Mondelez (MDLZ) Q3 2025: Europe Chocolate Price Elasticity Hits 0.8, Forcing Strategic Recalibration
Elevated chocolate price elasticity in Europe and U.S. biscuit volume declines forced Mondelez to recalibrate pricing and promotional strategies, while maintaining focus on channel expansion and cost productivity. Leadership signals a return to algorithmic EPS growth in 2026, anchored by cocoa cost normalization and targeted reinvestment, but near-term volume and margin headwinds persist.
Summary
- Europe Chocolate Repricing: Higher-than-expected price elasticity in Europe triggered immediate price and pack-size adjustments.
- U.S. Biscuit Volume Under Pressure: Volume declines and weak promotional ROI drive channel and pack architecture shifts.
- 2026 EPS Growth Target: Leadership commits to high single-digit EPS growth as cocoa input costs ease and reinvestment ramps.
Performance Analysis
Mondelez’s Q3 results reveal a business model under pressure from both macro and category-specific forces. In Europe, the company faced significant challenges in its chocolate business after implementing roughly 30% price increases to offset cocoa cost inflation. The resulting price elasticity, at 0.7 to 0.8, was notably higher than the historical 0.4 to 0.5 range, leading to sharper volume declines than anticipated. Management attributed this to both private competitors who lagged on pricing and retailers taking higher margins, particularly in the UK and Germany. Seasonal events, such as a July heatwave, further dampened volumes, while aggressive downsizing and format adjustments compounded the impact.
North America’s biscuit business also experienced headwinds, with volume declines accelerating to -4% in the quarter, compared to a -2.8% year-to-date average. The U.S. consumer, squeezed by economic concerns and persistent price increases, shifted toward value channels, smaller pack sizes, and increased promotional activity—though promotional ROI fell short of expectations. Mondelez’s better-for-you offerings (e.g., Perfect Bar, Builder’s Bar) and premium brands (e.g., Tate’s) showed resilience, but the core biscuit category remains challenged. In emerging markets, volume softness was largely due to Argentina’s macro crisis and strategic downsizing in India, while Brazil and Mexico posted strong recoveries. The company’s supply chain productivity program in North America is expected to deliver cost benefits starting in 2027, but near-term SG&A discipline was prioritized to preserve profitability.
- Elasticity Inflection in Europe: Chocolate price elasticity spiked to 0.7-0.8, forcing rapid price point and format adjustments.
- Promotional Ineffectiveness in U.S.: Value-seeking consumers and weak promo ROI pressured biscuit volumes and margins.
- Emerging Market Divergence: Argentina and India weighed on volumes, while Brazil and Mexico posted double-digit and mid-single-digit growth, respectively.
Across all regions, Mondelez is doubling down on channel expansion, pack architecture, and targeted reinvestment as it navigates a complex demand environment and prepares for cocoa input cost normalization in 2026.
Executive Commentary
"If I look at our biscuits, cakes and pastries and meals business, they're all performing well where we have share growth and volume mix growth. ... We see in the cocoa situation, as you know, we had to do quite substantial price increases in the order of about 30%. ... Overall, I would say, seeing the fact that this was the heaviest cocoa cost that we would have in the year, from here going forward, we expect a significant improvement. We expect to see a significant improvement in Europe."
Dirk van de Putt, Chairman and CEO
"We had a series of impacts that clearly we weren't anticipating ... tariffs and related uncertainty affecting the overall consumer confidence ... material destocking that happened in the US due to retailers lowering their working capital ... unprecedented heat wave in Europe. ... We are well protected and covered, but reality is we have put in place a series of coverage strategies that would allow us to participate to cocoa further potential declines. ... Our goal is clear in terms of EPS growth for next year. And so we are really targeting a high single digit EPS growth for 2026."
Luca Zaramella, CFO
Strategic Positioning
1. Europe Chocolate Reset
Mondelez is recalibrating its European chocolate strategy in response to elevated price elasticity and competitive price gaps. The company is rolling back certain price points, resizing pack formats (notably the 300g chocolate bar), and ramping innovation in flavors and formats. Retailers’ margin grabs and lagging competitor pricing (especially from private firms) exacerbated share losses, but recent competitive price moves and targeted promo effectiveness are expected to stabilize the business. Seasonal activation for Q4 is a key lever to drive volume recovery.
2. U.S. Channel and Pack Expansion
In North America, Mondelez is aggressively expanding into value, club, and e-commerce channels, where its share lags traditional food and mass outlets. The company is tailoring pack price architecture (PPA, pack-price architecture) to hit critical price points, particularly at the $3 and $4 levels, and investing in multipacks and on-the-go formats. Better-for-you and premium segments are outperforming, with protein bars and vegan chocolate lines delivering double-digit growth. However, core biscuits remain the main source of volume drag, and promotional strategies are being overhauled to focus on activation and event-based promotions rather than simple price cuts.
3. Emerging Markets Execution
Emerging markets delivered mixed results, with macro volatility in Argentina and strategic downsizing in India weighing on overall volume. Excluding these, volume declines were more muted, and Brazil and Mexico showed strong execution and recovery. The company continues to see a long runway for distribution and category expansion, particularly in chocolate, biscuits, and adjacent categories like snack bars and cakes.
4. Supply Chain and Productivity Initiatives
Mondelez launched a multi-year North America supply chain program aimed at automation, capacity expansion, and logistics optimization. The initiative targets cost reductions in U.S. bakeries and the DSD (direct store delivery) logistics network, with anticipated benefits beginning in 2027. The program is designed to maintain service levels while lowering structural costs and supporting future volume growth.
5. Capital Allocation and Reinvestment
SG&A discipline in 2025 freed up resources for targeted reinvestment in 2026, particularly in working media and brand activation. Management emphasized that cost savings will be reinvested to drive long-term growth, with a focus on innovation, channel expansion, and category adjacencies. The company’s “virtual cycle” model—balancing margin expansion and reinvestment—remains central to its strategy as cocoa costs normalize.
Key Considerations
Mondelez’s Q3 underscores the tension between pricing power, volume retention, and category growth in a volatile cost and demand environment. The company is actively rebalancing its strategy across geographies, categories, and channels, with a clear emphasis on protecting long-term share and earnings growth.
Key Considerations:
- Elasticity Management in Europe: Sustained price elasticity above historical norms requires ongoing pack, price, and promotional adaptation.
- U.S. Channel Penetration: Expanding share in value, club, and e-commerce channels is critical for volume recovery and future-proofing the portfolio.
- Emerging Market Volatility: Macro shocks (Argentina) and strategic downsizing (India) can mask underlying category momentum and require nimble execution.
- Supply Chain Investment: Automation and logistics optimization in North America are long-term levers, with meaningful impact expected post-2026.
- Reinvestment Discipline: SG&A savings in 2025 are earmarked for working media and innovation in 2026 to protect category leadership.
Risks
Persistent category elasticity in Europe and the U.S., combined with macroeconomic uncertainty, tariff risk, and retailer margin pressure, could prolong volume and margin headwinds. Execution risk remains high as the company adapts pricing, pack architecture, and channel strategies, while emerging market volatility and competitive responses could disrupt recovery trajectories. Leadership’s confidence in cocoa cost normalization is a key assumption underpinning 2026 guidance.
Forward Outlook
For Q4 2025, Mondelez guided to:
- Step up in organic net revenue growth, driven by seasonal activation in Europe and price realization in North America.
- Continued volume pressure in U.S. biscuits, offset by pricing and channel expansion.
For full-year 2026, management targets:
- High single-digit EPS growth, supported by cocoa cost deflation and reinvestment in brands and innovation.
Management highlighted:
- Seasonal events and improved promo effectiveness in Europe as Q4 growth levers.
- Ongoing channel and pack architecture initiatives in the U.S. to drive volume stabilization and recovery in 2026.
Takeaways
Mondelez’s Q3 highlights the limits of pricing power in core categories and the necessity of rapid strategic adaptation. Investors should monitor the pace of volume stabilization in Europe and the U.S., the impact of supply chain productivity programs, and the company’s ability to redeploy cost savings into growth initiatives as cocoa costs normalize.
- Price Elasticity as a Limiting Factor: Elevated elasticity in Europe and the U.S. caps further pricing and necessitates mix and format innovation.
- Channel and Pack Expansion Prioritized: Execution in value, club, and e-commerce channels is vital for volume recovery and future growth.
- 2026 EPS Growth Hinges on Cocoa and Reinvestment: Cost normalization and disciplined reinvestment are prerequisites for delivering on algorithmic growth targets.
Conclusion
Mondelez faces a challenging demand and cost environment but is actively recalibrating its strategy to restore volume growth and protect margins. The company’s ability to execute on pack, price, and channel initiatives, while redeploying cost savings into innovation and brand support, will determine the trajectory of its recovery and long-term value creation.
Industry Read-Through
Mondelez’s Q3 underscores the limits of pricing power in global snacking and the importance of channel and pack agility. Elevated price elasticity in Europe and volume pressure in the U.S. biscuits category signal broader category fatigue and value-seeking consumer behavior. Competitors in chocolate, biscuits, and broader CPG (consumer packaged goods) must balance price realization with volume retention, while preparing for input cost normalization and renewed investment cycles. Retailer margin demands and channel shifts toward value and e-commerce are likely to persist, pressuring legacy players to adapt pack architecture, promotional strategy, and supply chain models to protect share and profitability.