Mondelez 2012 Annual Report Download - page 46

Table of Contents
Commodity Trends
We purchase large quantities of commodities, including sugar and other sweeteners, coffee, cocoa, wheat, corn products, soybean
and vegetable oils and dairy. In addition, we use significant quantities of packaging materials to package our products and natural
gas, fuels and electricity for our factories and warehouses. We regularly monitor worldwide supply and cost trends of these
commodities so we can act quickly to obtain ingredients and packaging needed for production.
Significant cost items in biscuit, chocolate, gum & candy and many powdered beverage products are sugar and cocoa. We
purchase sugar and cocoa on world markets, and the prices of these commodities are affected by the quality and availability of
supply and changes in foreign currencies. Significant cost items in our biscuit products are grains (wheat, corn and soybean oil).
Grain costs have experienced volatility and have increased significantly in recent years due largely to burgeoning global demand
for food, livestock feed and biofuels such as ethanol and biodiesel and other factors such as weather. The most significant cost
item in coffee products is green coffee beans which we purchase on world markets as well as from local grower cooperatives.
Green coffee bean prices are affected by the quality and availability of supply, changes in the value of the U.S. dollar in relation to
certain other currencies and consumer demand for coffee products. Significant cost items in packaging include cardboards, resins
and plastics and our energy costs include natural gas, electricity and diesel fuel. We purchase these packaging and energy
commodities on world markets and within the countries we operate, and the prices are affected by supply and changes in foreign
currencies.
During 2012, our aggregate commodity costs increased primarily as a result of increased packaging, energy, grains and oil costs.
We expect the price volatility and a slightly higher cost environment to continue over the remainder of 2013. We have addressed
higher commodity costs primarily through higher pricing, lower manufacturing costs due to our end-to-end cost management
program and overhead cost control. We expect to continue to use these measures to address further commodity cost increases.
External factors such as weather conditions, commodity market conditions, currency fluctuations and the effects of governmental
agricultural programs affect the prices for raw materials and agricultural materials used in our products. We use hedging techniques
to limit the impact of price fluctuations in our principal raw materials. However, we do not fully hedge against changes in commodity
prices, and these strategies may not protect us from increases in specific raw material costs. While the prices of our principal raw
materials can be expected to fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and
that they will generally remain available from numerous sources.
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