Mondelez 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Hyperinflation in Argentina and Brazil

“Turning to Latin America, organic revenue grew 12.3% for the year, almost entirely due to pricing in the hyperinflationary economies in Venezuela and Argentina.”

Customers trading down to cheaper brands in inflation

“in markets like Argentina and Venezuela the effects of high inflation have led some consumers to trade down to cheaper brands”

Difficult to hedge such strong currency changes

“savings however were offset by commodity inflation especially in emerging markets such as India and Brazil. As local currencies weakened the cost to purchasing raw materials traded in dollars, euros or sterling spiked. And while we usually have good commodity coverage it’s significantly more difficult to cover these Forex impacts so it keep our cost of goods quickly.”

Will pass price through eventually but will can’t protect gross margins in back half of year

“Of course we fully expect to offset commodity inflation over time including the impacts of currency but we’re unable to price quickly enough to protect gross margins in the back half of the year.”

It takes consumers a while to get used to price changes

“The reaction we talked about and the sensitivity in emerging markets is likely to be more from consumers and it just takes a while to get the price back on a potential way to make sure that in every channel, there is a right path and the right size and right price point for every consumer and get that all the way through the system, it takes consumers a little bit to get used to that. And typically it’s a quarter in emerging markets.”