Ken Goldman: Understood. Thank you.
Luca Zaramella: Thank you, Ken.
Operator: Our next question comes from Bryan Spillane, Bank of America.
Bryan Spillane: Hey, thanks, operator. Good afternoon, Dirk, Luca.
Dirk Van De Put: Hey, Bryan.
Bryan Spillane: It looks just…
Luca Zaramella: Hi, Bryan.
Bryan Spillane: Hey, just a — I have a couple of questions, actually, and one is just getting back to the guidance, and I just want to tie in. It’s $2 billion a share repurchase this year, but you also repurchased quite a bit of shares in the fourth quarter. So if we think about the impact that share repurchases or a lower share count would have on fiscal ’24, it should be more than the roughly 2% that a %2 billion repo would suggest. Right? Just simply because the timing of your ’23 share repurchases were so late, it should drive the share count down a little bit more than we would normally see. I just want to make sure I’m thinking about that correctly.
Luca Zaramella: I think you’re thinking about that correctly. Yes.
Bryan Spillane: Okay, all right, Because that’s going to square to just how much we need to burden operating profit growth, and I think it’s not going to be quite as high as I think, as it would have sort of looked. Okay, thanks for that. And then the second question, just. Luca, if you could talk a little bit about Argentina? You know it’s been topical over this earnings season for companies operating there. We’ve seen a range of outcomes, I guess, or actions companies have taken. So if you just kind of walk us through Argentina, does the devaluation at all have any effect on local operations? What’s incorporated into the guidance, and also, maybe if you can just touch on, is that what’s driving the FX guidance to be so moderate? Because we fielded that question a bunch over the last few minutes. Thanks.
Luca Zaramella: So, Argentina for us, is round about a $600 million business. We are very happy the way the business has been managed over the years. We have a clear playbook. What matters in Argentina for us is not necessarily top line growth. It’s not share. It is about protecting the cash that we have there. And Argentina has been consistently generating cash for us, and we have been able also to take some cash out of the country. Some of the companies have talked about exposure on net monetary position. Our net monetary position is in control. It will go down over the course of ’24 as we have a clear playbook and by the way, we incent Argentina, not like all the other business units, but we incent Argentina on net monetary position and free cash flow generation.
There was a little bit of a spike in net monetary exposure in Q4, and that was, as the old government put in place some price control mechanism. But as those have been released, the net monetary position in Q4 is going to be very manageable and I don’t expect any major impact due to that. It’s also fair to say that we have full control of the operation. We are free to price at this point in time, and the team is fully committed to protecting as much as they can the size and the scale of Argentina. So I [Technical Difficulty] any issues or whatsoever in terms of impairment. Clearly, there has been material devaluation. The parallel market runs at rates that are even higher than the official one reported, that are obviously already much higher than last year.
And so we will have to cap most likely growth for Argentina going forward into 2024. Having said that, it becomes a moot point as we guide you to organic net revenue growth and forex impact. And so the two offset each other. And if you take the guidance we gave in terms of organic net revenue growth and the impact on revenue, which is around about half a point of growth, that should do the trick in terms of you forecasting Mondelez in total.
Bryan Spillane: Thanks, Luca.
Luca Zaramella: Thank you, Bryan.
Operator: Our next question comes from David Palmer with Evercore.
David Palmer: Thanks. A couple of questions. On Europe and pricing, so often we talk about the retailer, customer, and the dynamic of getting through pricing there. I wonder, as are you taking pricing this year? Are you — is your pricing strategy to offset the dollar impact that you’re going to see from cocoa? Or — it would seem like that would be a pretty reasonable expectation for the players there, given what’s happening with cocoa. But maybe there’s some timing issues for 2024 there to think about. And then how — from what you’ve seen about — from the consumer there, is the pricing — price elasticity, they are much different than what you would see from what you see in your biscuits business in the U.S., for example?
Dirk Van De Put: Yes. Yes, your first assumption is correct in the sense that we are trying to offset the dollar impact of the inflation that we’re seeing on our input costs, and we’re not pricing for percentage margin, but offsetting that dollar impact, which yes, we believe is a reasonable position. I think this year, seeing the situation in Europe and the fact that the retailers are seeing probably some deflation in other areas of their business, it is a little bit of an explanation to explain that not only cocoa, but also sugar or hazelnut are showing significant inflation, which is not the expectation. I think by now they understand that it has to happen in chocolate, so we have high hopes that we will be able to land that in a good way.
As it relates to elasticity, I would say the elasticity in Europe has been very reasonable. We might maybe expect a little bit of an uptick as prices keep on going up for a third year in a row, particularly in chocolate. But there is very little or low down-trending within the category, because everybody will have to price. So it’s a joint movement of all the brands. So we don’t expect that there will be huge differences between different brands and no shifting of consumers. What we’ve seen in the past year is a strong price increase of 12% to 15% in Europe in chocolate, with a very limited 0% to 0.5% effect on volume. And so that shows that elasticity is very low. We think that is driven because of strong brand loyalty. The fact that chocolate has a very distinct taste profile and consumers tend to stick with their chocolate brand because they like taste and people recognize the taste of their brand.
So private label is very small and people do not tend to switch brands very easy. We call it the taste of the nation. Every country has their favorite chocolate. And then on top of that, we will do significant investments, very strong activations. We’ve been driving seasonals very hard. The next year, we will celebrate 200 years of Cadbury, which will be a major activation in the U.K. So all that combined make us believe, and we have proved in the past, that the elasticity will be limited to our opinion in chocolates in Europe.
David Palmer: And a quick follow-up. Distribution growth seems to be a key driver, a growth driver for the company. I don’t think I’ve ever heard you say how much of your organic sales growth will come from distribution expansion. But if you had to guess how many percentage points of that organic sales targets would come from that, what would you say?
