Output Explorer

Based on the information available as of December 31, 2015, and projecting forward to the fiscal year 2020, the potential risks for Mondelez International (formerly the confectionery and snack foods division of Kraft Foods Inc.) can be categorized into strategic execution, commodity volatility, geopolitical exposure, and shifting consumer trends.

While the provided MD&A snippet references the 2018 Keurig Dr Pepper transaction, the core risk profile established by the company's 2015 strategy—"accelerating consumer-centric growth," "driving operational excellence," and "creating a winning growth culture"—remains the baseline for predicting 2020 challenges.

1. Currency Exchange Rate Volatility

As of late 2015, Mondelez operates in over 150 countries with significant revenue generated outside the United States (often cited as approximately two-thirds of total net revenues). The strongest dollar observed in 2014 and 2015 posed a significant headwind to reported earnings.

• Prediction for 2020: Continued volatility in foreign exchange rates remains a primary financial risk. If the US dollar strengthens further against emerging market currencies (particularly in Latin America and parts of Europe), it will materially reduce the reported value of international sales when translated back to dollars, potentially masking organic volume growth or margin expansion. The company's hedging strategies may not fully offset prolonged adverse currency shifts.

2. Commodity Price Fluctuations

The company's cost structure is heavily influenced by agricultural commodities including cocoa, sugar, wheat, milk powder, palm oil, and packaging materials.

• Prediction for 2020: As of 2015, global commodity markets were experiencing periods of low prices, but the cyclical nature of agriculture suggests high volatility is likely to persist through 2020. A sudden spike in cocoa or sugar prices could compress gross margins if the company cannot successfully pass these costs on to consumers without eroding demand. Supply chain disruptions related to climate change affecting crop yields in key growing regions are an emerging long-term risk that could impact 2020 production costs.

3. Shifting Consumer Preferences and Health Trends

The strategic priority of "accelerating consumer-centric growth" acknowledges the pressure from changing dietary habits. By late 2015, there was a marked global shift toward healthier snacking options, reduced sugar content, and cleaner labels.

• Prediction for 2020: The risk lies in the speed of innovation relative to consumer demand. If Mondelez fails to sufficiently reformulate iconic brands (reducing sodium, sugar, or trans fats) or launch successful new categories that align with "health and wellness" trends, they face the risk of volume stagnation or decline in key developed markets. Furthermore, regulatory pressures regarding sugar taxes (already being discussed or implemented in the UK and Mexico as of 2015) could become more widespread globally by 2020, impacting pricing power and sales volumes for chocolate and sugary biscuits.

4. Execution Risk in Emerging Markets

The company's growth strategy relies heavily on emerging markets where demographics favor snacking growth. However, these regions often present higher risks regarding political instability, inflation, and infrastructure challenges.

• Prediction for 2020: Political unrest in regions like Egypt, Turkey, or parts of Southeast Asia could disrupt distribution networks or impact consumer purchasing power. Additionally, economic slowdowns in major emerging economies (e.g., China or Brazil) could dampen the "consumer-centric growth" engine. The reliance on local supply chains in volatile regions introduces execution risks regarding quality control and logistics.

5. Competitive Landscape and Private Label

The "snacking" category is highly fragmented and competitive, involving giants like Nestlé, Mars, and Ferrero, as well as agile local competitors and expanding private label offerings.

• Prediction for 2020: In developed markets facing sluggish economic growth, consumers may trade down to lower-cost private label alternatives. If retailers prioritize shelf space for their own brands, Mondelez could face margin pressure or loss of distribution visibility. Furthermore, the rise of digital-native DTC (Direct-to-Consumer) snack brands poses a threat to traditional distribution models, requiring significant investment in e-commerce capabilities that may yield uncertain returns by 2020.

6. Integration and Strategic M&A Risks

While the specific Keurig Dr Pepper transaction occurred later, the strategy of leveraging investments and potential acquisitions to drive growth was evident in 2015.

• Prediction for 2020: Any future large-scale divestitures or acquisitions necessary to refine the portfolio carry integration risks. Misjudging the valuation of targets or failing to integrate acquired brands culturally and operationally could result in goodwill impairments or underperformance, diverting management focus from the core operational excellence strategy.

Summary

Looking toward 2020, the most critical risks for Mondelez International are the inability to offset currency headwands, failure to adapt product portfolios to health-conscious trends fast enough, and commodity price spikes that outpace the ability to raise prices. The company's success in 2020 will largely depend on its capacity to execute its three strategic priorities while navigating a complex macroeconomic environment characterized by uncertainty in both developed and emerging markets.

Based on the strategic profile of Mondelez International as it stands entering 2016 and projecting five years ahead toward 2020, several material risk vectors emerge that could impact the company's ability to deliver long-term growth and shareholder value. While the company's portfolio of iconic brands and global footprint provides resilience, the execution of its strategic priorities—specifically consumer-centric growth and operational excellence—faces distinct headwinds over this medium-term horizon.

1. Emerging Market Currency and Macroeconomic Volatility A significant portion of Mondelez’s revenue derives from operations in Emerging Markets (EM), particularly in regions such as China, Latin America, and Eastern Europe. Between now and 2020, fluctuations in local currencies against the US dollar pose a persistent risk to reported earnings. Many EM economies face cyclical downturns, inflationary pressures, or political instability that could erode purchasing power. Even if organic volume growth remains stable in these regions, translation headwinds could negatively impact consolidated results. Furthermore, capital controls or regulatory changes in countries where we hold substantial manufacturing assets could complicate cash repatriation and reinvestment strategies.

2. Commodity Cost Inflation and Supply Chain Disruption Our cost of sales is heavily influenced by the price of agricultural commodities, including cocoa, milk solids, wheat, corn, palm oil, and sugar. While we utilize hedging programs to mitigate near-term volatility, a structural upward trend in these inputs between 2015 and 2020 could compress margins if pricing actions cannot fully offset costs. Additionally, climate change impacts on crop yields (particularly cocoa in West Africa) introduce long-term supply chain risks. We also face rising energy and transportation costs, which affect logistics across our complex global distribution network.

3. Shifting Consumer Preferences and Health & Wellness Trends The snacking category is undergoing a fundamental shift driven by heightened consumer scrutiny of nutritional profiles. Demand for reduced sugar, reduced sodium, clean-label ingredients, and non-GMO products is accelerating. Our core franchise in biscuits and chocolate faces the dual challenge of innovating existing products (reformulation) to meet these standards while developing new categories that appeal to health-conscious demographics. Failure to innovate quickly enough risks market share erosion to niche competitors or private-label brands that may be more agile in adopting these trends. Regulatory pressures on sugar content labeling and advertising to children are also becoming more stringent globally, which could increase compliance costs and limit marketing effectiveness.

4. Competitive Dynamics and Retail Channel Evolution The competitive landscape is intensifying due to the rise of private-label offerings and specialty snack start-ups that capitalize on direct-to-consumer digital channels. Traditional retail distributors continue to consolidate, increasing their bargaining power regarding slotting fees and trade spend. To maintain growth, we must invest heavily in e-commerce capabilities and omni-channel strategies. If the digital transformation lags behind competitor velocity, we risk losing visibility and shelf presence among younger consumers who increasingly discover products online.

5. Equity Method Investment Realization The company currently holds a significant equity method investment in Keurig Green Mountain, Inc. While this investment has provided steady returns, it represents a substantial portion of our intangible assets and liquidity. A primary strategic risk extending to 2020 involves the timing and tax implications of realizing the value of this stake. Whether through a partial or full monetization event, the market valuation of such holdings is subject to public market volatility and the target company’s performance. Any delay in exiting this position or a decline in the fair value of the investment could impact our balance sheet flexibility and reported earnings stability. Furthermore, integration efforts or partnership dynamics related to beverage synergies could introduce execution risks.

6. Capital Structure and Shareholder Returns Following the separation from Kraft Foods, maintaining an optimal capital structure is critical. We are committed to a dividend policy and periodic share repurchases. However, sustained debt service obligations must be balanced against necessary CapEx investments for factory modernization and IT infrastructure. If credit markets tighten or interest rates rise significantly over the next five years, refinancing costs could increase, potentially limiting our ability to execute large-scale acquisitions or sustain targeted payout ratios during periods of lower operating cash flow.

Conclusion While Mondelez’s brand strength positions us well for 2020, success will depend on navigating these macro and micro-economic uncertainties. Management must prioritize agility in pricing and innovation to protect margins while managing currency exposures. Successful navigation of the Keurig investment lifecycle and continued discipline in capital allocation will remain key focal points for investors monitoring the company’s progress toward 2020.

Based on the context and information available up to December 31, 2015 (as of February 8, 2019), predicting risks for Mondelez International Inc. in 2020 requires extrapolating historical trends and known strategic priorities observed during that period.

Since I cannot predict the future (e.g., specific regulatory crackdowns or unexpected currency devaluations not yet known) but must act as a professional expert utilizing available data, here is my analysis based on corporate strategy signals present at the time:

Contextual Analysis (Pre-2019)

By December 2015, Mondelez International had established itself as a global leader with operations in over 140 countries (stated in the text) and diverse product lines including biscuits, chocolate, gum/candy, cheese, powdered beverages, and groceries. Their stated priorities included "accelerating consumer-centric growth," "operational excellence," and "creating a winning growth culture."

However, the most significant risk drivers visible in this era centered on:

1. Consumer Preference Shifts: The rise of plant-based proteins (soy, pea), non-starchy carbs, and fiber content was accelerating globally before 2020. Mondelez's heavy reliance on traditional snack categories would face headwinds.
2. Sustainability & Supply Chain: Increasing regulatory pressure on food labeling (e.g., soy, milk powder allergens like whey/eggs) and supply chain resilience (especially post-pandemic scenarios emerging).
3. Geopolitical Instability: Continued volatility in key sourcing regions, particularly dairy (US/Europe) and cocoa (Latin America/Asia).
4. Market Dynamics: Competition from low-cost producers (particularly in China) and the ongoing digital marketing shift away from traditional print media.

Predicted Potential Risks for 2020

1. Shift to Healthy Snacks (Plant-Based)

• Assumption: Global consumers moved increasingly toward lower-sugar and higher-fiber/protein snacks between 2018 and 2020.
• Prediction: Significant revenue erosion expected in the Traditional Biscuits/Crackers, Cakes, and Frozen Food sectors if consumers substitute traditional fats/starches for plant-based alternatives. Mondelez's portfolio must adapt quickly or risk stagnation in growth rates.

2. Regulatory Compliance Costs

• Assumption: New federal regulations regarding nutrition content and labeling in major markets (USA, EU, etc.) emerged or intensified.
• Prediction: Increased operating expenses related to reformulation, new ingredient sourcing, and extended shelf-life testing for products containing soy, gluten, or artificial ingredients. This could compress margins on core product lines.

3. Geopolitical Volatility in Dairy and Cocoa

• Assumption: Political unrest, trade disputes (e.g., US-Mexico, Europe-China relations), or natural disasters impacted agricultural yields or export flows in 2020.
• Prediction: Fluctuations in raw material prices due to transport disruptions or supply chain bottlenecks, potentially leading to inventory obsolescence issues for imported goods.

4. Digital Transformation Pressures

• Assumption: Rapid adoption of e-commerce and mobile-first marketing strategies by competitors necessitated a similar move for Mondelez.
• Prediction: High investment required to modernize distribution networks and engage younger demographics digitally. Failure to implement this could result in a widening gap with agile competitors.

5. Consumer Sentiment Shifts (Health & Environment)

• Assumption: Public awareness of climate change ("Greenwashing" concerns) and health consciousness rose.
• Prediction: Reduced sales velocity on premium-priced items unless packaged with strong sustainability narratives, potentially affecting brand equity and pricing power.

Conclusion

While no negative event occurred in reality, the primary expectation for Mondelez International in 2020 was one of intensive adaptation. The company faces high uncertainty regarding whether its traditional product mix can maintain its top-line growth trajectory while navigating a rapidly changing consumer landscape defined by healthy options, stricter regulations, and sustainable packaging mandates.

To: Shareholders / Board of Directors From: Corporate Strategy Office Date: February 8, 2019 Subject: Outlook for 2020 – Strategic Risk Assessment

As of February 2019, reviewing the Annual Report on Form 10-K and the Management Discussion and Analysis of Financial Condition and Results of Operations, we have compiled a risk assessment for the Company for the period leading into 2020. While our internal systems do not possess data on 2020-specific market fluctuations beyond the fiscal year context established in our internal forecasting models, we can extrapolate probable risks based on the strategic trajectory outlined in the report and the operational realities of the snack sector.

Strategic Priorities and Associated Risks

The management team has articulated three strategic priorities for acceleration: accelerating consumer-centric growth, driving operational excellence, and creating a winning growth culture. These pillars present significant risks if misaligned with external market conditions:

1. Consumer Sentiment and Growth Velocity: The goal to accelerate consumer-centric growth relies heavily on maintaining the integrity of the product portfolio. Inflationary pressures and supply chain disruptions, which became prevalent in 2020, could threaten this priority. A reduction in consumption or a change in dietary preferences could slow the growth rate required to meet the aggressive targets previously set during the expansion phase.

2. Operational Efficiency and Scaling Challenges: The Company operates across over 80 countries with a substantial 150-country distribution network. Expanding this footprint increases complexity. Risks include:

   • Supply Chain Fragility: Any disruption in the sourcing of key ingredients (such as dairy or baking commodities) would impact operational excellence. Given the multi-tiered nature of the supply chain, cost transmission failures could erode margins.
   • Localization Costs: Maintaining local flavors requires deep R&D resources. A shift in regional taste preferences or cultural sensitivity could lead to increased localization costs without proportional returns in top-line growth.

3. Capital Allocation and Integration: The report highlights the impact of the Keurig/Dr Pepper merger on shareholder returns. Integrating such a significant equity method change carries risks regarding deferred taxes, earnings consolidation, and goodwill. If the integration process fails to deliver expected synergies in 2020, it may introduce unnecessary tax liabilities or reduce net income.

4. Talent Acquisition and Retention: Creating a "winning growth culture" places high demand on leadership. In the face of evolving global labor economics, retaining key talent capable of executing innovation and distribution strategies in an expanded country network could be challenging. Burnout rates among key senior management could negatively impact the pace of strategic execution.

External Macro-Factors

While the report does not explicitly detail 2020 macro-trends, industry standards in early 2019 suggest the following drivers that would affect the Company:

• Commodity Volatility: Fluctuations in raw materials (flour, cocoa) generally impact snack production costs. The Company's ability to pass these costs to consumers without compromising prices is a key variable for 2020 profit sustainability.
• Regulatory Environment: Increasing scrutiny on food safety labeling and export/import compliance, particularly in developing markets with expanding retail penetration. Non-compliance could result in costly fines or market restrictions.

Conclusion

Based on the Company's current trajectory and the strategic framework presented in the MD&A, the most probable risks for 2020 are centered around sustaining growth momentum amidst operational complexity and managing the financial impacts of the recent equity restructuring.

The Company's ability to leverage its global footprint and iconic brands will serve as a stabilizer. However, the transition from rapid expansion to sustained profitability remains subject to unforeseen variables. Management will need to balance the need for speed against the necessity of margin preservation in international markets.

End of Outlook

Forward-Looking Statements & MD&A Risk Factor

The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results may differ materially from those projected in any forward-looking statements due to numerous risks, uncertainties and factors not under our control, including, but not limited to:

• Our substantial debt levels, which could limit financial flexibility for strategic initiatives;
• The highly competitive environment in which we operate with new entrants constantly innovating;
• Economic conditions that adversely affect consumer spending on or buying of snacks;
• Fluctuations in foreign currency exchange rates;
• Changes in laws governing snack products, ingredients and packaging, and regulatory approval processes;
• Adverse economic, social and political developments in the countries in which we operate, including disruptions caused by natural disasters, pandemics, labor unrest, geopolitical conflicts, or terrorism;
• Increased compliance costs and reputational risk as a result of changes in regulations regarding corporate governance, public disclosure, environmental matters and anti-bribery;
• Risks related to potential failures in our supply chain, information systems, logistics, manufacturing processes, and other operational matters;
• Loss of key personnel or failure to recruit qualified professionals;
• Significant fluctuations in sales volume and pricing patterns, particularly during peak holiday periods;
• Changes in consumer preferences or trends;
• Increased competition from branded snack food manufacturers and others;
• Our reliance on certain suppliers and processors and on distributors;
• Unfavorable outcomes in legal or regulatory proceedings against us;
• Adverse tax rulings, audits or assessments;
• Any downgrade in our credit ratings;
• Changes in weather patterns and agricultural yields;
• Damage to our brands due to negative publicity relating to product safety, quality, or health concerns;
• Any disruption in our distribution network or information systems;
• Any significant increase in freight and transportation costs;
• The loss of a major customer;
• Material adverse changes in our relationships with our suppliers, licensees, manufacturers and other parties;
• Inability to maintain our licenses, trademarks, and other intellectual property rights; and
• A decrease in demand for consumer products, including snacking products.

Moreover, as part of KDP's historical business operations prior to the combination, it had certain ongoing legal, tax, regulatory, litigation and other exposures, some of which are not addressed or known until such time as they have arisen. While we believe that KDP is now effectively subject to a higher level of oversight and scrutiny, these and other future challenges will require continued management attention and resources that could divert management from operating our existing business.

This section provides an analysis of material items identified by the company in its 2018 Annual Report on Form 10-K. These include various non-routine transactions and events that were reported at the time of their occurrence, such as acquisition and joint venture transactions, divestitures, gain-on-sale adjustments, impairments, restructuring charges, and income tax impacts. It does not represent a comprehensive list of all significant items that impacted the year-end financial statements.

Item 7A - Quantitative and Qualitative Disclosures About Market Risk

Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) – Item 7A, "Quantitative and Qualitative Disclosures About Market Risk." Disclosure is provided for interest rate risk (including fair value of fixed and variable rate obligations), foreign currency exchange rate risk, commodity price risk, credit risk, and other market risks that would reasonably be expected to have a material impact on our financial condition and results of operations, including our outlook. This includes an analysis of quantitative data, sensitivity analyses, risk limits and strategies, and a description of how we measure and monitor risk exposure.

We also disclose whether there have been any significant changes in market risk, or if our activities expose us to changing or unanticipated market risks after March 31, 2019.

There were no significant changes in our quantitative and qualitative disclosures about market risk since our Form 10-K filing for 2018.

Item 1B - Unresolved Staff Comments

None.

Forward-Looking Statements

EX-99.2 — d358567_ex99-2.htm

Exhibit 99.2

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis (“MD&A”) is designed to provide readers with a narrative explanation of our business and financial position as at December 31, 2018 compared to the same date last year and the results of operations for the three-year period ended December 31, 2018, as well as an analysis of financial condition at December 31, 2018. Readers should review the full MD&A together with the accompanying unaudited interim consolidated financial statements and related notes. Unless otherwise specified, all references in this MD&A relate to our continuing operations. For the purpose of preparing this MD&A, unless otherwise noted, our fiscal year end has been changed to the last day of December effective July 1, 2017, consistent with the rest of the Group. Unless indicated otherwise, references are to our continuing operations only. Additional terms can be found at the end of this MD&A.

Throughout this document, we use the following financial measures:

•   Cash flow from operations and free cash flow: free cash flow equals net cash provided by operating activities less capital expenditures; •   Operating margin percentage: revenue, expressed as a percentage of cost of sales; •   Adjusted EBITDA: operating profit plus depreciation and amortization expense, share-based compensation expense, impairment losses, and deferred tax effects, before transition expenses incurred in connection with our separation from Kraft Foods Inc.; •   Goodwill and intangible asset impairment charge: goodwill and intangible asset impairment charges exclude any non-operating gains and losses; •   Inventory turnover ratio: inventory turns equal annualized total cost of goods sold divided by average inventory for the period, multiplied by one hundred. Inventory turns is used to evaluate inventory performance. We use inventory turnover ratios for planning purposes and to measure productivity across our production, warehouse, and sales organizations; and •   Average wholesale unit price (“AWUP”). AWUP per ounce refers to the average wholesale selling price per unit of chocolate and sugar. Chocolate is defined as confectionery and non-chocolate.

Definitions of these measures are presented in Note 3 to our consolidated financial statements. Our definitions of these measures reflect our internal reporting and may not match comparable metrics prepared by other companies.

Our MD&A contains references to certain financial measures not calculated in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") such as:

•   Freely convertible shares: Free Confectionary Share (FCS) includes FCS issued for stock options exercised using the Black-Scholes valuation model; and •   Payables: Short-term trade payables and short-term bank indebtedness that mature within twelve months. Payables exclude amounts related to post-retirement plans and long-term debt.

These metrics do not have standardized meanings prescribed by U.S. GAAP and are not intended to be a substitute for more detailed analysis of our financial results. Refer to “Non-U.S. GAAP Measures” in Note 14 to our consolidated financial statements for additional information about these non-GAAP measures, as well as reconciliations between the most directly comparable U.S. GAAP measures, and our management’s reasons for presenting them.

Overview

We are a global manufacturer and marketer of snacks and chocolates, with operations in over 80 countries. Our principal businesses include biscuit and cookies, candy and confectionery, premium ice cream and yogurt, gourmet chocolates, and other products. In addition, we manage coffee through KCB Holdings, Inc., a company in which we own a 21.6% interest. KCB manufactures high-quality roasted and ground arabica beans for sale to beverage companies primarily in Latin America and Asia Pacific. As of December 31, 2018, KCB had $695 million in revenues, $75 million in net earnings, and $100 million in shareholders' equity.

We have four primary geographic markets:

•   In North America, which accounted for approximately 39% of our overall sales for the year ended December 31, 2018; •   In Continental Europe, which represented approximately 25% of our sales for the year ended December 31, 2018; and •   In Asia Pacific, which accounted for approximately 27% of our sales for the year ended December 31, 2018.

In addition, we sell a variety of products through direct-to-consumer channels around the world, including Canada, Australia, New Zealand, the United Kingdom, South Africa and India.

For our financial reporting purposes, our results are organized into two segments: Biscuits, Candy and Confectionery Products and Ice Cream and Yogurt Products. Our reportable segments reflect the manner in which we manage our business. Segment results include inter-segment revenues and expenses eliminated in consolidation. All segment results include intercompany eliminations. Operating segments are evaluated based on pre-tax contribution, adjusted EBITDA, and adjusted EBITDA margin (pre-tax contributions). The Chief Executive Officer considers adjusted EBITDA and its components in assessing our performance and in making decisions concerning funding priorities. Adjusted EBITDA and its components are not measurements calculated according to U.S. GAAP and should not be considered as alternatives to operating profits or cash flows from operating activities, as determined by U.S. GAAP, or as indicators of our operating performance or liquidity. See “Reconciliation Between Adjusted EBITDA and Net Earnings.”

We strive to improve our profitability through disciplined growth initiatives and enhanced efficiencies across all areas of our operations. Over the past several years, we have made significant investments in our business to enhance capabilities and accelerate innovation, drive operational excellence, build a strong foundation for organic growth and create a winning culture that fosters a team-oriented culture across all functions. We believe these improvements will continue to strengthen our competitive position as we leverage our iconic brands, deep innovation capabilities, large global footprint, leading market positions and broad geographic coverage to continue driving profitable long-term top-line growth. However, there is substantial uncertainty related to macroeconomic trends and consumer behavior, including the effects of rising food prices and the introduction of competing products, which creates both opportunities and challenges.

Key elements of our growth strategy include: accelerating consumer-centric growth; focusing on enhancing operational excellence through our Core Transformation program; investing in innovative solutions to address changing consumer tastes, lifestyles and diet preferences; building a world-class go-to-market organization and leveraging our strong franchises and partnerships; and developing a winning culture throughout all of our functions. These elements are discussed in greater detail below.

2018 Business Highlights

During 2018, we achieved many significant achievements and delivered outstanding results. Key highlights included:

•   Sales volumes increased 15%, with particular strength in our ice cream and specialty cake businesses. Sales volumes of our ice cream products in 2018 totaled nearly 160 million equivalent units, up 10%. Volume increases were driven by double-digit growth in our frozen yogurt, dairy, premium ice cream and premium ice cream novelties categories and strong growth in our specialty cake category. We also saw steady growth in our ready-to-eat salads category, which added 10% of our overall sales growth, and our cheese and grocery lines contributed to strong overall growth. Sales growth was led by our ice cream and yogurt category, where we experienced double-digit growth. We also experienced strong growth in our cheese and grocery business as the popularity of healthier choices expanded. We also maintained our strong position in the frozen yogurt category, where we saw double-digit growth, driven by the success of our new Frozen Bliss line. In addition, we launched several new products during the year, including the first-ever whole milk version of our ice cream bar and our first premium ice cream novelties. Additionally, we grew our presence in convenience stores by opening more than 600 new retail locations worldwide. Finally, our international business grew 18% during the year, driven by double-digit growth in our European and Asian businesses and stable growth in our other regions. On a constant dollar basis, our global volume growth was flat year-over-year. •   We successfully completed our integration with Kraft Foods Inc. (Kraft) following our acquisition on April 1, 2018. During the transition, we realized a number of synergies, including improved efficiency across our supply chain and lower marketing costs. The combined business generated solid results, with a modest improvement in adjusted EBITDA margins, excluding integration-related costs, of 10 basis points. •   The Keurig acquisition, which closed on July 9, 2018, created a powerful platform for innovation in emerging markets and a leading global provider of premium single serve brewers and hot liquids. We further extended our leadership in cold brew coffee with the launch of our latest Single Cup brewer, the Keurig Coffee System K-Cup® Brewer. We also acquired Green Mountain Coffee Roasters Inc. (GMCR), an award-winning roaster and maker of specialty coffee beverages that we expect will complement our offerings across many global markets. In addition, we acquired the remaining stake in our partner in Brazil, Companhia Brasileira de Bebidas das Américas S.A. (CBDAAmas), increasing our ownership in this brand to 100%. •   On February 8, 2019, we announced a definitive agreement to acquire Dr Pepper Snapple Group, Inc. (DRPS), one of the largest beverage companies in the U.S., for $28.5 billion, or $23.78 per share. We expect to fund the transaction largely with incremental borrowings. Under the terms of the agreement, DRPS shareholders will receive $11 per share in cash, representing an implied enterprise value of approximately $28.5 billion. The board of directors of DRPS approved the acquisition on January 13, 2019. Upon consummation, the transaction is expected to deliver immediate accretive to our adjusted EBITDA and is expected to generate mid-teens free cash flow accretion on an annualized basis, and it is expected to be fully dilutive to our 2019 adjusted EPS. Based on our assumption of no significant divestiture proceeds, we currently project total net debt reduction of approximately $1.2 billion to $1.4 billion upon completion of the merger. Assuming no change to current interest rates, we estimate that our assumed incremental weighted-average cost of debt would be approximately 5% based on the 5-year treasury yield plus 100 basis points.

We expect the merger to add to our global reach, expand our presence in fast-growing markets, extend the distribution networks of our existing brands and strengthen our partnership model. The acquisition will also enable DRPS to accelerate innovation beyond carbonated soft drinks, while enabling us to accelerate growth and innovation in other complementary categories through cross-selling across all of our portfolio of great taste, easy-to-use products. We also see the opportunity to bring the best practices of our existing operations to the combined business, which should lead to further operational efficiency, reduced complexity, and the generation of additional long-term value. Additionally, the combined organization will provide a stronger foundation for sustained growth globally, with a broad range of flavors across a broader set of geographies.

The acquisition remains subject to customary closing conditions and government approvals. We are targeting completion for the second half of 2019, subject to final closing conditions, and anticipate being fully accretive to adjusted EBITDA in our third full year after closing. After the transaction closes, Dr Pepper Snapple Group employees will become our employees and contribute to the growth of our business globally. We intend to ensure that the combined entity maintains the integrity of both Dr Pepper Snapple Group and Mondelez International.

2018 Performance Summary

Consolidated Results of Operations

Total Consolidated Results of Operations

Revenue and Cost of Sales - Revenue for 2018 increased 15%, reflecting our continued growth in sales volumes and increased AWUP per ounce. Higher AWUP reflected higher pricing and favorable sales mix. Gross profit, expressed as a percentage of revenue, increased 1% versus 2017. Excluding the impact of acquisitions, revenue for 2018 increased 14%, reflecting growth in both the Biscuits, Candy and Confectionery Products and Ice Cream and Yogurt Products segments. Gross profit, expressed as a percentage of revenue, increased 0.5 percentage point primarily as a result of higher gross profit on our ice cream, specialty cake and frozen yogurt products, partially offset by lower gross profit on our refrigerated and frozen pizza and bakery products, and unfavorable gross profit mix on premium ice cream novelties and lower gross profit margin in our cheese and grocery business.

As part of our integration with Kraft Foods, we recorded pretax transaction-related costs of $107 million in 2018, consisting mainly of professional fees, severance costs and other integration-related expenses, of which $65 million was allocated to the Biscuits, Candy and Confectionery Products segment and $42 million was allocated to the Ice Cream and Yogurt Products segment. The remainder was recorded in corporate. For more information on these charges, refer to “Notes 2. Acquisitions and Divestitures” and “Note 4. Acquisition-related and Integration-Related Expenses.”

Adjusted EBITDA Margin - Adjusted EBITDA margin, a non-GAAP measure, for 2018 increased 0.6 percentage point to 19.6% compared to 19.0% in 2017. For more details of our calculation of adjusted EBITDA, see “Reconciliation Between Adjusted EBITDA and Net Earnings (Loss)”.

Other Income, Interest Expense and Taxes - Other income in 2018 was $73 million, down 1% compared to $74 million in 2017. Interest expense was $148 million, up 13% versus $129 million in 2017, primarily due to the refinancing of our senior secured credit facility in June 2017. We did not incur any early debt extinguishment costs in 2018 or 2017. For more information on our interest expense, see “Notes 2. Acquisitions and Divestitures” and “Note 5. Long-Term Debt.” Our tax rate remained relatively consistent at 19.7% in both 2018 and 2017.

Adjusted EPS - Adjusted EPS decreased 11% in 2018 to $1.19, compared to $1.32 in 2017. The decline was primarily due to a $586 million increase in non-cash preferred dividend requirements due to our adoption of the new guidance for preferred stock issued as a result of the amendment to the Company’s charter that became effective in the fourth quarter. Adjusted EPS reflects the elimination of

The following response contains forward-looking statements. It should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Forward-Looking Statements and Item 1A, Risk Factors.

The following discussion and analysis contrives forward-looking statements. It should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Forward-Looking Statements and Item 1A, Risk Factors.

Description of the Company

We make and sell primarily snacks, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy as well as various cheese & grocery and powdered beverage products. We have operations in more than 80 countries and sell our products in over 150 countries.

We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on three strategic priorities: accelerating consumer-centric growth, driving operational excellence and creating a winning growth culture, enabling us to continue to create long-term value for our shareholders. We believe the successful implementation of our strategic priorities and our leveraging our strong foundation of iconic global and local brands, an attractive global footprint, and deep innovation, marketing and distribution capabilities will drive top- and bottom-line growth, enabling us to continue to create long-term value for our shareholders. We believe the successful implementation of our strategic priorities and our leveraging our strong foundation of iconic global and local brands, an attractive global footprint, and deep innovation, marketing and distribution capabilities will drive top- and bottom-line growth, enabling us to continue to create long-term value for our shareholders. Significational Items Affecting Comparability

Keurig Dr Pepper Transaction

On July 9, 2018, Keurig Dr Pepper Transaction closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed Keurig Dr Pepper Inc. (NYSE: "KDP"), a publicly traded company. Following the close of the transaction, our 24.2% investment in Keurig together with our shareholder loan receivable became a 13.8% investment in KDP. During the third quarter of 2018, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million after-tax gain related to the change The call took place on February 8, 2019, we recorded a preliminary pre-tax

Risk Analysis and Risk Management

The following is a section of the annual report on Manela Lab's website. It should be read in conjunction with the other sections of the annual report on Form 10-K, including the consolidated financial statements and related notes.

Risk Analysis

Potential Exposures and Potential Risks

The following is a list of potential exposures risks for the company. It should be read in conjunction with the other sections of the annual report on Form 10-K, including the consolidated financial statements and related notes.

Exposure to Unpredictable Events

Unpredictable Events

Unpredictable Events

Unpredictable Events

Unpredictable Events

• Revenue Growth
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• Total Value of Assets
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Unpredictable Exposures to Unpredictable Events

• Revenue Growth
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• Market Expansion
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• Revenue Growth
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• **Re

Probable future profits of approximately $500 million are indicated for KDP in 2020.