Kerry H1 financials boosted by foodservice, innovation and emerging markets
02 Aug 2023 --- Kerry Group has reported a 5.1% organic growth in revenue for the first half of 2023, reaching €4.1 billion (US$4.51 billion). The company attributed its performance to volume growth in emerging markets and Europe, especially in the foodservice channel, as well as customer innovation and cost-efficiency initiatives.
Despite facing industry inflation, Kerry said its margins reached an “inflection point in the second quarter,” demonstrating how its well-positioned for growth for the rest of the year.
The business highlights that its customer innovation activity mainly focuses on adding new taste profiles, boosting nutritional values and providing more value options for consumers.
“We delivered a good performance in the first half of the year recognizing varying conditions across our markets,” says Edmond Scanlon, CEO at Kerry.
“Strong volume growth was achieved in APMEA (Asia Pacific, Middle East and Africa) and Europe led by our performance in the foodservice channel, while North America saw customers work through elevated inventory levels. We continue to see good levels of customer innovation activity and our margins reached an inflection point in the second quarter.”
Edmond Scanlon, CEO at Kerry. (Image Credits: Kerry).“We also made good strategic progress, particularly in executing on our emerging markets strategy with significant acquisitions and investments across APMEA and LATAM.”
Emerging markets expansion
The company flagged two strategic acquisitions in Latin America and China, which has grown its “strong local emerging markets footprint.”
Kerry acquired Proexcar, a Colombian producer of clean label functional ingredients for the meat market and Greatang, a Shanghai-based provider of authentic and innovative taste solutions for the foodservice hotpot market.
These acquisitions will enhance the business’s local taste solutions and position Kerry as an innovation partner for local foodservice chains and local and international customers in the meals and snacks markets.
Proexcar and Greatang have 120 employees each and are set to strengthen Kerry’s presence and growth potential in the ANDEAN and Chinese regions, respectively.
Kerry also opened its taste facility in Karwang, Indonesia during the first half of the year.
Kerry’s APMEA region reported 5.8% more revenue and 7.1% increased volumes.
“With Kerry’s strong local footprint and track record of growth across emerging markets, these complementary strategic developments will support our future growth ambitions,” says Scanlon.
Taste and Nutrition grows, dairy struggles
The company’s Taste and Nutrition segment increased its revenue by 2.7% to €3.54 billion (US$3.89 billion) thanks to volume growth and price increases. Kerry explains that the division struggled with industry’s higher-than-usual inventories.
Kerry is expanding its footprint in emerging markets. (Image Credits: Kerry).
“The division delivered solid volume growth in light of industry stocking and pricing dynamics. Foodservice achieved high-single-digit volume growth supported by innovation with quick service restaurant (QSR) and coffee chains on seasonal products, menu enhancement and back-of-house efficiency solutions. Volumes in the retail channel were lower due to continued customer inventory management in North America,” explains the business.
The Kerry Food End Use Markets division led by Dairy Snacks and Meat highlighted “strong” performance in savory taste, functional systems and Tastesense – the company’s salt and sugar reduction technology.
Earlier this year, Kerry launched its next-generation Tastesense Advanced range of solutions to transform the low and zero-sugar product market.
Meanwhile, the company’s Dairy Ireland business saw a revenue and volume decrease. Volumes fell 2.5% but decreased at a slower pace in Q2 (-0.5%).
“Volumes in Dairy Ireland were lower in the first half with elevated input costs impacting overall market demand dynamics. Within Dairy Ingredients, the lower volumes principally reflected softer market supply. At the same time, Dairy Consumer Products performed well, with volume growth led by Kerry’s branded cheese ranges and private-label spreads,” explains the company.
Besides dairy, the company also struggled in the Americas region, with volume declines of -2.2% in the first half of the year, due to a softer market condition in the retail channel. Nonetheless, the company achieved positive revenue (of 0.1%) due to price increases. Overall Kerry notes that they are poised for growth, also noting its balance sheet is in a strong position with “sufficient headroom to support future growth plans.”
“While recognizing current market conditions, we remain strongly positioned for growth and reiterate our full-year constant currency earnings guidance,” Scanlon concludes.
By Marc Cervera
