Good day, and thank you for standing by. Welcome to the Glanbia 2024 half-year results webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I will now hand over to Liam Henigan, Group Secretary and Head of Investor Relations, to open the presentation. Please go ahead, sir.
Thank you, operator. Good morning, and welcome to the Glanbia 2024 half-year results call. During today's call, the directors may make forward-looking statements. These statements have been made by the directors in good faith, based upon the information available to them up to the time of their approval of the Glanbia half-year 2024 results announcement, published earlier today. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by those forward-looking statements. The directors undertake no obligation to update any forward-looking statements made on today's call, whether as a result of new information, future events, or otherwise. I'm now handing the call over to Hugh McGuire, CEO, Glanbia plc.
Thank you, Liam. Good morning, everybody, and welcome to the Glanbia half-year 2024 results call. On today's call, I will provide an overview of our performance for the first half of the year. I'm joined by my colleague, Mark Garvey, who will cover the financials and outlook. At the end of the presentation, we will be happy to take your questions. I'm pleased to report that the group delivered a strong performance in the first half of 2024, with adjusted earnings per share growing by 12.4% to EUR 0.682. This was driven by strong consumer demand for our better nutrition brands and ingredients, with Glanbia Performance Nutrition and Glanbia Nutritionals both delivering volume growth of 3.1% in the first half.
In GPN, we continue to see good global consumer demand for Optimum Nutrition and our healthy lifestyle brand portfolio, with volumes accelerating during the second quarter. We are particularly pleased with the performance of the Optimum Nutrition brand, continuing its growth momentum, delivering 11.8% volume growth in the first half. In Nutritional Solutions, we saw good customer demand across the end markets we participate in, with the volume growth in the half driven by a good performance in our Premix Solutions business. Volume trends in our Protein Solutions business continued to improve, with sequential growth in quarter two, driven by healthy snacking demand. We also continued to progress our strategic agenda with the Flavor Producers acquisition, which was completed in April.
Integration is on track, and this acquisition significantly expands our flavor offerings, with revenue in excess of $120 million, largely from the North American markets. The business is an attractive and growing natural organic flavors market and is performing well to date. We remain focused on shareholder returns, and in the first six months of the year, returned $50 million to shareholders via share buybacks. Today, we are commencing a further $50 million share buyback program and announcing a 10% increase in our interim dividend, reflecting our confidence in the underlying earnings progression of the business. Looking ahead, we continue to focus on driving growth across our portfolio of great brands and ingredients. Based on current market environment and expectations for the remainder of the year, we reiterate our full year guidance of 5%-8% growth in adjusted earnings per share.
Mark will speak to the moving parts of this in a moment. Turning to GPN, we are pleased with volume growth of 3.1%. This was driven by our performance and healthy lifestyle nutrition brands, offsetting a headwind from SlimFast. Like-for-like revenue declined 0.8%, with pricing - 3.9%, which was largely driven by our planned promotional activity and some tactical pricing initiatives. Optimum Nutrition, which now represents 65% of GPN revenues, continues its strong momentum, delivering like-for-like growth of 7.7% and strong volume growth. The brand continues to strengthen its leadership position, supported by increased marketing, investment, and activation, and I will speak more to that shortly. Our healthy lifestyle brands, which represent 18% of GPN revenue, delivered like-for-like growth of 0.7%, building on a strong comparative period.
From a regional perspective, Americas was down 3% and international grew 3.3%. But worth noting, the SlimFast drag is entirely impacting the Americas performance. We also saw continued specialty channel decline, and combined impact of SlimFast and specialty channel decline was -5.5% revenue. SlimFast, which now represents 7% of GPN revenue, has continued to face headwinds due to ongoing diet category challenges. Like-for-like revenue declined by 34% in the first half, which was a drag of just over 3.5% on GPN revenue. While this was broadly in line with our expectations, the diet category continues to be challenged, which will result in further reduced shelf space as expected with U.S. retailers as we go into 2025.
Financially, we've rightsized our investment in the brand and have prioritized our investment in our protein growth brands in our portfolio. As a result of the reduced scale of the brand, we believe it fits more appropriately within our other portfolio brands. International growth was driven by good volume growth in Optimum Nutrition, with volume growth across key markets of Asia Pacific and Latin America, offsetting some competitive dynamics in the online channel in Europe. We're pleased with the continued EBITDA progression in GPN, which delivered just over EUR 156 million, an increase of 13.3% constant currency over prior year. This was driven by lower dairy input costs and a continued focus on revenue growth management initiatives, enabling us to increase marketing investment in the period.
Overall, EBITDA margins were very strong at 17.7%, an increase of 420 basis points over prior year. Turning then to our largest brand of Optimum Nutrition. The brand is built on authenticity and trust, and we continue to broaden and deepen our consumer reach and relevance for a wider range of consumers. As you know, Optimum Nutrition is anchored both in protein and energy, and the powder format has a really strong value proposition that continues to resonate with consumers. The brand grew like-for-like revenue by 7.7% in the first half, which was driven by volume growth of 11.8%, with a strong performance across both the Americas and international regions, driven by increased velocities, distribution gains, and marketing activation.
From a consumption perspective, our U.S. consumption is in line with the prior year, which is a very strong comparative period. We've continued to gain market share in the protein powder category in U.S. measured channels , growing ahead of the category. We've seen good growth in household penetration and making good progress driving distribution, with more than 30% increase in points of distribution across FDM, with new shelf sets as we head into half two. Our marketing execution continues to be strong, with longer-term brand equity indicators of growth very positive as we recruit new consumers, with 67% of consumers in the U.S. new to brand in the last year, with 38% new to category. A new pack design will start rolling out, first into U.S. retail from August, our latest evolution of our design in more than 5 years.
The new design features an enlarged Optimum Nutrition logo, a call-out of protein in the product descriptor, highlighting the product benefit, and a bigger flavor call-out on front of pack. We continue to roll out more creative assets under the More of You in You campaign, as we expand our partnerships across social, digital, and retail media. We're very happy with the impact of the McLaren Formula One partnership, which has provided excellent brand visibility. We continue to expand our distribution and on-shelf visibility as category leader across multiple FDM retailers, displaying our full product portfolio as one brand block. We continue to expand in usage occasions with innovation, whether new flavor extensions, new pack sizes, or more premium innovation for our more committed consumers.
Lastly, I would like to congratulate our seven Optimum Nutrition sponsored athletes, who between them won a total of six medals at the Olympic Games in Paris. Turning to our lifestyle brands, we continue to see good growth as consumers are focused on products that support a healthy and active lifestyle. Isopure, our high-protein, low-carb brand, grounded in purity, continues to do well with good volume growth in the first half. We continue to drive reach as we invest behind the brand with our Add Less Do More campaign, and pleasing to see household penetration grow strongly as we see new consumers enter the category. We continue to drive distribution with a 50% increase in points of distribution as we go into half two, albeit off a lower base of ACV. Our think! bar business continues to gain momentum in a competitive category.
Innovation in this category is important, and we've just launched think! Minis, a 100-calorie, 6-gram protein, healthy snacking offering, leveraging Girl Scout Cookies partnership. Plus, have launched three new flavors in our core high-protein line. In addition, we've increased investment in shopper and retail marketing to support in-store and improve findability and visibility in a busy category. Amazing Grass Green Superfood, the smallest part of the portfolio, delivered softer volumes in the quarter against heavy promotional spending from new entrants to the category. Second half, the brand will return to growth behind investments in our latest marketing campaign, Feel Amazing Every Day, with heavier emphasis on social influencers, new listings, and product renovation that provides improved taste and nutritional benefits. Moving to our second growth platform of nutritional solutions, revenue grew by 3.5% in the first half on a pro forma basis.
This was driven by a 3.1% increase in volume, a 3.9% decline in price, and a 4.3% increase driven by the impact of acquisitions. The price decline was driven by lower year-over-year market pricing. The volume growth was driven largely by a good performance in the Premix Solutions business, where we continue to see improving demand for vitamin and mineral fortification. We also saw good demand for Protein Solutions, with strong demand for our healthy snacking solutions in quarter two. The recently acquired flavors and dairy bioactive businesses continue to perform well with the integrations on track. Nutritional Solutions EBITDA was EUR 82.9 million, down 0.5% constant currency. EBITDA margins are good at 17.7%, in line with full year 2023 pro forma.
We have three platforms targeting three priority end-use markets across a broad range of customers. To our platforms in Premix Solutions, Protein Solutions, and Flavor Solutions, we have a collaborative one face to customer approach to deploying expertise and technologies in these growing end-use markets. Our first platform, where we continue to build on our core strengths in customized Premix Solutions, as the number two global leader, had good volume growth in H1 . We continue to scale our extensive Protein Solutions capability with strong demand for healthy snacking. And finally, our Flavor Solutions platform, where Flavor Producers integration and performance is on track... and we have sights on good growth opportunities as we integrate across our flavor business.
We continue to invest in innovation and capacity to ensure we have the best solutions to meet the growing needs of consumers and customers, that meet their functional taste and micronutrient needs across a broad range of formats. Our end-use markets have good growth, with innovative growth customers. Firstly, the vitamin, minerals, and supplements, or VMS category, which encompasses a wide range of products designed to provide nutritional support, enhance overall health. We have expertise and technical capabilities across all formats in VMS, such as gummies, tablets, and powders, including a portfolio of functionally optimized nutrients designed to perform better within gummy applications. We're encouraged by the growth trends and underlying demand we are seeing in this category, supported by a recent survey, which found approximately a third of U.S. consumers over the age of 18 plan to increase their usage of vitamin, minerals, and supplements.
Secondly, the active lifestyle and sports nutrition market, where 41% of consumers want to increase their protein intake. Clearly, we have market-leading positions here through our branded consumer business in GPN, but nutritional solutions also has market-leading expertise in this area, underpinned by proprietary solutions and ingredients, where we've seen the high protein bar segment growing approximately in the single digits. And finally, in functional beverages, which is a growing segment within the beverage industry and includes products enhanced with vitamins, minerals, and other solutions, providing multiple health benefits in a convenient format. According to a recent survey, 49% of consumers cite food and beverage and physical exercise as the top contributors to well-being, highlighting the importance of functional products as consumers take ownership of their health and wellness. With that, I will hand to Mark for the finance review.
Thanks, Hugh, and good morning to everyone on the call. Group revenue for the half year was $1.8 billion, down 1.1% on a constant currency and pro forma basis. Volumes were up 1.8%, driven by GPN and Nutritional Solutions. Price was down 4% due to dairy market pricing, as well as promotional and some tactical pricing activity. Acquisitions added 1.1% to group revenues. Effective January 1, 2024, the commercial arrangements associated with the group's U.S. joint venture were amended. In 2024, the group recognizes commissions earned on the sale of joint venture products, whereas previously, the group recorded the gross value of revenues and corresponding cost of sales on joint venture products sold. The change in commercial terms impacts the recognition and presentation of revenues and cost of sales from 2024 onwards only.
This has the impact of reducing GN and group revenues. It has no impact on EBITDA, and it results in increased EBITDA margins. To enable a like-for-like comparison, the variance in revenues is presented on a pro forma basis, as if these new arrangements were in place from the beginning of 2023. The group has also adopted EBITDA as a key performance measure from 2024, which is aligned with industry standards. Group EBITDA in the first half of 2024 was $262 million, up 12.8% constant currency, driven by strong performance from GPN. GPN EBITDA was up 30%, and Nutritional Solutions was broadly in line with last year. U.S. Cheese EBITDA was down 22% on prior year, as a result of the impact of lower market pricing and lapping procurement benefits in 2023.
Group EBITDA margin was 14.4%, compared to 12.6% in prior year, primarily due to stronger EBITDA margins in GPN, benefiting from lower whey costs, somewhat offset by increased marketing investments. Adjusted earnings per share was strong for the half year, of EUR 0.682, up 12.4% on prior year. There was also strong cash conversion in the first half of the year, delivering operating cash flow of $99 billion. For the 12 months to the end of June, operating cash flow was $503 million, representing a strong operating cash flow conversion rate of 96.3%. The group has a strong balance sheet. In April, the group acquired Flavor Producers for $300 million, and integration is on track.
Due to the strong cash conversion in the period, first half, net debt was $645 million, compared to $451 million at the same time last year. The net debt to EBITDA ratio was 1.2x , well below covenant levels, and we expect this metric to be around 1x by year-end. The group has $1.3 billion in committed facilities, with a weighted average maturity of 4.3 years. Investment in capital expenditure for the first half was $45 million, of which $30 million was allocated to strategic capital expenditure, primarily in Glanbia Nutritionals, with investment in additional capacity and IT capital investment related to acquisition integration. For the full year, capital expenditure, both strategic and sustaining, is expected to be between $80 million and $90 million.
We continue to focus on a consistent methodology for shareholder returns, and the board have approved a 10% increase in the group's interim dividend from EUR 0.1422- EUR 0.1564. We're committed to paying our annual dividend within our target payout ratio range of 25%-35% of adjusted earnings per share. In February, we announced that the group intended to return EUR 100 million to shareholders via share buybacks in 2024. In the first half, EUR 50 million was deployed on a share buyback program, purchasing and canceling 2.8 billion shares at an average price of EUR 17.95. Today, we announced the commencement of a further EUR 50 million buyback program.
Profit after tax for joint ventures for the half year is $3.7 billion, down $2.8 billion compared to prior year, due to the impact of higher input costs, some of which were not recovered in selling prices in the period. For the second half of the year, we expect joint ventures to be down by a similar amount. Net finance costs were $10.4 billion, up over $3 million compared to prior year, primarily due to higher rates and increased debt following the Flavor Producers acquisition. For the full year, we expect net finance costs to be in a range of $26 million-$28 million. For the half year, the effective tax rate was 16%, up from 14% in the prior year. For the full year, we expect a similar outcome.
We continue to assess the impact of the OECD Pillar Two rules. The group incurred exceptional items net of tax of $9.2 billion in the first half. These primarily related to ongoing portfolio reorganization costs post the recent divestiture of European joint ventures, as we look to optimize certain back office functions across the group. In addition, there were one-off costs associated with the acquisition of Flavor Producers. Now I'll walk through the components of guidance for the full year. GPN revenue growth is now expected to be between 2% and 5% for the year, including the 53rd week.
Following mid-single-digit volume growth in Q2, we expect good volume growth in the second half, so that full year volume growth is expected to be at the mid-single-digit level, which will be driven by strong performance from the Optimum Nutrition brand and the healthy lifestyle portfolio. The impact of the 53rd week is approximately 1.5% on revenues. Pricing, which was a -3.9% for the half year, is expected to be -3% for the full year. We have calibrated the GPN revenue growth range from 4%-7% to 2%-5%, due to additional softness in SlimFast as a result of distribution losses and some softness in the specialty channel in the U.S. and the direct-to-consumer channel in Europe, as well as more pricing investment.
For the full year, we expect Optimum Nutrition to deliver high single-digit volume growth. GN Nutritional Solutions volume growth is expected to be within the previously guided range of 3%-5%, with continued progress in premix and protein volumes expected in Q3 and Q4. We are upgrading GPN EBITDA margin expectations to be between 16%-16.5% for the year, compared to 15.7% in 2023. Whey procurement is now completed for the remainder of the year, and it is clear we will be navigating higher whey costs in the second half, which will impact second half EBITDA margins. We are also upgrading GN Nutritional Solutions EBITDA margins for the full year, which we now expect to be in a range of 18%-19%, compared to 17.8% in 2023.
Second half margins will have the benefit of higher protein margins as whey prices, particularly WPI, are relatively higher. We expect U.S. cheese EBITDA for the second half to be broadly in line with the second half last year. Operating cash flow conversion is expected to exceed 80% for the year. We are also reiterating adjusted earnings per share guidance for the year at 5%-8% constant currency growth. Given that for the first half, we reported 12.4% adjusted EPS growth, we expect low single digit adjusted EPS growth in the second half. We expect to have strong EBITDA growth in the second half compared to prior year, somewhat offset by higher finance costs following the Flavor Producers acquisition, headwinds from our joint ventures, and a 2% higher effective tax rate. With that, I will hand it back to Hugh.
Thanks, Mark. The purpose of Glanbia is delivering better nutrition. We know that people want to live full, healthy lives, reach their physical performance goals, to recover quickly and stay strong at any age. We're pleased with the performance in the first half of the year and expect to see an acceleration in volume growth in the second half, as we continue to focus on driving growth across our portfolio of great brands and ingredients. Our better nutrition brands and ingredients hold market-leading positions in growing categories that are driven by strong underlying health and wellness trends. We remain firmly focused on delivering shareholder value with a balanced approach to investing in the business and returning capital to shareholders, and we continue to focus on the strategic execution, prioritizing our growth initiatives.
Based on our current assessment of the environment, we are reiterating our Adjusted EPS growth of 5%-8% for 2024. With that, operator, I would like to open the call to questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your line to, for your name to be announced. To withdraw your question, please press star one and one again. Once again, if you'd like to ask a question, please press star one and one. We will now go to our first question. One moment, please. And your first question comes from the line of Rashad Kawan from Morgan Stanley. Please go ahead.
Hey, good morning, Liam, Mark, and Hugh. Thanks for taking my questions. A couple from me, please. First one, can you talk us through the building blocks behind the Like-for-like guide change in GPN? You mentioned a few factors in your remarks, but are any one of those more pronounced versus you know, some of the others? Are you seeing any changes in consumer behavior? And if you can talk about the competitive dynamics in the online channel in Europe as well, that you touched on, that would be helpful. And then second question on the GPN margin guidance. You know, even at the top end of the end of the range, that would imply H2 margins are over 200 basis points below the first half levels.
I saw some headlines this morning from interviews stating that you expect marketing spend to be slightly lower in the second half versus the first half. So is that all attributable to whey prices being higher in the second half, or is there an element of conservatism built into that guide? Thank you very much.
Good morning, Rashad. Mark here. Yeah, just to take you through the sales guidance that I said, SlimFast is a little bit of a further drag that we talked about in the last quarter. There's more of a 3% than a 2.5% drag, and that's primarily the challenges we're seeing in the diet category and some distribution losses, as I mentioned. I suppose we've been following that over the last number of months. Hugh mentioned the specialty channel in his comments as well, and we talked about that a little bit before. Some of that probably was a bit more drag of the first half, so we're just making sure that's into our guidance as well.
In terms of online in Europe, I would say that, competitive environment there, and we're trying to be quite disciplined in terms of how we manage that. We've seen some of our competitors, and particularly in the U.K., be quite promotional in terms of what they're doing. So we're just being cautious around that for the full year. And then pricing, I said, was going to be a little bit more. We said 2%-3% before, now we're saying 3%. We did mention some tactical pricing in that. I wanna make sure that you understand that relates to Creatine products, for example, which had high input costs last year. So we did increase price, and we're just readjusting those this year. That to us is just normal. It's very high margin in that product.
So that is about a 1% impact, I would say, on our overall pricing for the year. In terms of margins, we've obviously done very well in the first half, so we're very happy we've banked a 17.7% margin in the first half. We are seeing higher whey pricing coming into the second half. We knew that would be the case. We have now procured fully. I think we're being appropriately cautious in giving you a good guide of 16%-16.5% ahead of last year. A lot of marketing spends in the first half. We're probably low double digits, actually, in the first half, probably be high single digits in the second half. You mentioned the McLaren sponsorship as well, for example. So we think this is a reasonable guide for the full year as we see things play out.
Just to add to that, Rashad, I think maybe you asked the question, consumer behavior. It's clearly something we watch carefully, and we've seen some commentary, particularly out of the U.S. in the last few weeks. But it's not something that we're not seeing a pullback from our consumers. You know, this category tends to have high engagements. The protein brands tend to be a need to have an essential item as opposed to nice to have. So, something we're watching carefully, but not seeing any change in consumer behavior at the moment.
Thank you very much.
Thank you. Your next question comes from the line of Patrick Higgins from Goodbody. Please go ahead.
Thank you. Morning, everyone. First question I had was just on the format's performance. Look, you know, obviously, the continued strength in ON and the powder formats when you include Isopure is clearly very encouraging. But I just wanted to ask about, you know, the ready-to-drink and ready-to-eat formats. Like, I get the weakness in SlimFast is very specific to the diet category, but, you know, what is the, you know, the reason, I guess, why, you know, the your performance in the ready-to-eat and ready-to-drink formats with the other brands haven't really taken off, particularly when you consider the strength you've seen in those categories overall. Like, is that just with SlimFast masking solid growth in the rest of the RTD and RTE portfolio? Just some color on that'd be very helpful.
And then the second question I had is just around the margin piece again. And look, I appreciate it's very early to be talking about FY 2025, but should we assume that, you know, the H2 should be the run rate going forward? Or perhaps you can kind of chat through the puts and the takes that might see you to return to the 16-16.5 kind of guided range that you have for FY 2024.
Good morning, Patrick. Yep, I'll answer those. In terms of format performance, you know, we've clearly called out that powder is our primary 78% of our business. It's our primary growth driver. We've great efficiency in our powder plants, and we know powder, given its affordability, resonates well with consumers. When you look at RTE and RTD, it's effectively SlimFast. You know, ready-to-eat, our primary business there would be our think! brand in the U.S., which is doing well. We called it out as one of our protein growth brands. But we had a lost distribution for the, let's say, the SlimFast Keto Fat Bombs that would have been in there. So that's what's driving the ready-to-eat decline. Ready-to-drink, again, it's all SlimFast. SlimFast is primarily a ready-to-drink business.
Our ready-to-drink business outside of SlimFast is quite small. It's still quite small in Optimum Nutrition. So that it would really be, as you, as you suggested yourself, SlimFast within those two formats that are driving that negativity. In terms of margin piece for 25, I think you answered it yourself. It's very early for us to call at this stage. Mark clearly said, look, the margin movement, we're very happy with our margin in half one at 17.7% GPN, and clearly called that down a little for half two, but that whey is a, is a key driver of that. As we go into 2025, you know, at this point in time, we're we would see high whey prices as we go into 2025, but it's way too early for us to call.
We obviously, as you know, from, you know, over the last number of years, we have a number of levers to pull, whether that be price, market investment, revenue growth management. So we'll be figuring all that out as we move into the latter part of 2024. And, you know, there tends to be volatility in whey prices, and I'm sure we'll see volatility next year as well.
Okay, very clear. Thank you.
Thank you. Your next question comes from the line of Sethu Sharda from Barclays. Please go ahead.
... Hi, good morning. Thanks for taking my question. So, I have three questions. The first one is about the Optimum Nutrition consumption growth in North America, which optically doesn't look great, like, appreciate tough comps on this, but should we expect acceleration on this front in H2 as pricing drag diminishes and volume remains strong? And the second question is on the margins. Again, like, the SlimFast now making a material lower margin than Optimum Nutrition with the GPN. That is, like, some of the margin strength in H1 is also about positioning besides lower whey costs, if you can give some color on that. And the third is, like, on the outlook on the input cost for GPN for 2025, like the whey as you mentioned, is higher. What about cocoa, and how material is that as a percentage of costs?
Yeah, good morning. The line wasn't great, but I think we got most of the questions. I'll take one and three, and Mark will take two. In terms of ON consumption growth, I think your question was, would we see acceleration? You know, when we look at that consumption growth number, probably three things: One, if you... First of all, you're up against-- we're up against a strong comparator at the same time last year. Two, when we look at it, the specialty channel, if you remove the underperformance in the specialty channel, we'd be about mid-single digit growth. And last point is Amazon Prime, which is obviously a big event for us in terms of our por- portfolio and how we, how we support our brands, would be in last year's numbers and are not in this year's numbers.
Clearly, we will have volume growth at that base level anyway, within those revenue numbers. So we should see between, as we start to lap that comparator plus with the new points of distribution that the brand has gained as we go into quarter three and quarter four, you should see that, we should see that accelerate. In terms of outlook 2025, yeah, cocoa is good. Cocoa, our largest SKU is Double Rich Chocolate, way above standard, so that will... Cocoa will impact that as well. Look, it's something we're working our way through across all of our comps for next year. It's too early to call. Do we need to think about different pricing on our chocolate? Way above standard, that's something we're evaluating at the moment, but we'll be...
We'll have a clearer view in 2025 when we talk again later on in the year.
In terms of the question on margin, yes, SlimFast is a bit of a drag on margin, but less and less so as we really prioritize our investment across the different brands. In fact, ON, with the volume growth we saw, was clearly a help for us in terms of the production, sort of, process we have as well. So that was really a benefit for us as well, I would say, in the first half margin. So overall, just really, ON is helping us drive that margin in the first half.
Thank you. Your next question comes from the line of Nicola Tang from BNP Paribas. Please go ahead.
Hi, everyone, thanks for taking the question. The first, I wanted to come back on pricing. You mentioned the tactical pricing in GPN, and I think you mentioned that it was just on creatine, but maybe you could just clarify and talk a little bit more about what you're seeing in the wider space from competitors on pricing for GPN. And then secondly, sticking to GPN, on the international side of the business, which from a like-for-like perspective, looked pretty good, are there specific geographies that you would call out? You know, is this a function of share gains or promotional activity, or a function of the market growth itself? Thanks.
Good morning, Nicola. Yeah, in terms of pricing, so what Mark called out earlier on, 1% of our pricing is driven by a specific product called Creatine. It's performing very strongly for us with very strong volume growth, and we would have seen significant input cost inflation last year. I think in terms of our pricing, it was over 100% price increase we had to put through, and we're just pulling back on some of that now. Very deliberate, very comfortable with the pricing pullback in that specific part of our portfolio. In terms of promotional activity, when we spoke to you in early May, we would have said we'd seen a leveling off. We saw an increase in promotion activity in quarter two. We knew that whey was significantly inflated as we entered half two, so I...
The teams had good financial discipline, but we did end up spending a little bit back. You know, one of the things we watch carefully is gap to competition. We saw some significant promotion, particularly in the online D2C channel across Europe, which we had to react to. And that's always something we'll watch for as we look to defend share and growth. In terms of international geographies, I called it out specifically. Look, there's always ups and downs in international, with different dynamics across so many different markets that we ship to, but we have good growth in China and India, Middle East. Europe was the one market that probably was pulled back a little bit because of that competitive challenge in the D2C channel.
Thank you. We will now take the next question. The next question comes from the line of Damian McNeela from Deutsche Numis. Please go ahead.
Hi. Morning, everybody. Thanks for the questions. First question is, I don't know, Hugh, whether you can provide us a little bit more color about the softness that you're seeing in the U.S. specialty channel, and whether you expect that to continue for the remainder of the year, is the first question. And then the second question is on sort of, kind of related to what Patrick's question is, is given the strength of the RTD market in the U.S., whether there are any plans to innovate some of your sort of healthy lifestyle business to capitalize on that growth opportunity?
Yeah, I'd say... Look, the softness in specialty, there's two main customers, obviously, in the specialty channel in the U.S., and they have been struggling over the last 12 months. I think what we'll start to see as we head into half two is will be lower comps versus last year, so I don't think it will be as significant a drag in half two as it was in half one, or it was in half two last year. It's an important channel for us. It's an important channel for innovation, so we're hoping that they can rectify some of their performance challenges. It's primarily driven by lower footfall. So, you know, we still remain very supportive of those key customers, but we should see softer comps as we head into half two.
In terms of RTD, look, fair to say we're obviously not gonna share any plans, but it's a key area of focus for the business, particularly in North America. But also internationally, you know, we have a nice RTD business here in Ireland and in the U.K., and we continue to evaluate opportunities for RTD. In the U.S., we clearly have SlimFast as an RTD business, underperforming. Optimum Nutrition is small at the moment, but certainly with the growth, it's an area of continued focus and innovation will play a role in that as well. So, you know, can't share any more, but it is an area of focus for the business.
Okay. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. We will now go to the next question. And your next question comes from the line of Cathal Kenny from Davy. Please go ahead.
Morning, y'all, and thanks for taking my questions. First one on pricing within GPN. Mark, you said -3 for the full year's expectation versus -3.9 for the first half. Just wanted to understand the assumptions behind the H2 pricing expectation. That's my first question. Secondly, on ON, I think in prepared remarks, you flagged distribution gains and velocities. Hugh, would it be possible to get a little bit more color on those wins by region? And finally, just on NS margin, just the step up in terms of the full year guide versus H1, just in terms of the drivers of that, please. Thank you. They're my three questions.
Okay. So in terms of pricing, Cathal, how are you? In, from GPN perspective, yeah, we think 3% is the right level. It's still higher than the 2%-3% we talked about before because of some of the activity really in the first half. We do expect with higher COGS for all of our competitors as well, ourselves, as we edge into the second half, that there'll be more rational promotional activity. So that is our assumption as we sort of work through the second half. We feel we've been pretty disciplined around that, frankly, and we continue to sort of be, and we'll obviously monitor that carefully. And Hugh did mention the gap to competition point, and we'll keep very close to that as well. So that's really our assumption in terms as we're looking at the second half.
In terms of Nutritional Solutions margin, very happy we could upgrade that to 18%-19%. A little bit of the flip side, frankly, going on the whey side there, because if you look at the differential, particularly with WPI and the lower whey input cost, that's gonna benefit the Nutritional Solutions business in the second half. So we should see, protein really driving those margins more in the second half for us, in Nutritional Solutions.
Yeah, thanks. And then, Cathal, good morning. And in terms of distribution velocity, I think what I've said in the past is we tend to target, you know, in terms of growth, 50% velocity, 25% distribution, 25% innovation. We're, you know, what we'd call out, we're, we big effort for the teams in the last 12 months as we drive our retail distribution and visibility. And, I did call out in the U.S. alone, we'd have an increase in 30 percentage points of distribution, so that's a significant number. Now, it's hard to call velocity off that just, those new shelf sets will only be going in as we speak or over the next couple of months. But, you know, same in Europe with good job by the team in Albert Heijn, Carrefour, and across broader international.
You know, Albert Heijn is a good example. That's a new listing for us. I think we have 40 SKUs done into Albert Heijn and with about 20,000 new points of distribution. It's, it's a new set for them. We'll see how it does. We're supporting it, but it's a key area of focus for us to continue to drive that broader distribution and visibility in these larger food, drug, mass retailers.
Thank you.
Thank you. There are no new questions. I will hand back to Hugh for closing remarks.
No, just to say thank you very much for all your questions. Pleased with half one performance and looking forward to talk to you again later on in the year.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.