Kerry Group plc

Good day and welcome to the Kerry Group third quarter 2022 call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome William Lynch, Head of Investor Relations, to begin the conference. William, over to you.

Thank you, Operator. Good morning and welcome to Kerry's Q3 2022 results call. I'm joined on our call by CEO Edmund Scanlon and our CFO Marguerite Larkin. Edmund and Marguerite will take you through a brief presentation and we will then open the lines for your questions. Before we begin, please note the usual disclaimer regarding forward-looking statements. I will now hand over to Edmund.

Thanks, William, and good morning, everyone. So moving to slide three and my overview comments on our year-to-date results. Overall, we are pleased to report that we continue to deliver strong business growth in what remains a highly dynamic marketplace. First, the volumes in case of nutrition are up 8.5% year-to-date, And this growth was broad-based across each of our regions and our markets, and was led by excellent performances in snacks, beverage, and meat, and bakery in particular. Overall growth in the retail channel remained strong, while food service continued to deliver double-digit growth through the third quarter. Moving to pricing, which was up 7.5% in case nutrition for the period, and a little higher at group level. And as you can see from the slide, pricing has increased through the year as we continue to manage through this unprecedented inflationary environment very much in collaboration with our customers. The resilience of supply chains remains a key focus across our industry as a result of the inflationary pressures and the geopolitical volatility in places. However, we continue to see good levels of innovation activity with our customers and we're working very closely to support them in developing their offerings. And also to help them to meet the needs of their consumers in areas such as new taste experiences and cleaner and healthier labels, while also evolving their offerings to meet a more value conscious consumer. So while our industry remains highly dynamic, with many challenges to navigate, the excellent performance we've shown this year, combined with our strong positioning with our customers, gives us confidence that we would continue to outperform and meet the opportunities in our marketplace. So with that, I hand you over to Marguerite for the financial overview.

Thanks, Edmund, and good morning, everyone. Moving to slide four and the summary group financial overview. Firstly, on revenue, group volumes were up 6.6% in the period, driven by the strong performance in taste and nutrition. Reported revenue was up 16.1% in the period, primarily due to organic growth, with foreign exchange and M&A broadly offsetting each other. Group EBITDA margins were back 40 basis points in the period, which was driven by the increased mathematical impact from the higher Q3 pricing that Edmund referenced, as we continue to offset the absolute increase in input costs. This dilution was partially offset by benefits from portfolio development, operating leverage, portfolio mix, and deficiency initiative. Reported EBITDA increased by 12.6% year-to-date due to the combination of strong revenue growth and margin development. And finally, net debt was 2.4 billion at the end of the period versus 2.5 billion at the end of H1. Turning next to slide five and the group revenue analysis. Overall reported revenue increased by 16.1% in the period, driven by the components as you can see highlighted here on the slide. Firstly, volume growth of 6.6% and price of 10.6%, which equates to 7.5% and 12.1% respectively on a life-for-life basis. On foreign exchange, we had a 6.6% translation currency tailwind on revenue, driven by a weaker Euro against the major currencies, combined with a 0.2% transaction impact. Overall, acquisitions and disposals with a net decrease of 7.9%, with acquisitions contributing 4.8% to revenue, driven primarily by Niocet. more than offset by the effect of last year's consumer foods, meats and meals business disposal of 12.7%. Moving next to slide six of the taste and nutrition business review. Firstly, we had volume growth of 8.5% in the period with growth of 8.2% in Q3. Pricing was 7.5% year to date and 10.6% in the quarter. resulting in the overall organic growth of 16% year-to-date and 19% in the third quarter. While we had good absolute profit growth, the EBITDA margin for the division was back 80 basis points year-to-date due to the impact of passing through input cost inflation, partially offset by mixed leverage efficiency and portfolio benefits. From an end-use markets perspective, Beverage continued to be strong, with launches in the tea and coffee, refreshing and nutritional beverage categories. Growth in meat and bakery was supported by increased demand for Kerry's range of food protection and preservation systems, while growth in snacks was strong through our authentic taste systems and taste and salt and sugar reduction technologies. In our channels, retail continued to deliver strong growth, with food service continuing to deliver double-digit volume growth. And volumes in emerging markets were up 12.3%, led by growth in the town, the Middle East, and Southeast Asia. Turning now to slide seven, and our regional performance within taste and nutrition. Firstly, the Americas had volume growth of 9.3% in the period and 9.6% in the third quarter. Growth in North America in the period was driven by our beverage, meat, and bakery and juice markets, and remained strong across both of our channels. In LATAM, we had very strong growth across Brazil, driven by performance in meals and meat, while volumes in Mexico were led by growth in beverage and snacks with regional leaders. In Europe, volumes were up 6.2% in the period and 4.4% in the third quarter. This growth was led by the snacks, dairy, and meals and juice markets, with food service a key driver of growth within the region. From a geographical perspective, growth was strongest in Central and Southern Europe, while performance in Eastern Europe was impacted by the ongoing war in the region. As previously announced, the divestment of the group's Russia subsidiary was also completed during the period. In Apnea, we had overall volume growth of 9% in the period and 8.6% in the third quarter. led by the meat, snacks, and bakery and juice markets. Growth was strong across both channels and was strongest across the Middle East and Southeast Asia, partially offset by China, which continues to be impacted by local restrictions. Turning to slide eight and Dairy Ireland, which delivered solid growth despite being in a period of significant price inflation. Overall pro forma volume growth in the period was 1.8%, with growth of 1% in the third quarter. Pricing for the period was up 36.6%. The dairy ingredients business achieved good overall volume growth, while in dairy consumer products, overall category volumes were impacted by higher prices. And EBITDA margin for the division was back 190 basis points, as a result of passing through input cost inflation. Finally, to cover off a couple of other financial matters on slide nine. For input costs, we are expecting elevated levels of inflation to continue through Q4 at a broadly similar level to Q3. We will continue to manage these input cost fluctuations through our well-established pricing model with the aim of recovering the absolute cost of these price increases. And on currency, we're forecasting a translation tailwind of approximately 9% on earnings for the full year, based on current exchange rates. So to sum up on the overall financial performance, we were pleased with our continued progress and strong growth across the period, particularly given the current market dynamics. And with that, I'll hand you back to Edmund for the outlook.

Thanks, Marguerite. Now moving to slide 10 and the full year outlook. While overall market conditions remain uncertain, we believe we are well positioned as we continue to work with our customers to evolve their offerings. We remain confident in our ability to manage through the current inflationary cycle with our well-established pricing model and our cost initiatives. we would continue to strategically evolve our portfolio and invest capital aligned to our strategic priorities and key growth platforms. And given we have just finished the third quarter, today we're narrowing our full year adjusted earnings guidance range from 5% to 9% to 68% on a constant currency basis. And with that, I'll hand you back to the operator and we look forward to taking your questions.

Thank you, speakers, for the presentation. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Cathal Kenny from Davie Research. Your line is open.

Morning, all, and thanks for taking my questions. Two questions from my side. Firstly, on the Americas, can you speak to the performance of the North American division or region within that, please, by channel for food service and retail? Second question relates to margin at a group level. Can you outline the change in margin in Q3 and the drivers of that margin and how we should think about margin for the full year?

They're my two questions. Thank you.

Good morning, Cahill, and I'll take the first part of that question, and Marguerite takes the second part. Just in terms of, let's say, our overall business in the Americas, it's been a very strong quarter for the business with a 9.6% growth. And just to look at that between LATAM and North America, Once you think about last time in the 20s from a growth perspective and strong performance in North America then in the mid to high single digits on. What I would say is there's been a lot of significant level of launches in the second and third quarter in North America. I would say the level of engagement with customers is quite strong. On the retail channel, I would particularly call out beverage from an innovation perspective. I would call that category is quite dynamic, whether it's on areas like alcoholic beverage on the one hand, nutritional and functional beverage on the other hand, areas like hydration. So quite strong on the retail side. And also on the food service side, We've seen a return of seasonal LTOs in the quarter, a step up from where it was a year ago. Actually, we did see some earlier launches of some of the seasonal LTOs a little bit earlier than we would have typically seen them in the past. And, of course, you know, what I talked to before around reducing operational complexity at the back of the store, I can safely say at this stage that that's a structural change in the food service channel, and we're very well placed to take advantage of that opportunity.

And maybe then, Cahill, good morning. Just your question on margins. So firstly, our overall margin at a group level was back 40 basis points year-to-date, and then in the quarter, just over 100 basis points. The higher margin dilution in the third quarter was solely due to the mathematical impact of passing through the increased input cost inflation that I referenced through higher pricing and the phasing of profits in the second half. I would say our normal levers have continued to positively contribute to margin during the period. And then from a full year perspective, we're not calling out any changes to the fundamental drivers of margin. However, given the increased mathematical impact and the timing of the portfolio benefits, we are looking at group margins being directionally back at, I'd say, 60 to 70 basis points for the full year.

Thank you. That's clear.

Your next question comes from the line of Charles Eden from UBS. Your line is open.

Hi, good morning. Just a couple of questions from me. Firstly, Emma, would you mind just quantifying the growth that you saw in the retail channel in TNN in the third quarter? And maybe just get some comments around the performance by customer type. So I'm thinking global FMCGs versus your local and regional customer base. And then my second question is just on the guidance. I'll be blunt. Why not raise the full-year constant FX EPS guide at the midpoint? I sort of fully understand the pricing strength is just a cost offset, as Marguerite just alluded to. But with volumes also very strong and coming in ahead of expectations, I'm surprised that you haven't maybe noticed that up. So if you could just talk to that a little bit. Thank you.

Sure. And thanks, Charles. Firstly, in terms of retail, overall retail volumes were 5.6% in the third quarter. and that was primarily driven from our performance in the North America region from a regional perspective. In terms of customer type, I wouldn't necessarily call out any kind of a major shift or anything like that from a segmentation standpoint as we look right across our customer base. There's nothing really noteworthy there to call out from what we've seen over the last year. We're not seeing any significant market share shift or anything like that. What I would say is that there is quite an amount of innovation happening across the board. I guess I call it renovation, where we're working with customers right across the board to improve the nutritional profile of products, clean up labels, reduce sugar, salt, and fat, without compromising on taste. One would not typically see that kind of activity from a category growth perspective, but from a carry perspective, that is certainly a driver in terms of our performance in the retail channel. In terms of guidance, maybe just to frame that a little bit, we do expect that there are full year growth in TNN to be in that 7% zone from a volume growth perspective. And I guess based on, let's say, my own experience with customers, I would say particularly in the Europe region, we are seeing an element of cautiousness with customers. So our Our perspective on the guidance is really around being pragmatic and we feel, let's say, our approach is appropriate given where we are at this time of the year and the level of visibility we have and our engagement with customers.

That's clear. Thank you.

Your next question comes from the line of James Target from Berenberg. Your line is open.

Hi, good morning, Edmund. Good morning, Marguerite. A couple of questions. I mean, just firstly, coming back on your last comment, Edmund, about the volume growth, you're talking about 7% for the full year for TNN. Obviously, you know, after what you've achieved, I guess, in Q3, I mean, what are you – you mentioned Europe – seeing some cautiousness, but are you actually seeing any signs that some of your customers are starting to, you know, postpone or cancel orders? And, you know, if we look at food service in particular, I mean, clearly it was a strong, very strong quarter in terms of growth, but we are seeing some data showing, you know, full slowdown in QSR, and I appreciate, you know, what you're doing on the LTOs, but are you seeing any weaknesses materializing in food service at all, you know, perhaps towards the end of the quarter. And then that would be very helpful just to get some idea of that. And then in the retail channel, thanks for the growth rate, any big difference there between your branded volumes and your private label, that would be really helpful. And then just lastly, just in terms of guidance, Marguerite, any comments on free cash flow and conversion expectations for this year at this stage?

Thank you. Thanks, James. Maybe just to give a few comments. Look, we have seen some shifts in consumer behavior across different markets, and we have seen some volatility in order patterns. And we have seen some customers decrease orders. But on the other hand, we've seen other customers actually increase orders. And I would say my level of cautiousness would be more from a geographic perspective around the European region, let's say, rather than what we're seeing in North America, where we're seeing North America continuing to be quite dynamic. We have seen an uptake on the level of engagement on the, let's say, the private label side. Certainly the level of engagement with retailers as they're trying to, let's say, scenario plan and things like that certainly has increased. But overall, I guess we feel we're well positioned with the level of engagement right across the board that we're having with customers. And as they're looking at various scenarios, and looking out into the next number of quarters, we feel that the level of engagement we have is very strong. The level of collaboration we're having with customers is very strong. So ultimately, we feel well positioned as things, let's say, evolve here in the coming quarters. I think it's fair to say that our approach is pragmatic. You know, I wouldn't call out any kind of, let's say, major change from a, At the stocking standpoint, we haven't seen anything kind of meaningful, any meaningful level at this moment in time. In terms of, let's say, that point on, let's say, branded versus private label, let's say, other than maybe one or two geographies, we haven't seen any meaningful, let's say, change. And ultimately, from a carry perspective, from a practical standpoint, in many instances our customers actually serve both channels, both branded and private label. So again, from an impact perspective, we don't see a major impact as that potentially will evolve in the coming quarters. In terms of food service, like you see there in the numbers, Overall, we had growth of 14, you know, mid-single digits in that 14% zone. And that is a strong performance. And again, it was, I would say, primarily driven by the Americas from an overall scale perspective. And I guess that point that I know I've touched on before in terms of innovations to reduce back-of-house complexity, I would say that now is the biggest driver of opportunity growth and innovation pipeline. I would say when we look right across our business, we believe that that is structural in terms of, let's say, the food service channel, and we feel while that that they work is primarily orientated from a geographic perspective in North America. What we typically see is when customers, especially global customers, global QSR customers, let's say fast casual customers, or coffee chains, when they make changes in the back of the stores where they might start in North America for reasons we've spoke about in the past, they actually roll out those changes in back of store, let's say operations globally subsequently. So look, we're extremely well positioned in terms of helping those customers reduce that complexity. We've talked about it many times in the past, but this is a real feature now in food service. And again, we feel optimistic about the channel as we look forward, despite, let's say the obvious, let's say challenges that are gonna be out there in the coming quarters.

And then, James, on your cash points, while we don't get the detailed cash update at the quarter, I will say that we are continuing to work to a cash conversion in the zone of 80% for the full year, obviously balancing this against requirements linked with the increased inflationary requirements. So hopefully that gives you our thinking.

Great. Thank you very much, Becky.

Your next question comes from the line of Jason Mullins from Goodbody. Your line is open.

Hi, good morning. Just for clarity around the cash flow performance, I appreciate you don't necessarily give colour during the quarter, but I guess the debt position that you've travelled with from half year to where you're sitting at the moment hasn't necessarily moved that much, so maybe just give a bit of Context in terms, particularly the working capital that maybe was a drag in the first half, how we should think about that for the rest of the year. And then just finally around the input cost situation, appreciate a bit of colour that you've mentioned for the second half. But how should we think about, I guess, the early part of next year or what you're thinking about how some of those input costs are going to travel through next year? Thank you.

Good morning, Jason. So just in terms of cash, I think it's fair to say we're making progress. Obviously, at this juncture, we don't give a detailed update on the moving parts, but in summary, our reduction in debt from 2.5 billion to 2.4 billion does reflect profits in the period, working capital, and also our capital expenditure during the period. I think in the context of the full year, just to reiterate my earlier point, in the context of the full year, again, to confirm that we're continuing to work to that cash conversion in the zone of 80%, and obviously at the full year, we'll give you the full breakdown of the various working capital components, et cetera, that makes up that cash conversion. Then in terms of the raw material cost inflation, firstly maybe looking at it from a taste and nutrition perspective on raw materials, we're looking at mid-teens raw material cost inflation overall year-to-date, and we expect that to be more like high-teens for the full year. And then within Dairy Ireland, input cost inflation is obviously more significant. And the combination of those two would lead to an overall input cost and inflation for the group of, you know, more than 20% in the zone of 20 plus percent for the full year as we look out for the remainder of the year.

Thank you.

The next question comes from the line of Feinberg from Credit Suisse. Your line is open.

Hi, guys. A couple of hopefully quick questions from me. Would you suggest the very strong volume performance in TNN in Q3 also reflects a normalization of the supply chain? Or would you say there are still areas of difficulties that you still have. And the second question comes back to your brief comments on the stocking. What visibility do you have on inventories at your customers? I'm conscious because one of the largest food and beverage companies spoke about running significantly higher levels of inventories that they're going to look to normalize over the next few months or it could be up to a year and how that might impact your volumes in FY23. Thanks.

Thanks, Maham. I'll try and give a few perspectives. I would say overall from a supply chain standpoint, look, there does continue to be ongoing supply chain challenges. And we're continuing to mitigate that supply chain disruption. And we have been carrying, let's say, extra inventories. And I would say, you know, While there's lots of challenges across the industry from a pricing standpoint and an inflation standpoint, and we're all asking ourselves questions about price elasticity and trading down and what have you, at the end of the day, the most important point with any engagement with a customer continues to be guarantee of supply and security of supply. And I think in terms of, let's say, one of the drivers of our business, I feel, is that we've been doing a pretty decent job at supplying our customers over the last number of years, despite all the challenges, whether it's COVID or geopolitical events or other supply chain disruptions. And I think we've been benefiting true engagement with our customers as a reward, if you will, for, let's say, doing a good job from an overall supply chain perspective. We don't have perfect visibility in terms of what's out there, let's say, across the industry from an overall stocking level standpoint. But for sure, it is at an elevated level across the industry. You know, we haven't seen any meaningful level of destocking. We're not expecting to see a meaningful level of destocking. I'm sure some customers are, you know, maybe taking some actions. It's something we keep a very close eye on, but not something that I would be calling out here at this moment in time as, you know, we should be expecting something in the short term. Maybe over the long term, there might be a gradual destocking across the supply chain. But right now, I just don't expect that to be a major factor here in the coming quarter. As for 2023, I just feel it's just a little bit too early to comment on that at this moment in time.

Your next question comes from the line of Lauren Molyneux from Citi.

Your line is open.

Hi, morning. Thanks for taking my question. I just have two, please. So, firstly, can you just talk a bit more about what you're seeing in the emerging markets, kind of how that trended through the quarter, whether you're starting to see any necessities there in reaction to some of the pricing that's going through, and I guess your expectations for how well those markets hold up as well? And then my second question will be on your volume outlook for 2023. I know you've kind of touched on it slightly, but I was wondering if you could talk more to the shape of volume that you're expecting through the year and that you're planning, and also kind of how those volumes look by channel, whether you're expecting some conversion from out-of-home to at-home as consumers' wallets are squeezed.

Thank you.

Good morning, Lauren. I appreciate the question in 2023, but I just feel at this stage it's a little bit too early to comment. I mean, what I would say is that I feel that we're well positioned. I think we're pragmatic in terms of what potential scenarios could play out. And overall, we feel confident on our ability to be able to engage with customers to help them to, let's say, meet the challenges and the opportunities that will present themselves over the course of the next 12 months. In terms of emerging markets, overall emerging market growth in Q3 was up mid-teens, and this was representative of excellent growth in Lausanne. and also in the Acme region, I guess, outside of China. China continues to be, let's say, challenged from an overall perspective and from the restrictions that we've seen there. And another area I would call out that has been challenged for obvious reasons due to the war, and that's Eastern Europe. The growth drivers, I would say, here in emerging markets, just to call out one in particular, and it's that localization of supply. And we're not seeing, let's say, a demand impact, and you're not seeing that demand impact in our numbers in EMs, because I feel we're, again, we're well positioned to be able to meet that demand from a local perspective. And we see customers in EMs really, I guess, prioritizing partners that can work with them locally from a development perspective and also from a supply perspective. And from a channel perspective then, on the retail side, we've seen particularly strong growth on the snacking area due to growth in authentic taste solutions and on the food service side, It's mainly with the QSR chains and the reintroduction of LTOs and also some recovery from where we were a year ago.

Your next question comes from the line of Lisa Denise from Morgan Stanley. Your line is open.

Hi, good morning, and thank you for taking my question. I have a follow-up on food service and some moving parts there. So we've seen some QSR and restaurant traffic trends slowing sequentially, and some QSR and CPG companies have sort of cited lower transactional volumes and a notable shift back to at-home consumption. But on the other side, you've noted very strong demand for simplification in back-of-store solutions, and even noted this time sort of the return of seasonal innovation trends. So how do we think about the sort of net growth outlook and what you're seeing across the different regions in food service? It would be just very helpful to understand some of the moving parts here and where you're benefiting, where there potentially could be some levels of weakness. Thank you.

Thanks, Lisa, and I'll take the question. Like I said, look, we're very pleased with the continuous strong performance in food service. And we feel we're extremely well positioned. I mean, I would ask you to cast your mind back to, let's say, the early days of COVID where our business was significantly impacted. And we proactively engaged with our key customers in that phase and really worked proactively with them to work through the various challenges that they were seeing. At the time, the first point obviously was that there was an impact from a labor standpoint, a labor availability standpoint. And maybe at the very outset, the perspective was that you know, that that labor availability might be short-term in nature. Subsequently, you know, it transpired that it is more structural in nature, not just from an availability standpoint, but also we've seen a significant step up from a cost of labor standpoint. And many of our food service customers had to restrict opening hours or make some restrictions on menus. So we've been working with our customers in the food service channel every step of the way here over the last couple of years. And I think we've positioned ourselves extremely well to be having the right level of conversation with them as they're identifying challenges and we're helping them to overcome those challenges that they're seeing. I would say from a geographic standpoint, the Americas certainly would be the most dynamic. And what I mean by that is that these labor challenges which are structural in nature are primarily a feature in North America. And again, I just feel that we're coming to them proactively with solutions, whether it's highly concentrated beverage solutions, ambient stable solutions, different types of dispensing solutions from a beverage standpoint. And these are resonating with our customers. And when customers change their back-of-store operations, and please bear in mind that the primary orientation of our business is in QSR and fast casual, which we think are going to be the beneficiaries of any evolution of the market in the next phase. We're extremely well positioned, I feel. I would say that from a Europe perspective, the UK, was a little bit subdued. We did see that at the earlier phases of recovery, UK was probably the first to recover in Europe. That then subsequently was followed by continental Europe. And within the Acme region, we saw performance in the quarter well above 20% driven by primarily the seasonal menu offerings, but also solutions designed to improve the overall nutritional impact. So as we look at the food service channel, we feel we're extremely well positioned. We feel that the market for us, the market opportunity within the food service channel will actually be bigger for us because of the structural changes we're seeing in the channel all around that back-to-store complexity and removing it.

Thank you very much for that. It's very helpful. And I have a small follow-up on the EBITDA margin guidance for the full year, if that's possible. So you've guided sort of in the ballpark of EBITDA margins being down minus 60 bits. And I just want to understand, is that just the mathematical price to input inflation effect, or is there anything else that is sort of embedded in that sort of qualitative guidance? Thank you.

Hi, Lisa. I'll take that question. It's predominantly due to the increased mathematical impact and also, as I referenced, the timing of the portfolio benefit, which was more orientated to the earlier part of the year versus the last part of the year.

Okay, thank you very much. Thanks.

Your next question comes from the line of Virginia Boucher-Furt from Deutsche Bank. Your line is open.

three questions.

First of all, can you please update us on your M&A pipeline and comment on the market generally? Sorry, Virginie. Sorry, Virginie. We just can't hear you so clearly. I'm not too sure the line is in grace. Oh. That's better, Virginie.

Can you hear me now?

Yeah, that's better, Virginie.

Thanks. Okay, perfect. Hear about that. Could you please update us on your M&A pipeline, what you are seeing in terms of valuations, sellers' expectations, competition for assets? Have you seen any meaningful change that may or may not provide opportunities for you? Then just a small clarification. You mentioned earlier on the call that you've seen a return of LTOs in food service. And also you have seen earlier launches than you would have seen in the past. So does it mean that some sales in food service might have been pulled forward, which might in part explain your conservatism on Q4? And then last question, it's a quick data point which relates to 2009. So I'm going to test your memory, even if I know you were not in the same position at the time, but Would you happen to know how much of taste and nutrition did food service represent at the time compared to the 30% it represents today? Thanks.

I'll kick off here and maybe William might help me with your last question. Just on M&A, I would characterize our pipeline as continuing to be quite active. But that said, expectation management around valuations is taking a little bit of time. So where we are spending some time with various promoters and owners of businesses, let's say managing expectations for the reasons that we all know. That said, the pipeline continues to be active. I think, Virginie, your point on food service is fair. We have seen a pull forward, I would say, of a number of seasonal LTOs being launched a little bit earlier. And look from an overall perspective, I would say, I would characterize our perspective on the outlook and let's say the full year guidance as being pragmatic and appropriate.

I've gone back in the history lesson there, Virginie, and thanks for the challenge. I mean, food service currently, we're in the zone of 30%. That's where we're kind of back in that zone, given obviously the growth that we've seen across this year. If you go back into the end of the previous decade, really, we were back into the 2008, 2009. You're looking at under 20% zone. but we were in that zone being about a fifth of what we would have characterized as taste and nutrition, you know?

Okay, great. Thanks a lot.

Your next question comes from the line of Heidi Vesterinen from VNN Peribas. Your line is open.

Thank you. I've just got two questions left. Some of your customers have talked about skew rationalization. Is this something you see and how would it impact your business? And then secondly, you have a lot of innovations relating to sustainability. As consumers become pressured, does sustainability still matter to consumers? Have you seen any changes there? Thank you.

Thanks, Heidi. I would say on the first part of your question first on skew rationalization, I would say that it has been a factor I would say right across the last couple of years where, and I would say primarily driven from the supply chain challenges that we've been encountering over the last number of years. I wouldn't describe any uptake or anything like that in skew rationalization in the last quarter or the last couple of quarters, but certainly a factor that has been there for the last number of years. In terms of your question on sustainability and sustainability driving innovation, I would say that sustainability innovations that are also bringing cost benefits, and from our perspective, the key call out there, is solutions that have an impact on food waste probably have significantly increased over the course of the last number of quarters, probably starting in Q1. So that has seen a progressive I would say increase in the level of engagement and level of interest from customers because it's not only helping customers from a sustainability standpoint, it's also helping customers from a cost standpoint. I would say broadly, sustainability is there as an underpin across most categories, but what has separated or changed, I would say, over the course of the last number of quarters is sustainability, let's say, objectives or ambitions that drive cost savings as well.

Thank you. There are no further questions at this time.

I would like to turn the call back over to William for closing remarks.

Thanks. Thank you very much, operator. Listen, thanks, everyone, for joining us, and thanks for taking the time to go through your questions with us today. If there's any follow-ups, please reach out to the IR team. Listen, we wish you a good day. Thank you.

This concludes today's call. You may now disconnect.