Recovering foodservice drives Kerry’s growth prospects amid COVID-19 variability

29 Apr 2021 --- Kerry is flagging “strong growth prospects” in the retail channel as the foodservice industry recovers from COVID-19 restrictions. In its Q1 interim management statement, the Ireland-based food company also emphasized its focus on merger and acquisition (M&A) opportunities.

“We saw significant variability and highly dynamic market conditions right across our end-use markets (EUMs), channels and regions,” says CEO Edmond Scanlon.

Against this backdrop, he is satisfied with the business momentum seen throughout the quarter. The performance reflected sustained strong growth in the retail channel, while the foodservice channel continued to be impacted by increased restrictions in many local markets. They then returned to growth in March.Kerry will continue to invest for growth and enablement of its business model.

COVID-19 creates varied conditions
Kerry acknowledges that market conditions remain highly variable as differences in recovery paths are emerging across regions. Some countries see increased mobility, substantial reopening activity and increased consumer confidence, while others continue to adapt to changing local conditions. 

Nonetheless, global markets have seen at-home consumption remain elevated with an evolution in work practices and daily routines. The overall recovery in the foodservice channel slowed in the period before showing good signs of recovery as many countries advanced their vaccine roll-out programs. 

Kerry flags other prevailing trends as including demand for health and immunity enhancement, plant protein options and products addressing a diverse range of sustainability criteria.

Revenue dips
Overall, Kerry Group saw business volume growth of 1.9 percent in Q1. There was also a pricing increase of 0.5 percent, an adverse transaction currency impact of 0.2 percent, contribution from business acquisitions of 1.0 percent and an adverse translation currency impact of 6.7 percent. This resulted in a reported revenue decrease of 3.5 percent.

Additionally, group trading margin decreased by 50 basis points, reflecting ongoing COVID-19-related costs and an adverse foreign exchange impact.

At the end of March, net debt decreased slightly to €1.9 billion (US$2.3 billion). The group says its consolidated balance sheet remains strong, which will facilitate the continued organic and acquisitive growth of group businesses.

Notably, the company emphasizes that it will continue to invest for growth and enablement of its business model, while continuing to pursue M&A opportunities aligned to its strategic growth priorities. 

The strategic review of our dairy-related businesses in Ireland and the UK is ongoing. The group expects to deliver strong volume growth and adjusted earnings per share growth in 2021 of 11 to 15 percent on a constant currency basis.

Recent Kerry investments include €30 million (US$36 million) in an Indonesian manufacturing facility and US$750,000 toward improving access to milk in Burundi.

Taste & Nutrition sees good growth
Kerry’s Taste & Nutrition sector records overall volume growth of 2.0 percent driven by performance in APMEA. 

The Americas began with a slow start but finished strongly, while Europe remained challenging due to the level of restrictions in place across the first quarter.

Business volumes in developing markets increased by 10.7 percent, led by strong performances in China and Brazil, while overall volumes in developed markets decreased due to the impact of restrictions on the foodservice channel.

The retail channel delivered 5.9 percent growth, led by beverage, snacks and meals EUMs. While foodservice channel volumes declined 8.2 percent, Kerry says this is a good performance in the context of increased restrictions.Chilled meals achieved strong growth throughout, supported by health and wellness positionings.

Consumer Foods growth driven by meat snacking
The Consumer Foods sector saw 1.0 percent volume growth. This was led by strong growth in meat snacking, like the Fridge Raiders range. Cheestrings delivered a solid performance despite school closures and Oakhouse Foods continued to have excellent growth in the period. 

Richmond had a good performance across the meat sausage range, while Kerry’s plant-based meat-free ranges continued to achieve excellent growth supported by strong innovation and new launch activity.

Spreadable butter performed well, while sliced meats were impacted by reduced deli counter operations. Chilled meals achieved strong growth throughout, supported by health and wellness and plant-based launches.

Volumes in frozen meals were initially affected by customer stocking in the previous quarter, before delivering a strong finish to the period. 

Earlier this month, a Kerry expert told FoodIngredientsFirst that there has been a trajectory of positivity toward frozen foods pre-dating but enhanced by the COVID-19 pandemic.

Edited by Katherine Durrell