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

Hello, and welcome to our 2022 Mondelez International Investor Update. We appreciate your taking the time to join us, and we thank you for your continued interest and investment. Today, we'll share an update on our strategy to advance our global snacking leadership and walk you through the next phase of our company evolution. We hope you'll walk away with a deeper understanding of our opportunities and growth priorities, and we have allocated a good deal of time for Q&A with our senior leadership team. We'll start with an overview of our plan to win from Chairman and CEO, Dirk Van de Put. Dirk will take you through our performance since launching our growth strategy more than 3 years ago and explain why we're confident that Mondelez now is poised for even stronger performance in our second decade. Then, our Chief People Officer, Paulette Alviti, will join Dirk to share her perspectives on how our winning culture will serve as a key engine to accelerate this growth. After that, we'll dive deeper into our growth strategy in our key categories. First, we'll discuss our plan to achieve global chocolate leadership with Martin Renault, our Chief Marketing and Sales Officer; and Vince Gruber, our EVP and President for Europe. Next, Vince will be joined by Gustavo Valle, our EVP and President of North America, to share our plans to advance our position in biscuits, while expanding the fast-growing baked snack segment. We'll then pause for Q&A and take a short break. After the break, Martin will return to the stage, alongside Maurizio Brusadelli, our EVP and President for Asia, Middle East and Africa, as well as Sandra Macquillan, our Chief Supply Chain Officer. Martin will cover our progress and plans around marketing excellence, while Maurizio and Sandra will share insights on our initiatives to further improve sales excellence and supply chain. After that, my colleague, Andre Gevargiz, will host a fireside chat with CFO, Luca Zaramella; and Christine McGrath, our Chief Impact and Sustainability Officer, to discuss the critical role of sustainability in advancing our strategy. Finally, Luca will discuss our strategic priorities to unlock further value creation. We'll close the day with additional time for Q&A and a few words from Dirk. Before I hand it over to Dirk, I would like to remind you that many of the statements that we make today will be forward-looking. Also, unless noted as reported, we'll be referencing our non-GAAP financial measures, and we provide our year-over-year growth on a constant currency basis, unless otherwise noted. You can find our statements around forward-looking statements, comparable GAAP measures and GAAP to non-GAAP reconciliations and more information in our presentation and on our website. With that, let's get things started with Dirk.

Hello, and welcome, everybody. We are excited to have you with us. On behalf of the entire Mondelez International leadership team, welcome to our 2022 Investors Update. We appreciate you joining us today. This year makes the 10th anniversary of our company. And while we have many brands that have been around for generation, our company is still quite young. And while we are proud of all that we have achieved in the past decade, we are even more excited about the opportunities we see in the years ahead. Today, we will talk about that vision, sharing our strategic plans to build on our unique strengths, sharpen our focus and accelerate our growth in the years ahead. By mobilizing our teams globally around our 3 strategic pillars, growth, execution and culture, we've step changed the growth of the company, strengthened our competitive advantages and built a platform for sustained and attractive long-term performance. Our focus on profit dollar growth, local-first commercial execution, high return investments and clearly defined incentives has helped us to consistently meet or exceed our financial and operational commitments. As such, we are well positioned to take our performance to the next level. Today, we will share highlights of our progress and demonstrate why we believe the next phase in our evolution will be the most exciting one yet. We'll start by recapping our actions and performance over the past 3-plus years, which have driven our virtuous cycle of growth. As a result, we have a clear winning position as a global snacking leader, with a strong core business in the fast-growing chocolate and biscuit snacks categories. Looking ahead, we are reshaping our portfolio to further accelerate growth. We are increasing our focus on chocolate and biscuits, which we have expanded to include cakes, pastries and snack bars, while expecting to exit non-core businesses in other categories over time. And we are doubling down on execution to capture the sizable opportunities ahead of us. By strengthening our investments in key capabilities and enablers, including sales, marketing, revenue growth management and supply chain, we are positioning the company to win for the long term. Let's take a look at our plan to win in more detail. To ground our go-forward conversation, we'll start with some perspective on our recent performance. Since the launch of our strategy in 2018, we have consistently delivered against our long-term algorithm. Strong top line momentum driven by brand and sales investment has enabled us to consistently deliver profitable growth, reinvest in the business and return significant capital to our shareholders. Over the past 3 years, we've delivered and exceeded our long-term growth algorithm of 3%-plus organic net revenue growth with a healthy mix of volume and price. Over the same period, we've consistently delivered high single-digit adjusted EPS growth. We've also grown our dividend double digits on average over the past 3 years and achieved or exceeded $3 billion in free cash flow every year. We have achieved this step change in performance by successfully reimagining and repositioning the business since 2018. This encompasses 5 key elements. First, we've shifted our focus from cost savings and percentage margins to delivering volume-driven profit dollar growth, which funds a virtuous cycle of reinvestment. Second, we've transitioned our portfolio from a collection of power brands and less reported smaller brands to a targeted focus on our core categories of chocolate and biscuits. Now our full portfolio of brands in those categories is supported by increased and more consistent advertising spend. Third, we've evolved our organization from a centralized matrix to a simpler local-first approach with clear accountabilities. Fourth, we focused on growth and improved our marketing and sales capabilities. And finally, to reward and drive the right behaviors, we've revised our incentive program to better align it to our growth strategy, driving ownership and accountability deeper into the organization. Together, these changes have step changed the trajectory of the company, creating a strong foundation for our next chapter. Now that we've reviewed the company's progress over the past few years, let's take a closer look at our 5 key competitive advantages. First, our leadership in attractive and resilient categories, like chocolate and biscuits, positions us well to benefit from the growing consumer preference for snacking; second, we have an advantaged footprint, with more than 1/3 of our revenue base in high-growth emerging markets; third, the strength of our iconic brands differentiates us and allows us to navigate inflationary periods such as the one we are in today; and fourth, our growing excellence in marketing, sales and cost management allows us to drive demand and deliver profitable volume-driven growth; finally, and perhaps most importantly, our growth culture enables us to attract and retain the very best people in the CPG industry, who can bring our vision to life through strong execution. Let's dive deeper into each of these competitive advantages. First, our categories. Demand for our key snacking categories continues to grow. Consumer research validates our confidence that snacking plays an increasingly important role in consumers' life. Our annual state of snacking report, conducted in partnership with the global consumer research leader, The Harris Poll, finds that 64% of people prefer to eat many small snacks throughout the day, often replacing a traditional breakfast, lunch or dinner. 86% of people around the world snack on a daily basis on average 3.3x per day. Additionally, 88% of consumers believe a balanced diet can include a little indulgence. This finding confirms that categories like chocolate remain very important to shoppers and their families, even as people seek to improve their overall health. Finally, snacking is here to stay, and it's a behavior, led by Generation Z and millennials, who snack on average 15% more per day than older generations. Taken together, these consumer research trends, both guide and reaffirm our strategy. We are confident we are playing in the right categories and that we are well positioned to win. We currently hold a clear #1 global position in biscuits with 17% share, a very close #2 global position in chocolate with 12% share, the #3 global position in candy with 5% share and the #2 position in gum with 22% share. Growth in these snacking categories has risen steadily over the past few years from just shy of 3% in 2019 (sic) [ 2018 ] to 5% last year. While we are at the point in the economic cycle where pressure on the consumer is increasing, our core categories of chocolate and biscuits have been historically resilient because they provide consumers with affordable moments of pleasure and fuel. As I mentioned, we are the undisputed #1 in global biscuit and a very close #2 in chocolate. And when you combine our focus categories of chocolate and biscuit into a universe, where the lines are increasingly blurring, we are a clear #1 by a significant amount. Chocolate and biscuits are also very durable categories performing well during economic downturns. Our second competitive advantage is our geographic footprint, with solid strength in developed markets, combined with broad exposure to the rapidly growing and demographically favored emerging markets. About 1/3 of our revenue comes from emerging markets, growing high single digits. All of our geographic regions are growing at or above our top line algorithm. The strength of our iconic brands provides another clear competitive advantage. We are proud that consumers all around the world continue to reach for and seek out our trusted and beloved brands. In fact, our brands are the market leaders in our core categories of biscuits and chocolate in numerous markets around the world. To name just a few, Oreo is the world's favorite cookie. Cadbury Dairy Milk is the #1 chocolate brand in key markets like the U.K., India and Australia. And we are the world's leader in savory crackers. And during COVID, consumers demonstrated their preference for brands that they know and trust, while private label share declined to 5% in chocolate and 10% in biscuits. The fourth competitive advantage that fuels our confidence is our commercial capabilities, including marketing, sales and cost management. Our purposeful marketing strategy, which you'll hear about later, is becoming a differentiator as we've improved across every aspect of this area. Similarly, we're investing in best-in-class sales capabilities and activations, with an emphasis on emerging markets. We've added distribution to more than 700,000 stores in China and more than 500,000 stores in India since the start of 2019. And we are continuing to invest to sustain growth in digital commerce, which has doubled as a percentage of our reported revenue since 2019. Additionally, we are advancing our revenue growth management capabilities with investments in technology and talent. This will be important for both the short-term inflationary cycle and our long-term ambition of strong top and bottom line performance. We're also confident in the strength of our ongoing cost efficiency by driving down controllable input and conversion costs, advancing customer service and streamlining logistics. Cost discipline is embedded throughout the organization, as evidenced by the fact that we were able to reduce overheads in 2021, even while growing revenue more than 5%. Of course, one of the most important enablers of bringing these 4 competitive advantages to life is our people, the very best people in the CPG industry. Our nearly 85,000 employees love our brands and our consumers, and that is the engine and driving force of our company. Now I'd like to invite our Chief People Officer, Paulette Alviti, to share a bit more perspective on how we are continuing to enhance our growth culture to further drive success. Paulette?

Thank you, Dirk. I'm happy to provide additional context in how we have built the foundations of our growth culture and what I'd call our unique strength here at Mondelez. When we redefined our growth strategy back in 2018, we knew a key enabler for our success would be cultural. And we united behind a common purpose, underpinned by newly adopted shared values, driving local empowerment in a local-first operating model and putting our brands and consumers at the forefront, aligning our rewards and locally-driven strategic KPIs and providing rich career experiences for our colleagues, all driving a laser-focused mindset around growth. These shifts allow us to get closer to the consumer, increase our speed to market and agility in driving solutions, unlock our robust collaborative spirit, where we work to support each other around shared goals and excite our talent around the opportunity for a career in sought-after general management roles. Our culture has become a unique competitive advantage, and we have a clear culture strategy with robust programs and metrics designed to continue that momentum. We are taking our talent and culture strategy to the next level, aspiring to be the most engaged culture with the best talent among CPG companies. To reach this vision, we're focusing on 3 key areas: first, building a team of deep and diverse talent will remain a critical enabler to growth. We're doubling down on programs in diversity, equity and inclusion, including mentorship for leaders and early career diverse talent recruitment, expanding investment in top talent programs and rigorous processes on succession planning, career and development that will unlock internal sufficiency, so we can read -- confidence is underpinned by the progress we've been making against our key priorities, while headroom remains for further growth. As we strive to achieve diversity representation commensurate with our markets, in 2021 alone, we increased black management representation in the U.S. by 60%. And since 2018, we've increased women and senior management by 15%, with women now holding 39% of our leadership roles, positioning us to reach our 2024 target of 40%. And year-over-year, we continue to expand the number of global markets where we are recognized externally as a top employer. Together, these efforts build our brand as a career destination for top talent, while driving local retention. We continue to build robust talent management processes with more planful development actions for our people. Our depth of talent results reflect this rigor with succession readiness for top leadership improving every year, up 16 percentage points since 2019. And we continued to extend our strategic talent review processes last year, adding another 4,500 more colleagues globally, covering our entire manager and above population with robust career dialogues and career development plans that ready our future generation of leaders. In summary, we will build on the cultural foundations we have honed since 2018, being choiceful about the people investments we make to retain and develop our talent in a rapidly evolving labor market. Our culture will continue to serve as a catalyst for agile leadership and empowering our people to drive growth. Now I'll hand it back to Dirk to share our strategy for the next phase of growth.

Thanks, Paulette. We believe that consistent delivery against our financial commitments, investment in the long-term health of our brands and the capabilities of our people combined with our key competitive advantages position us well to advance to the next phase of our company's evolution. We launched the company in October 2012, separating from Kraft Foods. The next several years, from 2014 to 2017, focused primarily on cost transformation and improved margins. After embedding a culture of cost discipline, our focus shifted to step changing our top line growth performance. Now we are ready to accelerate our growth and focus our portfolio on the very attractive chocolate and biscuits categories. We are pleased, but not satisfied, with our track record in delivering consistent growth over the past 3 years, and believe the best is yet to come. In support of this, we are evolving our strategy and enhancing our long-term algorithm. Our strategy continues to prioritize excellence in growth, execution and culture. At the same time, we recognized that we must invest in making our growth, execution and culture more sustainable for both people and the planet. That's why we are elevating sustainability to the fourth pillar within our strategy. We call this approach, sustainable snacking, and we believe it is critical to win in both the marketplace and in the hearts and minds of consumers. The competitive advantages and evolution that I've described give us confidence in adjusting our long-term algorithm. We are enhancing our long-term algorithm to 3% to 5% organic net revenue growth. Our long-term algorithm continues to include adjusted EPS growth in the high single digits and free cash flow of $3 billion plus. Our focus areas within each strategic pillar are in line with the mega trends defining our sector and broader environment. Snacking continues to grow, and our approach to a more focused portfolio around chocolate, biscuits and baked snacks will help us to capitalize on this strength. Our investments in digital commerce and a more consumer-centric supply chain will position us well for the rising digital revolution and move to more local supply chains. Our focus on engagement, well-being and flexibility will help attract and retain employees in a post-COVID environment. And our focus on building the right capabilities will be critical in a highly competitive talent environment. It's important to note that our strategy remains relevant and appropriate in spite of the currently challenging macro environment. There are certainly a number of challenges in the near term that will make it even more important to execute well, whether it's a stretched global supply chain, inflationary conditions that we haven't seen in decades or the significant geopolitical uncertainty presented by the war in Ukraine. Although we face headwinds from all of these dynamics, we are confident that we are taking the right actions that will deliver strong financial performance and sustained momentum. We believe the strength of our brands, the resilience of our core categories and our affordable price points will enable us to continue to grow volume, especially in emerging markets. At the same time, we believe our relentless pursuit of productivity and supply chain simplification as well as the pricing power of our brands will enable us to offset many of the profitability risks. We are confident that through our strategy and execution, we will successfully navigate near-term volatility and accelerate long-term profitable growth. We're taking actions in 4 key areas to sustain and accelerate profitable growth. First, we are continuing to increase our focus on the core of chocolate and biscuits; second, we are taking both organic and inorganic steps to fill geographical white spaces; third, we are expanding distribution in high-growth channels, where we have clear headroom to grow; and fourth, we are increasing our presence in underrepresented segments and price tiers. Let's walk through each of these actions in detail. First, we are doubling down on our core categories of chocolate and biscuits. Chocolate and biscuits are attractive and historically durable categories in both developed and emerging markets, and they still have significant headroom in terms of penetration and per capita consumption. Our revenue from these 2 core categories combined grew nearly 6% on average over the last 3 years compared to a decline in our revenue from other categories, in part due to the COVID-related disruption of the gum category. Over the past 10 years, we have been reshaping the business from approximately 60% chocolate and biscuits to almost 80%. And our long-term vision is to generate 90% of revenue through these 2 core categories. As we continue reshaping our portfolio, we will drive value through targeted acquisitions that expand our presence in chocolate and biscuits by filling geographical gaps and extending into underrepresented segments and price tiers. The 8 acquisitions we've completed or announced since 2018 add $2 billion in annual revenue and have an average growth rate in the high single digits. Our acquisition of Tate's grew our presence in the premium biscuit space, and we successfully transitioned that business to direct store delivery. The addition of Hu and Perfect Snacks enabled us to take advantage of growing demand for premium well-being snacks in the U.S. While the acquisition of Grenade enabled us to strengthen our presence in well-being snack bars in the U.K. Additionally, we expanded our presence in baked snacks with the acquisition of Give & Go in the U.S. as well as Chipita in Europe. In our most recent announcement of Ricolino, a confectionery and chocolate leader in one of our key priority markets of Mexico, which doubles the size of our business, provides strong route-to-market capabilities in the traditional trade and gives us a platform to further develop our biscuit business. Looking ahead, we will continue expanding our exposure to growing profit pools in chocolate, biscuits and baked snacks. Our M&A approach has 3 key components. First, we prioritize finding the right opportunities with attractive, sustainable profit pools and rigorous return metrics; second, we rapidly deliver value through strong integration and effective cost and sales synergies; and finally, we work to optimize growth through targeted investments, with a focus on filling white spaces, delivering multi-category strength and filling capability gaps. As we continue doubling down on chocolate and biscuits, we expect to exit nonstrategic assets over time. Today, we have announced that we plan to divest our developed market gum business after concluding a strategic review. In addition, we are also preparing to divest our global Halls business. These decisions free us to concentrate on our core chocolate and biscuit franchises and reinvest in those businesses. We also have sizable equity stakes in KDP and JDE Peet's, which provides significant firepower for growth-accretive snacking M&A going forward. Another key action we are taking to accelerate growth is building strength across multiple core categories in our major markets. Today, the majority of our key markets are skewed to a single core category. For example, the majority of our revenue in the U.K., India and Australia comes from chocolate. By contrast, our Southeast Asia revenues are almost exclusively from biscuits. We are working hard to address this imbalance by leveraging our iconic brands and established distribution as well as strategic transactions. In India, for instance, we have 65% share within the chocolate category. Our strong relationships with local customers and our robust distribution network provide a great platform to grow biscuits. Similarly, in Southeast Asia, we are leveraging the global brand recognition of Cadbury and Toblerone to expand our presence in chocolate. We are complementing these efforts with strategic transactions to support organic growth. For example, in Australia, the 2021 acquisition of Gourmet Food doubled our share in biscuits by enabling us to expand into premium crackers. Along with portfolio reshaping, we continue investing in both traditional and newer channels to reach additional consumers. We're investing more than $1 billion to become the digital commerce leader in snacks. We're building our talent and capabilities, integrating them deeper into the business and also increasing digital advertising. Digital commerce accounted for about 6% of our 2021 revenues, and we are targeting 20% by 2030. We are also strategically leveraging both direct and indirect routes to market to expand our distribution in emerging markets, and we are closing portfolio gaps and leveraging channel-specific activations to improve our share in European discounters, where our revenue has grown double digits every year over the last 3 years. Through brand extensions and acquisitions, we will play more and more across the full continuum of biscuits and baked snacks, by extending our presence into a much broader range, including cakes, pastries and snack bars. For example, our LU brand, already the well-established #1 cookie in France, offers a growing range of prepackaged soft cakes and pastries. Or under our Milka platform, the iconic European chocolate brand, which has expanded into new snacking occasions like cookies and brownies and we'll partner with Chipita to move into croissants and pastries. While we primarily play in mainstream price points, we see strong opportunities to better penetrate opening price points, while trading consumers up to premium price points. In emerging markets, we are currently underrepresented in low-priced products like small-sized single chocolate bars with less than 10% share. We are continuing to introduce new offerings that allow more consumers to access our products and increase the penetration of the chocolate category. We are similarly underrepresented in the premium price tier across both developed and emerging markets. Increasing our premium focus, we're launching our largest premium offering, Toblerone, into this space as well as developing local offerings and acquiring strategic assets such as Hu. To conclude, we have been consistently delivering against our 2018 strategy and long-term algorithm, driving volume-driven, profitable growth. We are extending our leadership positions in attractive and resilient snacking categories. We are leveraging our competitive advantages and investing in brands and capabilities to maintain momentum. And now we are advancing to the next phase of our company's evolution, acceleration and portfolio focus. Now I'd like to introduce Martin and Vince to begin our deeper dives into our core categories.

Thank you, Dirk, and hello, everyone. As Dirk explained earlier, chocolate is a great category to be in. In our most recent annual state of snacking survey, 74% of consumers said they can't imagine a world without chocolate. We can't imagine such a world either, and we are well positioned to lead the future of chocolate with our purposeful brands and superior products. In the next few minutes, we will walk you through our plan to become the #1 player in chocolate, starting with another view of our already strong base, and then diving deeper into our 3 key growth drivers: strengthen tablet leadership; win in seasonals, gifting and sharing; step-change presence and performance in premium. Our $9.3 billion revenue chocolate franchise is performing well, growing at a very healthy 5.7% CAGR over the past 3 years. We play in attractive geographies with strength in higher per capita consumption developed markets like the U.K., Nordics, Australia, Germany and France, complemented by emerging markets like India and Brazil with high growth potential and a rapidly expanding middle class. Our branded products as private label share is only 5% globally and declining. Chocolate has historically shown resilience to economic downturns and pricing actions, perceived as an affordable indulgence and an important pick-me-up. We have strong momentum in this category gaining share. Today, we are a very close #2 in global share, closing the gap behind the #1 manufacturer. Our clear aim is to become #1. We can achieve this by leveraging the power of our brands. Consumers all over the world trust our beloved brands to bring them great taste, satisfaction, comfort and nostalgia. Our iconic global chocolate brands, Cadbury Dairy Milk, Milka and Toblerone account for half of our annual chocolate revenues and are growing at a 6.1% 3-year CAGR. All are very strong assets with both Cadbury Dairy Milk and Milka over $2 billion in annual revenues and the broader Cadbury portfolio over $4 billion. The other half of our revenue comes from local jewels, which represent the taste of the nation in many markets, growing even faster in the last 3 years at a collective 6.7% CAGR. Some of the largest and most widely recognized of these local jewels include Lacta in Brazil, Cote d'Or in France and Belgium, Marabou in Sweden and Freia in Norway. Each of these distinctive brands is beloved in its markets, where these names are literally synonymous with high-quality chocolates. Building on our strong chocolate franchise, we have a robust plan to sustain mid-single-digit growth and reach the #1 global position. The 3 key building rocks in our plans are: strengthening tablet leadership, which is the largest opportunity for us in chocolate; winning in seasonals, gifting and sharing; and finally, step changing our presence and performance in the premium price tier. Let's take a closer look at each of these growth drivers. And to start, let me hand over to the President of Mondelez Europe, Vince Gruber.

Thanks, Martin, and great to speak with you all today. The first step in our plan to sustain mid-single-digit growth in chocolate and reach the #1 position is to strengthen our leadership position in tablets, which represents the largest segment of the global chocolate market. Tablets represent nearly 1/4 of the total global chocolate category, and this format is the heartland of our chocolate franchise, accounting for almost half our chocolate revenues. Tablets are the fastest-growing segment outside the U.S., growing at a nearly 6% CAGR over the last 3 years in the key markets where we play. And we have outperformed that market, growing almost 6.5% and gaining share. We are the clear leader in this segment with about 34% share globally. And we have extended that leadership since the launch of our strategy in 2018 with a 50 basis points cumulative share gain over the last 3 years. And let me speak a minute about the importance of tablets to consumers. Why is leadership in tablets so important? Because tablets are defining the signature taste of chocolate, what consumers declare as their preferred taste. So how do we expand our leadership in tablets? First, we will work to further expand our leadership in our core tablets, which satisfies the everyday treat occasion. We already have the #1 and #2 tablets globally with Cadbury Dairy Milk and Milka. Both brands are over 100 years young and have evolved to remain contemporary, relevant and in great health today, growing high single digits and mid-single digits, respectively, on average over the last 3 years. We believe that sustained and accelerated growth starts with dialing up the purpose and the identity of our brands, like generosity for Cadbury and tenderness for Milka. We are and must remain the clear leader in terms of taste appeal. That is why we have invested in Milka renovation. We're very proud of being able to developed the most tender ever tasting and melting Milka chocolate, which will retain current and win new customers. And as expected of segment leaders, we are evolving our core portfolio to include differentiated offerings, including vegan and reduced sugar products that meet new consumer needs. Second, we are working hard to step change the part of our tablets portfolio that meets the indulgent and pampered consumer needs space. Consumers in this motivation set are seeking mindful moments to satisfy craving with simple rewards. We meet that need through differentiated higher unit price line extensions, such as Milka MMMAX in Europe and Cadbury Silk in India. We're excited about the opportunity to increase investments in these sub-brands to realize their potential. We believe we can double the size of Cadbury Silk in India, for example, from over $150 million today. And we will apply the learning from these successful brand extensions to develop indulgent offers for other key markets like the U.K. The third key element of our tablet strategy is to invest and grow in dark chocolate, the fastest-growing type of chocolate. We have built strong dark chocolate brands in Australia, Brazil, India and France, and are now working to fill portfolio gaps in other major chocolate markets, such as the U.K., while investing and accelerating our existing dark chocolate brands. Now let's look closer at our second key chocolate growth driver, winning in the seasonal gifting and sharing segments. The seasonal gifting and sharing space accounts for approximately 1/3 of the chocolate market. And these segments extend far beyond major holidays like Christmas, Easter or Chinese New Year. Chocolate gifting is an everyday expression of thanks, celebration or support between friends and loved ones around the world. These segments are attractive for a number of reasons. Firstly, they have a higher price per kilo than the average of the chocolate category; secondly, they are highly incremental and expandable segments; and thirdly, they are increasingly relevant globally as demand for premium gifting grows alongside the rapid expansion of the middle class in emerging markets. We have very significant headroom in this area, with only 18% of our sales from these products in 2021. But we are growing faster than the market and we are gaining share. These segments have averaged 4.2% growth over the last 3 years, while we have grown almost 6% in this space. We have a strong plan to sustain and accelerate growth in each of these important segments. First, we will continue to build a robust assortment of seasonal icons that are locally and culturally relevant. Expanding upon our already strong footprint with consumers favorites like our Milka Bunnies in Europe and Cadbury's creme eggs and shell eggs in the U.K. Both of these strong brands are must-have in Easter baskets. The same is true for the Christmas season, where we play a major role with Milka Santa and Advent Calendars, for example and a broad Christmas portfolio under Cadbury in U.K. We're working hard to further focus our portfolio of seasonal offerings and enhance our marketing activations to expand seasonal chocolate consumption around the world. Second, we see exciting opportunities to expand our share in pralines. This is a segment showing mid-single-digit growth. And there are so many occasions throughout the year where gifting with chocolate is relevant. Alongside more formal gifting, there are many moments where people want to express their emotions or just simply send a message. That is the area where our brands are well suited to play. We will accelerate our offer in talking gifting with bundles like Say it with Milka, which is a range of chocolate messages like "all the best" or "thank you". The personalization of brands like Cadbury or Toblerone for Mother's Day and Father's Day through our direct-to-consumer site is another great example of how we can become more giftworthy also through our everyday core brands. First, we are stepping up our efforts in family sharing by renovating our successful heroes and favorites concept to develop a broader range of treats and chocolates. Miniature versions of consumers' favorite brands, across markets where we have a strong presence in chocolate category. With that, I will hand back to Martin to discuss the opportunity in premium.

Thank you, Vince. The third and final chocolate growth driver that we will discuss today is a smaller but attractive one: accelerating our performance in the premium space. We are currently underrepresented in the premium price tier, but we have a growing number of brands we can leverage to expand our presence in this space. Let's take a closer look. Premium chocolate represents a sizable and attractive profit pool. As you know, our strength is in the mainstream price tier, which accounts for 83% of the total chocolate category, where we have a share above 10% globally. However, we see significant headroom within the premium space, which makes up the remaining 17% of the category, where our share is only around 6%. Premium chocolate is growing well. And as you would expect, the average price per kilo in the premium tier is approximately double the mainstream tier. We have a number of brands in this space already, and our priority is to unlock their potential over the coming years. This includes Hu in the states, which we acquired in 2021, and Green & Black's in the U.K., both organic-led, high-quality mass premium offerings. We also have a unique brand in Toblerone, which has extremely high brand awareness around the world, but has much more potential. We are relaunching the brand with a new purpose, expanding the portfolio and adopting a broader channel focus. In the near term, we see the potential to drive this $375 million brand to a $0.5 billion brand by 2025. To get there, we are launching the new Be More Triangle purpose, with a disruptive new visual identity, more modern and premium. This relaunch will be supported by a double-digit increase in advertising spend on a brand where we have historically spent considerably less than the company average. In keeping with the brand's new purpose, we are developing new gifting offerings and disruptive alternative seasonal icons leveraging the triangle identity. We are early in the process, but we believe it's time to act on the potential of these unique brands. So to summarize our chocolate story. Our strong chocolate franchise gives us the #2 position in the category today, very close to #1, and we are driving towards that position with significant share gains and strong momentum. We have iconic brands with pricing ability when needed across both developed and emerging markets. Our products are affordable treats, moments of fuel and pleasure that consumers love. And we have been growing revenue almost 6% on average over the last 4 years, outpacing the category. We see a long runway of opportunities ahead of us to sustain and accelerate these growth rates. So we are investing to drive that growth and extend our presence across markets, segments and price tiers. With that, let me pass it over to Gustavo Valle, who will talk to you about our other core category of biscuits.

Thank you, Martin, and thanks to all of you for joining us today. Complementing our strategy to achieve the global #1 position in chocolate, we have strong plans to further expand our leadership in biscuit, including both sweet and savory segments, while building strength in the growing baked snack segment. Capitalizing on our strong growth momentum over the past few years, we have exciting plans to strengthen our leadership in biscuit by accelerating our core growth and expanding our opportunity set by extending biscuit into baked snack. Our plan to win in biscuit is focused on 4 key growth drivers: expand Oreo by $1 billion over the next 3 years. grow local jewels, dial-up chocobakery and expand baked snacks. Let's take a closer look. Our business franchise is performing well, generating $13.5 billion in revenue last year and growing at a healthy 4-year CAGR of 4.7%. The business currently is grounded in developed markets, which account for about 73% of our revenue and are growing nicely at 3.7% 3-year CAGR. We see significant opportunity to expand our presence in emerging markets, which currently accounts for about 1/4 of our volume and are delivering ROS growth of more than 10% on a 3-year CAGR. Global Brands, which account for about 1/3 of our business, have been growing at 9% CAGR over the past 3 years. while local jewels are performing well, growing at nearly 4% CAGR. Mondelez is already the clear leader in the global biscuit category, holding the #1 global market share by sizable margin with share gains over the past 3 years. The biscuit category has been growing 4.5% over the last 3 years, and we are confident that we can capitalize on this momentum to accelerate growth and further grow our category leadership. We expect to grow mid-single digits in biscuit. To get there, we will deliver against 4 key drivers. First, we have exciting plans to advance our iconic portfolio brand; second, we will step up investment in local jewels that represent the taste of the nation in critical geographies and have more runway to improve. Third, we will accelerate performance in our chocobakery business. And finally, we will significantly invest in rapidly growing baked snack segment, where we are uniquely positioned to grow this business as the only company that has both leading positions in chocolate and biscuit, with our core brands and recently acquired assets to meet rapidly changing consumer needs and play across the full continuum of the biscuit category. Let's start by taking a closer look at our plans to continue growing our Oreo franchise. Oreo is the world's favorite cookie and #1 global biscuit brand, trusted and loved by families for 110 years. We continue to deliver strong growth in this business with high single-digit growth over the past 3 years. Looking ahead, we expect to build on Oreo's significant brand strength and heritage and grow global share by 1 point, taking us from 7% to 8% over the next 3 years. To get there, we will substantially expand geographical reach outside Oreo's current core markets of United States and China. We will also aim to reach the $100 million plus revenue threshold in 4 additional markets, bringing the total to 7 by both strengthening traditional distribution and investing in digital commerce. We have a clear strategy to drive growth in Oreo by strengthening the core, capitalizing on emerging opportunities and meeting distinct consumer needs. Our thematic activations such as our recent highly successful collaboration with Lady Gaga, Pokemon and Batman has been consistently successful in driving incremental growth. We are also leveraging our revenue growth management tools to develop price architecture initiative that grow key channels, drive new occasions and expand overall consumption, such as family sharing packs in developed markets and multipack for the modern trade in countries like India. Finally, we are innovating a wide range of new Oreo format and textures such as themes, minis, gluten-free, coated and wafers, to meet new and emerging consumer needs. We're also broadening the Oreo brand beyond traditional biscuit within [indiscernible] and expanding into areas like cakes, which we will discuss in more detail later. Our growth plan for Oreo in India encapsulates these approaches. In such a short time, we have scaled this business to more than $100 million by deploying strong working media investment, executing thematic activations, expanding our distribution footprint and growing occasions and channels. In addition to expanding Oreo, we have robust plans to grow our local jewels biscuit brand. Our local jewel brands such as LU in France and Belgium, Ritz and Tate's in the U.S. ORO in Italy and Kinh Do in Vietnam today account for more than 50% of our biscuit revenue. We have a strong portfolio of these local jewels consisting mostly on everyday good recipes that consumers love and trust. Families all over the world turn to these brands for comfort and nostalgia. A kitchen or pantry in much of the world will feel incomplete without at least one of these brands. We have made solid progress taking this brand from nearly flat several years ago to well into low single-digit growth range in past years. Our aim is to accelerate these local jewels into mid-single-digit range through 3 clear priorities. The LU biscuit platform, ubiquitous in French and Belgian homes among many other European countries is a good example of our strategy to grow these local jewels. Our approach consists on 3 main drivers: First, we will activate the core through creative marketing and sales initiatives such as the in-store national Biscuit Day event. Second, we will enhance and sharpen the brand purpose by incorporating consumer desires such as more sustainable source ingredients. The fact that we source the wheat needed for this new biscuit under our Harmony charter sourcing initiative is a great example of the ways that we are modernizing our recipes to address consumer growing demand for simple, clean ingredients sourced from family farms that support the communities where they are growing. Third, we will selectively innovate to expand the LU brand into adjacent segments such as cakes, pastries and wafers. Wafers are an especially compelling example of how we are extending local jewels brands into new formats that are culturally and locally relevant. And we will do the same thing with many of the other brands like Ritz and TUC. And now let me turn into over to Vince Gruber to discuss our ambitions around chocobakery and baked snacks.

Thanks, Gustavo. The first key element of our biscuit expansion strategy is dialing up our chocobakery business. Chocobakery is a highly attractive business and a segment where we have unique advantages in being able to combine our iconic and leading chocolate brands like Milka and Cadbury in a large and well-established biscuit segment. Our current chocobakery business is a nice proof of that. In a short period of time, we have built this business from 0 to approximately $500 million. We have clear priorities to deliver faster growth in this business with strong brand equity, superior product capabilities and higher investments. In addition, we see opportunities in expanding our chocobakery into other segments like cakes and wafers to excite consumers with new sensations. Part of our growth agenda is to drive the geographic expansion with Cadbury in a number of developed and emerging markets as well as Lacta in Latin America. And in select markets where we do not have a chocolate presence, we will build out and lead with our Chips Ahoy franchise. The fourth and final element of our growth strategy is expanding in the fast-growing baked snack segment. Baked snack is an attractive market valued at more than $85 billion, which consists of 2 main snack formats. Cake and pastries, a $70 billion-plus market growing at 4.5% CAGR and snack bars, a $17 billion market that is also growing fast. With the cake and pastry segment, pastries like croissant designed for mid-morning occasions, account for about 45% of the market. Meanwhile, cakes consumed more in the afternoon breaks, making up the remaining 55%. Mondelez currently holds the third share position in this fragmented space. And our leading chocolate and biscuit brands, combined with our recently acquired capabilities in fresh bakery and pastries uniquely positions us to compete and build significant share in this large segment. With the snack bar space, we have a fairly limited presence today, roughly 3% share. But we see strong opportunities to expand both organically and through recent acquisitions. This highly incremental, fast-growing category addresses consumers' growing demand for snacks that help address physical, mental and emotional well-being. Let's take a closer look at both cakes and pastries, as well as snack bars. Cakes and pastries enable us to play across the full continuum of biscuit and significantly increased our playing field as the cake and pastry market is nearly as big as biscuits. Expanding our presence within the packed cake and pastry market, especially in Europe, represents a highly attractive and highly incremental opportunity, covering new occasions. Our approach to this space will be grounded in a set of core brands with quality recipes that are country relevant. Within the cake segments, we will continue building our choco cake offerings, such as Milka brownies and muffins, while leveraging other local brands like LU. On the pastry side, we will leverage the technology and distribution capabilities we acquired with Chipita to expand our presence in croissants and create delicious new chocobakery offerings. In snack bars, we are building out this business through M&A and organic expansion. We recently acquired Grenade, the #1 U.K. energy and protein bar, and its strong, well-being credentials give us good foothold among young Atlantic consumers. This brand is growing in double digits. Similarly, our Perfect Snacks brand holds more than 90% share of the chilled bar segment in North America. And we are rapidly growing distribution and selectively increasing our offerings to fuel even stronger growth. We also are leveraging our core chocolate and biscuit brands to further elevate performance in the snack bar segment, for example, by extending belVita breakfast biscuits into snack bars in Europe. Let me also spend a moment talking about another great asset in our baked snacks lineup, which is Give & Go. Give & Go is 1 of the leading players within the in-store bakery segment in North America, which retailers have been expanding significantly. Our Give & Go business delivers a fully finished thaw and sell options for everyday treats such as brownies and cookies, breakfast offerings such as muffins and pastries, and celebrations, such as seasonal kits and cupcakes. This business has been winning through a differentiated customer value proposition, with strong innovation, commercialization capabilities and leading category insights. It also has the most comprehensive range of products of any in-store bakery supplier, which simplifies both the purchasing and supply chain for retail partners. And importantly, for retailers, it allows them to increase profits by reducing in-store labor and waste, while offering brands and products that consumers really love. This business has demonstrated significant growth over the past several years, growing high single digit on average and approaching $600 million. And importantly, it also delivers solid profitability, which is the same whether we are offering one-off branded options like two-bite brownies or Kimberly's Bakeshoppe or whether it's under one of our retail partners' brands. Simply put, we are very excited and confident in our strategy to ramp and grow our baked snacks business. It's a very large space that nearly doubles our opportunity in biscuit. It's a highly fragmented category that provides a unique share expansion opportunity by a global scale player as we are. It's large and found across all markets. It's incremental and complementary to biscuit and chocolate. In most cases, it represents a higher price per kilo than core biscuit. And most important, no other company has the same leadership in chocolate and biscuit to make it happen. We expect to build our portfolio over the next several years. I'll now turn back over to Gustavo.

Thanks. In summary, we are confident that our plans to expand, innovate and invest in the biscuit and baked snacks space will further enhance our leadership in both existing and emerging product format. Our track record of growth over the past 4 years is strong at nearly 5%, and we have significant runway ahead. At the same time, extending into baked snacks is a natural place for us to leverage our chocolate and biscuit leadership and grow share in a large, highly attractive and incremental space where we have a clear set of capabilities to win, while strengthening our partnership with key retailers by expanding our store presence into new areas. We believe these clear focused growth drivers will enable us to significantly extend our leadership in biscuit and baked snack and deliver compelling growth.

Thank you, Gustavo, and thank you, everyone, for joining us today for our first Q&A session. With me is Dirk Van de Put, our Chairman and CEO; Paulette Alviti, our Chief People Officer; Vince Gruber, our President of Europe; Maurizio Brusadelli, our President of EMEA; and Gustavo Valle, our President of North America. We have roughly 30 minutes for this session. [Operator Instructions] With that, let's get started.

Our first question comes to us from Andrew Lazar at Barclays.

First off, Dirk, what kind of time frame should we think about regarding the 90-10 split between chocolate and biscuit versus the rest of the portfolio that I think you talked about on Slide 26 in the deck? And how much of that is simply the planned divestiture of gum and Halls? I think that's maybe a few points of it, but what type of time frame are we looking at?

Well, it's difficult to get into an exact time frame. We obviously have clearly declared that we want to increase the snacking percentage over time. And today, we've announced our intent to divest the gum business in developed markets as well as our Halls business. And we are clearly going to continue to pursue additional bolt-on acquisitions who sometimes might come with categories that we don't want to be in. But I would say, roughly, you can expect us to reach that 90%, 10% in the next 3 to 4 years, I don't have an exact time line. We will see how we go and what type of bolt-on acquisition opportunities we have. The most important part here is that we have significant runway as it relates to biscuits and chocolates, where we have clearly leadership opportunities. We have room in terms of channels, white space, geographical expansion. So that's really where the focus is, and then we will balance that with gradually exiting some of the other categories that we're in.

And then, Paulette, you mentioned growth capabilities. I guess specifically, what areas would you say are most needed or the biggest areas of focus over the next couple of years?

Yes. I would say a couple of core areas to highlight, and hopefully, they came through as we were talking a little bit earlier. But the first, I would say is RGM, you know the state of the environment we're operating in right now and our focus on profitable growth. We're spending a lot of time establishing strong local RGM skill sets, focusing on those teams and investing in the right data and tools to make sure that they're equipped to be successful. The other I would say definitely would be digital. We've been making significant strides on our enterprise digital strategy. One of the things we have coming up, the second half of this year actually, is launching a new digital hub that's helping thousands of our colleagues actually have access to new content that is very core to the consumer and customer vantage point that we're driving through digital. So we're very excited about that to increase the acumen of the enterprise. And then lastly, as we were just talking a little bit around M&A and our focus on integration specifically, being able to use the learnings that we've had across the enterprise already in some of the markets that we've been very successful in and making sure that we've got the teams and the workforce plan set up in our business units to be ready for that. And being smart about it, so that we're not in a position to detract from the efforts on our core business. So those would be the 3 main areas I'd probably highlight.

Great. Thanks, Andrew. Our next question comes to us from Ken Goldman, JPMorgan.

Two questions for me, if I can. First, I didn't hear it necessarily, and I know the day is not over yet, but a lot of talk about innovation, other than maybe sort of leaning into dark chocolate and the migration into adjacent categories. And specifically, I wanted to ask, historically, Mondelez has talked about pushing a little bit into healthier snacking. Is this still a focus for the company? And is there a reason it was -- at least so far sort of on the back burner today and sort of in your discussions about chocolate and biscuits?

Well, first of all, Ken, I would say the innovation part, there's a second part in the presentations today where you will see Martin, our CMO, in the question and answer, and I would maybe refer that part, an overall view on innovation to those questions and answers. As it relates to wellbeing, wellbeing is still a big focus for the company. We're trying to make a contemporary interpretation of what does wellbeing really mean for the consumer today. And that has a whole evolution. And sometimes they mix it even up with wellbeing for the planet as part of a whole wide wellbeing thinking. So we want to make sure that whatever we do, the evolution that we see in our portfolio is in line with what the consumer sees as wellbeing. Second, we believe that education of the consumer and explaining how to eat healthy is a big part of what we need to do, not necessarily new products or so on, but more mindful snacking or portion control. We think that will play a big role, and we are planning to do things on pack to get that message across and gradually having more portion control options in our range. And then, of course, there is renovation and there is innovation. And so we want to make sure that under our existing brands, we want to offer the right options. So still the brand but in a healthier version. For instance, Oreo Zero Sugar that we launched in China in Q3, or the Cadbury Plant Bar, which is a vegan bar. Those are 2 examples of how we could do that. We're also working very hard in this area of renovation and innovation on improving our nutritional profile of our products. So we're trying to reduce constantly sugar, sodium, go to simpler ingredients. And then we also are very focused on wellbeing acquisition. It's not really innovation or renovation, but it also helps us to get a more balanced portfolio. I'm referring here to the ones we've already done like Perfect Bar or LU or Gourmet Food in Australia. So those are really the ways we will gradually see a better balancing of our wellbeing offer product-wise, but we're also planning to communicate constantly with the consumer and making them understand that, yes, indulgence can be a part of a well-balanced diet, but you need to do it with moderation.

Very helpful. If I can ask a very quick follow-up. Is there a way to quantify, Dirk, how we should think about the divestitures of developed market gum and Halls, and how that might sort of affect your long-term sales algorithm? If you could just help us out a little bit with that, that would be great.

Yes. Yes. And Luca will talk about that later on. He will be in the second Q&A. But it will -- from a top line perspective, it will probably make a difference of 0.3%, 0.4% growth rate for us. And then the bottom line will largely remain the same algorithm as we currently have. But Luca can go a little bit deeper into the details in the second Q&A on that.

We'll go now to Alexia Howard from Bernstein.

So my first question is really around the outlook for margins, and I know you don't typically talk about margins. But I think the formula for the first 5 years was whatever growth in gross profit dollars that we get, we'll reinvest half of that in the business and, like, the rest of it, fall to the bottom line. I guess by definition, that would imply some margin improvement, but it's been fairly flat while you've meaningfully improved the top line and that's worked really well. I'm just wondering if we look out over the next 5 years, is the expectation that we might see more leverage and maybe faster profit growth on the EBIT line than the top line organic sales growth? And then I have a follow-up.

Okay. Dirk, maybe start and then we'll also have Luca here for Q&A to delve into a bit more of that.

Yes. I would say that in normal circumstances, the algorithm does allow for a small percentage increase of our gross profit year-after-year. But we try not to be super focused on the net revenue gross profit relationship. What we are really focused on is how many gross profit dollars can we grow year-over-year. And you know probably that our focus there is 4%. And over time, we hope that to gradually improve that to 5%. In the current environment, to get to a 4% gross profit growth, you need to do a lot more net revenue. So the relationship between net revenue and gross profit is a little bit off because of the inflation. And so that's why it's not going to be easy from a percentage gross profit margin in this year and next year to see a substantial increase. But as long as we keep on delivering that 4% gross profit growth, our algorithm works. We can reinvest half. We get our high single-digit EPS growth, and that's really what we're after here. Gradually, those percentage gross profit markets will come back. But in the current environment, I think our focus needs to be how many gross profit dollars can we really add.

Great. That's really helpful. A quick follow-up on chocolate. You talked a lot about seasonal gifting premium. I'm curious about low ticket price items in emerging markets, particularly with the idea that with global food inflation, those lower income consumers might not have the personal disposable income to really payout for treats and snacks. Are you pushing on that? I was just curious about why that wasn't particularly focused on this morning.

No, I'm going to give that to Maurizio maybe, and Vinzenz, if he wants to jump in?

Yes. Thank you. And maybe I start with the low unit price. Obviously, in emerging markets is crucial, as you said, to keep the right price points, and this is what we are doing. And we use the LOP as a penetration driver for the category. Then we gradually trade up our consumers. And I think the best example of this strategy is India where we have a 65% share of market in chocolate. And there is a constant trading gap while building penetration and consumption of the category. Still in India, we are talking about grams in terms of average consumption, while in Europe, we talk about kilos. And maybe Vinzenz can talk a bit about the seasonal part of the business, as you asked.

Yes, definitely, Maurizio. I think in developed markets, I think season is a fantastic, I would say, highly accretive segment in chocolate. You may have seen in the presentation before gifting, sharing and seasons is 1/3 of the total chocolate category. And the beauty of that is it's really a different moment in consumers' life, where in the course of a year, those moments are coming up like Easter and Christmas as the biggest one. But also during the year, think about Valentine's Day, Mother's Day, Father's Day, a birthday. Chocolate is really magic because it's a really nice gift for consumers. The good thing, from a business point of view, is it's highly accretive, as I said, in 2 ways. One is in revenue, but also in revenue per kilo because consumers are less sensitive on the way they're getting is more about the emotionality the brands can express. And I think we are very well suited here in most of the markets with the power brands we have. Think about Cadbury in U.K., think about the Milka in Germany, think about the Cote d'Or in France and in Belgium. I think it's highly accretive. And you have seen in the numbers, we are outperforming the market growth by literally 50%.

Maybe I can add that also in emerging markets, we started to exploit the opportunity of the seasonal business. We have many local opportunities like Diwali in India or Hari Raya in Southeast Asia, and we have a great portfolio. So we are learning from the developed and big products to make sure that we develop the business as well in the seasonal market and emerging markets.

Let's go to our next question, Chris Growe of Stifel.

I had 2 questions, if I could, as well. So the first one will just be -- and it's a bit of a follow-on to an earlier discussion about like opening price point products and premium products. Are those -- is there any margin trade-off with those products? I know a premium product has a higher price per kilo, but in many cases, they aren't necessarily a more profitable product for you on the bottom line. Just curious how you're thinking about that in terms of a margin goal for some of these new areas you may be moving into.

I think as you said, I think if you look at back on season but also gifting and sharing, the revenue per kilo you can generate in chocolate, as an example, is up to 40%, 50% higher. So even if the margin would be, on average, together chocolate, the uplift in dollars you're getting, it's quite substantial. And the incrementality is super high, as I said before. So I think there are 2 ways of premiumizing the portfolio -- the mix element of the seasonal and gifting portfolio is accretive and mix enhancing to the whole business. And the other thing is sort of how to play in the real premium in terms of premium chocolate, which I think in the second part, LatAm will show a bit more where we go. But I think premium itself is one is the perception of a premium box. The other thing is the revenue per kilo, which is adding highly to the total net of the business.

Yes, I would say, Vinzenz, roughly, it's a -- percentage-wise, roughly the same margin. But dollars per kilo that you add in gross profit is much.

Absolutely. It's a 50% higher per kilo. And on an average margin, that means more dollars.

Yes, definitely.

That makes a lot of sense. And just a quick, maybe a similar type of question, but as I think about the movement into -- and we'll use the India example of you have such a dominant share in chocolate and moving into biscuits, for example. Is that this next phase moving into some of these whitespace categories, maybe not necessarily whitespace market, is that a much more expensive endeavor for the company than, say, the last several years? So is there an increase in investment required and more resources to push into some of these new areas of focus?

I can set it up and maybe you guys want to jump in. I would say it's always been a focus area for us, but we had to catch up on our core businesses around the world, increase our investment, and we will still continue to do that. But that algorithm we were just talking about allows us to reinvest every year the half of that 4% gross profit growth. At the current size of the business, that's about $200 million extra A&C investment every year. That will gradually go more in establishing those white spaces that we have. The main thing I would say is to stick with it. Maybe in the past, we sometimes tried and then left again. The main thing, the reason for the success of Oreo in India is that we stuck with it for 10 years, and now it starts to be really important for us. So what we're declaring is, yes, more investment, but it's not going to significantly alter the algorithm of the company at all, but we're going to stick with it and make sure that over the years, that second or third category we're getting in is becoming more and more important for us. Go ahead, guys, if you want to add to that, yes.

Yes. I think Dirk said it well, and in India or in China for gum, I mean we launched those Oreo in India and obviously, tried in China, most -- more than a decade ago. And now we have the scale and it's self-funding. So not that we need additional resources. Obviously, at the beginning, you have to do a little bit of investment to establish the brands. But now we are generating great gross profit that is self-funding the top line. And as you know, overall, India and China are accretive as well for the margin of the company. So scale, volume and the continued growth, it's a benefit for consumers and, obviously, also for all of us.

If I may, we are expanding in those white spaces with proven platforms. So in the case of Oreo where we are doing the same in other emerging markets, where Oreo is growing almost double digit. And we are going to have 4 new countries exceeding the threshold of the $100 million net revenue a year. And we are applying those markets what we have already proven in other markets. So this is a white space in a platform that we have already test and proved in other markets.

Great. Thanks, Chris. Let's move to John Baumgartner of Mizuho. John?

Just to follow up on Chris' question. In terms of the biscuits, whether it's India, Brazil, Mexico, it sounds as though Oreo is a big contributor there. But when you think about the relative balance between building biscuits in these markets where you have larger confectionery share already, to what extent do you feel you have to acquire local biscuits brands relative to accelerating entry, be it through Oreo or launch in chocobakery through your existing confectionery brands that are there now?

I'm not sure if anybody wants to jump in right away. But what I would say, John, is we -- in developing markets, we need presence in the market. And so as a consequence, we need to make sure that we have the right distribution, we can have the presence there. And if you have to do that for an Oreo, for instance, it's going to go very gradual. If you make a local acquisition with some local brands, it's yes, it's about having more market share and more critical mass, but it's largely about having much more access to the market through their distribution system. So that's one of the key things that we want to look at. I'll let maybe Maurizio, Vinzenz and Gustavo add if you want.

Yes. I think Dirk said well, maybe I'll give you an example. In Vietnam, we were not present a few years back, and then we acquired the leader in both biscuits and snacks. And this gave us the opportunity to become the leader in those segments and also to make sure that Oreo became much more relevant. So in my region, we have 40% of local brands, and they play a great role. So I think we have a good balance already between global and local. And as Dirk said, if we see any opportunity, I would say, in every country to further strengthen the portfolio, this is what we are doing.

And then as we all know, the biscuit market is a relatively wide market as it relates to brands. Oreo can be important. But in best case scenario, Oreo reaches about 10% market share in the U.S. So that's as far as Oreo can go after years of presence. So for us to be an important player in the biscuit market, we will need more brands than just Oreo to take up a position of 20%, 30% market share.

Okay. And just a follow-up on chocolate. Great detail on the renovation and the discussion there. Can you speak geographically in terms of your focus area? I mean there wasn't much discussion about China after you launched a few years ago in chocolate. To what extent does your growth plans sort of rep on just sticking with your core markets and renovating in Europe and Asia, ex China, relative to gaining new white space growth, whether that's a greater push in China or a larger push into the U.S. with a Toblerone or a Milka? How do you think about the balance there, new markets versus existing markets?

Yes, thank you. If I talk about China, I mean, I would say chocolate there is a kind of difference is more on celebration. And as you said, we tried, I think we have much more opportunity to continue to focus on biscuits and gum and now entering as well in cakes in China. So this will be the first priority for us. We have a lot of headroom to continue to sustain double-digit growth while continuing to evaluate in the longer term if chocolate will become, again, an opportunity or not.

As it relates to other markets and expansion of our chocolate business, for sure, we see an opportunity with some of our global brands like Toblerone still has, although a very known brand and present in many, many markets, we believe that it can play a much bigger role in premium. And so that's, for instance, a way that we can do chocolate. Another way we do chocolate around the world is Hu, the acquisition of Hu in the U.S., which is a vegan brand. That allows us to start carving out our part in the chocolate market. So I would say compared to the big launches we had in the U.S. and in China, it's a little bit more targeted approach, making sure that we go for certain aspects of the chocolate market and that we can win there versus trying to launch immediately a brand that has to stand next to the big local brand. Of course, we will continue to evaluate acquisition options of local chocolate brands. That has been a big driver in the past for us, and that will not stop right now. But those are...

On their geography, packaging and brands that you're looking there? And those are my 2 questions.

Okay. The algorithm, at the moment, I would say, on the lower side, is organic on the higher side would include some M&A. It's about a point difference. If we do in M&A, what we have mapped out for us, it's going to make a point difference for us. We already have acquired about $2 billion in net sales in the past 3 years, which is growing almost 10%. So that gives you an idea how much it's adding to the top line for us. Imagine that we're going to expand that $2 billion over the years to come, and we're aiming for a high single-digit growth rate on those new acquisitions. That will give you an idea how it starts to contribute to our top line. So that's the way we are thinking about it. On the second part, which is about the entry price point and what are opportunities around the world, maybe Maurizio you can talk a little bit in different markets that you have where you see an opportunity Gustavo, you've done Latin America. You can talk a little bit about that, too.

Thank you, Dirk. I mean, obviously, LOP, as I said before, a great opportunity for us to build the penetration of our brands. And as you well know, in markets, which are traditional trade dominated, you have to play in the right price points and making sure that we give consumers the opportunity to enter in the category and then trading up. In my region, the biggest opportunity is coming from demographics. We have a young population that will continue to grow and will continue to become richer. And our brands are very aspirational. So among Southeast Asia, India, Africa, the Middle East, we have a clear strategy to play in the right price points. And we do this in both biscuits and chocolate, I would say, in a good way. I mean we grew share constantly in the last 3 years. So that's the strategy that we have. And I think it is a strategy that is working because if we are not present in traditional trade with the right price points, then it's difficult to compete locally. So yes.

And the important thing in many of these markets is that we have a route to market that allow us to -- not only to access to the different trade formats, but also give us the expertise to understand the right price point for the different shopping missions. And in the particular case of biscuits, for example, the entry price points is done with global brands like Oreo, where we have solutions, for example, in countries like Mexico or Brazil with a 4 count unit that is addressing this entry point. But also with some of the local brands in Latin America, for example, we have Club Social that is added-value cracker that was built around low unit price and on the go, which is very customized for the local consumer. So the idea that this premium brand is not a contradiction with the entry price point because it can be done with brands that at the end of the day, create value and deliver good margin, too.

Do you have a follow-up, Ken?

No. I'm okay.

Let's go to Rob Moskow, Credit Suisse. Rob?

I was wondering if you could give me a little more detail about the rationale for making acquisitions in fresh baked snacks and the strategy. Do you feel like you have to be a market leader in any of these geographies where you're making these acquisitions? Like, for example, on Chipita, maybe you can give us more detail about where you are now the market leader? Or is the strategy just to become better skilled at it and, therefore, leverage some of your trademarks in markets like the U.S. for example, in putting the Oreo brand on a fresh baked product? Do you have to be a market leader to succeed? Or do you not have to be a market leader to succeed in these geographies?

Well, there's a big difference between the 2. In fact, Chipita is a packaged bakery snack, while Give & Go is a fresh bakery. And so there is a difference between the 2. I would say, if I go first to fresh bakery, it's a separate aisle in the U.S. where the consumer goes for particular occasions, for particular needs. It's considered as the names says itself as fresh, and the consumer is prepared to pay a certain price for that. It has a whole supply chain that is unique to deliver that. And there is an opportunity to bring branding to that. You don't have to be the market leader, but you do need to have the right size of production capacity so that you can deliver -- and distribution capacity, which allows you then to deliver that product at the highest quality at the right price. That is critical. You don't need to be the market leader overall, but you do want to be the leader in certain segments of that fresh bakery, which allows you to have bigger plans. If I talk to Chipita, I'm sure that Vinzenz will jump in. Chipita is a completely different situation. That's a separate shelf in Europe. Cakes and pastries packed, cakes and pastries are in a separate shelf. It's a very big shelf. And Chipita is a key player in many markets in Europe and Eastern Europe, particularly East and Central Europe. And so for us, it's important to have a presence there in that market to learn how to be there, but it offers us an extension of our brands into that shelf basically. So we don't need to be the market leader. It happens to be that Chipita is a market leader, but it's -- that's not the intent. The intent is to bring our other brands into that shelf. And the vehicle was an existing brand that's very strong, which helped us a lot. But sorry, Vinzenz, I may have...

No, I think what really personally excites me in this cake and pastry expansion is that if you look at the size on a global base, it's a $70 billion category, basically, it's $100 billion. So think about the new playground we are getting by going into cake and pastry. And to your point, Dirk, is it's about the capabilities in which segment you want to play. And staying for a second with Chipita, it's a way of capability to produce that type of croissants, but it's a scalable business. It's a very -- from a portfolio point of view, very slim, but very broad going into new occasions for the consumer. Again, for us, it's about the incrementality of the growth we see for our company. It's a territory we have been played, not so much playing in the past. It's a new capability we are acquiring with Chipita and Give & Go. And it covers occasions which chocolate and biscuits are not covering at the moment to the full extent. Chipita, for example, the croissant is a mid-morning occasion, where in Europe are not so strong to the categories we are. So I think if we put all that together and add the brands we have, think about the Chipita croissant with a Milka chocolate on or with a Cadbury on. And you see that the synergy is not just in scaling production or scaling route to market, but also scaling our brands, becomes really a nice box of growth.

I think you said it well, Vinzenz. It's not about the product format or if it's fresh or packaged. It's what consumption occasion is the consumer is looking for and how we are going to fulfill that. Plus it sells at a higher net revenue per kilo. It has very nice margins, that's all the benefit. But it allows us to extend our brands in more consumption occasion. That's really what drives it.

Great. A follow-up on that. Oreo extended into a chocolate bar several years ago, and now it's extending into snack cakes. I don't think the chocolate bar is on shelf today. Are there any learnings from that experience that you're taking as you launch Oreos into snack cake?

Yes. That was a very different strategy. So the thinking was we are not in the chocolate market in China and the U.S. How do we get a footfall there? Starting with a brand new brand is going to be difficult. So let's use Oreo because there is this segment in between chocolate and biscuits, which we call chocobakery, which is basically biscuits with chocolate in it or around it. And we usually use our chocolate brands to do that. So Milka or Cadbury chocobakery is a big, big segment in Europe. Since we didn't have chocolate brands, we decided to get into that segment by using Oreo. The negative of all that was that we had only a very small presence on the shelf. The chocobakery segment is not that big in the U.S. and in China. And so that caused us not to really be able to make something significant happening. This now, in cakes and pastries, is completely different. We have well over $1 billion, $2 billion now presence in those already. This is really a different consumption occasion and an extension of existing brands in markets where those brands are very big. So this has nothing to see with the chocolate experience, I would say. And the size already, the speed at which it's moving and the opportunity it has will be a big success for us. While the other one was trying to be in a clever way or in a clever way trying to enter the chocolate market, which is a different approach.

Thanks, Dirk. Thanks, Paulette. Thanks, Vinzenz, Maurizio, Gustavo. That wraps up our first Q&A session. We'll now take an 8-minute break before starting up our next session on execution. Thanks. [Break]

In order to drive our strategies across chocolate, biscuits and baked snacks, we need to execute with excellence, and that starts with driving a high quality, consistent and impactful marketing agenda. Our plan is simple: continue to build excellence in our marketing, a clear brand investment strategy and driving improved innovation. Let's take a closer look. We have significantly transformed our marketing approach over the last few years. First, we have modernized our consumer research to deeply understand our categories embracing, for example, a new demand spaces methodology across snacking to maximize the potential of our brand portfolio. Second, we have shifted our investment posture from fewer brands and lower spend to higher spend levels on a focused portfolio of both global and local brands, breathing new life into our brands. In parallel, we have fully renewed our brand's creative strategies, creating more meaningful and lasting connections with consumers centered around specific brand purposes. Fourth, we have adjusted our advertising from a traditional and mass approach to one that is highly digital and personalized. Fifth, we have upgraded our talent. Today, we are more diverse and have brought in new capabilities, in particular, to accompany our digital acceleration. Finally, we have changed the organization structure consistent with the overall company, pivoting from a centrally focused approach to one that is more business-unit driven, supported with a strong global center of excellence. Together, these changes have better positioned our marketing teams to help execute on the significant opportunities that lie ahead. Thanks to these evolutions, our marketing effectiveness has made significant progress over the last couple of years, and that can be seen across a number of key metrics. This includes growing penetration as 88% of our measured 2021 revenue grew or held household penetration; brand meaningfulness as 91% of our 2021 net revenue held or gained brand meaningfulness versus 2019; media ROI, which has increased 25% versus 2019 and is in the top quartile globally from food and beverage companies; and creative effectiveness, where more than half of our creative assets are in the top quartile, representing a 7-point increase versus the past 2 years. As we move forward, we really want to lead the future of marketing, and we have a clear picture of where marketing can make an impact and help drive superior growth. First, lead with purpose. We want to continue to reinforce our amazing portfolio of brands, staying very focused with brands which have strong purposes at their light hours, sharp growth strategies and the right level of investments behind them. Second, products made right. We are obsessed with making sure that we have the right products, ensure we deliver superior product quality, keeping our recipes contemporary and launching targeted and incremental innovation. Third, we need to continue to deliver leading edge creatives that connects our brands to our consumers and bring them to life. This includes, in particular, the expansion of our personalization at scale program to make sure we deliver the right message for the right consumer at the right moment. Today, 30% of our assets are personalized in digital media. We aim to quickly move to more than 60%. And finally, we want to monetize data. We have now a full ecosystem of partners and technology to build more direct relationships with our consumers to generate even better return on investment and, at the same time, enable data-driven insights. Now let's take a look at our brand investment strategy. On top of having the right marketing approach, it is key to make sure we are focusing the investments behind the right brands. We have a clear strategy and segmentation that drives our prioritization in each market between brands in which we invest, brands that we just aim to sustain and those that we call transition brands. After a few years of continuous improvement, we now expect approximately 75% of our net revenue to come from invest brands. Invest brands have strong profitability profiles and the potential to grow share. They are our priority in terms of investment. Our sustain brands are those brands that can play an important role with medium investments and where we are looking to retain market share levels. And finally, transition brands are those that do not represent a strategic growth opportunity and receive little to no investment. Over time, these are expected to be reinvented or divested. Among those transition brands, in particular, we have further potential for portfolio rationalization. On top of having a very focused brand portfolio strategy, we have been increasing our working media spend by double digits over the past 2 years, and we plan to continue that level of increase. This has been possible, thanks to an increase in total A&C, but also through rigorous prioritization to increase the weight of working media within our total A&C spend, which was 53% in 2021, up from 45% in 2018. At the same time, we have significantly improved our media ROI, reaching now top-tier performance versus our food and beverages peers, thanks to both efficiency and effectiveness improvement. The combination of increasing media spend and improved ROI is driving an important part of our growth acceleration as a company. But what is exciting is that there is much more opportunity to invest behind our brands. When we look at our media efficiency across biscuits and chocolate, you can see we have a long way to go. We are still far from reaching our point of saturation, in particular with our Invest brands. This is very encouraging as we look at our potential for the future. With more investments, our teams have the responsibility to deliver even greater execution to continue to drive ROI. And I'm quite proud to see that the quality of our brand strategies and plans is continuously improving. All our key brands have now a very clear purpose around often very important human values like tenderness in the case of Milka as an example here. They are also embracing sustainability through the length of their unique purpose. Like LU in France, showcasing our sustainable wheat program, Harmony, as a key proof point of the brand giving proof-of-love purpose. Let me close with a few thoughts on our approach to innovation. We have been working quite a lot on how to maximize the impact of innovation, and we feel good with our first results. Two years ago, we decided to reduce our project portfolio by more than 25% and to rebalance to rediscover what we call core innovation, and in particular, the core innovation behind our most important brands and products. Thanks to that refocus, we have seen the results of our projects improve significantly, and we are now above benchmark in contribution to growth and incrementality. Our focus now is to maximize the incrementality of what we call beyond the core innovation with a few important levers. First, drive even more focus in the business units behind a few priority projects. Second, enhance our capabilities to develop even better consumer-centric ideas with new methodologies and continuing to leverage fast test and learns to quickly iterate with consumers. And finally, continue our open innovation approach with SnackFutures CoLab. And we are encouraged by a few recent innovations, which are promising in some of our key strategic priorities. Oreo Gluten Free in the U.S.; Oreo Zero in China; Lacta Intense, which already took the leadership of dark chocolate in Brazil; Oreo Choco-Pie in Vietnam; and Caramilk, a new chocolate mass launched in Australia and the U.K. with strong incrementality for our core tablets. In summary, marketing at Mondelez International is having a great momentum and is a great engine for growth. We have a very focused portfolio approach. We are increasing our investments and driving better effectiveness with great execution. We have the potential to still drive more incrementality via beyond the core innovation, and we are accelerating our digital consumer strategy. Thank you very much. And I will now leave the space to Maurizio Brusadelli, President of our EMEA region, to discuss sales excellence at Mondelez International, another critical area for our future growth.

Thank you, Martin, and good morning, everyone. I'm here to talk about how our sales engine has contributed to delivering success and how we plan to make it even better. Our iconic global and local brands across markets give us a unique competitive advantage to win in store. Deep shopper understanding and our strength to execute with excellence in store has helped us to win consistently across markets and channels. This strength in sales and distribution was tested during COVID with local lockdowns, movement restrictions, trade disruption and consumers behaving and shopping differently. Our resilience and ability to pivot helped us emerge as winners, and we grew share in 75% of our revenue base. We doubled down on capturing more ground in high-growth channels. E-commerce contribution doubled during this period to make us strong leaders in the lead categories in our large markets like U.S. biscuit, U.K. chocolate and China biscuit. We have a strong presence in traditional trade, especially in emerging markets, where we have continued to expand coverage, adding more than 1 million stores in priority markets over the last 3 years. And we remain leaders in the fast-growing discounter channel in Europe. As we flex our strong sales muscles, we have also been building new ones. We advanced revenue growth management, which I will talk more about later. In addition, digital data and analytics is steadily emerging as another of our competitive advantages via use of artificial intelligence, image recognition and cloud solutions. As we continue to further build sales as a competitive advantage, we have narrowed our focus to 4 priority areas: be omnipresent across all key channels and continue driving up our visibility and availability; be the indispensable partner of choice and a top tier supplier with all partners; and take a comprehensive approach to revenue growth management and embedded it across all our markets. All these initiatives are underpinned by being digitally enabled to keep growing coverage, improving cost to serve and executing with excellence. Let me bring this to life along with some examples. A great example is our discounter business in Europe and the U.S. We are achieving strong progress against a large addressable market of nearly $2 billion in the EU discount channel by driving deeper presence and visibility and focusing on the right products and formats. We are the biggest branded contributor of discounter growth in snacking, driving share gains in the channel. Over the past 4 years, we have delivered a CAGR of 11% and driven share gains in the EU. In the U.S., we are also making progress, for example, with a strong multiyear joint business plan with Dollar General to drive biscuit growth. And as we execute our discounter strategy, our focus in the EU and U.S. will be to continue driving distribution and store growth. Given the opportunity in this channel, we expect a double-digit growth and share gains. Another great example of our strategy to be omnipresent across channels is traditional trade in India. Affluence is growing both in urban and rural India. And our opportunity is to be present everywhere that consumers seek snacking. We are present in 3 million stores, of which 0.5 million were added in the last few years. There are now over 0.5 million Mondelez-owned visi-coolers, placed in stores to deliver the best chocolate experience in the hot Indian climate. Today, 800,000 stores are managed through Suggested Order Artificial Intelligence, driving digital efficiency and higher sales per store. With more than 100,000 villages directly covered, we are amongst the top 3 FMCG companies in rural India and have an aspiration to be the #1 snacking player there. We will continue to drive this strategy in the future, expanding distribution in new stores, cold chain capabilities, driving our leading position in snacking in rural and increasing investment in our 100,000 top stores for greater execution and growth. As we described at CAGNY, the opportunity is huge with a universe of approximately 9 million stores in India. Moving beyond brick-and-mortar stores, we have expanded our scope from e-commerce to digital commerce, building a strong leadership position and driving incremental growth. Business to consumers has become our area of strength in key markets as we have consistently applied our digital flywheel approach. We will continue to accelerate the activation across many markets. Direct-to-consumer will focus on lifting and bundles, including personalization to accelerate growth. We are leveraging and shaping the emerging e-business-to-business landscape to drive growth in underserved outlets and channels. Digital commerce will continue to drive growth, and we expect it to account for 20% of total Mondelez net revenue by 2030, up from 6% in 2021. China is a great example of our digital commerce strategy in action, with a diverse landscape and multiple platforms and business models. In some of our categories, digital commerce accounts for more than 20% of our revenue already. We have sized the China opportunity by leveraging digital commerce for marketing and innovation, increasing investment and moving with speed and agility to learn as we go and improve our approach. The results have been rewarding. We are the #1 biscuit brand online with Oreo; we have built Stride into the top gum brand on Tmall super; and we have become the #1 new category recruiter, leveraging our brands with the use of data and analytics. We aim to double our business in 3 years based on superior consumer experiences, driving eRGM-targeted marketing activation and omnichannel efficiency. Moving to revenue growth management. You will hear us talk more about RGM as it has become a fundamental part of our strategy. We have traditionally used pricing and price pack architecture, but we are now focused on using all the levers available to drive top and bottom line growth, which also includes more efficient promotion management, driving trade terms and managing mix. We currently have activated or established RGM programs covering 65% of our revenue base with 30% at activated status and 35% established. In the next 3 years, we expect to have implemented RGM excellence in all our markets to varying degrees, reaching advanced status across 70% of our revenue base with more advanced skill sets, embedded predictive analytics and integrated digital tools. We have started to see strong results in a few markets. 2021 was an incredible year for Brazil, growing double digits, where RGM played a central role in unlocking value. We price to offset inflation using rigorous analytics. We coupled it with an occasion-based portfolio design through smart pricing, set to the right incentive curve and supported it with strong brand programs and rigorous execution. We will continue strengthening RGM fundamental in Brazil as well as around the world. Moving to technology. Leveraging the power of technology in sale is and will be a critical differentiator for Mondelez. We want to be on the leading edge to enhance our performance across all stages of the selling process. Before the seller gets into the store, technology helps identify the right store, the right range and the right frequency to sell to help improve the efficiency of the call. Once the person is in store, image recognition helps review the shelf, and algorithm help direct targeted task in store, leading to greater efficiency, time management and impact of salesperson during the time in the store. Analytics diagnose issues and help discover opportunities for sales planning and resourcing. With our global partnership, we are elevating our capabilities in selling and driving digital to accelerate growth. To close, we are building on our position of strength, making clear and bold investment in high-growth channels, improving key metrics with a focus on customer and shopper-centric category growth plan, increasing capabilities and executing against an ambition revenue growth management road map and investing and leveraging digital across our organization and processes. Now over to you, Sandra.

Thanks very much, Maurizio, I'm very happy to speak with you all today. At Mondelez International, we're building a top-tier consumer-centric supply chain. I'm going to share some insights into that evolution and explain how we've created a clear set of work streams to take us to best-in-class delivery across service safety, quality, cash and, of course, to deliver continuous productivity in partnership with our business units. Our overall focus is to do it right from shelf to field in service of our global growth acceleration agenda. I continue to be amazed, appreciative and very proud of the resilience, perseverance and unflappable spirit shown by our supply chain teams and colleagues, particularly how they've responded to the challenges around COVID, inflation volatility and even more recently, the awful war in the Ukraine. I deeply thank every single one of the 53,000 supply chain employees we have around our Mondelez world. The investments we've made around our capabilities, systems and infrastructures have created a stronger, increasingly flexible supply chain that is delivering industry-leading standards for people and food safety as well as product quality. It's leveraging economies of scale in procurement, whilst utilizing the competitive advantage of in-market manufacturing in both developed and emerging markets and bringing us closer to our consumers and our customers. So that's the strong base we're building from. Now let me share where we're headed and our vision of what a top-tier consumer goods supply chain looks like. First, it is a supply chain that is geared towards value creation in all phases from shelf to field. Our top-tier supply chain creates value to the procurement processes, the manufacturing processes and customer service and logistics. It sees best-in-class service, quality and safety, has enabled us to do best-in-class delivery of cash and productivity to provide fuel for growth. Therefore, we are taking an end-to-end view of what our actions at each stage of the supply chain ultimately mean for the consumer as we shift from a manufacturing-centric to consumer-centric supply chain. Second, we've shifted from a focus on restructuring, zero-based budgeting and the installation of high CapEx lines of the future to a more agile investment strategy with a focus on automation and digitization to increase efficiency and reduce cost. For example, we now have flexible packaging facilities in China with Suzhou, meeting growth demands by maintaining line throughputs with more flexibility, particularly in packaging. This facility is now at Phase 4 of our integrated Lean Six Sigma journey. We are employing cobots, automatic guided vehicles and virtual reality technology in several sites across all regions. We're underpinning this with the implementation of our manufacturing data strategy. In Europe, over the last few years, we have very successfully upgraded the performance of Bournville in all aspects of performance. Third, on the fundamentals of safety and quality. We've pivoted our focus to best-in-class performance benchmarks versus a historic focus on internal targets. This shift is already yielding results. We have moved to measuring right first time for quality at the buy, make, move and sell stages of our supply chain and are seeing some SKU supply chains exceeding our target of 98%. On safety, while continuing to measure total incident rate, we started to include the more granular and actionable metric of severity. As a result, we have seen all our safety metrics, including TIR, moved to top-tier performance. And finally, building on our very successful creation and strong evolution in the last 3 years of integrated Lean Six Sigma in manufacturing, we're stepping up our investment in capabilities to unlock the potential of our existing talent and attract new talent in strategically important areas like logistics and procurement, areas where we may have historically prioritized less and behind manufacturing for investment. Underpinning all of this is digitization, which enables better transparency that is critical to realizing our sustainability goals, including empowering our people, improving supply chain delivery and ultimately reducing our operating cost and driving up our cash delivery. We have already brought transparency for our consumers in our traceability from shelf to field on SKUs in France, which is LU, and in North America, which is Triscuit. So now let me talk more about our productivity agenda to continuously reduce supply chain costs. Our productivity agenda takes on increasing importance at times like this when we are in a challenging environment of higher levels of inflation. But it's in our DNA to pursue supply chain productivity year in and year out, as you will have seen, even in recent tough times. Our ongoing long-term goal is to realize approximately 4% gross productivity and 2% net productivity. We've been delivering close to those levels the last few years in strong partnership with our business units. We are currently carrying out a reexamination of our supply chain from shelf to field, recognizing today's economic situation to meet these productivity goals and also to achieve the top-tier service levels whilst balancing inventory levels and, obviously, cash delivery. Let me now walk through the initiatives we are pursuing across the entire supply chain to realize these ambitions. It all starts with enhancing our supply and demand planning processes and outcomes. Our key initiative in this space is the global transformation of how we plan which, at its core, is the implementation of statistical forecasting using machine learning. We expect to increase our forecast accuracy by as much as 15% in some regions and will enable us to improve our customer service, inventory KPIs and waste reduction to best-in-class levels. In procurement, we're deepening strategic supplier partnerships and enhancing supplier performance management processes to reduce costs and share the benefits and, at the same time, reducing our reliance on single-source suppliers to mitigate the risk of supply disruption. In 2021, we introduced the design-to-consumer value approach to better align costs with consumer benefits. By asking what matters to the consumer, we can realize cost efficiencies without compromising consumer value. In 2021, we over-delivered by 50% on our goal for the year and have strong plans moving forward in our strategic plan for the next 3 years. In manufacturing and logistics, with the creation in 2020 of our central analytics team, we are now using end-to-end digital modeling to continually reevaluate our network to better serve customers and consumers. We are increasing growth CapEx investments to reduce bottlenecks and increase capacity in key strategic areas like India, China and Oreo supply globally. Ultimately, we are looking to be above 50% of CapEx spend, enabling volume growth. In manufacturing, we're building towards our first data-powered and remotely operated lights out factory, which will step change productivity. And in consumer service and logistics, we're better connecting all phases of the product journey and leveraging investments in technology to optimize warehouse management, route planning and truck fill. And finally, we remain focused on the safety of our people and quality of our products, which underpin everything we do and our huge value drivers in engagement, retention, reduction of waste, protection of our brands, protection of our reputation, people and delivery of our growth agenda. So you've heard a bit about what we are doing to evolve towards a top tier supply chain. And we acknowledge the last 12 months have presented a lot of challenges in the U.S. in particular. So let me address that for a minute. At the start and peak of COVID, the resilience of our network, including our DSD organization, allowed us to outperform competition, demonstrated by leading levels of on-shelf availability and significant share gains. Then, sector-wide challenges emerged with trucking and container supply lagging demand and unprecedented labor shortages at third parties. There were also supplementing inventory management through improvements in data visibility and control towers. We're deepening our partnerships with strategic suppliers where interdependence can be a strength as well as onboarding new suppliers where appropriate. We are also investing CapEx, where needed, to support our turnaround. And finally, we're improving the cross-functional planning process, as I mentioned previously. We expect to see service level improvements in the coming 6 months with the full effects of our remediation actions felt in 2023. With that, let me wrap up. So we're building from a strong base, leveraging our competitive advantages and continuing to evolve the end-to-end supply chain from shelf to field, underpinned by safety and quality and investments in digital and sustainability. We're driving towards best-in-class service delivery and quality in support of the company's growth acceleration agenda. And we are relentlessly pursuing productivity this year and every year. Thank you for your attention today.

Thank you, Sandra. Hi, everyone. I'm joined today by our CFO, Luca Zaramella; and Chief Impact and Sustainability Officer, Christine McGrath, for a discussion about sustainability at Mondelez International. We hope you'll find this segment both engaging and insightful. And for further information on these subjects, please look out for our latest Snacking Made Right ESG annual report, which will be published later this month. With that, let's start our discussion. Hi, Chris. Thanks for joining us today.

It's great to be here.

Firstly, how would you describe the company's ambitions in the area of sustainability? And where do you think we can make the most impact?

Sure. So for us, sustainability is very much about building a sustainable snacking company. And it's core to our business growth that helps to create value along the value chain, and it also helps to make our business more resilient. And for us, we're very focused on leading in the areas where we know that we can make a significant impact, like cocoa and wheat, being one of the world's largest chocolate and biscuit companies, and then also driving change where the world needs it the most, so areas like climate change and packaging waste. And 2022 is really a significant milestone for us because it marks not only 10 years as a company, but 10 years on our sustainability journey. And so we've been able to scale our signature programs and, importantly, learn what's working and what else we need to go focus on as we move forward. And we have clear road maps to take us to the future.

That's great. Thanks, Chris. And what do you believe really differentiates Mondelez from other companies in this area?

Our approach to sustainability is about focus, innovation and collaboration. And so focus is really those areas where we can make a significant impact and bringing innovation to come up with new programs that really get at tackling root causes versus just sort of settling for what might be on the marketplace. And also measuring -- we bring a business discipline in measuring the impact of the programs. And then sharing that information at a sector level in terms of -- with our peers and working with industry groups, other peer companies, suppliers, governments, et cetera, to drive more change at scale. And cocoa is a great example. So we're one of the world's largest buyers of cocoa. We were used to buying certified cocoa. When we weren't satisfied with what we were seeing in terms of the kind of data and the kind of approach because it wasn't addressing all the issues, so 10 years ago, we launched Cocoa Life to get at an integrated solution, and we measure the impact, and we share that information at a sector with the others in the cocoa industry to help them learn and be able to scale solutions and change faster.

Thank you, Chris. And turning to you, Luca. As CFO, how do you think about sustainability?

Thank you, Andre. As I always say, any good business needs to be sustainably run for its long-term potential and sustainability over the long period of time. And in that regard, sustainability is not any different than any other type of investment we make. I know it is the right thing to make the business thrive over the long period of time. As a leader of a company, I also know I'm making decisions that impact many stakeholders, many people, not only in the company but outside. And so it is a great recognition of responsibility, the one that I have. And I always make sure that caring about the planet and making sure that well-being of our consumers and those that work for the company is always top of mind, not only for me, but for everyone within the company. Clearly, sustainability comes at a cost and not dissimilarly than any other investments, I want to make sure there is a return on these investments. And so we prefer spending money and investing money behind big challenging topics but really making a difference for the planet and for our key stakeholders.

Thank you, Luca. And back to you, Chris. We focus on 4 key areas within sustainability at Mondelez. Ingredients, social impact climate and packaging. I'd like to double-click on ingredients first, please. And most of our audience will be familiar with Cocoa Life, but I'd love to hear in your words what is it and what impact is it having?

So cocoa is the most important ingredient that we buy and as I mentioned, is a challenged supply chain. And so just a bit of context on why we focus so much. It is our most important ingredient, pivotal to our growth. And it's important to us to make cocoa right. And we want to make sure that means that the farmers, as Luca said, the farmers that are growing have a good standard of living. The second thing is that it's important to understand cocoa has grown by small holder -- they're small holder farms, small holder-owned businesses. And so therefore, children and women are part of the family, and we want to make sure that children are protected, and we want to make sure that we tap into giving women economic empowerment because we know that women play an important role in the cocoa supply chain. They're often overlooked. And when they have their own economic independence, they invest more in children's education and the welfare of the household and the community. And it's also important for climate change because for us, cocoa is the #1 source of our CO2, and that's another reason why it's been a big focus for us for many years in terms of helping to eliminate deforestation and also teaching farmers how to grow more cocoa on less land. And so we launched our Cocoa Life program 10 years ago, as I mentioned in 2012. We now are at a point 10 years later, we've scaled. We're working with over 200,000 farmers and 75% of our chocolate volume today is sourced through the program. But importantly, not just the size, what we're really excited about is the impact that we see the program is having. So it's an integrated program. We work on 3 areas: farming businesses, empowered communities and the environment. And on farming businesses, farmers are making -- continue to have increased incomes. But importantly, it's driven by improving yields. So we know that farmers are earning -- or growing more on their farms, and that's how they are able to earn more income. The second thing is the community. So almost all of the 2,500 communities where we're working have community action plans. Think of it as a strat plan. They develop together to talk about the future viability of the community. And they've also been able to -- 70% of those plans are funded by the local governments, which is again, is another important part of sustained health of the community. We've put a big effort on scaling our child labor monitoring and remediation systems. We more than doubled it since last year with 61% and well on our way to full coverage by 2025. And on the environment side, we map and satellite monitor about 198,000 farms. About 80% of the farms were working quite a bit. And we're really excited to see that there's been very little deforestation in the last few years on those farms. So net-net, our integrated approach is working. And it's also -- we have very good information about what else we need to do, where we need to take the program. And later in the year, we'll be sharing the next generation of what we'll be doing on Cocoa Life to take us to 2030.

Thank you, Chris. And Luca, what role does your finance organization have to play in delivery of these ambitions and goals?

I'll start by saying that everyone in Mondelez has a role to play with our sustainability ambitions agenda. It clearly starts with our suppliers, with people that interact with those suppliers, with our factories, et cetera. And I think good ideas, as we know, start everywhere in the company, but importantly, we need the commitment and understanding of the whole organization behind it. As it boils down to finance, the #1 priority for us, I believe it is about ensuring that we hit these programs in terms of commitments and that we make sure that funding is obtained to make progress. In that regard, one of the things we did last year, which was very important to me was the first green bond which was an overwhelming success with investors, and that has helped us funding those investments. We also need to make sure that we have viable plans as someone that deals with a lot of stakeholders. I have one key asset, which is my word. And when we make a commitment, I want to make sure that we know what we are talking about and that we execute well that agenda. We also want to ensure that as we report our progress to the outside world, we report it in a way that is high quality and measuring a lot of this impact is quite challenging at the moment. But I want to make sure that over time, we make progress and that finance gives the seal of approval. And so that when we tell investors or any stakeholders, this is what we are doing, and this is what we have done It really is what we have done.

Very clear. Thank you, Luca. And Chris, back to you. Let's pivot to climate. So we publicly stated our ambition to reach net 0 greenhouse gas emissions by 2050. And -- what will it take to get there as an organization?

So climate change and helping to tackle it is something we've been working on since the start of the company. And our first focus has always been to make sure that we have our own house in order. So looking at our own operations, and we've made great progress there, reducing our greenhouse gas emissions by about 300,000 tons since 2014, for example. And we do that by using more efficient energy systems, using renewable electricity, where we can, et cetera. But it's also important to understand our environment, our greenhouse gas footprint, about 70% of it comes from ingredients. So it's cocoa, as we've discussed, wheat, dairy, oils, those are the primary drivers of our CO2. And so in cocoa, we -- in addition to the deforestation, we've been doing a lot of work to help farmers learn training about 300,000 farmers in good environmental practices and providing shade trees. We've planted over 4.5 million shade trees to date, and we're still going forward with that. So all of that helps to shrink that greenhouse gas footprint. But beyond that, we're also -- as we look to net zero, part of the shift that you're asking of what it will take is really bringing, I think, sort of the carbon lens and the greenhouse gas lens to all the business decisions that we make, whether it's putting -- thinking about a new piece of equipment that we're putting in and what's the footprint of designing a new logistics route and thinking about working with suppliers and farmers on ingredients. So we've got a clear road map of what it will take us to get there. Some of the -- there's some innovation that's still required, but we know that we'll be able to switch as our ovens become obsolete, we'll switch them from gas to electric. We'll do things like take our fleet and make -- switch it over to electric vehicles. And then in the ingredient side, one other area where we've made great progress is on regenerative agriculture. In Europe, we have our Harmony Wheat program. And today, all of our wheat biscuit volume is sourced through that program. So we're taking those practices and now working with suppliers and farmers to scale the regen ag around the world. And so we're really encouraged by the -- we've put a lot, as Luca said, we did a lot of work to put very specific plans in place and understand what it would take and what the building blocks would be. And we're going to continue with 5-year goals and interim steps along the way to measure our progress.

Thanks, Chris. And back to you, Luca, these initiatives clearly cost money. How do you think about that cost? How do you plan for that?

We have clear short- and long-term goals. And I engage with the broader organization to ensure that we know exactly what we have to do and subsequently that we know the economic implication of all the things that we are committing to do. I believe some of these initiatives will result in a cost reduction. If you think about sustainability, I believe it is, first and foremost, doing more with less and particularly using less water, using less gas, using less packaging will result in cost savings. And I think that is obviously beneficial for the planet, but also for our overall P&L. Many of these initiatives, though, will result in incremental costs and not resulting in incremental costs. Some of them are already into the P&L, but there is definitely more to come, particularly as it relates to new technologies, the entry cost of this technology today is quite high. But I expect as there is a broader adoption, as there is a broader understanding of the fact that, that is the way to go, costs will come down over time. For ongoing costs that hit the P&L directly. Obviously, we try to make space into the P&L to plan for them and ensuring that we have the necessary funding. I have also to be very clear here that some of these initiatives will have to be paid by our consumers because eventually, we will be providing more value to them. I think it is important from anyone that buys a certain product to know that, that product is made sustainably. And if there are costs, those are the right things to do and eventually consumers will be more willing to pay for products that are sustainably sold.

Understood. Chris, one topic we haven't discussed yet is packaging. We see a future of net zero packaging waste and a circular economy by 2050. And we're taking significant action to make our packaging more recyclable. But recycling rates are still quite low globally for some of our key materials. So how do you think about the journey from today up until a circular packaging economy in 2050?

So packaging is an area we've been working on for a long time. And I think just to set a little bit of context because here again, we're dealing with some systemic challenges. So our packaging footprint today, about 20% of it, we use plastics, flexible films pretty much. And what we know is that, that is a really efficient from -- in terms of delivering high quality and food safety and reducing food waste because it keeps the products fresh. So we want to continue all those really good things. But the systemic challenges is that there just really isn't infrastructure today in the world to collect and recycle plastics and about 25% of the world's of plastic today is recycled in the world, and particularly for flexibles because only 3% of flexible film is recycled today. And so that's what we're working on. So we have a comprehensive packaging strategy, we call it light and right. It's about using less packaging, better packaging and helping to build better systems. So less packaging, that's been a focus for us for a long time. We've taken out 68,000 tons of packaging since the start of the company. And that's a continued focus for us. It saves money, as Luca said, and it's also great for the environment. The second area in terms of better packaging. So we're well on our way to getting all of our packaging to be recyclable. We're at 95% today and getting to 100% by 2025. And that's essentially basically changing the materials over to fit design rules that make them recyclable, single-layer films versus multiple layers as an example. But the other area in terms of better packaging is when we can substitute plastic for paper like some of our biscuit trays or some of the flow wrap and some of our chocolates, that's something that we're pursuing as well and also reducing our virgin plastic. So we have a 5% virgin plastic reduction goal by 2025. And this year, we're starting to put some recycled plastic in our Cadbury wrappers in Australia and is more -- we're working to have more with our suppliers to get more of -- more availability of that type of material. And then that leads to better systems. So better systems means we've been very strong advocates for extended producer responsibility. It's a mouthful. But essentially, it's the fees companies pay to help build infrastructure. We are working at an industry level, in coalitions and working to advocate with governments to make sure that, that money goes into really investing in sustainable systems that will collect and recycle flexibles as part of the equation and also provide the incentives for people to collect and recycle the materials. And then lastly, we're making our own investment. So we have our Sustainable Futures Impact Investment Fund. Last year, we invested through Circulate Capital started an Ocean Fund. And so they're investing in small entrepreneurs in India and Southeast Asia, who are building some of these new collect kinds of ways to collect materials and recycle them. And we're really encouraged we'll be able to take as much plastic as we put into those markets out and have it be Circular. So it's all of those pieces together, less packaging, better packaging and better systems that we need to continue to work on. And again, with suppliers, other peer companies, et cetera, to really get to a whole circular packaging economy by 2050.

Thanks, Chris. And final question from me today staying with you, could you just talk a little bit about your interaction and the interaction of this agenda with the leadership of the company and also with the Board of Directors?

Sure. So since I've -- since Dirk has been with us, I've been meeting with him quarterly to talk about our progress and our journey. So where are we in terms of our KPIs and talking through strategic initiatives. And then the Board, this is a very big priority for the Board. And so I meet with them twice a year to discuss the progress. And again, road maps before we take any of the big commitments that we make, we fully discuss it with them as well. So a lot of oversight and engagement by our directors as well as the C-suite and I meet with Luca regularly as well.

Clear. Okay. That brings our discussion to an end. Thank you, Chris. Thank you, Luca. And as I said earlier, please look out for our upcoming Snacking Made Right ESG annual report.

Thank you, Andre, and good afternoon. I'm very happy to be here today to talk about the next phase of our company, which is about accelerated growth and earnings. My presentation will revolve around 3 topics: our P&L levers and operating discipline, what we have accomplished and how much there is still to do. Second, capital allocation priorities and results; and finally, a review of our outlook for 2022, near-term operating dynamics and an updated long-term algorithm. Let's start with our P&L drivers and results. As we move into the next phase of acceleration and focus, we start from a much stronger base of reliable and sustainable growth, underpinned by strong commercial execution and higher amounts as well as quality of investments. We continue to focus and strengthen our portfolio by doubling down on our core chocolate and biscuits, exploring growth accretive adjacencies and exiting businesses that are lower priority. Free cash flow generation has also been a key priority and output of our strategy over the past several years, and our deployment of capital has been a strength as we have prioritized growth investments in our business, added growth accretive acquisitions and return capital to shareholders both through dividends and opportunistic and price-sensitive repurchase of our stock. Looking back over the past 3 years, we have shifted to a more attractive and more balanced as well as sustainable financial cadence. Revenue growth rate has accelerated from sub 2% to more than 4%. Profit dollar growth has increased in order to invest for growth at higher levels with much improved and more efficient level of A&C spending. And we have consistently delivered high single-digit EPS growth, both at constant currency and in U.S. dollars. Finally, volume leverage, better profit dollar growth and superior management of working capital, have allowed us to deliver material cash. We have also seen great strength across a much larger part of our portfolio, core biscuits and chocolate, which now make up nearly 80% of our total sales have delivered combined growth of more than 5% over the past 3 years. And we have step-changed our local brands growth after years of underinvestment, enabling us to grow nearly 4% over the past 3 years, while our global brands continue to outperform the categories. The key unlock for our local brands was incremental investments and core renovation. While we are happy there is more to do, and we aspire to grow these brands in line or above categories. In terms of geographies, we have seen high single-digit profitable growth across emerging markets, while developed markets continue to post solid growth and generate good cash. Turning to our portfolio focus. We plan to continue reshaping the portfolio in a thoughtful and disciplined way by doubling down investments in our core chocolate and biscuits businesses, where we can have significant opportunities to unlock more growth, expanding closing adjacencies where we can further develop attractive top and bottom line opportunities, reducing our exposure to slow-growth, noncore snacking categories and adding growth-accretive acquisitions, where we are the natural owner who can apply our competitive advantage to further enhance growth and profitability. Turning to our sustainable growth model, which gives us increasing confidence in our ability to deliver ongoing earnings power. This model begins with driving operational efficiencies through strong overhead cost management and productivity. We invest the savings back into the business where we can get the best return, including working media, route to market and digital. This in turn allows to deliver volume-driven top line growth and generate strong free cash flow, which we deploy in a value-enhancing way back into the business and in the form of cash to our shareholders. Next, let me talk about our efforts around productivity and overhead management. Strong productivity remains an ongoing ambition for us, and we have made solid progress over the past several years despite a number of challenges in terms of inflation and supply chain constraints. Going forward, we are targeting a few key areas that you heard from Sandra, including the implementation of Lean Six Sigma and digital across the entire network as well as statistical forecasting to drive out waste. In terms of overheads, we continue to make strong progress in driving down our costs in a methodical way. Moving forward, we will increase our use of digital tools and analytics to drive further efficiencies into the business. And we are taking additional steps to focus and simplify our processes, while managing our cost packages for further efficiencies. These efficiencies and our savings, along with our focus on profit dollar growth, give us the room in the P&L to continue to make growth-oriented investments. We have made significant increases in our A&C spend to better support our brands through high return and efficient working media spend, and we have more room for further improvement. Moving forward, our priorities are clear. We will continue to target A&C in excess of top line growth. We will continue to allocate more spend to working media, and we will further support our brands and accelerate digital. Our sustainable growth algorithm is predicated on balance and our focus on volume, profit dollar growth and reinvestment has resulted in high-quality EPS, both on a constant currency basis and U.S. dollar growth, with both growing plus high single digits on average from 2018 to '21. As we move forward and increase our focus on chocolate and biscuits and deploy our balance sheet firepower to synergy-accretive acquisitions as well as unlock savings through digital, we are increasingly confident that we can continue to sustain these results with room for some improvement over the long term. Strong cash conversion is another key to our algorithm. We have made significant progress, improving 55 days, our cash conversion cycle since 2015 and delivering best-in-class levels. But there is more room for us to go further as we implement digital planning tools to improve our demand forecasting and drive down our base inventory. We also feel good about our CapEx plan, which we expect to run at about 4% of net revenue over the next 5 to 10 years. These plans call for a higher percentage of growth CapEx, and we'll be able to fund our initiatives, including emerging market capacity growth, specifically around proven platforms like Oreo, Cadbury and Milka. These areas of focus and initiatives should continue to translate into continuous free cash flow improvement. Next, I'll spend some time on our capital allocation priorities and why we believe they are and will continue to add value. Our capital allocation priorities remain the same. Our first priority is reinvesting in the core business. Second, we will prioritize growth-accretive acquisitions. Our third priority is capital return through dividend growth and share repurchase. Paying down debt is a lower priority given the strength of our balance sheet. Let me spend a moment on each. We know one of the best returns we can make is continuing to reinvest into our current business, where the core opportunities remain large and attractive. This includes an increase in more impactful A&C, increasing our omnichannel presence through route-to-market investments and investing in new capabilities around RGM, integration and our digital agenda. M&A is our next priority. Our approach is disciplined and consistent in terms of how we identify and evaluate opportunities, focusing primarily on bolt-on acquisitions and snacking assets that can benefit from our competitive advantages, scale across multiple geographies and take advantage of our existing brands and commercial expertise. We also have specific strategic and financial criteria, which include expanding our core portfolio or filling key gaps, identifying assets that align with emerging consumer trends and applying rigorous return metrics that are risk-adjusted, based on the business and geographies. And as you can see, our last 8 acquisitions have enabled us to fill multiple gaps, including well-being, premium, some category-wide spaces in certain geographies and adjacencies. Together, they add more than $2 billion in revenue. Let's take a closer look at some of them and how we have helped improve or accelerate performance, starting with Tate's, a well-known iconic cookie brand that enabled us to enter the premium cookie segment. We have been averaging around 20% growth over the past few years by increasing household penetration and adding significant distribution. One of the big unlocks has been putting this brand on our DSD network, which gives it significant growth potential. Going forward, we expect more distribution gains, incremental innovation and the ability to go into other geographies. Perfect Snacks is a premium brand with well-being credentials that is unique given its significant leadership position in the chilled high-protein bar market. We have driven high-quality growth in this business despite the temporary setback from COVID in 2020 and have seen a significant increase in household distribution points and share. And now we are working to expand the brand in a targeted way with new formats, such as the recently launched snack-sized portions offered in outlets light Target. One more acquisition to highlight is Give & Go. Give & Go is a leader within the large and fast-growing in-store bakery segment. We have been able to provide more capital to help unlock capacity and expand distribution and launch in new categories, and we are seeing great results, with strong growth over the past 2 years. There is an application in the category of our brands and cross-fertilization of know-how between our portfolio and Give & Go. Finally, profitability of the platform is good and through volume growth as well as deployment of capital, there is still room to improve. Let me spend a minute on our portfolio announcement today. As Dirk said earlier, our vision is to continue to move the portfolio closer to 100% snacking. We believe exiting the developed gum business is an important step in this direction. Given our view that it is more appropriate for us to invest incremental dollars towards chocolate and biscuits. In terms of net revenue, these businesses represent $450 million and will come exclusively in North America and developed markets in Europe, including brands like Trident, Dentyne and Hollywood. We will continue to invest in our attractive emerging market gum business as we provide scale and distribution access. We are also announcing our intention to exit our global Halls business which is $470 million in annual revenues. We expect to start the marketing process in Q3, and we'll keep you updated as appropriate. And turning to our most recent acquisition of Ricolino that we announced just last month. We are very excited about this business as it doubles our size in a priority market like Mexico with strong positions in confectionery and chocolate. It significantly expands our route-to-market capabilities with more than 2,100 DSD routes, including over 420,000 moms and pop stores. And it provides an excellent platform for us to expand our biscuits presence in this country. Turning to capital return. We continue to build on our strong track record of returning cash to shareholders. This includes consistent double-digit dividend growth over the past 3 years and opportunistic share repurchase capabilities that give us flexibility and the ability to act in times of market dislocation. This disciplined approach, along with our virtuous cycle has helped us deliver strong TSR results. Let's now take a look at our coffee investments and the financial flexibility they provide. JDE Peet's and Keurig have both been great long-term investments, and we expect both businesses to drive more value going forward. Although great investments, these are nonstrategic assets that give us great flexibility and also provide ample firepower for future growth-accretive M&A. And finally, we continue to take action to reinforce our balance sheet. We have taken actions over the past couple of years to issue that at a very attractive rate. improve the average length and spacing of maturities to ensure we have strong liquidity and the right amount of leverage to continue to fund our M&A agenda. Turning to our long-term algorithm. We are now expecting 3% to 5% top line growth in light of our recent performance with potential to accelerate beyond this with further portfolio reshaping. We continue to expect EPS to grow high single digits over the long term. While free cash flow trajectory should continue to improve, and we remain committed to growing our dividends in excess of adjusted EPS. This algorithm is based on current portfolio today. In terms of 2022, there are no changes to the updated 2022 outlook that we recently provided on our Q1 earnings call. Although we are quite confident in our ability over the long term to deliver our new algorithm, the current operating environment may result in a wider range of outcomes and cause the shape of our P&L to look different than what we have come to expect. These ranges have been reflected in our '22 outlook. These factors include higher inflation, higher and more frequent pricing, more volatility around sourcing and currency and the current war in Ukraine. We expect material cost inflation to remain dynamic in our sector for the remainder of this year and into 2023. We remain confident in our ability to drive productivity and manage overheads. But the net result might be gross margin dollar growth that is lower than top line. We also expect higher and more frequent pricing. We will continue to take a targeted approach that focuses on offsetting costs, but also utilizes all of our RGM levers. And although elasticity has been quite low, we do plan for it to return to more historical levels. The impact might be a higher top line growth, with a higher contribution for pricing than volume. We will continue to manage our sourcing both for continuity of supply, but to also ensure we take appropriate action to hedge our commodities to get the best sustainable cost structure. To close, we believe we are better positioned than ever to accelerate growth, earnings and cash flow over the next several years. We build off a position of strength and a proven track record of results. We had a strong, growing and highly durable set of categories in our portfolio, superior brands and an advantaged geographical footprint conducive for growth. We are continuing to make high ROI investments in brands, capabilities and talents. And we are focused on taking steps to reshape our portfolio with growth accretive assets in our core. With that, let's move to our final Q&A session.

Thank you, Luca, and welcome to our second Q&A session. With me again is Dirk, Luca Zaramella, our CFO; and Martin Renaud, our Chief Marketing and Sales Officer. So it's a good opportunity to have both of them. So let's make good use of their time. Unfortunately, Chris McGrath could not be with us today. Similar to our last Q&A, we have around 30 minutes slotted for this session. [Operator Instructions] With that, let's get started. Our first question comes to us from Bryan Spillane of Bank of America.

Shep, so just 2 quick ones. One, Luca, in terms of the algorithm, can you just talk a little bit about how the gap between sales and earnings per share might be different between now and, let's say, 2025 than it was between 2018 and '21? And I guess what I'm thinking is share repurchases probably are still part of the equation, but it doesn't sound like there would be much leverage from net interest. So just trying to understand where the growth -- the EPS growth versus the sales growth, where that leverage is and how it's different.

Yes. Okay. So first and foremost, the algorithm is predicated on continuous volume growth. And I'm sure you appreciate the fact that now we are moving up the algorithm in terms of top line. As we make more acquisitions, obviously, there will be more accretion. And I always mention the importance of assets like Chipita in terms of contributing to EPS growth in the years to come. Reality is an asset like Chipita, we financed it at 0 cost. And it is obviously going to give us an incremental business that to start with was $600 million, $700 million in revenue. But importantly, it adds both in terms of revenue and cost synergies. So the EBIT, the way you have to think about the EBIT is 5% plus growth under normal circumstances. And obviously, we want to invest in A&C. I just finished saying that specifically around local brands, we still have a long way to go, and I truly believe that it will be very beneficial for the algo continue to invest in those brands and step up that growth in line with the categories. Below the line, at this point in time, we factor in $2 billion of share repurchases on a going-forward basis. We just finished telling you though that there is an opportunity to initiate the process for gum developed market and Halls and that will contribute to the funds that are available either for acquisitions or share buybacks. And then in terms of interest, we want to keep, obviously, lead to interest cost. Today, we are best-in-class, I believe, in terms of interest cost. And the idea is to really leverage that keeping the right balance and tapping particularly in those markets where interest costs are lower, namely Europe, to make sure that we keep this interest cost in control. And so I think you will be pleased with EPS growth in the years to come because it will be high quality and it will be predicated on continuous volume leverage, cost savings and investments in the company in areas like A&C and digital.

Right. And just one follow-up to that in terms of growth. I think if you pick through the presentation and there's going to be an increase in the percentage of CapEx that goes to growth CapEx more of the A&C spend is going to go to working media. There's also a mention of investment in, I guess, in supply chain, but into -- really into faster-growing channels. So I guess as we kind of think about the message today and those 3 pieces, fair to say that whether it's capital investment or P&L investment, more of it is going to be supporting growth than maybe has been the case in the last 3 years? Is that the message we're to take away?

I think the way you have to think about that is that we will never leave cost efficiencies alone. I think you saw in the presentation that we are striving for 2% productivity with no restructuring program. So as you think about cost savings, obviously, digital is being unlocked for executional excellence. We are investing heavily in key processes of the companies like supply and demand planning using statistical forecasting. So there are cost savings to be attained. On top of that, don't forget the cost synergies that we're going to get. And if we put in place a continuous M&A activity going forward that has -- I can't tell you how much every year because obviously, it's unpredictable precisely. There will be cost savings and leverage coming out of that too. The reality is Oreo, Cadbury, Milka, all these brands have tremendous potential. We have proven propositions where we know that investing more is going to be beneficial for the long term of the company. And so it is revenue but not revenue only, but importantly, we want to keep on gaining share and propel choco biscuits that hopefully, you are as excited as I am about those categories.

Thanks, Bryan. Let's go to our next question, Michael Lavery at Piper Sandler.

Just wanted to come back to the A&C. You're talking about growing that in excess of spending, which is, I'm sure, delighting all of your brand managers. How long of a runway is that? And is there sort of a target level maybe as like a percentage of sales that would be kind of the end game?

Martin, I think this is in your alley.

Okay. Bryan, as we have shown in the presentation, we really feel we have a lot of potential ahead of us. So we believe we can still increase year-on-year on the key brands and in the key markets. And we will do that as part of the algorithm. I think, obviously, we need to deliver results, and I'm sure Luca will be here to remind us that it needs to be really incremental. But I think we have a long way to go. So we have not defined a name game in terms of percentage. I think we need to do that in a solid way and grow year-on-year.

But we do know from some of the studies we've done around the world that, in most cases, can still double our investment in our brands and still generate a significantly incremental sales as a consequence of that. The other thing I would say, Martin or Luca, is that we don't want to -- this is not an algorithm, whereby we're certainly going to invest more and then goes at the detriment of the bottom line. It's the continuation of what we currently are doing. So that doesn't really change.

And the great news is that we really have potential both on global brands and local jewels. And I think -- and we have proven that we have an impact as we increase our investment. So I think we are -- we can be very confident about delivering extra growth, thanks to extra investments.

No, that's great color. And I was going to follow up on supply chain, but without Christine, you've teed up another one great here on the local jewels versus the global brands. Just wanted to come back to that obviously, switching to your current approach has been very effective at driving better top line growth. But just curious how you also balance keeping the scale benefits and learnings across markets and best practices for something like the global brands, they're clearly still working very well. But as you point to Oreo, for example, as a huge component of the growth for biscuits in an earlier presentation, how do you balance giving all the brands, the support they need and deserve, but still having that global synergy for some of the biggest ones.

Yes, great question. Thank you. It's a big part of my job, actually. So we are working a lot with the business units all over the world to bring all those learnings together. So obviously, for the global brand, we have a very clear global strategies, and we are accompanying each BU to really get to the next level of strategy and accelerate their growth. As far as local jewels are concerned, we have also very clear strategies by category. We have some platforms that can play across different brands. For example, we mentioned treat size in sharing in chocolate. We have Caramilk, which is a transversal platform that can go across global brands and local jewels. So we are really working to get to a common knowledge and leverage that knowledge across all the business units across the world, too. That's really at the heart of our model, local first, but not local only and get things stronger together.

And if I may add, I think it is important to realize that our factories make Oreo and in many cases, local jewels. And in the past, we were into situations where by not having the local jewels growing, we were forced to invest money to restructure some of these factories, which I always say it's better to invest money to grow rather than getting smaller. And so those brands provide the scale in our factories. And importantly, the route to market is shared. And so they are important scale providers, and I truly believe the combination of global and local brand is what makes our company magic in many countries around the world. .

Next question, let's go to Laurent Grandet from Guggenheim.

So thanks for -- I mean, first of all telling me there's a piece of France with the LU sampling. I've got a follow up from the previous session first and then a question. So for the follow up, so margin, you mentioned in chocolate season and gifting or premium will be similar in terms of percentage margin than the existing range, but more accretive in terms of dollar margin. Now regarding the cake and pastries, how should we think about margin versus biscuits?

Look, I think we have always to anchor ourselves in a couple of concepts. One, it is incrementality and the other one is GP dollar growth. So I can tell you right away, cakes and pastries, or this category that is very adjacent to our biscuits business, in many cases, command higher percent of margins. But importantly, in terms of per pound or per kilo, it is a very solid category. So I don't expect any major dilution in percentage terms. The reality is as a company, I think it was an important shift, the one we made to move into gross profit dollars. And I always remind everyone that is really the way we look at things. In terms of capital deployed and the amount of benefits we are going to take out of the cakes and pastry, I think the benefit is going to be material. It is going to be one of the best return on investment proposition that we have within the company.

I was going to add that we are also really willing to build brands in cakes and pastry. So 7Days is really an amazing brand. It's more than a product. And also, we plan to leverage our amazing brands like Cadbury, LU that you mentioned. So we really believe we can build unique propositions, which have the power to price.

And then my question is really more about the U.S. specifically. I mean, I could -- I mean to us. I mean, the U.S. has been relatively underperforming versus the rest of your geographies in the past 3 years. And part of it, it seems like I mean, it's still -- you're under rule presentation in convenience stores and probably the route to market here. I mean, was something you said you will try to fix as you were not leveraging your own DSD system there. So could you give us where you stand in the U.S. specifically in terms of route to market your DSD leveraging including the new brands and some of them probably more single serve or small portion that would be fitting pretty well with the convenience store channel?

Yes. I think if you -- if you look at the performance of the U.S. over the last 3 years, I would say, last year was a very good year for the U.S. We had -- sorry, the first year of the pandemic had a very good performance in the U.S. than last year was a little bit of, driven largely by supply chain, not necessarily because of our presence in the convenience stores. Having said that, we clearly do have an opportunity in convenience stores solving for that and that has to see with the infrastructure of getting there, but largely also with the range of products that we can offer. As you can imagine, biscuits is a category, which is our core category for the U.S. is not that widely consumed through the convenience store. It's not like candy bars or salted snacks. So there's a little bit less of an opportunity there. But we have opportunity to progress, which we are working on and have been working hard. And in fact, that whole channel has been growing much faster than the rest of our business. But the real issue of the U.S. has been the supply chain, the sort of volatility that we've seen with labor, with trucking, with some of the ingredients and that has played a critical role, not to forget that in the second half of last year, we also had a strike in some of our plants, which knocked us off for a few months as it relates to service to our clients. And so those are the things that we are currently working on recuperating. In normal circumstances, that would have gone faster, but in the current difficult supply chain situation, labor and trucking that is taking longer than we would have expected. So that's really the core of why you currently see the U.S. a little bit underperforming. But we feel that in the second half of this year, it will be coming back, and we should be in a good position by the end of this year.

Let's move to our next question, Pam Kaufman, Morgan Stanley.

You highlighted criteria driving your M&A approach. But I was wondering if you can also discuss how you're thinking about the opportunity for divestitures. You announced that you're planning to sell developed market gum and your Halls business. Are there other areas of your portfolio that you're evaluating reshaping through divestitures? And would you consider selling brands that do fit in with your core categories but may not have as attractive growth prospects?

Yes. So if you look at the business right now, 20% of our businesses in other categories could be gum, could be candy, could be in meals, could be in powdered beverages. And over time, as we said in the presentation, we want to get to 90% of our business being into chocolate biscuits and baked snacks. So that gives you a flavor of what those other categories are. Now the percentage will also be influenced by the M&A that we do, and that will automatically increase the chocolate and biscuit percentage. But over time, we do expect that in certain geographies, this is not the same for all geographies. Emerging markets are very different from developed markets for us. But over time, we will keep a close look to these other categories and decide if they still have a future in the company. And overall, you could see us as a biscuits and chocolate company in the next 3, 4 years. That's really what we are going to be. As it relates to -- what was the second?

Core categories.

Brands...

The brands -- yes, sorry. Yes, in theory, we feel that what we call the tail brands, we have 3 solutions for those. One is to really invest and make them a success. And that's what we've been doing with a lot of our local brands. The second one is what we call nesting, is to bring them in under another existing brand and make them flourish there; or three, could be a divestment. And yes, it could be possible that in some of those categories, we decided to divest the brand, it's rare. But if we really see no future, and we can't grow that brand, then we probably would seriously consider that.

And my second question is on your strategy to grow e-commerce to 20% of revenue by 2030. What capabilities are you investing in? And do you envision this going through retailer sites? Or will there be any direct-to-consumer retail? And then what are the implications from this channel mix shift on profitability?

Okay. So I'll take that one. So today, 80% of our e-commerce sales are in what we call B2C. We envision that to continue to be our biggest subsegment for e-commerce, and we are investing a lot of capabilities in digital tech insights and analytics, supply chain, obviously, also new talents and new capabilities from a people point of view. So -- and we see a great future for that. We see 2 other channels with great potential for us. The first one is what we call direct-to-consumer, which is around 15% of our sales today. It's probably one where we still need to acquire even more capabilities because that's new, we need also to adapt our offer from a consumer point of view, different price points, different offers, but we see also a very interesting potential here. And finally, the last one, which is B2B, which is only 5% and which we see growing very fast and probably will accelerate, which is allowing us to increase our distribution in areas where with our own system, we couldn't go. And also that's quite new for us. So obviously, we are bringing new capabilities to build that. But overall, we are on track to deliver that vision. We are very excited. We believe if it's really incremental and to answer the point on margin at company average.

Next question comes from Ken Goldman, JPMorgan.

How would you characterize, I guess, the interest you've seen so far from potential suitors for both Halls and gum? Or is it really just far too early to ask that? And I was curious, I don't think you've said this, forgive me if you did. Can you remind us on what roughly the operating margins are on these assets in the context of maybe your total business?

Yes. So maybe I'll start. In terms of margins, look, they go above average. We mentioned many times that gum and particularly Halls, they command a margin premium compared to the average of the company. The reality is that gum in developed market before COVID and obviously more impacted by COVID, it has been from a revenue standpoint declining. And we truly believe now that the situation is improving due to COVID restrictions being lifted and people going back to normal, more normalize. There is an opportunity really to invest in the category and step up growth. And so why I believe the value of the business in some ones that is committed to growing this category and this brand versus us where we have huge opportunities in chocolate and biscuits is really what makes the difference. So the margin itself can be diluted because of the divestiture of these 2. It is important to say that the value creation that hopefully will be paid for by the interest parties and potentially, we might even be part of -- to a JV, for instance, or a construction that might -- or a construct that is in line with what you saw for coffee, for instance, we might still have opportunities to grab value creation coming out of it. So I expect -- this all in all to be potentially in a couple of years after we sanitize some standard cost, a situation where you will see higher top line growth, and you will see higher EPS coming out of all of these. We just launched the process today, quite frankly. We are in the process of carving out financials for the 2 lines of business. So we'll keep you informed about what comes out of it. We haven't reached out to potential buyers, but we have been approached by some buyers. And I think there will be good interest in great brands and categories that can really deliver solid growth in the years to come.

Let's go to our next question, Cody Ross, UBS, Cody?

Can you discuss the white space opportunities you still have in emerging markets, specifically India and China? What percentage of doors are you in? And how does that compare to your closest competitor?

To start off with India, we would probably be at about half the percentage of possible doors. If I look at India, I would say it's a market where you probably can assume that there's 6 million stores, and we will now be in about 3 million stores with our biscuits as a -- sorry, I'm mixing up India and China. In India, we have 9 million stores. We cover about 2 million directly. In China, there are 6 million store, and we cover about 3 million directly. That's sort of the order of magnitude. In both cases, I would say, because not every door is the same door. But in both cases, I would say the opportunity for us to add to it is probably around 80% more business. If we would be in all the stores because those stores are -- obviously are more rural or they are smaller. There is a whole infrastructure that needs to go with it. So there's investment that has to go hand in hand in it. But I would say in both markets, just through physical distribution in the years to come, we can see some significant growth but it's going to go step by step because you need to put in place that infrastructure plus you need to make sure that it's paying back and that you get the sales that you were hoping for. So it's not like, okay, turn it on and the sales will come. It's a very careful approach where you have to constantly measure and see what's going on.

And then I just want to talk a little bit about overhead. You reduced overhead by about 300 basis points since 2015. You plan to reduce overhead by another 100 to 200 basis points over the next 3-plus years. That would still put you in the middle of the pack compared to your U.S. packaged food peers. Why is 13% to 14% of sales the right range? And what is preventing you from making more progress?

It is because we have a DSD system in the U.S. and the DSD system with all the benefits that it entails in terms of capabilities and execution at point of sales, it comes at a higher cost. When I look at the sales, marketing and admin excluding DSD and considering, obviously, the fact that we are an international company that we are in investment mode, particularly in sales and marketing, and particularly in emerging markets, I think our overheads will benchmark quite well. Having said that, there is an element here of still opportunities to be untapped. Digital will be a key unlock of executional excellence around overhead costs. But I just want to give you the real assessment, which is, a, I believe we have done a tremendous amount of work around cost. We have the right balance between back office and outsourcing and insourcing. Many of the back-office services are outsourced in our company. We just came out of a major transformation that implied the application of Workday around the world with the creation of shared services and self-service as far as HR services are concerned. There is still a lot to go, but the foundation is very strong. I think if you ask, can you reduce the overheads further and touch DSD, I personally believe that is not the right way to go because DSD is a competitive advantage. You might have seen what DSD has done to Tate's. And there are still a lot of opportunities that we can tap into and Gustav and the team are really making sure that we can digitize even more the sales force. And I think you will see savings over time, ideally, we would like to get to a situation where A&C as a percentage of overheads and as a percentage of revenue and overheads as a percentage of revenue, they are much closer. And that's the way you have to see about -- you have to think about us going after costs and investing in the business as well.

Let's go to our next question, Andrew Lazar at Barclays. Andrew?

Just one. I guess, as you think about the organic sales growth range of 3% to 5%, just what are the key factors to keep in mind that would get you towards, let's say, the lower end of that range versus the higher end of that range, again, on an organic basis?

The 3% to 5% pretty much it is all organic. If you take a look at the categories before and after COVID our categories, I think it's fair to say that our categories range in terms of growth from 3% to 4%. On top of that, as Dirk said a couple of times this morning, we are aiming to adding share. And so I think you can envisage a situation where you grow around about 4%. And then as we make portfolio transformation, and we invest more in the business, obviously, the goal is really to get much closer to the 5%. So the way you have to see the 3% to 5% is for the most part of organic. I think we have been proving to you that we can grow 4%. And the goal is through share gains and further portfolio transformation, we can get much closer to the 5%, which is the ultimate goal for us. We would like to get this company to grow in that range because we know that we have the brands, the capabilities. And importantly, the fuel we're going to get through volume leverage is what is going to propel earnings and allow continuous investment in the company.

Thanks, Andrew. Well, I think that's actually a pretty good stopping point and concludes this Q&A session. Dirk, Luca, Martin, thanks so much for your time. I'll now turn it over to Dirk for some closing remarks.

Thank you all for being with us today. You've heard about our plans to accelerate and increase our focus on core chocolate and biscuits. You've heard Martin and Vince talk about our strong position in chocolate and clear plans to achieve the #1 global position. Gustavo and Vince gave you a view into our strategy to grow and further strengthen our leadership in biscuits and baked snacks. Martin, Maurizio and Sandra provided you with some clear proof points of success and future plans to further improve our execution across marketing, sales and supply chain. Chris and Luca discussed our approach to sustainable snacking. And you heard Luca talk about how we bring it all together and create value to our enhanced financial algorithm. The passion of our people and the power of our brands make it both an honor and a pleasure to lead team Mondelez. And I am excited to see our talented colleagues all around the world write this next chapter in our company's evolution.