Good day, and welcome to the Mondelez International Fourth Quarter 2019 Year End Earnings Conference Call. Today’s call is scheduled to last about 1 hour, including remarks by Mondelez management and the question-and-answer session. [Operator Instructions] I’d now like to turn the call over to Mr. Shep Dunlap, Vice President, Investor Relations of Mondelez. Please go ahead, sir.

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, mondelezinternational.com/investors. During this call, we’ll 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 and risk factors contained in our 10-K and 10-Q 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 results. In addition, we provide our year-over-year growth on a constant currency basis unless otherwise noted. 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 give you an overview of our results as well as a progress update against our strategic priorities. Then Luca will take you through the financials and our outlook. We’ll close with Q&A. And with that, I’ll now turn the call over to Dirk.

Thank you, Shep, and good afternoon, everybody. I will start off on Slide 4, called delivering long-term shareholder value creation. 2019 was a great year for Mondelez International. It was the first full year under our new consumer centric growth strategy. And we delivered strong results on the top and the bottom line, while generating significant free cash flow. Our solid execution and targeted investments in both our global and local brands enabled us to meet or exceed all of our financial targets for the year. These results give us increasing conviction that our strategy will create a sustained momentum in our business, allowing us to deliver on our long-term financial targets in the years to come. Switching to Slide 5, recapping the year, here are a few highlights. We delivered organic net revenue growth of 4.1%, which was broad based across geographies and brands, and was driven by both volume and pricing. In terms of geographies, emerging markets growth was strong, growing mid-single digit in ex-Argentina and driven primarily by key geographies like China, Russia and India, but also by emerging high growth markets in Southeast Asia. Developed markets showed robust growth with both Europe and North America performing well, delivering share gains and driving category growth. Overall, the results reflect the quality of our brand portfolio with our unique combination of both global and local brands benefiting from increased and targeted investments throughout the year. Our adjusted EPS growth was more than 8% for the year, and we are pleased with our full year free cash flow generation of about $3 billion, which was well ahead of our outlook. Switching to Slide 6, our strategy is now well embedded in the business. In the past 12 months, we’ve made great strides in implementing it across the different business…

Thank you, Dirk and good afternoon. on the slide 9, is our financial performance for both quarter four and full year. We ended 2019 strongly, continuing the momentum were created since the beginning of our new strategic plan. This is the case as this relates to organic top-line growth that translated into earnings growth and free cash flow. We believe these outcomes to be high quality. revenue growth was broad-based by region, global and local brands and in terms of developed and emerging markets. As a matter of fact, 12 out of the 13 business units delivered growth in 2019. importantly, there was a good balance of volume and pricing, both of which are important. Volume allowing us to leverage the great infrastructure we have created with much work over the last few years and pricing to drive value. This balance results in top-line drove attractive profit dollar growth while enabling reinvestments in our brands. in Q4 and throughout 2019, we also made significant investments in area like Europe and AMEA to further support our brands and broader growth initiatives as well as in the biscuits category, North America and certain markets in Latin America. These investments were in line with our original plan and a bit higher in certain areas and delivered unexpected returns and share gains. Turning to slide 10. overall, we grew 4.1% in both Q4 and in 2019. We deliver strong volume and pricing led growth in virtually all key emerging markets like China, India, Southeast Asia, Russia, Mexico and Africa. In aggregate, emerging markets grew approximately 8% for both the year and the quarter. excluding inflation-driven growth in Argentina, emerging markets grew 6% for the year. These results support our conviction that our emerging market footprint is a competitive advantage and the investments we have…

[Operator Instructions] We will take our first question from the line of Andrew Lazar with Barclays.

Good evening everybody.

Hi Andrew.

Hi Andrew.

Hi. Just two for me. First, I’d say obviously Mondelez had a much stronger than initially plan 2019 especially on organic sales growth. Company is looking for 3% plus in 2020, which is the long-term algorithm as you said, though obviously a deceleration from the 4% plus you showed in 2019. I was hoping you could talk a bit to this in terms of where or whether you’re building in some conservatism there? Or if there’s really something more specific behind it, whether it’s, as you said, lapping a longer Easter and a hotter summer and things of that nature? And then I’ve got a follow-up.

Okay. Yes, I think 2019 was a good year for us. We’ve just went through the numbers, not only because of the numbers, but I think also that it was sort of the first confirmation that our strategy’s working. This was the first year, full year with the new strategy for us. We saw a number of signs that we think will continue next year, like the volume growth, like solid gross profit and OI dollar growth, market share gains, continue cost discipline. It was, as you alluded, helped by later Easter season, which gives us work time in store and also that we left the very hot summer of 2018 in Europe in 2019. So we can see now the markets in the last quarter, where the categories were more than 2.8%, not around the 4% that they were in the middle of the year. I think the unlock that we have, we will continue to work those out, put the consumer first, keep on focusing on our execution and keep on increasing our investments and keep on improving our marketing activating our local brand, so all of that will continue next year. And also what we have done as it relates to our responsibilities and goals and better alignment of our incentives, we’re making a few more tweaks this year. And we have a number of issues that we need to solve, in the first place, Brazil supply chain, which is growing better, but also we have to pay attention to China for instance. So all that, for us we are saying the markets or the categories we think will be around 3%, we see ourselves increasing our market share, and so we call it the 3% plus in line with our long-term algorithm. And it’s the beginning of the year, we are always very thoughtful as we set our targets and we’ll see how the first quarter goes. But at this stage, we feel that it’s certainly not in our book slow down from this year, we continue as we are, but we do believe that the categories will be a little bit less than they were last year, because of the reasons that I said. I think apart from the two watchouts that I mentioned, we see nothing at this stage that would particularly preoccupy us for the start of the year. So overall I would say, for us it’s continued to strategy as we are. Yes, the numbers are a little bit less than they were in 2019, but that was largely driven by the structure of how things came about in 2019 and 2020 is a continuation of where we are.

Got it. Thanks very much. I’ll leave it there.

Okay.

Our next question is from Brian Lane with BOA.

Hey, good afternoon, everyone.

Hey, Brian.

Hey, Brian.

Hi. So I guess, I wanted to pick up just on the expectation for incremental investment for 2020, so maybe just a couple of points around that. First, if you can kind of maybe size what the incremental investment in 2020 would be relative to what it was in 2019. And then I guess is we’re thinking about the sources of that, would we – would it sort of suggest that you’d have gross profit, dollar growth growing faster than operating profit growth because there’s going to be some incremental investment in A&C, or am I not thinking about that correctly?

No, I think you’re – well, it’s – you’re thinking about it correctly, but let me start from the start. And so in 2019, our extra investment was about $150 million, largely focused on more A&C route-to-market as R&D. And we’re going to be in the same ballpark in 2020 as extra investment. In 2019, we had plans that extra investment would have an impact on earnings. I don’t know if you remember, we said we would be sort of around mid-single digit earnings. But then during the year, our sales came in better as expected. We generated more gross profits. And in the end, we were ending the year on an 8% EPS increase. However, we had Brazil that affected us in a way. And in fact, our gross profit could have grown more and we would have hoped to invest more in 2019. So in 2020, the extra gross profit that we’re adding is slightly higher than we did in 2019 in dollars. And we’re flowing, let’s say, 40% of that roughly into A&C and the other investment areas. So it’s similar to what it was last year, but we don’t have the negative effect of Brazil, and that’s why we can continue with that algorithm and deliver high-single digit EPS growth.

That’s helpful. And then just in terms of where geographically the spend is going to be, could you just maybe give us a little bit of color on kind of maybe where you emphasized the extra spend in 2019, and kind of where the incremental pieces going in 2020? And I’ll leave it there. Thanks.

Yes. It goes largely to – first of all, the two sources or the two destinations of the money is one in extra marketing and media investment, to be very specific, it’s all in media. And the second part is in distribution expansion. So the extra media investment is a little bit across the board. In most countries, it’s different level that we do that, but the idea is to continue increasing our media pressure. As it relates to the route-to-market that is more concentrated in the emerging markets, the India’s, the China’s, the Russia’s, where we still have a huge opportunity to increase our distribution. I would also like to add that, as it relates to those media investments, not only our rate increasing, the overall spend on A&C, but within that A&C we are shifting more into media. So we are increasing our working media spent largely through digital. And then also we constantly are trying to increase our ROI, which increased about 12% in 2019 on our media spend. So, and on top of that, we have restructured our agency. So we also think that our non-media spend will have higher efficiency and higher quality. So all that together, we have the effect of the higher investment, but also that re-shifting which has a pretty big effect on our media pressure. So that’s a little bit how it all comes together.

That’s great. Thank you for that color.

Okay.

We will take our next question from Dara Mohsenian with Morgan Stanley.

Hey guys.

Hi.

Obviously some pretty strong results in terms of organic sales growth in 2019, but within that we saw a really solid acceleration in volume growth. So I’d love to hear a bit of a state of the union now that the full year results are in, what drove that in your mind, how sustainable that volume of pickup is going forward? You mentioned both volume mix and pricing will be up next year, is one a bigger driver of that organic sales growth than the other. And then secondly on Brazil, have the supply chain issues – are those now been resolved and they’re behind you? And maybe just give us a little more of an update on how you’re managing the powdered beverage business, and if we should expect sequential improvement in the first half of the year versus the back half of last year, do those strategies take longer to play out? Thanks.

Okay. I’ll start and maybe, Dirk will cover a little bit, Brazil. So, as to volume, clearly, we like what we have seen. We like that top-line growth is coming mostly through a good balance of both volume and pricing. We believe that balance is quite important, because it allows us to create value in the marketplace, but at the same time, to have the leverage that we need for our algorithm to really fully work. It is pretty much across the board, maybe looking at the numbers you might say it is a little bit less in emerging markets, but when you strip out Argentina, you really see a good balance of volume and pricing even in emerging markets. We keep on investing on our franchises, route-to-market in quality of our brands. And so we expect that to continue and we will always try to strike the right balance between pricing and volume. So, I don’t think Q4 was a material exception through the rest of the year. I think the only one that came back in terms of volume growth in the second part of the year is North America. That is executing quite well behind biscuit, both in terms of marketing and I would say in terms of the execution. So, I think we will continue seeing that as we continue investing in our franchises. In Brazil, quite frankly, the supply chain issue is for the most part behind us, but there is more work to be done. And on PBs, I don’t know, Dirk, if you want to comment a bit on – specifically on what we’re doing and how we see that progressing in 2020?

Yes. Yes. So, the PB market is starting to recuperate a little bit, but still not that great. And on top of that Tang, our brands, which was the leading brands was having some shared challenges. So what – and as a result of that, we saw some destocking of PBs in the trade, because there was less demand for it. So, what we’re doing is, we are launching a new bundle on Tang, going a little bit back to what Tang was in the past. We had probably drifted a little bit too much into new variety, new flavor and so on, and more bringing it back to how Tang can really play a role in the daily beverage choice of kids in the family and how it contributes to that. We are increasing our investments. We’re launching a new campaign. We’re launching, of course, a number of new flavors, but overall, it’s a bit too early to say what’s going to happen. We are in the middle of the season of Brazil at the moment, but that’s what we’re doing on a powdered beverages.

In terms of comparison, the second part of the year will be easier in terms of top-line, because we started the destocking of PBs in the second part. So, I think that’s maybe, the way you have to think about how it will phase out throughout the year.

Great. Thanks guys.

Thank you, Dara.

Our next question is from John Baumgartner with Wells Fargo.

Good afternoon. Thanks for the question.

Hi.

Hi.

Dirk, I wanted to dig a little bit into the local brands. and I guess first off, could you maybe, ballpark what percentage of the revenue base there, it’s already been activated with the increased investments and of the brands that have not been activated, how are you thinking about the phasing of the investment uptick between 2020, maybe 2021 at this point?

Yes. so, the local brands, I would roughly say about 45% of our portfolio is global brands, about 45% is local brands that we want to activate. And then about 10% is a brand that we do not want to activate and largely run there for cash. Of those local brands, those 45%, most of them have been activated; I wouldn’t say yet with the optimal media spend yet. So that’s where we want to increase it. But the ones that we have been able to increase media and reposition them and give them sort of a new purpose that has worked really well for us. So, one of the most striking examples would be Jubilee in Russia, which is a legacy biscuit brand, which was kind of dormant and we’ve revamped it, and it’s now showing double-digit growth and a strong market share increase. And we see that with a number of brands, LU in Europe, and we see that with a number of brands around the world. So, I wouldn’t say that it’s – within that 45%, that part was not activated than other parts was activated now. But overall, the local brands are growing 3.2% versus the global brands, but the local brands are now getting very close to category growth and we really want them to be in line with category growth and global brands clearly need to be above that, that’s the way we think about it.

Okay. And then just to follow up on that, where you had increased the investment in those local brands, I’m curious how your competitors are responding. Are you seeing them generally staying rationale in terms of pricing and kind of following your lead, doubling down on marketing and innovation of their own? Just where are the observations there so far in terms of the competitive dynamics?

Well, we tried to avoid to run price promotions and so on, on the local brands. So, the reaction there has been, I mean, I wouldn’t say, within in a price war as I think about it around the world. Yes. as we move some of these local brands and sometimes we move them more into the sustainability direction and things like that, yes, there is a reaction of competition trying to do the same. But I think overall, that’s very good for the category, because that will help the consumer increase its interest in our category. So, we’re not against it, I think it’s a good movement overall.

Great. Thank you for your time.

Okay.

We’ll take our next question from Chris Growe with Stifel.

Hi, good evening.

Hi, Chris.

Hi, Chris.

Hi. I just had a question if I could ask first, and I don’t think you’ve addressed it yet. but just, I’m curious what rate of inflation you expect for this year and then related to that, you’ve talked about some pricing, you have some cost savings coming through. Is it pricing that mostly offsets cost inflation for the year or will you need some – maybe, your simplified growth savings offset some of that as well?

So, I think when you look at the last couple of years, we have seen quite a bit of inflation pressure, mostly around I would say transportation costs, labor costs, and I would add Forex to that, clearly with the dollar strengthening, there was a big inflation component that touched to that. Commodities were a little bit more favorable than the last five years, over the last couple of years I would say, as we move forward, we see a little bit more normal inflation pressure around labor and clearly, there are differences around the world, there are economies like India, where labor inflation is quite high; but overall for the company it is a little bit lower in that area. But clearly, we see a little bit more of a commodity-driven inflation, particularly around cocoa, dairy is another one, and packaging costs as well. So all in all, we expect commodities, forex and inflation to be in 2020 in the ballpark of what we have seen in 2019. And so we expect obviously to price that away. In the short-term, I think we do as a company a good job in putting in place good coverage strategy. And so we are never hand-to-mouth in terms of some of these commodities or even some packaging inflation can be covered well through those instruments. And so in the short-term, we will always try to strike the best balance between our volume, our pricing and our inflation. In the long-term or in the medium-term, we really want to price it away. I can’t give you the exact number in terms of pricing. We don’t guide to a breakdown between, what we say in terms of revenue and volume and pricing. But I think it is fair to say I don’t see dynamics changing dramatically into 2020. What we’re doing in terms of productivity and cost saving initiatives, reality is what we would like to do is for that money to be half reinvested back into the business and fund A&C and route-to-market investments, and there has to be dropped to the bottom line. So that’s the way we think. We see productivity and cost saving initiatives to be the real upside to margin and stepped up investments.

Okay. Thank you for that. And I have just one other quick question, which would be and I think that – I think that gets classified under the route-to-market investments, but you’ve had an expansion of distribution in some of the faster growth channels. You’ve talked about the U.S., the club stores and discount stores. I think that’s also occurring in the emerging market. Just curious, is that an incremental investment level for you? Is that costing more than part of your investment in 2020 as well? And should we see that be a contributor to revenue growth?

Yes. We are – if I would summarize what we did in 2019, which we are largely repeating in 2020, maybe, even increasing a little bit in the developed markets that would be particularly around seasonals that we tried to have a better and stronger in store presence. And then also going into the – what we call the alternative growth channels in U.S. that would be convenient for instance, and put a bit more manpower, a bit more investment in there – in the emerging markets, it largely has to see with physical distribution opening more distribution centers, having more trucks on the road, putting more coolers in the stores in India; but also in China for instance, it means going into third tier cities, setting up sales teams there and starting to cover these cities. So for instance, in China, we’ve added about 140,000 new stores this year and we are planning to continue that into the 2020. So, it does help our revenue clearly, I mean we’ve seen a well above category growth in China and we are seeing very strong double-digit growth in India. And we are counting that our distribution expansion is helping us. and at the same time in the developed markets, we want to continue that shift into more seasonals and more alternative growth channels, which also will help our revenue growth.

We’ll take our next question from Steve Strycula with UBS.

Hi, good afternoon.

Hi, Steve.

Good, Dirk. A quick question for you to kick off. As you think about the outlook for 2020 in your guidance for 3% plus growth. How should we think about how you evaluated macro considerations, whether it be – what’s kind of unfolding in front of us in China right now, or even with some of the other multinational companies has cited with macro softness in select countries across South America. I know that you’ve called out discrete issues for the powdered beverage category, but love to hear your view on those two macro situations and have a quick follow-up for Luca.

Okay. So, if I start with maybe, the developed markets, if we see a little bit of a pullback in developed markets, which we don’t see at the moment, to be honest, we see some very vibrant growth in Europe and in the U.S. So, it’s clearly not visible for us, but I would say, our snacking categories are a little bit more resilient if there would be a pullback in the economy than other FMCG categories. Trade tensions between the U.S. and others are really not currently impacting us. Brexit, I would say is a risk, although I don’t see it in 2020, but if there would be no deal near the end of the year, that would be possibly a disruptor. But we – I assume at this stage that we’ll find the deal and that it will be a relatively smooth transition. in the emerging markets and I know that some of our colleagues are seeing different impacts there. We are not feeling an impact in India or in China, but we would probably be a bit more cautious around the projections for Latin America. Obviously, we have high inflationary environment in Argentina, which we are largely managing to protect our scale and our absolute profit generation as well as our cash flow in the country. And we do know and we see it of course, that there is more volatility in emerging markets, but we feel that the growth opportunities far outweigh the risks of that. You have to also take into account that snacking behavior and snacking demand is still growing very fast in these markets and there’s still a lot of runway there. And then I would overall say that our categories are showing an acceleration into 2019. We are forecasting them at 3%, which is our long-term expectation for our categories. We don’t see that at the moment as being risk, because we believe that there is still a lot of opportunity for consumers to keep on snacking more. And for instance, our study we recently did about the state of snacking clearly showed that the behavior is on the uptick. So overall, I would say we cannot confirm some of the other impressions that you’ve heard from some of our colleagues. We feel pretty good about what we’re seeing around the world.

Thanks. Very helpful. And then quick question for Luca. Did I miss in your prepared remarks for fiscal 2020 guidance, what the EBIT dollar outlook would be on a constant currency basis to kind of get to the algorithm you’re on EPS?

Look, we purposely didn’t go there necessarily. We gave you enough elements; I think we have commented a bit on what type of gross profit growth it sees for the year. Obviously, we expect gross profit to be the source of funding for A&C and route-to-market. The long-term algorithm implies a strong mid single-digit OI growth. And again, I think in 2020, if you do the math, we should be around about there. We believe, in the end, the way we are running the business, which is we want to have volume growth. We want to have a shared gain, simplifying a category growth that is projected and exiting the last year, it was 2.8%, so around about three. I think that gives us together with cost savings and investments in the business, the ability for us, by not even counting much on below the OI or the EBIT line items gives us the ability to achieve the high-single digit EPS that is part of the guidance we gave for 2020. And importantly, the $3 billion plus of free cash flow that is our long-term guidance for cash.

Steve, just before we switch to the next question. Did your question also consider the Coronavirus in China? Was that, because I largely talked about the economies that we see around the world, but maybe it’s also good that I comment a little bit on China and the Coronavirus situation for us. So, quickly China is about $1 billion net revenue country for us, so about 4.5%. We had a very strong 2019 and it contributed to our growth. We do believe there will be an impact on our Q1 revenue, but it’s really too early to quantify for us at this point. We are monitoring the situation closely and we’ll update you, if in case there is something that we need to report. The outbreak has come during Chinese New Year, which is a time of high consumption. Our sell-in was in line with expectations, was quite good. We now have to see in the coming weeks what has happened with the sell-out during Chinese New Year. The other thing that is happening is that, normally today our factories, we have four factories in China, two of our factories, they are in a region where we normally would have started up our factories again. The government – the local government has asked to keep our factories closed for another 10 year – sorry, it’s 10 days, in order to not have too much of a risk with the infection. And we also have voluntarily put some travel restrictions to our own people to travel less within China and also for our global people to travel less to China. But overall, I would like to point out that we do believe that this could have a short-term impact, but long-term we continue to be very convinced for the outlook of the Chinese market for us.

Great. Thank you.

Thank you, Steve.

Our next question is from Jason English with Goldman Sachs.

Hey folks, thanks for squeezing me in, much appreciate it. And happy belated New Year.

Hi.

Two things for me, for first, congrats on a row – on a solid year, it’s great to see the momentum, particularly on your core business, biscuits and chocolate performing quite nicely. The gum and confection side though continues to relinquish on market share side. Can you touch on what, if any plans you have to resuscitate that business? So that’s question one. And then second question, in the context of overall, the business is doing pretty solid with the portfolio you have. Can you also then touch on your strategic ambitions? As we think about M&A and some of the investments that you have out there, the potential to monetize and the potential to reallocate some of those to build your portfolio in new areas. Just update us on your broader thought process on strategic direction. Thank you.

Okay, well. Maybe I’ll talk about gum and candy, and Luca, can talk a little bit about our M&A and strategic investment. So there is a clear distinction this year in 2019 between gum and candy. On gum, what has changed or not changed is the fact that we are doing very well in emerging markets, where we are gaining shares in our gum business. We have year-to-date very good revenue growth, we gained shares particularly in China, which is our second biggest gum market in the world and in Brazil we are gaining share. It is clearly not the strongest category in those markets, but it is positive growth for the category and positive share for us in emerging markets. We continue to be challenged in developed markets. Largely in the U.S., Europe is in a – we’re clearly seeing a better situation, but it’s – it’s the U.S. that continues to be very difficult for us. The category is displaying now low growth, but it’s growing, but we are still losing some share. And we have some fundamental category challenges and we have some brand challenges. I would say that, on our major brand Trident, things are quite okay. It’s in the smaller brands, which we are gradually, I would say, flush out of the system, that’s what is causing this continued share loss for us. As it relates to candy, I would say, the reason why candy was not as vibrant this year was largely due to the U.S. market where we had capacity issue. That capacity issue is now solved and we expect a much better 2020 for our candy business in the U.S. I would say that as we look at the future plans for gum, it’s a difficult situation for us, because gum is very profitable and gives a scale in key markets. So it’s not something that we can just sort of shift the side. We are working on a number of initiatives to address that share decline. First of all, as I said strengthening our core brands like Stride in China or Trident in the U.S., improving quality, changing the positioning, improving the positioning, we are doing expansion into means that of course doesn’t solve our gum problem, but that does reinforce the brand. And we are having very good results with that, in for instance, France, with Hollywood. And then we have started to launch a number of new experiences, new reasons to chew, particularly in Brazil and we are also seeing some very good traction on that. So we have the first sort of test and learn as it relates to renew the initiatives on gum and we have to see how they’ll span-out in 2020. So maybe Luca you can talk about the M&A.

Yes. May be let’s start with the coffee and I will start by saying that the JVs are performing well and are very attractive, but at this point in time, in terms of what we have always described as a financial investment and so there would be a point in time where we will exit those investments. They are good investments. They continue to perform quite strongly. We had a good earnings growth related to them in 2019 and we are expecting solid earnings throughout into 2020. The category itself continue to be attractive. I think in the past we commented a bit into, you know how much we would welcome an IPO of JDE. I think that would establish a public mark for that investment. We believe that eventually will improve our value over all as Mondelez as it is a good asset. And I think it will allow you guys to do a proper some of the part analysis for Mondelez by a way of – a subway or for that. I would say also that JDE is truly a great company, still quite a bit of untapped potential, it’s a compelling growth story as a company and it is a little bit more than, than roster ground. I think it is a company that has a big presence in premium segments through what we call instant coffee and on-demand as well as a professional presence in terms of, away from home and servicing other occasions than in Hong Kong. So I’m just – we feel quite good about those. Having said that, the timing of the exit as we always said will depend upon how much potential we still see in those companies and an appropriate use of funds which potentially is better M&A and assets that we like in the snacking landscape globally. We will remain disciplined in terms of M&A and we have discussed that our preference at this point in time is on both times. We are looking at premium wellbeing areas, adjacencies and trying to fill some of the portfolio gaps we have both geographically and category wise in some places around the world. So we believe that by staying disciplined, we will have the ability to fill some of these gaps and step up even more – our growth rate on the top line and on earnings as well.

Great. Thank you so much.

Thank you, Jason.

We take our final question from Ken Zaslow with Bank of Montreal.

Good afternoon everyone. I just have two quick questions. One is on the investment, at what point do they become self funding? I know they’ve had good returns, but how do you think about the years in which they will just kind of be a virtuous cycle? And the second question I have is in Europe, what has the utilization rates been in the facilities and where are they now and where they look to be visit. It seems like that’s part of the opportunity that you guys continue to leverage over time as you get more volume through it as operating leverage? And I’ll leave it with those two.

Okay. Maybe I’ll talk about the investments and then Luca can talk about the operating leverage.

Yes.

So when the investments become self funding, I think it’s still a little bit of way for us. We feel that we have potential to drive the categories around the world and we see good reaction, good return on investment still. And so as we are trying to develop a long-term algorithm that is repeatable year-after-year. at this stage, it feels that the algorithm allows us to keep on adding more investments every year and hopefully, that translates into strong facilities. And so I would say at a certain stage, some extra investments will not generate more growth. And then we have to start questioning it, but at this stage you see its working really well for us.

So it is self-funding, I mean for the algorithm to work and for us to be able to deliver upon the promise of share growth, high-single-digit EPS and $3 billion of cash flow. That algorithm itself includes a level of investment, which is factored in, and it is allowing us to hit on all those numbers. I think in the end, the measure of success for us is whether we will be able to deliver share gains consistently. And the second one is, if we increase our volume consistently, all of that came to fruition in 2019.

Then the second part of the question, there was a little bit of a disturbance in the line. Could you repeat it maybe?

I think I got it. It was about...

Yes. On the European side, it seems like you keep on getting margin expansion utilization. Basically the assets have been put together through acquisitions. As you keep on getting leverage and do some restructuring a little bit. It sounds like the utilization rates should continue to increase. Where have they been? Where are they? And where are they going I guess is kind of what I’m thinking?

Yes. Look, I think in general terms we don’t comment on capacity utilization by result. I think that’s – that will be a bit of too much of a comment I will say. Look, we have invested quite a bit in terms of both creating a more nimble and a more flexible organization, both in overheads and infrastructure, it’s not only legacy site. We invested in brand new sites in Europe. And Europe I remind you is a little bit more than continental Europe or UK. It is also Russia in our case. So I would characterize the old status of the facilities in Europe quite good. It can be further optimized but we still have available capacity in terms of continuing, growing the big blockbuster brands that we have. Milka is one example, Cadbury, Oreo but also the local brands and I think that’s what we’re working on.

Great. Thank you very much.

Thank you.

Well in conclusion I would say that 2019 was a major step forward for the company and it was the first full year of executing our new strategy. We’ve successfully launched and driven this more consumer centric approach to get growth across organization and as a result, we are building an effective Local First Culture that is delivering. We are a good finish to the year with broad-based revenue growth and strong earnings and cash flow. And the momentum we’ve created across our brands and our geographies this past year reinforces our confidence that we have in our strategy, our people, and our ability to execute. There’s certainly more work to do, and a long way of opportunities is ahead of us, but we believe that the early success combines with the attractive category dynamics, and further targeted investment provides us greater confidence that we can deliver sustained long-term growth and attractive total returns. With that I would like to end the call. Thank you for assisting.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.