Good morning, and welcome to The Magnum Ice Cream Company webcast. My name is Peter Black, and I will be your operator for today's call. Before we begin, please note that today's presentation is being recorded. At this time, all participants are in listening only mode. After the presentation, we will move into a Q&A session. Instructions for Q&A session will be provided at the time, and we will take your questions one by one. With that, I am pleased to turn your call over to Lloyd Midwinter. Lloyd, please go ahead.
Hello, and welcome to our webcast for the Q3 2026 trading update of The Magnum Ice Cream Company. My name is Lloyd Midwinter, Head of Investor Relations, and I am here with our CEO, Peter ter Kulve, and our CFO, Abhijit Bhattacharya. Our press release and this investor presentation are available on our Investor Relations website, where a replay and transcript of today's webcast will also be made available. Before we begin, I would like to draw your attention to the cautionary statement regarding forward-looking statements and assumptions included in this presentation. This applies to the presentation, webcast, and Q&A session. Peter, over to you.
Good morning, everyone, and thank you for joining us. Sorry for my croaky voice. I have been traveling for two weeks through Asia and picked up a bug. First, the headline. Our Q3 performance was extremely strong as we gained market share driven by volume-led growth ahead of a growing ice cream category. Our revenue grew 12.1% to EUR 2.5 billion, with organic sales growth of 9.6%, led by 7.3% volume. All regions achieved strong growth in the quarter, with the extended summer in Europe aiding growth by an estimated 2%-3%. Aside from our top-line performance, we are delivering productivity savings in line with our plans. Given our strong performance year-to-date, we are upgrading our growth outlook to approximately 5.5% from 3%-5%, and we maintain our margin outlook for the full-year.
Before getting deeper into the results, I want to briefly reiterate the value creation model we previously set out. Ice cream is a growing category, and as the leader, we are focused on building and activating our brands like the top beauty companies, bringing the execution rigor of the best bottling businesses and building an ownership culture accountable to deliver. In practical terms, that means creating consumer desire and having the right products in the right place at the right time and at the right price. This combination of innovation, execution, and ownership mindset is driving our growth momentum. Our first summer season as a standalone company shows the impact our strategy is having on performance, share gains across all regions, and leading the category in delivering volume growth. The good news is these are still early days.
We have been laying the foundation for the future, investing in our brands, building our innovation pipeline, and improving our execution rigor. All of this gives me confidence in the opportunity ahead. I will now get into the quarter, which was a great one. As mentioned, our revenue reached EUR 2.5 billion, driven by organic sales growth of 9.6%. Reported revenue was up 12.1%, mainly due to 2.6% growth from acquisitions. Our growth was led by 7.3% volume, 7.3% volume, and supported by 2.2% price. This demonstrates the strength of our brands and our innovation pipeline. Our frontline-first organization was able to capture higher demand with improved execution. Let me share more about what this looks like. All three of our regions contributed to growth.
Europe and ANZ grew 8.9%, driven by successful innovation and share gains in key markets, whilst also benefiting from favorable weather, which I will address later. We achieved double-digit growth in several markets, including France and the U.K. and Ireland. Magnum and Ben & Jerry's both grew double digits, with innovation driving performance. In Europe, pricing was lower, mainly due to channel mix and phasing of promotional spend during the quarter compared to previous year. Americas achieved 3.9% growth, with continued momentum from our leading brands in the U.S. I am particularly pleased with our volume growth of 2.3%, which reflects a disciplined approach to an evolving category. We focused on driving growth through innovation, including handheld and premium formats, with strong performances from Yasso, Ben & Jerry's, and Popsicle.
Consumers in the U.S. are still willing to spend when you get the product right, and Yasso is a great example of this, growing 30% in the quarter after multiple years of growth before. Now, looking towards AMEA, sales were 17.6% higher. Supported by freezer cabinet expansion, innovation, and execution. We achieved strong performance, including in Pakistan, India, and Turkey. Unfortunately, China continued to be impacted by unfavorable weather, and we experienced channel shifts that we need to deal with. Our focus on brands and innovation, execution and availability, is clearly delivering growth across all our regions. These results demonstrate both the strength of the ice cream category and our ability to win. Innovation continues to be one of the most important drivers of our growth. Year-to-date, more than 10% of revenue has come from new products. Our approach is aligned around four focus areas.
First, strengthening our core portfolio through quality upgrades and relevant flavor innovation. Second, managing our portfolio architecture across format, flavors, price points, and channels. Third, unlocking more occasions with new formats from our premium brands. And fourth, expanding the categories through new products with innovative benefits. We have had some great successes. The best example for this season is Magnum La Pistache, which has become the number one ice cream innovation across Europe and exceeded even our own expectations. This is a great example of what our enhanced focus as a standalone company can deliver. One of the areas I am most enthusiastic about, where we are delivering strong results and see further opportunities, is unlocking more occasions with new formats from our premium brands. Investing in the expansion of our Ben & Jerry's portfolio is delivering growth and bringing new consumers on board.
The brand has an exciting runway for growth as we combine innovation with the unique quality and purpose of Ben & Jerry's. Our new formats have been a great success, with sticks ranked as three of the top 10 in the U.S., and sandwiches ranking within the top five of innovations in Europe. Today, we offer Ben & Jerry's in formats for nearly every snacking occasion. A pint for relaxing on the couch, pieces for sharing, sandwiches and sticks for on the go. For consumers in the U.S., where snacking occasions are being redefined, we are meeting the moment, and we are taking this playbook around the world, expanding our other premium brands with new formats such as Magnum Cones, Solero Bonbons, and the Yasso Pints. Now, I will take a moment to talk about the weather.
Everyone based in Europe will know we had an extended summer, which was supportive to growth this quarter. Across key markets, there were more days above 25 degrees, average temperatures were higher, and sunshine hours increased. The extended summer in Europe aided global sales by an estimated 2%-3% during the quarter. Favorable weather alone does not deliver share gains, and in some parts of the world, the weather was even unfavorable. What really differentiated our performance was improved execution, which where our frontline-first model really came into play. That said, we are not perfect. We will continue to strengthen our refreshment portfolio, create better joint business plans, build supply chain flexibility, and implement more advanced planning and forecasting. These capabilities will enable us to respond faster, increase availability, and better capture consumer demand at peak moments during the summer season.
Another important competitive advantage is our freezer cabinet network. We have around 3 million freezers worldwide and expanded the fleet by 4% this year, driving increased availability. We are deploying more freezers in key markets, focused on the higher growth AMEA region and introducing new innovative formats to increase the efficiency and effectiveness of our fleet. Our approach is highly disciplined. We target the right outlets, deploy and activate our freezer cabinets, then keep them productive and reinvest with discipline. Our cabinets generate on average EUR 1,200-EUR 1,300 revenue per year. Therefore, expanding our fleet by 4% contributes around 1% to growth, and you can expect us to continue investing in freezer cabinets to drive sustainable growth in the future. Now looking towards the full-year, we are upgrading our growth outlook to approximately 5.5%.
Our fourth quarter is relatively small in terms of sales and mainly the low season and in more developed markets with slower growth. Therefore, we expect Q4 sales to be at a similar level to last year. We are maintaining our outlook for margin improvement in line with our multi-year financial framework. Productivity savings and operating leverage are expected to offset higher costs, primarily driven by oil and energy prices. On a comparable perimeter basis, we continue to expect adjusted EBITDA improvement of 40 basis points-60 basis points. Reported adjusted EBITDA margin improvement is expected to be zero to 20 basis points, mainly due to the impact of our acquisition in India. This reflects an expected margin improvement of approximately 70 basis points in H2, after absorbing around 100 basis points of additional cost inflation related to oil and energy.
To summarize, before our Q&A session, let me close with a few key points. First, I am extremely proud of the team for delivering such a strong performance with revenue up 12.1% and organic sales growth of 9.6%, led by 7.3% volume and all regions growing, and our productivity program remains firmly on track. Second, our priorities are clear. We are focused on creating demand with our leading brands and innovation and are converting that demand through increased availability and improved execution. This is compounded by our frontline-first ownership culture. Third, and maybe most important, we have room to run. Whilst the external environment remains uncertain, the fundamentals of our business are strong, the category is strong, and we continue to be laser focused on executing our growth strategy and productivity program.
Thank you, Peter. We are now happy to address your questions. Please start by asking one question each so everybody has a chance to participate. If you have follow-up questions after the call, please feel free to contact me and the investor relations team. Operator, please start the Q&A session.
Thank you. At this time, I am just going to remind everybody how to ask a question. As a reminder, you will need to press star one one on your telephone keypad and wait for your name to be announced. If you want to withdraw your question, you need to press star one one again. With that, I am going to hand over to Lloyd and the first question is coming from David Roux.
Great. Thanks. First question from David please—
Yeah. Morning, Peter. Congratulations on a very strong performance. I guess as we look into 2027, I guess the group is probably a victim of its own success following a very strong first year as a standalone business. I am not looking for guidance for 2027, but I just want to get an understanding of the strategy. You obviously have the medium-term guidance for 3%-5% OSG and 40 basis points-60 basis points margin expansion. I am just wondering to what extent would the business look to protect that next year and what levers do you have to protect that algorithm? Or would you be comfortable temporarily operating outside this to sustain investment behind your brands and ensure long-term growth? Because obviously we are going to be coming off a very high basis of comparison this year, in particular on the growth number. Thank you.
Yeah. Thanks, Dave. Sorry, my voice is a little bit bad. Last year we did 4.6% growth. This year we do 5.5% growth. So this is two years that the engine is running. What is now driving The Magnum Ice Cream Company's growth? First, ice cream is a good market. The latest figures I looked at in the U.S., the market was growing 4%. Globally, it is growing between 3%-4%. So we start with a good market. Then we have now a well-codified embedded system to drive distribution with a lot of operational rigor. We believe it drives approximately 1%. Then we have a very good approach, I believe, it seems to work three years in a row towards innovation, which we also believe contributes 1% a year. So we are fully confident with our algorithm delivering 3%-5% a year because the engine is running.
We really know how to create demand in this healthy category.
Great. Thanks, Peter. Can I have the next question? The next question is from Warren.
Yes, sorry. Warren, your line is open now.
Yeah. Hi, Peter. Lloyd, it's Warren here at Barclays. My main question really is on the margins again, Peter. You mentioned kind of the operational leverage from this top line growth and the productivity kind of offsetting the higher cost, oil and energy. I'm just wondering whether you're able to kind of help us a little bit more on that, because I guess the one area where you haven't quite yet shown your mettle fully is on margins. I was wondering whether we could get a little bit of an idea on how you kind of see the gross margin and then the drop through to the operating margin from the volume.
I don't know whether there's a rule of thumb on the volume drop through to the margin. Then if you're able to kind of just identify and maybe quantify some of the buckets on the leverage and the productivity versus the COGS pressures that you've got, just to help us a little bit more understand the shape of the second half with regards to the kind of zero to 20 basis points guidance. That would be good. Then the kind of housekeeping follow-up from what you're saying, Peter, are you able just to kind of put some numbers around market shares actually in some of the key geos? Thanks.
Hey, Warren. Let me start with market share and then hand over the margin question to Abhijit, and he will tell you how the productivity program is translating into the step up of gross margins and EBITDA. Yeah. Our market share this year was in a very good territory again. In most markets, we are gaining share. Year-to-date, Germany is a little bit iffy, so I'm chasing the German GM. In the U.S., we had a period of weakness, which is correcting now because Häagen-Dazs went on a promo drive as a reaction to our stick introduction. In Breyers, we probably got the pricing a little bit wrong for two months. But again, we expect this year to have share growth in all regions, including the AMEA region. It's looking good, but as always, it's hard work. You have a good month, competition reacts.
But again, our model of distribution, expansion, and innovation helps us to structurally gain share in the global ice cream market. But market by market, there are always ups and downs in the quarter, but we seem to be winning this year. Abhijit, over to you.
Hi, Warren. So let me give you two cuts on the margin, one on full-year basis and one for the second half of the year. So of course, we get with this growth, leverage. But what we got hit this year, as you are aware, is the oil impact and energy impact. And on a full-year basis, that was about 70 basis points. So we have a positive leverage of around 30 basis points or so, but that gets eaten up by the oil impact. Then, of course, we had productivity gains as well as some of the commodity tailwinds that we had, which kind of offsets it, which allows us to keep the guidance for the full-year flat. And that's also in line with what we had said that we were planning to compensate the oil impact earlier in the year.
Unfortunately, it has lasted the full-year. But more importantly, as Peter mentioned in his opening comments, the second half, our overall margin improvement is 70 basis points in the second half, despite 100 basis points impact from oil in the second half. So actually, we are exiting the year in the second half with a pretty good profit momentum despite the 100 basis points from oil.
And we keep on investing behind our brands and behind our customers, and we actually invest more instead of less.
Yeah.
Great. Thanks, Warren, for your question. Hopefully, that answered both parts. Antoine, I think, next question from your line, please.
Thank you, Lloyd, and hi Peter, hi Abhijit. Quick question. You said that you expected Q4 to be broadly flat. Anything to flag there beyond the pre-buying reversal in Europe? I would have thought that growth could remain good considering Breyers relaunch, U.S. momentum being pretty good and easy comps. Yeah. Anything to flag? Thanks.
Yeah. Basically, we're a seasonal business. Q1, everybody is running very hard to get the cabinets in place, to secure the new shelf space at retailers, to land the innovation. It's a built-up quarter. Then we have two quarters of harvest, where now for a couple of years, we had some decent harvests. The last quarter is basically a slower quarter for us because it's mainly in-home channel in developed markets, and our investments tends to go to Q1, Q2, and Q3 because you get a better return. It's not the season that we're driving very hard. The good news is that actually with the build up of the Southern Hemisphere, I hope that in the future, Q4 becomes much more of an active quarter for us as a business. It's now 13%.
I dream of the day it's 20%, and 20% fueled by innovation, fueled by trade activities, because that would balance the business a little bit more. We now guided for sort of flattish after an outstanding year.
Thank you.
Thank you, Peter. Next question, please, I think from the line of David.
David, your line is open.
Actually, that is David Hayes, if you can hear me.
That's you. Go ahead.
Yes, there we go. It's not David. I'm going to ask the Ben & Jerry's question, if I may, with the article that we saw in The Week, just to put some clarification on this situation that continues to obviously linger on and off in the media. Just to understand, is Magnum open to discussions at a price? I guess everything's got a price. If something was offered for Ben & Jerry's that covered stranded costs and was just too good to be true.
Is that something that you would engage in, or is there a certain circumstance or not? I guess just to also clarify, that is the only circumstance that discussion would take place. There's nothing that we should be aware of in the agreements that mean that an offer that comes in needs to be entertained for any other reason than any other commercial approach. Thank you so much.
Let me start very simply. Ben & Jerry's is not for sale, and there are no offers, as you have read when you have read the article more correctly. Ben & Jerry's is absolutely flying. We had a double-digit growth quarter, year-to-date at 9%, driven by innovation in the handheld formats. Our occasion-based growth strategy of The Magnum Ice Cream Company is working for Ben & Jerry's. Ben & Jerry's is flying. They are very edgy in all their campaigns. Nothing has changed. We have a new independent board installed. We have a very enthusiastic leadership team. No, it's embedded. It's working. It's growing. It has always been noisy over the years. Ben is still trying to create noise. Actually, you could ask yourself the question, is that actually bad for the brand? Not when you look at the sales figures.
Yeah. Thank you.
Very good. Okay, so time for the next question for Guillaume. Please go ahead with your question.
Thank you very much. Guillaume Delmas here at UBS. Good morning, Peter, Abhijit, and Lloyd. My question is on Turkey, really, so a key country for you. Peter, can you maybe talk about what you saw in the third quarter in Turkey, and particularly to what extent you have been able to compensate for all these measures imposed by the Turkish Competition Authority? Are these measures having a significant impact on your margins there because Turkey tends to command above group average margin. Any color on what you saw in Q3 and the outlook for Turkey would be great. Thank you.
Great question. Guillaume, why is Turkey such a special country? Because over time, we were able to get consumption up from 0.5 L a head to 7 L a head, which is almost a German level. How did we do that? It is innovation driven, penetration driven, bringing new occasions and extending distribution to when you go on holiday in Turkey, basically, there is literally Algida at arm's length, just as there is Coke at arm's length. This year, Turkey had an unbelievable run with innovation, whether it is the bowl cone, whether that is their new scoopable take-home range, whether it is their new Cornetto program. Honestly, it is one of our best innovation machines. When we got the intervention, which obviously we implemented in Q2 to keep 30% of the shelves empty in smaller outlets, we basically did the following. The team focused on building new sales channels.
We built up a 3,500 units scooping business around Turkey. We extended our market shares in hard discounters, actually quite successfully. We opened more out-of-home outlets, the smaller type. And in some smaller outlets, we extended the size of the cabinets that we could still sell our former portfolio. This basically led to a very satisfying performance in Turkey, where we basically hit all the original growth targets and with that, all the leverage. But more importantly, most of the innovation we put in was actually quite premium innovation, which had a good impact on the margin. Turkey is in outstanding space, and we continue to work with the authorities to help them with their program.
Thank you very much.
Okay, so moving to the next question, over to you, Sam from Goldman Sachs.
Morning. Thank you for taking my question. Congratulations as well on the results today. I just wanted to kind of dive into your comments on innovations. Firstly, thank you for quantifying the impact that it has had for this year. Is that similar to historical years, or have you really seen a step-up in 2026 versus history? And how is that comparing with the market? Then just kind of thinking through to 2027 and beyond, we have seen a real step-up, at least, as a consumer, I have seen that on the shelves, a real step-up in genuine innovations from Magnum. How do you make sure that essentially you still have new exciting formats and flavors that stay relevant and that it does not become too crowded? How do you manage that? Thank you.
Sam, thank you for this question because we have two drivers that gives this business a growth rate ahead of the industry. One is distribution, which we have already discussed. The other one is innovation. Basically, we created an innovation model that is focused on creating new ice cream occasions and new ice cream benefits. This year, when you look over a two, three-year period, 30% of our products is new. In the first nine months of this year, 10% of sales comes out of new products. These are not just new products, a new flavor of Ben & Jerry's. No. New formats, driving new occasions, driving category growth. That is why at this moment in time, actually our customers are also very happy with us because we truly drive category growth. We also drive new benefits. We are leaning in very heavy on protein.
Yasso now being more than 0.5 billion. Who would have imagined that? Growing at 30% is phenomenal as ice cream is full in the protein because we are a dairy product, but these protein versions obviously accelerate even more. Our Hydro:ICE, our hydration products. So our innovation engine works, and our innovation next year is better than this year, and I am more than convinced that the year after will be better yet.
Because the motor is really starting to up. Not only in the U.S., but also in China, also in India, and also in Europe. Innovation is one of the things that sets The Magnum Ice Cream Company apart, and I am really proud of that because it is really a lot of work. But our models work, our combination of R&D and marketing works, the link to the markets for fast implementation works. It is an engine that is humming.
Great. Thanks for that question, Sam. Now moving to the next question from Michiel at KBC.
Michiel Declercq, your line is open.
Yes. Hi, Michiel Declercq from KBC Securities, and thank you for taking my question. My question will also be a bit of a follow-up on AMEA, Turkey. I appreciate, of course, the measures that you have taken, being the supermarkets, the bigger focus on the scooping part, et cetera. Now, if I compare it towards the second quarter, it implies a meaningful step up in volumes, Q3 versus Q2, whereas you still had those TSA impacts. I am just wondering, what is the big reason for this step up? Is it also maybe the other countries, Pakistan, India, that are accelerating? Or is it really in Q3 that you saw these measures that you have taken in Turkey come into effect, just the bridge a bit here from close to zero to almost 6%? The drivers behind that, and if it is more than just Turkey.
Yeah. India is on fire, but we will publish the results on 6th of November. But have a look. Pakistan is on fire, is really doing really well, and Turkey is doing really well. In Q2, we actually got stock back because we had to empty all these bloody cabinets and that is negative sales. Now, we basically implemented the whole program and Turkey is full on volume growth again. So the Turkey program worked, but also the rest of the region is doing extremely well. That is basically driving it. It is a very proud part of our portfolio because the whole model. I took a bunch of analysts to Turkey. India is now in full implementation of the Turkish model. Will it work? In Pakistan, we started a little bit earlier. Pakistan is on fire.
Cool. Thank you—
Thanks, Michiel, for your question. Moving to the next question now. Over to you, Charlie, at Rothschild. Please go ahead with your question.
Yeah. Hi, Peter, Abhijit. Thanks for the question. Hope you're well. I just wanted to follow on a bit on the AMEA region and ask a bit more information on China, please, where I think you spoke about some bad weather and channel shift. Is there the right amount of stock in the channels at the moment after the bad weather, or could we perhaps see a bit reversing? Then maybe just a follow-up on India. Can you just provide a bit more color on the recipe transformation and shifting more to dairy? When should we start seeing those new products coming to market? Thank you.
Thanks, Charlie. Good question. Maybe you don't know, I worked five years in China, and I helped to create a model that delivered multiple years of share growth. We are now a clear number two in China for many years. Yes, the weather in China was not very good, especially in Q2, beginning of Q3. That's not the real thing. I spent a month in China to really investigate what's going on. What you see is that we had a stronghold in convenience stores and supers. Convenience stores and hypermarkets, not supermarkets, they're mostly hypers, are under severe pressure. There is a new channel building up, which is the snacking channel. These are 200 m-300 m stores dedicated to snacking, with sort of 15,000 snacking products in there, and they're growing like gangbusters. Three years ago, there were zero, there are now 70,000.
We need to adapt our business model, trade structures, partly innovation, investments, to better capture the growth in this channel. That's why I was there. It has a benefit for us, because these channels are more Tier 4, 5 cities than convenience and hypermarkets, which we're very focused on Tier 1 and Tier 2 cities. So we're adapting our business mix to the channel shifts, and that is actually way more interesting than the weather. There are no overstocking in China. I've worked in China too long. As a hawk do, Abhijit and I look at stocks, at distributors in every single country in the world. Not under our watch will this become a problem, and it is not a problem now. But of course, then when it slows down, you really see it in the figure that it slows down, and that's fine.
Structurally, China is a really good market, and I am convinced that we can further grow our shares. Flipping to India. We did four things in India. We changed our formulations to dairy ice cream. We got a very good response on that, both in impulse and take home. by next year, most of our portfolio should be in dairy, and it is working. We see that in brand image tracking, but we also see that in sales. Cannot say too much, 6th of November.
What we also did is do a price adaption to hit popular price points. Again, seems to work. Volume is coming through. And we changed the distribution system for more modern trade and wholesale trading to the Turkish distribution cabinet model. Seems to be working and accelerating growth. I cannot say a lot more about the results because otherwise I get into trouble with the Indian regulator. 6th of November, the results come out.
Great. Thanks, Peter.
Thanks, Charlie. Hopefully that addressed the two parts there to your question. We've got next question coming from Jeff. Jeff at BNP Paribas, please go ahead with your question.
Okay, thank you. Two questions, if I may. The first one is just thinking about COGS pressures a little bit more. This year you've got oil, but on the other side you've got cocoa. If we think forward, obviously there's a lot of things going on but, as things stand today, how would you frame the sort of aggregate COGS picture for next year versus what you've experienced this year? That's the first question. The second question, you've spoken before, Peter, about GLP-1s, but predominantly through the lens of the U.S. I'm just wondering if there's been any incremental learnings from markets like the U.K., where GLP-1 penetration's starting to quite meaningfully now, and whether you're seeing anything different to what you saw in the U.S. Thank you.
Yeah. Hi, Jeff. Two good questions. This year, we had swings and roundabouts. Chocolate came down, oil went up. Next year, we expect a sizable COGS inflation, approximately 6%, sort of EUR 180 million. 50% in D&E, 50% in developed markets. We can manage this. You know our pricing capabilities in emerging markets. It's the same as the former mothership. In developed markets, we'll need a little bit of pricing. Everybody will need pricing. Retailers will need pricing. Competition will need pricing because costs go up, and that should not be a problem. So, we feel that we can handle this in our normal business mix. Then, getting to your second question on GLP-1. It's fascinating, we get more and more data going in. I've also presented that at the Barclays Back to School conference.
GLP-1s lead to different snacking and food behavior, when you make it specific for ice cream. What you see, the sort of scoop of vanilla on top of a big apple cake, that is going away because the apple cake is going away. But handheld ice cream, portion control, more premium, better ingredients, wellness is booming. It's growing more than 6% in the American market, where not a lot grows in foods. So we get actually pretty decent tailwinds there. Obviously, we also have to manage Breyers brand. So it's not all, everything goes up. But Jeff, can you believe it? Yasso growing with 30% after five years of growth, now more than 0.5 billion. We have some serious tailwinds behind our business.
Thank you.
Thank you. Next question now coming from Tom. Tom at Deutsche Bank, please go ahead.
Tom Sykes, your line is open.
Thanks. Yeah, hi. Tom Sykes at Deutsche. Just to follow up on the COGS question, do energy costs form part of the basket that retailers look at when you are negotiating prices? Do they just look more at the agri-commodities, and then you have to factor in or try and negotiate more on the energy costs? Then just on the shelf space, and the cabinet expansion, footprint expansion, could you maybe say something about how larger retailers are viewing that for next summer, given some out of stocks and the strength of demand? Maybe on the energy side, do you at all see people switching off cabinets and reduced capacity when energy costs are high? Presumably it is a high cost for them to run the chilled cabinet in their own retail outlet. Thank you.
Abhijit, can you take the first question on energy cost? I'll take the second part.
Hi, Tom. When we discuss with retailers, we take the whole basket of commodities, and that will include chocolate, dairy, milk, but also energy is very much a part of cost. It's not that we leave it out. The energy cost partly sits in our gross margin, and partly sits in our distribution cost. From a P&L point of view, you see it above the gross margin and below. Yes, it's part of the negotiations, absolutely.
Yeah. On are cabinets being switched off? No, they are not. Do retailers, small and large, need price increases because their own logistic cost and their own energy cost is up? For sure. We're here together with our customers that we need to manage the P&L of the category. Out of stock this year, I think we learned a lot. It looks easy growing double digits in the market with a lot of volume. It's actually not that easy. It is a logistic tour de force, not only of our own factories, our own warehouses, our own distributors, but also for the retailers. Actually, we had too much out of stock in Q3 in certain countries, certain customers.
Together with them, we are now working on plans, more store delivery, more back of store space, for example, in certain hotspots, putting a refrigerated container in the parking lot. We're working through with a lot of operational rigor in plans to help the retailers live with heat waves, because I don't know whether we will have three or four next year, but we are going to more heat waves. All of us need to learn to work with these heat waves because there's a lot of money in a heat wave. Because a heat wave is an unpromoted sale, both for retailers and for ourselves. They are super profitable, but you need to be able to get the stock in the right place. Imagine, during a heat wave on Sunday. That is a logistic tour de force.
Great. Thanks, Tom. Hopefully, that addressed your questions. Next question comes from Maxime. Maxime at ING, please go ahead with your question.
Hi. Good morning, Peter, Abhijit. Hope you are doing fine and safe recovery to you, Peter. One question actually on TSAs. I understand from the press release that you will start the digital implementation in the U.K. in November. When may you see the first results and what is basically the plan in terms of communication to the market with regards to that transition? That would be all for me. Thank you.
Could you just repeat the last part of your question? Sorry.
Yeah. So basically, when and how do you plan to communicate with the market with regards to the IT transition, any milestone we should be aware of?
Yeah. First, the TSAs, we have been updating every quarter since we separated, and we have been exiting them in line with the original plan. You see that also in the press release of this quarter. The IT TSAs, we will now start unwinding as we implement the new IT system that we have. From an implementation point of view, we go live on the 1st of November this year with U.K., Hungary, and Romania. That will happen. We have taken all the necessary precautions of pre-selling a little bit so that no customer is affected. When we come with our Q4 results, we will tell you how that has gone. Then we have further rollouts as planned next year.
The idea is to have it all done before the end of next year so that we can exit the TSAs before the end of 2027.
So far so good. Fingers crossed, but we're prepared. We often talked about this tech switch as an enormous challenge for the business. To be honest, it is, because this is a humongous project. We need to data harmonize over the whole company. We have redefined 860 processes and harmonized them. When we get out of this, and I'm sure we will, we have the most modern tech stack in our industry. We'll have way more data and way more opportunities to apply agentic solutions to run the business better. It's a lot of work, but by the end of next year, this will truly be a different type of company. Much more Revolut and much less AB InBev.
Great. Thank you, Maxime. Good question. So time for, I think, our final question before we wrap up the call for today. Jeremy from Van Lanschot, please go ahead.
Hi. Morning, all. Just to follow on the pre-buying and technology rollout questions topic. I just have a few quick-fire questions. Are you able to quantify the impacts that you experienced in the third quarter of the pre-buying? You mentioned that the technology rollout would start in November. How long will customers be impacted for, do you think? Does it impact all the customers in the markets you just mentioned or certain parts of the market? I assume this technology needs to be rolled out to other countries in the future, so other countries will experience similar pre-buying and pull forward as a result? Thanks very much.
Yeah. Let me take those quickly. So one is the impact for pre-buying, because it was only in small countries and we are doing it in the off-season, is not big. It is less than 50 basis points in the quarter. For Q4, it is slightly bigger, simply because the sales in Q4 are smaller. It impacts all customers in the market because you change, and that is why we ensure that we supply some of them a bit in advance so that there is no impact to the customer. There is a regular plan. Per country, this is a cadence that we will roll out over the next 12 months. So it happens with any kind of rollout. We have a very experienced team. So yeah, we do not see anything new to be looked at on this.
Okay. Thanks, Abhijit, for answering that question. That is it for our Q&A session today, so time to wrap up the call before we close.
Yes. Thanks for joining. Yeah, it was a good quarter. Most importantly for me, the quarter showed that operational rigor is improving, that we could deal with heightened demand in an efficient way. Still things to do better, but it was heavy lifting. Most important, our underlying model is working. Distribution expansions I spoke about at the Capital Markets Day during the launch of the business are truly delivering the growth. Our innovation engine is firing, which makes me feel confident that we can also sustain decent growth rates in a decently growing industry. Productivity is coming through. Tech transformation is heavy lifting. But at the end of it, we have a different type of company. Thanks for following us and thanks for being present at this call.
This concludes today's—
Going to—
Oh, sorry. This is the operator here. I was going to say, this concludes today's conference call. Thank you for participating. You may now disconnect.