Mondelez International, Inc. (MDLZ) Q2 2021 Earnings Report, Transcript and Summary

Good day, and welcome to the Mondelez International Second Quarter 2021 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Mondelez management and the question-and-answer session. I'd now like to turn the call over to Mr. Shep Dunlap, Vice President, Investor Relations for 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. 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, 10-Q and 8-K filings for more details on our forward-looking statements.

Thanks, Shep, and thanks to everyone for joining the call today. Firstly, I want to acknowledge our colleagues, our suppliers and our customers around the world who continue to navigate through the pandemic, particularly in markets where COVID vaccines are not yet widely available. We continue to work hard to accelerate access to vaccines for our colleagues, and sincerely appreciate everyone's efforts to maintain the supply and availability of our products. We had a strong first half executing our strategy well and leveraging our advantaged enablers to deliver against our growth drivers. The strong first half gives us the confidence to raise our full year revenue growth outlook to 4%-plus. We are seeing improving mobility trends in many places, helping to drive recovery in areas such as world travel retail and Gum & Candy that was negatively impacted last year. We also see continued strong demand for the categories and channels that experienced elevated demand last year due to COVID. Once again, this quarter, we have demonstrated that our strategy is working as it is driving a virtuous cycle that is consistently delivering a profitable, volume-driven top line and bottom line growth, as well as good returns to our shareholders. We are leveraging our revenue growth management capability which is particularly important in this inflationary environment to generate fuel for continued investment in our brands and capabilities. And we continue to reshape our portfolio to further increase our focus on snacking as well as to accelerate our long-term growth rate. To this end, we announced in Q2 an agreement to acquire Chipita, which I will speak more about later. After this strong first half of the year and strong previous years, I remain even more confident that we have the right strategy and are taking the right actions to deliver continued and accelerated growth.

Thank you, Dirk and good afternoon. Our second quarter performance was strong across the board. We delivered robust topline growth, healthy gross profit dollar growth that allowed reinvestment in our brands, and attractive free cash flow. Revenue for the quarter increased by 6.2%. Growth was broad based and volume-led. Pricing, which was favorable across all regions, was also a key contributor.

Your first question comes from the line of Ken Goldman with JPMorgan.

Hi, thank you. Dirk, you mentioned that your plan remains prudent. You talked about global volatility. I'm curious, though, how you see the situation today in some of your key emerging markets and what your outlook is for the rest of the year. Again, I know you don't have a crystal ball, but are there any areas of the world where you might be more optimistic? More concerned? Just trying to get a sense of that?

Okay. Thanks, Ken. And yes, a pleasure to go into that. You probably saw that we had a strong emerging market performance in Q2 with 16% growth in the quarter and now a 5% growth on a 2-year average basis. It would have been probably higher but we have disruption in India. COVID caused in May. And so if you look around I would say, look at the big markets. We have strong double digit growth in all the BRICS countries. So Brazil and Russia and then the high single-digit growth in China. So there's nothing there. I would say of those countries, there's always a potential maybe, except for China, that COVID will cause some volatility, particularly a country like India looks more susceptible to it. But overall, they seem to be on a path of a gradual increase. China, I mean, operating well. COVID seems to be under control. They are returning to mobility and we've seen a constantly improving category performance. And on top, we have strong share gains, sometimes like in Gum 3 points year-to-date. If I look at India, they bounced back in June of the crisis of April and May, and the daily cases are now at 10% of what the peak was. So, the short-term risk of further disruption remains significant due to the slow vaccine rollout and new variants. But if I look at the long-term prospects, I believe they still are very strong. And our team there is executing the strategy very well, doing more investment, increasing the range and driving more distribution. And then Brazil had very strong growth, double-digit net revenue and now also double digit on a 2-year CAGR. The COVID nervousness is still there. And then the chocolate and biscuit consumption is growing while the Gum & Candy, which, as you know, is very heavily affected by COVID, is still negative by the reduced mobility. In Brazil, we see the vaccine rollout accelerating and it's starting to have an impact. And so we expect mobility in Brazil in the second half to be quite strong. And we also see some share gains in biscuits in Brazil. So, in the big markets, I cannot say, apart from what I just said, that there would be major surprises. I would say, at this stage, Southeast Asia is particularly affected, and so that's going to take a few months probably. We have transmissions peaking in Vietnam and Indonesia. Q2 was flat against 2019, so we have to monitor that very closely. And then the Middle East and Africa, in general, they are in growth on a two-year basis, but that's also a part of the world that I would say we need to remain careful, and I don't think they have fully recovered. If I look at Latin America, the smaller markets, Mexico, slight growth on a two-year basis now. They had a tough year last year, coming back quite nicely. The rest of the smaller markets, probably not quite there yet, still below the 2019 levels. That's also driven by the fact that our Gum & Candy business is quite important in those markets. And then the European emerging markets, apart from Russia, they remain strong. So, I would say overall, there are smaller markets that are affected at the moment, but the big emerging markets are doing well. Volatility remains, but I would largely see that in India and Southeast Asia and potentially, Africa. But overall, I think the mix of our emerging markets, over time, will keep on showing more stability and a gradual increase versus 2019.

That is very helpful. Thank you, Dirk. And then quickly, Luca, I was just thinking about the phasing of the third quarter and the fourth quarter from a top line perspective. As we model each of those quarters, are there any onetime maybe headwinds or tailwinds that you'd like us to consider or keep in mind?

I mean the straight answer is no. Clearly, we are very happy with the strong first half. And the 4%-plus guidance, which implies at least 3% growth for the second half, is evenly spread, I would say, between Q3 and Q4 the 3%-plus or at least 3% in the second half might appear conservative, and maybe it is given the first half trend. But as Dirk just finished talking about emerging markets, we know the situation is still volatile in certain parts of the world. And we do not know to which extent Gum & Candy and World Travel Retail will recover. So we feel quite good about the 4-plus percent. Expect the growth to be evenly spread between Q3 and Q4.

Thank you.

Thank you, Ken.

Your next question comes from the line of Andrew Lazar with Barclays.

Good evening everybody.

Hi Andrew.

Hi there. Maybe to start with, you talked about how you obviously expect better organic revenue growth for the year and or kind of standing path on the EPS growth outlook. And I guess it's a combination of reinvestment and some additional inflation. But first off, I was hoping, Luca, you could break down those two for us. Is 1 of those two maybe a significantly larger portion of the impact to the incremental impact to margins in the back half of the year. And to the extent it's reinvestment to kind of hold up market share, given you're starting to lap some of the unprecedented market share gains from last year. What are you seeing that helps inform your ability to hold on to some of these share points or these share wins as you go forward? Thank you.

So maybe I'll start with this last one. In terms of share gains, the peak of the share gains were last year in Q2. And as we said many times, each were expanding consistent across the board. Our top countries now were middle size countries in both chocolate and biscuit posted tremendous share gains. And obviously, the 75%, 80% share gains that we're talking about, don't give full justice to the absolute amount of shares. And so, by lapping the peak last year, what I can tell you today is that, we are fairly happy with the overall result over the 2-year period. And we intend to keep it as it is as of Q2 and potentially slightly growing those share gains in the second part of the year. In terms of dynamics, the amount of A&C that we are going to invest for the second part of the year is pretty much in line with what you have seen so far in the first half. Obviously, Q2 last year, we kind of cut a little bit A&C because we were impossibilitated to do business in certain places, particularly in emerging markets. But when you look on the face of it, the increment in the second part of the year will be lower. But in terms of run rate and absolute numbers, it is absolutely in line with the first part of the year. In terms of pricing and inflation, I would say, there is going to be more in the second part of the year. To start with our pipeline of commodities and ForEx has been advantageous in the first part of the year, and we expect some commodities and ForEx impact to be relatively higher in the second part. So, there will be some more pressure in Q3 specifically. But we will continue to be very disciplined in terms of cost and pricing. And the overall goal for us is to enter 2022; A, with some strong share momentum; and 2, with some GP level that will enable continued investment. So, as I said Q3 will be more pressured than Q4. But I think at this point in time, have line of sight to incremental pricing. We have line of sight to incremental volume. And we have line of sight certainly to more of what we call RGM, which is critical for us as we continue to support our brands and with the ultimate goal to again, as I said to enter 2022 with a strong momentum.

Thank you.

Your next question comes from the line of Nik Modi with RBC Capital Markets.

Yes. Good afternoon everyone. So I just wanted to follow up on Andrew's question regarding share gains. And a year ago, we were talking a lot about consumer trial and household penetration? And Luca and Dirk, I was hoping you can maybe provide an update on the retention. What you're seeing from some of these new consumers. Maybe that can help us provide some perspective around the sustainability of share gains? Thank you.

Yes. So, if I look at the household penetration in the last 12 months, globally, we have an increase of about 150 million households which we are holding on to. That is not falling back. The other area that I see is not necessarily going to lead to share gains, but I think it will lead to strong categories is this combination of an at-home consumption that is lower than it was -- slightly lower than it was last year but still significantly higher than it was in 2019. But that is then sort of buildup or there's a build-on from mobility increases. And the impulse channel coming back and giving a strong growth in Gum & Candy as well as in biscuits and chocolate. And so that, I think, would be a second factor that will influence this. And then I -- as Luca was saying, we are lapping the highest share increases that we had last year. That was, of course, a combination of our brands and the performance of our brands, but also the fact that our supply chain last year kind of worked better than some of our competitors. That effect we knew over time was going to go away. But in the second half of the year, those huge increases driven by our supply chain performance last year are gone, so we'll be lapping market share increases that are milder. And on top, we're expecting, as we did in the second quarter, but also in the third and the fourth quarter to continue to increase our working media spend in a significant way. So, I expect that also to contribute to the market share gain. So -- but what we expect to happen is that by the end of this year, the market share gains that we had at the end of last year will have retained or potentially increased a little bit.

Excellent. That's very helpful. And then just one last question. As we start seeing a surge in cases in the US and obviously, other pockets of the world have been not as favorable as what the US has been, are you seeing retailers behave any differently? Are they -- is there this fear that supply won't be able to come to the market if people start stocking up so they're buying inventory in early. Any context around that?

Not really at this stage. We haven't really seen anything. It was a little bit, but not really significantly, I would say. Now, if the news continues to worsen like the CDC is saying today that even vaccinated people in certain circumstances should start to wear masks again. The fact that consumers might stay at home longer because the returning to work is not as evident after Labor Day at the moment, I think we might see a sort of a repeat of previous situations. I don't think it will lead to massive stocking at home. But the increased consumption at home, I think, will continue for a while. So, at the moment, for instance, the food consumption at home still shows a 15% spend increase versus 2019. I think that will continue well into the third quarter and potentially, in the fourth quarter. And the out-of-home eating is still not quite there. It's still 5% down, the spending there versus what it was in 2019. But the consumer is venturing out more, which also helps our snacking category. So, I think overall, our categories will benefit. But I do not expect that we will see massive sort of stocking and retailers struggling with replenishment.

Excellent. Thank you so much. I'll pass it on.

Thank you.

The next question comes from the line of Bryan Spillane with Bank of America.

Hey good afternoon everyone. Hi. Just wanted to ask a question about investment levels. I think you talked about part of the -- what's contemplated in the guidance for the full year in '21 is some incremental investment, and wanting to be in a good place to invest for '22 as well. So, I guess 2 questions around that. One is just where is the -- where are you making those product categories or which geographies? And then second, just if you give us a sense of what types of investments those are. So are they product and packaging? Is it marketing? Just trying to get an understanding of kind of where and what the investments are?

It is a combination of the strategy we had all along since the launch of the new strategy in 2018. First and foremost, it is around global brands, but also about local brands. And so, the local jewels we have around the world are all benefiting from increased A&C. It is about more working media than anything else. And so, we are reducing consistently over the last couple of years, the amount of nonworking media that we have in our plans and in our numbers. We are consistently pushing the envelope on renovation of some of these brands. And we continue investing in new packaging, in new quality, etcetera. But the overwhelming part of the investment is around working media. It is more skewed towards biscuits and chocolate, but we are also increasing, particularly in some places like China and Latin America gum investment because we want obviously to reap the benefit of increased mobility. And so, I think it is all around all these global and local brands. And that's I think paying back in terms of share gains and certainly in terms of volume and revenue growth.

Thank you.

Thank you, Bryan.

Your next question comes from the line of Robert Moskow with Credit Suisse.

Hi, two quick questions. The first is, have you experienced higher freight and logistics costs, did that occur in 2Q? I didn't hear it called out. And if it is, is it showing up in SG&A or is it in COGS? And then the other question was, I just want to confirm about the guidance. It's high single digit off of a higher EPS base, by about $0.03 following the restatement. So, I know you said there's a lot of reinvestment, but are you also saying that some of it -- some of this top line benefit will drop to the bottom line because -- around the order of $0.03? Thanks.

So logistics cost and freight cost is a pressure point already in Q2, and it is reported into COGS. It is, for the most part of it, a phenomenon that we saw in North America, but it is not only limited to North America. Ocean freight are really on the rise everywhere, and it is impossible pretty much to cover for a long period of time. And so we are facing pressure particularly in that area. Obviously, given the fact that we have in the US a DSD system, which is a captive system, which is on-lease trucks, etcetera, we are somewhat more insulated than others, but it is definitely a pressure point. We called out in general inflation because there is more than logistics and freight. There is also some packaging costs that is high. And in general, commerce and co-pack are rising cost with us. In terms of EPS, we have been guiding to high single-digit, that is of the base that has been restated and there is a little bit of an upside driven by the incremental revenue. But the most part of the upside is being reinvested back in the business. You might imagine, Rob, that as we might implement more pricing around the world, and given also the high share that we are retaining, we want to enter 2022, A, with strong share momentum; and B, with a level of profitability that is allowing us to continue to reinvest. And if we implement more pricing, obviously, we need more support to our brands.

Great. Thank you.

Thank you, Rob.

Your next question comes from the line of Alexia Howard with Bernstein.

Good evening everyone.

Hi Alexia.

Hi.

Two quick questions for me. I think you mentioned in the press release that you were getting some benefit from manufacturing productivity, I'm curious if that's just operating leverage or whether there is specific manufacturing cost savings that you're seeing around the world? And if so, where those are and what's going on? And then my second question is really around just the commentary on the negative mix on both the revenues and the gross margin. I was just wondering if you were able to quantify that and qualitatively describe what's happening? Thank you.

So, in terms of net productivity, with the exclusion of commodities and ForEx costs, we include everything else in net productivity pretty much. So, labor inflation and any other type of inflation that is in there. We are benefiting from the fact that volume is growing 4.4% in the quarter, and that is providing leverage in our factories as well, obviously. But I think it's fair to say also that all the actions that we have put in place in the last few years in terms of simplification, for instance, of the portfolio, the fact that we continue to invest our CapEx mostly behind productivity initiatives is giving us benefits. And that is particularly evident in places like Latin America and EMEA that have a good rate of net productivity. Clearly, in the US, where, as I said, logistics inflation, which is part of productivity is higher is somewhat muting a bit the benefit that we are having in conversion costs. In terms of mix, I called out during the prepared remarks that as you think about World Travel Retail, which is a $0.25 billion business in 2019 or a little bit less, it is still running at 40% of what we used to be in 2019. And this is a business that runs with a much higher gross profit because it is mostly World Travel Retail, which is Toblerone and it is sold at a very premium to the rest of the portfolio. The other one, obviously, is gum. I said that it is 80% of what it used to be in 2019. It is 5% of the total revenue that we have. And again, that is a line of business that runs with a GP margin that is relatively higher to the rest of the portfolio. So I don't want to embark in giving you an exact mix number. What I can tell you is that, if we restore the business to the levels of 2019, it will be a material impact and positive impact in terms of dollars that will drop to the bottom line. As I said, think about gum running at 20% higher than it is today or world travel retail running at 60% higher than it is today, that will be a material benefit to the bottom line and to the profitability. It is fair to say that you haven't seen a big impact last year or this year, because we have been able to offset it through a lot of cost measures that are embedded into the P&L. In fact, when you look at the overhead line, we are very happy with what we have. And I think that is the reason why we're holding profit at good levels and increasing it by 10% in the first half, despite double-digit A&C.

Great. Thank you very much. I’ll pass it on.

Thank you, Alexia.

Your next question comes from the line of Chris Growe with Stifel.

Hi. Good evening.

Hi, Chris.

Hi, Chris.

Hi, guys. I just had two questions for you. The first one would just be with -- in relation to the degree of cost inflation, I'm just trying to get a sense of how it differs, if it differs between developed and emerging markets. And I guess related to that, I'm seeing very strong pricing in Latin America, a little bit more in Asia, but very limited pricing in Europe and North America to start to see that pricing pick up based on the inflation in the second half of the year.

Look, it's difficult for me to make statements about future pricing, as it boils down to segment pricing and profitability. What I would tell you is, we are seeing pressure in the commodity market. And so, what we see in commodities like sugar, edible oils, packaging material, resins costs, et cetera, those are common to all markets around the world. To that, I would add that in some developing markets, ForEx pressure is compounding. And so, if you think about the Russian ruble, there is more cost pressure in some of these developing markets. Certainly, in the US, when we look at labor costs, when we look at packaging costs, when we look at edible oils and logistics and freight, there is clearly a material impact. As I said, I don't want to start making comments about future pricing. But what I can tell you is that, in general terms, A, we have developed great capabilities around revenue growth management, and North America is most likely leading the pack in that area. And second, I will tell you that, not any different than any other segment we operate in, all the business that we have is trying to enter 2022 with a level of profitability that allows continued investment. And I would leave it at there, because, as I said, I don't want to give any indication of future pricing by segment.

I understand. Thank you for the color you can give. And just a quick follow-on in relation to Brian's question earlier about the investment, I think you just said about how you're trying to be in a position to be able to reinvest again next year in 2022. I assume, you're going to reinvest every year, frankly, and I think that's hopefully going to help drive the strong revenue growth. I just want to get a little more color, as you’re thinking about 2022. Is it a heavier rate of reinvestment you foresee? Or is it just the normal course of continued investment that you're calling out for next year?

No. we are -- in general, what we're trying to do, of course, is a little bit up or down every year is to take half of the extra gross profit that we generate in dollars every year and reinvested in the business. That's the ideal format, let's say, that we're trying to achieve. And we're not planning to change that next year. As you can imagine, we will have to deal with the inflation that we see as Luca was explaining, so we will have to do more pricing, and we might have a little bit more pressure on our gross profit line. So, we -- for the remainder of the year, we are expecting that we will do better from a topline perspective, we will see significant growth in our gross profit line. But we are expecting that most of it, we will have to reinvest in the business. That's what we mean to get ourselves into the ideal position at the start of next year. But then next year, we're expecting to do exactly what I explained. Continue our current way of looking at things, and no expectation of increasing investment significantly next year. Now, on a year-over-year basis, that's usually a seven to eight, sometimes double-digit increase of our investment that formula I was talking about.

That makes sense. Thanks so much for your time today.

Thank you, Chris.

Your next question comes from the Michael Lavery with Piper Sandler.

Good afternoon. Thank you.

Hi.

Hi.

Just wanted to follow up on innovation and SKU rationalizations and maybe try to tie them together a little bit. One, just could you give a sense of your progress on SKU rationalizations? I know the 25% you were cutting is big, but it clearly hasn't slowed the organic growth. Just then also curious a little bit related to that on innovation, if it's -- what your learnings are from that process. And if it changes how you think about screening or gating your launches and just what implications it might have as you look at new products.

Yes. First of all, on SKU rationalization. There's really three levels of how you should think about SKU rationalization. First of all, there is stopping production. And so not reducing certain SKUs anymore. Second is then having those SKUs not in inventory anymore. And then third, having those SKUs not in the store anymore. So, those are the three levels. Where we are at the moment is that of that 25%, most of it, the production has been stopped. We're gradually running out of inventory. We didn't want to write off the inventory, which would give us a big cost effect. And then it's now starting to show up in-store. In-store, we're not yet down 25%, but it's increasing rapidly. The effect of that sort of trickle reduction is going to be that I don't think you will see an effect on our topline, and that is really should go by almost unnoticed that we have 25% less SKUs. Keep in mind also that, that 25% was kind of 2% or 3% of our total net revenue. And if we manage it well in-store and keep the same shelf space and replace those 25% with faster rotating SKUs, we could even gain sales. On innovation, in a business like ours, innovation is kind of three things. It's, first of all, what we call renovation, it's existing SKUs that we have to renovate, update, make more interesting. Second, there is then innovation within the core news flavors and so on. And then there's what we call innovation beyond the core, which is new to market type of segments or new types of products. What we have been aiming for in our innovation approach is that renovation part and that sort of new flavors part. That's where we believe we can reduce a little bit the amount of activity that we have, and we've been doing that also around the 25% mark. And that has led to bigger renovations or bigger sort of within the core innovations. And we're seeing the benefit from that. And it's clearly showing up in the way our net revenue growth is being composed. Where we still have work to do is, what we call beyond the core. We're working that hard. We're trying to shift some resources to that. That requires a longer lead time, requires more investment, but over time, can give a significant growth for the company. So, what I would say here also, the 25% reduction has given an upside to us. And we are very happy with the way our innovation contribution to growth is panning out at the moment.

Really great color. Thank you so much.

Thank you.

Okay. And your last question comes from the line of Ken Zaslow with Bank of Montreal.

Hey good evening guys.

Hi Ken.

Just a couple of questions. One is, what have you seen with price elasticity to customers. And how is this different than in the past. Second question would be, when you think about your acquisitions, all your tack-on -- your bolt-on acquisitions, how much incremental sales growth do you think that's added? And how much will it add going forward?

The first question, Luca, do you --

Elasticity. So, if we see elasticity numbers that given prices raises --

Okay. Yes. Okay. Sorry, I can't -- I didn't understand the question the first time, it was a bit interrupted for me. But from an elasticity perspective, our categories are showing what I would say, an average elasticity from what I've seen to other food categories. And it depends a little bit where you are in which market around the world. In developed markets where most of the sales are through supermarkets and done in larger packs, there are price points, but they're probably not as solid. And for instance, in Germany, the price per kilo is extremely important, while in France, the exact price point where that pack normally is sold is much more important. And so, it's a mixed picture. But I would say, we can more easily move things up or down. And then again, when we talk about pricing, you should not just think about direct price increase. It's also what we call price pack architecture. It's the amount and the depth of promotions that we have and at some of the trade activities that we deploy. So pricing is a big word or is sort of a grouping of a number of activities, which might not necessarily immediately translate in a lasting effect for the consumer who suddenly sees the price change. In emerging markets, it's slightly different. There, it's really about price points and you need to maintain those price points. So in general, what we do there is we work much harder on productivities, reducing of packaging, improving the cost of our ingredients, improving the cost of our distribution and so on. Also making sure that we work hard on price pack architecture and so on. So that's a bit more of a difficult approach, where you need to stick to the price points. And usually, when you have to move away from a price point, the elasticity effect shows quite considerably in your volumes. And so, the game is played slightly different there. So I hope that explains a little bit the two ways that we manage elasticity. But I would say, in North America and Europe, in general, the way we're doing it, and as you probably heard in previous discussions, our price movements are bigger than previous year but not massive. And that's thanks to that RGM approach, I would say. We are able to deal with the elasticity that comes from it and an example is a 4%-plus volume growth we've seen in this quarter. As it relates to acquisitions, acquisitions that we've done so far have added about $1.5 billion to our top line. The idea is that they grow high single digits, and so you can probably calculate what they add to our top line growth. I would say, it's probably in the order of 0.3% growth. Our plan is to continue to do bolt-on acquisitions. It's difficult to say how much and when and at which growth rate. But, in general, when we announced our strategy, we always said that we were counting on a 3%-plus organic growth, and then we would complement that with growth through acquisition. In that thinking, we were thinking that about 0.5, 0.6 of growth would come eventually from acquisitions. So that's more or less what we have in mind. We haven't done that many acquisitions yet, and it will probably still take us a few years before we got a significant math that would lead to that 0.5, 0.6. But that's sort of our thinking as it relates to the contribution of acquisition.

Great. I appreciate it. I just had a quick one, just to add is, at what level of sales growth would you not reinvest that would fall to the bottom line? And I'm not guiding you anywhere, but if it was 5%, would you drop it down? Is it 6%? Is it 4.5%? And then, I'll leave it there, and I really appreciate your time.

So the idea is to -- the algorithm we have in mind is 3%-plus on the top line. It is under normal circumstances, 4% to 5% GP dollars. And then we take half of it, we reinvest it and half of it we drop it to EBIT. And then, that should deliver the EPS growth of high single digit. Clearly, as you look at this year, we are ahead on top and bottom line. But as we said very clearly, what we want to do is to sustain the market share gains and potentially additional pricing that is coming and enter 2022 with the level of confidence that we can still have this virtuous cycle we are in and that we want to protect.

Great. I appreciate it, guys. Thank you.

Okay. Thank you. I think with that, we can conclude the call. We'd like to reiterate that it was a great quarter, solid top line growth, good gross margin and gross profit growth, significant reinvestment in the business and I think a strong bottom line. Going forward, we will see a bit more inflation pressure. And our intent is that we will deliver a higher topline growth, 4%-plus, as we said. And that any additional margin that we have that we would reinvest in the business so that we can enter to 2022 with a great share position as well as a great margin position, which would allow us to continue our virtuous circle in 2022. Thank you for the interest in the business. Looking forward to take you through the results of Q3 and Q4. And thank you, of course, for all your questions. And that's it. Thank you.

This concludes today's conference call. Thank you for participating and you may now disconnect.