Good afternoon and thanks for joining us. With me today are Dirk Van de Put, our Chairman and CEO, and Luca Zaramella, our CFO. Earlier today, we sent out our press release and presentation slides, which are available on our website. During this call, we will make forward-looking statements about the Company's performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements of risk factors contained in our 10-K, 10-Q, and 8-K filings for more details on our forward-looking statements. As we discuss our results today, unless noted as reported, we'll be referencing our non-GAAP financial measures, which adjust for certain items included in our GAAP result. In addition, we provide our year-over-year growth on a constant currency basis, unless otherwise noted. We're also presenting revenue growth on a two-year CAGR basis to provide better comparability, given the impact of COVID on 2020 results. You can find the comparable GAAP measures and GAAP to non-GAAP reconciliations within our earnings release and at the back of the slide presentation. In today's call, Dirk will provide a business and strategy update, then Luca will take you through our financial results and outlook. We will close with Q&A. With that, I'll turn the call over to Dirk.

Thanks, Shep. And thanks to everyone for joining the call today. Q3 marked another quarter of high-quality top-line growth for our business. These results were marked by a continuation of solid volume growth that we are used to, as well as higher contributions from pricing as we successfully executed pricing actions in multiple markets in light of the inflationary environments. Demand for our categories remains very strong across both developed and emerging markets, and within those categories, our market share remains higher than pre-COVID as a result of strength in execution, activation, and innovation. As you know, like the rest of the industry, we are currently operating in a very dynamic environment that poses multiple challenges. These include input cost inflation globally, as well as labor and truck shortages in markets like the U.S. and the UK. We are taking appropriate actions to navigate these, including further rounds of pricing and cost control. You will hear more on this in a moment from both myself and Luca later in the call. Despite the current operating environment, we remain focused on and confident in our long-term strategy of delivering accelerated growth through a virtuous, top-line driven cycle, which requires continuous investment in our brands and our capabilities. Let me turn to Slide 5 and the consumer. During Q3, consumer confidence stabilized in general with a notable highlight of improved confidence in Western Europe, India, and much of Latin America as consumers are now more optimistic about job prospects and personal finances in those geographies. Mobility continues to rise, which provides a boost to gum and candy, as well as the travel retail channel, but both are expected to remain below pre-COVID levels at least through 2022. Ongoing uncertainty is fueling the desire for comfort and indulgence, which has been a consistent trend throughout COVID, and of course, this is benefiting trusted brands like ours. All this means that our core categories are growing faster than they were pre-COVID and our portfolio, which skews towards in-home consumption, is benefiting. Demand is strong in developed markets, but especially so in emerging markets. Notwithstanding a few smaller markets like Vietnam, which are suffering from continued COVID lockdowns. On top of all this, we have gained share during the COVID period. The elevated demand for our categories is contributing to price elasticity below historical levels. Consumers are willing to pay more for essentials or affordable treats as they spend less on eating and drinking outside the home. Let me spend a moment on the current operating environment on Slide 6. Like other companies, we are experiencing cost inflation globally, particularly on transportation costs and packaging, which are most pronounced in the U.S. Costs have moved higher in the second half of the year relative to the first half, and we expect inflation to persist in 2022. There is also an element of volatility in the supply chain due to labor shortages at third-parties combined with a significant gap between demand and supply of trucking capacity and containers in places like the U.S. and the UK. In addition, there are energy shortages in China as demand has outstripped the supply of electricity in many areas. And as you might be aware, we also had a strike at three of our plants and three distribution centers in the U.S. The strike is now resolved, but impacted our production output in the quarter. The good news is that the new contracts give us flexibility and unlock additional capacity to support our growth ambitions. COVID-19 continues to cause disruption in certain geographies. This was felt most acutely in Q3 in Southeast Asia and resulted in a temporary closure of our factory in Vietnam, for example. Although challenging, we are managing through all these dynamics. We believe we are well equipped to continue to deliver against our objectives, given the strength of our brands, our continued investments, pricing as necessary, and our focus on execution. Turning to slide 7, you can see that our strategy is continuing to drive a virtuous cycle. And the results support our ability to consistently deliver profitable, volume-driven growth, pricing as needed, and return of capital to our shareholders. We grew revenue by 5.5% in the quarter and 5.1% year-to-date, lapping 3.9% growth in the first three quarters of 2020. Gross profit growth was impacted by cost inflation and supply chain volatility in Q3, but continues to be well over 4% year-to-date, which we consider a very healthy indicator of our ability to deliver the high single-digit adjusted EPS growth that is part of our 2021 outlook and our long-term financial algorithm. Our year-to-date working media investments have increased double-digit versus last year. And combined with our advantage portfolio of brands and our execution and activation capabilities, mean that on a two-year cumulative basis, we are gaining or holding share across 75% of our revenue year-to-date. And in terms of cash generation and capital return, we increased our year-to-date free cash flow by approximately $400 million versus last year. And we returned $3.1 billion of capital to shareholders. Adding the Q3 revenue growth to our track record of performance since launching our strategy in late 2018, you can see on slide 8 that we are now averaging a 4.1% quarterly growth rate. We believe we can consistently grow in line or in excess of our long-term algorithm of 3% plus based on the long runway of growth opportunities we show on Slide 9. These enablers include, for instance, increased brand investment, higher quality and purpose-led marketing, and pricing when necessary. This quarter, we continued to make progress against our key growth drivers. These include continuing on our journey to grow Oreo by $1 billion by the end of 2023, with activations like Oreo Pokemon, which became our fastest selling addition of all time in the U.S., surpassing the previous records set by Game of Thrones and Lady Gaga Oreos. This also includes expanding our presence in key channels like digital commerce, which grew 25% this quarter on a reported basis, lapping 80% of growth in the previous year. Additionally, emerging markets where we continue to gain distribution in places like China and India, with another 120,000 and 80,000 stores added this quarter. Finally, this includes increasing our exposures to high growth segments, where we are underrepresented. For example, well-being, where we announced breakthrough innovation this quarter on our largest brands with the Cadbury Plant Bar in the UK, which is suitable for vegans, and our Oreo Zero Sugar in China, which has the clear potential to expand to other geographies. Turning to Slide 10, let me update you on our sustainability journey. Climate change is a critical issue facing our planet, and we must do our part to help. We also know that if we want to deliver consistent long-term growth and shareholder returns, we must be a sustainable snacking company. For those reasons, we recently announced that we will take the necessary actions that we believe will allow us to achieve net-zero emissions by 2050. This is a major target that applies to all greenhouse gas emissions across scopes 1, 2, and 3. This target also sees us join the United Nations race to zero campaign, as well as the science-based targets initiative business ambition for 1.5 degrees, where we are strengthening our position from our previous commitment of well below 2 degrees. We plan to deliver net-zero by focusing on the highest contributors to our carbon footprint. In our case, that is our raw materials which contribute 71% of our emissions. We will amplify our existing programs like Tolko life and harmony wheat in support of this. We will focus on leveraging emerging low-carbon technology at our owned operations. Alongside working towards net-zero emissions, we will continue to advance all other pillars of our ESG agenda, including sustainable ingredient sourcing, diversity, equity, and inclusion, and net-zero packaging. We are excited to continue our journey to build a sustainable snacking company. With our proven strategy, our preferred brands, our executional excellence, our compounding investments, and our enhanced ESG agenda, I'm confident that we are well-positioned to deliver strong performance for years to come. With that, I will hand over to Luca for more details on our financials.

Thank you, Dirk, and good afternoon. Our third quarter performance was strong across the board. We delivered top-line trends, good operating profit dollar growth, including significant branding investment and excellent free cash flow. Revenue grew 5.5% underpinned by solid volume growth and pricing that we have been implementing to counter unprecedented cost inflation. Emerging markets continued with accelerated growth, displaying the resilience of our categories and strong execution. They grew more than 12% for the quarter, and nearly 9% on a two-year basis. Our emerging markets results include double-digit growth in Brazil, Mexico, and India, as well as high single-digit growth in China, Russia, and Africa. These markets are attractive growth engines for us as consumer purchasing power continues to grow while we pursue distribution expansion. We continue to invest behind them in a big way. For the quarter, developed markets growth remains solid at 2% with a two-year average growth of 3%. Demand and consumption trends are robust in these markets. Albeit, supply chain restrictions limited our growth, specifically in North America. Turning to Slide 13 and portfolio performance. Biscuits grew 2.7% and more than 5% on a two-year average. Brazil, Russia, and Mexico posted double-digit growth, while India and China grew mid-single-digits. Oreo continues to be a standout performer. Chocolate grew more than 11% with a two-year average of more than 8%. India, Brazil, and France grew double-digits, the UK grew high single-digits, and Russia grew mid-single-digits. Cadbury, Milka, and Lacta all delivered robust volume-led growth for the quarter. Gum and candy posted double-digit growth, resulting from a continued improvement in mobility. Moving to market share performance on slide 14. We continue to see good share performance. On a two-year cumulative basis, we have held or gained share in 75% of the business. These skits and chocolate heads have seen gains in 80% of our revenue base. Notable share gainers on a two-year basis include the U.S., China, Russia, and Brazil. Meanwhile, the UK, Australia, Russia, and South Africa in chocolate. Gum and candy has shown gains in 30% of our revenue base, primarily due to gum performance in China, Russia, and France. Although still below pre-COVID levels, this category continues to improve with mobility trends. Moving to page 15, Gross profit dollars grew 2% for the quarter, reflecting the acute impact of elevated inflation in commodities, as well as transportation and labor costs in North America. While all other regions still face some inflation, they all display GP dollars growth in line with our expectations. In the short term, we have adjusted our promotional and trade deal spending to the elevated cost environment. But as we expect these dynamics to persist into 2022, we have also taken and announced price increases across a significant number of markets. Of note, we announced a new round of pricing last month in the U.S., which will go into effect at the start of next year. Although cost pressures are not as high in the U.S., we also have a robust pricing agenda for other markets too. We have implemented pricing in Brazil, Mexico, Russia, and Southeast Asia, in addition to other business units. Our goal remains to enter 2022 with improved dollar profitability levels from these actions to support the virtuous cycle which funds continued investment. Operating income dollars increased 4.5% due to strong overhead management and simplification initiatives. We continue to invest in A&C, which was up almost double-digits in the quarter. On a year-to-date basis, gross margin has increased nearly 5% while operating income dollars have grown by more than 8%. A&C spending has increased double digits. Moving to regional results on Slide 16. Europe revenue grew 4.6% in the quarter and 4% on a two-year basis, while dollars grew by 4.5% versus last year, reflecting a strong virtuous cycle. North America grew 0.3% on top of 6.3% growth last year, resulting in a two-year average growth of 3.3%. Operating income declined 9.7% in the quarter. Overall, North America results were negatively impacted by service level constraints in the U.S., as transportation and labor shortages have affected both cost and capacity. These constraints primarily impacted our external manufacturing and third-party logistics partners. We expect profit dollar growth to improve in conjunction with recently announced price increases across much of our U.S. portfolio that take effect as of January 1st next year. For the quarter, the impact of the six-week U.S. strike was mitigated by a business continuity plan, which included increasing inventory levels ahead of it. Nevertheless, there will be an impact in Q4, which I will discuss in our outlook. AMEA posted growth of 5.72% and a two-year average of 4.9% with broad-based strength apart from Southeast Asia, where COVID-related restrictions did impact our Q3. India delivered double-digit growth in the quarter, and China delivered high single-digit growth. AMEA operating income dollars grew nearly 8% while continuing to make sizable working media and route to market investments. Latin America grew 26% in Q3 and 14% on a two-year average. Brazil and Mexico both grew double-digits while dollars in Latin America grew double-digits over the prior year due to pricing and volume growth. Now, turning to EPS on Slide 17. Q3 EPS increased 9.4% at constant currency, driven primarily by operating gains, with year-to-date EPS increasing by nearly 9%. Moving to cash flow and capital return on Slide 18. We delivered free cash flow of $700 million in the third quarter, bringing us to $2.1 billion on a year-to-date basis. We also repurchased approximately $1.8 billion in shares in the first three quarters at attractive prices. I wanted to spend a quick moment on some of the significant improvements in our best factory financing costs and pension costs on Slide 19. Since 2014, interest expense has been reduced by approximately 60% despite an increase in total borrowings, with a current average rate of 1.7%. At the same time, we have extended our maturity from 7.7 years to 9.6 years. Similarly, pension funding has improved significantly in recent years to 99%, driving material reductions in pension contribution requirements and costs. In September, we issued our first sustainability-linked bond, which was the largest to date in the GPG sector, enabling us to cost-effectively fund our sustainability initiatives around focal packaging and our net-zero carbon target.

Let me spend a moment on the current operating environment on Slide 21 regarding the current inflation and supply chain environment and our actions. The supply chain environment remains a challenge for us, like many others with higher cost inflation, as well as labor shortages at third-party providers and transportation capacity. We have a well-established plan to mitigate the impact of inflation and supply chain pressures over time. These include successful implementation of price increases as part of our Revenue Growth Management strategy, supported by the strength of our brand. We're also continuing in our journey of portfolio simplification to identify additional SKU reduction opportunities and to improve service levels and overall efficiency. In terms of our manufacturing network, we are taking actions to free up capacity with more flexibility in some of our plants and logistics networks. We also continue to execute our hedging programs on key commodities, which we believe have been effective, as you can tell by looking at our realized and unrealized mark-to-market gains this year. Overall, we are confident that these initiatives will allow us to offset the majority of the pressures we are currently facing and will drive long-term profit dollar growth, albeit with some lumpiness given the cadence of pricing and input cost increases. Moving to our outlook on Slide 22. We expect most of the trends that we have experienced in Q3 to extend into Q4, including robust demand for our categories and brands in both developed and emerging markets, continued transportation and labor inflation and supply chain pressure in our North American region, increased focus on Revenue Growth Management activities across a wider span of businesses, and a high level of investment in our people, brands, markets, and capabilities. Based on our strong results year-to-date, continued category resilience, and solid demand trends, we are raising our full-year revenue growth outlook to approximately 4.5%. This implies Q4 growth of 3% or nearly 4.5% on a two-year basis and assumes approximately a 1-point headwind from the impact of the continued transportation and logistics constraints and the recent strikes in the U.S. As the market conditions remain fluid, this outlook does not reflect a material worsening from the current environment. In terms of EPS, we continue to expect high single-digit growth for the full year despite the initial pressure from commodities and transportation and labor dynamics in North America. We also expect free cash flow generation of over $3 billion. Forex translation is now expected to positively impact our reported revenue by 2 percentage points and EPS by $0.09 from the year based on current market rates. One note related to our simplified-to-grow restructuring plan. We have extended the program by one year as we're still left with about $100 million of available funds that we plan to spend on high-return supply chain and overhead-related projects. The overall amount of the restructuring program is unchanged. So this does not change anything else in our outlook for this next year. Our updated outlook is based on current conditions and does not factor in material degradation in the operating environment that would be triggered by a significant worsening of COVID or supply chain restrictions. To wrap up, we are encouraged by the trajectory of demand for our brands and categories across our geographies. We are confident in our growth strategy and our ability to continue to execute against it going forward. This means balanced and consistent top and bottom line growth, continued reinvestment in our business, disciplined cost management, and strong free cash flow generation. With that, let's open it up for Q&A.

We'll take a question from Andrew Lazar of Barclays. Your line is open.

Great, thanks very much. Two for me. First, Dirk, if you could talk a little bit more about key trends you're seeing in both emerging and developed markets, and really the key consumer dynamics there, and then Luca, maybe if you could give us a bit more rationale behind the implied deceleration in Q4 organic sales growth and then touch on preliminary expectations for 2022, the top and bottom line. Thanks so much.

Thank you, Andrew. I'll begin and then hand it over to Luca. Emerging markets continue to drive significant growth for us. In the third quarter, they experienced double-digit growth, and year-to-date growth is also in double digits, with a high single-digit two-year compound annual growth rate, indicating strong volume growth and good pricing. Consumer confidence appears to be improving in markets like India and large parts of Latin America, thanks to vaccine rollouts and a return to normalcy. This improvement is reflected in their personal finances and consumption patterns. However, consumers are still spending more time at home, which benefits our categories. The BRIC countries are particularly strong, with robust double-digit growth in India and Brazil, and high single-digit growth in China and Russia. Execution in these countries has been positive as we enter this quarter. Additionally, Africa, Poland, Pakistan, and Mexico are also showing solid growth. The only disruptions in emerging markets are seen in some smaller regions, notably Southeast Asia, where severe COVID cases and significant restrictions have impacted operations. Our plant in Vietnam was closed for three weeks, affecting Q3, though we expect this to be temporary. In developed markets, demand remains strong, but the operating environment is challenging, particularly in the U.S. We experienced significant consumption spikes in 2020 in the U.S. Currently, revenue is up 2% in Q3 and just over 1% year-to-date, compared to a very strong last year. Looking at a two-year compound annual growth rate, it's over 3%, which is better than the 2% growth we had in 2019 for developed markets. Consumers are spending, on average, 15% more time at home than before the pandemic, which is advantageous for our categories and portfolio. In North America specifically, the two-year compound annual growth rate is almost 4%, though there is a slight decline year-to-date compared to last year. 2020 was an exceptionally strong year for North America. Demand for biscuits remains very robust; however, service challenges in the second half, due to logistic capacity constraints, third-party labor issues, and a resolved strike, impacted Q3 and will likely continue into Q4. In Europe, we have observed solid growth this quarter and year-to-date, with strong demand for our core products. The UK, Germany, the Nordics, and mass retail have shown noteworthy year-to-date revenue growth, building on last year’s strong performance. We are also benefiting from the recovery in convenience and travel retail as consumers regain mobility. Additionally, we are navigating an inflationary environment, with plans to increase prices further than we have thus far. Good news is that elasticity levels are below historical ones, nearly non-existent, which supports our overall performance. Now, I'll pass it over to you, Luca.

Thank you, Dirk and hi Andrew. I'll start with revenue guidance. As far as revenue goals, I would simply say the business is fundamentally in a good place. You might have seen in the pages that we presented that chocolate and biscuit categories are vibrant. On a two-year basis, our share gains are very good, and you might also have noticed that the pricing contribution is increasing as you would expect, given the cost pressures we are facing. But also that volume is holding up quite well. We can also say that virtually all international businesses are positioned very well for both Q4 and 2022. However, in North America, obviously the six-week strike predominantly, but also the volatility that Dirk mentioned, is putting some pressure on our supply chain, and that will impact the Q4 performance, in a context where the market is steadily positive and demand is quite good. So we estimate that, mostly because of the strike impact in Q4, there will be a one-point revenue pressure for the whole of Mondelez. So to sum it up, Q4 is still going to be a good quarter, I believe, in terms of revenue when considering that there is the one-time strike impact. And at this point, we feel quite good about the top line and its momentum into 2022. From a profitability standpoint, we also feel good about the full-year profit outlook. In the end, I think you know, that year-to-date GP dollar is up by 5%, EBIT by 8% in an environment where we are increasing A&C double-digits while maintaining our margins flat. I feel comfortable with our EPS high-single-digit guidance for 2021. Having said that, I have to recognize that there is some GP pressure in Q3 that will persist into Q4 and partly into 2022. The pressure is due to commodity and transportation costs and compounded, quite frankly, by some industry-wide supply chain constraints. North America is driving most of the pressure in the GP line in the quarter, and it is, in fact, the only region that declined GP dollars versus last year, with the other regions all above or close to our goal of 4% GP growth year-on-year. We are taking the appropriate actions to counter those cost spikes. We have recently announced a 6% to 7% price list increase in the U.S., which will take effect in 2022, January. We have also announced pricing in Q4 in Brazil, Mexico, Russia, Southeast Asia, Africa, and across Western Europe. We are leveraging RGM as we said many times, also going after productivity and general cost measures. So we expect sequential improvement versus previous years in the following quarters as more pricing kicks in. We believe that our 2022 EBITDA growth will be solid through volume mix pricing, obviously productivity, and we’re contemplating meaningful A&C increases at this point. So 2022, from an EBITDA standpoint, should be on algorithm based on what we know today because obviously Q1 will be a little bit more pressure, and we will provide more clear and comprehensive guidance in the next earnings cycle for 2022.

Thank you.

Thank you, Andrew.

Our next question is from Nick Modi of RBC Capital Markets.

Hey, good afternoon, guys. This is Filippo Falorni on for Nick.

Hi Filippo.

Hi, I just want to go back to your long-term guidance on organic sales growth of 3% plus. You've shown a slide that since the implementation of your new strategy, you've clearly delivered a 4% organic range pretty consistently and on average, for several quarters now, and you just raised guidance for this year. So I was just wondering about your confidence in delivering 4% consistently going forward and potentially raising your long-term organic sales growth outlook going forward?

Yes, I'll begin. Looking at the long-term algorithm as a baseline, our categories have been growing at over 3 percent historically, which is a solid starting point. We aim to gain market share, so we expect to exceed the 3 percent mark, which underpins this baseline. Ultimately, we focus more on actual performance than on long-term projections. By executing effectively, we hope to achieve results closer to 4 percent rather than 3 percent, which is the reasoning behind our long-term algorithm. If there are catalysts like portfolio changes and acquisitions, that may provide a good opportunity for us to adjust our expectations and aim for something above 3 percent. However, our track record demonstrates consistent higher growth, and we intend to maintain that moving forward.

Got it. Thank you very much, that's helpful. And then a quick follow-up. Your market share performance has been very strong in recent quarters, and over the last couple of years, some of your global brands like Oreo have done extremely well. Can you just talk about your local brands and how they've been doing recently and over the last year or so?

Historically, our global brands have been growing faster than our local brands, but we have been increasing the growth of our local brands mainly through renovations and activations. In 2020, however, our local brands outpaced our global brands due to the impact of COVID-related changes in consumer behavior. For example, Toblerone suffered from a decline in travel retail, and Hall's was affected by a limited cough and cold season. Trident also encountered challenges as reduced mobility affected the gum category. Looking at year-to-date 2021, our global brands are now growing faster than local brands again, although both are experiencing strong growth in the mid-single-digit range. We are pleased with the current status of our local brands, which have improved from being flat or declining a few years ago to mid-single-digit growth now. We are committed to increasing brand investments each year and will continue to activate more local brands over time. We believe we have found the right balance and will maintain this approach.

Great. Thanks, guys. I'll pass it on.

Okay.

Thank you. We'll take our next question from Ken Goldman of JPMorgan. Your line is open. And Mr. Goldman, you may want to check your mute switch, your line is open. We'll move next to the line of Brian Spillane of Bank of America.

Hi, thank you, Operator. Good afternoon, everyone.

Hi, Brian.

So just two quick ones for me. 1. Just a follow-up on the commentary for Q4, Luca. Just listening to some of the puts and takes on the gross profit line. Are gross margins in the fourth quarter going to be somewhat similar to what we saw in Q3, or do you expect a further deterioration?

Versus last year, they should be a little bit better. We should have a little bit less pressure. Remember, we are in some emerging markets specifically implementing additional pricing, which went into effect in July and August. It should be sequentially better when compared to last year.

Year-over-year, but what about just sequentially? I think it was 38.3% in the third quarter. So is fourth quarter going to be in that neighborhood?

Yes, it would be around that neighborhood a little bit lower, most likely on a pure number.

Okay. And then Dirk, just your perspective on the incremental rounds of pricing that you're taking to offset inflation. And I guess how it'll be different this time. I think if we go back prior to your arrival at Mondelez, one of the issues was that there was a lot of pricing taken over time to protect or build margins. It had an impact on volume and demand, and it's a big part of what you came in to address and change. Time you've been at Mondelez, can you talk about how you've thought about that dynamic this time around and how it will be different?

As a principle, what we're trying to do is balance between volume growth, pricing, and mix, which needs to offset the inflation; that's how we think about it. And then on top of that, we have a productivity program, which we use to increase our margins. It's different from the past in the sense that we are not as aggressive on pricing. We're not trying to build extra margin because of pricing; we're looking at maintaining it as it is, and then the extra comes from the productivity programs. The other big difference versus the past is that we continue to increase year-over-year our investment in our brands. First of all, our overall A&C pot, but then also how much we are shifting within A&C into working media. So the worst you can do, I think, is increase prices and not increase your support for your brands. We've been supporting our brands now every year more and more. Our media pressure has significantly increased versus 3-4 years ago. We can see that the brand health is increasing. I think our brands are now more susceptible to pricing, and consumers should accept it better. Those are the two big differences, Bryan, versus what it was a few years ago.

Alright. Thanks. Thanks, Dirk. Thanks, Luca.

Thank you, Bryan.

We'll take our next question from Chris Growe of Stifel.

Hi. Good afternoon. Thank you.

Hi, Chris.

Hi, Chris.

I just had a question. First, as we think about a planning assumption for next year as you have some strong pricing going into place, especially in the U.S., do you model as such that the elasticities remain very favorable, or do you expect elasticities to be more like their historical average? If it's better than that, that represents upside to your outlook. I'm curious how you think about that with what you're seeing with the consumer today?

At the moment, we are modeling historical elasticity, and we know that the current elasticity we are experiencing is better, which could be an upside for us. We are also utilizing Revenue Growth Management, which involves a variety of techniques that aren’t always just straightforward price increases. When looking at consumers, I believe the main factors at play are the stabilizing consumer confidence and increased mobility. There is a persistent desire for comfort, leading consumers to snack more and spend more time at home, creating strong demand for our categories. Our categories are growing approximately 4% globally compared to the 3% we typically plan for. This suggests that consumers currently exhibit nearly no elasticity, and we hope that this trend continues for some time. While we are cautious about incorporating this into our planning for next year, we do believe there may be better elasticity than what we previously anticipated.

Okay. I have another question regarding North America. Could you provide more details about the costs related to the strike? I understand you mentioned a potential impact on revenue in the fourth quarter, and it seems you shipped slightly less than consumption in this quarter. I'm looking to understand how the strike has affected the business in Q3, and that's all I had. Thank you.

Yes, maybe.

Yep.

On the strike from a top-line perspective, as we mentioned in Q3, the effect is quite minimal. There was hardly any impact as we began the quarter with a significantly high level of trade stock due to increased consumption. We have now depleted that stock. There will be an impact in Q4, but we estimate it along with other supply chain-related issues to be around one point of revenue for that quarter. From a cost perspective, we have managed to reduce the cost impact; while there are some negative factors, they are not substantial enough to affect the top P&L profile for Q4 in any meaningful way. Clearly, some demand and supply pressures will add slight strain to the value chain, and we will experience some under-absorption reflected in the P&L in Q4, but that is the extent of it; overall, there is no significant impact at this time.

Okay. Great. Thank you.

We'll take our next question from Alexia Howard of Bernstein.

Good evening, everyone.

Hi, Alexia.

Hi, Alexia.

Hi there. So I have two questions. The first one is on pricing. It sounded as though you're getting the pricing in North America in early January, and yet you've been able to take pricing in a number of other regions earlier than that. I'm just wondering if there's something structural or procedural in North America that makes it harder or lengthier to take pricing here, and just if you have observations on that. And then my follow-up question is really around the net-zero commitments. I remember a few months ago, I think that was a lesser commitment than some of the other companies made. Did something change? Did you get better visibility into how you might achieve that goal, or is it more about things changing out in the world and therefore, you've got to make that commitment and see where it takes you? Thank you.

Dirk, you think pricing out taking at zero?

Yes, the simple answer is we had a lot being particularly on promotional activities. Also, giving obviously some internal dynamics to our company which we discussed. We had luck being at promotional windows and promotional activities well before Q2, and that bound us with our customers to certain promo windows and certain promotional activities. We thought that rather than disrupting even further the supply chain, our preference was really to go for a full 100% price increase as of January 1st. So there might be a couple of quarters of delay in these locations, but I think all-in-all considering all the effects that we had internal and external, it was better for us to go into effect with pricing as of Q1 next year. We will be extremely nimble here. We still don't know to what extent logistics costs will spike during the Christmas season and the holiday season in the U.S. So if we see continuous cost pressure, at this point, we cannot rule out additional pricing waves, and at that point, it will be more simultaneous to what we see than it has been this last time. On this zero, the thinking was that we wanted to make sure that we have worked as much detail as we possibly could. And so we were a little bit reserved in the past few years to declare anything until the team has done their homework. And so they've been working quite hard, and we've gone quite deep. I've been told that it's probably one of the deepest exercises in trying to understand how to really get there. We were really wondering: will we get there? Can we make a plan that we can realistically believe is doable? We wanted to know the different details step-by-step. If I summarize it a little bit, it's obviously a very significant announcement for us. It's really an acceleration and an extension of our existing initiative. It applies to all our greenhouse gases and the full supply chain, so scope 1, 2, and 3. With this, we are joining the UN race to zero and the SVTI business ambition for 1.5-degree Celsius. If you look at our footprint, 71% comes from ingredients. So the three big areas to work on are those ingredients, our own operations, and our logistics. In ingredients, that means that we need to continue and increase our investment in cocoa life; that's one of the big factors. We have a wheat program related to regenerative agriculture that we need to extend. We need to ensure that our whole packaging approach is clear on recyclable, but also working on the recyclability and the use of virgin plastic over the years. In our operations, we need to understand renewable electricity; we need to reduce food waste, which we've done quite significantly, but we need to do more. We have to change all our ovens, all our boilers, and so on and so on. In logistics, we need to switch to electric vehicles, hydrogen trucks, and work on our warehouse emissions, and change the efficiency of our networks. Just to name a few things of what this means. The team has worked through all these details, and they've come up with a plan that is credible. It's not easy. We've also made a 10-year plan for the Company, Vision 2030, which we are planning an Investor Day around that in 2022. All the costs of net-zero have been built into that plan, which was another thing that we wanted to ensure. That's why you felt we were a little bit hesitant in the past month, because we were working through this exercise, and I really didn't know if this all adds up, if this is the plan that we really believe in. But I think we've come up with something strong that the Company feels we can deliver. It's not going to be easy, but that’s why we can make the announcements right now.

Thank you very much for all the color. I'll pass it on.

Okay.

Thank you.

We'll take our next question from Jason English of Goldman Sachs.

Hey, good afternoon, folks. Thanks for having me, and congrats on a good result.

Thank you, Jason.

All right, Jason.

A couple of questions for me. First, the 6% to 7% price increase in the U.S. that is weighted average? Is that what we should actually expect to see flowing? Or is it on partial portfolio, dampening effects? Anything we should be considering as we look to put pen to paper on our models?

It is an overall net average price increase in the U.S. portfolio. So we have announced that for biscuits, and on average that's the number we are going with for gum and candy as well. Hall's will be a little bit later in the cycle. But all in all it is going to be very close to the 6%, 7%.

Got it. Okay. And then staying in North America, could you clarify the growth expenses that are being excluded? They're quite significant, approximately $330 million year-to-date. These are substantial figures. Can you explain what this expense encompasses and what the anticipated return on this investment is?

We announced earlier in the year the closure of the plants. And with all the activities we have been having around the reset of some of the U.S. network, that's really the biggest part of the cost in restructuring. So that's really what it is at this point.

And the anticipated return or savings that you expect to be generated from that?

Obviously, we have an internal rate of return expectation that is well in excess of our cost of capital. You might imagine that particularly as it relates to the two plants, we're going to avoid fixed costs as we go into next year. The return is going to be on the high side. On top of that, the strike resolution gives us additional flexibility. It was a win-win for us and our employees to whom we gave good benefits, I believe. Together with the avoidance of fixed costs, the additional flexibility of this program will yield good returns.

Excellent. Great stuff. Pass it on. Thank you.

We'll take our next question from David Palmer of Evercore ISI.

Thank you. Good afternoon. Wondering if you could talk about the Third Quarter gross margin decline. Your pricing was 3%. How much do you think was the impact of input inflation versus other factors like the supply chain inefficiencies in the U.S. and UK? And I have a quick follow-up.

Yes. As I said, when I look at really GP growth across the board for our regions, I feel quite good about what was accomplished across the European business, the EMEA business, and the Latin America business. The pressure can be released from North America, and it is, quite frankly, mostly attributable to the logistics and transportation cost constraints that we have seen. We also had to acknowledge though, that particularly around some commodities like edible oils, there has been some pressure. So I would say that the GP line pressure comes in Q4 mostly because of the commodity and logistics costs, and it is mostly attributable to the North American business. As you think going forward, pricing should really improve margins because I believe the cost severity in Q3 is quite high. It may go a little bit further in Q4 and into 2022, but it cannot feasibly proportionately match the same amount as we have seen in Q2 and Q3, in Q4, and into 2022. So that's a little bit of color around the GP line.

I have a quick follow-up to Jason's question about price increases in the U.S. Are those announced price increases expected to add over a point to your global price number as we move into the first half of 2022? Additionally, regarding your comments on global travel retail for 2021, you mentioned in your prepared remarks that you don't anticipate returning to 2019 levels, potentially even by the end of 2022. However, does that imply that it's possible to recover some of that in 2022? How far below in 2021 were those businesses compared to 2019? Thank you.

Yes. Maybe I'll go with the first part and answer the gum and candy questions. I think you know how big North America is in total for the Company, and you have a sense of what a 6% to 7% price increase would do. I think your math is in the ballpark. Obviously, the question is how is volume going to react? What we're seeing at the moment is that elasticities are more benign than they have been historically, but we need to see protracted price increases into next year and we need to see what moving away from some price anchors will do to our consumers. That's a little bit the question mark at this point. For the totality of the company at this time, I see good revenue momentum going into '22, and I see revenue being on algorithm for next year as well.

So on the gum and candy category, I think it was coming in world travel retail. But on gum, roughly, I would say gum drops to about 65% to 70% last year of what it was in 2019 because of mobility. I think for the total of '21, it's going to be roughly around 85%, maybe 90% of where it was in 2019. Then we expect to close that gap in 2022. At the beginning of the year, the recuperation was slower. Recently, we have seen an acceleration of the recuperation of gum. So we’re talking about double-digit revenue year-to-date growth of gum and strong double-digit revenue growth in Q3. Year-to-date on a two-year CAGR, we're still facing high single-digit declines, but as I said, the recovery is going faster. We’re starting to see some markets, particularly China and Russia, where we now have a positive two-year CAGR on gum. The emerging markets remain attractive for us, and the question is really on the developed markets, which is only 2% of our 2020 net revenue. That's really where we expect recovery to be slowest. As for world travel retail, that dropped almost to zero, I would say; it was probably at 5% of what it was before the pandemic. This year, we might get back to, depending a little bit on what happens at travel at the end of the year, but maybe 65% or 70%, and then depending on what consumers decide to do regarding travel, that's the big unknown. We will for sure go up significantly next year, but I'm not quite sure that we will see the same amount of travel in the future as we saw in 2019. That’s still a little bit up in the air. But we will get close to, I think, gum will be all the way back, but remember, gum wasn't growing a lot in 2019.

Thank you.

And we'll take our final question from Pamela Kaufman of Morgan Stanley.

Hi, good evening.

Hi.

Hi, Pamela.

How are you thinking about the level of investment needed to support the strong top-line momentum that you've seen? And do you expect to increase brand investment further to support higher pricing? If so, can you talk about which categories and geographies there might be greater investment behind?

Yes. I can talk a little bit about the principles and then maybe Luca can go into more detail if needed. In general, we believe that we want to outgrow our categories, and to outgrow our categories, our brands need to have more visibility, more support, and more innovation than others. We believe that can be achieved with a roughly 7% to 8% increase year-over-year of our A&C investment. That fits into our long-term algorithm, where our expectation is that half of the growth of 4% plus growth that we want in gross profit year-after-year, that half of that gets reinvested. Not all of that goes into A&C; some goes into overheads, and part goes into R&D. Overall, that's the thinking, and that allows for that roughly 7% to 8% increase, so it’s 15 through the long-term algorithm. As it relates to pricing and increasing our investments, we try to maintain our algorithm. If we see we can get a better top line, we might do continuously flowing at 50% back into investment. This year, as an example, we have a double-digit increase in our A&C year-to-date while we are doing the price increases that Luca talked about. The other movement that we're going to do is within the A&C investments; we are moving more of the investment in working media. We have done that now for multiple years. So the investments are really compounding. There is the increase in overall A&C, and then the increase in working media within A&C. We have also made big strides on the quality, effectiveness, and ROI of our marketing. If you talk about where do you want to do more, we have our local jewels, which we have given significantly more investment in the last three years. We want to continue to do that more on the brands that we're already supporting and activate more brands. Additionally, in terms of markets where we would do that, probably the some of the markets where we are underrepresented, largely emerging markets, that's where we think the biggest increases should be made in our A&C because we still have to build the category for the longer term.

Thank you. Can you just give an update on the white space opportunities that you're targeting and how you're leveraging the recent acquisitions to address these opportunities?

Yes. The opportunities for us are clear. First, we need to ensure our categories continue to grow, as we are significant players in them, and our growth is heavily reliant on our performance. Second, we will work on increasing our market share, which will provide us with greater growth potential. Third, we can expand our channels, as our market share varies across different channels. For example, in more developed markets, we can enhance our online or digital commerce presence, while in emerging markets, we aim to improve our numerical distribution. This quarter, we plan to increase our presence in China by 120,000 stores and in India by 80,000 stores. Additionally, there are high-growth segments within our categories where we are currently underrepresented, such as well-being and premium products, where we should launch new offerings using our recent acquisitions. For example, Chipita fits into this strategy. There are also geographic opportunities in countries where we are not yet active. We have not expanded into many of these yet, but an acquisition like Chipita, which operates in East and Central Europe and other emerging markets, will strengthen our position. Many of these countries are either ones where we already have a minor presence or are similar to those in which we are already established, enhancing our critical mass. Lastly, we see growth potential in adjacent segments like bakery and bars, with Chipita and Give & Go being prime examples of this opportunity.

Thank you.

And this does conclude our discussion.

I think we've come to the end. Yeah?

Sorry. Go ahead. This does conclude today's Mondelez Corporation Q3 2021 earnings call. You may now disconnect. Everyone, have a good day.