Mondelez 2012 Annual Report Download - page 8

Table of Contents
Distribution and Marketing
Across our segments, our products are generally sold to supermarket chains, wholesalers, supercenters, club stores, mass
merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets. We
distribute our products through direct store delivery, company-owned and satellite warehouses, distribution centers and other
facilities. We also use the services of independent sales offices and agents in some of our international locations.
Our marketing efforts are conducted through three principal sets of activities: (i) consumer marketing in on-air, print, outdoor, digital
and social media; (ii) consumer incentives such as coupons and contests; and (iii) trade promotions to support price features,
displays and other merchandising of our products by our customers.
Raw Materials and Packaging
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 cost-effectively secure ingredients and packaging required 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.
Intellectual Property
Our intellectual property rights (including trademarks, patents, copyright, registered designs, proprietary trade secrets, technology
and know-how) are material to our business.
We own numerous trademarks and patents in countries around the world. Depending upon the country, trademarks remain valid for
as long as they are in use or their registration status is maintained. Trademark registrations generally are for renewable, fixed
terms. We have patents for a number of current and potential products. Our patents cover inventions ranging from basic packaging
techniques to processes relating to specific products and to the products themselves. Our issued patents extend for varying periods
according to the date of patent application filing or grant and the legal term of patents in the various countries where patent
protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of
patent, the scope of its coverage as determined by the patent office or courts in the country, and the availability of legal remedies in
the country. While our patent portfolio is material to our business, the loss of one patent or a group of related patents would not
have a material adverse effect on our business.
From time to time, we grant third parties licenses to use one or more of our trademarks in connection with the manufacture, sale or
distribution of third party products. Similarly, we sell some products under brands we license from third parties. In our agreement
with the Kraft Foods Group, we each granted the other party various licenses to use certain of our and their respective intellectual
property rights in named jurisdictions following the Spin-Off.
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