Mondelez Faces Cocoa Costs and Pricing Woes in 2026

Date of Call: Feb 3, 2026

Guidance:

• Revenue and organic sales outlook for 2026 is 0% to 2% growth, with significant momentum expected in emerging markets (EM) and sequential improvement across regions.
• North American volumes expected to remain soft, with the biscuit category down, but investments will focus on driving awareness and improving frequency/quantity.
• European chocolate pricing in 2026 will be flat, with adjustments for elasticity in northern markets and investments to support volume recovery.
• Significant cocoa cost headwind of ~$0.5B in Q1 2026 due to inventory accounting, with cocoa pipeline cost higher than current spot price.
• Expect improved volume trajectory through 2026, with a focus on EM growth, European recovery post-price increases, and North American stabilization.
• 2027 expected to see a significant profit recovery, particularly in chocolate margins, with cocoa prices aligning better with supply/demand.

Business Commentary:

Chocolate Strategy and Cocoa Market Dynamics:

• Mondelez executed its chocolate strategy with significant price increases in 2025, showing resilience in the face of price volatility. However, in northern European markets like Germany and the U.K., there was higher-than-expected elasticity, requiring adjustments in 2026.
• The company plans to increase investments behind its brands, focusing on hitting the right price points and innovation, notably through the Biscoff collaboration.
• Recent sharp declines in cocoa prices have introduced short-term pressures and potential competitive reactions, necessitating flexibility in their guidance for 2026.

North American Market Challenges:

• Volume trends in North America remain weak, with the biscuit category down 4% in volume over the last three months and 3% for the year 2025.
• Consumer confidence is low, affecting the average shopping basket size, leading to reduced frequency and quantity of snack purchases.
• Mondelez plans to adapt by investing more in brand awareness, using price pack architecture to address affordability, and expanding in under-indexed channels like club and online.

Emerging Markets Momentum:

• Mondelez reported strong momentum in emerging markets, with growth expectations continuing into 2026, particularly in Latin America and EMEA.
• Growth in these markets is supported by less elasticity and meaningful contributions from pricing and volume mix, despite economic challenges in specific countries like Argentina.

Financial Outlook and Investment Strategy:

• The company's guidance for 2026 is prudent, considering short-term pressures in the U.S. biscuit category and potential disruptions in Europe due to customer negotiations.
• Mondelez plans substantial investments in advertising and consumer promotions, aiming to improve volume trajectory, with significant increases in working media spend.
• The strategy aims to balance reinvestment in brand growth with improving profitability, especially in chocolate, with expectations of margin improvement in 2027.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges challenges: 'short-term pressure points,' 'higher-than-expected elasticity,' and a 'consumer confidence near historic low' in North America. However, they express confidence in plans: 'we are going to remain very agile,' 'we are planning to increase our investments,' and see '2027 as a step change' with 'significant profit recovery' and 'strong EPS growth.'

Q&A:

• Question from Andrew Lazar (Barclays Bank PLC): Concerns about the impact of falling cocoa prices on Mondelez's chocolate strategy and potential price deflation.
  Response: Executives noted resilience in the chocolate category despite volatility, executed well on pricing in 2025, but saw higher elasticity in northern Europe, leading to adjustments in 2026. They are increasing brand investments to drive consumption frequency and quantity, supporting innovation (e.g., Biscoff), and will remain agile due to sudden cocoa price drops creating short-term competitive uncertainty. Cocoa at a historic low bodes well for 2027 margin recovery.

• Question from Andrew Lazar (Barclays Bank PLC): Follow-up on guidance range and updated thoughts on the cocoa environment.
  Response: Guidance is prudent, reflecting short-term pressures in the U.S. biscuit category and European customer negotiations. The wide range allows flexibility due to recent, unexpected cocoa price declines and potential competitive reactions. Cocoa fundamentals (supply/demand) remain unchanged, and the current price is seen as fair and favorable for long-term profitability, especially entering 2027.

• Question from Peter Galbo (BofA Securities): Request for details on cost phasing for cocoa in 2026 and potential price investments in chocolate.
  Response: Top-line pricing in chocolate will be flat in 2026. A one-time $0.5B inventory adjustment in Q1 reflects higher locked-in cocoa costs vs. current spot, creating a cost headwind in H1 before sequential improvement. Profit phasing will face headwinds initially, but investments in A&C are steady. Volume and revenue are expected to improve sequentially through the year.

• Question from Peter Galbo (BofA Securities): Perspective on the North American market, its challenges, and pricing actions.
  Response: Attributes North America's softness to low consumer confidence and affordability issues, impacting frequency/quantity, not brand penetration. Strategy involves increased brand investment, PPA for affordability, expansion in value channels, and focusing on premium/protein offerings. Learned that aggressive promotion in H1 2025 hurt returns; moving to better consumer activations rather than broad price cuts.

• Question from Megan Christine Alexander (Morgan Stanley): Clarification on the net price/cost relationship in chocolate for 2026 and the profit recovery timeline.
  Response: Pricing net of cost for chocolate in 2026 is expected to be neutral to slightly positive, with flat pricing offset by locked-in higher cocoa costs. The real profit recovery is anticipated in 2027 as cocoa resets to a lower, more sustainable level, allowing margins to improve significantly.

• Question from Megan Christine Alexander (Morgan Stanley): Expectations for emerging markets (EM) growth in 2026 and implications for developed markets.
  Response: EM will continue growing, ideally exceeding guidance, driven by momentum in Latin America and EMEA. Developed markets may see volume declines due to PPA impact, but with less contribution from pricing and more from volume/mix. Overall, EM growth is key to offsetting developed market softness.

• Question from Michael Lavery (Piper Sandler): Details on advertising spend and investment levels for 2026.
  Response: SG&A decreased in 2025 due to overhead savings and reduced nonworking media. For 2026, plans are to step up working media investment while keeping nonworking media low, and continue overhead savings though annual incentive plans will increase. Overall A&C investment over 2024-2026 is expected to be substantial.

• Question from Michael Lavery (Piper Sandler): Questions about emerging market volume growth in Latin America and assumptions in guidance.
  Response: Latin America's performance is strong outside of Argentina (economic turmoil, cash protection) and Brazil (which managed elasticity well). Key markets like Mexico are growing. The region's growth is solid, with Argentina's issues masking underlying strength, supporting the guidance assumptions.

• Question from Christopher Carey (Wells Fargo Securities): Regional drivers for the expected significant volume trajectory improvement in 2026.
  Response: Volume growth is expected primarily from EMEA (India, Australia, China recovery) and Latin America. North America volume decline is expected to ease but not turn positive due to consumer softness. Europe's volume should improve as chocolate price increases ease and other categories perform well, with phasing improving through the year.

• Question from Christopher Carey (Wells Fargo Securities): Investments to be lapped entering 2027 and the outlook for margins and operating leverage.
  Response: 2026 sees a step-up in working media investment. 2027 will involve another step-up in brand investment to drive volume growth, with cocoa margin recovery (targeting pre-2025 levels) providing a significant profit tailwind. The goal is balanced reinvestment and EPS growth, not a full margin reset.

• Question from David Palmer (Evercore ISI): Path to profitability recovery in European chocolate and timeline back to pre-2025 levels.
  Response: Aiming to restore the pre-2025 profit pool in Europe, with 2027 as a key year for recovery. This involves managing price points, channels, and potential competitive reactions. 2026 serves as a new base with promotions to drive value, while 2027 is positioned for a step-change improvement, aided by lower cocoa costs.

• Question from David Palmer (Evercore ISI): Milestones or data points to watch for in 2026 related to European chocolate recovery.
  Response: Key focus will be monitoring potential competitive reactions to Mondelez's pricing and cocoa cost adjustments, as sudden cocoa price declines could lead to unexpected market behavior.

• Question from Scott Marks (Jefferies): Impact of GLP-1 developments on Mondelez's business and expectations.
  Response: GLP-1s are modeled quarterly; short-term impact is minimal due to low adoption. Over a 10-year horizon with 10-20% adoption in the U.S., potential effect is a negligible 0.5% to 1.5% volume impact. No significant current or near-term threat to business.

• Question from Scott Marks (Jefferies): Update on investments in cocoa growing regions outside of West Africa.
  Response: Diversifying cocoa supply to Latin America (Ecuador, Brazil) and Asia (India, Indonesia) for long-term risk management. Also investing in lab-grown cocoa, which could be approved in Europe and the U.S. for its sustainability benefits, reducing supply chain risks.

Contradiction Point 1

2026 Chocolate Pricing Outlook

Contradiction on whether chocolate pricing in 2026 will be stable/neutral or involve price reductions.

Could you clarify the cost phasing for cocoa through 2026 and the phasing of potential price investments in chocolate? - Peter Galbo (BofA Securities)

2025Q4: For 2026, chocolate pricing will be roughly flat. - [Luca Zaramella](CFO)

What is the U.S. path to regaining growth? - Peter Galbo (BofA Securities)

2025Q3: In Europe, deflationary chocolate pricing should drive volume growth as elasticity works both ways. - [Luca Zaramella](CFO)

Contradiction Point 2

2026 North American Strategy and Volume Outlook

Contradiction on the expected trajectory for the U.S. biscuit category volume in 2026.

Dirk, what is your perspective on the North American market given weak volume trends and a peer's price cuts, and what are the next steps? - Peter Galbo (BofA Securities)

2025Q4: The company does not anticipate needing price cuts of the magnitude seen from a peer. - [Dirk Van de Put](CEO)

Could you outline the U.S. path to return to growth? - Peter Galbo (BofA Securities)

2025Q3: The goal is to return to positive growth in the U.S. next year. - [Dirk Van de Put](CEO)

Contradiction Point 3

Cocoa Price Environment and Hedging Outlook

Contradiction on cocoa price direction and its impact on 2026 planning.

How does the fall in cocoa costs impact the guidance range, investment flexibility, and your updated assessment of the cocoa environment? - Andrew Lazar (Barclays)

2025Q4: The recent price drop is seen as a correction. The current level is considered fair and beneficial for future profitability, especially in 2027. - [Luca Zaramella](CFO)

How do you anticipate cocoa and cocoa butter price trends and hedging strategies for 2026? - Peter Galbo (BofA Securities)

2025Q2: The company believes cocoa prices will have to come down. Hedging strategies are being adjusted accordingly. - [Luca Zaramella](CFO)

Contradiction Point 4

European Chocolate Pricing Strategy and Elasticity Outlook

Contradiction on pricing strategy aggressiveness and elasticity expectations between quarters.

Where is Mondelez in its chocolate strategy, and how will it address potential price deflation following recent pricing increases? - Andrew Lazar (Barclays)

2025Q4: In 2026, adjustments are needed in northern European markets... due to higher-than-expected price elasticity. - [Dirk Van de Put](CEO)

Given favorable pricing/elasticity, should the company be less aggressive on RGM in its cocoa inflation strategy, or proceed "full steam ahead"? - Kenneth Goldman (JPMorgan)

2025Q1: Pricing has been successfully negotiated and implemented, with elasticities so far in-line at ~0.5. - [Dirk Van de Put](CEO)

Contradiction Point 5

North American Market Performance and Strategy

Contradiction on the severity of market softness and the strategic response regarding price points.

Dirk, how do you view the North American market given weak volume trends and a peer's price cuts, and what are the go-forward actions? - Peter Galbo (BofA Securities)

2025Q4: The biscuit category has seen a 4% volume decline over the last three months. U.S. consumer confidence is at a historic low... Consumers are shifting spending to basics and seeking value. - [Dirk Van de Put](CEO)

Can you elaborate on regional trends for the upcoming year? - Andrew Lazar (Barclays)

2025Q1: In North America, consumer confidence declined sharply, impacting snacking; biscuits performed better than other categories, and share gains were achieved. - [Dirk Van de Put](CEO)