MDLZ 10-K diff: FY 2023-12-31 → FY 2024-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+65 paragraphs −69 paragraphs ~65 changed
FY 2023-12-31 (earlier)
Item 1A. Risk Factors.You should carefully read the following discussion of significant factors, events and uncertainties when evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. The events and consequences discussed in these risk factors could materially and adversely affect our business, operating results, liquidity and financial condition. While we believe we have identified and discussed below the key risk factors affecting our business, these risk factors do not identify all the risks we face, and there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be significant that may have a material adverse effect on our business, performance or financial condition in the future.Strategic and Operational Risks
Commodity and other input prices are volatile and may increase or decrease significantly or availability of commodities may become constrained.We purchase and use large quantities of commodities, including cocoa, dairy, wheat, edible oils, sugar and other sweeteners, flavoring agents and nuts. In addition, we purchase and use significant quantities of product packaging materials, natural gas, fuel and electricity for our factories and warehouses, and we also incur expenses in connection with labor and the transportation and delivery of our products. Costs of raw materials, energy and other supplies and services are volatile and fluctuate due to conditions that are difficult to predict. These conditions include global competition for resources; currency fluctuations; geopolitical conditions or conflicts (including the ongoing war in Ukraine and international sanctions imposed on Russia for its invasion of Ukraine, developments in the Middle East and rising tensions between China and Taiwan); inflationary pressures related to domestic and global economic conditions or supply chain issues; transportation and labor disruptions; tariffs or other trade barriers; government intervention to introduce living income premiums or similar requirements such as those announced in 2019 in two of the main cocoa-growing countries; changes in environmental or trade policy and regulations, alternative energy and agricultural programs; severe weather; agricultural productivity; crop disease or pests; water risk; health pandemics; forest fires and other natural disasters; acts of terrorism; cybersecurity incidents; supplier capacity; and consumer or industrial demand. Many of these conditions are or could be exacerbated or worsened by climate change. Increased government intervention and consumer or activist responses caused by increased focus on climate change, deforestation, water, plastic waste, animal welfare and human rights concerns and other risks associated with the global food system could adversely affect our or our suppliers’ reputation and business and our ability to procure the materials we need to operate our business. Some commodities are grown by smallholder farmers who might not be able to invest to increase productivity or adapt to changing conditions. Our work to monitor our exposure to commodity prices and hedge against input price increases cannot fully protect us from changes in commodity costs due to factors like market illiquidity, specific local regulations and downstream costs. Thus, our hedging strategies have not always protected and will not in the future always protect us from increases in specific raw material costs. Continued volatility in the prices of commodities and other supplies we purchase or changes in the types of commodities we purchase as we continue to evolve our product and packaging portfolio could increase or decrease the costs of our products, and our profitability could suffer as a result. Moreover, increases in the price of our products, including increases to cover inflation and higher input, packaging and transportation costs, may result in lower sales volumes or customer delistings, while decreases in input costs could require us to lower our prices and thereby affect our revenues, profits or margins. Likewise, constraints in the supply or availability of key commodities and necessary services like transportation, such as we experienced across our business, particularly in the United States and United Kingdom, may limit our ability to grow our net revenues and earnings. If our mitigation activities are not effective, if we are unable to price to cover increased costs (including if we are delayed in our ability to raise prices or unable to raise the prices of our products enough to keep up with the rate of inflation), if we must reduce our prices, if increased prices affect demand for our products (including if consumers forego purchasing certain of our products or switch to “private label” or lower-priced product offerings), or if we are limited by supply or distribution constraints, our financial condition, results of operations, cash flows and stock price can be materially adversely affected.12
Table of ContentsWe are subject to risks from operating globally.
We are a global company and generated 73.4% of our 2023 net revenues, 73.6% of our 2022 net revenues and 75.1% of our 2021 net revenues outside the United States. We manufacture and market our products in over 150 countries and have operations in approximately 80 countries. Therefore, we are subject to risks inherent in global operations. Those risks include:
• changing macroeconomic conditions in our markets, including as a result of inflation (and related monetary policy actions by governments in response to inflation), volatile commodity prices and increases in the cost of raw and packaging materials, labor, energy and transportation;• compliance with U.S. laws affecting operations outside of the United States, including anti-bribery laws such as the Foreign Corrupt Practices Act (“FCPA”);• the imposition of increased or new tariffs, sanctions, export controls, quotas, trade barriers, price floors or similar restrictions on our sales or key commodities like cocoa, potential changes in U.S. trade programs and trade relations with other countries, or regulations, taxes or policies that might negatively affect our sales or profitability;
• compliance with antitrust and competition laws, trade laws, data privacy laws, anti-bribery laws, human rights laws and a variety of other local, national and multinational regulations and laws in multiple regimes;
• currency devaluations or fluctuations in currency values, including in developed and emerging markets. This includes events like applying highly inflationary accounting as we did for our Argentinean subsidiaries beginning in July 2018 and for Türkiye beginning in April 2022;• changes in capital controls, including currency exchange controls, government currency policies or other limits on our ability to import raw materials or finished products into various countries or repatriate cash from outside the United States;
• increased sovereign risk, such as defaults by or deterioration in the economies and credit ratings of governments, particularly in emerging markets;
• changes or inconsistencies in local regulations and laws, the uncertainty of enforcement of remedies in non-U.S. jurisdictions, and foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources;
• varying abilities to enforce intellectual property and contractual rights;
• discriminatory or conflicting fiscal policies;
• greater risk of uncollectible accounts and longer collection cycles; and
• design, implementation and use of effective control environment processes across our diverse operations and employee base.In addition, increased political and economic changes or volatility, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, government shutdowns, travel or immigration restrictions, tariffs and other trade restrictions, public health risks or pandemics, energy policy or restrictions, public corruption, expropriation and other economic or political uncertainties, including inaccuracies in our assumptions about these factors, could interrupt and negatively affect our business operations or customer demand. For example, the ongoing developments in the Middle East could impact demand for our products or result in increased supply chain costs or other cost impacts. High unemployment or the slowdown in economic growth in some markets could constrain consumer spending. Declining consumer purchasing power could result in loss of market share and adversely impact our profitability. The nature and degree of the various risks we face can also differ significantly among our regions and businesses.All of these factors could result in increased costs or decreased revenues and could materially and adversely affect our product sales, financial condition, results of operations, cash flows, stock price, and our relationships with customers, suppliers and employees in the short- or long-term.The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations.
The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations (as discussed below in Recent Developments and Significant Items Affecting Comparability – War in Ukraine under Management’s Discussion and Analysis of Financial Condition and Results of Operations ). The scope and duration of the war in Ukraine is uncertain and rapidly changing, and we are unable to predict the full extent to which the war in Ukraine will impact our business operations, financial performance, results of operations and stock price in the future. We have discontinued new capital investments and suspended our advertising13
Table of Contentsspending in Russia. As the business and geopolitical environment continues to change, our operations and activity in Russia, which accounted for 2.9% of 2023 consolidated net revenues, or Ukraine, which accounted for 0.4% of 2023 consolidated net revenues, may decline or be further scaled back. International sanctions, export controls and other measures, including restrictions on the transfer of funds to and from Russia, that have been imposed on Russian entities make it more difficult to operate in Russia, and failure to comply with applicable sanctions and measures could subject us to regulatory penalties and reputational risk. The war could also result in the temporary or permanent loss of assets or our ability to conduct business operations in Russia, and our Russian assets may be partially or fully impaired in future periods, or our business operations terminated, based on actions taken by Russia, other parties or us. In addition, our operations may be subject to increased disruptions to our information systems, including through network failures, malicious or disruptive software or cyberattacks by hackers, criminal groups or nation-state organizations. There is a possibility of loss of life and physical damage and destruction of property. We may not be able to operate in certain areas due to damage and safety concerns. We might also face questions or negative scrutiny from stakeholders about our operations in Russia despite our role as a food company and our public statements about Ukraine and Russia.The war in Ukraine has continued to result in worldwide geopolitical and macroeconomic uncertainty. The war continues to disrupt commodity markets, including for wheat, energy and energy-related commodities, and continues to contribute to supply chain disruption and inflation. Other ongoing consequences of the war have included increased volatility of input prices, including for packaging materials, energy, commodities, other raw materials, labor and transportation; adverse changes in international trade policies and relations; increased exposure to foreign currency fluctuations, including volatility of the Russian ruble; constraints, volatility or disruptions in the credit and capital markets; increased costs to ensure compliance with global and local laws and regulations; difficulty protecting and enforcing our intellectual property rights; and heightened risk to employee safety including health and safety risks related to securing and maintaining facilities. We expect continued volatility with respect to commodity and other input prices, and our hedging activities might not sufficiently offset this volatility.These and other impacts of the war in Ukraine could have the effect of heightening many of the other risks described in the risk factors presented in this filing, including but not limited to those relating to our reputation, brands, product sales, sanctions, trade relations in countries in which we operate, input price inflation and volatility, results of operations and financial condition. We might not be able to predict or respond to all impacts on a timely basis to prevent near- or long-term adverse impacts to our results. The ultimate impact of these disruptions also depends on events beyond our knowledge or control, including the scope and duration of the war and actions taken by parties other than us to respond to them. Any of these disruptions could have a negative impact on our business operations, financial performance, results of operations and stock price, and this impact could be material. Additionally, the war in Ukraine, or related developments in Russia, Europe or elsewhere, may also materially adversely affect our operating results and financial position in a manner that is not currently known to us or that we do not currently consider to be a significant risk.
We operate in a highly competitive industry where we face risks related to the execution of our strategy as well as our ability or willingness to respond, timely or otherwise, to channel shifts, pricing and other competitive pressures.
The food and snacking industry is highly competitive. Our principal competitors are food, snack and beverage companies that operate globally, regionally and locally, and, in many markets, include retailers with their own branded and private label products. Failure to effectively respond to actions, innovations or other challenges from our competitors could adversely affect our business.
Competitor and customer pressures require that we timely and effectively respond to changes in relevant markets, including changes to distribution channels and technological developments. These pressures could affect our prices, including our ability to price in response to commodity and other cost increases. Failure to effectively and timely assess new or developing trends, technological advancements (including advancements such as artificial intelligence, machine learnings and augmented reality, which may become critical in understanding consumer preferences in the future) or changes in distribution methods and set proper pricing, including as a result of inflation or weak economic conditions or recessions, or effective trade incentives could negatively impact availability of or demand for our products, our operating results, achievement of our strategic and financial goals and our ability to capitalize on new revenue or value-producing opportunities. The rapid growth of some channels, such as discounters as well as digital commerce which has expanded significantly following the onset of the COVID-19 pandemic, may impact our current operations or strategies more quickly than we planned for, create consumer price14
Table of Contentsdeflation, alter the buying behavior of consumers or disrupt our retail customer relationships. We may need to increase or reallocate spending on existing and new distribution channels and technologies, marketing, advertising and new product innovation to maintain or increase revenues, market share and brand significance. These expenditures may not be successful, including those related to our digital commerce and other technology-focused efforts, and might not result in trade and consumer acceptance of our efforts, which could materially and adversely affect our product sales, financial condition, results of operations and cash flows. We will be disadvantaged if we are not able to effectively leverage developing online channels such as direct-to-consumer and electronic business-to-business commerce. New distribution channels, as well as growing opportunities to utilize external manufacturers, lower the barriers to entry and allow smaller competitors to gain market share more effectively. Additionally, if we adjust pricing but cannot maintain or increase sales volumes, or our labor or other costs increase but we cannot increase prices to offset those changes, our financial condition and results of operations will suffer.Further, our ability to compete may be limited by an inability to secure new retailers or maintain or add shelf and/or retail space for our products. There can be no assurance that retailers will provide sufficient, or any, shelf space, nor that online retailers will provide online access to, or adequate product visibility on, their platform. Unattractive placement or pricing may put our products at a disadvantage compared to those of our competitors. Even if we obtain shelf space or preferable shelf placement, our new and existing products may fail to achieve the sales or pricing expectations set by our retailers, potentially causing these retailers to remove our products from their shelves.During 2023, we continued to operate under our strategy to drive long-term growth by focusing on four strategic priorities: accelerating consumer-centric growth, driving operational excellence, creating a winning growth culture and scaling sustainable snacking. If our strategy is not effective, we fail to achieve our goals and objectives or identify or prioritize the areas most important to achieving our goals, or we fail to effectively operate under our strategy in a way that minimizes disruptions to our business, it could materially and adversely affect our financial condition, results of operations, cash flows and stock price.
Promoting and protecting our reputation and brand image is essential to our business success.
Our success depends on our ability to maintain and enhance our brands, expand to new geographies and new distribution platforms such as digital commerce, and evolve our portfolio with new product offerings that meet consumer needs and expectations.
We seek to strengthen our brands through investments in our product quality, product renovation, innovation and marketing investments, including consumer-relevant advertising, digital communication and consumer promotions. Actual or perceived failure to effectively address the continuing global focus on well-being, including changing consumer acceptance of certain ingredients, industrial manufacturing and processing, nutritional expectations of our products, the sustainability of our ingredients, our supply chain (including human rights and animal welfare issues) and our packaging (including plastic packaging and its ability to be recycled and other environmental impacts) could adversely affect our brands. Increased negative attention from the media, academics and online influencers, governments, shareholders and other stakeholders in these areas as well as on the role of food marketing, our response to political and social issues or catastrophic events, and other environmental, social, human capital or governance practices, including our diversity, equity and inclusion initiatives, could adversely affect our brand image. Undue caution or our failure to react timely in addressing these challenges and trends could weaken our competitive position. Such pressures could also lead to stricter regulations, industry self-regulation that is unevenly adopted among companies, increased transparency in public disclosures, and increased focus on food and snacking marketing and labeling practices. Increasing and disparate legal or regulatory restrictions on our labeling, advertising and consumer promotions, or our response to those restrictions, could limit our efforts to maintain, extend and expand our brands. This includes regulations such as front-of-pack labeling and selective food taxes in multiple jurisdictions as well as age-based restrictions on sales of products with certain nutritional profiles enacted in some states in Mexico. In the United Kingdom, a ban on specific types of TV and online advertising of food containing levels of fat, sugar or salt above specified thresholds is expected to go into effect in October 2025, and new measures restricting certain promotions and in-store placement of some of those products recently went into effect. Moreover, adverse publicity, regulatory developments or legal action against us, our employees or our licensees related to product quality and safety, where and how we manufacture our products, environmental risks including climate change, human and workplace rights across our supply chain, labor relations, or antitrust, anti-bribery and anti-corruption compliance could damage our reputation and brand health. Such actions could undermine our customers’ and shareholders’ confidence and reduce demand for our products, even if the regulatory or legal action is unfounded or these matters are immaterial to our operations. Our product sponsorship15
Table of Contentsrelationships, including those with celebrity spokespersons, influencers or group affiliations, could also subject us to negative publicity.
In addition, our success in maintaining and enhancing our brand image depends on our ability to anticipate change and adapt to a rapidly changing marketing and media environment, including our increasing reliance on established and emerging social media and online platforms, digital and mobile dissemination of marketing and advertising campaigns, targeted marketing and the increasing accessibility and speed of dissemination of information. A variety of legal and regulatory restrictions as well as our own policies and participation in industry self-regulation initiatives limit how and to whom we market our products. These restrictions may limit our brand renovation, innovation, marketing and promotion plans, particularly as social media and the communications environment continue to evolve. The social media platforms we use to market our products may change their marketing rules or algorithms or may fall out of favor with certain consumer groups, and we may fail to effectively adapt our marketing strategies or may decide to no longer utilize certain platforms for marketing. We might also fail to sufficiently evolve our digital marketing efforts to effectively utilize consumer data. Negative posts or comments about Mondelēz International, our brands or our employees on social media or web sites (whether factual or not) or security breaches related to use of our social media accounts and failure to respond effectively to these posts, comments or activities could damage our reputation and brand image across the various regions in which we operate. Placement of our advertisements in social media may also result in damage to our brands if the media itself experiences negative publicity. Our brands may be associated with or appear alongside harmful content before these platforms or our own social media monitoring can detect this risk to our brand. In addition, we might fail to invest sufficiently in maintaining, extending and expanding our brands, our marketing efforts might not achieve desired results and we might be required to recognize impairment charges on our brands or related intangible assets or goodwill. Third parties may sell counterfeit or imitation versions of our products that are inferior or pose safety risks. When consumers confuse these counterfeit products for our products or have a bad experience with the counterfeit brand, they might refrain from purchasing our brands in the future, which could harm our brand image and sales. Third parties might also improperly use our brands as part of phishing or other scams, which could negatively affect our brand image. Failure to successfully maintain and enhance our reputation and brand health could materially and adversely affect our company and product brands as well as our product sales, financial condition, results of operations, cash flows and stock price.
We must correctly predict, identify, interpret and meet changes in consumer preferences and demand and offer new and improved products that meet those changes.
Consumer preferences for food and snacking products change continually. Our success depends on our ability to predict, identify, interpret and meet the tastes, dietary habits, packaging, sales channel and other preferences of consumers around the world and to offer products that appeal to these preferences in the places and ways consumers want to shop. There may be further shifts in the relative size of shopping channels in addition to the increasing role of digital commerce for consumers. Our success relies upon managing this complexity to promote and bring our products to consumers effectively. Weak economic conditions, recessions, inflation, equity market volatility or other factors, such as global or local pandemics, severe or unusual weather events, and our response to political and social issues or catastrophic events, may affect consumer preferences and demand in ways that are hard to predict. In connection with the COVID-19 pandemic, rapid changes in lifestyles and consumption patterns were accompanied by increased demand for biscuits and decreased demand for gum. Failure to offer and deliver products that appeal to consumers or to correctly judge consumer demand for our products will impact our ability to meet our growth targets, and our sales and market share could decrease and our profitability could suffer.
We must distinguish between short-term fads and trends and long-term changes in consumer preferences. Our sales can be adversely affected when we do not accurately predict which shifts in consumer preferences or category trends will be long-term or we fail to introduce new and improved products to satisfy changing preferences. In addition, because of our varied and geographically diverse consumer base, we must be responsive to local consumer needs, including with respect to when and how consumers snack and their desire for premium or value offerings. We must also provide an array of products that satisfy the broad spectrum of consumer preferences and use marketing and advertising effectively to reach consumers at the right time with the right message. Increasing and disparate legal or regulatory restrictions on our labeling, advertising and consumer promotions, or our response to those restrictions, could limit our efforts to offer and deliver products that appeal to consumers. Demand for our products could decrease and our profitability could suffer if we fail to expand our product offerings successfully across product categories, rapidly develop products in faster growing and more profitable categories or reach consumers in efficient and effective ways leveraging data and analytics.16
Table of ContentsNegative perceptions concerning the health, environmental and social implications of certain food products, ingredients, packaging materials, and sourcing or production methods could influence consumer preferences and acceptance of some of our products and marketing programs. For example, consumers have increasingly focused on well-being, including reducing sodium and added sugar consumption or using weight-loss drugs to reduce consumption overall or change consumption patterns, as well as the source and authenticity of ingredients in the foods they consume. Continuing to focus on and expand our well-being offerings while refining the ingredient and nutrition profiles of existing products is important to our growth, as is maintaining focus on ethical sourcing and supply chain management opportunities to address evolving consumer preferences. In addition, consumer preferences differ by region, and we must monitor and adjust our use of ingredients and other activities to respond to these regional preferences. We might be unsuccessful in our efforts to effectively respond to changing consumer preferences and social expectations. Continued negative perceptions or failure to satisfy consumer preferences could materially and adversely affect our reputation, brands, product sales, financial condition, results of operations, cash flows and stock price.
Our operations in certain emerging markets expose us to political, economic and regulatory risks.
Our growth strategy depends in part on our ability to expand our operations in emerging markets, including among others Brazil, China, India, Mexico, Argentina, Eastern Europe, the Middle East, Africa and Southeast Asia. However, some emerging markets have greater political, economic and currency volatility and greater vulnerability to infrastructure and labor disruptions than more established markets. In many countries, particularly those with emerging economies, engaging in business practices prohibited by laws and regulations with extraterritorial reach, such as the FCPA and the U.K. Bribery Act, or local anti-bribery laws may be more common. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials, including in connection with obtaining permits or engaging in other actions necessary to do business. Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition, results of operations and stock price.In addition, competition in emerging markets is increasing as our competitors grow their global operations and low-cost local manufacturers improve and expand their production capacities. Our success in emerging markets is critical to achieving our growth strategy. Failure to successfully increase our business in emerging markets and manage associated political, economic and regulatory risks could adversely affect our product sales, financial condition, results of operations, cash flows and stock price.
Our use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions.
We use information technology and third-party service providers to support our global business processes and activities, including supporting critical business operations such as manufacturing and distribution; communicating with our suppliers, customers and employees; maintaining effective accounting processes and financial and disclosure controls; executing mergers and acquisitions and other corporate transactions; conducting research and development activities; meeting regulatory, legal and tax requirements; and executing various digital marketing and consumer promotion activities. Global shared service centers managed by third parties provide an increasing number of services important to conducting our business, including accounting, internal control, human resources and computing functions.
Continuity of business applications and services has been, and may in the future be, disrupted by events such as infection by viruses or malware; other cybersecurity attacks; issues with or errors in systems’ maintenance or security; power outages; hardware or software failures; denial of service attacks; telecommunication failures; natural disasters; terrorist attacks; and other catastrophic occurrences. Our use of new and emerging technologies such as cloud-based services and mobile applications continues to evolve, presenting new and additional risks in managing access to our data, relying on third parties to manage and safeguard data, ensuring access to our systems and availability of third-party systems. In addition, we are experiencing new and more frequent attempts by third parties to gain access to our systems, such as through increased email phishing of our workforce.We leverage third parties for various technology and business services who may experience cybersecurity breaches, whether from circumvention of security systems, denial-of-service attacks or other cyberattacks such as hacking, phishing attacks, computer viruses, ransomware or malware, cyber extortion, employee or insider error, malfeasance, social engineering, physical breaches or other actions or attempts to exploit vulnerabilities may cause confidential information or Personally Identifiable Information belonging to us or our employees, customers,
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consumers, partners, suppliers, or governmental or regulatory authorities to be misused or breached. These risks could be magnified since the number of employees, contractors and others working outside of offices increased since the COVID-19 pandemic. Additionally, continued geopolitical turmoil, including the ongoing war in Ukraine, has heightened the risk of cyberattacks. When risks such as these materialize, the need for us to coordinate with various third-party service providers and for third-party service providers to coordinate amongst themselves might increase challenges and costs to resolve related issues. Our information security program includes capabilities designed to evaluate and mitigate cyber risks arising from third-party service providers. Cyber threats to externally-hosted technology and business services are beyond our control. Additionally, new initiatives, such as those related to digital commerce and direct sales, that increase the amount of confidential information that we process and maintain increase our potential exposure to a cybersecurity breach. Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. If our controls, disaster recovery and business continuity plans or those of our third-party providers do not effectively respond to or resolve the issues related to any such disruptions in a timely manner, our product sales, financial condition, results of operations and stock price may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of intellectual property and damage to our reputation or brands.
We continue to invest and augment our cybersecurity program and posture with enhanced identity and access management solutions, multi-factor authentication, risk-based access for remote connectivity, privileged access management, network security, backup and disaster recovery, training and awareness, in addition to advance threat protection emanating from sophisticated, persistent and state-sponsored threat actors, including from internet browsing to email, further reducing our attack surface and likelihood of credential thefts and compromise. Further, we have 24/7 security operations, enhancing the monitoring and detection of threats in our environment, including but not limited to the manufacturing environment and operational technologies, as well as adjusting information security controls based on our threat intelligence information. However, security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every breach or disruption on a timely basis. Due to the constantly evolving and complex nature of cyber threat actors, we cannot predict the form and impact of any future incident, and the cost and operational expense of implementing, maintaining and enhancing protective measures to guard against increasingly complex and sophisticated cyber threats could increase significantly. Moreover, as cyberattacks increase in frequency and magnitude around the world, we may be unable to obtain cybersecurity insurance in the amounts and on terms we view as appropriate and favorable for our operations.
We transfer data across local, regional, and national borders to conduct our operations, and we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data. Privacy and data protection laws may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. The European Union’s General Data Protection Regulation (“GDPR”) has greatly increased the jurisdictional reach of E.U. law, added a broad array of requirements for handling personal data including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance of up to 4% of global annual revenue for the preceding financial year in addition to potential restrictions on data transfer and processing. Laws recently passed in other jurisdictions, such as the Personal Information Protection Law of 2021, enacted in China, and the Digital Personal Data Protection Act of 2023, enacted in India, similarly impose significant regulatory requirements. The California Consumer Privacy Act (“CCPA”) requires greater transparency in handling personal information from consumers by imposing new responsibilities for the handling, disclosure and deletion of personal information for consumers, permits California to assess potentially significant fines for violating CCPA and creates a right for individuals to bring class action suits seeking damages for violations. In addition, similar legislation in Virginia, Colorado, Utah and Connecticut, all of which have gone into effect or will go into effect during 2023, impose transparency and other obligations with respect to personal data of their respective residents and provide residents with similar rights. Our efforts to comply with multijurisdictional privacy and data protection laws and the uncertainty of new laws and regulations will likely increase the complexity of our processes and may impose significant costs and challenges that are likely to increase over time, and we could incur substantial penalties or be subject to litigation related to violation of existing or future data privacy laws and regulations.
We are subject to risks from unanticipated business disruptions.
We manufacture and source products and materials on a global scale. We utilize an interdependent supply chain – a complex network of suppliers and material needs, owned and leased manufacturing locations, external manufacturing partners, distribution networks, shared service delivery centers and information systems that support18
Table of Contentsour ability to provide our products to our customers consistently. Factors that are hard to predict or beyond our control, like weather, natural disasters, water and energy availability, supply and commodity shortages, port congestions or delays, transport capacity constraints, terrorism, political unrest or armed hostilities (including the ongoing war in Ukraine and developments in the Middle East), cybersecurity incidents, labor shortages, strikes or work stoppages, operational and/or financial instability of our key suppliers and other vendors or service providers, government shutdowns or health pandemics, including any potential impact of climate change on these factors, could damage or disrupt our operations or those of our suppliers, their suppliers, our external manufacturing partners, distributors or other business partners. Failure to effectively prepare for and respond to disruptions in our operations, for example, by not finding alternative suppliers or replacing capacity at key or sole manufacturing or distribution locations or by not quickly repairing damage to our information, production or supply systems, can cause delays in delivering or the inability to deliver products to our customers, and the quality and safety of our products might be negatively affected. Moreover, disputes with significant customers or suppliers, including disputes regarding pricing or performance, could adversely affect our sales, financial condition, and results of operations. The occurrence of a material or extended disruption may cause us to lose our customers’ or business partners’ confidence or suffer damage to our reputation, and long-term consumer demand for our products could decline. We use insurance to transfer our financial risk related to these exposures, but some of the risks we face are difficult or impossible to insure and the timing of insurance recoveries may not match the timing of the financial loss we incur. We are subject to risk related to operational safety, including risk of fire, explosion or accidental contamination. We could also fail to achieve our strategic objectives due to capability or technology deficiencies related to our ongoing reconfiguration of our supply chain to drive efficiencies and fuel growth. Further, our ability to supply multiple markets with a streamlined manufacturing footprint may be negatively impacted by portfolio complexity, significant changes in trade policies, changes in volume produced and changes to regulatory restrictions or labor-related or other constraints on our ability to adjust production capacity in the markets in which we operate. These events could materially and adversely affect our product sales, financial condition, results of operations, cash flows and stock price.We may not successfully identify, complete or manage strategic transactions.We regularly evaluate a variety of potential strategic transactions globally, including acquisitions, divestitures, joint ventures, equity method investments and other strategic alliances that could further our strategic business objectives, and acquisitions and joint ventures are an important part of our strategy to increase our exposure to fast-growing snacking segments, fill geographic white spaces and expand into adjacent categories. For example, in 2022 we acquired Chipita, Clif Bar and Ricolino and in 2023, we completed the sale of our developed market gum business in the United States, Canada and Europe and sold our remaining equity investment in Kuerig Dr Pepper Inc. Such transactions and investments present significant challenges and risks. We may not successfully identify potential strategic transactions to pursue, may not have counterparties willing to transact with us, or we may not successfully identify or manage the risks presented by these strategic transactions, or complete such transactions. Our success depends, in part, upon our ability to identify suitable transactions; negotiate favorable contractual terms; comply with applicable regulations and receive necessary consents, clearances and approvals (including regulatory and antitrust clearances and approvals that may face increased scrutiny); integrate or separate businesses; manage or achieve performance of ESG goals and initiatives; realize the full extent of the benefits, cost savings or synergies presented by strategic transactions; offset loss of revenue associated with divested brands or businesses; effectively implement control environment processes; minimize adverse effects on existing business relationships with suppliers and customers; achieve accurate estimates of fair value; minimize potential loss of customers or key employees; and minimize indemnities and potential disputes with buyers, sellers and strategic partners. In addition, execution or oversight of strategic transactions may result in the diversion of management attention from our existing business and may present financial, managerial and operational risks.
With respect to acquisitions and joint ventures in particular, we are also exposed to potential risks based on our ability to conform standards, controls, policies and procedures, and business cultures; consolidate and streamline operations and infrastructures; identify and eliminate, as appropriate, redundant and underperforming operations and assets; manage inefficiencies associated with the integration of operations; and coordinate timely and ongoing compliance with applicable laws, including antitrust and competition, anti-bribery and corruption and import/export laws. Equity investments such as our investments in JDE Peet’s N.V. joint venture and other strategic alliances pose additional risks, as we could share ownership in both public and private companies and in some cases management responsibilities with one or more other parties whose objectives for the alliance may diverge from ours over time, who may not have the same priorities, strategies or resources as we do, or whose interpretation of applicable policies may differ from our own. Transactions or ventures into which we enter might not meet our financial and non-financial control and compliance expectations or yield the anticipated benefits. Depending on the nature of the19
Table of Contentsbusiness ventures, including whether they operate globally, these ventures could also be subject to many of the same risks we are, including political, economic, regulatory and compliance risks, currency exchange rate fluctuations, and volatility of commodity and other input prices. Either partner might fail to recognize an alliance relationship that could expose the business to higher risk or make the venture not as productive as expected.
Furthermore, we may not be able to complete, on terms favorable to us, desired or proposed divestitures of businesses that do not meet our strategic objectives or our growth or profitability targets. Our divestiture activities, or related activities such as reorganizations, restructuring programs and transformation initiatives, may require us to provide or receive transitional support and/or ongoing commercial relationships, recognize impairment charges or take action to reduce costs that remain after we complete a divestiture. Gains or losses on the sales of, or lost operating income from, those businesses may also affect our profitability.
Any of these risks could materially and adversely affect our business, product sales, financial condition, results of operations, cash flows and stock price.Macroeconomic and Industry Risks
Our business is subject to an increasing focus on sustainability matters.We have announced, and may from time to time announce, certain initiatives, including goals, targets and other objectives, related to sustainability matters. These statements reflect our current plans and do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these goals, targets and other objectives expose us to numerous operational, reputational, financial, legal and other risks. Our ability to achieve any stated goal, target or objective is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include evolving regulatory requirements affecting sustainability standards or disclosures or imposing different requirements, the reliance on other value chain actors to implement the required changes, the pace of changes in technology and the availability of suppliers that can meet our sustainability and other standards. In addition, statements about our sustainability goals, targets and other objectives, and progress against those goals, targets and other objectives, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. Our selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time to time or differ from those of others. Methodologies for reporting this data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations, and other changes in circumstances, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. Further, developing and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including recent legislation in California related to reporting greenhouse gas emissions and climate-related financial risk, the SEC’s proposed climate-related reporting requirements, and similar proposals by other international regulatory bodies such as the Corporate Sustainability Reporting Directive in the European Union, especially to the extent these standards are not harmonized or consistent.
Our business may face increased scrutiny from the investment community, customers, consumers, employees, activists, media, regulators and other stakeholders related to our sustainability initiatives, including the goals, targets and objectives that we announce, and our methodologies and timelines for pursuing them. At the same time, stakeholders and regulators have increasingly expressed or pursued opposing views, legislation and investment expectations with respect to sustainability initiatives, including the enactment or proposal of “Anti-ESG” legislation or policies. If our sustainability practices do not meet evolving investor or other stakeholder expectations and standards or if we are unable to satisfy all stakeholders, our reputation, our ability to attract or retain employees, our sales and our attractiveness as an investment, business partner or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives, to comply with ethical, environmental or other standards, regulations or expectations, or to satisfy various reporting standards with respect to these matters, within the timelines we announce, or at all, could have the same negative impacts, as well as expose us to government enforcement actions, fines and private litigation. Even if we achieve our goals, targets and objectives, we may not realize all of the benefits that we expected at the time they were established.20
Table of ContentsClimate change might adversely impact our supply chain or our operations.Scientific evidence collected by the Intergovernmental Panel on Climate Change demonstrates that carbon dioxide and other greenhouse gases in the atmosphere have caused and will in the future cause changes in weather patterns around the globe that expose us to physical and transition risk. Physical risks include the increasing frequency of extreme weather events and natural disasters and effects on water availability and quality and biodiversity loss. These impacts increase risks to the global food production and distribution system and to the safety and resilience of the communities where we live, work and source our ingredients, and could further decrease food security for communities around the world. Decreased agricultural productivity caused by climate change has and in the future may continue to limit the availability of the commodities we purchase and use and increase the costs of such products. These include cocoa, which is a critical raw material for our chocolate and biscuit portfolios that is particularly sensitive to changes in climate and has recently had a global decrease in availability and increase in price, as well as other raw materials such as dairy, wheat, vegetable oils, sugar and nuts. Weather events such as floods, severe storms or water shortages that are partially caused or exacerbated by climate change might disrupt our business operations or those of our suppliers, their suppliers, our external manufacturing partners, distributors or other business partners and could increase our insurance and other operating costs.
Transition risks include increased focus by federal, state and local regulatory and legislative bodies globally regarding environmental policies relating to climate change, regulating greenhouse gas emissions (including carbon pricing or a carbon tax), energy policies, disclosure obligations and sustainability (including single use plastics). New legal and regulatory requirements have increased and could continue to increase our operating costs for things like energy or packaging through taxes or regulations, including payments under extended producer responsibility policies, taxes on specific packaging material types and targets to increase the use of reuse/refill delivery models. Increasing regulation of carbon taxes could also substantially increase our product supply chain and distribution costs. Even if we make changes to align ourselves with such legal or regulatory requirements, we may still be subject to significant penalties or potential litigation if such laws and regulations are interpreted and applied in a manner inconsistent with our practices. Concern about climate change might cause consumer preferences to switch away from products or ingredients considered to have high climate change impact and towards products that are more sustainably grown and made. We expect to incur additional costs as we evolve our portfolio and engage in due diligence, verification and reporting in connection with our ESG and sustainability initiatives. We might not effectively address increased attention from the media, shareholders, activists and other stakeholders on climate change and related environmental sustainability matters, including deforestation, land use, water use and packaging, including plastic. Those stakeholders might also have requests or proposals that are not aligned with the focus of our efforts on climate change and ESG matters. Climate change-related impacts could also reduce demand for our products. If costs for raw materials increase or availability decreases, we raise prices for our products and our competitors respond differently to those cost or availability pressures, demand for our products and our market share could suffer. We have also experienced decreased demand for chocolate during periods when temperatures are warmer.
In 2021, we announced our goal of net zero greenhouse gas emissions by 2050. Achieving this goal will require significant transformation of our business, capital investment and the development of technology that might not currently exist. We might incur significant additional expense or be required to recognize impairment charges in connection with our efforts, and we might be unable to achieve, or be perceived to fail to achieve, our goal.
Any or all of these risks could materially and adversely affect our ability to meet the needs of our customers, reputation, product sales, financial condition, results of operations, cash flows and stock price.
Our retail customers are consolidating, and we must leverage our value proposition in order to compete against retailer and other economy brands.
Retail customers, such as supermarkets, discounters, digital commerce merchants, warehouse clubs and food distributors in the European Union, the United States and other major markets, continue to consolidate, form buying alliances or be acquired by new entrants in the food retail market, resulting in fewer, larger customers. Large retail customers and customer alliances can delist our products or reduce the shelf space allotted to our products and demand lower pricing, increased promotional programs or longer payment terms. Retail customers might also adopt these tactics in their dealings with us in response to the significant growth in online retailing for consumer products, which is outpacing the growth of traditional retail channels and has increased further since the COVID-19 pandemic.21
Table of ContentsThe growth of alternative online retail channels, such as direct-to-consumer and electronic business-to-business, may adversely affect our relationships with our large retail and wholesale customers.In addition, larger retail customers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own retailer and other economy brands that compete with some of our products. Our products must provide higher quality or value to our consumers than the less expensive alternatives, particularly during periods of economic uncertainty, recessions or significant inflation. Consumers may not buy our products if they perceive little difference between the quality or value of our products and those of retailer or other economy brands. If consumers prefer or otherwise choose to purchase the retailer or other economy brands, we can lose market share or sales volumes, or we may need to shift our product mix to lower margin offerings.Retail consolidation also increases the risk that adverse changes in our customers’ business operations or financial performance will have a corresponding material adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease or cancel purchases of our products, or delay or fail to pay us for previous purchases.
Failure to effectively respond to retail consolidation, increasing retail power and competition from retailer and other economy brands could materially and adversely affect our reputation, brands, product sales, financial condition, results of operations, cash flows and stock price.We are subject to changes in our relationships with significant customers, suppliers and distributors.During 2023, no single customer accounted for more than 10% of our net revenues. There can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing and develop their own brands. The loss of or disruptions related to a significant customer could result in a material reduction in sales or change in the mix of products we sell to the customer. This could materially and adversely affect our product sales, financial condition, results of operations, cash flows and stock price.Disputes with significant customers, suppliers or distributors, including disputes related to pricing or performance and any resultant refusal to provide shelf and/or retail spaces for our products, could adversely affect our ability to supply or deliver products or operate our business and could materially and adversely affect our product sales, financial condition and results of operations. The financial condition of our significant customers and business partners are affected by events that are largely beyond our control. New regulations can also affect our commercial practices and our relationship with customers, suppliers or distributors. Deterioration in the financial condition of significant customers, suppliers or distributors or regulations affecting our relationship with these parties could materially and adversely affect our product sales, financial condition, results of operations, cash flows and stock price.We may be unable to hire or retain and develop key personnel or a highly skilled and diverse global workforce or effectively manage changes in our workforce and respond to shifts in labor availability.
We must attract, hire, retain and develop effective leaders and a highly skilled and diverse global workforce. We compete to hire new personnel with a variety of capabilities in the many countries in which we manufacture and market our products and then to develop and retain their skills and competencies. We have experienced and could continue to experience unplanned or increased turnover of employees with key capabilities, and we could fail to develop adequate succession plans for leadership positions or hire and retain a workforce with the skills and in the locations we need to operate and grow our business. We could also fail to attract and develop personnel with key emerging capabilities that we need to continue to respond to changing consumer and customer needs and grow our business, including skills in the areas of digital commerce and marketing, data analytics, and procurement and supply chain expertise. Occurrence of any of these conditions could deplete our institutional knowledge base and erode our competitiveness.
We are experiencing an increasingly tight and competitive labor market and could face unforeseen challenges in the availability of labor. A sustained labor shortage or increased turnover rates within our employee base as a result of general macroeconomic factors (including high inflation and hyperinflation in certain markets), have led and in the future could continue to lead to increased costs, such as increased overtime to meet demand and increased wages to attract and retain employees. We have also been negatively affected and could continue to be negatively affected by labor shortages or constraints experienced by our partners, including our external manufacturing partners, freight providers, other strategic suppliers and distributors. Failure to achieve and maintain a diverse workforce and22
Table of Contentsleadership team, compensate our employees competitively and fairly, maintain a safe and inclusive environment or promote the well-being of our employees could affect our reputation and also result in lower performance and an inability to retain valuable employees.
We must address changes in, and that affect, our workforce and satisfy the legal requirements associated with how we manage and compensate our employees. This includes our management of employees represented by labor unions or workers’ councils, who represent approximately 55% of our 79,000 employees outside the United States and approximately 21% of our 12,000 U.S. employees. Strikes such as the one we experienced in some of our U.S. manufacturing and distribution facilities in 2021, work stoppages, or other forms of labor unrest by our employees or those of our suppliers, distributors or other business partners, or situations like the renegotiation of collective bargaining agreements, have in the past and may in the future cause disruptions to our supply chain, manufacturing or distribution processes. Changes in immigration laws and policies or restrictions could make it more difficult for us to recruit or relocate skilled employees. We could also fail to effectively respond to evolving perceptions and goals of those in our workforce or whom we might seek to hire with respect to flexible working or other matters.
These risks could materially and adversely affect our reputation, ability to efficiently operate our manufacturing facilities and overall business and meet the needs of our customers, product sales, financial condition, results of operations, cash flows and stock price.Legal and Regulatory Risks
We face risks related to complying with changes in and inconsistencies among laws and regulations in many countries in which we operate.Our activities around the world are highly regulated and subject to government oversight. Various laws and regulations govern food production, sourcing, packaging and waste management (including packaging containing PFAS), storage, distribution, sales, advertising, labeling and marketing, as well as intellectual property, competition, antitrust, trade and export controls, labor, tax, social and environmental matters, privacy, data protection, and health and safety practices. Government authorities regularly change laws and regulations, their interpretations of existing laws and regulations, and their enforcement priorities. Our failure to comply with existing laws and regulations (or allegations thereof), or to make changes necessary to comply with new or revised laws and regulations or evolving interpretations and application of existing laws and regulations, and differing or competing laws and regulations across the markets where our products are made, manufactured, distributed and sold, could materially and adversely affect our product sales, financial condition, results of operations and cash flows, including as a result of higher compliance costs, higher capital expenditures and higher production costs. For instance, our financial condition, results of operations and cash flows could be negatively affected by the regulatory and economic impact of changes in the corporate tax policies of the United States and other countries; trade relations among the United States and other countries, including China, Mexico and the European Union; and changes within the European Union. Evolving expectations on ESG disclosures and reporting will also result in new regulatory actions. In addition, the results of third-party studies (whether or not scientifically valid) purporting to assess the health implications of consumption of certain ingredients or substances present in certain of our products or packaging materials have resulted in and could continue to result in our being subject to new taxes and regulations or lawsuits that can adversely affect our business.
We may decide or be required to recall products or be subjected to product liability claims.
We could decide, or laws or regulations could require us, to recall products due to suspected or confirmed deliberate or unintentional product contamination, including contamination of ingredients we use in our products that third parties supply, spoilage or other adulteration, product mislabeling or product tampering. These risks could be heightened in light of increased pressure on our suppliers from supply chain challenges. Additionally, to the extent we are required to perform remote audits, these audits do not fully offset risks from the inability to conduct on-site audits. In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, consumers might reduce their overall consumption of products in this category. Any of these events could materially and adversely affect our reputation, brands, product sales, financial condition, results of operations, cash flows and stock price.
We may also suffer losses when our products or operations or those of our suppliers violate applicable laws or regulations, or when our or our suppliers’ products cause injury, illness or death. In addition, our marketing could face claims of false or deceptive advertising or other criticism. A significant product liability claim or other legal23
Table of Contentsjudgment against us, a related regulatory enforcement action, a widespread product recall or attempts to manipulate us based on threats related to the safety of our products could materially and adversely affect our reputation and profitability. Moreover, even if a product liability, consumer fraud or other claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against our products or processes could materially and adversely affect our reputation, brands, product sales, product inventory, financial condition, results of operations, cash flows and stock price, and we could incur significant expense responding to such a claim.
We face risks related to legal or tax claims or other regulatory enforcement actions.
We operate around the world in environments with constantly evolving legal, tax and regulatory frameworks, and we are subject to risk of litigation, legal or tax claims or other regulatory enforcement actions. Actions by our employees, contractors, agents or others in violation of our policies and procedures could lead to deficiencies in our internal or other controls or violations, unintentional or otherwise, of laws and regulations. Furthermore, as a result of the COVID-19 pandemic and supply chain challenges, there may be investigations, legal claims or litigation against us relating to our actions or decisions in response to these conditions. We could also be subject to litigation, legal claims or regulatory actions in connection with the continued evolution of our sustainability and ESG-related initiatives. In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers, employees and shareholders. When litigation, legal or tax claims or regulatory enforcement actions arise out of our failure or alleged failure to comply with applicable laws, regulations or controls, we could be subject to civil and criminal penalties, and voluntary and involuntary document requests, that could materially and adversely affect our reputation, product sales, financial condition, results of operations, cash flows and stock price. Even if a claim is unsuccessful, without merit or not pursued to completion, the cost of responding to such a claim, including expenses and management time, could adversely affect us.
We could fail to maintain effective internal control over financial reporting or disclosure controls and procedures.
The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of controls and fraud. If we do not maintain effective internal control over financial reporting or design and implement disclosure and other controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements and other disclosures, including in connection with controls executed for us by third parties, we might fail to timely detect any misappropriation of corporate assets or inappropriate allocation or use of funds and could be unable to file financial reports or make other disclosures accurately and on a timely basis.
We face challenges as we work to meet our ESG goals and continue to evolve our ESG-related disclosures and reporting considering various existing and developing standards, such as those of the Financial Stability Board’s TCFD, the EU Corporate Sustainability Reporting Directive and the SASB Standards of the Value Reporting Foundation. We might fail to meet our ESG goals or report on them accurately and timely.
As a result of any of these factors, our reputation, results of operations and stock price could be materially adversely affected.We face risks related to adequately protecting our valuable intellectual property rights.We consider our intellectual property rights, particularly and most notably our trademarks, but also our patents, copyrights, registered designs, proprietary trade secrets, recipes, technology, know-how and licensing agreements, to be a significant and valuable part of our business. We attempt to protect our intellectual property rights by taking advantage of a combination of patent, trademark, copyright and trade secret laws in various countries, as well as licensing agreements, third-party nondisclosure and assignment agreements and policing of third-party misuses and infringement of our intellectual property in traditional retail and digital environments. Our failure to obtain or adequately protect our intellectual property rights (including in response to developments in artificial intelligence technologies), or any change in law or other changes that serve to lessen or remove the current legal protections of our intellectual property, may diminish our competitiveness and could materially harm our business, financial condition and stock price.24
Table of ContentsWe may be unaware of potential third-party claims of intellectual property infringement relating to our technology, brands or products. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert management’s and other key personnel’s attention from our business operations. Third-party claims of intellectual property infringement might require us to pay monetary damages or enter into costly license agreements. We also may be subject to injunctions against development and sale of certain of our products, which could include removal of existing products from sale. Any of these occurrences could materially and adversely affect our reputation, brand health, ability to introduce new products or improve the quality of existing products, product sales, financial condition, results of operations, cash flows and stock price.
Financial Risks
We face risks related to tax matters, including changes in tax laws and rates, disagreements with taxing authorities and imposition of new taxes.As a global company, we are subject to taxation in the United States and various other countries and jurisdictions. As a result, our effective tax rate is determined based on the income and applicable tax rates in the various jurisdictions in which we operate. Our future effective tax rates could be affected by changes in the composition of earnings in countries with differing tax rates or other factors, and adverse changes in the underlying profitability or financial outlook of our operations in several jurisdictions could lead to changes in the realizability of our deferred tax assets, resulting in a charge to our effective tax rate.
Changes in tax laws in the U.S. or in other countries where we have significant operations (such as Brazil’s recently passed tax legislation), including rate changes or corporate tax provisions that could disallow or tax perceived base erosion or profit shifting payments or subject us to new types of tax, could materially affect our effective tax rate and our deferred tax assets and liabilities. In addition, aspects of U.S. tax laws may lead foreign jurisdictions to respond by enacting additional tax legislation that is unfavorable to us. As of December 31, 2023, numerous countries have now enacted the Organization of Economic Cooperation and Development’s model rules on a global minimum tax, with the earliest effective date being for taxable years beginning after December 31, 2023. Based on the guidance available thus far, we do not expect this legislation to have a material impact on our consolidated financial statements, but we will continue to evaluate it as additional guidance and clarification becomes available.We are also subject to tax audits by governmental authorities. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liabilities, including interest and penalties. Unexpected results from one or more such tax audits could significantly adversely affect our effective tax rate, results of operations, cash flows and stock price.
We are subject to currency exchange rate fluctuations.At December 31, 2023, we sold our products in over 150 countries and had operations in approximately 80 countries. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. Our financial position and operating results are sensitive to movements in currency exchange rates, which have recently been more volatile, because a large portion of our assets, liabilities, revenue and expenses must be translated into U.S. dollars for reporting purposes or converted into U.S. dollars to service obligations such as our U.S. dollar-denominated indebtedness and to pay dividends to our shareholders. In addition, movements in currency exchange rates affect transaction costs because we source product ingredients from various countries. Our efforts to mitigate our exposure to exchange rate fluctuations, primarily on cross-currency transactions, may not be successful. We factor exchange rate impacts into our local pricing decisions, but there may be lags in implementing pricing changes due to competitive pressures or customer or regulatory constraints. We also hedge a number of risks including exposures to foreign exchange rate movements and volatility of interest rates that could impact our future borrowing costs. Hedging of these risks could potentially subject us to counter-party credit risk. In addition, local economies, monetary policies and currency hedging availability affect our ability to hedge against currency-related economic losses. We might not be able to successfully mitigate our exposure to currency risks due to factors such as continued global and local market volatility, actions by foreign governments, trade disputes, economic sanctions, political uncertainty, inflation, interest rates and limited hedging opportunities. For instance, in December 2023, the Argentinean peso devalued significantly in excess of historic levels. Accordingly, changes in the currency exchange rates that we use to translate our results into U.S. dollars for financial reporting purposes or for transactions involving multiple currencies could materially and adversely affect future demand for our products, our financial condition, results of operations, cash flows and stock price, and our relationships with customers, suppliers and employees in the short or long-term.25
Table of ContentsWeak financial performance, downgrades in our credit ratings, rising interest rates, illiquid global capital markets and volatile global economic conditions could limit our access to the global capital markets or the effectiveness of our cash management programs, reduce our liquidity and increase our borrowing costs.
We access the long-term and short-term global capital markets to obtain financing. Our financial performance, our short-and long-term debt credit ratings, interest rates, the stability of financial institutions with which we partner, the liquidity of the overall global capital markets (which could be impacted by the United States government’s decisions regarding its debt ceiling) and the state of the global economy, including the food industry, could affect our access to, and the availability and cost of, financing on acceptable terms and conditions and our ability to pay dividends in the future. Globally, several central banks in various countries have raised, and may again raise, interest rates to combat inflation. There can be no assurance that we will have access to the global capital markets on terms we find acceptable.
We regularly access the commercial paper markets in the United States and Europe for ongoing funding requirements. A downgrade in our credit ratings by a credit rating agency could increase our borrowing costs and adversely affect our ability to issue commercial paper. Disruptions in the global commercial paper market or other effects of volatile economic conditions on the global credit markets also could reduce the amount of commercial paper that we could issue and raise our borrowing costs for both short- and long-term debt offerings.
We use cash management programs, such as factoring and supply chain finance arrangements, in our business when circumstances are favorable to manage liquidity. If these programs or underlying customer or supplier terms do not continue and we are unable to secure alternative programs, our cash and working capital may be negatively affected and we may have to utilize our various financing arrangements or increase our long-term borrowings for short- and long-term liquidity requirements.
Limitations on our ability to access the global capital markets, a reduction in our liquidity or an increase in our borrowing costs could materially and adversely affect our financial condition, results of operations and stock price.Volatility in the global capital markets, interest rates, inflation rates, our participation in multiemployer pension plans and other factors could increase our costs relating to our employees’ pensions.We sponsor defined benefit pension plans for a number of our employees throughout the world and also contribute to other employees’ pensions under defined benefit plans that we do not sponsor. At the end of 2023, the projected benefit obligation of the defined benefit pension plans we sponsor was $8.6 billion and plan assets were $9.2 billion.
For defined benefit pension plans that we maintain, the difference between plan obligations and assets, or the funded status of the plans, significantly affects the net periodic benefit costs of our pension plans and the ongoing funding requirements of those plans. Our largest funded defined benefit pension plans are funded with trust assets invested in a globally diversified portfolio of investments, including equities and corporate and government debt. Among other factors, changes in interest rates, inflation rates, mortality rates, early retirement rates, investment returns, funding requirements in the jurisdictions in which the plans operate and the market value of plan assets affect the level of plan funding, cause volatility in the net periodic pension cost and impact our future funding requirements. Legislative and other governmental regulatory actions may also increase funding requirements for our pension plans’ benefits obligation. Volatility in the global capital markets may increase the risk that we will be required to make additional cash contributions to these company-sponsored pension plans and recognize further increases in our net periodic pension cost.We also participate in multiemployer pension plans for certain U.S. union-represented employees. As a participating employer under multiemployer pension plans, we may owe more than the contributions we are required to make under the applicable collective bargaining agreements. For example, if we partially or completely withdraw from a multiemployer pension plan, we may be required to pay a partial or complete withdrawal liability, such as the withdrawal liability we are paying in connection with our complete withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund in 2018. This kind of withdrawal liability will generally increase if there is also a mass withdrawal of other participating employers or if the plan terminates. See Note 11, Benefit Plans , to the consolidated financial statements for more information on our multiemployer pension plans.
A significant increase in our pension benefit obligations, future funding requirements or net periodic benefit costs could curtail our ability to invest in the business and adversely affect our financial condition, results of operations, cash flows and stock price.
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FY 2024-12-31 (later)
Item 1A. Risk Factors.You should carefully read the following discussion of significant factors, events and uncertainties when evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. The events and consequences discussed in these risk factors could materially and adversely affect our business, operating results, liquidity and financial condition. While we believe we have identified and discussed below the key risk factors affecting our business, these risk factors do not identify all the risks we face, and there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be significant that may have a material adverse effect on our business, performance or financial condition in the future. In addition to the effects of current and potential trade and tariff policies and resulting global impacts on our business and operations discussed in Item 7 of this Form 10-K and in the risk factors below, additional or unforeseen effects from these policies may give rise to or amplify many of these risks discussed below.Strategic and Operational Risks
Commodity and other input prices are volatile and may increase or decrease significantly or availability of commodities may become constrained.We purchase and use large quantities of commodities, including cocoa, dairy, wheat, edible oils, sugar and other sweeteners, flavoring agents and nuts. In addition, we purchase and use significant quantities of product packaging materials, natural gas, fuel and electricity for our factories and warehouses, and we also incur expenses in connection with labor and the transportation and delivery of our products. Costs of raw materials, energy and other supplies and services are volatile and fluctuate due to conditions that are difficult to predict. These conditions include global competition for resources; tariffs or other trade barriers; currency fluctuations; geopolitical conditions or conflicts (including the ongoing war in Ukraine and international sanctions imposed on Russia for its invasion of Ukraine, conflicts in the Middle East and rising tensions between China and Taiwan); inflationary pressures related to domestic and global economic conditions or supply chain issues; transportation and labor disruptions; government intervention to introduce living income premiums or similar requirements; changes in environmental or trade policy and regulations, alternative energy and agricultural programs; severe weather; agricultural productivity; crop disease or pests; water risk; health pandemics; forest fires and other natural disasters; acts of terrorism; geopolitical regional conflicts; cybersecurity incidents; supplier capacity; and consumer or industrial demand. During 2024, price volatility and higher aggregate costs were driven by a confluence of factors: disrupted international supply chains, labor market challenges, soaring commodity prices (especially for cocoa beans) and increased transportation and labor costs. For additional information, see Item 7, Commodity Trends .
Many of these conditions are or could be exacerbated or worsened by climate change. Increased government intervention and consumer or activist responses caused by increased focus on climate change, deforestation, water, plastic waste, animal welfare and human rights concerns and other risks associated with the global food system could adversely affect our or our suppliers’ reputation and business and our ability to procure the materials we need to operate our business. Some commodities are grown by smallholder farmers who might not be able to invest to increase productivity or adapt to changing conditions.
Our efforts to monitor our exposure to commodity prices and hedge against price increases cannot fully protect us from changes in input costs, including due to factors like changing import duties and tariffs, market illiquidity, specific local regulations and downstream costs. Thus, our hedging strategies have not always protected and will not in the future always protect us from increases in specific raw material costs. Continued volatility in the prices of commodities and other supplies we purchase or changes in the types of commodities we purchase as we continue to evolve our product and packaging portfolio could increase or decrease the costs of our products, and our profitability could suffer as a result. Moreover, increases in the price of our products, including increases to cover inflation and higher input, packaging and transportation costs, may result in lower sales volumes or customer delistings, while decreases in input costs could require us to lower our prices and thereby affect our revenues, profits or margins. Likewise, constraints in the supply or availability of key commodities and necessary services like transportation may limit our ability to grow our net revenues and earnings. If our mitigation activities are not effective, if we are unable to price to cover increased costs (including if we are delayed in our ability to raise prices or unable to raise the prices of our products enough to keep up with the rate of inflation), if we must reduce our prices, if increased prices affect demand for our products (including if consumers forego purchasing certain of our products or switch to “private label” or lower-priced product offerings), or if we are limited by supply or distribution constraints, our financial condition, results of operations, cash flows and stock price can be materially adversely affected.12
Table of ContentsWe are subject to risks from operating globally, including potential cost impacts of any tariffs that may be enacted by governments as well as other trade and regulatory uncertainty.
We are a global company and generated 74.0% of our 2024 net revenues, 73.4% of our 2023 net revenues and 73.6% of our 2022 net revenues outside the United States. We market our products in over 150 countries and have operations in approximately 80 countries. Therefore, we are subject to risks inherent in global operations. Those risks include:
• the imposition of increased or new tariffs, sanctions, export controls, quotas, trade barriers, price floors or similar restrictions on our sales or key commodities like cocoa, potential changes in U.S. trade programs and trade relations with other countries, or regulations, taxes or policies that affect our operations, sales or profitability. Also see “ We are subject to risks from changes to the trade policies and tariff and import/export regulations by the U.S. and/or other foreign government s”;
• changing macroeconomic conditions in our markets, including as a result of inflation (and related monetary policy actions by governments in response to inflation), volatile commodity prices, the ongoing longer-term impact of changes in international trade policies (including Brexit) and increases in the cost of raw and packaging materials, labor, energy and transportation;• compliance with U.S. laws affecting operations outside of the United States, including anti-bribery laws such as the Foreign Corrupt Practices Act (“FCPA”);• compliance with antitrust and competition laws, trade laws, data privacy laws, anti-bribery laws, human rights laws, new regulations intended to address increasing global concerns around forced labor, and a variety of other local, national and multinational regulations and laws in multiple regimes;
• currency devaluations or fluctuations in currency values, including in developed and emerging markets. This includes events like applying highly inflationary accounting as we did for our Argentinean subsidiaries beginning in the third quarter of 2018, Türkiye beginning in the second quarter of 2022 and both Egypt and Nigeria beginning in the fourth quarter of 2024;• changes in capital controls, including currency exchange controls, government currency policies or other limits on our ability to import raw materials or finished products into various countries or repatriate cash from outside the United States;
• increased sovereign risk, such as defaults by or deterioration in the economies and credit ratings of governments, particularly in emerging markets;
• changes or inconsistencies in local regulations and laws, the uncertainty of enforcement of remedies in non-U.S. jurisdictions, and foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources;
• varying abilities to enforce intellectual property and contractual rights;
• discriminatory or conflicting fiscal policies;
• greater risk of uncollectible accounts and longer collection cycles; and
• design, implementation and use of effective control environment processes across our diverse operations and employee base.In addition, increased political and economic changes or volatility, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, government shutdowns, product boycotts, travel or immigration restrictions, tariffs and other trade restrictions, public health risks or pandemics, energy policy or restrictions, public corruption, expropriation and other economic or political uncertainties, including inaccuracies in our assumptions about these factors, could interrupt and negatively affect our business operations or customer demand. For example, the ongoing conflicts in the Middle East could impact demand for our products or result in increased supply chain costs or other cost impacts. High unemployment or the slowdown in economic growth in some markets could constrain consumer spending. Declining consumer purchasing power could result in loss of market share and adversely impact our profitability. The nature and degree of the various risks we face can also differ significantly among our regions and businesses.All of these factors could result in increased costs or decreased revenues and could materially and adversely affect our product sales, financial condition, results of operations, cash flows, stock price, and our relationships with customers, suppliers and employees in the short- or long-term.We are subject to risks from changes to the trade policies and tariff and import/export regulations by the U.S. and/or other foreign governments.
Changes in the import and export policies, including trade restrictions, new or increased tariffs or quotas, embargoes, sanctions and countersanctions, safeguards or customs restrictions by the U.S. and/or other foreign13
Table of Contentsgovernments, could require us to change the way we conduct business and adversely affect our financial condition, results of operations, reputation and our relationships with customers, suppliers and employees in the short- or long-term. Likewise, changes in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct our business could adversely affect our business.
As an example, on February 1, 2025, the U.S. government announced a 25% tariff on product imports from certain countries, including Mexico and Canada, and 10% tariffs on product imports from certain countries, including China. These actions are expected to result in retaliatory measures on U.S. goods. If maintained, the newly announced tariffs and the potential escalation of trade disputes could pose a significant risk to our business and would affect our revenue and cost of goods sold. The extent and duration of the tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets. Further, actions we take to adapt to new tariffs or trade restrictions may cause us to modify our operations or forgo business opportunities. For additional information, see Financial Outlook – Trade and Regulatory Uncertainty under Management's Discussion and Analysis of Financial Condition and Results of Operations .
The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations.
The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations (as discussed below in Recent Developments and Significant Items Affecting Comparability – War in Ukraine under Management’s Discussion and Analysis of Financial Condition and Results of Operations ). The scope and duration of the war in Ukraine is uncertain and rapidly changing, and we are unable to predict the full extent to which the war in Ukraine will impact our business operations, financial performance, results of operations and stock price in the future. We have discontinued new capital investments and suspended our advertising spending in Russia. As the business and geopolitical environment continues to change, our operations and activity in Russia, which accounted for 2.9% of 2024 consolidated net revenues, or Ukraine, which accounted for 0.4% of 2024 consolidated net revenues, may decline or be further scaled back. International sanctions, export controls and other measures, including restrictions on the transfer of funds to and from Russia, that have been imposed on Russian entities make it more difficult to operate in Russia, and failure to comply with applicable sanctions and measures could subject us to regulatory penalties and reputational risk. The war could also result in the temporary or permanent loss of assets due to expropriation or further curtailment of our ability to conduct business operations in Russia, and our Russian assets may become partially or fully impaired or our operations may be deconsolidated in future periods, or our business operations terminated, based on actions taken by Russia, other parties or us. In addition, our operations may be subject to increased disruptions to our information systems, including through network failures, malicious or disruptive software or cyberattacks by hackers, criminal groups or nation-state organizations. There is a possibility of loss of life and physical damage and destruction of property. We may not be able to operate in certain areas due to damage and safety concerns. We might also face questions or negative scrutiny from stakeholders about our operations in Russia despite our role as a food company and our public statements about Ukraine and Russia.The war in Ukraine has continued to result in worldwide geopolitical and macroeconomic uncertainty. The war continues to disrupt commodity markets, including for wheat, energy and energy-related commodities, and continues to contribute to supply chain disruption and inflation. Other ongoing consequences of the war have included increased volatility of input prices, including for packaging materials, energy, commodities, other raw materials, labor and transportation; adverse changes in international trade policies and relations; increased exposure to foreign currency fluctuations, including volatility of the Russian ruble; constraints, volatility or disruptions in the credit and capital markets; increased costs to ensure compliance with global and local laws and regulations; difficulty protecting and enforcing our intellectual property rights; and heightened risk to employee safety including health and safety risks related to securing and maintaining facilities. We expect continued volatility with respect to commodity and other input prices, and our hedging activities might not sufficiently offset this volatility.These and other impacts of the war in Ukraine could have the effect of heightening many of the other risks described in the risk factors presented in this filing, including those relating to our reputation, brands, product sales, sanctions, trade relations in countries in which we operate, input price inflation and volatility, results of operations and financial condition. We might not be able to predict or respond to all impacts on a timely basis to prevent near-14
Table of Contentsor long-term adverse impacts to our results. The ultimate impact of these disruptions also depends on events beyond our knowledge or control, including the scope and duration of the war and actions taken by parties other than us to respond to them. Any of these disruptions could have a negative impact on our business operations, financial performance, results of operations and stock price, and this impact could be material. Additionally, the war in Ukraine, or related developments in Russia, Europe or elsewhere, may also materially adversely affect our operating results and financial position in a manner that is not currently known to us or that we do not currently consider to be a significant risk.
We operate in a highly competitive industry where we face risks related to the execution of our strategy as well as our ability or willingness to respond, timely or otherwise, to channel shifts, pricing and other competitive pressures.
The food and snacking industry is highly competitive. Our principal competitors are food, snack and beverage companies that operate globally, regionally and locally, and, in many markets, include retailers with their own branded and private label products. Failure to effectively respond to actions, innovations or other challenges from our competitors could adversely affect our business.
Competitor and customer pressures require that we timely and effectively respond to changes in relevant markets, including changes to distribution channels and technological developments. These pressures could affect our prices, including our ability to price in response to commodity and other cost increases. Our ability to succeed depends on our ability to adapt to changing market conditions, which includes identifying and responding to new or developing trends, technological advancements (including advancements such as artificial intelligence, machine learning and augmented reality) which are increasingly important for understanding evolving consumer preferences. Our ability to adjust distribution methods and pricing, including adapting to fluctuating inflation, new or increased tariffs and/or trade barriers, economic conditions and recessions, as well as implementing effective trade incentives is also critical to advancing our priorities. Failure in these areas could negatively impact availability of or demand for our products, our operating results, achievement of our strategic and financial goals and our ability to capitalize on new revenue or value-producing opportunities.
The rapid growth of some channels, such as discounters and digital commerce, may impact our current operations or strategies more quickly than we planned for, create consumer price deflation, alter the buying behavior of consumers or disrupt our retail customer relationships. We may need to increase or reallocate spending on existing and new distribution channels and technologies, marketing, advertising and new product innovation to maintain or increase revenues, market share and brand significance. These expenditures may not be successful, including those related to our digital commerce and other technology-focused efforts, and might not result in trade and consumer acceptance of our efforts, which could materially and adversely affect our product sales, financial condition, results of operations and cash flows. We will be disadvantaged if we are not able to effectively leverage developing online channels such as direct-to-consumer and electronic business-to-business commerce. New distribution channels, as well as growing opportunities to utilize external manufacturers, lower the barriers to entry and allow smaller competitors to gain market share more effectively. Additionally, if we adjust pricing but cannot maintain or increase sales volumes, or our labor or other costs increase but we cannot increase prices to offset those changes, our financial condition and results of operations will suffer.Further, our ability to compete may be limited by an inability to secure new retailers or maintain or add shelf and/or retail space for our products. There can be no assurance that retailers will provide sufficient, or any, shelf space, nor that online retailers will provide online access to, or adequate product visibility on, their platform. Unattractive placement or pricing may put our products at a disadvantage compared to those of our competitors. Even if we obtain shelf space or preferable shelf placement, our new and existing products may fail to achieve the sales or pricing expectations set by our retailers, potentially causing these retailers to remove our products from their shelves.During 2024, we continued to operate under our strategy to drive long-term growth by focusing on four strategic priorities: accelerating consumer-centric growth, driving operational excellence, creating a winning growth culture and scaling sustainable snacking. If our strategy is not effective, we fail to achieve our goals and objectives or identify or prioritize the areas most important to achieving our goals, or we fail to effectively operate under our strategy in a way that minimizes disruptions to our business, it could materially and adversely affect our financial condition, results of operations, cash flows and stock price.15
Table of ContentsPromoting and protecting our reputation and brand image is essential to our business success.
Our success depends on our ability to maintain and enhance our brands, expand to new geographies and new distribution platforms such as digital commerce, and evolve our portfolio with new product offerings that meet consumer needs and expectations.
We seek to strengthen our brands through investments in our product quality, product renovation, innovation and marketing investments, including consumer-relevant advertising, digital communication and consumer promotions. Actual or perceived failure to effectively address the continuing global focus on well-being, including changing consumer acceptance of certain ingredients, industrial manufacturing and processing, nutritional expectations of our products, the sustainability of our ingredients, our supply chain (including human rights and animal welfare issues) and our packaging (including plastic packaging and its ability to be recycled and other environmental impacts) could adversely affect our brands. Increased negative attention from the media, academics and online influencers, governments, shareholders and other stakeholders in these areas as well as on the role of food marketing, our response to political and social issues or catastrophic events, and other environmental, social, human capital or governance practices could adversely affect our brand image. Undue caution or our failure to react timely in addressing these challenges and trends could weaken our competitive position. Such pressures could also lead to stricter regulations, industry self-regulation that is unevenly adopted among companies, increased transparency in public disclosures, and increased focus on food and snacking, including marketing and labeling practices. Increasing and disparate legal or regulatory restrictions on our labeling, advertising and consumer promotions, or our response to those restrictions, could limit our efforts to maintain, extend and expand our brands. This includes regulations such as front-of-pack labeling and selective food taxes in multiple jurisdictions as well as age-based restrictions on sales of products with certain nutritional profiles. For example, in the United Kingdom, a ban on specific types of TV and online advertising of food containing levels of fat, sugar or salt above specified thresholds is expected to go into effect in October 2025, and new measures restricting certain promotions and in-store placement of some of those products recently went into effect. Moreover, adverse publicity, regulatory developments or legal action against us, our employees, licensees, or other actors in our supply chain related to product quality and safety, where and how we manufacture our products, environmental concerns including climate change and waste management, human and workplace rights across our supply chain, alleged health implications of certain food products or processing methods, labor relations, or antitrust, anti-bribery and anti-corruption compliance could damage our reputation and brand health. Such actions could undermine our customers’ and shareholders’ confidence and reduce demand for our products, even if the regulatory or legal action is unfounded or these matters are immaterial to our operations. Our product sponsorship relationships, including those with celebrity spokespersons, influencers or group affiliations, could also subject us to negative publicity.
In addition, our success in maintaining and enhancing our brand image depends on our ability to anticipate change and adapt to a rapidly changing marketing and media environment, including our increasing reliance on established and emerging social media and online platforms, digital and mobile dissemination of marketing and advertising campaigns, targeted marketing and the increasing accessibility and speed of dissemination of information. A variety of legal and regulatory restrictions as well as our own policies and participation in industry self-regulation initiatives limit how and to whom we market our products. These restrictions may limit our brand renovation, innovation, marketing and promotion plans, particularly as social media and the communications environment continue to evolve. The social media platforms we use to market our products may change their marketing rules or algorithms or may fall out of favor with certain consumer groups, and we may fail to effectively adapt our marketing strategies or may decide to no longer utilize certain platforms for marketing. We might also fail to sufficiently evolve our digital marketing efforts to effectively utilize consumer data. Negative posts or comments about Mondelēz International, our brands or our employees on social media or web sites (whether factual or not) or security breaches related to the use of our social media accounts and failure to respond effectively to these posts, comments or activities could damage our reputation and brand image across the various regions in which we operate. Placement of our advertisements in social media may also result in damage to our brands if the media itself experiences negative publicity. Our brands may be associated with or appear alongside harmful content including outputs from generative artificial intelligence models, before these platforms or our own social media monitoring can detect this risk to our brand. In addition, we might fail to invest sufficiently in maintaining, extending and expanding our brands, our marketing efforts might not achieve desired results and we might be required to recognize impairment charges on our brands or related intangible assets or goodwill. Third parties may sell counterfeit or imitation versions of our products that are inferior or pose safety risks. When consumers confuse these counterfeit products for our products or have a bad experience with the counterfeit brand, they might refrain from purchasing our brands in the future, which could harm our brand image and sales. Third parties might also improperly use our brands as part of phishing or other scams, which could negatively affect our brand image. Failure to successfully maintain and enhance our16
Table of Contentsreputation and brand health could materially and adversely affect our company and product brands as well as our product sales, financial condition, results of operations, cash flows and stock price.
We must correctly predict, identify, interpret and meet changes in consumer preferences and demand and offer new and improved products that meet those changes.
Consumer preferences for food and snacking products change continually. Our success depends on our ability to predict, identify, interpret and meet the tastes, dietary habits, packaging, sales channel and other preferences of consumers around the world and to offer products that appeal to these preferences in the places and ways consumers want to shop. There may be further shifts in the relative size of shopping channels in addition to the increasing role of digital commerce for consumers. Our success relies upon managing this complexity to promote and bring our products to consumers effectively. Weak economic conditions, recessions, inflation, new or increased tariffs, and/or trade barriers, equity market volatility or other factors, such as global or local pandemics, severe or unusual weather events, and our response to political and social issues or catastrophic events, may affect consumer preferences and demand in ways that are hard to predict. Failure to offer, effectively promote and deliver products that appeal to consumers or to correctly judge consumer demand for our products will impact our ability to meet our growth targets, and our sales and market share could decrease and our profitability could suffer.
We must distinguish between short-term fads and trends and long-term changes in consumer preferences. Our sales can be adversely affected when we do not accurately predict which shifts in consumer preferences or category trends will be long-term or we fail to introduce new and improved products to satisfy changing preferences. In addition, because of our varied and geographically diverse consumer base, we must be responsive to local consumer needs, including with respect to when and how consumers snack and their desire for premium or value offerings. We must also provide an array of product formats, pack sizes and price points that satisfy the broad spectrum of consumer preferences and use marketing and advertising effectively to reach consumers at the right time with the right message. Increasing and disparate legal or regulatory restrictions on our labeling, advertising and consumer promotions, or our response to those restrictions, could limit our efforts to offer and deliver products that appeal to consumers. Likewise, new or increased tariffs and/or trade barriers and our response to these tariffs and barriers could limit our ability to offer and deliver our products on a cost-effective basis. Demand for our products could decrease and our profitability could suffer if we fail to expand and promote our product offerings successfully across product categories, rapidly develop products in faster growing and more profitable categories or reach consumers in efficient and effective ways leveraging data and analytics.Negative perceptions concerning the health, environmental and social implications of certain food products, ingredients, packaging materials, and sourcing or production methods could influence consumer preferences and acceptance of some of our products and marketing programs. For example, consumers have increasingly focused on well-being, including reducing sodium and added sugar consumption or using weight-loss drugs to reduce consumption overall or change consumption patterns, as well as the source and authenticity of ingredients in the foods they consume. Continuing to focus on and expand our well-being offerings while refining the ingredient and nutrition profiles of existing products is important to our growth, as is maintaining focus on ethical sourcing and supply chain management opportunities to address evolving consumer preferences. In addition, consumer preferences differ by region, and we must monitor and adjust our use of ingredients and other activities to respond to these regional preferences. We might be unsuccessful in our efforts to effectively respond to changing consumer preferences and social expectations. Continued negative perceptions or failure to satisfy consumer preferences could materially and adversely affect our reputation, brands, product sales, financial condition, results of operations, cash flows and stock price.
Our operations in certain emerging markets expose us to political, economic and regulatory risks.
Our growth strategy depends in part on our ability to expand our operations in emerging markets, including among others Brazil, China, India, Mexico, Argentina, Eastern Europe, the Middle East, Africa and Southeast Asia. However, some emerging markets have greater political, economic and currency volatility and greater vulnerability to infrastructure and labor disruptions than more established markets. In many countries, particularly those with emerging economies, engaging in business practices prohibited by laws and regulations with extraterritorial reach, such as the FCPA and the U.K. Bribery Act, or local anti-bribery laws may be more common. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials, including in connection with obtaining permits or engaging in other actions necessary to do business. Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition, results of operations and stock price.17
Table of ContentsIn addition, competition in emerging markets is increasing as our competitors grow their global operations and low-cost local manufacturers improve and expand their production capacities. Our success in emerging markets is critical to achieving our growth strategy. Failure to successfully increase our business in emerging markets and manage associated political, economic and regulatory risks could adversely affect our product sales, financial condition, results of operations, cash flows and stock price.
Our use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions.
We use information technology and third-party service providers to support our global business processes and activities, including supporting critical business operations such as manufacturing and distribution; communicating with our suppliers, customers and employees; maintaining effective accounting processes and financial and disclosure controls; executing mergers and acquisitions and other corporate transactions; conducting research and development activities; meeting regulatory, legal and tax requirements; and executing various digital marketing and consumer promotion activities. Global shared service centers managed by third parties provide an increasing number of services important to conducting our business, including accounting, internal control, human resources and computing functions.
Continuity of business applications and services has been, and may in the future be, disrupted by events such as infection by viruses or malware; other cybersecurity attacks; issues with or errors in systems’ maintenance or security; power outages; hardware or software failures; denial of service attacks; telecommunication failures; natural disasters; terrorist attacks; and other catastrophic occurrences. Our use of new and emerging technologies such as cloud-based services and mobile applications continues to evolve, presenting new and additional risks in managing access to our data, relying on third parties to manage and safeguard data, ensuring access to our systems and availability of third-party systems. In addition, we are experiencing new and more frequent attempts by third parties to gain access to our systems, such as through increased email phishing of our workforce.Our use of third-party technology and business services may expose us to cybersecurity breaches. These can include: (1) breaches of security systems, which could involve circumvention, denial-of-service attacks, or other cyberattacks such as hacking, phishing attacks, computer viruses, ransomware or malware, cyber extortion and (2) internal threats such as employee or insider errors, malfeasance, deepfake or social engineering schemes, physical breaches or other actions or attempts to exploit vulnerabilities. These threats could result in the misuse or breach of confidential information and Personally Identifiable Information belonging to us or our employees, customers, consumers, partners, suppliers, or government and regulatory authorities. Additionally, continued geopolitical turmoil, including the ongoing war in Ukraine and conflicts in the Middle East, has heightened the risk of cyberattacks. When risks such as these materialize, the need for us to coordinate with various third-party service providers and for third-party service providers to coordinate amongst themselves might increase challenges and costs to resolve related issues. Our information security program includes capabilities designed to evaluate and mitigate cyber risks arising from third-party service providers. Cyber threats to externally-hosted technology and business services are beyond our control. Additionally, new initiatives, such as those related to digital commerce and direct sales, that increase the amount of confidential information that we process and maintain increase our potential exposure to a cybersecurity breach. Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. If our controls, disaster recovery and business continuity plans or those of our third-party providers do not effectively respond to or resolve the issues related to any such disruptions in a timely manner, our product sales, financial condition, results of operations and stock price may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of intellectual property and damage to our reputation or brands.
We continue to invest and augment our cybersecurity program and posture with enhanced identity and access management solutions, multi-factor authentication, risk-based access for remote connectivity, privileged access management, network security, backup and disaster recovery, training and awareness, in addition to advance threat protection emanating from sophisticated, persistent and state-sponsored threat actors, including from internet browsing to email, further reducing our attack surface and likelihood of credential thefts and compromise. Further, we have 24/7 security operations, enhancing the monitoring and detection of threats in our environment, including the manufacturing environment and operational technologies, as well as adjusting information security controls based on our threat intelligence information. However, security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every breach or disruption on a timely basis. Due to the constantly evolving and complex nature of cyber threat actors, we cannot predict the form and impact of18
Table of Contentsany future incident, and the cost and operational expense of implementing, maintaining and enhancing protective measures to guard against increasingly complex and sophisticated cyber threats could increase significantly. Moreover, as cyberattacks increase in frequency and magnitude around the world, we may be unable to obtain cybersecurity insurance in the amounts and on terms we view as appropriate and favorable for our operations.
We transfer data across local, regional, and national borders to conduct our operations, and we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data. Privacy and data protection laws may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. For example, the European Union’s General Data Protection Regulation (“GDPR”) has greatly increased the jurisdictional reach of E.U. law, added a broad array of requirements for handling personal data including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance of up to 4% of global annual revenue for the preceding financial year in addition to potential restrictions on data transfer and processing. Our efforts to comply with multijurisdictional privacy and data protection laws and the uncertainty of new laws and regulations will likely increase the complexity of our processes and may impose significant costs and challenges that are likely to increase over time, and we could incur substantial penalties or be subject to litigation related to violation of existing or future data privacy laws and regulations.
We are subject to risks from unanticipated business disruptions.
We manufacture and source products and materials on a global scale. We utilize an interdependent supply chain – a complex network of suppliers and material needs, owned and leased manufacturing locations, external manufacturing partners, distribution networks, shared service delivery centers and information systems that support our ability to provide our products to our customers consistently. Factors that are hard to predict or beyond our control, like weather, natural disasters, water and energy availability, supply and commodity shortages, port congestions or delays, transport capacity constraints, terrorism, political unrest or armed hostilities (including the ongoing war in Ukraine and conflicts in the Middle East), cybersecurity incidents, labor shortages, strikes or work stoppages, new or increased tariffs and/or trade barriers, operational and/or financial instability of our key suppliers and other vendors or service providers, government shutdowns or health pandemics, including any potential impact of climate change on these factors, could damage or disrupt our operations or those of our suppliers, their suppliers, our external manufacturing partners, distributors or other business partners. Failure to effectively prepare for and respond to disruptions in our operations, for example, by not finding alternative suppliers or replacing capacity at key or sole manufacturing or distribution locations or by not quickly repairing damage to our information, production or supply systems, can cause delays in delivering or the inability to deliver products to our customers, and the quality and safety of our products might be negatively affected. Moreover, disputes with significant customers or suppliers, including disputes regarding pricing or performance, could adversely affect our sales, financial condition, and results of operations. The occurrence of a material or extended disruption may cause us to lose our customers’ or business partners’ confidence or suffer damage to our reputation, and long-term consumer demand for our products could decline. We use insurance to transfer our financial risk related to these exposures, but some of the risks we face are difficult or impossible to insure and the timing of insurance recoveries may not match the timing of the financial loss we incur. We are subject to risk related to operational safety, including risk of fire, explosion or accidental contamination. We could also fail to achieve our strategic objectives due to capability or technology deficiencies related to our ongoing reconfiguration of our supply chain to drive efficiencies and fuel growth. Further, our ability to supply multiple markets with a streamlined manufacturing footprint may be negatively impacted by portfolio complexity, significant changes in trade policies, changes in volume produced and changes to regulatory restrictions or labor-related or other constraints on our ability to adjust production capacity in the markets in which we operate. These events could materially and adversely affect our product sales, financial condition, results of operations, cash flows and stock price.We may not successfully identify, complete or manage strategic transactions.We regularly evaluate a variety of potential strategic transactions globally, including acquisitions, divestitures, joint ventures, equity method investments and other strategic alliances that could further our strategic business objectives, and acquisitions and joint ventures are an important part of our strategy to increase our exposure to fast-growing snacking segments, fill geographic white spaces and expand into adjacent categories. For example, in 2024 we sold our remaining equity investment in JDE Peet’s N.V. and acquired Evirth (Shanghai) Industrial Co., Ltd. In 2023, we completed the sale of our developed market gum business in the United States, Canada and Europe and sold our remaining equity investment in Keurig Dr Pepper Inc., and in 2022 we acquired Chipita Global S.A.,19
Table of ContentsClif Bar & Company and Ricolino. Such transactions and investments present significant challenges and risks. We may not successfully identify potential strategic transactions to pursue, may not have counterparties willing to transact with us, or we may not successfully identify or manage the risks presented by these strategic transactions, or complete such transactions. Our success depends, in part, upon our ability to identify suitable transactions; negotiate favorable contractual terms; comply with applicable regulations and receive necessary consents, clearances and approvals (including regulatory and antitrust clearances and approvals that may face increased scrutiny); integrate or separate businesses; manage or achieve performance of ESG goals and initiatives; realize the full extent of the benefits, cost savings or synergies presented by strategic transactions; offset loss of revenue associated with divested brands or businesses; effectively implement control environment processes; minimize adverse effects on existing business relationships with suppliers and customers; achieve accurate estimates of fair value; minimize potential loss of customers or key employees; and minimize indemnities and potential disputes with buyers, sellers and strategic partners. In addition, execution or oversight of strategic transactions may result in the diversion of management attention from our existing business and may present financial, managerial and operational risks.
With respect to acquisitions and joint ventures in particular, we are also exposed to potential risks based on our ability to conform standards, controls, policies and procedures, and business cultures; consolidate and streamline operations and infrastructures; identify and eliminate, as appropriate, redundant and underperforming operations and assets; manage inefficiencies associated with the integration of operations; and coordinate timely and ongoing compliance with applicable laws, including antitrust and competition, anti-bribery and corruption and import/export laws. Equity investments and other strategic alliances pose additional risks, as we could share ownership in both public and private companies and in some cases management responsibilities with one or more other parties whose objectives for the alliance may diverge from ours over time, who may not have the same priorities, strategies or resources as we do, or whose interpretation of applicable policies may differ from our own. Transactions or ventures into which we enter might not meet our financial and non-financial control and compliance expectations or yield the anticipated benefits. Depending on the nature of the business ventures, including whether they operate globally, these ventures could also be subject to many of the same risks we are, including political, economic, regulatory and compliance risks, currency exchange rate fluctuations, and volatility of commodity and other input prices.
Furthermore, we may not be able to complete, on terms favorable to us, desired or proposed divestitures of businesses that do not meet our strategic objectives or our growth or profitability targets. Our divestiture activities, or related activities such as reorganizations, restructuring programs and transformation initiatives, may require us to provide or receive transitional support and/or ongoing commercial relationships, recognize impairment charges or take action to reduce costs that remain after we complete a divestiture. Gains or losses on the sales of, or lost operating income from, those businesses may also affect our profitability. Any of these risks could materially and adversely affect our business, product sales, financial condition, results of operations, cash flows and stock price.Macroeconomic and Industry Risks
Our business is subject to an increasing focus on sustainability matters.We have announced, and may from time to time announce, certain initiatives, including goals, targets and other objectives, related to sustainability matters. These statements reflect our current plans and do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these goals, targets and other objectives expose us to numerous operational, reputational, financial, legal and other risks. Our ability to achieve any stated goal, target or objective is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include evolving regulatory requirements affecting sustainability standards or disclosures or imposing different requirements, the reliance on other value chain actors to implement the required changes, the pace of changes in technology and the availability of suppliers that can meet our sustainability and other standards. In addition, statements about our sustainability goals, targets and other objectives, and progress against those goals, targets and other objectives, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. Our selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time to time or differ from those of others. Methodologies for reporting this data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations, and other changes in circumstances, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. Further, developing and collecting, measuring and reporting ESG-related information and metrics can20
Table of Contentsbe costly, difficult and time consuming and is subject to evolving reporting standards, including recent legislation in California related to reporting greenhouse gas emissions and climate-related financial risk, the SEC’s climate-related reporting requirements, and similar proposals by other international regulatory bodies such as the Corporate Sustainability Reporting Directive in the European Union, especially to the extent these standards are not harmonized or consistent.
Our business may face increased scrutiny from the investment community, customers, consumers, employees, activists, media, regulators and other stakeholders related to our sustainability initiatives, including the goals, targets and objectives that we announce, and our methodologies and timelines for pursuing them. At the same time, stakeholders and regulators have increasingly expressed or pursued opposing views, legislation and investment expectations with respect to sustainability initiatives, including the enactment or proposal of “Anti-ESG” legislation or policies. If our sustainability practices do not meet evolving investor or other stakeholder expectations and standards or if we are unable to satisfy all stakeholders, our reputation, our ability to attract or retain employees, our sales and our attractiveness as an investment, business partner or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives, to comply with ethical, environmental or other standards, regulations or expectations, or to satisfy various reporting standards with respect to these matters, within the timelines we announce, or at all, could have the same negative impacts, as well as expose us to government enforcement actions, fines and private litigation. Even if we achieve our goals, targets and objectives, we may not realize all of the benefits that we expected at the time they were established.Climate change might adversely impact our supply chain or our operations.Scientific evidence collected by the Intergovernmental Panel on Climate Change demonstrates that carbon dioxide and other greenhouse gases in the atmosphere have caused and will in the future cause changes in weather patterns around the globe that expose us to physical and transition risk. Physical risks include the increasing frequency of extreme weather events and natural disasters and effects on water availability and quality and biodiversity loss. These impacts increase risks to the global food production and distribution system and to the safety and resilience of the communities where we live, work and source our ingredients, and could further decrease food security for communities around the world. Decreased agricultural productivity caused by climate change has limited and in the future may continue to limit the availability of the commodities we purchase and use and increase the costs of such products. These include cocoa, which is a critical raw material for our chocolate and biscuits & baked snacks portfolios that is particularly sensitive to changes in climate and has recently had a global decrease in availability and increase in price, as well as other raw materials such as dairy, wheat, vegetable oils, sugar and nuts. Weather events such as floods, severe storms or water shortages that are partially caused or exacerbated by climate change might disrupt our business operations or those of our suppliers, their suppliers, our external manufacturing partners, distributors or other business partners and could increase our insurance and other operating costs.
Transition risks include increased focus by federal, state and local regulatory and legislative bodies globally regarding environmental policies relating to climate change, regulating greenhouse gas emissions (including carbon pricing or a carbon tax), energy policies, disclosure obligations and sustainability (including single use plastics). New legal and regulatory requirements have increased and could continue to increase our operating costs for things like energy or packaging through taxes or regulations, including payments under extended producer responsibility policies, taxes on specific packaging material types and targets to increase the use of reuse/refill delivery models. Regulations intended to reduce carbon emissions, including any actual or proposed carbon taxes, could also substantially increase our product supply chain and distribution costs. Even if we make changes to align ourselves with such legal or regulatory requirements, we may still be subject to significant penalties or potential litigation if such laws and regulations are interpreted and applied in a manner inconsistent with our practices. Similarly, we may incur substantial costs if such legal or regulatory requirements are subsequently reversed or modified. Concern about climate change might cause consumer preferences to switch away from products or ingredients considered to have high climate change impact and towards products that are more sustainably grown and made. We expect to incur additional costs as we evolve our portfolio and engage in due diligence, verification and reporting in connection with our ESG and sustainability initiatives. We might not effectively address increased attention from the media, shareholders, activists and other stakeholders on climate change and related environmental sustainability matters, including deforestation, land use, water use and packaging, including plastic. Those stakeholders might also have requests or proposals that are not aligned with the focus of our efforts on climate change and ESG matters. Climate change-related impacts could also reduce demand for our products. If costs for raw materials increase or availability decreases, we raise prices for our products and our competitors respond differently to those21
Table of Contentscost or availability pressures, demand for our products and our market share could suffer. We have also experienced decreased demand for chocolate during periods when temperatures are warmer.
In 2021, we announced our goal of net zero greenhouse gas emissions by 2050. Achieving this goal will require significant transformation of our business, capital investment and the development of technology that might not currently exist. We might incur significant additional expenses or be required to recognize impairment charges in connection with our efforts, and we might be unable to achieve, or be perceived to fail to achieve, our goal. Any or all of these risks could materially and adversely affect our ability to meet the needs of our customers, reputation, product sales, financial condition, results of operations, cash flows and stock price.
Our retail customers are consolidating, and we must offer an effective value proposition in order to compete against retailer and other economy brands.
Retail customers, such as supermarkets, discounters, digital commerce merchants, warehouse clubs and food distributors in the European Union, the United States and other major markets, continue to consolidate, form buying alliances or be acquired by new entrants in the food retail market, resulting in fewer, larger customers. Large retail customers and customer alliances can delist our products or reduce the shelf space allotted to our products and demand lower pricing, increased promotional programs or longer payment terms. Retail customers might also adopt these tactics in their dealings with us in response to the significant growth in online retailing for consumer products, which is outpacing the growth of traditional retail channels. The growth of alternative online retail channels, such as direct-to-consumer and electronic business-to-business, may adversely affect our relationships with our large retail and wholesale customers.In addition, larger retail customers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own retailer and other economy brands that compete with some of our products. Our products must provide higher quality or value to our consumers than the less expensive alternatives, particularly during periods of economic uncertainty, recessions or significant inflation. Consumers may not buy our products if they perceive little difference between the quality or value of our products and those of retailer or other economy brands. If consumers prefer or otherwise choose to purchase the retailer or other economy brands, we can lose market share or sales volumes, or we may need to shift our product mix to lower margin offerings.Retail consolidation also increases the risk that adverse changes in our customers’ business operations or financial performance will have a corresponding material adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease or cancel purchases of our products, or delay or fail to pay us for previous purchases. Failure to effectively respond to retail consolidation, increasing retail power and competition from retailer and other economy brands could materially and adversely affect our reputation, brands, product sales, financial condition, results of operations, cash flows and stock price.We are subject to changes in our relationships with significant customers, suppliers and distributors.During 2024, no single customer accounted for more than 10% of our net revenues. However, there can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing and develop their own brands. The loss of or disruptions related to a significant customer could result in a material reduction in sales or change in the mix of products we sell to the customer. This could materially and adversely affect our product sales, financial condition, results of operations, cash flows and stock price.Disputes with significant customers, suppliers or distributors, including disputes related to pricing or performance and any resultant refusal to provide shelf and/or retail spaces for our products, could adversely affect our ability to supply or deliver products or operate our business and could materially and adversely affect our product sales, financial condition and results of operations. The financial condition of our significant customers and business partners are affected by events that are largely beyond our control. New regulations can also affect our commercial practices and our relationship with customers, suppliers or distributors. Deterioration in the financial condition of significant customers, suppliers or distributors or regulations affecting our relationship with these parties could materially and adversely affect our product sales, financial condition, results of operations, cash flows and stock price.22
Table of ContentsWe may be unable to hire or retain and develop key personnel or a highly skilled and diverse global workforce or effectively manage changes in our workforce and respond to shifts in labor availability.
We must attract, hire, retain and develop effective leaders and a highly skilled and diverse global workforce. We compete to hire new personnel with a variety of capabilities in the many countries in which we manufacture and market our products and then to develop and retain their skills and competencies. We have experienced and could continue to experience unplanned or increased turnover of employees with key capabilities, and we could fail to develop adequate succession plans for leadership positions or hire and retain a workforce with the skills and in the locations we need to operate and grow our business. We could also fail to attract and develop personnel with key emerging capabilities that we need to continue to respond to changing consumer and customer needs and grow our business, including skills in the areas of advanced technology, artificial intelligence, machine learning, digital commerce, data analytics and supply chain expertise. Occurrence of any of these conditions could deplete our institutional knowledge base and erode our competitiveness.
We are experiencing an increasingly tight and competitive labor market and could face unforeseen challenges in the availability of labor. A sustained labor shortage or increased turnover rates within our employee base as a result of general macroeconomic factors (including high inflation and hyperinflation in certain markets), have led and in the future could continue to lead to increased costs, such as increased overtime to meet demand and increased wages to attract and retain employees. We have also been negatively affected and could continue to be negatively affected by labor shortages or constraints experienced by our partners, including our external manufacturing partners, freight providers, other strategic suppliers and distributors. Failure to achieve and maintain a diverse workforce and leadership team, compensate our employees competitively and fairly, maintain a safe and inclusive environment or promote the well-being of our employees could affect our reputation and also result in lower performance and an inability to retain valuable employees.
We must address changes in, and that affect, our workforce and satisfy the legal requirements associated with how we manage and compensate our employees. This includes our management of employees represented by labor unions or workers’ councils, who represent approximately 60% of our 78,000 employees outside the United States and approximately 20% of our 12,000 U.S. employees. Strikes, work stoppages or other forms of labor unrest by our employees or those of our suppliers, distributors or other business partners, or situations like the renegotiation of collective bargaining agreements, have in the past and may in the future cause disruptions to our supply chain, manufacturing or distribution processes. Changes in immigration laws and policies or restrictions could make it more difficult for us to recruit or relocate skilled employees. We could also fail to effectively respond to evolving perceptions and goals of those in our workforce or whom we might seek to hire with respect to flexible working or other matters. These risks could materially and adversely affect our reputation, ability to efficiently operate our manufacturing facilities and overall business and meet the needs of our customers, product sales, financial condition, results of operations, cash flows and stock price.Legal and Regulatory Risks
We face risks related to complying with changes in and inconsistencies among laws and regulations in many countries in which we operate.Our activities around the world are highly regulated and subject to government oversight. Various laws and regulations govern food production, sourcing, packaging and waste management (including packaging containing PFAS), storage, distribution, sales, advertising, labeling and marketing, as well as intellectual property, competition, antitrust, trade and export controls, labor, tax, social and environmental matters, privacy, data protection, and health and safety practices. Government authorities regularly change laws and regulations, their interpretations of existing laws and regulations, and their enforcement priorities. Our failure to comply with existing laws and regulations (or allegations thereof), or to make changes necessary to comply with new or revised laws and regulations or evolving interpretations and application of existing laws and regulations, and differing or competing laws and regulations across the markets where our products are made, manufactured, distributed and sold, could materially and adversely affect our product sales, financial condition, results of operations and cash flows, including as a result of higher compliance costs, higher capital expenditures and higher production costs. For instance, our financial condition, results of operations and cash flows could be negatively affected by the regulatory and economic impact of changes in the corporate tax policies of the United States and other countries; tariff policies and trade relations among the United States and other countries, including China, Mexico, Canada and the European Union; and changes within the European Union. Evolving expectations on ESG disclosures and reporting will also result in new regulatory actions. In addition, the results of third-party studies (whether or not scientifically valid) purporting to23
Table of Contentsassess the health implications of consumption of certain ingredients or substances present in certain of our products or packaging materials have resulted in and could continue to result in our being subject to new taxes and regulations or lawsuits that can adversely affect our business.
We may decide or be required to recall products or be subjected to product liability claims or litigation.
We could decide, or laws or regulations could require us, to recall products due to suspected or confirmed deliberate or unintentional product contamination, including contamination of ingredients we use in our products that third parties supply, spoilage or other adulteration, the introduction of foreign objects, food-borne illnesses, product mislabeling or product tampering. These risks could be heightened in light of increased pressure on our suppliers from supply chain challenges. In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, consumers might reduce their overall consumption of products in this category. Any of these events could materially and adversely affect our reputation, brands, product sales, financial condition, results of operations, cash flows and stock price.
We may also suffer losses when our products or operations or those of our suppliers violate applicable laws or regulations, or when our or our suppliers’ products cause injury, illness or death. In addition, our marketing could face claims of false or deceptive advertising or other criticism. A significant product liability or related claim or other legal judgment against us, a regulatory enforcement action, a widespread product recall or comments relating to the safety of our products could materially and adversely affect our reputation and profitability. Moreover, even if a product liability, consumer fraud or other claim, litigation or investigation has no merit, is not pursued or is unsuccessful, the negative publicity surrounding assertions against our products or processes or conduct could materially and adversely affect our reputation, brands, product sales, product inventory, financial condition, results of operations, cash flows and stock price, and we could incur significant expense responding to such a claim, litigation or investigation. For example, a recent purported personal injury lawsuit filed against a number of food companies, including us ( Bryce Martinez vs. Kraft Heinz Co. Inc. et al. ), alleged that certain food products we and other companies make are addictive and cause health problems. While we believe that this lawsuit is without merit and intend to vigorously defend ourselves, we cannot predict the outcome or the impact of such litigation or similar lawsuits on our business or reputation. In addition, while we currently maintain insurance coverage that, subject to its terms and conditions, is intended to address costs associated with certain aspects of product recalls, this insurance coverage may not, depending on the specific facts and circumstances surrounding an incident, cover all losses or all types of claims that arise from an incident, or the damage to our reputation or brands that may result from an incident.
We face risks related to legal or tax claims, litigation, investigations or other regulatory enforcement actions.
We operate around the world in environments with constantly evolving legal, tax and regulatory frameworks, and we are subject to risk of litigation, legal or tax claims, investigations, or other regulatory enforcement actions. Actions by our employees, contractors, agents or others in violation of our policies and procedures could lead to deficiencies in our internal or other controls or violations, unintentional or otherwise, of laws and regulations. We could also be subject to litigation, legal claims, investigations or regulatory actions in connection with the continued evolution of our sustainability and ESG-related initiatives. In addition, we may be impacted by litigation trends, including class action, individual or multi-jurisdiction lawsuits, or investigations or enforcement actions involving consumers, employees, shareholders or other stakeholders. For example, as a global snacking company, we are subject to increased regulatory scrutiny and face legal challenges in a variety of jurisdictions concerning the alleged health implications of certain food products and our methods in marketing those products. When litigation, legal or tax claims, investigations or regulatory enforcement actions arise out of our failure or alleged failure to comply with applicable laws, regulations or controls, we could be subject to civil and criminal penalties, and voluntary and involuntary document requests, that could materially and adversely affect our reputation, product sales, financial condition, results of operations, cash flows and stock price. Even if a claim, lawsuit, investigation, enforcement action or other action is unsuccessful, without merit or not pursued to completion, the reputational impact or cost of responding to such a claim, including expenses and management time, could adversely affect us.We face risks related to adequately protecting our valuable intellectual property rights.We consider our intellectual property rights, particularly and most notably our trademarks, but also our patents, copyrights, registered designs, proprietary trade secrets, recipes, technology, know-how and licensing agreements, to be a significant and valuable part of our business. We attempt to protect our intellectual property rights by taking24
Table of Contentsadvantage of a combination of patent, trademark, copyright and trade secret laws in various countries, as well as licensing agreements, third-party nondisclosure and assignment agreements and policing of third-party misuses and infringement of our intellectual property in traditional retail and digital environments. Our failure to obtain or adequately protect our intellectual property rights (including in response to developments in artificial intelligence technologies), or any change in law or other changes that serve to lessen or remove the current legal protections of our intellectual property, may diminish our competitiveness and could materially harm our business, financial condition and stock price.We may be unaware of potential third-party claims of intellectual property infringement relating to our technology, brands or products. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert management’s and other key personnel’s attention from our business operations. Third-party claims of intellectual property infringement might require us to pay monetary damages or enter into costly license agreements. We also may be subject to injunctions against development and sale of certain of our products, which could include removal of existing products from sale. Any of these occurrences could materially and adversely affect our reputation, brand health, ability to introduce new products or improve the quality of existing products, product sales, financial condition, results of operations, cash flows and stock price.
Financial Risks
We face risks related to tax matters, including changes in tax laws and rates, disagreements with taxing authorities and imposition of new taxes.As a global company, we are subject to taxation in the United States and various other countries and jurisdictions. As a result, our effective tax rate is determined based on the income and applicable tax rates in the various jurisdictions in which we operate. Our future effective tax rates could be affected by changes in the composition of earnings in countries with differing tax rates or other factors, and adverse changes in the underlying profitability or financial outlook of our operations could lead to changes in the realizability of our deferred tax assets, resulting in a charge to our effective tax rate.
Changes in tax laws in the U.S. or in other countries where we have significant operations, including rate changes or corporate tax provisions that could disallow or tax perceived base erosion or profit shifting payments or subject us to new types of tax, could materially affect our effective tax rate and our deferred tax assets and liabilities. As of January 2025, the change in U.S. presidential administration and control of U.S. Congress may produce changes to U.S. tax legislation. In addition, aspects of U.S. tax laws may lead foreign jurisdictions to respond by enacting additional tax legislation that is unfavorable to us. As of December 31, 2024, numerous countries have now enacted the Organization of Economic Cooperation and Development’s model rules on a global minimum tax, with the earliest effective date being for taxable years beginning after December 31, 2023. Important details of these minimum tax regimes are still being considered. Based on the guidance available thus far, we do not expect this legislation to have a material impact on our consolidated financial statements, but we will continue to evaluate it as additional guidance and clarification becomes available.We are also subject to tax audits by governmental authorities. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liabilities, including interest and penalties. Unexpected results from one or more such tax audits could significantly adversely affect our effective tax rate, results of operations, cash flows and stock price.
We are subject to currency exchange rate fluctuations.As of December 31, 2024, we sold our products in over 150 countries and had operations in approximately 80 countries. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. Our financial position and operating results are sensitive to movements in currency exchange rates, which have recently been more volatile, because a large portion of our assets, liabilities, revenue and expenses must be translated into U.S. dollars for reporting purposes or converted into U.S. dollars to service obligations such as our U.S. dollar-denominated indebtedness and to pay dividends to our shareholders. In addition, movements in currency exchange rates affect transaction costs because we source product ingredients from various countries. Our efforts to mitigate our exposure to exchange rate fluctuations, primarily on cross-currency transactions, may not be successful. We factor exchange rate impacts into our local pricing decisions, but there may be lags in implementing pricing changes due to competitive pressures or customer or regulatory constraints. We also hedge a number of risks including exposures to foreign exchange rate movements and volatility of interest rates that could25
Table of Contentsimpact our future borrowing costs. Hedging of these risks could potentially subject us to counter-party credit risk. In addition, local economies, monetary policies and currency hedging availability affect our ability to hedge against currency-related economic losses. We might not be able to successfully mitigate our exposure to currency risks due to factors such as continued global and local market volatility, actions by foreign governments, trade disputes, economic sanctions, political uncertainty, inflation, interest rates and limited hedging opportunities. For instance, in December 2023, the Argentinean peso devalued significantly in excess of historic levels. Accordingly, changes in the currency exchange rates that we use to translate our results into U.S. dollars for financial reporting purposes or for transactions involving multiple currencies could materially and adversely affect future demand for our products, our financial condition, results of operations, cash flows and stock price, and our relationships with customers, suppliers and employees in the short or long-term.
Weak financial performance, downgrades in our credit ratings, illiquid global capital markets and volatile global economic conditions could limit our access to short-term financing, reduce our liquidity and/or increase our borrowing costs.
We regularly access the commercial paper markets in the United States and Europe for ongoing funding requirements. A downgrade in our credit ratings by a credit rating agency could increase our borrowing costs and adversely affect our ability to issue commercial paper. Disruptions in the global commercial paper market or other effects of volatile economic conditions on the global credit markets also could reduce the amount of commercial paper that we could issue and raise our borrowing costs for both short- and long-term debt offerings. Additionally, we use cash management programs, such as factoring and supply chain finance arrangements, in our business when circumstances are favorable to manage liquidity. If these programs or underlying customer or supplier terms do not continue and we are unable to secure alternative programs, our cash and working capital may be negatively affected and we may have to utilize our various financing arrangements or increase our long-term borrowings for short- and long-term liquidity requirements. Limitations on our ability to access the commercial paper markets, a reduction in our liquidity or an increase in our borrowing costs could materially and adversely affect our financial condition, results of operations and stock price.Volatility in the global capital markets, interest rates, inflation rates, our participation in multiemployer pension plans and other factors could increase our costs relating to our employees’ pensions.We sponsor defined benefit pension plans for a number of our employees throughout the world and also contribute to other employees’ pensions under defined benefit plans that we do not sponsor. At the end of 2024, the projected benefit obligation of the defined benefit pension plans we sponsor was $7.9 billion and plan assets were $8.5 billion.
For defined benefit pension plans that we maintain, the difference between plan obligations and assets, or the funded status of the plans, significantly affects the net periodic benefit costs of our pension plans and the ongoing funding requirements of those plans. Our largest funded defined benefit pension plans are funded with trust assets invested in a globally diversified portfolio of investments, including equities and corporate and government debt. Among other factors, changes in interest rates, inflation rates, mortality rates, early retirement rates, investment returns, funding requirements in the jurisdictions in which the plans operate and the market value of plan assets affect the level of plan funding, cause volatility in the net periodic pension cost and impact our future funding requirements. Legislative and other governmental regulatory actions may also increase funding requirements for our pension plan benefit obligations. Volatility in the global capital markets may increase the risk that we will be required to make additional cash contributions to these company-sponsored pension plans and recognize further increases in our net periodic pension cost.We also participate in multiemployer pension plans for certain U.S. union-represented employees. As a participating employer under multiemployer pension plans, we may owe more than the contributions we are required to make under the applicable collective bargaining agreements. For example, if we partially or completely withdraw from a multiemployer pension plan, we may be required to pay a partial or complete withdrawal liability, such as the withdrawal liability we are paying in connection with our complete withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund in 2018. This kind of withdrawal liability will generally increase if there is also a mass withdrawal of other participating employers or if the plan terminates. See Note 11, Benefit Plans , to the consolidated financial statements for more information on our multiemployer pension plans.
A significant increase in our pension benefit obligations, future funding requirements or net periodic benefit costs could curtail our ability to invest in the business and adversely affect our financial condition, results of operations, cash flows and stock price.
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Item 7 · Management's Discussion & Analysis
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FY 2023-12-31 (earlier)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis contains forward-looking statements. It should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Forward-Looking Statements and Item 1A, Risk Factors .
Overview of Business and Strategy
Our core business is making and selling chocolate, biscuits and baked snacks, with additional businesses in adjacent, locally relevant categories including gum & candy, cheese & grocery and powdered beverages around the world.
We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on four strategic priorities: accelerating consumer-centric growth, driving operational excellence, creating a winning growth culture and scaling sustainable snacking. We believe the successful implementation of our strategic priorities and leveraging of our attractive global footprint, strong core of iconic global and local brands, marketing, sales, distribution and cost excellence capabilities, and top talent with a growth mindset, will drive consistent top- and bottom-line growth, enabling us to continue to create long-term value for our shareholders.
For more detailed information on our business and strategy, refer to Item 1, Business.
Recent Developments and Significant Items Affecting Comparability
Macroeconomic environmentWe continue to observe significant market and geopolitical uncertainty, inflationary pressures, supply constraints and exchange rate volatility. As a result, we experienced significantly higher operating costs, including higher overall raw material, labor and energy costs that have continued to rise. Our overall outlook for future snacks revenue growth remains strong; however, we anticipate ongoing volatility. We will continue to proactively manage our business in response to the evolving global economic environment, related uncertainty and business risks while also prioritizing and supporting our employees and customers. We continue to take steps to mitigate impacts to our supply chain, operations, technology and assets.War in UkraineIn February 2022, following the Russian military invasion of Ukraine, we stopped production and closed our facilities in Ukraine; since then we have taken steps to protect the safety of our employees and to restore operations at our two manufacturing facilities, which were significantly damaged in March 2022. We continue to support our Ukraine employees, including paying salaries to those not yet able to return to work until full production returns. See Note 1, Summary of Significant Accounting Policies - War in Ukraine, to the consolidated financial statements and refer to Items Affecting Comparability of Financial Results for additional information.
We have suspended new capital investments and our advertising spending in Russia, but as a food company with more than 2,500 employees in the country, we have not ceased operations given we believe we play a role in the continuity of the food supply. We continue to evaluate the situation in Ukraine and Russia and our ability to control our operating activities and businesses on an ongoing basis and comply with applicable international sanctions, and we continue to consolidate both our Ukrainian and Russian subsidiaries. During 2023, Ukraine generated 0.4% and Russia generated 2.9% of consolidated net revenue and during 2022, Ukraine generated 0.3% and Russia generated 4.0% of consolidated net revenue. Our Russian net revenues declined in 2023 due to continued suspension of advertising as well as currency weakness. Despite the decrease in revenues, the profitability of our Russian business in 2023 remained above historical levels. We cannot predict if the recent strength in our Russian business will continue in the future.
Our operations in Russia are subject to risks, including the temporary or permanent loss of assets or our ability to conduct business operations in Russia and the partial or full impairment of our Russian assets in future periods, or the termination of our business operations, based on actions taken by Russia, other parties or us. For more information, see Item 1A, Risk Factors , including the risk entitled “ The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations. ”32
Table of ContentsDevelopments in the Middle EastIn October 2023, conflict developed in the Middle East between Hamas and Israel, and conflict has expanded throughout the region. In the fourth quarter of 2023, we experienced minor sales impact related to this conflict in certain AMEA markets, but this did not have a material impact on our business, results of operations or financial condition. We continue to evaluate the impacts of these developments on our business and we cannot predict if it will have a significant impact in the future.Acquisitions and DivestituresDuring 2022, we completed the following acquisitions to strategically complement and expand our existing portfolio:
• Ricolino, a confectionery business with products sold primarily in Mexico
• Clif Bar & Company (“Clif Bar”), a leading U.S. maker of nutritious energy bars with organic ingredients
• Chipita Global S.A. ("Chipita"), a high-growth leader in the central and Eastern European croissant and baked snacks categoryAdditionally in 2022, we announced our intention to divest our developed market gum and global Halls candy businesses and in the fourth quarter of 2022, we announced an agreement to sell the developed market gum business. On October 1, 2023, we completed the sale of our developed market gum business to Perfetti Van Melle Group, excluding the Portugal business which we retained pending regulatory approval. After obtaining the regulatory approval, w e completed the sale of the Portugal business to Perfetti Van Melle Group on October 23, 2023.Refer to Note 2, Acquisitions and Divestitures , and Liquidity and Capital Resources for additional details.
Investment Transactions
JDE Peet’s Transactions (Euronext Amsterdam: “JDEP”)In 2023, we sold approximately 9.9 million of our shares, which reduced our ownership interest by 2.0 percentage points, from 19.7% to 17.7%. We recorded a loss of €21 million ($23 million). In 2022, we sold approximately 18.6 million of our shares back to JDEP, which reduced our ownership interest by approximately 3.0 percentage points. We recorded a loss of €8 million ($8 million). In 2021, we issued €300 million exchangeable bonds. If all bonds were redeemed in exchange for shares, this would represent approximately 8.5 million shares or approximately 10% of our equity interest in JDEP.Keurig Dr Pepper Transactions (Nasdaq: "KDP")In 2023, we sold the remainder of our shares in KDP, representing approximately 76 million shares. Our reduction in ownership to below 5% eliminated our significant influence over KDP, resulting in a change in accounting from equity method investment accounting to accounting for equity interests with readily determinable fair values in the first quarter of 2023. Prior to this change, we recorded a pre-tax gain on equity method transactions of $493 million ($368 million after-tax)- in 2023. After the change in accounting, we recorded pre-tax gains for marketable securities of $606 million in 2023. In 2021, we sold approximately 42.7 million shares in KDP, which reduced our ownership interest by 3.0 percentage points to 5.3%. We recorded a pre-tax gain of $768 million (or $581 million after-tax).For additional information, refer to Note 7, Investments and Note 10, Financial Instruments.TaxesWe continue to monitor existing and potential future tax reform around the world. As of December 31, 2023, numerous countries have now enacted the Organization of Economic Cooperation and Development’s model rules on a global minimum tax, with the earliest effective date being for taxable years beginning after December 31, 2023. Based on the guidance available thus far, we do not expect this legislation to have a material impact on our consolidated financial statements but we will continue to evaluate it as additional guidance and clarification becomes available.
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Financial Outlook
We seek to achieve profitable, long-term growth and manage our business to attain this goal using our key operating metrics: Organic Net Revenue, Adjusted Operating Income and Adjusted EPS. We use these non-GAAP financial metrics and related computations, particularly growth in profit dollars, to evaluate and manage our business and to plan and make near- and long-term operating and strategic decisions. As such, we believe these metrics are useful to investors as they provide supplemental information in addition to our U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) financial results. We believe it is useful to provide investors with the same financial information that we use internally to make comparisons of our historical operating results, identify trends in our underlying operating results and evaluate our business. We believe our non-GAAP financial measures should always be considered in relation to our GAAP results. Refer to Non-GAAP Financial Measures for the definitions of our non-GAAP financial measures and Consolidated Results of Operations for the respective reconciliations.
In addition to monitoring our key operating metrics, we monitor a number of developments and trends that could impact our revenue and profitability objectives:
Demand
We monitor consumer spending and our market share within the food and beverage categories in which we sell our products. Core snacks categories continued to expand due to the continued growth of snacking as a consumer behavior around the world. As part of our strategic plan, we seek to drive category growth by leveraging our local and consumer-focused commercial approach, making investments in our brand and snacks portfolio, building strong routes to market in both emerging and developed markets and improving our availability across multiple channels. We believe these actions will help drive demand in our categories and strengthen our positions across markets.
Long-Term Demographics and Consumer Trends
Snack food consumption is highly correlated to GDP growth, urbanization of populations and rising discretionary income levels associated with a growing middle class, particularly in emerging markets. We believe that snacks continue to be a source of comfort as well as excitement and variety for consumers. Social media increasingly helps consumers find food trends, inspiration and connection on their social media and other feeds. Consumers are also interested in buying snacks conveniently, whether through same-day delivery platforms, shipped sources or different retail settings. Many consumers also continue to prioritize sustainability in their purchase decisions, valuing sustainably sourced ingredients, low carbon footprint preparation and lower waste packaging. We seek to continue to offer snacks that meet consumer needs and preferences and align with our strategic priorities.
PricingOur net revenue growth and profitability may be affected as we adjust prices to address new conditions, such as increasing input and operating costs due to supply, transportation and labor constraints and higher cost trends. We adjust our product prices based on a number of variables including market factors, transportation, logistics and changes in our product input costs, and we have increased prices to control costs given significant cost inflation.Operating CostsOur operating costs include raw materials, labor, selling, general and administrative expenses, taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax planning. To remain competitive on our operating structure, we continue to work on programs to expand our profitability, such as our Simplify to Grow Program, which is designed to bring about significant reductions in our operating cost structure in both our supply chain and overhead costs. We experienced significantly higher operating costs, including higher overall raw material and labor costs that have continued to rise.
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Summary of Results• Net revenues were approximately $36.0 billion in 2023 and $31.5 billion in 2022, an increase of 14.4% in 2023 and an increase of 9.7% in 2022. In both 2023 and 2022, our net revenue growth continued to reflect increased demand for most of our snack category products in both our emerging and developed markets.– Net revenues increased in 2023, driven by higher net pricing, incremental net revenues from our acquisitions of Clif Bar and Ricolino in 2022, favorable volume/mix and incremental net revenue from a short-term distributor agreement related to the sale of our developed market gum business, partially offset by a significant impact from unfavorable currency translation, as the U.S. dollar strengthened relative to most currencies we operate in compared to exchange rates in the prior year, and the impact of our developed market gum divestiture in 2023.– Net revenues increased in 2022, driven by higher net pricing, incremental net revenues from our acquisitions of Chipita, Clif Bar and Ricolino in 2022 and Gourmet Foods and Grenade in 2021 and favorable volume/mix, partially offset by a significant impact from unfavorable currency translation, as the U.S. dollar strengthened relative to most currencies we operate in compared to exchange rates in the prior year, and a decline in our developed market gum business, divested in 2023, and the impact from our divestitures in 2022.
• Organic Net Revenue, a non-GAAP financial measure, increased 14.7% to $35.6 billion in 2023 and increased 12.3% to $31.7 billion in 2022. Organic Net Revenue increased in both 2023 and 2022 due to higher net pricing and favorable volume/mix. Organic Net Revenue is on a constant currency basis and excludes revenue from acquisitions and divestitures. Refer to Non-GAAP Financial Measures for the definition of Organic Net Revenue and Consolidated Results of Operations for our reconciliation with net revenues.
• Diluted EPS attributable to Mondelēz International increased 84.7% to $3.62 in 2023 and decreased 35.5% to $1.96 in 2022.
– Diluted EPS increased in 2023 driven by an increase in Adjusted EPS, a gain on marketable securities, favorable year-over-year change in mark-to-market impacts from currency and commodity derivatives, higher net gain on equity method investment transactions, lower impact from the European Commission legal matter, lapping prior year acquisition-related costs, lapping prior year incremental costs due to the war in Ukraine, a gain on divestiture, lapping prior year loss on debt extinguishment, lower intangible asset impairment charges and lapping prior year inventory step-up charges. These favorable items were partially offset by higher acquisition integration costs and contingent consideration adjustments, higher equity method investee items, higher negative initial impacts from enacted tax law changes, higher remeasurement loss of net monetary position, lower operating results from divestitures, higher divestiture-related costs, lapping prior year 2017 malware incident net recoveries and higher Simplify to Grow program costs.
– Diluted EPS decreased in 2022 driven by lapping prior year net gains on equity method transactions, unfavorable year-over-year mark-to-market impacts from currency and commodity derivatives, the impact from the European Commission legal matter, higher acquisition-related costs, incremental costs incurred due to the war in Ukraine, higher acquisition integration costs and contingent consideration adjustments, higher intangible asset impairment charges, higher remeasurement loss of net monetary position, inventory step-up charges incurred in 2022 and lower net earnings from divestitures, partially offset by lower Simplify to Grow program costs, an increase in Adjusted EPS, lower negative impacts from enacted tax law changes, lower equity method investee items, 2017 malware incident net recoveries and lower negative impact from pension participation changes.
– Adjusted EPS, a non-GAAP financial measure, increased 14.3% to $3.19 in 2023 and increased 3.3% to $2.79 in 2022. On a constant currency basis, Adjusted EPS increased 19.0% to $3.32 in 2023 and increased 11.9% to $3.02 in 2022. Refer to Non-GAAP Financial Measures for the definition of Adjusted EPS and Consolidated Results of Operations for our reconciliation with diluted EPS.
– Adjusted EPS increased in 2023, driven by operating gains, impact from acquisitions, lower interest expense, fewer shares outstanding and dividend income from marketable securities, partially offset by unfavorable currency translation, higher taxes and lower benefit plan non-service income.
– Adjusted EPS increased in 2022, driven by operating gains and fewer shares outstanding, partially offset by unfavorable currency translation, higher interest expense and lower equity method investment earnings.
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Discussion and Analysis of Historical Results
Items Affecting Comparability of Financial Results
The following table includes significant income or (expense) items that affected the comparability of our results of operations and our effective tax rates. Please refer to the notes to the consolidated financial statements indicated below for more information. Refer also to the Consolidated Results of Operations – Net Earnings and Earnings per Share Attributable to Mondelēz International table for the after-tax per share impacts of these items.
For the Years Ended December 31,See Note 2023 2022 2021(in millions, except percentages)
Simplify to Grow Program Note 8Restructuring Charges $ (106) $ (36) $ (154)
Implementation Charges (25) (87) (167)
Intangible asset impairment charges Note 6 (26) (101) (32)Mark-to-market gains/(losses) from derivatives (1)Note 10 185 (318) 277Acquisition and divestiture-related costs Note 2
Acquisition integration costs and
contingent consideration adjustments (1)(246) (148) 40
Inventory step-up — (25) —
Acquisition-related costs — (254) (25)
Net gain on divestitures and acquisitions
108 — 8
Divestiture-related costs (83) (18) (22)
2017 Malware incident net recoveries — 37 —
Incremental costs due to war in Ukraine (2)
Note 1 1 (121) —
European Commission legal matter Note 14 (43) (318) —
Remeasurement of net monetary position Note 1 (98) (40) (13)Impact from pension participation changes (1)Note 11 (10) (10) (42)
Impact from resolution of tax matters (1)
Note 14 — — 7
Loss on debt extinguishment and related expenses Note 9 (1) (129) (137)
Initial impacts from enacted tax law changes Note 16 (83) (17) (100)
Gain on marketable securities Note 7 593 — —
Gain/(loss) on equity methodinvestment transactions (3)Note 7 462 (22) 740
Equity method investee items (4)
(93) 25 (41)
Effective tax rate Note 16 26.1 % 26.8 % 27.2 %(1) Includes impacts recorded in operating income, benefit plan non-service income and interest expense and other, net. Mark-to-market gains/(losses) above also include our equity method investment-related derivative contract mark-to-market gains/(losses) (refer to Note 10, Financial Instruments ) that are recorded in the gain on equity method investment transactions on our consolidated statement of earnings.(2) Incremental costs due to the war in Ukraine include direct charges such as asset impairments due to damaged facilities and inventory, higher expected allowances for uncollectible accounts receivable and committed compensation. Please see the Non-GAAP Financial Measures section and Note 1, Summary of Significant Accounting Policies – War in Ukraine , for additional information.
(3) Gain/(loss) on equity method investment transactions is recorded outside pre-tax operating results on the consolidated statement of earnings. See footnote (1) as mark-to-market gains/(losses) on our equity method-investment-related derivative contracts are presented in the table above within mark-to-market gains/(losses) from derivatives.
(4) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's equity method investee, including acquisition and divestiture-related costs, restructuring program costs and intangible asset impairment costs.
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Consolidated Results of OperationsThe following discussion compares our consolidated results of operations for 2023 with 2022 and 2022 with 2021.
2023 compared with 2022For the Years Ended December 31,2023 2022 $ Change% Change
(in millions, except per share data)Net revenues $ 36,016 $ 31,496 $ 4,520 14.4 %
Operating income 5,502 3,534 1,968 55.7 %
Earnings from continuing operations 4,968 2,726 2,242 82.2 %Net earnings attributable to
Mondelēz International4,959 2,717 2,242 82.5 %Diluted earnings per share attributable to
Mondelēz International3.62 1.96 1.66 84.7 %Net RevenuesNet revenues increased $4,520 million (14.4%) to $36,016 million in 2023, and Organic Net Revenue (1) increased $4,572 million (14.7%) to $35,570 million. Emerging markets net revenues increased 15.0% and emerging markets Organic Net Revenue increased 20.4% (1) . Developed markets net revenues increased 13.9% and developed markets Organic Net Revenue increased 11.1% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below:Emerging Markets Developed Markets Mondelēz InternationalFor The Year Ended December 31, 2023
Reported (GAAP) $ 14,011 $ 22,005 $ 36,016
Divestitures (5) (479) (484)Short-term distributor agreements
(2) (20) (22)
Acquisitions (507) (529) (1,036)
Currency 1,138 (42) 1,096
Organic (Non-GAAP) $ 14,635 $ 20,935 $ 35,570
For The Year Ended December 31, 2022
Reported (GAAP) $ 12,184 $ 19,312 $ 31,496
Divestitures (27) (471) (498)
Organic (Non-GAAP) $ 12,157 $ 18,841 $ 30,998$ Change
Reported (GAAP)15.0 % 13.9 % 14.4 %
Divestitures 0.2 pp 0.4 pp 0.2 pp
Short-term distributor agreements
— (0.2) —
Acquisitions (4.2) (2.8) (3.4)
Currency 9.4 (0.2) 3.5Organic (Non-GAAP)20.4 % 11.1 % 14.7 %
Vol/Mix 2.8 pp 0.4 pp 1.3 pp
Pricing 17.6 10.7 13.4(1) Please see the Non-GAAP Financial Measures section for additional information.Net revenue increase of 14.4% was driven by our underlying Organic Net Revenue growth of 14.7%, the impact of acquisitions and the impact of a short-term distributor agreement, partially offset by unfavorable currency translation and the impact of divestitures. Overall, we continued to see strong demand for our snack category products across most regions. Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix. Higher net pricing in all regions was due to the benefit of carryover pricing from 2022 as well as the effects of input cost-driven pricing actions taken during 2023. Favorable volume/mix was driven by AMEA, Latin America and Europe reflecting both improved product mix and volume gains, while volume/mix was essentially flat in North America. The November 1, 2022 acquisition of Ricolino added incremental net revenues of $507 million (constant currency basis) through the one-year anniversary of the acquisition. The August 1, 2022 acquisition of Clif Bar added incremental
37Table of Contentsnet revenues of $529 million through the one-year anniversary of the acquisition. The short-term distributor agreement related to the October 1, 2023 sale of our developed market gum business added incremental net revenues of $22 million. Unfavorable currency impacts decreased net revenues by $1,096 million, due primarily to the strength of the U.S. dollar relative to several currencies, primarily due to the Argentinean peso and Russian ruble as well as the Turkish lira, Egyptian pound, Indian rupee, Chinese yuan, Nigerian naira, Australian dollar, South African rand, Pakistan rupee and Canadian dollar, partially offset by the strength of several currencies relative to the U.S. dollar, including the Mexican peso, euro, Brazilian real, Polish zloty and British pound sterling. The impact of 2023 and 2022 divestitures resulted in a year-over-year reduction in net revenues of $14 million. Refer to Note 2, Acquisitions and Divestitures, for additional information.Operating IncomeOperating income increased $1,968 million (55.7%) to $5,502 million in 2023, Adjusted Operating Income (1) increased $749 million (15.3%) to $5,634 million and Adjusted Operating Income on a constant currency basis increased $939 million (19.2%) to $5,824 million due to the following:For the Years Ended December 31,2023 2022 $ Change % Change(in millions)Operating Income $ 5,502 $ 3,534 $ 1,968 55.7 %Simplify to Grow Program (2)131 122 9Intangible asset impairment charges (3)26 101 (75)
Mark-to-market (gains)/losses from derivatives (4)
(189) 326 (515)Acquisition integration costs and
contingent consideration adjustments (5)246 136 110Inventory step-up (5)— 25 (25)Acquisition-related costs (5)— 330 (330)
Gain on divestiture (5)
(108) — (108)
Divestiture-related costs (5) (10)
83 18 65Operating results from divestitures (5)(194) (148) (46)Operating results from short-term distributor agreements(3) — (3)
2017 Malware incident net recoveries — (37) 37European Commission legal matter (6)43 318 (275)Incremental costs due to war in Ukraine (7)(1) 121 (122)
Remeasurement of net monetary position (8)
98 40 58
Impact from pension participation changes (9)
— (1) 1Adjusted Operating Income (1)$ 5,634 $ 4,885 $ 749 15.3 %
Unfavorable currency translation 190 — 190Adjusted Operating Income (constant currency) (1)$ 5,824 $ 4,885 $ 939 19.2 %Key Drivers of Adjusted Operating Income (constant currency) $ ChangeHigher net pricing $ 4,143
Higher input costs (2,522)
Favorable volume/mix 189
Higher selling, general and administrative expenses (947)Impact from acquisitions (5)112
Higher asset impairment charges (36)Total change in Adjusted Operating Income (constant currency) (1)$ 939(1) Refer to the Non-GAAP Financial Measures section for additional information.
(2) Refer to Note 8, Restructuring Program , for more information.
(3) Refer to Note 6, Goodwill and Intangible Assets , for more information.
(4) Refer to Note 10, Financial Instruments, and the Non-GAAP Financial Measures section for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives.38Table of Contents(5) Refer to Note 2, Acquisitions and Divestitures , for more information on the October 1, 2023 sale of the developed market gum business, November 1, 2022 acquisition of Ricolino, August 1, 2022 acquisition of Clif Bar and the January 3, 2022 acquisition of Chipita.(6) Refer to Note 14, Commitments and Contingencies , for more information.
(7) Refer to Note 1, Summary of Significant Accounting Policies – War in Ukraine, for more information.(8) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina and Türkiye.
(9) Refer to Note 11, Benefit Plans , for more information.
During 2023, we realized higher net pricing and favorable volume/mix, which was partially offset by increased input costs. Higher net pricing, which included the carryover impact of pricing actions taken in 2022 as well as the effects of input cost-driven pricing actions taken during 2023, was reflected across all regions. Overall, volume/mix benefited from improved product mix and continued strong demand for our snack category products across most regions. Favorable volume/mix was driven by AMEA, Latin America and Europe, which was marginally offset by slightly unfavorable volume/mix in North America. The increase in input costs was driven by higher raw material costs, slightly offset by lower manufacturing costs driven by productivity. Higher raw material costs were in part due to higher energy, sugar, grains, dairy, cocoa, packaging, edible oils and other ingredients costs as well as unfavorable year-over-year currency exchange transaction costs on imported materials.
Total selling, general and administrative expenses increased $618 million from 2022, due to a number of factors noted in the table above, including in part, the impact of acquisitions, higher acquisition integration costs and contingent consideration adjustments, higher divestiture-related costs, higher remeasurement loss of net monetary position and lapping prior-year 2017 malware incident net recoveries, which were offset by a lower impact from the European Commission legal matter, lapping prior year acquisition-related costs, a favorable currency impact related to expenses, lower implementation costs incurred for the Simplify to Grow program, the impact from divestitures and lower incremental costs due to the war in Ukraine. Excluding these factors, selling, general and administrative expenses increased $947 million from 2022. The increase was driven primarily by higher advertising and consumer promotion costs and higher overhead costs in part due to increased investments in route to market capabilities.
Unfavorable currency changes decreased operating income by $190 million primarily due to the strength of the U.S. dollar relative to most currencies, including the Russian ruble, Argentinean peso, Egyptian pound, Chinese yuan, Indian rupee, Turkish lira, Australian dollar and South African rand, partially offset by the strength of a few currencies relative to the U.S. dollar, primarily the euro, Mexican peso, Brazilian real and Polish zloty.
Operating income margin increased from 11.2% in 2022 to 15.3% in 2023. The increase in operating income margin was driven primarily by the favorable year-over-year change in mark-to-market gains/(losses) from currency and commodity hedging activities, lapping prior year acquisition-related costs, lower impact from the European Commission legal matter, lower incremental costs due to the war in Ukraine, gain on the sale of our developed market gum business, lower intangible asset impairment charges, higher Adjusted Operating Income margin and lapping prior year inventory step-up charges, partially offset by higher acquisition integration costs and contingent consideration adjustments, higher divestiture-related costs, higher remeasurement loss of net monetary position and lapping prior year 2017 malware incident net recoveries. Adjusted Operating Income margin increased from 15.8% in 2022 to 15.9% in 2023. The increase was driven primarily by higher net pricing, overhead cost leverage, lower manufacturing costs driven by productivity and favorable product mix, partially offset by higher raw material costs and higher advertising and consumer promotion costs.
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Net Earnings and Earnings per Share Attributable to Mondelēz InternationalNet earnings attributable to Mondelēz International of $4,959 million increased by $2,242 million (82.5%) in 2023. Diluted EPS attributable to Mondelēz International was $3.62 in 2023, up $1.66 (84.7%) from 2022. Adjusted EPS (1) was $3.19 in 2023, up $0.40 (14.3%) from 2022. Adjusted EPS on a constant currency basis was $3.32 in 2023, up $0.53 (19.0%) from 2022.For the Years Ended December 31,2023 2022 $ Change % Change
Diluted EPS attributable to Mondelēz International $ 3.62 $ 1.96 $ 1.66 84.7 %Simplify to Grow Program (2)0.08 0.07 0.01Intangible asset impairment charges (2)0.01 0.05 (0.04)
Mark-to-market (gains)/losses from derivatives (2)
(0.12) 0.19 (0.31)Acquisition integration costs and
contingent consideration adjustments (2)0.14 0.05 0.09
Inventory step-up (2)
— 0.01 (0.01)
Acquisition-related costs (2)
— 0.19 (0.19)Divestiture-related costs (2)0.04 0.01 0.03Operating results from divestitures (2) (3)(0.13) (0.16) 0.03
Gain on divestiture (2)
(0.08) — (0.08)
2017 Malware incident net recoveries — (0.02) 0.02European Commission legal matter (2)0.01 0.23 (0.22)
Incremental costs due to war in Ukraine (2)
— 0.09 (0.09)Remeasurement of net monetary position (2)0.07 0.03 0.04Impact from pension participation changes (2)
0.01 0.01 —Loss on debt extinguishment and related expenses (4)
— 0.07 (0.07)
Initial impacts from enacted tax law changes (5)
0.06 0.01 0.05
Gain on marketable securities (6)
(0.34) — (0.34)
(Gain)/loss on equity method investment transactions (6)
(0.25) 0.02 (0.27)
Equity method investee items (7)
0.07 (0.02) 0.09Adjusted EPS (1)$ 3.19 $ 2.79 $ 0.40 14.3 %
Unfavorable currency translation 0.13 — 0.13Adjusted EPS (constant currency) (1)$ 3.32 $ 2.79 $ 0.53 19.0 %Key Drivers of Adjusted EPS (constant currency) $ ChangeIncrease in operations $ 0.47Impact from acquisitions (2)0.06
Change in benefit plan non-service income (0.03)
Change in interest and other expense, net (8)0.04Dividend income from marketable securities 0.01
Change in equity method investment net earnings —
Change in income taxes (5)
(0.05)
Change in shares outstanding (9)
0.03Total change in Adjusted EPS (constant currency) (1)$ 0.53(1) Refer to the Non-GAAP Financial Measures section appearing for additional information. The tax expense/(benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS.• 2023 taxes for the: Simplify to Grow Program were $(26) million, intangible asset impairment charges were $(6) million, mark-to-market gains from derivatives were $21 million, acquisition integration costs and contingent consideration adjustments were $(60) million, divestiture-related costs were $(25) million, operating results from divestitures were $46 million, gain on divestiture were $(8) million, European Commission legal matter were $(24) million, remeasurement of net monetary position were zero, impact from pension
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participation changes were $(3) million, initial impacts from enacted tax law changes were $83 million, gain on marketable securities were $133 million, gain on equity method investment transactions were $124 million and equity method investee items were zero.
• 2022 taxes for the: Simplify to Grow Program were $(26) million, intangible asset impairment charge were $(25) million, mark-to-market losses from derivatives were $(56) million, acquisition integration costs and contingent consideration adjustments were $(72) million, inventory step-up charges were $(7) million, acquisition-related costs were $11 million, divestiture-related costs were $(9) million, operating results from divestitures were $50 million, 2017 malware incident net recoveries were $10 million, European Commission legal matter were zero, incremental costs due to the war in Ukraine were $4 million, remeasurement of net monetary position were zero, impact from pension participation changes were $(3) million, loss on debt extinguishment and related expenses were $(31) million, initial impacts from enacted tax law changes were $17 million, loss on equity method investment transactions were $2 million and equity method investee items were zero.(2) See the Operating Income table above and the related footnotes for more information.(3) Divestitures include completed sales of businesses, partial or full sales of equity method investments and exits of major product lines upon completion of a sale or licensing agreement. As we record our share of KDP and JDE Peet’s ongoing earnings on a one-quarter lag basis, we reflected the impact of prior-quarter sales of KDP and JDE Peet’s shares within divested results as if the sales occurred at the beginning of all periods presented.
(4) Refer to Note 9, Debt and Borrowing Arrangements , for more information on the loss on debt extinguishment and related expenses.
(5) Refer to Note 16, Income Taxes , for information on income taxes.
(6) Refer to Note 7, Investments , for more information on gains on marketable securities and gains and losses on equity method investment transactions.
(7) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's equity method investee, such as acquisition and divestiture-related costs, restructuring program costs and intangible asset impairment costs.
(8) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation.
(9) Refer to Note 12, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 17, Earnings per Share , for earnings per share weighted-average share information.41
Table of Contents2022 compared with 2021For the Years Ended December 31,2022 2021 $ Change % Change(in millions, except per share data)Net revenues $ 31,496 $ 28,720 $ 2,776 9.7 %
Operating income 3,534 4,653 (1,119) (24.0) %
Earnings from continuing operations 2,726 4,314 (1,588) (36.8) %
Net earnings attributable to Mondelēz International 2,717 4,300 (1,583) (36.8) %
Diluted earnings per share attributable to Mondelēz International 1.96 3.04 (1.08) (35.5) %Net RevenuesNet revenues increased $2,776 million (9.7%) to $31,496 million in 2022, and Organic Net Revenue (1) increased $3,477 million (12.3%) to $31,664 million. Emerging markets net revenues increased 20.3% and emerging markets Organic Net Revenue increased 22.0% (1) . Developed markets net revenues increased 3.9% and developed markets Organic Net Revenue increased 6.9% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below:Emerging Markets Developed Markets Mondelēz InternationalFor The Year Ended December 31, 2022
Reported (GAAP) $ 12,184 $ 19,312 $ 31,496Divestitures
(27) (471) (498)
Acquisitions (596) (620) (1,216)
Currency 743 1,139 1,882
Organic (Non-GAAP) $ 12,304 $ 19,360 $ 31,664
For The Year Ended December 31, 2021
Reported (GAAP) $ 10,132 $ 18,588 $ 28,720
Divestitures (47) (486) (533)
Organic (Non-GAAP) $ 10,085 $ 18,102 $ 28,187% Change
Reported (GAAP)20.3 % 3.9 % 9.7 %
Divestitures 0.2 pp 0.2 pp 0.3 pp
Acquisitions (5.9) (3.5) (4.3)
Currency 7.4 6.3 6.6Organic (Non-GAAP)22.0 % 6.9 % 12.3 %
Vol/Mix 8.0 pp (0.3)pp 2.6 pp
Pricing 14.0 7.2 9.7(1) Please see the Non-GAAP Financial Measures section for additional information.Net revenue increase of 9.7% was driven by our underlying Organic Net Revenue growth of 12.3% and the impact of acquisitions, partially offset by unfavorable currency translation and the impact of divestitures. Overall, we continued to see increased demand for our snack category products. Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix. Higher net pricing in all regions was due to the benefit of carryover pricing from 2021 as well as the effects of input cost-driven pricing actions taken during 2022. Favorable volume/mix was driven by AMEA, Latin America and North America, primarily due to strong volume gains across our snack category products, while volume/mix was essentially flat in Europe. The November 1, 2022 acquisition of Ricolino added incremental net revenues of $98 million (constant currency basis), the August 1, 2022 acquisition of Clif Bar added incremental net revenues of $361 million, the January 3, 2022 acquisition of Chipita added incremental net revenues of $720 million (constant currency basis), the April 1, 2021 acquisition of Gourmet Food added incremental net revenues of $15 million (constant currency basis) through the one-year anniversary of the acquisition in 2022 and the March 25, 2021 acquisition of Grenade added incremental net revenues of $22 million (constant currency basis) through the one-year anniversary of the acquisition in 2022. Unfavorable currency impacts decreased net revenues by $1,905 million, primarily due to the strength of the U.S. dollar relative to most currencies, including the euro, British pound sterling, Argentinean peso, Turkish lira, Australian dollar, Indian rupee,
42Table of ContentsPolish zloty, Chinese yuan and Swedish krona, partially offset by the strength of a few currencies relative to the U.S. dollar, primarily the Russian ruble, Brazilian real and Mexican peso. The impact of divestitures resulted in a year-over-year reduction in net revenues of $35 million. Refer to Note 2, Acquisitions and Divestitures , for more information.Operating IncomeOperating income decreased $(1,119) million ((24.0)%) to $3,534 million in 2022, Adjusted Operating Income (1) increased $232 million (5.0%) to $4,885 million and Adjusted Operating Income on a constant currency basis increased $544 million (11.7%) to $5,197 million due to the following:For the Years Ended December 31,2022 2021 $ Change % Change(in millions)Operating Income $ 3,534 $ 4,653 $ (1,119) (24.0) %Simplify to Grow Program (2)122 319 (197)Intangible asset impairment charges (3)101 32 69
Mark-to-market losses/(gains) from derivatives (4)
326 (279) 605Acquisition integration costs (5)136 (40) 176Inventory step-up (5)25 — 25Acquisition-related costs (5)330 25 305
Net gain on acquisition (5)
— (8) 8Divestiture-related costs (5)18 22 (4)Operating results from divestitures (5)(148) (127) (21)
2017 Malware incident recoveries, net (37) — (37)European Commission legal matter (6)318 — 318Incremental costs due to war in Ukraine (7)121 — 121Remeasurement of net monetary position (8)40 13 27Impact from pension participation changes (9)(1) 48 (49)
Impact from resolution of tax matters (6)
— (5) 5Adjusted Operating Income (1)$ 4,885 $ 4,653 $ 232 5.0 %
Unfavorable currency translation 312 — 312Adjusted Operating Income (constant currency) (1)$ 5,197 $ 4,653 $ 544 11.7 %Key Drivers of Adjusted Operating Income (constant currency) $ ChangeHigher net pricing $ 2,736
Higher input costs (1,926)
Favorable volume/mix 195
Higher selling, general and administrative expenses (478)Impact from acquisitions (5)56
Lower amortization of intangible assets 8
Higher asset impairment charges (47)Total change in Adjusted Operating Income (constant currency) (1)$ 544(1) Refer to the Non-GAAP Financial Measures section.
(2) Refer to Note 8, Restructuring Program , for more information.
(3) Refer to Note 6, Goodwill and Intangible Assets , for more information.
(4) Refer to Note 10, Financial Instruments , Note 18, Segment Reporting , and Non-GAAP Financial Measures for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives.(5) Refer to Note 2, Acquisitions and Divestitures , for more information on the November 1, 2022 acquisition of Ricolino, August 1, 2022 acquisition of Clif Bar, January 3, 2022 acquisition of Chipita, April 1, 2021 acquisition of Gourmet Food, March 25, 2021 acquisition of a majority interest in Grenade, January 4, 2021 acquisition of the remaining 93% of equity in Hu and April 1, 2020 acquisition of a significant majority interest in Give & Go.(6) Refer to Note 14, Commitments and Contingencies , for more information.43
Table of Contents(7) Refer to Note 1, Summary of Significant Accounting Policies – War in Ukraine, for more information.
(8) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina and Türkiye.
(9) Refer to Note 11, Benefit Plans , for more information.During 2022, we realized higher net pricing and favorable volume/mix, which was largely offset by increased input costs. Higher net pricing, which included the carryover impact of pricing actions taken in 2021 as well as the effects of input cost-driven pricing actions taken during 2022, was reflected in all regions. Overall, volume/mix benefited from strong volume growth due to continued increased demand for our snack category products. Favorable volume/mix was driven by AMEA and Latin America, which was slightly offset by unfavorable volume/mix in North America and Europe. The increase in input costs was driven by higher raw material costs as well as higher manufacturing costs. Higher raw material costs were in part due to higher dairy, packaging, edible oils, energy, grains, sugar, nuts and other ingredients costs as well as unfavorable year-over-year currency exchange transaction costs on imported materials, partially offset by lower cocoa costs.
Total selling, general and administrative expenses increased $1,121 million from 2021, due to a number of factors noted in the table above, including in part, the impact from the European Commission legal matter, the impact of acquisitions, higher acquisition-related costs, higher acquisition integration costs and contingent consideration adjustments, higher remeasurement loss of net monetary position, higher divestiture-related costs, incremental costs due to the war in Ukraine and lapping the prior year favorable impact from the resolution of a tax matter, which were partially offset by a favorable currency impact related to expenses, lapping the prior year unfavorable impact from pension participation changes, 2017 malware incident net recoveries, lower implementation costs incurred for the Simplify to Grow Program and the impact from divestitures. Excluding these factors, selling, general and administrative expenses increased $478 million from 2021. The increase was driven primarily by higher advertising and consumer promotion costs and higher overheads, in part due to increased investments in route to market capabilities.
Unfavorable currency changes decreased operating income by $312 million, primarily due to the strength of the U.S. dollar relative to most currencies, including the euro, British pound sterling, Turkish lira, Australian dollar, Indian rupee, Polish zloty, Egyptian pound and Chinese yuan, partially offset by the strength of a few currencies relative to the U.S. dollar, including the Russian ruble and Brazilian real.
Operating income margin decreased from 16.2% in 2021 to 11.2% in 2022. The decrease in operating income margin was driven primarily by the year-over-year unfavorable change in mark-to-market gains/(losses) from currency and commodity hedging activities, the impact from the European Commission legal matter, higher acquisition-related costs, lower Adjusted Operating Income margin, higher acquisition integration costs and contingent consideration adjustments, incremental costs due to the war in Ukraine, higher intangible asset impairment charges, higher remeasurement of net monetary position and inventory step-up charges incurred in 2022, partially offset by lower costs for the Simplify to Grow Program, lapping the prior year unfavorable impact from pension participation changes, the impact of 2017 malware incident net recoveries and the impact of divestitures. Adjusted Operating Income margin decreased from 16.5% in 2021 to 15.8% in 2022. The decrease was driven primarily by higher raw material costs, unfavorable product mix and the impact of acquisitions, partially offset by higher net pricing and overhead cost leverage.44
Table of ContentsNet Earnings and Earnings per Share Attributable to Mondelēz InternationalNet earnings attributable to Mondelēz International of $2,717 million decreased by $1,583 million (36.8%) in 2022. Diluted EPS attributable to Mondelēz International was $1.96 in 2022, down $1.08 (35.5%) from 2021. Adjusted EPS (1) was $2.79 in 2022, up $0.09 (3.3%) from 2021. Adjusted EPS on a constant currency basis was $3.02 in 2022, up $0.32 (11.9%) from 2021.For the Years Ended December 31,2022 2021 $ Change % Change
Diluted EPS attributable to Mondelēz International $ 1.96 $ 3.04 $ (1.08) (35.5) %Simplify to Grow Program (2)0.07 0.17 (0.10)Intangible asset impairment charges (2)0.05 0.02 0.03
Mark-to-market losses/(gains) from derivatives (2)
0.19 (0.17) 0.36Acquisition integration costs and
contingent consideration adjustments (2)0.05 (0.02) 0.07Inventory step-up0.01 — 0.01Acquisition-related costs (2)0.19 0.01 0.18Divestiture-related costs (2)0.01 0.01 —Operating results from divestitures (2)(0.16) (0.17) 0.012017 Malware incident net recoveries(0.02) — (0.02)European Commission legal matter0.23 — 0.23Incremental costs due to war in Ukraine0.09 — 0.09Remeasurement of net monetary position (2)0.03 0.01 0.02Impact from pension participation changes (2)0.01 0.02 (0.01)Loss on debt extinguishment (3)0.07 0.07 —Initial impacts from enacted tax law changes (4)0.01 0.07 (0.06)Gain on equity method investment transactions (5)0.02 (0.39) 0.41
Equity method investee items (6)
(0.02) 0.03 (0.05)Adjusted EPS (1)$ 2.79 $ 2.70 $ 0.09 3.3 %
Unfavorable currency translation 0.23 — 0.23Adjusted EPS (constant currency) (1)$ 3.02 $ 2.70 $ 0.32 11.9 %Key Drivers of Adjusted EPS (constant currency) $ ChangeIncrease in operations $ 0.27Impact from acquisitions (2)0.03
Change in benefit plan non-service income —
Change in interest and other expense, net (7)
(0.03)
Change in equity method investment net earnings (0.01)
Change in income taxes (4)
—
Change in shares outstanding (8)0.06Total change in Adjusted EPS (constant currency) (1)$ 0.32(1) The tax expense/(benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS.• 2022 taxes for the: Simplify to Grow Program were $(26) million, intangible asset impairment charge were $(25) million, mark-to-market losses from derivatives were $(56) million, acquisition integration costs and contingent consideration adjustments were $(72) million, inventory step-up charges were $(7) million, acquisition-related costs were $11 million, divestiture-related costs were $(9) million, operating results from divestitures were $50 million, 2017 malware incident net recoveries were $10 million, European Commission legal matter were zero, incremental costs due to the war in Ukraine were $4 million, remeasurement of net monetary position were zero, impact from pension participation changes were $(3) million, loss on debt extinguishment and related expenses were $(31) million, initial impacts from enacted tax law changes were $17 million, loss on equity method investment transactions were $2 million and equity method investee items were zero.
• 2021 taxes for the: Simplify to Grow Program were $(83) million, intangible asset impairment charges were $(8) million, mark-to-market gains from derivatives were $44 million, acquisition-related costs were $(4) million, acquisition integration costs and contingent
45Table of Contentsconsideration adjustments were $12 million, divestiture-related costs were $(8) million, operating results from divestitures were $53 million, remeasurement of net monetary position were zero, impact from pension participation changes were $(8) million, loss on debt extinguishment were $(34) million, initial impacts from enacted tax law changes were $100 million, gain on equity method investment transactions were $184 million and equity method investee items were zero.(2) See the Adjusted Operating Income table above and the related footnotes for more information.
(3) Refer to Note 9, Debt and Borrowing Arrangements , for more information on losses on debt extinguishment.
(4) Refer to Note 16, Income Taxes , for information on income taxes.
(5) Refer to Note 7, Investments , for more information on gains and losses on equity method investment transactions.(6) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's equity method investee, such as acquisition and divestiture-related costs, restructuring program costs.
(7) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation.
(8) Refer to Note 12, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 17, Earnings per Share , for earnings per share weighted-average share information.
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Results of Operations by Operating Segment
Our operations and management structure are organized into four operating segments:
• Latin America
• AMEA
• Europe
• North America
We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise across our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions.
We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. See Note 18, Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results.Our segment net revenues and earnings were:For the Years Ended December 31,2023 2022 2021(in millions)
Net revenues:
Latin America$ 5,006 $ 3,629 $ 2,797AMEA7,075 6,767 6,465Europe12,857 11,420 11,156North America11,078 9,680 8,302
Net revenues $ 36,016 $ 31,496 $ 28,720For the Years Ended December 31,2023 2022 2021(in millions)Earnings before income taxes:Operating income:Latin America $ 529 $ 388 $ 261
AMEA 1,113 929 1,054
Europe 1,978 1,481 2,092
North America 2,092 1,769 1,371
Unrealized gains/(losses) on hedging activities (mark-to-market impacts) 189 (326) 279
General corporate expenses (356) (245) (253)
Amortization of intangible assets (151) (132) (134)
Net gain on divestitures and acquisitions
108 — 8
Acquisition-related costs — (330) (25)
Operating income 5,502 3,534 4,653
Benefit plan non-service income 82 117 163
Interest and other expense, net (310) (423) (447)
Gain on marketable securities
606 — —
Earnings before income taxes $ 5,880 $ 3,228 $ 4,369
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Latin America
For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 5,006 $ 3,629 $ 1,377 37.9 %
Segment operating income 529 388 141 36.3 %For the Years Ended December 31,2022 2021 $ Change% Change
(in millions)Net revenues $ 3,629 $ 2,797 $ 832 29.7 %
Segment operating income 388 261 127 48.7 %2023 compared with 2022
Net revenues increased $1,377 million (37.9%), due to higher net pricing (31.0 pp), the impact of acquisitions (14.0 pp) and favorable volume/mix (3.8 pp), partially offset by unfavorable currency (10.0 pp) and the impact of divestitures (0.9 pp). Higher net pricing was reflected across all categories, driven primarily by Argentina as well as Brazil and Mexico. The November 1, 2022 acquisition of Ricolino added incremental net revenues of $507 million (constant currency basis) through the one-year anniversary of the acquisition in 2023. Favorable volume/mix reflected strong volume growth as the region continued to see increased demand for most of our snack category products. Favorable volume/mix was driven by gains in gum, biscuits & baked snacks, candy and cheese & grocery, partially offset by declines in refreshment beverages and chocolate. Unfavorable currency impacts were primarily due to the strength of the U.S. dollar relative to a few currencies in the region, primarily the Argentinean peso, partially offset by the strength of most currencies relative to the U.S. dollar, primarily the Mexican peso and Brazilian real. The impact of our 2022 divestitures resulted in a year-over-year decline in net revenues of $22 million.
Segment operating income increased $141 million (36.3%), primarily due to higher net pricing, the impact of our Ricolino acquisition, favorable volume/mix, lower manufacturing costs driven by productivity and lapping prior year inventory step-up charges. These favorable items were partially offset by higher raw material costs, higher other selling, general and administrative expenses, higher advertising and consumer promotion costs, higher remeasurement loss on net monetary position and higher acquisition integration costs.2022 compared with 2021
Net revenues increased $832 million (29.7%), due to higher net pricing (23.7 pp), favorable volume/mix (8.2 pp) and the impact of acquisitions (3.5 pp), partially offset by unfavorable currency (4.4 pp) and the impact of divestitures (1.3 pp). Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico. Favorable volume/mix reflected strong volume growth as the region continued to see increased demand for our snack category products. Favorable volume/mix was driven by gains in gum, biscuits & baked snacks, chocolate, candy and cheese & grocery, partially offset by a decline in refreshment beverages. The November 1, 2022 acquisition of Ricolino added incremental net revenues of $98 million (constant currency basis) in 2022. Unfavorable currency impacts were primarily due to the strength of the U.S. dollar relative to several currencies in the region, primarily the Argentinean peso, partially offset by the strength of several currencies relative to the U.S. dollar, primarily the Brazilian real and Mexican peso. The impact of divestitures resulted in a year-over-year decline in net revenues of $21 million.
Segment operating income increased $127 million (48.7%), primarily due to higher net pricing, favorable volume/mix, lower manufacturing costs due to productivity, lower divestiture-related costs and lower costs incurred for the Simplify to Grow Program. These favorable items were partially offset by higher raw material costs, higher other selling, general and administrative expenses, higher advertising and consumer promotion costs, higher remeasurement loss on net monetary position, acquisition integration costs incurred in 2022, the impact of divestitures, inventory step-up charges incurred in 2022 and lapping a prior year favorable impact from the resolution of a tax matter.
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AMEA
For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 7,075 $ 6,767 $ 308 4.6 %
Segment operating income 1,113 929 184 19.8 %For the Years Ended December 31,2022 2021 $ Change% Change
(in millions)Net revenues $ 6,767 $ 6,465 $ 302 4.7 %
Segment operating income 929 1,054 (125) (11.9) %2023 compared with 2022Net revenues increased $308 million (4.6%), due to higher net pricing (8.6 pp) and favorable volume/mix (3.1 pp pp), partially offset by unfavorable currency (7.1 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. Favorable volume/mix reflected overall volume gains from increased demand for most of our snack category products. Favorable volume/mix was driven by gains in chocolate, gum, candy and refreshment beverages, partially offset by declines in biscuits & baked snacks and cheese & grocery. Unfavorable currency impacts were due to the strength of the U.S. dollar relative to most currencies in the region, including the Egyptian pound, Indian rupee, Chinese yuan, Nigerian naira, Australian dollar, South African Rand, Pakistan rupee and Japanese yen.Segment operating income increased $184 million (19.8%), primarily due to higher net pricing, favorable volume/mix, lapping prior-year intangible asset impairment charges, lower manufacturing costs driven by productivity and lower costs incurred for the Simplify to Grow Program. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, unfavorable currency, higher other selling, general and administrative expenses and higher fixed asset impairment charges.2022 compared with 2021
Net revenues increased $302 million (4.7%), due to favorable volume/mix (7.4 pp), higher net pricing (5.1 pp) and the impact of an acquisition (0.3 pp), partially offset by unfavorable currency (7.6 pp) and the impact of a divestiture (0.5 pp). Favorable volume/mix reflected overall volume gains from increased demand for our snack category products. Favorable volume/mix was driven by gains in biscuits & baked snacks, chocolate, refreshment beverages and candy, partially offset by declines in gum and cheese & grocery. Higher net pricing was reflected across all categories. The April 1, 2021 acquisition of Gourmet Food added incremental net revenues of $15 million (constant currency basis) through the one-year anniversary of the acquisition in 2022. Unfavorable currency impacts were due to the strength of the U.S. dollar relative to most currencies in the region, including the Australian dollar, Indian rupee, Chinese yuan, Philippine peso, Egyptian pound, South African Rand, and Japanese yen. The impact of the November 1, 2021 divestiture of the packaged seafood business, which was part of our April 1, 2021 acquisition of Gourmet Food, resulted in a year-over-year reduction in net revenues of $35 million.
Segment operating income decreased $125 million (11.9%), primarily due to higher raw material costs, intangible asset impairment charges incurred in 2022, unfavorable currency, higher advertising and consumer promotion costs, higher other selling, general and administrative expenses, higher costs incurred for the Simplify to Grow Program, higher fixed asset impairment charges and the impact of a divestiture. These unfavorable items were partially offset by higher net pricing, favorable volume/mix and lower manufacturing costs driven by productivity.
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Europe
For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 12,857 $ 11,420 $ 1,437 12.6 %
Segment operating income 1,978 1,481 497 33.6 %For the Years Ended December 31,2022 2021 $ Change% Change
(in millions)Net revenues $ 11,420 $ 11,156 $ 264 2.4 %
Segment operating income 1,481 2,092 (611) (29.2) %2023 compared with 2022
Net revenues increased $1,437 million (12.6%), due to higher net pricing (13.8 pp), favorable volume/mix (0.7 pp) and the impact from short-term distributor agreements (0.2 pp), partially offset by unfavorable currency (1.9 pp) and the impact of divestitures (0.2 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. Overall, volume/mix was favorable driven by improved product mix. Favorable volume/mix was driven by gains in biscuits & baked snacks, chocolate, gum and refreshment beverages, partially offset by declines in cheese & grocery and candy. The short-term distributor agreement related to the October 1, 2023 sale of our developed market gum business added incremental net revenues of $22 million. Unfavorable currency impacts reflected the strength of the U.S. dollar relative to several currencies across the region, including the Russian ruble, Turkish lira, Norwegian krone, Ukrainian hryvnya and Swedish krona, partially offset by the strength of several currencies relative to the U.S. dollar, including the euro, Polish zloty, British pound sterling and Swiss franc. The impact of divestitures reflected a year-over-year decline in net revenues of $4 million from our 2023 divested developed market gum business.Segment operating income increased $497 million (33.6%), primarily due to higher net pricing, lower impact from the European Commission legal matter, lapping the prior year incremental costs incurred due to the war in Ukraine, lower acquisition integration costs and favorable volume/mix. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, unfavorable currency, divestiture-related costs incurred in 2023, higher costs incurred for the Simplify to Grow Program, higher other selling, general and administrative expenses, higher remeasurement loss on net monetary position, higher manufacturing costs and an intangible asset impairment charge incurred in 2023.
2022 compared with 2021
Net revenues increased $264 million (2.4%), higher net pricing (7.4 pp) and the impact of acquisitions (6.4 pp), partially offset by unfavorable currency (11.3 pp) and unfavorable volume/mix (0.1 pp). Higher net pricing was reflected across all categories. The January 3, 2022 acquisition of Chipita added incremental net revenues of $685 million (constant currency basis) and the March 25, 2021 acquisition of Grenade added incremental net revenues of $22 million (constant currency basis) through the one-year anniversary of the acquisition in 2022. Overall, volume/mix was slightly unfavorable as declines in biscuits & baked snacks and cheese & grocery were mostly offset by gains in candy, gum, chocolate and refreshment beverages. Unfavorable currency impacts reflected the strength of the U.S. dollar relative to most currencies across the region, including the euro, British pound sterling, Turkish lira, Polish zloty, Swedish krona and Romanian leu, partially offset by the strength of a few currencies relative to the U.S. dollar, primarily the Russian ruble.
Segment operating income decreased $611 million (29.2%), primarily due to higher raw material costs, the impact from the European Commission legal matter, unfavorable currency, incremental costs incurred due to the war in Ukraine, higher acquisition integration costs, higher other selling, general and administrative expenses, higher advertising and consumer promotion costs, unfavorable volume/mix and fixed asset impairment charges incurred in 2022. These unfavorable items were partially offset by higher net pricing, lapping the prior year unfavorable impact of pension participation changes, the impact of acquisitions and the impact of divestitures.
50Table of ContentsNorth America
For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 11,078 $ 9,680 $ 1,398 14.4 %
Segment operating income 2,092 1,769 323 18.3 %For the Years Ended December 31,2022 2021 $ Change% Change
(in millions)Net revenues $ 9,680 $ 8,302 $ 1,378 16.6 %
Segment operating income 1,769 1,371 398 29.0 %2023 compared with 2022Net revenues increased $1,398 million (14.4%), due to higher net pricing (9.5 pp), the impact of an acquisition (5.6 pp) and flat volume/mix (- pp), partially offset by the impact of divestitures (0.4 pp) and unfavorable currency (0.3 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. The August 1, 2022 acquisition of Clif Bar added incremental net revenues of $529 million through the one-year anniversary of the acquisition in 2023. Overall, volume/mix was flat as slight volume gains were offset by unfavorable mix. Flat volume/mix was driven by gains in candy and chocolate offset by a decline in biscuits & baked snacks. While the impact of divestitures reflected a year-over-year increase in net revenues of $12 million (net of the loss of revenue for the fourth quarter) from our 2023 divested developed market gum business, it had a negative impact on the net revenue growth rate as the divested business did not grow as fast as the remaining segment. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar.Segment operating income increased $323 million (18.3%), primarily due to higher net pricing, the impact of our Clif Bar acquisition, higher operating results from the divested developed market gum business, lower costs incurred for the Simplify to Grow Program and lapping prior year inventory step-up charges. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, higher acquisition integration costs and contingent consideration adjustments, higher other selling, general and administrative expenses, an intangible asset impairment charge incurred in 2023, divestiture-related costs incurred in 2023, unfavorable volume/mix and unfavorable currency.2022 compared with 2021
Net revenues increased $1,378 million (16.6%), due to higher net pricing (11.8 pp), the impact of acquisitions (4.9 pp) and favorable volume/mix (0.6 pp), partially offset by unfavorable currency (0.4 pp) and the impact of divestitures (0.3 pp). Higher net pricing was reflected across all categories driven by pricing actions taken during 2022. The August 1, 2022 acquisition of Clif Bar added incremental net revenues of $361 million and the January 3, 2022 acquisition of Chipita added incremental net revenues of $35 million in 2022. Favorable volume/mix was driven by gains in candy and chocolate, partially offset by a decline in biscuits & baked snacks which primarily reflected the impact of supply chain constraints on volume during the year. While the impact of divestitures reflected a year-over-year increase in net revenues of $22 million from our 2023 divested developed market gum business, it had a negative impact on the net revenue growth rate as the divested business did not grow as fast as the remaining segment. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar.
Segment operating income increased $398 million (29.0%), primarily due to higher net pricing, lower costs incurred for the Simplify to Grow Program, lapping a prior year intangible asset impairment charge, the impact of acquisitions and the impact of divestitures. These favorable items were partially offset by higher raw material costs, higher manufacturing costs, higher acquisition integration costs and contingent consideration adjustments (including lapping a prior year benefit from contingent consideration adjustments), higher advertising and consumer promotion costs, fixed asset impairment charges incurred in 2022, inventory step-up charges incurred in 2022, unfavorable volume/mix, higher other selling, general and administrative expenses and unfavorable currency.
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Liquidity and Capital ResourcesWe believe that cash from operations, our revolving credit facilities, short-term borrowings and our authorized long-term financing will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations and payments for acquisitions, share repurchases and quarterly dividends. We expect to continue to utilize our commercial paper program and international credit lines as needed. We continually evaluate long-term debt issuances to meet our short- and longer-term funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. Our investment in JDE Peet's provides us additional flexibility. Overall, we do not expect negative effects to our funding sources that would have a material effect on our liquidity, and we continue to monitor our global operations including the impact of ongoing or new developments in Ukraine and the Middle East. To date, we have been successful in generating cash and raising financing as needed. However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, results of operations and financial condition.Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for acquisitions, shareholder returns (such as dividend payments and share repurchases), property, plant and equipment and any significant one-time non-operating items.
Long-term cash requirements primarily relate to funding long-term debt repayments (refer to Note 9, Debt and Borrowing Arrangements ), our U.S. tax reform transition tax liability and deferred taxes (refer to Note 16, Income Taxes ), our long-term benefit plan obligations (refer to Note 11, Benefit Plans ) and commodity-related purchase commitments and derivative contracts (refer to Note 10, Financial Instruments ).
We generally fund short- and long-term cash requirements with cash from operating activities as well as cash proceeds from short- and long-term debt financing (refer to Debt below). We generally do not use equity to fund our ongoing obligations.For a full discussion related to the financial condition for the fiscal year ended December 31, 2021, including a year-to-year comparison between 2022 and 2021, see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.Cash Flow
We believe our ability to generate substantial cash from operating activities and readily access capital markets and secure financing at competitive rates are key strengths and give us significant flexibility to meet our short and long-term financial commitments. Our cash flow activity over the last three years is noted below:
For the Years Ended December 31,2023
20222021(in millions)Net cash provided by operating activities $ 4,714 $ 3,908 $ 4,141
Net cash provided by/(used in) investing activities
2,812 (4,888) (26)
Net cash used in financing activities (7,558) (456) (4,069)Net Cash Provided by Operating ActivitiesThe increase in net cash provided by operating activities in 2023 was primarily due to an increase in cash-basis net earnings. This is largely a result of business growth and acquisitions completed during 2022.Net Cash Used in/Provided by Investing ActivitiesThe improvement in net cash provided by/used in investing activities was largely driven by lapping prior year cash consideration paid for the Chipita, Clif Bar and Ricolino acquisitions combined with proceeds from the developed market gum divestiture and higher proceeds from the current year KDP and JDEP share sales as compared to the prior year JDEP share sale, partially offset by lapping higher proceeds from the settlement and replacement of net investment hedge derivative contracts. Refer to Note 2, Acquisitions and Divestitures and Note 7, Investments for more information.
52Table of ContentsCapital expenditures were $1,112 million in 2023, $906 million in 2022 and $965 million in 2021. We continue to make capital expenditures primarily to modernize manufacturing facilities and support new product and productivity initiatives. We expect 2024 capital expenditures to be up to $1.4 billion, including capital expenditures in connection with our Simplify to Grow Program and for funding our strategic priorities. We expect to continue to fund these expenditures with cash from operations.Net Cash Used in Financing ActivitiesThe increase in net cash used in financing activities was primarily due to lower debt proceeds, higher debt repayments and an increase in dividends paid to shareholders, partially offset by lower share repurchases in 2023.DividendsWe paid dividends of $2,160 million in 2023, $1,985 million in 2022 and $1,826 million in 2021. On July 27, 2023, the Audit Committee, with authorization delegated from our Board of Directors, declared a quarterly cash dividend of $0.425 per share of Class A Common Stock, an increase of 10 percent, which would be $1.70 per common share on an annualized basis. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.
For U.S. income tax purposes only, the Company has determined that 100% of the distributions paid to its shareholders in 2023 are characterized as a qualified dividend paid from U.S. earnings and profits. See Note 13, Capital Stock , to the consolidated financial statements and Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Issuer Purchases of Equity Securities , for information on our share repurchase program.GuaranteesAs discussed in Note 14, Commitments and Contingencies , we enter into third-party guarantees primarily to cover the long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. As of December 31, 2023 and December 31, 2022, we had no material third-party guarantees recorded on our consolidated balance sheets. Guarantees do not have, and we do not expect them to have, a material effect on our liquidity.Debt
The nature and amount of our long-term and short-term debt and the proportionate amount of each varies as a result of current and expected business requirements, market conditions and other factors. As such, we may issue commercial paper or secure other forms of financing throughout the year to meet short-term working capital or other financing needs.At its December 2023 meeting, the Board of Directors approved a new $2 billion long-term financing authorization that replaced the prior long-term financing authorization of $2 billion. As of December 31, 2023, $2.0 billion of the long-term financing authorization remained available.
Our total debt was $19.4 billion at December 31, 2023 and $22.9 billion at December 31, 2022. Our debt-to-capitalization ratio was 0.41 at December 31, 2023 and 0.46 at December 31, 2022. The weighted-average term of our outstanding long-term debt was 7.8 years at December 31, 2023 and 8.2 years at December 31, 2022. Our average daily commercial borrowings were $2.1 billion in 2023, $1.6 billion in 2022 and $0.5 billion in 2021.
One of our subsidiaries, Mondelez International Holdings Netherlands B.V. (“MIHN”), has outstanding debt. Refer to Note 9, Debt and Borrowing Arrangements . The operations held by MIHN generated approximately 72.2% (or $26.0 billion) of the $36.0 billion of consolidated net revenue during fiscal year 2023 and represented approximately 91.9% (or $26.1 billion) of the $28.4 billion of net assets as of December 31, 2023.Refer to Note 9, Debt and Borrowing Arrangements , for more information on our debt and debt covenants.53Table of Contents
Commodity TrendsWe regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production. During 2023, the primary drivers of the increase in our aggregate commodity costs were higher energy, sugar, grains, dairy, cocoa, packaging, edible oils and other ingredient costs as well as unfavorable year-over-year currency exchange transaction costs on imported materials.
A number of external factors such as the current macroeconomic environment, including global inflation, effects of the war in Ukraine, climate and weather conditions, commodity, transportation and labor market conditions, currency fluctuations and the effects of governmental agricultural or other programs affect the cost and availability of raw materials and agricultural materials used in our products. We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, such as dairy, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. Due to competitive or market conditions, planned trade or promotional incentives, fluctuations in currency exchange rates or other factors, our pricing actions may also lag commodity cost changes temporarily.
As a result of international supply chain and labor market disruptions and generally higher commodity, transportation and labor costs, we expect price volatility and a higher aggregate cost environment to continue. While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available.
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Non-GAAP Financial Measures
We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business. We use non-GAAP financial measures to budget, make operating and strategic decisions and evaluate our performance. We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the following categories: acquisition and divestiture activities, gains and losses on intangible asset sales and non-cash impairments, major program restructuring activities, constant currency and related adjustments, major program financing and hedging activities and other major items affecting comparability of operating results. We believe the non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have provided the reconciliations between the GAAP and non-GAAP financial measures along with a discussion of our underlying GAAP results throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.
Our primary non-GAAP financial measures are listed below and reflect how we evaluate our current and prior year operating results. As new events or circumstances arise, these definitions could change. When our definitions change, we provide the updated definitions and present the related non-GAAP historical results on a comparable basis (1) .
• “Organic Net Revenue” is defined as net revenues (the most comparable U.S. GAAP financial measure) excluding the impacts of acquisitions, divestitures (2) , short-term distributor agreements related to the sale of a business (3) , and currency rate fluctuations (4) . We believe that Organic net revenue reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results. We also evaluate Organic Net Revenue growth from emerging markets and developed markets, and these underlying measures are also reconciled to U.S. GAAP above.
• Our emerging markets include our Latin America region in its entirety; the AMEA region, excluding Australia, New Zealand and Japan; and the following countries from the Europe region: Russia, Ukraine, Türkiye, Kazakhstan, Georgia, Poland, Czech Republic, Slovak Republic, Hungary, Bulgaria, Romania, the Baltics and the East Adriatic countries.
• Our developed markets include the entire North America region, the Europe region excluding the countries included in the emerging markets definition, and Australia, New Zealand and Japan from the AMEA region.• “Adjusted Operating Income” is defined as operating income (the most comparable U.S. GAAP financial measure) excluding the impacts of the Simplify to Grow Program (5) ; gains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture (2) or acquisition gains or losses, divestiture-related costs (6) , acquisition-related costs (7) , and acquisition integration costs and contingent consideration adjustments (8) ; inventory step-up charges (9) ; operating results of divestitures (2) ; operating results from short-term distributor agreements related to the sale of a business (3) ; remeasurement of net monetary position (10) ; mark-to-market impacts from commodity, forecasted currency and equity method investment transaction derivative contracts (11) ; impact from resolution of tax matters (12) ; 2017 malware incident net recoveries; incremental costs due to the war in Ukraine (13) ; impact from the European Commission legal matter (14) ; impact from pension participation changes (15) ; and costs associated with the JDE Peet's transaction. We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income. We also evaluate growth in our Adjusted Operating Income on a constant currency basis (4) . We believe these measures provide improved comparability of underlying operating results.
• “Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International (the most comparable U.S. GAAP financial measure) from continuing operations excluding the impacts of the items listed in the Adjusted Operating Income definition as well as losses on debt extinguishment and related expenses; gains or losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; mark-to-market unrealized gains or losses and realized gains or losses from marketable securities (16) ; initial impacts from enacted tax law changes (17) ; and gains or losses on equity method investment transactions. Similarly, within Adjusted EPS, our equity method investment net earnings exclude our proportionate share of our investee’s significant operating and non-operating items (18) . We also evaluate growth in our Adjusted EPS on a constant currency basis (4) . We believe Adjusted EPS provides improved comparability of underlying operating results.
55Table of Contents(1) When items no longer impact our current or future presentation of non-GAAP operating results, we remove these items from our non-GAAP definitions. In the first quarter of 2023, we added to the non-GAAP definition for divestitures the inclusion of changes from equity method investment accounting to accounting for equity interests with readily determinable fair values (“marketable securities”; refer to footnote (2) below). In addition, we added to the non-GAAP definitions the exclusion of gains or losses associated with marketable securities (see footnote (16) below). In the fourth quarter of 2023, we added to the non-GAAP definitions the exclusion of the operating results from short-term distributor agreements related to the sale of a business (see footnote (3) below). In addition, we added to the non-GAAP definitions the exclusion of realized gains and losses from derivatives that mitigate the foreign currency volatility related to the remeasurement of the respective net monetary assets or liabilities during the periods presented associated with applying highly inflationary accounting (see footnote (10) below).
(2) Divestitures include completed sales of businesses, exits of major product lines upon completion of a sale or licensing agreement, the partial or full sale of an equity method investment and changes from equity method investment accounting to accounting for marketable securities. As we record our share of JDE Peet’s ongoing earnings on a one-quarter lag basis, any JDE Peet’s ownership reductions are reflected as divestitures within our non-GAAP results the following quarter.(3) In the fourth quarter of 2023, we began to exclude the operating results from short-term distributor agreements that have been executed in conjunction with the sale of a business. We exclude this item to better facilitate comparisons of our underlying operating performance across periods.(4) Constant currency operating results are calculated by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate the financial statements in the comparable prior year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior year period.(5) Non-GAAP adjustments related to the Simplify to Grow Program reflect costs incurred that relate to the objectives of our program to transform our supply chain network and organizational structure. Costs that do not meet the program objectives are not reflected in the non-GAAP adjustments.
(6) Divestiture-related costs, which includes costs incurred in relation to the preparation and completion (including one-time costs such as severance related to the elimination of stranded costs) of our divestitures as defined in footnote (2), also includes costs incurred associated with our publicly-announced processes to sell businesses. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.(7) Acquisition-related costs, which includes transaction costs such as third party advisor, investment banking and legal fees, also includes one-time compensation expense related to the buyout of non-vested ESOP shares and realized gains or losses from hedging activities associated with acquisition funds. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.
(8) Acquisition integration costs and contingent consideration adjustments include one-time costs related to the integration of acquisitions as well as any adjustments made to the fair market value of contingent compensation liabilities that have been previously booked for earn-outs related to acquisitions that do not relate to employee compensation expense. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.(9) In the third quarter of 2022, we began to exclude the one-time inventory step-up charges associated with acquired companies related to the fair market valuation of the acquired inventory. We exclude this item to better facilitate comparisons of our underlying operating performance across periods.(10) In connection with our applying highly inflationary accounting (refer to Note 1, Summary of Significant Accounting Policies ), for Argentina (beginning in the third quarter of 2018) and Türkiye (beginning in the second quarter of 2022), we exclude the related remeasurement gains or losses related to remeasuring net monetary assets or liabilities denominated in the local currency to the U.S. dollar during the periods presented and the realized gains and losses from derivatives that mitigate the foreign currency volatility related to the remeasurement of the respective net monetary assets or liabilities during the periods presented.
(11) We exclude unrealized gains and losses (mark-to-market impacts) from outstanding commodity and forecasted currency and equity method investment transaction derivative from our non-GAAP earnings measures. The mark-to-market impacts of commodity and forecasted currency transaction derivatives are excluded until such time that the related exposures impact our operating results. Since we purchase commodity and forecasted currency transaction contracts to mitigate price volatility primarily for inventory requirements in future periods, we make this adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons of our underlying operating performance across periods. We exclude equity method investment transaction derivative contract settlements as they represent protection of value for future divestitures.(12) See Note 14, Commitments and Contingencies , in our Annual Report on Form 10-K for the year ended December 31, 2022.
(13) In February 2022, Russia began a military invasion of Ukraine and we stopped our production and closed our facilities in Ukraine for a period of time due to damage incurred to our facilities during the invasion. We began to incur incremental costs directly related to the war including asset impairments, such as property and inventory losses, higher expected allowances for uncollectible accounts receivable and committed compensation. We have isolated and exclude these costs and related impacts as well as subsequent recoveries from our operating results to facilitate evaluation and comparisons of our ongoing results. Incremental costs related to increasing operations in other primarily European facilities are not included with these costs.(14) In the fourth quarter of 2022, we began to exclude the impact from the European Commission legal matter. In November 2019, the European Commission informed us that it initiated an investigation into our alleged infringement of European Union competition law through certain practices allegedly restricting cross-border trade within the European Economic Area. On January 28, 2021, the European Commission announced it had taken the next procedural step in its investigation and opened formal proceedings. We have been cooperating with the investigation and are currently engaged in discussions with the European Commission in an effort to reach a negotiated, proportionate resolution to this matter. Due to the unique nature of this matter, we believe it to be infrequent and unusual and therefore exclude it to better facilitate comparisons of our underlying operating performance across periods. Refer to Note 14, Commitments and Contingencies , for additional information.
(15) The impact from pension participation changes represents the charges incurred when employee groups are withdrawn from multiemployer pension plans and other changes in employee group pension plan participation. We exclude these charges from our non–GAAP results because those amounts do not reflect our ongoing pension obligations. See Note 11, Benefit Plans , for more information on the multiemployer pension plan withdrawal.
(16) In the first quarter of 2023, we began to exclude mark-to-market unrealized gains or losses, as well as realized gains or losses, associated with our marketable securities from our non-GAAP earnings measures. These marketable securities gains or losses are not indicative of underlying operations and are excluded to better facilitate comparisons of our underlying operating performance across periods.
56Table of Contents(17) We have excluded the initial impacts from enacted tax law changes. Initial impacts include items such as the remeasurement of deferred tax balances and the transition tax from the 2017 U.S. tax reform. We exclude initial impacts from enacted tax law changes from our Adjusted EPS as they do not reflect our ongoing tax obligations under the enacted tax law changes. Refer to Note 16, Income Taxes , for more information.
(18) We have excluded our proportionate share of our equity method investees’ significant operating and non-operating items such as acquisition and divestiture related costs, restructuring program costs and initial impacts from enacted tax law changes, in order to provide investors with a comparable view of our performance across periods. Although we have shareholder rights and board representation commensurate with our ownership interests in our equity method investees and review the underlying operating results and significant operating and non-operating items each reporting period, we do not have direct control over their operations or resulting revenue and expenses. Our use of equity method investment net earnings on an adjusted basis is not intended to imply that we have any such control. Our GAAP “diluted EPS attributable to Mondelēz International from continuing operations” includes all of the investees’ significant operating and non-operating items.
We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S. GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides you with a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Because non-GAAP financial measures vary among companies, the non-GAAP financial measures presented in this report may not be comparable to similarly titled measures used by other companies. Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any U.S. GAAP financial measures. A limitation of these non-GAAP financial measures is they exclude items detailed below that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully evaluating the following tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in this Form 10-K.
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Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements includes a summary of the significant accounting policies we used to prepare our consolidated financial statements. We have discussed the selection and disclosure of our critical accounting policies and estimates with our Audit Committee. The following is a review of our most significant assumptions and estimates.
Goodwill and Indefinite-Life Intangible AssetsWe review our operating segment and reporting unit structure annually or as significant changes in the organization occur for goodwill testing throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting our goodwill reporting units. Annually, on July 1, we test goodwill and indefinite-life intangible assets for impairment and may perform qualitative testing, or depending on factors such as prior year test results, current year developments, current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. In our quantitative testing, we compare a reporting unit’s estimated fair value with its carrying value. We estimate a reporting unit’s fair value using a discounted cash flow method which incorporates planned growth rates, market-based discount rates and estimates of residual value. This year, for our Europe and North America reporting units, we used a market-based, weighted-average cost of capital of 7.1% to discount the projected cash flows of those operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 10.1%. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and industry and economic conditions based on available information. Given the uncertainty of the global economic environment, those estimates could be significantly different than future performance. If the carrying value of a reporting unit’s net assets exceeds its fair value, we would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value.
In 2023, 2022 and 2021, there were no impairments of goodwill. In connection with our 2023 annual impairment testing, each of our reporting units had sufficient fair value in excess of carrying value. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.
Annually, we assess indefinite-life intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of these assets. If significant potential impairment risk exists for a specific asset, we quantitatively test it for impairment by comparing its estimated fair value with its carrying value. We utilize estimates of future sales, earnings growth rates, royalty rates and discount rates in determining a brand’s global fair value. If the carrying value of the asset exceeds its estimated fair value, the asset is impaired and its carrying value is reduced to the estimated fair value.
In 2023, we recorded $26 million of intangible asset impairment charges related to a chocolate brand in the North America segment and a biscuit brand in the Europe segment. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs. We use several accepted valuation methods, including relief from royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty rates and discount rates in determining a brand's global fair value. We also identified thirteen brands, of which five were recently acquired, with $3.7 billion of aggregate book value as of December 31, 2023 that each had a fair value in excess of book value of 10% or less. We believe our current plans for each of these brands will allow them to not be impaired, but if plans to grow brand earnings and expand margin are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future. In 2022, we recorded $101 million of intangible asset impairment charge related to two biscuit brands in AMEA. In 2021, we recorded a $32 million of intangible asset impairment charge related to one biscuit brand in North America.Refer to Note 6, Goodwill and Intangible Assets , for additional information.58Table of Contents
Business Combinations
The assets acquired and liabilities assumed upon the acquisition or consolidation of a business are recorded at fair value, with the residual of the purchase price allocated to goodwill. We engage third-party valuation specialists to assist management in determining the fair values of certain assets acquired and liabilities assumed. In determining fair value, we utilized various forms of the income approach, depending on the asset being valued. Such valuations require management to make significant judgments, estimates and assumptions, especially with respect to intangible assets. Management makes estimates of fair value based upon the best information available at the date of acquisition. These estimates are based upon historical experience and information obtained from the management of the acquired company and are inherently uncertain. Critical estimates in valuing certain of the intangible assets include, but are not limited to: expected future cash flows of the acquired business, discount and royalty rates and economic lives of customer relationships, trade names and fixed assets. Unanticipated events and circumstances may occur, which may affect the accuracy or validity of such assumptions or estimates.
Further, certain of our acquisitions may include earn-out provisions or other forms of contingent consideration. As of the acquisition date, we record contingent consideration, as applicable, at the estimated fair value of expected future payments associated with the earn-out. Any changes to the recorded fair value of contingent consideration will be recognized as expenses or earnings in the period in which they occur. Such contingent consideration liabilities are based on best estimates of future expected payment obligations, which are subject to change due to many factors outside of our control. Changes to the estimate of expected future contingent consideration payments may occur, from time to time, due to various reasons, including changing discount rates as well as actual results differing from estimates and adjustments to the revenue or earnings assumptions used as the basis for the liability based on historical experience.
Trade and Marketing Programs
We promote our products with trade and sales incentives as well as marketing and advertising programs. These programs include, but are not limited to, new product introduction fees, discounts, coupons, rebates and volume-based incentives as well as cooperative advertising, in-store displays and consumer marketing promotions. Trade and sales incentives are recorded as a reduction to revenues based on amounts estimated due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising and consumer promotion expenses are charged to operations as a percentage of volume, based on estimated sales volume and estimated program spending. We do not defer costs on our year-end consolidated balance sheets and all marketing and advertising costs are recorded as an expense in the year incurred.
Employee Benefit Plans
We sponsor various employee benefit plans worldwide, including primarily pension plans and postretirement healthcare benefits. For accounting purposes, we estimate the pension and postretirement healthcare benefit obligations utilizing assumptions and estimates for discount rates; expected returns on plan assets; expected compensation increases; employee-related factors such as turnover, retirement age and mortality; and health care cost trends. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Our assumptions also reflect our historical experiences and management’s best judgment regarding future expectations. These and other assumptions affect the annual expense and obligations recognized for the underlying plans.
We amortize the effect of changes in the assumptions over future periods to reflect the cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost). These changes are deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.
Since pension and postretirement liabilities are measured on a discounted basis, the discount rate significantly affects our plan obligations and expenses. For plans that have assets held in trust, the expected return on plan assets assumption affects our pension plan expenses. The assumptions for discount rates and expected rates of return and our process for setting these assumptions are described in Note 11, Benefit Plans , along with additional information on our employee benefit plans.59Table of Contents
As a sensitivity measure, a fifty-basis point change in our discount rates or the expected rate of return on plan assets would have the following effects, increase/(decrease), on our annual benefit plan costs:As of December 31, 2023U.S. Plans Non-U.S. Plans
Fifty-Basis-Point Fifty-Basis-Point
Increase Decrease Increase Decrease
(in millions)Effect of change in discount rate on pension costs $ (2) $ — $ (19) $ 22
Effect of change in expected rate of return on plan assets on pension costs (8) 8 (39) 39
Effect of change in discount rate on postretirement health care costs 2 (2) — —Income Taxes
As a global company, we calculate and provide for income taxes in each tax jurisdiction in which we operate. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions. Our provision for income taxes is significantly affected by shifts in the geographic mix of our pre-tax earnings across tax jurisdictions, changes in tax laws and regulations, tax planning opportunities available in each tax jurisdiction and the ultimate outcome of various tax audits.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of our assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those differences are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be realized. We review the realizability assessment on a quarterly basis, including impacts from our latest estimates of future taxable income.
We believe our tax positions comply with applicable tax laws and that we have properly accounted for uncertain tax positions. We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained by the taxing authorities based on the technical merits of the position. The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon resolution. We evaluate uncertain tax positions on an ongoing basis and adjust the amount recognized in light of changing facts and circumstances, such as the progress of a tax audit or expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of uncertain tax positions are reasonable. However, final determination of historical tax liabilities, whether by settlement with tax authorities, judicial or administrative ruling or due to expiration of statutes of limitations, could be materially different from estimates reflected on our consolidated balance sheets and historical income tax provisions. The outcome of these final determinations could have a material effect on our provision for income taxes, net earnings or cash flows in the period in which the determination is made.
See Note 16, Income Taxes , for additional information on our effective tax rate, current and deferred taxes, valuation allowances and unrecognized tax benefits.
Contingencies
See Note 14, Commitments and Contingencies , to the consolidated financial statements.
New Accounting Guidance
See Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements for a discussion of new accounting standards.60Table of Contents
FY 2024-12-31 (later)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis contains forward-looking statements. It should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Forward-Looking Statements and Item 1A, Risk Factors .
Overview of Business and Strategy
Our core business is making and selling chocolate, biscuits and baked snacks, with additional businesses in adjacent, locally relevant categories including gum & candy, cheese & grocery and powdered beverages around the world.
We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on four strategic priorities: accelerating consumer-centric growth, driving operational excellence, creating a winning growth culture and scaling sustainable snacking. We believe the successful implementation of our strategic priorities and leveraging of our attractive global footprint, strong core of iconic global and local brands, marketing, sales, distribution and cost excellence capabilities, and top talent with a growth mindset, will drive consistent top- and bottom-line growth, enabling us to continue to create long-term value for our shareholders.
For more detailed information on our business and strategy, refer to Item 1, Business.
Recent Developments and Significant Items Affecting Comparability
Macroeconomic environmentWe continue to observe significant market and geopolitical uncertainty, fluctuating consumer demand, inflationary pressures, supply constraints, trade and regulatory uncertainty and exchange rate volatility. As a result, we experienced significantly higher operating costs, including higher overall raw material, labor and energy costs that have continued to rise. In particular, we expect to continue to face higher cocoa costs, as the market price for cocoa beans has increased significantly year-over-year and it is likely that prices will remain elevated for some time. Refer to Commodity Trends for additional information.
Our overall outlook for future snacks revenue growth remains strong; however, we anticipate ongoing volatility. We will continue to proactively manage our business in response to the evolving global economic environment, related uncertainty and business risks while also prioritizing and supporting our employees and customers. We continue to take steps to mitigate impacts to our supply chain, operations, technology and assets.
Additionally, we provide more information on risks related to trade and regulatory uncertainty in our Financial Outlook section and under Item 1A, Risk Factors .War in UkraineIn February 2022, following the Russian military invasion of Ukraine, we stopped production and closed our facilities in Ukraine; since then we have taken steps to protect the safety of our employees and to restore operations at our two manufacturing facilities, which were significantly damaged in March 2022. See Note 1, Summary of Significant Accounting Policies - War in Ukraine, to the consolidated financial statements, and refer to Items Affecting Comparability of Financial Results for additional information.
We have suspended new capital investments and our advertising spending in Russia, but as a food company with more than 2,500 employees in the country, we have not ceased operations given we believe we play a role in the continuity of the food supply. We continue to evaluate the situation in Ukraine and Russia and our ability to control our operating activities and businesses on an ongoing basis and comply with applicable international sanctions. We continue to consolidate both our Ukrainian and Russian subsidiaries. During both 2024 and 2023, Ukraine generated 0.4% and Russia generated 2.9% of consolidated net revenue. The profitability of and the assets held by our Russian business continue to remain above historic levels. We cannot predict if the recent strength in our Russian business will continue in the future.
Our operations in Russia are subject to risks, including the temporary or permanent loss of assets due to expropriation or further curtailment of our ability to conduct business operations in Russia. In the event this were to32
Table of Contentsoccur, this could lead to the partial or full impairment of our Russian assets or deconsolidation of the operations in Russia in future periods, or the termination of and loss of revenue from our business operations, based on actions taken by Russia, other parties or us. For additional information, see Item 1A, Risk Factors , including the risk entitled “ The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations. ”Developments in the Middle EastIn October 2023, conflict developed in the Middle East between Hamas and Israel, and has expanded to other parts of the region. During 2024, we experienced sales impacts related to this conflict in certain AMEA markets, but this did not have a material impact on our business, results of operations or financial condition. We continue to evaluate the impacts of these developments on our business and we cannot predict if it will have a significant impact in the future.
ERP System Implementation
In July 2024, our Board of Directors approved funding of $1.2 billion for a multi-year systems transformation program to upgrade our global ERP and supply chain systems (the “ERP System Implementation”). The ERP System Implementation spending comprises both capital expenditures and operating expenses, of which a majority is expected to relate to operating expenses. The operating expenses associated with the ERP System Implementation represent incremental transformational costs above the normal ongoing level of spending on information technology to support operations. The ERP System Implementation program will be implemented by region in several phases with spending occurring over the next five years, with expected completion by year-end 2028. Refer to Non-GAAP financial measures and Note 1, Summary of Significant Accounting Policies for additional information.
Extreme Price Growth in Argentina
During December 2023, the Argentinean peso significantly devalued. The peso's devaluation and potential resulting distortion on our non-GAAP Organic Net Revenue, Organic Net Revenue growth and other constant currency growth rate measures resulted in our decision to exclude the impact of pricing increases in excess of 26% year-over-year ("extreme pricing") in Argentina, from these measures beginning in Q1 2024. The benchmark of 26% represents the minimum annual inflation rate for each year over a 3-year period which would result in a cumulative inflation rate in excess of 100%, the level at which an economy is considered hyperinflationary under U.S. GAAP. Throughout the following MD&A discussion, we now exclude, on a prospective basis beginning on January 1, 2024, the impact of extreme pricing in Argentina from the net pricing impact of Organic Net Revenue and Organic Net Revenue growth and its related impact on our other non-GAAP financial constant currency growth measures with a corresponding offset to changes in currency translation rates. Additionally within the MD&A discussion, "currency-related items" totals the impact of extreme pricing and the currency translation rate changes. Refer to Non-GAAP financial measures for additional information.
Currency-related items impacted our non-GAAP financial measures for the year ended December 31, 2024 as follows:
• Organic Net Revenue: In total, unfavorable currency-related items of $710 million (2.0 pp) were driven by unfavorable currency translation rate changes of $1,877 million (5.2 pp), partially offset by extreme pricing of $1,167 million (3.2 pp). In Emerging Markets, unfavorable currency-related items of $778 million (5.6 pp) were driven by unfavorable currency translation rate changes of $1,945 million (13.9 pp), partially offset by extreme pricing of $1,167 million (8.3 pp). In Developed Markets, favorable currency-related items of $68 million (0.3 pp) were driven by favorable currency translation rate changes.
• Adjusted Operating Income: Unfavorable currency-related items of $191 million were driven by unfavorable currency translation rate changes of $460 million, partially offset by extreme pricing of $269 million.
• Adjusted EPS: Unfavorable currency-related items of $0.12 were driven by unfavorable currency translation rate changes of $0.32, partially offset by extreme pricing of $0.20.
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Table of ContentsAcquisitions and DivestituresDuring 2024, we completed the acquisition of Evirth (Shanghai) Industrial Co., Ltd. (“Evirth”), a leading manufacturer of cakes and pastries in China.During 2022, we completed the following acquisitions to strategically complement and expand our existing portfolio:
• Ricolino, a confectionery business with products sold primarily in Mexico
• Clif Bar & Company (“Clif Bar”), a leading U.S. maker of nutritious energy bars with organic ingredients
• Chipita Global S.A. ("Chipita"), a high-growth leader in the central and Eastern European croissant and baked snacks categoryAdditionally in the fourth quarter of 2022, we announced an agreement to sell the developed market gum business. On October 1, 2023, we completed the sale of our developed market gum business to Perfetti Van Melle Group, excluding the Portugal business which we retained pending regulatory approval. After obtaining the regulatory approval, w e completed the sale of the Portugal business to Perfetti Van Melle Group on October 23, 2023.Refer to Note 2, Acquisitions and Divestitures , and Liquidity and Capital Resources for additional details.
Investment Transactions
JDE Peet’s Transactions (Euronext Amsterdam: “JDEP”)During the first quarter of 2024, we determined there was an other-than-temporary impairment of our investment in JDEP, resulting in an impairment charge of €612 million ($665 million). On November 29, 2024, we sold our remaining 85.9 million shares to JAB Holdings Company and recorded a gain of €313 million ($332 million)
In 2023, we sold approximately 9.9 million of our shares, which reduced our ownership interest by 2.0 percentage points, from 19.7% to 17.7%. We recorded a loss of €21 million ($23 million). In 2022, we sold approximately 18.6 million of our shares back to JDEP, which reduced our ownership interest by approximately 3.0 percentage points. We recorded a loss of €8 million ($8 million).Keurig Dr Pepper Transactions (Nasdaq: "KDP")In 2023, we sold the remainder of our shares in KDP, representing approximately 76 million shares. Our reduction in ownership to below 5% eliminated our significant influence over KDP, resulting in a change in accounting from equity method investment accounting to accounting for equity interests with readily determinable fair values in the first quarter of 2023. Prior to this change, we recorded a pre-tax gain on equity method transactions of $493 million ($368 million after-tax) in 2023. After the change in accounting, we recorded pre-tax gains for marketable securities of $606 million in 2023.For additional information, refer to Note 7, Investments and Note 10, Financial Instruments.Benefit Plans
During the third quarter of 2024, we entered into an agreement with two third party insurance companies for the Mondelēz Global LLC Retirement Plan (“MDLZ Global Plan”), the pension plan for US salaried employees. The agreement features a buy-in of the plan assets with an option to elect a future buy-out conversion. The MDLZ Global Plan was terminated on December 31, 2024, and we intend to execute the buy-out conversion in 2025. Refer to Note 10, Benefit Plans for additional information.TaxesWe continue to monitor existing and potential future tax reform around the world. Numerous countries have now enacted the Organization of Economic Cooperation and Development’s model rules on a global minimum tax, effective for 2024. Important details of these minimum tax regimes are still being considered. Based on the guidance available thus far, this legislation did not have a material impact on our consolidated financial statements, but we will continue to evaluate it as additional guidance and clarification becomes available.
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Financial Outlook
We seek to achieve profitable, long-term growth and manage our business to attain this goal using our key operating metrics: Organic Net Revenue, Adjusted Operating Income and Adjusted EPS. We use these non-GAAP financial metrics and related computations, particularly growth in profit dollars, to evaluate and manage our business and to plan and make near- and long-term operating and strategic decisions. As such, we believe these metrics are useful to investors as they provide supplemental information in addition to our U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) financial results. We believe it is useful to provide investors with the same financial information that we use internally to make comparisons of our historical operating results, identify trends in our underlying operating results and evaluate our business. We believe our non-GAAP financial measures should always be considered in relation to our GAAP results. Refer to Non-GAAP Financial Measures for the definitions of our non-GAAP financial measures and Consolidated Results of Operations for the respective reconciliations.
In addition to monitoring our key operating metrics, we monitor a number of developments and trends that could impact our revenue and profitability objectives:
Demand
We monitor consumer spending and our market share within the food and beverage categories in which we sell our products. Core snacks categories continued to expand due to the continued growth of snacking as a consumer behavior around the world. As part of our strategic plan, we seek to drive category growth by leveraging our local and consumer-focused commercial approach, making investments in our brand and snacks portfolio, building strong routes to market in both emerging and developed markets and improving our availability across multiple channels. We believe these actions will help drive demand in our categories and strengthen our positions across markets.
Long-Term Demographics and Consumer Trends
Snack food consumption is highly correlated to GDP growth, urbanization of populations and rising discretionary income levels associated with a growing middle class, particularly in emerging markets. We believe that snacks continue to be a source of comfort as well as excitement and variety for consumers. Social media increasingly helps consumers find food trends, inspiration and connection on their social media and other feeds. Consumers are also interested in buying snacks conveniently, whether through same-day delivery platforms, shipped sources or different retail settings. Many consumers also continue to prioritize sustainability in their purchase decisions, valuing sustainably sourced ingredients, low carbon footprint preparation and lower waste packaging. We seek to continue to offer snacks that meet consumer needs and preferences and align with our strategic priorities.
PricingOur net revenue growth and profitability may be affected as we adjust prices to address new conditions, such as increasing input and operating costs due to supply, transportation and labor constraints, the impact of tariffs and higher cost trends. We adjust our product prices based on a number of variables including market factors, transportation, logistics and changes in our product input costs, and we have increased prices to control costs given significant cost inflation.Operating CostsOur operating costs include raw materials, labor, selling, general and administrative expenses, taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax planning. We experienced significantly higher operating costs, including higher overall raw material (particularly cocoa) and labor costs that have continued to rise. Refer to Commodity Trends for additional information.
Trade and Regulatory Uncertainty
In many markets, including the United States, a portion of our products, including significant inputs, are imported from other jurisdictions. On February 1, 2025, the United States government announced tariffs up to 25% on imports from certain countries, including Mexico and Canada, and 10% tariffs on product imports from certain countries, including China. While we are still evaluating the potential impact of these actions as well as our ability to mitigate the impact, they are expected to adversely impact our revenue and cost of goods sold in the United States. If the provisions of those tariffs were maintained as proposed, we would expect those adverse impacts to be significant. In addition, retaliatory tariffs imposed by other countries or other potential government actions, would likely result in further adverse impacts to our revenue and cost of goods sold. For additional information, see Item 1A, Risk Factors , including the risk entitled “ We are subject to risks from changes to the trade policies and tariff and import/export regulations by the U.S. and/or other foreign governments .”
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Summary of Results• Net revenues were approximately $36.4 billion in 2024 and $36.0 billion in 2023, an increase of 1.2% in 2024 and an increase of 14.4% in 2023.
– Net revenues increased in 2024, driven by higher net pricing and incremental net revenue from our acquisition of Evirth, partially offset by unfavorable currency-related items, as the U.S. dollar strengthened relative to most currencies we operate in compared to exchange rates in the prior year, the impact of our 2023 divestiture of the developed market gum business and unfavorable volume/mix.– Net revenues increased in 2023, driven by higher net pricing, incremental net revenues from our acquisitions of Clif Bar and Ricolino in 2022, favorable volume/mix and incremental net revenue from a short-term distributor agreement related to the sale of our developed market gum business, partially offset by a significant impact from unfavorable currency translation, as the U.S. dollar strengthened relative to most currencies we operate in compared to exchange rates in the prior year, and the impact of our developed market gum divestiture in 2023.• Organic Net Revenue, a non-GAAP financial measure, increased 4.3% to $37.1 billion in 2024 and increased 14.7% to $35.6 billion in 2023. In 2024, Organic Net Revenue increased due to higher net pricing, partially offset by unfavorable volume/mix. In 2023, Organic Net Revenue grew due to higher net pricing and favorable volume/mix. Organic Net Revenue is on a constant currency basis and excludes revenue from acquisitions and divestitures. Refer to Non-GAAP Financial Measures for the definition of Organic Net Revenue and Consolidated Results of Operations for our reconciliation with net revenues.
• Diluted EPS attributable to Mondelēz International decreased 5.5% to $3.42 in 2024 and increased 84.7% to $3.62 in 2023.
– Diluted EPS decreased in 2024 driven by lapping prior-year gain on marketable securities, lapping prior-year gain on equity method investment transactions, 2024 net loss on equity method transactions including an impairment, lapping prior-year gain and operating results from the developed market gum business divested in 2023, higher intangible asset impairment charges and costs incurred for the ERP Systems Implementation program. These unfavorable items were partially offset by an increase in Adjusted EPS, favorable year-over-year change in acquisition integration costs and contingent consideration adjustments, favorable year-over-year change in mark-to-market impacts from commodity and currency derivatives, lower divestiture-related costs, lower remeasurement loss of net monetary position, favorable year-over-year change in initial impacts from enacted tax law changes and lapping prior-year impact from the European Commission legal matter.
– Diluted EPS increased in 2023 driven by an increase in Adjusted EPS, a gain on marketable securities, favorable year-over-year change in mark-to-market impacts from currency and commodity derivatives, higher net gain on equity method investment transactions, lower impact from the European Commission legal matter, lapping prior year acquisition-related costs, lapping prior year incremental costs due to the war in Ukraine, a gain on divestiture, lapping prior year loss on debt extinguishment, lower intangible asset impairment charges and lapping prior year inventory step-up charges. These favorable items were partially offset by lower operating results from divestitures, higher acquisition integration costs and contingent consideration adjustments, higher negative initial impacts from enacted tax law changes, higher remeasurement loss of net monetary position, higher divestiture-related costs, lapping prior year 2017 malware incident net recoveries and higher Simplify to Grow program costs.
• Adjusted EPS, a non-GAAP financial measure, increased 9.1% to $3.36 in 2024 and increased 15.4% to $3.08 in 2023. On a constant currency basis, Adjusted EPS increased 13.0% to $3.48 in 2024 and increased 20.2% to $3.21 in 2023. Refer to Non-GAAP Financial Measures for the definition of Adjusted EPS and Consolidated Results of Operations for our reconciliation with diluted EPS.
– Adjusted EPS increased in 2024, driven by operating gains, fewer shares outstanding, lower taxes, lower interest expense, impact from an acquisition and higher benefit plan non-service income, partially offset by unfavorable currency-related items and lapping prior year dividend income related to our former KDP investment.
– Adjusted EPS increased in 2023, driven by operating gains, impact from acquisitions, lower interest expense, fewer shares outstanding, dividend income from marketable securities and higher equity method investment earnings, partially offset by unfavorable currency translation, higher taxes and lower benefit plan non-service income.
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Discussion and Analysis of Historical Results
Items Affecting Comparability of Financial Results
The following table includes significant income or (expense) items that affected the comparability of our results of operations and our effective tax rates. Please refer to the notes to the consolidated financial statements indicated below for more information. Refer also to the Consolidated Results of Operations – Net Earnings and Earnings per Share Attributable to Mondelēz International table for the after-tax per share impacts of these items.
For the Years Ended December 31,See Note 2024 2023 2022(in millions, except percentages)
Simplify to Grow Program Note 8Restructuring Charges $ (77) $ (106) $ (36)
Implementation Charges (72) (25) (87)
Intangible asset impairment charges Note 6 (153) (26) (101)Mark-to-market gains/(losses) from derivatives (1)Note 10 544 185 (318)Acquisition and divestiture-related costs Note 2
Acquisition integration costs and
contingent consideration adjustments (1)315 (246) (148)
Inventory step-up (3) — (25)
Acquisition-related costs (3) — (254)
Gain on acquisition and divestitures
4 108 —
Divestiture-related costs (1) (83) (18)
2017 Malware incident net recoveries — — 37
Incremental costs due to war in Ukraine
Note 1 (3) 1 (121)
European Commission legal matter Note 14 3 (43) (318)
ERP System Implementation costs (2)
(78) — —
Remeasurement of net monetary position Note 1 (31) (98) (40)Impact from pension participation changes (1)Note 11 (10) (10) (10)
Loss on debt extinguishment and related expenses Note 9 — (1) (129)
Initial impacts from enacted tax law changes Note 16 (24) (83) (17)
Gain on marketable securities
Note 7 — 593 —
(Loss)/gain on equity methodinvestment transactions (3)Note 7 (321) 462 (22)
Effective tax rate Note 16 23.5 % 26.1 % 26.8 %(1) Includes impacts recorded in operating income, benefit plan non-service income and interest expense and other, net. Mark-to-market gains/(losses) above also include our equity method investment-related derivative contract mark-to-market gains/(losses) (refer to Note 10, Financial Instruments ) that are recorded in the gain on equity method investment transactions on our consolidated statement of earnings.(2) ERP System Implementation program costs represent incremental operating expenses above the normal ongoing level of spending on information technology to support operations. These expenses include third-party consulting fees, direct labor costs associated with the program, accelerated depreciation of our existing SAP financial systems and various other expenses, all associated with the implementation of our information technology upgrades.
(3) (Loss)/gain on equity method investment transaction s includes impairments and is recorded outside pre-tax operating results on the consolidated statement of earnings. See footnote (1) as mark-to-market gains/(losses) on our equity method-investment-related derivative contracts are presented in the table above within mark-to-market gains/(losses) from derivatives. In addition, the amount shown in 2024 is inclusive of the gain on economic hedges related to sales proceeds from our JDEP transaction, which was recorded in Interest and other expense, net .
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Consolidated Results of OperationsThe following discussion compares our consolidated results of operations for 2024 with 2023 and 2023 with 2022.
2024 compared with 2023For the Years Ended December 31,2024 2023 $ Change% Change
(in millions, except per share data)Net revenues $ 36,441 $ 36,016 $ 425 1.2 %
Operating income 6,345 5,502 843 15.3 %Net earnings attributable to
Mondelēz International4,611 4,959 (348) (7.0) %Diluted earnings per share attributable to
Mondelēz International3.42 3.62 (0.20) (5.5) %Net RevenuesNet revenues increased $425 million (1.2%) to $36,441 million in 2024, and Organic Net Revenue (1) increased $1,544 million (4.3%) to $37,054 million. Emerging markets net revenues increased 1.1% and emerging markets Organic Net Revenue increased 6.2% (1) . Developed markets net revenues increased 1.2% and developed markets Organic Net Revenue increased 3.2% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below:Emerging Markets Developed Markets Mondelēz InternationalFor The Year Ended December 31, 2024
Reported (GAAP) $ 14,163 $ 22,278 $ 36,441
Short-term distributor agreements
(3) (22) (25)
Acquisitions (72) — (72)
Currency-related items
778 (68) 710
Organic (Non-GAAP) $ 14,866 $ 22,188 $ 37,054For The Year Ended December 31, 2023
Reported (GAAP) $ 14,011 $ 22,005 $ 36,016
Divestitures (5) (479) (484)Short-term distributor agreements (2) (20) (22)
Organic (Non-GAAP) $ 14,004 $ 21,506 $ 35,510$ Change
Reported (GAAP)1.1 % 1.2 % 1.2 %
Divestitures - pp 2.3 pp 1.4 pp
Acquisitions (0.5) — (0.3)
Currency-related items
5.6 (0.3) 2.0Organic (Non-GAAP)6.2 % 3.2 % 4.3 %
Vol/Mix (0.6)pp (1.1)pp (1.0)pp
Pricing 6.8 4.3 5.3(1) Please see the Non-GAAP Financial Measures section for additional information.Net revenue increase of 1.2% was driven by our underlying Organic Net Revenue growth of 4.3% and the impact of an acquisition, partially offset by unfavorable currency-related items and the impact of our 2023 divestiture of the developed market gum business. Organic Net Revenue growth was driven by higher net pricing, partially offset by unfavorable volume/mix. Higher net pricing in all regions was due to the benefit of carryover pricing from 2023 as well as the effects of input cost-driven pricing actions taken during 2024. Overall, unfavorable volume/mix was driven by volume declines, reflecting the impacts of expected customer price negotiation disruptions in Europe primarily in the second quarter, consumer demand softness in the U.S. and Mexico in the first half of the year and geopolitical impacts in parts of AMEA, which were partially offset by favorable product mix. Unfavorable volume/mix was reflected in Europe and Latin America, partially offset by a gain in AMEA, while North America was essentially flat. The November 1, 2024 acquisition of Evirth added incremental net revenues of $72 million (constant currency basis) in 2024. Currency-related items decreased net revenues by $710 million, driven by unfavorable currency
38Table of Contentstranslation rate changes, partially offset by the adjustment for extreme pricing in Argentina. Refer to Recent Developments and Significant Items Affecting Comparability for additional information. Unfavorable currency translation rate changes were due to the strength of the U.S. dollar relative to most currencies, primarily the Argentinean peso, as well as the Brazilian real, Nigerian naira, Turkish Lira, Russian ruble, Egyptian pound, Mexican peso and Chinese yuan, partially offset by the strength of a few currencies relative to the U.S. dollar, including the British pound sterling, Polish zloty, euro and Colombian peso. The impact of our 2023 divestiture of the developed market gum business resulted in a year-over-year reduction in net revenues of $484 million in 2024. Refer to Note 2, Acquisitions and Divestitures, for additional information.Operating IncomeOperating income increased $843 million (15.3%) to $6,345 million in 2024, Adjusted Operating Income (1) increased $265 million (4.7%) to $5,899 million and Adjusted Operating Income on a constant currency basis increased $456 million (8.1%) to $6,090 million due to the following:For the Years Ended December 31,2024 2023 $ Change % Change(in millions)Operating Income $ 6,345 $ 5,502 $ 843 15.3 %Simplify to Grow Program (2)149 131 18Intangible asset impairment charges (3)153 26 127
Mark-to-market gains from derivatives (4)
(543) (189) (354)Acquisition integration costs and
contingent consideration adjustments (5)(315) 246 (561)Inventory step-up (5)3 — 3Acquisition-related costs (5)3 — 3
Gain on acquisition and divestitures (5)
(4) (108) 104
Divestiture-related costs (5)
1 83 (82)Operating results from divestitures (5)— (194) 194Operating results from short-term distributor agreements(2) (3) 1European Commission legal matter (6)(3) 43 (46)Incremental costs due to war in Ukraine (7)3 (1) 4
ERP System Implementation costs (8)
78 — 78
Remeasurement of net monetary position (9)
31 98 (67)Adjusted Operating Income (1)$ 5,899 $ 5,634 $ 265 4.7 %
Currency-related items
191 — 191Adjusted Operating Income (constant currency) (1)$ 6,090 $ 5,634 $ 456 8.1 %Key Drivers of Adjusted Operating Income (constant currency) $ ChangeHigher net pricing $ 1,889
Higher input costs (1,079)
Unfavorable volume/mix (149)
Higher selling, general and administrative expenses (215)Impact from acquisitions (5)10
Higher amortization of intangible assets (1)
Lower asset impairment charges 1Total change in Adjusted Operating Income (constant currency) (1)$ 456(1) Refer to the Non-GAAP Financial Measures section for additional information.
(2) Refer to Note 8, Restructuring Program , for more information.
(3) Refer to Note 6, Goodwill and Intangible Assets , for more information.
(4) Refer to Note 10, Financial Instruments, and the Non-GAAP Financial Measures section for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives.39Table of Contents(5) Refer to Note 2, Acquisitions and Divestitures , for more information on the November 1, 2024 acquisition of Evirth, October 1, 2023 sale of the developed market gum business, November 1, 2022 acquisition of Ricolino, August 1, 2022 acquisition of Clif Bar and the January 3, 2022 acquisition of Chipita.(6) Refer to Note 14, Commitments and Contingencies , for more information.
(7) Refer to Note 1, Summary of Significant Accounting Policies – War in Ukraine, for more information.(8) Refer to Recent Developments and Significant Items Affecting Comparability - ERP System Implementation , for additional information.
(9) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina, Türkiye, Egypt and Nigeria.
During 2024, we realized higher net pricing, which was partially offset by increased input costs and unfavorable volume/mix. Higher net pricing, which included the carryover impact of pricing actions taken in 2023 as well as the effects of input cost-driven pricing actions taken during 2024, was reflected across all regions. The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs driven by productivity. Higher raw material costs were in part due to higher cocoa, sugar, nuts and other ingredient costs, as well as unfavorable year-over-year currency exchange transaction costs on imported materials, partially offset by lower energy, edible oils, grains, dairy and packaging costs. Overall, unfavorable volume/mix was due to volume declines partially offset by favorable product mix. Unfavorable volume/mix was experienced in all regions.
Total selling, general and administrative expenses decreased $563 million from 2023, which was net of benefits from a number of factors noted in the table above, including in part, favorable contingent consideration adjustments related to the Clif Bar acquisition and lower acquisition integration costs, lapping prior-year divestiture-related costs, the elimination of costs from the developed market gum business divested in 2023, lower remeasurement loss of net monetary position, a favorable currency translation impact related to expenses and lapping prior-year impact from the European Commission legal matter, marginally offset by costs incurred for the ERP System Implementation program and higher implementation costs incurred for the Simplify to Grow program. Excluding these factors, selling, general and administrative expenses increased $215 million from 2023. The increase was driven primarily by higher advertising and consumer promotion costs and higher overhead costs in part due to increased investments in route to market capabilities.
Unfavorable currency-related items, net of the adjustment for extreme pricing in Argentina, decreased operating income by $191 million primarily due to the strength of the U.S. dollar relative to most currencies, including the Argentinean peso, Russian ruble, Brazilian real, Egyptian pound, Turkish lira, Chinese yuan and Nigerian naira, partially offset by the strength of a few currencies relative to the U.S. dollar, primarily the British pound sterling and Polish zloty.
Operating income margin increased from 15.3% in 2023 to 17.4% in 2024. The increase in operating income margin was driven primarily by favorable year-over-year change in acquisition integration costs and contingent consideration adjustments, favorable year-over-year change in mark-to-market gains/(losses) from commodity and currency hedging activities, higher Adjusted Operating Income margin, lower divestiture-related costs, lapping prior-year impact from the European Commission legal matter and lower remeasurement loss of net monetary position, partially offset by higher intangible asset impairment charges, lapping the prior-year gain and the impact from the developed market gum business divested in 2023 and costs incurred for the ERP System Implementation program. Adjusted Operating Income margin increased from 15.9% in 2023 to 16.2% in 2024. The increase was driven primarily by higher net pricing, lower manufacturing costs driven by productivity and overhead cost leverage, partially offset by higher raw material costs and higher advertising and consumer promotion costs.
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Net Earnings and Earnings per Share Attributable to Mondelēz InternationalNet earnings attributable to Mondelēz International of $4,611 million decreased by $(348) million (7.0%) in 2024. Diluted EPS attributable to Mondelēz International was $3.42 in 2024, down $(0.20) (5.5%) from 2023. Adjusted EPS (1) was $3.36 in 2024, up $0.28 (9.1%) from 2023. Adjusted EPS on a constant currency basis was $3.48 in 2024, up $0.40 (13.0%) from 2023.For the Years Ended December 31,2024 2023 $ Change % Change
Diluted EPS attributable to Mondelēz International $ 3.42 $ 3.62 $ (0.20) (5.5) %Simplify to Grow Program (2)0.09 0.08 0.01Intangible asset impairment charges (2)0.08 0.01 0.07
Mark-to-market gains from derivatives (2)
(0.32) (0.12) (0.20)Acquisition integration costs and
contingent consideration adjustments (2)(0.17) 0.14 (0.31)Divestiture-related costs (2)— 0.04 (0.04)Operating results from divestitures (2) (3)(0.07) (0.17) 0.10
Gain on divestitures (2)
— (0.08) 0.08European Commission legal matter (2)— 0.01 (0.01)
ERP System Implementation costs (2)
0.04 — 0.04Remeasurement of net monetary position (2)0.02 0.07 (0.05)Impact from pension participation changes (2)
0.01 0.01 —Initial impacts from enacted tax law changes (4)
0.02 0.06 (0.04)
Gain on marketable securities (5)
— (0.34) 0.34
Loss/(gain) on equity method investment transactions (6)
0.24 (0.25) 0.49Adjusted EPS (1)$ 3.36 $ 3.08 $ 0.28 9.1 %
Currency-related items
0.12 — 0.12Adjusted EPS (constant currency) (1)$ 3.48 $ 3.08 $ 0.40 13.0 %Key Drivers of Adjusted EPS (constant currency) $ ChangeIncrease in operations $ 0.24Impact from acquisitions (2)0.01
Change in benefit plan non-service income 0.01
Change in interest and other expense, net (6)0.04Change in dividend income from marketable securities
(0.01)
Change in income taxes (4)
0.05
Change in shares outstanding (7)
0.06Total change in Adjusted EPS (constant currency) (1)$ 0.40(1) Refer to the Non-GAAP Financial Measures section appearing for additional information. The tax expense/(benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS.• 2024 taxes for the: Simplify to Grow Program were $(36) million, intangible asset impairment charges were $(40) million, mark-to-market gains from derivatives were $107 million, acquisition integration costs and contingent consideration adjustments were $89 million, operating results from divestitures were zero, ERP Systems Implementation costs were $(19) million, remeasurement of net monetary position were zero, impact from pension participation changes were $(3) million, initial impacts from enacted tax law changes were $24 million and loss on equity method investment transactions were $4 million.
• 2023 taxes for the: Simplify to Grow Program were $(26) million, intangible asset impairment charges were $(6) million, mark-to-market gains from derivatives were $21 million, acquisition integration costs and contingent consideration adjustments were $(60) million, divestiture-related costs were $(25) million, operating results from divestitures were $46 million, gain on divestiture were $(8) million, European Commission legal matter were $(24) million, remeasurement of net monetary position were zero, impact from pension participation changes were $(3) million, initial impacts from enacted tax law changes were $83 million, gain on marketable securities were $133 million and gain on equity method investment transactions were $124 million.(2) See the Operating Income table above and the related footnotes for more information.41
Table of Contents(3) Divestitures include completed sales of businesses, partial or full sales of equity method investments and exits of major product lines upon completion of a sale or licensing agreement.
(4) Refer to Note 16, Income Taxes , for information on income taxes.
(5) Refer to Note 7, Investments , for more information on gains on marketable securities and gains and losses on equity method investment transactions.
(6) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation.
(7) Refer to Note 12, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 17, Earnings per Share , for earnings per share weighted-average share information.
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2023 compared with 2022For the Years Ended December 31,2023 2022 $ Change % Change(in millions, except per share data)Net revenues $ 36,016 $ 31,496 $ 4,520 14.4 %
Operating income 5,502 3,534 1,968 55.7 %
Net earnings attributable to Mondelēz International 4,959 2,717 2,242 82.5 %
Diluted earnings per share attributable to Mondelēz International 3.62 1.96 1.66 84.7 %Net RevenuesNet revenues increased $4,520 million (14.4%) to $36,016 million in 2023, and Organic Net Revenue (1) increased $4,572 million (14.7%) to $35,570 million. Emerging markets net revenues increased 15.0% and emerging markets Organic Net Revenue increased 20.4% (1) . Developed markets net revenues increased 13.9% and developed markets Organic Net Revenue increased 11.1% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below:Emerging Markets Developed Markets Mondelēz InternationalFor The Year Ended December 31, 2023
Reported (GAAP) $ 14,011 $ 22,005 $ 36,016
Divestitures
(5) (479) (484)
Short-term distributor agreements (2) (20) (22)
Acquisitions (507) (529) (1,036)
Currency 1,138 (42) 1,096
Organic (Non-GAAP) $ 14,635 $ 20,935 $ 35,570For The Year Ended December 31, 2022
Reported (GAAP) $ 12,184 $ 19,312 $ 31,496Divestitures (27) (471) (498)
Organic (Non-GAAP) $ 12,157 $ 18,841 $ 30,998% Change
Reported (GAAP)15.0 % 13.9 % 14.4 %
Divestitures 0.2 pp 0.4 pp 0.2 pp
Short-term distributor agreements — (0.2) —
Acquisitions (4.2) (2.8) (3.4)
Currency 9.4 (0.2) 3.5Organic (Non-GAAP)20.4 % 11.1 % 14.7 %
Vol/Mix 2.8 pp 0.4 pp 1.3 pp
Pricing 17.6 10.7 13.4(1) Please see the Non-GAAP Financial Measures section for additional information.Net revenue increase of 14.4% was driven by our underlying Organic Net Revenue growth of 14.7%, the impact of acquisitions and the impact of a short-term distributor agreement, partially offset by unfavorable currency translation and the impact of divestitures. Overall, we continued to see strong demand for our snack category products across most regions. Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix. Higher net pricing in all regions was due to the benefit of carryover pricing from 2022 as well as the effects of input cost-driven pricing actions taken during 2023. Favorable volume/mix was driven by AMEA, Latin America and Europe reflecting both improved product mix and volume gains, while volume/mix was essentially flat in North America. The November 1, 2022 acquisition of Ricolino added incremental net revenues of $507 million (constant currency basis) through the one-year anniversary of the acquisition. The August 1, 2022 acquisition of Clif Bar added incremental net revenues of $529 million through the one-year anniversary of the acquisition. The short-term distributor agreement related to the October 1, 2023 sale of our developed market gum business added incremental net revenues of $22 million. Unfavorable currency impacts decreased net revenues by $1,096 million, due primarily to the strength of the U.S. dollar relative to several currencies, primarily due to the Argentinean peso and Russian ruble as well as the Turkish lira, Egyptian pound, Indian rupee, Chinese yuan, Nigerian naira, Australian dollar,
43Table of ContentsSouth African rand, Pakistan rupee and Canadian dollar, partially offset by the strength of several currencies relative to the U.S. dollar, including the Mexican peso, euro, Brazilian real, Polish zloty and British pound sterling. The impact of 2023 and 2022 divestitures resulted in a year-over-year reduction in net revenues of $14 million. Refer to Note 2, Acquisitions and Divestitures, for additional information.Operating IncomeOperating income increased $1,968 million (55.7%) to $5,502 million in 2023, Adjusted Operating Income (1) increased $749 million (15.3%) to $5,634 million and Adjusted Operating Income on a constant currency basis increased $939 million (19.2%) to $5,824 million due to the following:For the Years Ended December 31,2023 2022 $ Change % Change(in millions)Operating Income $ 5,502 $ 3,534 $ 1,968 55.7 %Simplify to Grow Program (2)131 122 9Intangible asset impairment charges (3)26 101 (75)
Mark-to-market (gains)/losses from derivatives (4)
(189) 326 (515)Acquisition integration costs (5)246 136 110Inventory step-up (5)— 25 (25)Acquisition-related costs (5)— 330 (330)
Gain on divestitures (5)
(108) — (108)Divestiture-related costs (5)83 18 65Operating results from divestitures (5)(194) (148) (46)
Operating results from short-term distributor agreements
(3) — (3)
2017 Malware incident recoveries, net — (37) 37European Commission legal matter (6)43 318 (275)Incremental costs due to war in Ukraine (7)(1) 121 (122)Remeasurement of net monetary position (8)98 40 58Impact from pension participation changes (9)— (1) 1Adjusted Operating Income (1)$ 5,634 $ 4,885 $ 749 15.3 %
Currency-related items
190 — 190Adjusted Operating Income (constant currency) (1)$ 5,824 $ 4,885 $ 939 19.2 %Key Drivers of Adjusted Operating Income (constant currency) $ ChangeHigher net pricing $ 4,143
Higher input costs (2,522)
Favorable volume/mix 189
Higher selling, general and administrative expenses (947)Impact from acquisitions (5)112
Higher asset impairment charges (36)Total change in Adjusted Operating Income (constant currency) (1)$ 939(1) Refer to the Non-GAAP Financial Measures section.
(2) Refer to Note 8, Restructuring Program , for more information.
(3) Refer to Note 6, Goodwill and Intangible Assets , for more information.
(4) Refer to Note 10, Financial Instruments , Note 18, Segment Reporting , and Non-GAAP Financial Measures for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives.(5) Refer to Note 2, Acquisitions and Divestitures , for more information on the October 1, 2023 sale of the developed market gum business, November 1, 2022 acquisition of Ricolino, August 1, 2022 acquisition of Clif Bar and the January 3, 2022 acquisition of Chipita.(6) Refer to Note 14, Commitments and Contingencies , for more information.(7) Refer to Note 1, Summary of Significant Accounting Policies – War in Ukraine, for more information.
(8) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina and Türkiye.
(9) Refer to Note 11, Benefit Plans , for more information.44
Table of ContentsDuring 2023, we realized higher net pricing and favorable volume/mix, which was partially offset by increased input costs. Higher net pricing, which included the carryover impact of pricing actions taken in 2022 as well as the effects of input cost-driven pricing actions taken during 2023, was reflected across all regions. Overall, volume/mix benefited from improved product mix and continued strong demand for our snack category products across most regions. Favorable volume/mix was driven by AMEA, Latin America and Europe, which was marginally offset by slightly unfavorable volume/mix in North America. The increase in input costs was driven by higher raw material costs, slightly offset by lower manufacturing costs driven by productivity. Higher raw material costs were in part due to higher energy, sugar, grains, dairy, cocoa, packaging, edible oils and other ingredients costs as well as unfavorable year-over-year currency exchange transaction costs on imported materials.
Total selling, general and administrative expenses increased $618 million from 2022, due to a number of factors noted in the table above, including in part, the impact of acquisitions, higher acquisition integration costs and contingent consideration adjustments, higher divestiture-related costs, higher remeasurement loss of net monetary position and lapping prior-year 2017 malware incident net recoveries, which were offset by a lower impact from the European Commission legal matter, lapping prior year acquisition-related costs, a favorable currency impact related to expenses, lower implementation costs incurred for the Simplify to Grow program, the impact from divestitures and lower incremental costs due to the war in Ukraine. Excluding these factors, selling, general and administrative expenses increased $947 million from 2022. The increase was driven primarily by higher advertising and consumer promotion costs and higher overhead costs in part due to increased investments in route to market capabilities.
Unfavorable currency changes decreased operating income by $190 million, primarily due to the strength of the U.S. dollar relative to most currencies, including the Russian ruble, Argentinean peso, Egyptian pound, Chinese yuan, Indian rupee, Turkish lira, Australian dollar and South African rand, partially offset by the strength of a few currencies relative to the U.S. dollar, primarily the euro, Mexican peso, Brazilian real and Polish zloty.
Operating income margin decreased from 11.2% in 2022 to 15.3% in 2023. The decrease in operating income margin was driven primarily by the favorable year-over-year change in mark-to-market gains/(losses) from currency and commodity hedging activities, lapping prior year acquisition-related costs, lower impact from the European Commission legal matter, lower incremental costs due to the war in Ukraine, gain on the sale of our developed market gum business, lower intangible asset impairment charges, higher Adjusted Operating Income margin and lapping prior year inventory step-up charges, partially offset by higher acquisition integration costs and contingent consideration adjustments, higher divestiture-related costs, higher remeasurement loss of net monetary position and lapping prior year 2017 malware incident net recoveries. Adjusted Operating Income margin increased from 15.8% in 2022 to 15.9% in 2023. The increase was driven primarily by higher net pricing, overhead cost leverage, lower manufacturing costs driven by productivity and favorable product mix, partially offset by higher raw material costs and higher advertising and consumer promotion costs.
45
Table of ContentsNet Earnings and Earnings per Share Attributable to Mondelēz InternationalNet earnings attributable to Mondelēz International of $4,959 million increased by $2,242 million (82.5%) in 2023. Diluted EPS attributable to Mondelēz International was $3.62 in 2023, up $1.66 (84.7%) from 2022. Adjusted EPS (1) was $3.08 in 2023, up $0.41 (15.4%) from 2022. Adjusted EPS on a constant currency basis was $3.21 in 2023, up $0.54 (20.2%) from 2022.For the Years Ended December 31,2023 2022 $ Change % Change
Diluted EPS attributable to Mondelēz International $ 3.62 $ 1.96 $ 1.66 84.7 %Simplify to Grow Program (2)0.08 0.07 0.01Intangible asset impairment charges (2)0.01 0.05 (0.04)
Mark-to-market (gains)/losses from derivatives (2)
(0.12) 0.19 (0.31)Acquisition integration costs and
contingent consideration adjustments (2)0.14 0.05 0.09Inventory step-up— 0.01 (0.01)Acquisition-related costs (2)— 0.19 (0.19)Divestiture-related costs (2)0.04 0.01 0.03Operating results from divestitures (2)(0.17) (0.30) 0.13
Gain on marketable securities (6)
(0.34) — (0.34)2017 Malware incident net recoveries— (0.02) 0.02European Commission legal matter0.01 0.23 (0.22)Incremental costs due to war in Ukraine— 0.09 (0.09)
Gain on divestitures (2)
(0.08) — (0.08)Remeasurement of net monetary position (2)0.07 0.03 0.04Impact from pension participation changes (2)0.01 0.01 —Loss on debt extinguishment (3)— 0.07 (0.07)Initial impacts from enacted tax law changes (4)0.06 0.01 0.05Gain on equity method investment transactions (5)(0.25) 0.02 (0.27)Adjusted EPS (1)$ 3.08 $ 2.67 $ 0.41 15.4 %
Currency-related items
0.13 — 0.13Adjusted EPS (constant currency) (1)$ 3.21 $ 2.67 $ 0.54 20.2 %Key Drivers of Adjusted EPS (constant currency) $ ChangeIncrease in operations $ 0.47Impact from acquisitions (2)0.06Change in benefit plan non-service income (0.03)
Change in interest and other expense, net (6)
0.04
Dividend income from marketable securities 0.01
Change in equity method investment net earnings 0.01
Change in income taxes (4)
(0.05)
Change in shares outstanding (7)
0.03Total change in Adjusted EPS (constant currency) (1)$ 0.54(1) The tax expense/(benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS.• 2023 taxes for the: Simplify to Grow Program were $(26) million, intangible asset impairment charges were $(6) million, mark-to-market gains from derivatives were $21 million, acquisition integration costs and contingent consideration adjustments were $(60) million, divestiture-related costs were $(25) million, operating results from divestitures were $46 million, gain on divestiture were $(8) million, European Commission legal matter were $(24) million, remeasurement of net monetary position were zero, impact from pension participation changes were $(3) million, initial impacts from enacted tax law changes were $83 million, gain on marketable securities were $133 million and gain on equity method investment transactions were $124 million.
46Table of Contents• 2022 taxes for the: Simplify to Grow Program were $(26) million, intangible asset impairment charge were $(25) million, mark-to-market losses from derivatives were $(56) million, acquisition integration costs and contingent consideration adjustments were $(72) million, inventory step-up charges were $(7) million, acquisition-related costs were $11 million, divestiture-related costs were $(9) million operating results from divestitures were $50 million, 2017 malware incident net recoveries were $10 million, European Commission legal matter were zero, incremental costs due to the war in Ukraine were $4 million, remeasurement of net monetary position were zero, impact from pension participation changes were $(3) million, loss on debt extinguishment and related expenses were $(31) million, initial impacts from enacted tax law changes were $17 million and loss on equity method investment transactions were $2 million.(2) See the Adjusted Operating Income table above and the related footnotes for more information.
(3) Refer to Note 9, Debt and Borrowing Arrangements , for more information on losses on debt extinguishment.
(4) Refer to Note 16, Income Taxes , for information on income taxes.
(5) Refer to Note 7, Investments , for more information on gains and losses on equity method investment transactions.(6) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation.
(7) Refer to Note 12, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 17, Earnings per Share , for earnings per share weighted-average share information.
47Table of Contents
Results of Operations by Operating Segment
Our operations and management structure are organized into four operating segments:
• Latin America
• AMEA
• Europe
• North America
We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise across our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions.
We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. See Note 18, Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results.Our segment net revenues and operating earnings were:For the Years Ended December 31,2024 2023 2022(in millions)
Net revenues:
Latin America$ 4,926 $ 5,006 $ 3,629AMEA7,296 7,075 6,767Europe13,309 12,857 11,420North America10,910 11,078 9,680
Net revenues $ 36,441 $ 36,016 $ 31,496For the Years Ended December 31,2024 2023 2022(in millions)Operating income:Latin America $ 532 $ 529 $ 388
AMEA 1,192 1,113 929
Europe 2,068 1,978 1,481
North America 2,492 2,092 1,769
Unrealized gains/(losses) on hedging activities (mark-to-market impacts) 543 189 (326)
General corporate expenses (330) (356) (245)
Amortization of intangible assets (153) (151) (132)
Gain on acquisition and divestitures
4 108 —
Acquisition-related costs (3) — (330)
Operating income $ 6,345 $ 5,502 $ 3,534
48Table of Contents
Latin America
For the Years Ended December 31,2024 2023 $ Change% Change
(in millions)Net revenues $ 4,926 $ 5,006 $ (80) (1.6) %
Segment operating income 532 529 3 0.6 %For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 5,006 $ 3,629 $ 1,377 37.9 %
Segment operating income 529 388 141 36.3 %
2024 compared with 2023
Net revenues decreased $80 million (1.6%), due to unfavorable impact of currency-related items (6.2 pp) and unfavorable volume/mix (2.4 pp), partially offset by higher net pricing (7.0 pp). Currency-related items were unfavorable, net of the adjustment for extreme pricing in Argentina, due to currency translation rate changes. Unfavorable currency translation impacts were primarily due to the strength of the U.S. dollar relative to most currencies in the region, primarily the Argentinean peso, Brazilian real, Mexican peso and Chilean peso, partially offset by the strength of a few currencies relative to the U.S. dollar, primarily the Colombian peso. Overall, unfavorable volume/mix reflected volume declines due to consumer softness, primarily in Mexico and Argentina, partially offset by favorable product mix. Overall, unfavorable volume/mix was driven by declines in chocolate, candy, cheese & grocery and refreshment beverages, partially offset by gains in biscuits & baked snacks and gum. Higher net pricing, net of the adjustment for extreme pricing in Argentina, was driven by input cost-driven pricing actions and reflected across all categories, primarily in Argentina, Mexico and Brazil.
Segment operating income increased $3 million (0.6%), primarily due to higher net pricing, lower remeasurement loss on net monetary position, lower manufacturing costs driven by productivity, lower acquisition integration costs and lower other selling, general and administrative expenses. These favorable items were mostly offset by higher raw material costs, unfavorable currency-related items, unfavorable volume/mix, higher advertising and consumer promotion costs, higher costs incurred for the Simplify to Grow Program, costs incurred for the ERP Systems Implementation program and intangible asset impairment charges incurred in 2024.2023 compared with 2022
Net revenues increased $1,377 million (37.9%), due to higher net pricing (31.0 pp), the impact of acquisitions (14.0 pp) and favorable volume/mix (3.8 pp), partially offset by unfavorable currency (10.0 pp) and the impact of divestitures (0.9 pp). Higher net pricing was reflected across all categories, driven primarily by Argentina as well as Brazil and Mexico. The November 1, 2022 acquisition of Ricolino added incremental net revenues of $507 million (constant currency basis) through the one-year anniversary of the acquisition in 2023. Favorable volume/mix reflected strong volume growth as the region continued to see increased demand for most of our snack category products. Favorable volume/mix was driven by gains in gum, biscuits & baked snacks, candy and cheese & grocery, partially offset by declines in refreshment beverages and chocolate. Unfavorable currency impacts were primarily due to the strength of the U.S. dollar relative to a few currencies in the region, primarily the Argentinean peso, partially offset by the strength of most currencies relative to the U.S. dollar, primarily the Mexican peso and Brazilian real. The impact of our 2022 divestitures resulted in a year-over-year decline in net revenues of $22 million.
Segment operating income increased $141 million (36.3%), primarily due to higher net pricing, the impact of our Ricolino acquisition, favorable volume/mix, lower manufacturing costs driven by productivity and lapping prior year inventory step-up charges. These favorable items were partially offset by higher raw material costs, higher other selling, general and administrative expenses, higher advertising and consumer promotion costs, higher remeasurement loss on net monetary position and higher acquisition integration costs.49Table of Contents
AMEA
For the Years Ended December 31,2024 2023 $ Change% Change
(in millions)Net revenues $ 7,296 $ 7,075 $ 221 3.1 %
Segment operating income 1,192 1,113 79 7.1 %For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 7,075 $ 6,767 $ 308 4.6 %
Segment operating income 1,113 929 184 19.8 %
2024 compared with 2023
Net revenues increased $221 million (3.1%), due to higher net pricing (5.5 pp) the impact of an acquisition (1.0 pp), and favorable volume/mix (0.7 pp), partly offset by unfavorable currency translation rate changes (4.1 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. The November 1, 2024 acquisition of Evirth added incremental net revenues of $72 million (constant currency basis) in 2024. Overall, favorable volume/mix reflected favorable product mix, partially offset by volume declines reflecting the impact of geopolitical events in the region. Favorable volume/mix was driven by gains in gum, biscuits & baked snacks, chocolate and cheese & grocery, partially offset by declines in refreshment beverages and candy. Unfavorable currency translation impacts were due to the strength of the U.S. dollar relative to most currencies in the region, including the Nigerian naira, Egyptian pound, Chinese yuan, Indian rupee, Vietnam dong, Philippine peso and Japanese yen.
Segment operating income increased $79 million (7.1%), primarily due to higher net pricing, lower manufacturing costs driven by productivity and the impact from our Evirth acquisition. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, unfavorable currency translation rate changes, higher other selling, general and administrative expenses, unfavorable volume/mix, costs incurred for the ERP Systems Implementation program, higher acquisition integration costs and contingent consideration adjustments and an intangible asset impairment charge incurred in 2024.2023 compared with 2022Net revenues increased $308 million (4.6%), due to higher net pricing (8.6 pp) and favorable volume/mix (3.1 pp), partially offset by unfavorable currency (7.1 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. Favorable volume/mix reflected overall volume gains from increased demand for most of our snack category products. Favorable volume/mix was driven by gains in chocolate, gum, candy and refreshment beverages, partially offset by declines in biscuits & baked snacks and cheese & grocery. Unfavorable currency impacts were due to the strength of the U.S. dollar relative to most currencies in the region, including the Egyptian pound, Indian rupee, Chinese yuan, Nigerian naira, Australian dollar, South African Rand, Pakistan rupee and Japanese yen.Segment operating income increased $184 million (19.8%), primarily due to higher net pricing, favorable volume/mix, lapping prior-year intangible asset impairment charges, lower manufacturing costs driven by productivity and lower costs incurred for the Simplify to Grow Program. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, unfavorable currency, higher other selling, general and administrative expenses and higher fixed asset impairment charges.50Table of Contents
Europe
For the Years Ended December 31,2024 2023 $ Change% Change
(in millions)Net revenues $ 13,309 $ 12,857 $ 452 3.5 %
Segment operating income 2,068 1,978 90 4.6 %For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 12,857 $ 11,420 $ 1,437 12.6 %
Segment operating income 1,978 1,481 497 33.6 %
2024 compared with 2023
Net revenues increased $452 million (3.5%), due to higher net pricing (7.8 pp), partially offset by unfavorable volume/mix (2.1 pp), the impact of divestitures (1.4 pp) and unfavorable currency translation rate changes (0.8 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories except cheese & grocery. Overall, unfavorable volume/mix reflected volume declines due to the impact from customer price negotiation disruptions primarily in the second quarter, partially offset by favorable product mix. Unfavorable volume/mix was driven by declines in chocolate, biscuits & baked snacks, refreshment beverages, candy and gum, partially offset by a gain in cheese & grocery. The impact of our 2023 divestiture of the developed market gum business resulted in a year-over-year reduction in net revenues of $174 million. Unfavorable currency translation rate changes reflected the strength of the U.S. dollar relative to most currencies across the region, including the Turkish lira, Russian ruble and Ukrainian hryvnya, partially offset by the strength of a few currencies relative to the U.S. dollar, including the British pound sterling, Polish zloty and euro.
Segment operating income increased $90 million (4.6%), primarily due to higher net pricing, lower divestiture-related costs, lower impact from the European Commission legal matter, lower costs incurred for the Simplify to Grow Program, lower manufacturing costs driven by productivity and lower remeasurement loss on net monetary position. These favorable items were partially offset by higher raw material costs, higher intangible asset impairment charges, higher advertising and consumer promotion costs, lapping prior-year operating results from the developed market gum business divested in 2023, unfavorable volume/mix, unfavorable currency translation rate changes, higher other selling, general and administrative expenses, costs incurred for the ERP Systems Implementation program and higher fixed asset impairment costs.2023 compared with 2022
Net revenues increased $1,437 million (12.6%), due to higher net pricing (13.8 pp), favorable volume/mix (0.7 pp) and the impact from short-term distributor agreements (0.2 pp), partially offset by unfavorable currency (1.9 pp) and the impact of divestitures (0.2 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. Overall, volume/mix was favorable driven by improved product mix. Favorable volume/mix was driven by gains in biscuits & baked snacks, chocolate, gum and refreshment beverages, partially offset by declines in cheese & grocery and candy. The short-term distributor agreement related to the October 1, 2023 sale of our developed market gum business added incremental net revenues of $22 million. Unfavorable currency impacts reflected the strength of the U.S. dollar relative to several currencies across the region, including the Russian ruble, Turkish lira, Norwegian krone, Ukrainian hryvnya and Swedish krona, partially offset by the strength of several currencies relative to the U.S. dollar, including the euro, Polish zloty, British pound sterling and Swiss franc. The impact of divestitures reflected a year-over-year decline in net revenues of $4 million from our 2023 divested developed market gum business.Segment operating income increased $497 million (33.6%), primarily due to higher net pricing, lower impact from the European Commission legal matter, lapping the prior year incremental costs incurred due to the war in Ukraine, lower acquisition integration costs and favorable volume/mix. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, unfavorable currency, divestiture-related
51Table of Contentscosts incurred in 2023, higher costs incurred for the Simplify to Grow Program, higher other selling, general and administrative expenses, higher remeasurement loss on net monetary position, higher manufacturing costs and an intangible asset impairment charge incurred in 2023.
52
Table of ContentsNorth America
For the Years Ended December 31,2024 2023 $ Change% Change
(in millions)Net revenues $ 10,910 $ 11,078 $ (168) (1.5) %
Segment operating income 2,492 2,092 400 19.1 %For the Years Ended December 31,2023 2022 $ Change% Change
(in millions)Net revenues $ 11,078 $ 9,680 $ 1,398 14.4 %
Segment operating income 2,092 1,769 323 18.3 %
2024 compared with 2023
Net revenues decreased $168 million (1.5%), due to the impact of divestitures (2.8 pp), unfavorable currency translation rate changes (0.2 pp) and flat volume/mix (– pp), partially offset by higher net pricing (1.5 pp). The impact of our 2023 divestiture of the developed market gum business resulted in a year-over-year reduction in net revenues of $310 million. Unfavorable currency translation rate changes were due to the strength of the U.S. dollar relative to the Canadian dollar. Volume/mix was flat for the year as volume trends improved in the second half of 2024 offsetting consumer softness experienced in the U.S. in the first half of 2024. Overall, a volume/mix gain in chocolate was offset by declines in biscuits & baked snacks and candy. Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories.
Segment operating income increased $400 million (19.1%), primarily due to a favorable contingent consideration adjustment related to Clif Bar as well as lower acquisition integration costs, higher net pricing, lower manufacturing costs due to productivity, lapping prior-year intangible asset impairment charges, lower divestiture-related costs, lower other selling, general and administrative expenses and lower fixed asset impairment charges. These favorable items were partially offset by higher raw material costs, lapping prior-year operating results from the developed market gum business divested in 2023, unfavorable volume/mix, higher costs incurred for the Simplify to Grow Program, higher advertising and consumer promotion costs and costs incurred for the ERP Systems Implementation program.2023 compared with 2022Net revenues increased $1,398 million (14.4%), due to higher net pricing (9.5 pp), the impact of acquisitions (5.6 pp) and flat volume/mix (- pp), partially offset by the impact of divestitures (0.4 pp) and unfavorable currency (0.3 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. The August 1, 2022 acquisition of Clif Bar added incremental net revenues of $529 million through the one-year anniversary of the acquisition in 2023. Overall, volume/mix was flat as slight volume gains were offset by unfavorable mix. Flat volume/mix was driven by gains in candy and chocolate offset by a decline in biscuits & baked snacks. While the impact of divestitures reflected a year-over-year increase in net revenues of $12 million (net of the loss of revenue for the fourth quarter) from our 2023 divested developed market gum business, it had a negative impact on the net revenue growth rate as the divested business did not grow as fast as the remaining segment. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar.Segment operating income increased $323 million (18.3%), primarily due to higher net pricing, the impact of our Clif Bar acquisition, higher operating results from the divested developed market gum business, lower costs incurred for the Simplify to Grow Program and lapping prior year inventory step-up charges. These favorable items were partially offset by higher raw material costs, higher advertising and consumer promotion costs, higher acquisition integration costs and contingent consideration adjustments, higher other selling, general and administrative expenses, an intangible asset impairment charge incurred in 2023, divestiture-related costs incurred in 2023, unfavorable volume/mix and unfavorable currency.53Table of Contents
Liquidity and Capital ResourcesWe believe that cash from operations, our revolving credit facilities, short-term borrowings and our authorized long-term financing will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations and payments for acquisitions, share repurchases and quarterly dividends. We expect to continue to utilize our commercial paper program and international credit lines as needed. We continually evaluate long-term debt issuances to meet our short- and longer-term funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. Overall, we do not expect negative effects to our funding sources that would have a material effect on our liquidity, and we continue to monitor our global operations including the impact of ongoing or new conflicts in Ukraine and the Middle East. To date, we have been successful in generating cash and raising financing as needed. However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, results of operations and financial condition.Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for acquisitions, shareholder returns (such as dividend payments and share repurchases), property, plant and equipment and any significant one-time non-operating items.
Long-term cash requirements primarily relate to funding long-term debt repayments (refer to Note 9, Debt and Borrowing Arrangements ), our U.S. tax reform transition tax liability and deferred taxes (refer to Note 16, Income Taxes ), our long-term benefit plan obligations (refer to Note 11, Benefit Plans ) and commodity-related purchase commitments and derivative contracts (refer to Note 10, Financial Instruments ).
We generally fund short- and long-term cash requirements with cash from operating activities as well as cash proceeds from short- and long-term debt financing (refer to Debt below). We generally do not use equity to fund our ongoing obligations.For a full discussion related to the financial condition for the fiscal year ended December 31, 2022, including a year-to-year comparison between 2023 and 2022, see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.Cash Flow
We believe our ability to generate substantial cash from operating activities and readily access capital markets and secure financing at competitive rates are key strengths and give us significant flexibility to meet our short and long-term financial commitments. Our cash flow activity over the last three years is noted below:
For the Years Ended December 31,20242023
2022(in millions)Net cash provided by/(used in):
Operating activities
$ 4,910 $ 4,714 $ 3,908
Investing activities
526 2,812 (4,888)
Financing activities
(5,780) (7,558) (456)Net Cash Provided by Operating ActivitiesThe increase in net cash provided by operating activities in 2024 was primarily due to an increase in cash-basis net earnings, largely due to operating gains, partially offset by unfavorable year-over-year working capital movements, including the payment of the European Commission matter. Refer to Note 14, Commitments and Contingencies for additional information.Net Cash Used in/Provided by Investing ActivitiesThe reduction in net cash provided by investing activities was largely driven by lapping prior year proceeds from the developed market gum divestiture combined with lower proceeds from the current year JDEP share sale as compared to the prior year KDP and JDEP share sales, higher capital expenditures and cash consideration paid for the Evirth acquisition. Refer to Note 2, Acquisitions and Divestitures and Note 7, Investments for more information.
54Table of ContentsCapital expenditures were $1,387 million in 2024, $1,112 million in 2023 and $906 million in 2022. We continue to make capital expenditures primarily to modernize manufacturing facilities and support new product and productivity initiatives. We expect 2025 capital expenditures to be up to $1.4 billion, including capital expenditures in connection with our ERP System Implementation program and for funding our strategic priorities. We expect to continue to fund these expenditures with cash from operations.Net Cash Used in Financing ActivitiesThe decrease in net cash used in financing activities was primarily due to higher debt proceeds combined with lower debt repayments, partially offset by higher share repurchases and an increase in dividends paid to shareholders in 2024.DividendsWe paid dividends of $2,349 million in 2024, $2,160 million in 2023 and $1,985 million in 2022. On July 30, 2024, the Audit Committee, with authorization delegated from our Board of Directors, declared a quarterly cash dividend of $0.470 per share of Class A Common Stock, an increase of 11 percent, which would be $1.88 per common share on an annualized basis. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.
For U.S. income tax purposes only, the Company has determined that 100% of the distributions paid to its shareholders in 2024 are characterized as a qualified dividend paid from U.S. earnings and profits. See Note 13, Capital Stock , to the consolidated financial statements and Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Issuer Purchases of Equity Securities , for information on our share repurchase program.GuaranteesAs discussed in Note 14, Commitments and Contingencies , we enter into third-party guarantees primarily to cover the long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. As of December 31, 2024 and December 31, 2023, we had no material third-party guarantees recorded on our consolidated balance sheets. Guarantees do not have, and we do not expect them to have, a material effect on our liquidity.Debt
The nature and amount of our long-term and short-term debt and the proportionate amount of each varies as a result of current and expected business requirements, market conditions and other factors. As such, we may issue commercial paper or secure other forms of financing throughout the year to meet short-term working capital or other financing needs.At our July 2024 meeting, the Board of Directors approved a new $2 billion long-term financing authorization that replaced the prior long-term financing authorization of $2 billion. As of December 31, 2024, $1.5 billion of the long-term financing authorization remained available.
Our total debt was $17.7 billion at December 31, 2024 and $19.4 billion at December 31, 2023. Our debt-to-capitalization ratio was 0.40 at December 31, 2024 and 0.41 at December 31, 2023. The weighted-average term of our outstanding long-term debt was 7.7 years at December 31, 2024 and 7.8 years at December 31, 2023. Our average daily commercial borrowings were $1.1 billion in 2024, $2.1 billion in 2023 and $1.6 billion in 2022.
One of our subsidiaries, Mondelez International Holdings Netherlands B.V. (“MIHN”), has outstanding debt. Refer to Note 9, Debt and Borrowing Arrangements . The operations held by MIHN generated approximately 73.1% (or $26.6 billion) of the $36.4 billion of consolidated net revenue during fiscal year 2024 and represented approximately 81.9% (or $22.1 billion) of the $27.0 billion of net assets as of December 31, 2024.Refer to Note 9, Debt and Borrowing Arrangements , for more information on our debt and debt covenants.55Table of Contents
Commodity TrendsWe regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production. During 2024, the primary drivers of the increase in our aggregate commodity costs were higher cocoa, sugar, nuts and other ingredient costs as well as unfavorable year-over-year currency exchange transaction costs on imported materials, partially offset by lower energy, edible oils, grains, dairy and packaging costs. While the costs of our principal raw materials fluctuate, generally we believe there will continue to be an adequate supply of the raw materials we use and that they will broadly remain available.
A number of external factors such as the current macroeconomic environment, including global inflation, effects of geopolitical uncertainty, climate and weather conditions, commodity, transportation and labor market conditions, exchange rate volatility and the effects of local and global regulations, including trade policies, governmental agricultural or other programs affect the availability and cost of raw materials and agricultural materials used in our products. In particular, the supply of cocoa is exposed to many of these factors, including climate change and weather events, local regulations in cocoa-producing countries, and global regulations such as the EU Deforestation Regulation (which requires companies to ensure that the products they place on the EU market or export from it are not associated with deforestation). These factors could impact the supply of cocoa, which could potentially limit our ability to produce our products and significantly impact profitability.
During 2024, price volatility and the higher aggregate cost environment increased due to international supply chain and labor market disruptions and generally higher commodity, transportation and labor costs. We expect these conditions to continue to impact our aggregate commodity costs. In particular, we expect to face higher cocoa costs in the near- and medium-term due to these factors. For example, the market price for cocoa beans on the Intercontinental Exchange in London was 161% higher on the last trading day of the fourth quarter of 2024 compared to the same day in the fourth quarter of 2023 and it is likely that prices will remain elevated for some time. It is possible that we may not be able to increase prices sufficiently to fully cover the incremental costs of cocoa prices in this environment and/or our hedging strategies may not protect us from increases in cocoa costs, which could result in a significant impact on our profitability.
We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, such as dairy, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. Our commodity procurement practices are intended to mitigate price volatility and provide visibility to future costs, but also may potentially limit our ability to benefit from possible future price decreases. Additionally, our costs for major raw materials will not necessarily reflect market price fluctuations because of our forward purchasing and hedging practices. Due to competitive or market conditions, planned trade or promotional incentives, fluctuations in currency exchange rates or other factors, our pricing actions may also lag commodity cost changes temporarily.
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Non-GAAP Financial Measures
We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business. We use non-GAAP financial measures to budget, make operating and strategic decisions and evaluate our performance. We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the following categories: acquisition and divestiture activities, gains and losses on intangible asset sales and non-cash impairments, major program restructuring activities, constant currency and related adjustments, major program financing and hedging activities and other major items affecting comparability of operating results. We believe the non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have provided the reconciliations between the GAAP and non-GAAP financial measures along with a discussion of our underlying GAAP results throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.
Our primary non-GAAP financial measures are listed below and reflect how we evaluate our current and prior year operating results. As new events or circumstances arise, these definitions could change. When our definitions change, we provide the updated definitions and present the related non-GAAP historical results on a comparable basis (1) .
• “Organic Net Revenue” is defined as net revenues (the most comparable U.S. GAAP financial measure) excluding the impacts of acquisitions, divestitures (2) , short-term distributor agreements related to the sale of a business (3) , and currency rate fluctuations (4) . We believe that Organic net revenue reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results. We also evaluate Organic Net Revenue growth from emerging markets and developed markets, and these underlying measures are also reconciled to U.S. GAAP above.
• Our emerging markets include our Latin America region in its entirety; the AMEA region, excluding Australia, New Zealand and Japan; and the following countries from the Europe region: Russia, Ukraine, Türkiye, Kazakhstan, Georgia, Poland, Czech Republic, Slovak Republic, Hungary, Bulgaria, Romania, the Baltics and the East Adriatic countries.
• Our developed markets include the entire North America region, the Europe region excluding the countries included in the emerging markets definition, and Australia, New Zealand and Japan from the AMEA region.• “Adjusted Operating Income” is defined as operating income (the most comparable U.S. GAAP financial measure) excluding the impacts of the Simplify to Grow Program (5) ; gains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture (2) or acquisition gains or losses, divestiture-related costs (6) , acquisition-related costs (7) , and acquisition integration costs and contingent consideration adjustments (8) ; inventory step-up charges (9) ; the operating results of divestitures (2) ; operating results from short-term distributor agreements related to the sale of a business (3) ; remeasurement of net monetary position (10) ; mark-to-market impacts from commodity, forecasted currency and equity method investment transaction derivative contracts (11) ; impact from resolution of tax matters (12) ; 2017 malware incident net recoveries; incremental costs due to the war in Ukraine (13) ; impact from the European Commission legal matter (14) ; the impact from pension participation changes (15) ; and operating costs from the ERP System Implementation program (16) . We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income. We also evaluate growth in our Adjusted Operating Income on a constant currency basis (4) . We believe these measures provide improved comparability of underlying operating results.
• “Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International (the most comparable U.S. GAAP financial measure) from continuing operations excluding the impacts of the items listed in the Adjusted Operating Income definition as well as losses on debt extinguishment and related expenses; gains or losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; mark-to-market unrealized gains or losses and realized gains or losses from marketable securities (17) ; initial impacts from enacted tax law changes (18) ; and gains or losses on equity method investment transactions (19) . We also evaluate growth in our Adjusted EPS on a constant currency basis (4) . We believe Adjusted EPS provides improved comparability of underlying operating results.
57Table of Contents(1) When items no longer impact our current or future presentation of non-GAAP operating results, we remove these items from our non-GAAP definitions. Beginning in Q1 2024, due to a significant devaluation of the Argentinean peso that occurred in December 2023 and the resulting distortion it would cause on our non-GAAP constant currency growth rate measures, we now exclude the impact of pricing in excess of 26% year-over-year ("extreme pricing") in Argentina, which is the level at which hyperinflation generally occurs cumulatively over a 3-year period. We have excluded the impact of extreme pricing in Argentina from our calculation of Organic Net Revenue, Organic Net Revenue growth and other non-GAAP financial constant currency growth measures with a corresponding adjustment to changes in currency exchange rates. We made this change on a prospective basis due to the distorting effect expected in the current period and future periods following the Argentinian peso devaluation that occurred in December 2023 and did not revise our historical non-GAAP constant currency growth measures. Beginning in Q2 2024, we added to the non-GAAP definitions the exclusion of operating expenses associated with the ERP System Implementation program as they represent incremental transformational costs above the normal ongoing level of spending on information technology to support operations (see footnote (16) below).
(2) Divestitures include completed sales of businesses, exits of major product lines upon completion of a sale or licensing agreement, the partial or full sale of an equity method investment and changes from equity method investment accounting to accounting for marketable securities.(3) In the fourth quarter of 2023, we began to exclude the operating results from short-term distributor agreements that have been executed in conjunction with the sale of a business. We exclude this item to better facilitate comparisons of our underlying operating performance across periods.(4) Constant currency operating results are calculated by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate the financial statements in the comparable prior year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. Beginning in the first quarter of 2024, we also now include within our currency-related impacts a corresponding adjustment associated with the impact of extreme pricing in Argentina.(5) Non-GAAP adjustments related to the Simplify to Grow Program reflect costs incurred that relate to the objectives of our program to transform our supply chain network and organizational structure. Costs that do not meet the program objectives are not reflected in the non-GAAP adjustments.
(6) Divestiture-related costs, which includes costs incurred in relation to the preparation and completion (including one-time costs such as severance related to the elimination of stranded costs) of our divestitures as defined in footnote (2), also includes costs incurred associated with our publicly-announced processes to sell businesses. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.(7) Acquisition-related costs, which includes transaction costs such as third party advisor, investment banking and legal fees, also includes one-time compensation expense related to the buyout of non-vested employee stock ownership plan (“ESOP”) shares and realized gains or losses from hedging activities associated with acquisition funds. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.
(8) Acquisition integration costs and contingent consideration adjustments include one-time costs related to the integration of acquisitions as well as any adjustments made to contingent compensation liabilities for earn-outs related to acquisitions that do not relate to recurring employee compensation expense. We exclude these items to better facilitate comparisons of our underlying operating performance across periods. See Note 10, Financial Instruments - Fair Value of Contingent Consideration for additional information.(9) In the third quarter of 2022, we began to exclude the one-time inventory step-up charges associated with acquired companies related to the fair market valuation of the acquired inventory. We exclude this item to better facilitate comparisons of our underlying operating performance across periods.(10) In connection with our applying highly inflationary accounting (refer to Note 1, Summary of Significant Accounting Policies ), for Argentina (beginning in the third quarter of 2018), Türkiye (beginning in the second quarter of 2022) and Egypt and Nigeria (beginning in the fourth quarter of 2024), we exclude the related remeasurement gains or losses related to remeasuring net monetary assets or liabilities denominated in the local currency to the U.S. dollar during the periods presented and the realized gains and losses from derivatives that mitigate the foreign currency volatility related to the remeasurement of the respective net monetary assets or liabilities during the periods presented.
(11) We exclude unrealized gains and losses (mark-to-market impacts) from outstanding commodity and forecasted currency and equity method investment transaction derivatives from our non-GAAP earnings measures. The mark-to-market impacts of commodity and forecasted currency transaction derivatives are excluded until such time that the related exposures impact our operating results. Since we purchase commodity and forecasted currency transaction contracts to mitigate price volatility primarily for inventory requirements in future periods, we make this adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons of our underlying operating performance across periods. We exclude equity method investment transaction derivative contract settlements as they represent protection of value for future divestitures.(12) See Note 14, Commitments and Contingencies , in our Annual Report on Form 10-K for the year ended December 31, 2022.
(13) In February 2022, Russia began a military invasion of Ukraine and we stopped our production and closed our facilities in Ukraine for a period of time due to damage incurred to our facilities during the invasion. We began to incur incremental costs directly related to the war including asset impairments, such as property and inventory losses, higher expected allowances for uncollectible accounts receivable and committed compensation. We have isolated and exclude these costs and related impacts as well as subsequent recoveries from our operating results to facilitate evaluation and comparisons of our ongoing results. Incremental costs related to increasing operations in other primarily European facilities are not included with these costs.(14) In the fourth quarter of 2022, we began to exclude the impact from the European Commission legal matter. In November 2019, the European Commission informed us that it initiated an investigation into our alleged infringement of European Union competition law through certain practices allegedly restricting cross-border trade within the European Economic Area. On January 28, 2021, the European Commission announced it had taken the next procedural step in its investigation and opened formal proceedings. As of December 31, 2022, we recorded an estimate of the possible cost to resolve this matter. We have cooperated with the investigation and reached a negotiated, resolution to this matter. We subsequently adjusted our accrual accordingly and fulfilled our payment obligation in August 2024. Due to the unique nature of this matter, we believe it to be infrequent and unusual and therefore exclude it to better facilitate comparisons of our underlying operating performance across periods. Refer to Note 14, Commitments and Contingencies for additional information.
(15) The impact from pension participation changes represents the charges incurred when employee groups are withdrawn from multiemployer pension plans and other changes in employee group pension plan participation. We exclude these charges from
58Table of Contentsour non–GAAP results because those amounts do not reflect our ongoing pension obligations. See Note 11, Benefit Plans , for additional information on the multiemployer pension plan withdrawal.
(16) In July 2024, our Board of Directors approved funding of $1.2 billion for a multi-year systems transformation program to upgrade our global ERP and supply chain systems (the “ERP System Implementation”), which is comprised of both capital expenditures and operating expenses, of which a majority is expected to be operating expenses. The ERP System Implementation program will be implemented in several phases with spending occurring over the next five years, with expected completion by year-end 2028. The operating expenses associated with the ERP System Implementation represent incremental transformational costs above the normal ongoing level of spending on information technology to support operations. These expenses include third-party consulting fees, direct labor costs associated with the program, accelerated depreciation of our existing SAP financial systems and various other expenses, all associated with the implementation of our information technology upgrades. These operating expenses will be excluded from our non-GAAP financial measures as they are nonrecurring and excluding those costs will better facilitate comparisons of our underlying operating performance across periods.
(17) In the first quarter of 2023, we began to exclude mark-to-market unrealized gains or losses, as well as realized gains or losses, associated with our marketable securities from our non-GAAP earnings measures. These marketable securities gains or losses are not indicative of underlying operations and are excluded to better facilitate comparisons of our underlying operating performance across periods.
(18) We have excluded the initial impacts from enacted tax law changes. Initial impacts include items such as the remeasurement of deferred tax balances and the transition tax from the 2017 U.S. tax reform. We exclude initial impacts from enacted tax law changes from our Adjusted EPS as they do not reflect our ongoing tax obligations under the enacted tax law.
(19) We exclude gains and losses on equity method transactions including impairments of our equity method investments. In addition, we also exclude from our non-GAAP financial measures any gains or losses realized on economic hedges on sales proceeds from our equity method investment transactions, which have been recorded in Interest and other expense, net . These items are not indicative of underlying operations and are excluded to better facilitate comparisons of our underlying operating performance across periods.
We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S. GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Because non-GAAP financial measures vary among companies, the non-GAAP financial measures presented in this report may not be comparable to similarly titled measures used by other companies. Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any U.S. GAAP financial measures. A limitation of these non-GAAP financial measures is they exclude items that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully evaluating the tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in this Form 10-K, which can be found above under Consolidated Results of Operations .
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Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements includes a summary of the significant accounting policies we used to prepare our consolidated financial statements. We have discussed the selection and disclosure of our critical accounting policies and estimates with our Audit Committee. The following is a review of our most significant assumptions and estimates.
Goodwill and Indefinite-Life Intangible AssetsWe review our operating segment and reporting unit structure annually or as significant changes in the organization occur for goodwill testing throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting our goodwill reporting units. Annually, on July 1, we test goodwill and indefinite-life intangible assets for impairment and may perform qualitative testing, or depending on factors such as prior year test results, current year developments, current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. In our quantitative testing, we compare a reporting unit’s estimated fair value with its carrying value. We estimate a reporting unit’s fair value using a discounted cash flow method which incorporates planned growth rates, market-based discount rates and estimates of residual value. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and industry and economic conditions based on available information. Given the uncertainty of the global economic environment, those estimates could be significantly different than future performance. If the carrying value of a reporting unit’s net assets exceeds its fair value, we would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value.
In 2024, 2023 and 2022, there were no impairments of goodwill. In connection with our 2024 annual impairment testing, each of our reporting units had sufficient fair value in excess of carrying value. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.
Annually, we assess indefinite-life intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of these assets. If potential impairment risk exists for a specific asset, we quantitatively test it for impairment by comparing its estimated fair value with its carrying value. We utilize estimates of future sales, earnings growth rates, royalty rates and discount rates in determining a brand’s global fair value. If the carrying value of the asset exceeds its estimated fair value, the asset is impaired and its carrying value is reduced to the estimated fair value.
In 2024, we recorded $153 million of intangible asset impairment charges related to two biscuit brands in the Europe segment, one biscuit brand in the AMEA segment and one candy and one biscuit brand in the Latin America segment. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs . We use several accepted valuation methods, including relief from royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty rates and discount rates in determining a brand's global fair value. We identified thirteen brands, as part of our annual test, that each had a fair value in excess of book value of 10% or less. The aggregate value of the thirteen brands was $2.9 billion as of December 31, 2024. We believe our current plans for each of these brands will allow them to not be impaired, but if plans to grow brand revenue and earnings, and expand margin are not met or specific valuation factors outside of our control, such as discount rates change significantly, then a brand or brands could become impaired in the future. In 2023, we recorded $26 million of intangible asset impairment charges related to a chocolate brand in North America and a biscuit brand in Europe. In 2022, we recorded $101 million of intangible asset impairment charges related to two biscuit brands in AMEA.Refer to Note 6, Goodwill and Intangible Assets , for additional information.60Table of Contents
Business Combinations
The assets acquired and liabilities assumed upon the acquisition or consolidation of a business are recorded at fair value, with the residual of the purchase price allocated to goodwill. We engage third-party valuation specialists to assist management in determining the fair values of certain assets acquired and liabilities assumed. In determining fair value, we utilized various forms of the income approach, depending on the asset being valued. Such valuations require management to make significant judgments, estimates and assumptions, especially with respect to intangible assets. Management makes estimates of fair value based upon the best information available at the date of acquisition. These estimates are based upon historical experience and information obtained from the management of the acquired company and are inherently uncertain. Critical estimates in valuing certain of the intangible assets include, but are not limited to: expected future cash flows of the acquired business, discount and royalty rates and economic lives of customer relationships, trade names and fixed assets. Unanticipated events and circumstances may occur, which may affect the accuracy or validity of such assumptions or estimates.
Further, certain of our acquisitions may include earn-out provisions or other forms of contingent consideration. As of the acquisition date, we record contingent consideration, as applicable, at the estimated fair value of expected future payments associated with the earn-out. Any changes to the recorded fair value of contingent consideration will be recognized as expenses or earnings in the period in which they occur. Such contingent consideration liabilities are based on best estimates of future expected payment obligations, which are subject to change due to many factors outside of our control. Changes to the estimate of expected future contingent consideration payments may occur, from time to time, due to various reasons, including changing discount rates as well as actual results differing from estimates and adjustments to the revenue or earnings assumptions used as the basis for the liability based on historical experience.
Trade and Marketing Programs
We promote our products with trade and sales incentives as well as marketing and advertising programs. These programs include, but are not limited to, new product introduction fees, discounts, coupons, rebates and volume-based incentives as well as cooperative advertising, in-store displays and consumer marketing promotions. Trade and sales incentives are recorded as a reduction to revenues based on amounts estimated due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising and consumer promotion expenses are charged to operations as a percentage of volume, based on estimated sales volume and estimated program spending. We do not defer costs on our year-end consolidated balance sheets and all marketing and advertising costs are recorded as an expense in the year incurred.
Employee Benefit Plans
We sponsor various employee benefit plans worldwide, including primarily pension plans and postretirement healthcare benefits. For accounting purposes, we estimate the pension and postretirement healthcare benefit obligations utilizing assumptions and estimates for discount rates; expected returns on plan assets; expected compensation increases; employee-related factors such as turnover, retirement age and mortality; and health care cost trends. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Our assumptions also reflect our historical experiences and management’s best judgment regarding future expectations. These and other assumptions affect the annual expense and obligations recognized for the underlying plans.
We amortize the effect of changes in the assumptions over future periods to reflect the cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost). These changes are deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.
Since pension and postretirement liabilities are measured on a discounted basis, the discount rate significantly affects our plan obligations and expenses. For plans that have assets held in trust, the expected return on plan assets assumption affects our pension plan expenses. The assumptions for discount rates and expected rates of return and our process for setting these assumptions are described in Note 11, Benefit Plans , along with additional information on our employee benefit plans.61Table of Contents
As a sensitivity measure, a fifty-basis point change in our discount rates or the expected rate of return on plan assets would have the following effects, increase/(decrease), on our annual benefit plan costs:As of December 31, 2024U.S. Plans Non-U.S. Plans
Fifty-Basis-Point Fifty-Basis-Point
Increase Decrease Increase Decrease
(in millions)Effect of change in discount rate on pension costs $ 2 $ (2) $ (14) $ 19
Effect of change in expected rate of return on plan assets on pension costs (7) 7 (36) 36
Effect of change in discount rate on postretirement health care costs (1) 1 — —Income Taxes
As a global company, we calculate and provide for income taxes in each tax jurisdiction in which we operate. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions. Our provision for income taxes is significantly affected by shifts in the geographic mix of our pre-tax earnings across tax jurisdictions, changes in tax laws and regulations, tax planning opportunities available in each tax jurisdiction and the ultimate outcome of various tax audits.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of our assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those differences are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be realized. We review the realizability assessment on a quarterly basis, including impacts from our latest estimates of future taxable income.
We believe our tax positions comply with applicable tax laws and that we have properly accounted for uncertain tax positions. We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained by the taxing authorities based on the technical merits of the position. The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon resolution. We evaluate uncertain tax positions on an ongoing basis and adjust the amount recognized in light of changing facts and circumstances, such as the progress of a tax audit or expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of uncertain tax positions are reasonable. However, final determination of historical tax liabilities, whether by settlement with tax authorities, judicial or administrative ruling or due to expiration of statutes of limitations, could be materially different from estimates reflected on our consolidated balance sheets and historical income tax provisions. The outcome of these final determinations could have a material effect on our provision for income taxes, net earnings or cash flows in the period in which the determination is made.
See Note 16, Income Taxes , for additional information on our effective tax rate, current and deferred taxes, valuation allowances and unrecognized tax benefits.
Contingencies
See Note 14, Commitments and Contingencies , to the consolidated financial statements.
New Accounting Guidance
See Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements for a discussion of new accounting standards.62Table of Contents