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The call communicated a mostly positive operational and top-line performance in Q1 — led by a strong emerging-markets contribution (6.3% growth), improving developed-market momentum, successful innovations, and supply-chain productivity that helped limit margin deterioration. Offsetting these positives, management emphasized meaningful near-term cost headwinds from the Middle East conflict (alternative logistics, oil/packaging impacts), an inventory phasing drag (~$350M) and a ~270-basis-point margin decline, along with fragile consumer confidence in some developed markets and pockets of category softness. Management therefore reaffirmed guidance and signaled any upside would likely be reinvested to sustain growth. Overall the tone is cautiously optimistic: solid execution and growth engines are evident, but geopolitical and cost risks temper near-term upside.
The company reaffirmed its fiscal 2026 EPS guidance while flagging both momentum and specific headwinds: Q1 emerging markets (≈40% of the business) grew 6.3% with volume/mix +0.5% (≈+1% ex‑Argentina), China mid‑single‑digit, Evirth high‑single‑digit, India double‑digit, Brazil high‑single‑digit and Mexico flat; North America posted slightly positive net revenue in Q1 with management expecting a sequential revenue/volume inflection later in the year. Management cited an inventory‑phasing headwind of roughly $350 million, Q1 gross margins down ~270 basis points, industry cocoa coverage averaging ~10 months and a current cocoa reference level around 2,500 (grindings still negative, potential surplus), and said oil/packaging costs are largely hedged for the year and into 2027; any EPS upside would likely be reinvested as they reiterated confidence in strong 2027 EPS growth.
Emerging markets grew 6.3% in Q1 and represent ~40% of the business. Volume/mix in emerging markets was +0.5% (nearly +1% excluding Argentina). China delivered mid-single-digit growth (including a strong Chinese New Year); India posted strong double-digit growth in chocolate and biscuits (Biscoff launch sold out); Brazil delivered high-single-digit growth; Mexico was flat.
Europe showed improving share and returning volume share growth in chocolate driven by a robust Easter season and completed retailer negotiations; Australia & New Zealand chocolates had very strong growth. North America delivered slightly positive net revenue growth in Q1 with share gains in crackers (Ritz) and strong performance in candy and venture brands (Perfect Bar, Hu).
Despite inventory phasing headwinds, gross margins performed better than expected: inventory phasing headwind ~ $350 million but gross margin decline was only ~270 basis points. Management highlighted procurement and manufacturing productivity delivering year-on-year P&L benefits.
Multiple innovation wins and rollouts reported: Biscoff partnership momentum and successful launches (including sold-out launch in India); Milka Croissant strong start; 7Days launch in Brazil; Oreo cakes gaining traction in China and the U.S.; premium initiatives (Toblerone Pralines, Cadbury & More, Milka MAX); Ritz Drizzled/Ritz Bits; growth-focused ventures (Perfect Bar, Clif, Tate's).
Specific brand callouts showing strong performance: Ritz driving cracker share gains; Sour Patch Kids expected to grow double digits for the year with Chews incremental; venture brands (Perfect Bar, Hu, Clif, Tate's) delivering material growth.
Announced supply-chain modernization in North American biscuits: leveraging existing ~60% state-of-the-art network, bringing some co-manufactured platforms in-house, investing in packaging/multipacks, and automating DSD branches to improve flexibility and cost.
Management reiterated confidence in a strong 2027 EPS growth trajectory and indicated that any upside to 2026 EPS would likely be reinvested to accelerate growth.
Good afternoon, and welcome to the Mondelez International First Quarter 2026 Earnings Question-and-Answer Session. [Operator Instructions] On today's call are Dirk Van de Put, Chairman and CEO; Luca Zaramella, COO and CFO; and Shep Dunlap, SVP of Investor Relations. Earlier this afternoon, the company posted a press release and prepared remarks, both of which are available on its website. During this call, the company will make forward-looking statements about performance. These statements are based on how the company sees things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in the company's 10-K, 10-Q and 8-K filings for more details on forward-looking statements. As the company discusses results today, unless noted as reported, it will be referencing non-GAAP financial measures, which adjust for certain items included in the company's GAAP results.
In addition, the company provides year-over-year growth on a constant currency basis unless otherwise noted. You can find the comparable GAAP measures and GAAP to non-GAAP reconciliations within the company's earnings release and at the back of the slide presentation.
We will now move to our first question. We'll take our first question from Andrew Lazar with Barclays.
Dirk, I was hoping you could walk us through a bit more around the key drivers and climate in emerging markets as well as where you're seeing improvement in some of the key developed markets. I think in the prepared remarks, you mentioned returning to volume share gr...