Thank you. Mr. William Lynch, Head of Investor Relations, you may begin your conference.
Thank you, operator. Good morning, and welcome to Kerry Group's 2023 half year results call. I'm joined on the call by our CEO, Edmond Scanlon, and our CFO, Marguerite Larkin. Edmond and Marguerite will take you through today's presentation. Following this, we will then open the lines up for your questions. Before we begin, please note the usual disclaimer regarding forward-looking statements. I will now pass over to Edmond.
Thanks, William, and good morning, everyone. As ever, we appreciate you joining our call and your interest in our company. Beginning with slide four and my overview comments for our Half 1. We're pleased to deliver a good overall performance in the first half of the year, considering the varying conditions across our markets. Firstly, on volumes, we saw an incremental improvement in volume growth in the second quarter, which is significant considering the record comparatives we achieved last year and the pricing we've seen across our industry. Our volumes in the first half were driven by strong performances in APMEA and Europe, led by food service, with the retail channel in North America reflecting customer inventory management. While these dynamics have continued beyond Q2, we're currently seeing a lot of innovation activity, which is why we expect our volumes to continue their upward trajectory.
On margins, we saw a significant improvement in the second quarter. We had benefits from cost initiatives and portfolio developments coming through in the first half, and with the inflationary environment beginning to moderate and showing deflation in places, we feel good about the cadence of our margin improvements through the rest of the year. From a strategic perspective, we made good progress across the business in the first half. I would particularly like to call out the expansion of our presence in emerging markets through a combination of organic and inorganic investments. We opened a new taste facility in Indonesia and also made acquisitions in Colombia and China, which I'll give a little bit more detail on later on. As previously announced, we completed the disposal of our Sweet Ingredients Portfolio as we enhance and refine our portfolio to areas where we can add the most value.
Moving next to our Taste & Nutrition overview on slide five, where growth was driven by a strong performance in foodservice. Revenue for the division increased to $3.5 billion in H1 of the year, which reflected 6.8% organic growth. Volumes were up 1.4%, with overall pricing of 5.4% as we continue to manage input cost fluctuations. EBITDA margins were back 20 basis points in H1, with Q2 up 40 basis points. From an End Use Market perspective, volume growth was led by a strong performance in dairy applications, in snacks through savory taste and in meat, in taste and texture systems.
Looking at our channels, as mentioned, foodservice delivered another strong performance with volumes up high single digits, while volumes in the retail channel were back in H1 due to customer inventory management in North America. In emerging markets, we had 6% overall volume growth, led by a strong performance in the Middle East in particular. Turning to slide six and Taste & Nutrition's performance by region. Firstly, the Americas, where revenues increased likely to $1.9 billion, with overall volumes back 2.2%, driven by the dynamics I mentioned, primarily in the retail channel, and also not forgetting our strong volume comparative of over 9% in H1 last year. We achieved good volume growth in snacks in H1, with authentic taste-led innovations with global leaders and emerging brands. Dairy EUMs also performed well with functional and taste system innovations.
Latin delivered solid overall growth in the first half. We did undertake extensive maintenance work at a major facility in Mexico, which reduced operational capacity across the second quarter, and this facility is now back up and running again in the last few weeks. Looking across the broader region, growth was led by strong performances in the snacks and beverage end-use markets. Moving to Europe, where reported revenue increased to EUR 771 million, with volume growth of 4.6%. This was supported by excellent volumes in food service through menu enhancement activities, seasonal products, and ongoing nutritional profile improvements. Growth was led by the dairy, snacks, and meat end-use markets, with strong performances in the UK and Ireland in particular.
In APMEA, reported revenue increased to EUR 813 million, with volume growth of 7.1%, and this was led by meat, meals, and snack markets, and very strong growth in food service. Within the region, growth was strong in the Middle East and South Asia Pacific, with overall performance in China improving through the half. Moving to slide seven in Dairy Ireland, where performance reflected overall market conditions. Revenue in the first half decreased to EUR 675 million as a result of H1 volumes being back 2.5%. pricing in the first half was 0.4%, reflective of dairy markets. EBITDA was lower at EUR 29 million, with EBITDA margins also reducing as a result of the significant reduction in dairy market sales prices.
Within the division, the lower volumes in dairy ingredients principally reflected softer market supply, while dairy consumer products performed well, with volume growth led by Kerry's branded cheese ranges and private label spreads. With that, I'll pass you over to Marguerite to give you some more detail on the financial performance.
Thank you, Edmond, and good morning, everyone. Turning now to slide nine and the financial overview for the first half of the year. Group revenue increased to EUR 4.1 billion, with group volumes up 0.6%. Group EBITDA of EUR 518 million was in line with last year, while EBITDA margins were back 20 basis points. Adjusted earnings per share of EUR 1.80 was up 2%. Return on capital employed for H1 was 10.1%, with growth being offset by portfolio developments and foreign exchange, and free cash flow was EUR 232 million, representing 73% cash conversion. Turning next to our group revenue bridge on slide 10. Group reported revenue was up 1.6% in the first six months of the year.
This comprised a volume increase of 0.6% and pricing of 4.5%, as we managed year-on-year input cost inflation through our pricing models. Foreign currency translation was relatively neutral in the first half, while the effect of disposals, net of acquisitions, was adverse 3.4%, with a contribution from acquisitions of 1.1%, more than offset by the impact from divestments of 4.5%, primarily relating to the recent disposal of the Sweet Ingredients Portfolio and our businesses in Russia and Belarus last year. Moving to slide 11 and our revenue analysis by division. On the left-hand side, you can see the breakdown of revenue with group organic and volume growth driven by the performance of Taste & Nutrition.
On the right-hand side, you can see the regional analysis of Taste & Nutrition's 1.4% volume growth in the H1. This breakdown of overall volume growth highlights the varied dynamics across our markets, with very good performances in Europe and APMEA in the H1 of 2023, partially offset by the Americas. Our overall growth in the period was achieved against an exceptionally strong comparative performance across all our regions in the prior year. Turning now to our group margin bridge on slide 12. Group EBITDA of EUR 518 million in the H1 was in line with last year, with overall margins back 20 basis points and up in the Q2, as Edmond referenced.
Looking at the key moving parts, firstly, operating leverage and mix were neutral from a margin perspective, given the volume dynamics in the first half of the year. As anticipated, pricing was net dilutive in H1, driven principally by the mathematical impacts of recovering the absolute increase in raw material input costs through pricing. Our expectation is this effect will be significantly lower in the full year, given the current outlook for input costs. We were pleased to see that cost efficiencies contributed 30 basis points to EBITDA margin in the first half, driven by benefits from our Accelerate Operational Excellence program. Foreign currency was net neutral from a margin perspective. Acquisitions and disposals contributed a net 20 basis points, primarily resulting from the disposal of our Sweet Ingredients Portfolio. For the full year, we are currently expecting to deliver overall margin expansion.
Moving next to free cash flow on slide 13. We generated free cash flow of EUR 232 million in the first half of the year, which was up on last year, with average cash conversion on earnings of 73% and higher on a point-to-point basis. The main drivers of free cash flow were as follows: EBITDA of EUR 518 million, as I mentioned. We had a lower average working capital year-on-year investment of EUR 61 million, and this investment was reflective of revenue growth, partially offset by benefits from the ongoing management, managed reduction of inventory. Capital expenditure of EUR 106 million was higher, reflecting the timing and commissioning of capital projects. For 2023, we are on track to deliver improved year-on-year cash conversion of above 80%. Turning to our debt profile and credit metrics on slide 14.
Net debt at the end of June was EUR 1.8 billion. As you can see, the profile of our debt is good, with a weighted average maturity of 5.3 years. Our credit metrics are strong, with a net debt to EBITDA ratio of 1.6x, and we have a very strong balance sheet, which will continue to support the further development of our business. Finally, to cover off a number of other financial matters on slide 15. Finance costs of EUR 27.5 million were lower, primarily due to higher cash deposits and interest income. Non-trading items was an overall net credit of EUR 65 million, primarily relating to a net profit on disposals and costs relating to our Accelerate Operational Excellence program.
On the input costs and Taste & Nutrition, we had double digits year-on-year inflation in the first half. In Dairy Ireland, input costs went from inflation in Q1 to deflation in Q2. In Taste & Nutrition, we currently expect modest deflation in input costs in the second half, while remaining overall inflationary in the full year. In Dairy Ireland, we expect continued deflation in the second half. On currency, based on prevailing exchange rates, we are forecasting a translation headwind of circa 4% on adjusted earnings per share in the full year. To summarize on financial performance, we are pleased to deliver a good financial performance in the first half, especially given the market's backdrop. We continued to deliver volume growth with good EBITDA margin progression in the second quarter. We are on track to deliver our cash flow commitments for the full year.
With that, I'll pass you back to Edmond.
Thanks, Marguerite. Before I move to the outlook, I just want to update you on some of our recent strategic developments, in particular across our emerging markets footprint. If you turn to slide 17, you can see our strong track record of growth in emerging markets, including 9% average volume growth across the past five years, which we are pleased with considering the macro challenges over this time frame. We've a leading presence in emerging markets with $2.2 billion of revenue, 40 manufacturing facilities, 35 R&D centers, and 9,000 colleagues spread across over 20 countries. Key to our success in emerging markets has been our localized strategy, focused on supporting customers to innovate and operate in market to meet dynamic and evolving local consumer needs.
Aligned to this strategy, we have significantly developed our presence, our local presence and capability, and capabilities in these markets through a combination of organic footprint expansion and acquisitive developments. We've highlighted here on the slide our developments over the past couple of years, which you can see were well spread across Latin America and APMEA, with a good balance of newly built manufacturing facilities and acquisitions. I'm going to spend a moment on the three most recent developments on slide 18. Firstly, in May, we completed the acquisition of Proexcar, which produces clean label functional proteins and strengthens our capabilities and leading position within the Latin American meat market. The business is located in Colombia with 120 employees and provides a platform for further strategic growth within the Andean region.
In June, we opened our new state-of-the-art authentic taste facility in Karawang, in Indonesia. This expands our local footprint and applications capability in the important Indonesian market, while also supporting customers in key end-use markets across Southeast Asia. We have just announced the acquisition of Greatang, which further builds on our leading authentic taste position in China and strongly complements our Genuine Nature business. The business is located in Shanghai and is the leading producer of authentic and innovative taste solutions for local food service chains, as well as the meals and snacks markets. This acquisition will strengthen our capability and positioning as an innovation partner for local and international customers in China. These three strategic developments are strongly aligned to our specific local strategies in each of these markets.
Our performance in emerging markets will continue to play an important role in the group's overall growth and development, and these recent investments will support our growth aspirations in these markets. Finally, before we move to Q&A, I'd like to close out with our full year outlook. While market conditions remain uncertain, we remain strongly positioned for growth with a good innovation pipeline and expect to achieve Taste & Nutrition volume growth in the 2%-3% zone for the full year. We will continue to manage through the current input cost environment in collaboration with our customers. We will continue to invest capital and develop our portfolio aligned to our strategic priorities. Today, we are reiterating our constant currency earnings guidance of 1%-5% growth, which reflects an expected net dilution of 2% from portfolio developments.
With that, I'll hand you back to the operator, and we look forward to taking your questions.
Thank you. At this time, I would like to remind everyone, in order to ask a question, please press the star followed by the number one on your telephone keypad. Our first question comes from the line of Charles Eden from UBS. Your line is now open.
Hi, good morning. Thanks for taking my questions. Two for me, please. Firstly, Edmond, you mentioned the inventory management in the retail channel in North America. Could you comment on whether you expect to continue to see this being a headwind in Q3, or if you've seen any signs of improvement since the end of Q2? Second question, cash conversion remains strong in the first half at 73%, so broadly in line with the first half of last year at 72%. Marguerite, does this give you confidence that 2023 will once again be a year of free cash flow conversion above 80% as it was last year? I, I think you did hint at this in the prepared remarks, but I wanted to confirm that I heard that correctly. Thank you.
Thanks, Charles. I, I'll kick us off. I would say with respect to customer inventory management activities, I think it's fair to say in the North America market, there is, you know, there's a lot of different dynamics. We you know, we have seen customers reducing inventory levels. We've seen shrinkflation as a, as a, as a factor across the market as well. We've also seen a significant level of churn, which brings with it the opportunity for us to, to win market share, in, in the churn. We really targeted, I would say, that churn that has probably increased over the course of the last few years, with a notable increase certainly in the last six months, and we've targeted that churn for, for, for new wins.
I would say in, specifically on destocking, it varies by customer. For us, it has been centrally, or primarily centered around, the retail channel in North America, more limited in the food service space. You know, it's hard to get a clear read on, you know, where we are exactly in the cycle, but for sure, we have seen a number of customers that have, effectively finished their inventory reduction, activities. We're basing that on, on the level of engagement we have with, with customers. We do expect, a continued easing, of, of those destocking dynamics as we move through to Q3.
Charles, just on your cash conversion question. Yes, our, our cash conversion of 73% of the first half is very much in line with our expectations, 77% on a point-to-point basis. It does reflect the usual seasonality at this time of the year, but no change to our outlook for the full year. We're pleased with the progress we're making, and we expect to deliver cash conversion above the 2022 levels of 82% on an average working capital basis.
Thank you, both.
Thank you. Our next question comes from the line of Alex Sloane from Barclays. Please go ahead with your question.
Yeah, hi. Thanks all morning. Two questions from me. The first one, just on the full year expectations unchanged at the EPS level. If we could sort of zone in on Taste & Nutrition, can you talk, you talked about, you know, continued improving volumes in the second half. Can you maybe frame that in terms of where you see full year volume growth for Taste & Nutrition in light of destocking and high pricing? Clearly, given those factors, you know, I guess it's likely that volume is gonna be lower this year than the medium term guide of 4- 6. Is there any reason at this point why you wouldn't be able to get back onto the algorithm in 2024? That's the first one.
Second one, just on China, in Taste & Nutrition, clearly improving through the first half. We've heard some mixed messages on this front from customers and peers in terms of performance in China. How has performance been in Q2 relative to your expectations? Maybe what's the expectation in H2 for China? Specifically on the Greatang acquisition, you talked about, you know, some conditions to pay more for the acquisition if those are met over the next three years. Could you shed a bit more light on what those conditions are based on, you know, and maybe how Greatang has been growing and how you expect that to grow going forward? Thanks.
Hi, Alex. I'll, I'll, I'll take those questions. Firstly on, on EPS and, and how we're thinking about it and, and the guidance. On Taste & Nutrition, we're, we're planning for, volume growth in that 2%-3% zone, with, you know, slightly better, margin expansion than maybe we would've, initially expected. I think then as we look into, 2024, I think it's important for us to say that we do have a strong innovation pipeline that will lead to a, I would say, momentum, going into the second half of 2023, that we do expect to continue into 2024.
While it's too early to talk about, you know, 2024 in any meaningful way, we do, as we sit here today, we do feel good about volume growth, as we look out into 2024, you know, back in that 4%-6% range. I would say that margin looking into 2024 as we sit here today looks, looks positive as well. Look, obviously we'll give a, you know, we'll, we'll be giving a better read on, on, on that as we, as we, as we move through the year and, and get closer to the end of the year. On China, I would say overall, we're pleased with the performance that we're seeing in China.
We have had a good progression in volume over the last couple of quarters. We do expect to see another step up in growth over the coming months. We continue to be excited about the opportunity in China. You know, you saw the acquisition of Greatang. It's effectively a doubling down of our already strong positioning in the local Chinese authentic savory taste space. Greatang has its primary focus in the local food service market, but it is perfectly complementary to our Genuine Nature business, which we acquired in 2020, which had more of a retail focus. Now we can bring the same level of authentic local taste to both channels, both the retail channel and the food service channel, by leveraging the capabilities of both businesses.
We also see the opportunity going forward over time to layer in our salt reduction technology into those areas as well. You know, we have mentioned in the past that, you know, let's say, expectation management, as it relates to, to M&A, has been a, a, you know, a factor over, over the last year or so. We have, you know, let's say in the last two transactions that you've seen us make, there has been an earn-out element with, you know, let's say, significant, I would say stretchy, let's say earn-out metrics. And that's been, let's say, the, the, the, the tactic to kind of, let's say, bridge the gap between, you know, between, let's say, expectations.
We're, we're happy with the, the structure of those deals with, I would say, a significant portion of, of, of earn-out, based on, stretchy, targets.
Thanks very much, Edmund.
Thank you. The next question comes from the line of Jason Molins from Goodbody. Please go ahead with your question.
Hi, good morning. Edmond, you mentioned there, in terms of North America, that you were seeing a bit of churn in business in that market. Is that mainly in the retail channel or in food service? That's my first question. Then in terms of China and the improved performance that you've seen, where's the business now compared to sort of pre-COVID levels, and where do you see it, and how long will it take to get back to, I guess, that normal run rate that you've seen in previous years? Then final question really is around the, the margin performance and Taste & Nutrition. You called out efficiency plans that are progressing well and obviously have helped drive some of that margin benefit.
Can you maybe just elaborate a bit more on, on what that actually is and what you're driving through the business there? Thank you.
Jason, firstly, on, on the churn in North America, I, I would say we're, we're seeing it more in the retail channel. You know, we, we would, we would call out, let's say, you know, beverage as an area, snacking as an, as an area where we've seen significant churn. When I talk about that churn, it's, it's getting back to 2019 levels, actually. That has kind of, let's say, evolved over the course of the last six months. The level of churn over the last few years was, was less, and now what we're seeing for the, for the first six months of 2023 is more akin to 2019.
it's, you know, it's a, it's a, it's an area that we really target for, you know, to win market share and really target with our, with our innovation and proactive engagement with customers. So I, I guess, you know, while, while retail, you know, has been, you know, let's say, softer, in, in North America, at the same time, we're seeing quite a number of, let's say, new launches into the, into the market. We do have a, a strong pipeline there, and we do expect to be back in growth in the, in the retail channel, you know, in, in North America, or at least in positive territory by the end of the year.
Then in China, I mean, as you're, as you're well aware, it's been a, you know, pretty, pretty dynamic environment over the last number of years. I, I think it'll be, you know, let's say, probably out into 2024 before we get back to, let's say a kind of a more normalized, kind of a, a China scenario. Food service has, has been performing, very well for us in China. Let's say a more kind of, I would call it more Western, let's say, orientated food service, business, has been performing quite well for us in China.
Now with the acquisition of Greatang, we have more of an exposure to the more local food service chains, which we think is going to give us a good balance in terms of how we look at our overall business in China. As we look out to the coming years, and the medium term, we would continue to be, you know, pretty optimistic about the medium term and long term. It is a huge market. We're still, you know, we believe, under-penetrated in that market. We see a lot of upside over time. We have invested significantly over the years, both from an organic investment standpoint and an inorganic investment standpoint.
We feel we're well positioned both in retail, in, and in food service. We believe we have a particular strength as it relates to savory taste and authentic savory taste. I think with the combination of Greatang on top of what we already have, we'd be looking out, you know, fairly optimistically into the future, and getting to a more normalized, probably, performance in China, maybe in 2024.
Then, the margins, we had good improvements in margins in, in the second quarter, driven mainly as I, I mentioned, from benefits from the cost initiatives and also portfolio developments. In terms of the cost initiatives, specifically, we expect margin expansion of circa 30 basis points from the program this year, and that's slightly ahead of our expectations from a timing perspective. The benefits are on of the cost initiatives are coming through our Accelerate Operational Excellence program. It's progressing very well, and it's delivering on operational efficiencies in two main areas that I would call out. Firstly, manufacturing excellence through our plant transformation program, and secondly, supply chain excellence, focused mainly on warehousing and logistics.
Thank you very much.
Thank you. Our next question comes from the line of Fulvio Cazzol from Berenberg. Please go ahead with your question.
Yes, good morning, thank you for taking my questions. I just wanted to sort of ask one on the Americas, just given that we've seen that deceleration in Q2. Just wondering if you can somehow quantify what the destocking impact was? Because it sounds like with all of the churn opportunities and the strong performance in food service, your growth will be well above the 4%-6% targeted range if, if it wasn't for the destock. I just wanted to understand if you can quantify what the drag from destocking was. My second one is on Europe, where we actually saw an acceleration in Q2.
Just wondering if you can say a few words on the sustainability of that growth rate, because that's certainly doing a little bit better than what we would have expected over the medium term. Again, if you can just comment a little bit on, on what's driving that, please. Thank you.
Hi, Fulvio. Firstly on North America, I think it's key to note that while volumes in the Americas are lower in Q2 versus Q1, on an underlying basis, there's actually been very good progress between the quarters, given the year-on-year comparatives. As I said in the prepared remarks, in H1 2022, we had 9% volume growth in the Americas. That customer inventory management, you know, has been a significant feature in the retail channel. It has eased in the first half as we've moved through the first half, and it will continue to ease here as we progress through Q3. Shrinkflation has also been a feature and has become a feature over the last 12 months.
The last point I would just touch on in the Americas is that, while we did have a solid performance in LatAm, we did have significant maintenance work, which restricted our capacity in Mexico in Q2. This could have had a low single-digit impact on sales in LatAm in the quarter. That won't be a feature as we, you know, in Q3 and beyond. Then switching to Europe. The strong performance in Europe was due to a very strong food service channel growth, primarily driven by new launches, in, you know, for new summer launches, for beverage.
You know, the subsequent or related, you know, stocking, build up in the supply chain in, in advance of the, of, of the summer. The retail channel then was similar to last year. I suppose like we said back in April, we expected Europe to be more muted in the second half of the year. We're not calling out any, any change, any change in that outlook.
Thank you for that.
Thank you. Our next question comes from the line of Lauren Molyneux from Citi. Please go ahead with your question.
Hi, morning, Edmond and Marguerite. Thank you for taking, my questions. Just a couple. I was wondering if you could elaborate on the food service panel, and just kind of what you're seeing there. Any color on the frequency of purchase or the amount of purchases or kind of basket size in that channel? Then kind of after quite a strong Q1, sorry, H1, with high single-digit growth, what's your kind of best guess for volumes or, or how to think about volumes in H2 in that channel? Then secondly, I'm sorry if I missed this, but, I was wondering whether you reconfirmed that kind of 3% growth, volume growth for the T&N level for the full year, whether you're still happy with that or whether, you're a bit more cautious on that?
Also just on pricing expectations for the full year, given obviously a lot of the, the deflation, just how to think about pricing for the full year. Then the, the ability and kind of the confidence in passing that through, and also what you're seeing in terms of non-raw material inflation within your P&L and cost inflation there. Thank you.
... I'll, I'll take, I'll take the first two questions there. Firstly, on volume and, and volume outlook, I, I think it's, you know, maybe looking at it a high level perspective and how we're thinking about our business at the moment, we, we are very pleased with our overall performance and, and believe we're executing well, and we're positive about the second half. We are delivering volume growth against a challenging backdrop, where volume growth is hard to come by. We do expect a volume uptick in the second half and expect to be in that 2%-3% zone, you know, for the, for the full year. That's, that's how we're thinking about the, the full year from a, from a, an outlook perspective and volume.
On the food service channel, I suppose how we look at it by region. Firstly, I think it's fair to say we're extremely well positioned as it relates to the food service channel, and this is something you've been hearing from us for quite some time. We've had very good launch activity across regions. Volume growth in the Americas was low single digits. Europe and APMEA achieved good double-digit growth. The volume was supported by innovations, both in, you know, QSR chains and in coffee chains, probably on three areas: new menu items, the nutritional enhancement of menus, seasonal products, and of course, then solutions to enhance back of house operations. I think for us, the...
One of the reasons we feel confident about the channel is that our opportunity is actually growing within the channel, as well as the channel itself growing. That back of house, I suppose, operational complexity reduction opportunity was not an opportunity there previously. It is an opportunity that has presented itself over the course of the last year or two. We see it continuing, if not accelerating. It has started in North America, maybe over the course of the last 12 months, and we see this opportunity now at presenting itself in Europe. You know, that doesn't necessarily need the food service channel to grow itself, because our pie is actually growing within the food service channel.
I suppose from an outlook perspective, you know, we, we expect to see, I would say, continued strong growth for the second half, more or less in the same zone as H1. Again, with operational complexity reduction, nutritional improvements, and LTO activity continuing to be the key drivers.
Just on your pricing question, Lauren, for Taste & Nutrition, we currently expect low single-digit pricing for the full year, reflective of some pricing deflation expectation in the second half. For Dairy Ireland, we expect to see continued deflation. Just more generally on the other costs, no particular change. As we would've said, we have seen significant inflation in energy and labor related costs, which we manage through our pricing model.
Great, thank you.
As a reminder, if you'd like to ask a question, please press the star followed by the one on your telephone. Our next question comes from the line of Charles Bentley from Jefferies. Please go ahead with your question.
Hi, Edmond. Hi, Marguerite. Thanks for the opportunity to ask questions. I just wanted to ask a little bit more around the strategic value of the Greatang business. When I've done a little bit of digging, it appears to be split between kind of consulting, some market research, menu design, and store opening consulting, as well as seasoning sales, solid, semi-solid, and liquid seasoning. Is that right? Any indication of the split of revenues between the two would be helpful. Finally, in the release, when you kind of say, specifically mention it enhances your local taste innovation capability, specifically what you mean? Thanks very much.
Thanks, Charles. T here is no consulting revenue in this business. It is all product, it's all product revenue. It's a business we've been tracking for several years. It's actually a customer of our Genuine Nature business. And it's, it's quite complementary to, to that business. I, I think in terms of, let's say, the way they engage with their, with their customers is extremely proactive around, around the menu. It is a key, I suppose, way of engaging with customers on, in the food service channel around menu development. All the products supplied into the, the local food service, chains are taste-orientated products. I mean, let's say the, the, the, the main, I suppose, attributes of, of the products are taste related.
Genuine Nature, in terms of the, the building blocks of the authentic building blocks of taste, is a key factor in complementing that business and, and driving that business forward. The other factor there that we're very interested in, in, is that we're seeing that taste profiles migrating from the local food service market into mainstream, mainstream retail. We, we feel that now that we have strong access into that local food service, let's say authentic taste space, we'll be able to also translate that into snack applications and meal meals applications from a taste perspective. Quite complementary to what we already have there.
It's a deal that was done on a bilateral basis, and a business that we've been following for quite some time.
Makes sense. If I could just ask a quick follow-up. It's, it's essentially more channel rather than technology, as you'd say?
It's more channel than technology, yep.
Yeah. That's great. Thanks very much.
Thank you. Our final question for today comes from the line of Edward Hockin from JPMorgan. Please go ahead with your question.
Hi, this is Edward Hockin from JPMorgan. Thank you for taking my question. My first question is on the raw materials turning deflationary in H2. Clearly, the mechanical effect on pricing, but what can you say about the possible impact on volumes in Taste & Nutrition? Could there be some benefit as, as the pricing eases, or, or could there be some headwind from customers potentially delaying orders? My second question, if I may, is you talked of innovation, innovation activity helping to drive volumes improvement in the second half of the year.
Wondering if you could comment a bit more specifically on which categories in particular you see this innovation activity, what gives you the confidence of this step up, and how more broadly you see your market shares trending in your markets? Thank you.
Yeah. Just maybe on the pricing impact on volume. We I mean, I think pricing in terms of our customers and how they think about ordering, doesn't really have a huge impact on their order patterns as such. I mean, we are a relatively small proportion of their overall cost base, so it's not a major driver, and it's not a major thought process in terms of how we're thinking about that, you know, step up in volume as we're looking out into the second half. And that step up in volume is more driven from an innovation standpoint, the pipeline that we have with customers, both in foodservice and in retail.
I would say specifically in retail, from a category perspective, you know, we're, we're seeing an awful lot of churn in, I would say, in the beverage space. It is a category that has been impacted by both shrinkflation and destocking, but a huge amount of activity with many launches, I would say, right across the board. Probably the area that's most dynamic right now is the snacking area, and it's an area that we feel we're extremely well positioned. We have a strong foundational technology, taste capability as it relates to, you know, the whole areas of authentic stocks and broths, citrus, obviously in dairy as well.
Snacking to us is probably the most dynamic from an innovation standpoint now, and we're seeing a lot of customers in that space, investing, whether it's from a capacity standpoint, a new product development standpoint, a range extension standpoint. That's probably the category that's stand out and that has been stand out here for the last quarter, and we see it continuing for the next couple of quarters.
Thank you. There are no further questions at this time. Mr. William Lynch, I turn the call back over to you for closing remarks.
Thank you, operator. Yeah, we just want to say thank you to everyone for joining us on the call this morning. We wish you all a good day. Thank you.
Thank you. This does conclude today's conference call. You may now disconnect.