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

All right. If we can make our way to our seats, we're ready for the next presentation from Mondelez. First, I want to thank Mondelez for sponsoring today's break. The bundle is product drop, continues to be the most popular here at CAGNY and hopefully, gives us some comfort of the view that [ JT LP-1 ] won't be the end of the food industry. Since joining Mondelez as CEO since 2017, Dirk Van de Put has led a transformation in mindset, margin, sales through a combination of portfolio change, process change. And the end result has been more growth, a better value proposition for shareholders and importantly, consistently compounding returns. So to hear a little bit more of what's happening at Mondelez, I'd like to turn it over to Dirk.

Thank you, Bryan. A very kind introduction, and thanks to all of you for joining us. I want to apologize, first of all, my voice is not as good as it should be, but I hope I will be able to get through the presentation and answer the questions. Today, we are pleased to provide an update on the progress against our sustainable growth strategy, including a deep dive on the successful turnaround of our North American business. I'll start with highlights of our recent performance and share how continued progress against our strategic priorities positions us for multiyear growth. Then Gustavo Valle, our President for North America, will provide a deeper dive on how we're building a sustainable growth engine in the region. And after that, our Chief Financial Officer, Luca Zaramella, will share an update on our investment priorities and value creation strategy. So let's get started. 2023 was a record growth year on both the top and bottom line with substantial reinvestment to drive continued growth in the years ahead. Organic net revenue grew 14.7% or $4.6 billion versus prior year. We also delivered record adjusted gross profit dollar growth of $2.2 billion, which fueled an increase in our A&C investments by more than 21%, helping to drive consumer and customer loyalty. These results translated into a 19% OI and earnings growth. And we remain very confident that our virtuous cycle of reinvesting half of our gross profit dollar growth, which fuels local-first commercial execution and increased investment in our brands, capabilities and talent, will enable us to continue delivering attractive, sustainable top and bottom line growth. Since the launch of our strategy in 2018, we have consistently delivered against our long-term algorithm, step changing the company's growth trajectory. We're especially proud of our team's continued success in delivering across all of our key performance metrics, which include volume, revenue, earnings, and cash flow despite the fact that we went through significant volatility. We do believe that we have the right strategy, the right model, the right incentives and the right people to continue to deliver strong results. We're confident that the continued growth of our investment in our widely loved brands, with double-digit increase in advertising and consumer spend, offers an important competitive advantage. Along with our financial performance, I'm pleased to share that we are making significant progress towards our sustainability goals and targets. First, we are continuing to advance our leadership in sourcing critical ingredients more sustainably. About 85% of the cocoa volume used in our chocolate brands is sourced through Cocoa Life, our signature program that works to lift up the people and restore the landscapes where cocoa grows. Additionally, 100% of our palm oil is RSPO-certified. Second, we are advancing our performance in social sustainability. More than 75% of Cocoa Life communities in West Africa now has child labor monitoring and remediation systems in place. Third, we are making solid progress in helping to combat climate change with significant reductions in CO2 emissions, food waste and water usage. And finally, we continue to advance our light and right packaging strategy. About 96% of our packaging now is recyclable. These are just a few highlights of our continued progress toward building a more sustainable snacking company. We continue to believe that helping to drive positive change at scale is an integral part of our value creation with positive returns for our stakeholders. We will share additional details in our Annual Snacking Made Right report, which will be published in April. Another key element of our accelerated growth strategy is our continuing focus on portfolio reshaping. Completing the sale of our developed market gum business for $1.4 billion was an important step forward last year. We are well on our way to achieving our goal of generating 90% of our revenue through our core categories, chocolate, biscuits, and baked snacks. We're doubling down on our core categories because they remain very attractive for growth and future potential. In addition, they are resilient and durable in both developed and emerging markets. Consumer research supports our strategy to focus on these core categories. 88% of consumers snack daily. This trend is even more pronounced among Generation Z and Millennials with 94% snacking a day. According to our Annual State of Snacking Report conducted in partnership with The Harris Poll Consumer Research Firm, 66% of consumers consistently make room for snacks in their grocery budgets, even though they are more conscious of rising prices. And snacking is very brand-focused with 76% of consumers reporting long-time loyalty to their favorite brands. Snack brand loyalty is even stronger in North America at 84%. Importantly, our poll also shows that consumers are snacking in mindful, conscious ways. While we've heard a recent buzz about various diet and weight loss trends, our data continue to show that consumers firmly believe snacking plays an important role in active and busy lifestyles. More than 2/3 of consumers look for snacks that are portion-controlled, up 5% from last year. Taken together, these consumers' insights give us confidence that snacking remains a great business. We're confident that we remain well positioned to deliver our long-term growth algorithm. Let's take a closer look at our competitive advantages. First, we are playing in the right categories and we are playing to win. We currently hold a very close #2 global position in chocolate with nearly 13% global market share; a clear #1 global position in biscuits with 17.5% share; the #3 global position in cakes and pastries with 3.5% share, and the #3 global position in snack bars with nearly 10% share. Growth in these core snacking categories has risen steadily over the last few years from just shy of 4% in 2018 to nearly 13% last year. Looking ahead, we expect these categories to grow at mid-single digits. Along with our category focus, our solid volume growth across both developed and emerging markets represent another important competitive advantage. Unlike many competitors, we are continuing to successfully drive volume across all 4 of our regions. Roughly 40% of our revenues come from high-growth emerging markets, growing at a CAGR of more than 13%. At the same time, our iconic brands are continuing to drive above-algorithm growth in the developed markets of Europe and North America. Building upon these competitive advantages, we have an exciting runway of growth opportunities. We have multiple vectors of growth, including the following 3: first, expanding distribution; second, doubling down on revenue growth management; and three, reshaping our portfolio through strategic M&A. Distribution is a big opportunity for us. Our approach to expanding distribution is grounded in driving availability and visibility across all channels. We're making good progress in not only reaching more stores but also accelerating same-store growth. In emerging markets, we continue to expand our store footprint, aiming to reach 3 million additional stores by 2030. In developed markets, we're concentrating on closing fair share gaps, for example, striving to achieve leadership in the U.S. convenience channel and the European discount channel. We are also investing to elevate the sophistication of our in-store segmentation and effectiveness. Our visi-cooler model in India is a great illustration of this approach. We are rapidly scaling our visi-cooler program to not only reach more stores but also offer a larger assortment with the product mix optimized to meet local taste and temperature preferences. I'll close by reiterating the 5 key advantages that give us confidence that we can meet and exceed our long-term algorithm: first, our leadership in the attractive resilient core categories of chocolate, biscuits and baked snacks positions us well to benefit from growing consumer demand; second, our advantaged geographic footprint with more than 1/3 of our revenue base in high-growth emerging markets; third, our strong iconic brands give us substantial pricing power and enable us to build win-win partnerships with customers; fourth, our robust marketing and sales capabilities enable us to connect with our consumers to drive demand and accelerate profitable volume-driven growth; and finally, and perhaps most importantly, our winning culture enables us to attract and retain a deep, diverse bench of talent. With that, I'll turn over the podium to Gustavo, who will dive deeper into our exciting progress in transforming our North American business into a powerful growth engine. Gustavo?

Thanks, Dirk. Good afternoon, everyone. I'm excited to be here today to shine a spotlight on our North America business. I have had the pleasure of leading our operations in the United States and Canada for about 2 years, and I am proud to share our team's progress in building a sustainable growth engine for the company. I will start with an overview of our region and opportunity. After watching you and your families enjoy our sampling table a few minutes ago, I can tell that you already know and love our iconic brands. Our North America business is a very strong contributor to overall Mondelez revenue and profits. North America accounts for more than 30% of total net revenue and nearly 40% of operating income. Over the past 4 years, the region's net revenue has grown at nearly 8% CAGR. The U.S. snacking market, which is $170 billion in size, is growing rapidly, outpacing most other food categories. Within snacking, our Mondelez priority snacking categories account for approximately 35%, growing at even higher pace. More than half of that market is cookies, crackers and [ store bakery ] where we have strong leadership positions. Our categories are growing because snacking is an increasingly important part of consumer lives. Virtually, every American snack at least once per day. As people juggle increasingly busy skills across work, school and family, they have even more occasions to snack. This continued growth in their snacking behavior demonstrates that we have a very attractive runway to further accelerate growth. More than 90% of U.S. households already buy at least one Mondelez product each year, but we still have a lot of opportunity to increase household penetration, especially in our recently acquired brands but also for most of our well-established brands, which I will discuss in more detail later. As we work to grow our North American business, I am proud to share that we have successfully evolved the foundations of our operating and sales model. Over the past several years, we have effectively evolved our model from a focus on cost reduction to a value creation approach centered on driving reliable growth. Accordingly, we are investing in advancing manufacturing flexibility, improving sales execution, growing our pricing power and expanding our portfolio beyond biscuits. At the same time, we have invested in elevating our leadership culture, increasing the depth of talent and evolving our capabilities. Let's take a closer look. First, by streamlining our manufacturing network, we have improved our flexibility in responding to rapid changes in customer and consumer demand. For example, we are much more flexible in designing and producing new packaging formats, enable us to compete more effectively in key growth channels. Our manufacturing capacity for Oreo alone is up 35% over 2017. Direct store delivery is one of our key competitive advantages in biscuit, reaching 25,000 outlets, spanning 170,000 routes. Our leadership in DSD enabled us to win in store, gain distribution and maintain excellent relationship with the trade. As we [ develop ] selling focus on our front-line staff in 2023, food retailers rank us as their #1 preferred DSD farmer. This capability holds great promise for our future acquisition playbook. For example, by integrating Tate's Bake Shop into our DSD model back in 2021, we [ view ] distribution by more than 20% in the first year. We also are in a journey to recapture value through smart strategy in pricing. As you all know, the pandemic driving increases in commodity and labor cost a few years back created a very challenging price environment. But we have emerged from that tough period smarter and more strategic. As a category leader, our approach is much broader than just headline price. We take a comprehensive view of pricing that includes substantial brand support, rightsizing our products, driving a strong return on our promotional investment, and targeting attractive new occasions with special packs. We also are making substantial progress in simplifying our portfolio to ensure that we have the right focus behind the right brands, prioritizing our investment and innovation to do fewer things bigger and better. Our portfolio reshaping approach also includes acquiring and accelerating new brands in strategic growth areas such as premium biscuits as well as key adjacencies of cake, pastries and snack bars. All of our recent acquisitions in these spaces are growth accretive. We are very pleased to after fully integrating these 3 businesses, we have doubled distribution in Tate's, Give & Go is growing twice as fast in store bakery market, while Clif Bar has delivered double-digit margin improvement in the first year. These key acquisitions are great examples of our ongoing effort to expand our presence beyond biscuit, to become a multi-category snacking leader with a strong presence in both the traditional center of the supermarket and the faster-growing [indiscernible] sections. Of course, none of this progress would be possible without our great people. I firmly believe that Team Mondelez has the very best talent in the consumer packaged goods industry. We have strengthened our team through a combination of promoting and developing key talent from within our company and complementing that with targeted external leaders. We have built a deep and diverse bench behind our current leadership, and we continue stepping up our future forward growth capabilities. Putting it all together, I am proud to say that if you look at Mondelez North America today, we're a totally different company than we were just a few years ago. We have successfully transformed this region into a resilient, reliable driver of growth, and we are well positioned to take our performance to the next level. Our confidence in the region and team is visible in the results. Over the last 4 years, we have delivered sustainable top and bottom line growth, fueled by strong underlying volume growth and nearly $6 billion in cash flow, making the North America region a key earnings and cash flow growth engine for the company. So where will we grow from here? North America already represents an $11 billion business for our ambition, but our mission is even higher. Our plan to further accelerate growth has 4 key pillars: revenue growth management, channel expansion, digital leverage across the entire value chain, and best-in-class consumer marketing. Starting with revenue growth management. It's important to underscore that we embrace RGM as our way of doing business, not just a short-term solution to an immediate margin challenge. All too often, we hear buzz in the media about downsizing or shrinkflation, but our approach is much more targeted and strategic. We are dialing up analytical rigor, powered through technology to create the right pack for the right consumer at the right time. This will help us proactively engage with our customers as category captains. The second key driver of our growth strategy is winning in the convenience and club channels. We aim to earn our fair share of convenience by ramping up frontline sales infrastructure while innovating in the small pack format that fulfill growing consumer demand for immediate consumption moments. At the same time, we are accelerating our presence in the fast-growing club and value channels. With leading brands like Oreo, we have the right portfolio to capture even more of this important segment. The third driver of our North America growth plan is embracing technology. We are continuing to invest in machine learning and AI tools to help optimize demand planning, improve sales productivity and elevate in-store execution. Pilot programs in other markets around the globe are very promising, and we are excited about the opportunity to apply those learnings in the United States. Above all, we remain committed to strengthening consumer preference and loyalty through creative and meaningful activation that stays ahead of the latest trends. At the heart of this strategy is Oreo, already the world's favorite cookie and a true icon here in North America. Over the past few years, we have partnered with leading cultural voices like Lady Gaga and Super Mario, and we are planning some breakthrough partnership on an even bigger scale later this year. Of course, I will be remiss if I didn't spend a minute on our return to the Super Bowl last week. After more than a decade, Oreo returned to the big game with a playful twist on history. Kris Jenner helped us show why flipping a coin is so outdated. Beyond the TV commercial, our robust social media and surround sound campaign and consumer facing big decision to Twist on It. In case you missed it, let's take a look. [Presentation]

You don't need to twist on your Oreo to predict our North America team's role in the future. As you can see, our business is well positioned to drive even stronger growth in the years ahead. While the market, obviously, is developed, it still offers a lot of opportunity. We have successfully refocused the business to drive sustainable growth, and we have fixed the foundations to unlock new opportunities. As a result, we are confident in our path to deliver sustained low to mid-single-digit revenue growth, reliable in the years to come. With that, I'll turn it over to Luca to share some thoughts on our investment priority and value creation.

Thank you, Gustavo, and hello, everyone. I'm here today to share how capital allocation and the investments in our priority areas have delivered value and how we will leverage our balance sheet going forward. Let me start with M&A. Over the past 5 years, we have made 9 acquisitions, adding around about $3 billion in revenue with platforms that have grown high single digit. Our approach to M&A is simple and clear. We look for growth opportunities that address key portfolio gaps in our core categories and adjacencies as well as strategic geographies. We drive value through strong integration and by leveraging our global footprint, distribution strength, marketing expertise and financial discipline. Last, we expect to exit noncore positions such as developed market, gum, and redeploy that capital to our core categories. You can see that we have been very selective and made acquisitions that address key needs such as well-being, premium, white spaces and strategic adjacencies. Let's review the latest progress on a few. Chipita is a high-growth cakes and pastries platform. The 7Days brand has a leading position in Europe with an attractive footprint that spans across developed and emerging markets. In '23, we grew share, improved profitability through productivity and manufacturing efficiencies and increased our store coverage by more than 20%. Moving forward, we will continue to double down on croissant and baked rolls while continuing to expand distribution. Grenade is another great story, a rapidly expanding protein and energy bar that began in the U.K. In just 3 years, this business has more than doubled, expanding geographically by utilizing the power of our sales capabilities in markets such as Ireland and Netherlands. Grenade has also successfully leveraged other brands for innovation such as Oreo, driving high engagement and recruiting new consumers. Next, let's move to Ricolino, which more than triples our DSD routes in Mexico. In 2023, this business posted double-digit growth, ongoing margin improvement and strong share performance. We are now the #3 chocolate player in Mexico. Integration has gone very well, meeting all our key milestones across sales, marketing, supply chain, R&D and IT. Mexico is now one of our largest and most strategic business units, and we are excited to leverage the combined power of the Ricolino brands and infrastructure with our existing capabilities to take this business to the next level. Another area we are investing on is digital. Let me talk a bit about our digital enterprise strategy and how we will drive value. Our digital strategy is composed of 3 key streams. First is consumer engagement to enable us to better personalize our brand engagement with consumers. Second is customer engagement, which is a multiyear digital sales transformation to drive best-in-class revenue management and sales execution. And third, end-to-end executional excellence, which is focused on driving efficiency and effectiveness in all aspects of our company operations. Let me give you a few examples of how we are using digital to unlock value in sales and marketing. We believe generative AI will change meaningfully our approach to marketing. Content development is the area of marketing with the greatest value creation, given the scale of A&C investment we have. We expect AI to improve both the quality and speed of our creative content. We also expect great personalization, enabling us to personalize nearly all digital media to further differentiate our brands. In the end, our approach to AI in marketing should deliver significantly higher marketing ROIs for a fraction of the cost of traditional creation. We are also building capabilities with AI models to act as brains and transform and adjust our marketing more broadly across various dimensions. These brains utilize large language models to help ideate, generate, produce and optimize assets. Audience brains test messaging and content to anticipate reaction. Brand brains find and generate content, whether it be text, images, or video at scale that is aligned with brand purpose and design standards. Performance brains understand content and recommend changes to improve effectiveness. And channel brains understand variations across channels to optimize assets across. We have already pilots in place with brands such as Milka and expect to roll out further pilots later this year. AI-enabled digital also supports our approach to sales, whether it be leveraging second-party data to drive better sales execution or RGM optimization. Our focus on second-party data drives business decisions by leveraging distributor point-of-sales promotion and loyalty card data that streamlines operations and cultivates stronger connections with consumers and customers. AI also provides better insights to drive sales execution and excellence through guided selling for personalized recommendations, suggested order to make the order-taking simpler, recommended action to drive upselling, and sales performance tracking through data analytics and insights. RGM optimization is the third pillar of AI-enabled sales. Taking holistic RGM approach integrating sites with quick and efficient actions, whether it is smart pricing, optimizing assortment or modeling of various promotional strategies. Acquisitions and digital, together with investment in A&C, CapEx and our people, are not the only ways we plan to create value. We continue to deliver value through our overall capital return strategy. We remain highly focused on maintaining a strong balance sheet while returning cash to shareholders. We are committed to attractive dividend growth, growing at or above adjusted earnings. This has resulted in double-digit increase in 8 of the 9 last years. Share buybacks also remain an important mechanism of capital return as we have returned more than $10 billion to shareholders over the last 5 years. We have significantly outperformed our peer set over the past 5 years in terms of TSR. And we believe our model of high-quality, sustainable growth and disciplined capital allocation will enable us to drive strong shareholder returns in the coming years as well. Turning to our 2024 outlook. There is no change for what we discussed on our year-end earnings call. To close, we believe our company is well positioned for future value creation. Our global strength and scale in attractive categories provide a large runway of growth opportunities. We believe our investment in capabilities and talent, along with portfolio reshaping initiatives, will enable us to continue to compound growth and earnings over the coming years. Thank you for your time.

I'm going to start with Ken and then we'll go to Alexia.

Luca, quickly, just curious if we can get an update on the European pricing situation just in the last couple of weeks and whether that's meeting your expectations in terms of acceptance and any disruptions. And then a broader question. It's great to hear a presentation really focus on the top line and all the successes that you've had and the ways you'll keep growing the top line. One quick question is you guys in the past have talked about kind of getting back closer to a 40% gross margin. How important is that to you right now in the context of having so many opportunities still on the top line? And is that still really a reasonable goal for you within a reasonable -- or within a brief amount of time for lack of a better word?

We are making progress in Europe. We landed one important customer alliance lately so we are very positive. Having said that, there are still a couple of customers where negotiation is ongoing, and so we are in active talks. I think it is important to remember that particularly in cocoa, given the current situation, it is common to industry price increase. Most likely, that will have to be taken. So no further update at this point in time. But obviously, the fact that we have strong brands that we are entering the Easter time in Europe, which is a critical consumption season for chocolate, and the fact that we have good partnerships with retailer makes us think that hopefully, we'll land price as we did last year with less disruption than we have currently planned for. And maybe on the 40% margin, I think Dirk is very passionate about gross profit dollars so I'll pass that to him.

Yes. As you probably know, we are not focused on the percentage gross margin. We do believe that over time, the percentage gross margin of the business will go up. But that's not an objective that we have. Our objective is to grow the gross profit dollars. At the moment, that is going at a good pace, well above our algorithm. It happens to be that we have to do quite a bit of price increase so the percentage gross margin came down. But to give you an example, in the last 2 years, our algorithm called for -- our normal algorithm called for $400 million extra gross profit dollars per year. We did $1.2 billion, but the percentage gross margin came down. I'd rather take the dollars than the percentage, if you ask me. So going forward, what's probably going to happen is that we will price less but that we will take costs out. Costs will come down eventually. And as a consequence, you will see the gross profit margin go up. I'm not that excited about that. I'm much more interested in, can we keep on growing our gross profit dollars up to 5%, 6% a year? That's really our main target.

Alexia?

Wanted to talk about the emerging markets. It feels as though over the last 10, 15 years, most of the conversation has been about the BRIC markets, particularly India and China. Is there another wave of particular countries around the world that are coming into their own, in terms of your momentum there? I'm thinking particularly in Mexico with the Ricolino deal. But are there other parts of the emerging markets that are coming up that we should be keeping an eye on as the next wave?

Yes. The BRIC countries, for sure, rank high for us. All 4 of them they're -- of course, these days, one is a little bit less interesting, but the other 3 rank in our top 10 markets, Mexico now becoming very important for us. There's markets that we are particularly interested in because of the population, Indonesia, Vietnam, the Philippines, some of the African markets potentially. But at this stage, I would say that if you look at dollar growth again, Brazil, India, China, for us, and Mexico are really driving the growth at this stage.

Dave Palmer?

On some of your long-term charts, you showed the global category growth. In past years, it was 4%, 5%. It feels like we're kind of going back to that sort of an environment now where people are expecting 5%-type growth from you guys. You're gaining share in 2/3 of your business, getting great distribution gains, probably 2 points just from distribution. But I'm wondering like how you feel like this -- the global category growth is going kind of heading into the second half of the year and then maybe into '25. Do you feel like it's going to be settling in at that 4% level? Or are there things you're watching out for that to possibly slow even more than that?

I think the -- what will play a critical role in the second part of the year is the landing of pricing in chocolate. So I don't expect necessarily our total category growth to slow down in the second part of the year. Actually quite the opposite as we go through the implementation of pricing in Europe. What you have to think about this company delivering is at steady state, you have to foresee categories growing at about 4% to 5%, half of which is volume, half of which is pricing, which is pretty much what happened before COVID. And in that context, what is an accelerator for us is a couple of things. One, obviously, we want to continue to invest and gain share. And the other thing, which will come to fruition is us leveraging our balance sheet and adding more, hopefully, platforms in the areas of chocolate, biscuits, and cakes and pastries. And if you look at the platforms we have acquired over the last few years, particularly in the U.S., those have been great contributors to growth. So I ask you maybe to go back to last year, CAGNY, we presented a page that showed all the building blocks of category and performance acceleration for Mondelez. And in that context, I think our long-term algorithm as we make further portfolio changes and as the pricing and inflation situation settles, I think you're going to see nice growth coming out of this company.

Let's stay on the front row. We'll go with Rob Moskow.

Gustavo, can you talk a little bit more about North America's results in fourth quarter? Things kind of decelerated. It looked like there was a lot of transitory issues. So maybe you could tease out what was sticky and what was not. And I thought that the guidance kind of assumed a strong start for first quarter around the Super Bowl. The Nielsen data hasn't quite recovered yet. I want to know if you could talk to it.

Well, on Q4, we have 2 events that were one-off. We had the implementation of the European integration with Clif. So we have inventory that went from Q4 to Q3, and that affect our Q4 volumes. Then in Give & Go, and probably this is the biggest effect of Q4 in Give & Go, one of our businesses is the Ritz business, which is basically all these houses with decoration that are normally bought during the season, specifically in Christmas. This is a low-margin business with a lot of waste at the end of the year because whatever does not sell, come back to the company. So we decided in '23 to slow down this business. And it's a business that we're prepared the entire year to sell in the last quarter, but the sales effectively happened in the last quarter. But the decision to unplug this business was from the very beginning of the year. These 2 are elements that are not going to repeat again. Then there is some softness in the biscuits category, so we observed that in Q4. We still see softness in the biscuit category. But we have probably the stronger activation plan for North America in '24. So we have a very robust plan for Oreo not only with the Super Bowl, but we have activities every month for the year. But also, we are supporting other brands. Ritz, we have -- Ritz, with more than $1 billion brand, has a lot of support behind it; belVita, Clif. So we have strong support on our brands. We are expecting to gain distribution. Actually, we are gaining distribution. We are also expecting to improve our displays and in-store activation. So we are confident about the year despite that there are some softness. But in this -- Q2 will start to, let's say, overlap the effect of the SNAP, so SNAP reduced significantly in '23. This is going to last until the end of Q1. In Q2, we're going to have all the -- not the benefit, but we are, again, overlapping the student loans repayment that is also affecting consumers' pockets. So we -- the combination of this phasing in the consumer spending and the strong activation that we have behind our brands make us confident about the year.

Good. And I might just add, as you know, I mean, obviously, tracked data is part of the story, but some of the stuff we've been pushing when you think about online, when you think about club, obviously, has been a pretty bright spot for us. So there's that factor as well. Go to Andrew Lazar and I'll go to Nick.

Gustavo, you talked about how in North America, Mondelez, just leveraged this DSD system for some acquisitions pretty powerfully in cakes and such. And I'm curious what type of capacity you have in that system to leverage potential further acquisitions and platforms in the U.S. And how do you manage product forms in that distribution system that have varying levels of velocity on the shelf, which I know can be challenging for a system like that?

Well, our system is mainly focused on biscuit. So when we look at where we were able to do in -- with Tate's. Tate's not only give us the possibility to -- the DSD did not only give us the possibility to increase distribution on Tate's but also to activate the brand differently in the point of sale because we are in average touching every store 2 to 3 times a week. Our next, let's say, step should be probably bars. But we need to still make it as we did with Tate's. We need to create a pilot, make the test, see the implications. It's a different aisle. The velocities of the 2 categories are different. So it's a system that is based on moving cases. So we need to move volumes to make it profitable. But as we did it with Tate's, Tate's took us 1 year to implement from the first test to the full integration. But this is the intention, to really leverage in the mean time.

Nick?

Just maybe if I can follow up on the M&A question. Dirk, Luca, if you can just give us some context on the playing field. How full the pipeline is or potential pipeline? And are these regional assets or are there global assets? If you can just give us some context because, obviously, M&A has become a big part of the story. And you've had some good success so would love to understand more.

Yes. Well, we -- I would say that our main focus is bolt-on acquisitions. Luca explained in the presentation that we look at our categories and where can we make additions to our portfolio that strengthen our presence in a market or in a segment, depending what we're looking at. So we do a yearly exercise where we review everything that's going on around the world. It's about 30 to 40 companies at this stage. Then we start building up a relationship with them. Most of them are privately owned, most of them family owned. So it requires certain time of building up the trust and getting to a joint agreement at a better future for the companies with Mondelez. So we've been doing that for years. So we have a pipeline. We're constantly reaching out and meeting. So if we can't forecast the timetable, but what I can say is that the pipeline is active. There are some good discussions going on. The climate, everybody asks me, aren't deals becoming more cheaper. But in reality, they don't. I would say they're becoming more expensive because there's more interest. And so we also want to stay very disciplined. It's not because that company is on the list of 30, 40, that no matter what, we will buy it. It depends on what are the financial consequences and targets that we have. But I would say that we're going to continue executing against that. We're not going to force it. We're not going to walk away when we don't need to. But we're trying to let it run its course in a natural way. We're not going crazy on M&A.

Okay. With that, I want to thank Dirk for sharing his voice with us today. Hope it's a little bit less. I want to thank Mondelez for the break, and we'll head to the breakout.