn't really make a difference. But it is a temptation by governments. And I'm much more in favor of education and information and trying to fundamentally change the eating habits, doing a lot of work in schools, as an example. So sometimes the interests are a little bit against other, I would say. So Chris, Jonathan?

Dave (sic) [ Steven ], this is Jonathan. I just wanted to pick up on this point about relations with governments through many of our industry associations. So for example, we're -- through World Cocoa Foundation, we're members of the cocoa and forest initiative, which is a collaboration with the producer governments of the 2 major West African cocoa producing nations, Cote d'Ivoire and Ghana. And also through the Consumer Goods Forum, where we're working on deforestation forest positive coalitions to improve forest protection across the world. In both cases, it's really important that we have powerful relationships with producer governments. Ultimately, if you think about it, solutions on the ground really need to be owned by the countries where production takes place. They can't be imposed from the outside with land use and forestry. It's about decisions relating to land governments. A very good example, we worked in Indonesia with the UN Development Programme and the government of Indonesia to support development of the first ever national action plan for palm oil. And that's the kind of step that I think is very important to take, that we work very closely with producer governments to improve governance of land use, but also to support development of farmer networks and productivity and community development in those nations. So for us, government relations, extremely important on our production side as well.

The next question will come from Michael Lavery with Piper Sandler.

Two -- one, you talked about how the consumer is looking for these type of products, especially younger ones. Do you have a sense of what their -- what really drives purchases? Is it more corporate actions? Is it product attributes? Is it a bit of mix of both? And if it's a corporate activity, how do you connect Mondelez with your brands in the markets? And then just second question, would we be right to assume that these portion control packs have a lift on margin mix? It seems like that'd be really good price realization, but I want to make sure there's not a piece of that I might be missing.

Yes, yes. Clear -- the consumer thinks brands, not that much companies. They are very interested in what brands are doing. And we try not to talk too much about corporate actions. Mondelez, is not that known as a company. We're not -- some of our colleagues who have existed for a long time and are sort of well-known by consumers. So for us, it doesn't make sense to talk about Mondelez corporate actions. We try to channel everything through our brands. Now we do talk about Mondelez with governments with you, with the press, the business press. But as it relates to consumers, we channel everything through our brands. So for instance, Cocoa Life, we put a special seal of Cocoa Life on our packs on chocolate to make sure that the consumer knows, when I consume this product, it has been produced with chocolate that comes from farmers who are part of the Cocoa Life program. So -- and we have taken a clear stance there. And we do even more. We've defined that every brand these days, if it wants to really make a difference with the consumer, it needs to have a clear purpose. It's not just about the attributes of the product or the taste, it's about what that brand wants to stand for. That's really what especially younger consumers are interested in. So it goes further than just making the right claims on the pack or in the ingredients. It's about steering the whole brand into a direction that shows that the brand cares and that it is doing the right thing and connecting in that way with consumers. So for instance, Cadbury, everybody has a 'glass and a half' in them, has been a huge campaign in the U.K. We've linked to many subjects like recently to the COVID-19, and the reaction from the consumer has been overwhelming in that sense. So it is not only the right thing to do. It is a really good marketing, too, I think, for the brands, and it helps our brands grow. So no doubt, we have to go through our brands. The second question on portion control. Yes, you're right. In general, the per kilo price of these products is higher because there's more packaging. And so it tends to -- so it's not always the case. But in general, I would say, the percentage gross margin that we get from these products is good. And the dollar per kilo gross margin we get is very good on these products. So yes, it does help our mix if we sell more portion control.

We do have time for one more question, and that question will come from Steve Powers with Deutsche Bank.

We've covered a lot of ground. Just maybe one follow-up for me, Dirk or Chris or Jonathan, on the topic of collaborating with third-parties. I mean you've clearly spoken about your efforts to work externally with governments, with NGOs, through industry partnerships and coalitions. But I guess my question is just a little bit further on that is do you feel like stakeholders -- are all industry stakeholders are as aligned as they need to be to make the progress you desire? And if not, what role can Mondelez play in bringing those necessary coalitions closer together?

Thanks, Steve. Not sure. Chris, Jonathan, you want to go first or -- yes.

Sure. Yes. I'm happy to start here because part of the work that I do, I spent a significant amount of time in industry coalitions through the World Cocoa Foundation, through the Consumer Goods Forum, Forest Positive Coalition, we're part of a packaging coalition as well as a human rights one. So various parts of our team are involved. And I guess I think one of the things that we've made tremendous progress on, I think, is aligning as industry and recognizing -- always with the presence of an antitrust lawyer. But this is about recognizing that these challenges that we face, like deforestation, child labor, et cetera, are things that no one really sector can solve themselves, industry camp, government, et cetera. So it really makes the need for partnership critical and sharing best practices is something where we can come together and make progress faster. We have suppliers that are very important to us in these key commodities where we're working upstream, and they are just terrific partners in figuring out how can we go further faster. And I think the other thing that we recognize as industry is that having an aligned approach gives us a better position to be able to go to governments and find the common points of interest. Governments are seeing that they also want to tackle things like deforestation, too, and particularly in places like West Africa, that's why we have the cocoa and forest initiative that we all signed. The Ghanaians -- I've oriented about 33 companies signed together and are working against just to tackle it. Because things like climate change, not only it's a problem for industry and having a strong supply of cocoa is a problem to the local governments in terms of having a steady industry to rely on. So we find that common ground, and we make -- I think we're making good progress. That's not to say it's always easy. As you can imagine, collaboration requires a great deal of work. But I'm very encouraged having been at this for a while by the progress that we continue to make.

Yes. I would add as a CEO's view there. I think that there is certainly the power to do something. And when everybody gets together, there is a potential to make a big change. I think there's certainly good intentions from everybody. Everybody wants to do the right thing and is trying very hard. The progress is accelerating. But it remains sometimes -- I mean that's just me personally, sometimes, too slow. And that's just because of the complexity of the different parties around the table sometimes. But I do think that the sort of the overall sense of urgency is growing. I think investors play a role for us. If investors find this team important, we are more inclined to push harder on these teams. And I think in general, NGOs and governments are also understanding that, that progress needs to be made here. So I am encouraged, like Chris said. But sometimes, as a CEO within the company, you can move things very fast. It's a little bit frustrating, if you can call it like that, that things are not going fast enough sometimes.

And now I'd like to turn the conference back over to management for any closing comments.

I think that wraps everything up. I just want to thank everyone. I want to thank Dirk. I want to thank Chris and Jonathan for joining us today, shedding more light on this. And I want to just thank everyone for joining us, and I would encourage everyone to read our Snacking Made Right report that we released this morning, lots of good material on there. And as always, we're available for questions from an Investor Relations perspective. Thanks.

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.