Dirk Van De Put
Chairman and Chief Executive Officer at Mondelez International
Thank you, Shep, and thanks to everyone for joining the call today. I will start on Slide 4.
I'm pleased to share that 2024 is off to a solid start with strong profit delivery. We posted solid top line results in the first quarter, coupled with strong earnings and free cash flow generation. We continue to see momentum in emerging markets where consumer confidence remains strong and our categories remain resilient. There were a number of one-off factors that affected our sales in the quarter such as the disruption with some of our European clients and the boycott of Western products in the Middle East and Southeast Asia. We delivered another quarter of strong gross profit dollar growth through ongoing cost discipline and sound pricing. And we also continued our track record of strong free cash flow generation of more than $1 billion this quarter. To accelerate our strategy of global snacking leadership and drive sustainable long-term growth, we are continuing to invest significantly in our brands and capabilities, driving distribution gains and harnessing synergies from our recently acquired assets.
While our operating environment remains challenging and dynamic, our teams are focused and agile in dealing with the short term as well as executing against our long-term growth strategy. While surprising, but temporary, the cocoa inflation does not affect the fact that our categories remain durable and our growth opportunities remain sizable.
Turning to Slide 5. You can see that organic net revenue grew 4.2% this quarter with adjusted gross profit dollar growth of 11.6%, enabling us to continue investing in the business. We continue to increase our A&C spending year-over-year in the high single digits, which is driving consumer and customer loyalty for our iconic global brands as well as our local jewels. Adjusted EPS grew 16.3%, and we generated $1 billion in free cash flow. While many food and beverage segments are showing softness so far this year, and I'm now on Slide 6, our core categories of chocolate, biscuit and baked snacks are still demonstrating relatively more resilience and lower elasticity than the broader food universe. Consumer confidence varies by region with North America and Australia, New Zealand mixed, while Europe is improving and emerging markets remains strong. Shoppers in many markets are becoming increasingly sensitive to the absolute price point, driving them to choose smaller pack sizes in both biscuits and chocolate. And at the same time, consumers in our snacking categories remain very loyal to the brands they know and love.
In North America, we're seeing increased promotional intensity combined with a significant shift in sales to non-tracked channels, including club stores, dollar stores and emerging e-commerce platforms. Lower income consumers feel pressured, and we see that pressure weighing on their frequency in the category, especially among brands that skew more to that group. In Europe, consumer confidence is stable. While volume growth has slowed, the chocolate and biscuit categories are holding better than the broader FMCG landscape, and we're hearing increased optimism about the go-forward economic outlook. Emerging markets remain a strong growth driver, with consumer confidence driving resilient demand and low elasticity. Consumers in emerging markets are particularly interested in premium offers, enabling us to expand our range with new on-trend formats and pack sizes.
Turning to Slide 7. It is important to underscore that despite short-term marketplace volatility, we remain focused on advancing our long-term growth strategy by reinvesting in our brands and people, driving strong execution, reshaping our portfolio and scaling sustainable snacking. We continue to increase our focus on our attractive and resilient core categories of chocolate, biscuits and baked snacks, and we remain on track to deliver 90% of revenue through these core categories by 2030. For example, we're investing significantly to support our Cadbury brand's 200th anniversary in the United Kingdom this year, with a multichannel consumer activation promoting the brand promise of generosity. At the same time, we're strengthening store availability, visibility and execution around the world. During the first quarter alone, we added around 100,000 directly served stores in emerging markets. We are also harnessing the power of recent acquisitions by capturing synergies and driving growth. For example, we successfully completed a significant system integration in our Ricolino business this quarter, which boosts our ability to fully leverage the expanded routes to market in Mexico, particularly in the traditional trade. The combined Mondelez and Ricolino system paves the way for significantly expanded distribution in key categories, including chocolate.
Additionally, we are making continued progress on our environmental and social sustainability agenda. Just a few weeks ago, we earned validation for our net zero by 2050 road map from the Science-Based Targets initiative, demonstrating that we are on the right path towards combating climate change. We also delivered significant improvements in advancing our mindful snacking priorities, including enhancing nutrient and ingredient profiles, promoting active lifestyles, and empowering consumers to make more mindful eating choices. I do encourage you to read our annual Snacking Made Right report, now available on our website, to learn more about our sustainability strategy and to review our full year sustainability performance data.
Before I turn the microphone over to Luca, on Slide 8, I'd like to spend a few minutes putting the recent headlines about cocoa prices and chocolates into perspective. We're playing for the long term in chocolate because it is fundamentally a great category, with very high brand loyalty and low private label penetration. And within this great category, our business is strong and agile. Record costs for cocoa ingredients and the resulting current and future price increases for customers and consumers obviously are generating substantial discussion. Despite this near-term headwind, chocolate volume continues to grow. And within this growing category, we remain structurally advantaged with large opportunities still ahead. We are confident in our chocolate business for four main reasons. Our cocoa coverage strategies, our approach to pricing, our supply chain, and our iconic brands.
First, it is important to underscore that our coverage strategies have proven advantage versus market dynamics in the last few months. We are fully covered for 2024 and well protected heading into 2025. Our teams continue to monitor the market very closely to put ourselves in the best position possible. While poor weather and other factors on the supply and demand side have driven prices to unprecedented levels, we believe there will eventually be a market adjustment. We are confident that our teams are putting in place the right strategies to provide future flexibility. Luca will provide some additional details in a few minutes.
Second, we continue to implement sound pricing strategies, including both headline pricing and revenue growth management. We remain agile in balancing the need to offset inflation with the need to maintain solid volume dynamics. We are especially focused on protecting critical price points, including low unit price and other key threshold prices.
Third, we remain confident in our supply chain. Continuity remains our top priority, and we are confident in both our own team and our partners with robust work streams to minimize the risk.
Finally, and perhaps most importantly, we have some of the strongest, most iconic chocolate brands in the world, including Cadbury Dairy Milk, Milka, Cote d'Or, Marabou, Freia and Lacta, to name a few. These brands already are the leaders in numerous key markets, and we are well positioned to accelerate growth in emerging markets.
Our research shows that consumers remain extremely loyal to our great brands because chocolate plays an important role in their lives, helping to bring families together, celebrate key milestones and to enjoy some quiet me-time. In our annual State of Snacking survey conducted in partnership with The Harris Poll, 72% of consumers across 12 countries said that a world without chocolate would be a world without joy. Nearly 60% said that they would rather give up social media for a month than give up chocolate. Our economic -- sorry our iconic portfolio, strong brand loyalty and advantaged geographic footprint make us particularly well positioned to take advantage of these consumer trends. In summary, we're confident that we are well equipped to navigate a relatively short-term headwind and that we're structurally advantaged to accelerate long-term growth in this category.
With that, I'll turn it over to Luca to share additional insights on our financials.
