Good morning, and welcome to Kerry Group's Q1 2022 results call. Today's conference is being recorded. At this time, I would like to turn the conference over to William Lynch, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good morning, and welcome to Kerry's Q1 2022 IMS update call. I'm joined on the call by our CEO, Edmond Scanlon, and our CFO, Marguerite Larkin. Today, we'll start with a brief presentation which is available on our website.
Edmond will begin with his opening comments before handing over to Marguerite for the performance overview, and we will then open the lines for your questions. Before we begin, please note the usual disclaimer regarding forward-looking statements. I will now hand over to Edmond.
Thanks, William. Good morning, everyone, and thank you as ever for joining our call. Beginning with slide four and my overview comments. We're pleased with the strong business growth we delivered in Q1 of 12.9% organic at a group level. Group like-for-like volume growth was up 6.3%, driven by our Taste & Nutrition business.
Within the retail channel, we continued the good overall growth levels we've been tracking, and we achieved strong double-digit growth in the food service channel, which we were seeing strong business momentum, having already surpassed pre-pandemic levels at the back end of last year. We also had excellent growth and significant demand for our range of food waste solutions, as this is an area that our customers and their consumers were already focusing on from a sustainability perspective.
Now, given the current inflationary environment, the benefits of tackling food waste have even been further elevated. This brings me on to pricing of 6.6% at group level, and as expected, our pricing stepped up in the first quarter of the year. Over the last six months, our teams within our business have been working hard to actively manage through this inflationary environment in close collaboration with our customers.
Now moving on to the strategic front. We made a number of important developments in the period. The acquisition of c-LEcta in Leipzig, Germany, was a very important step in enhancing our biotechnology innovation capabilities, and we're very excited about the potential that we see here. Within the APMEA region, we expanded our local presence in Malaysia with the acquisition of ANMER, and we also made a number of investments in the Middle East and Africa.
The Middle East and Africa has been a very strong market for Kerry in recent years, and these investments significantly enhance our ability to deliver sustainable Taste & Nutrition solutions across the region. Finally, on our markets, what was very pleasing for me was the resilience of Kerry's overall growth in the period against a highly volatile market backdrop.
The inflationary environment and supply chain challenges that were a feature of our markets in the first quarter have been compounded by events in different parts of the world. First, the restrictions in China, which has had an impact on performance in the quarter, and second, the war in Ukraine.
Just to spend a moment on this. We continue to be horrified by the tragic events we're all seeing, and our hearts go out to the Ukrainian people in what is a truly devastating humanitarian crisis.
From the outset, we've done our absolute utmost to take care of our Ukrainian colleagues and their families right across the group, as well as supporting humanitarian efforts. Having initially taken measures to scale back our operations in Russia and Belarus, we took the decision to suspend our operations following extensive consultation with our stakeholders.
This was a very complex decision to make, with many factors taken into account, and not one that was taken lightly. In the food manufacturing sector, we all have an important responsibility across every market in which we operate, given the critical role our sector plays. Our aim, as we said when we announced the suspension, is to do so in a responsible and orderly manner while fulfilling our legal obligations.
We have taken significant steps in reducing operations with one manufacturing line already shut down, and we continue to work through the process in conjunction with the relevant parties and our customers. We'll update you further at our half year results as we work through the various phases involved. With that, I'll hand you over to Marguerite.
Thank you, Edmond. Turning to slide 5 and the summary financial overview. Group volumes were up 5.6% on a reported basis and 6.3% on a like-for-like basis, excluding the consumer foods, meats, and meals business, which we sold last year. Group EBITDA margins were up 10 basis points in the period.
This was primarily driven by accretion from recent portfolio developments, operating leverage and mix, offset by the impact of recovery of input cost inflation. Net debt was EUR 2.3 billion at the end of the period reflective of acquisition activity. Turning next to slide 6 and the group revenue analysis. Overall reported revenue increased by 8.1% in the period, driven by the components as you can see highlighted here.
Firstly, in the center of the slide, you have organic growth. Overall group volume growth was 5.6% and price was up 5.8%. On a like-for-like basis, this volume and price growth equates to 6.3% and 6.6% respectively. On currency, we had a 5.4% tailwind on revenue, driven by a weaker euro against the major currencies.
On acquisitions and disposals, there was a net decrease of 8.7% in the period which we have split out here. Acquisitions contributed 4% to revenue, driven primarily by Niacet and the effect of the meat and meals business disposal, as I mentioned, was 12.7% in the period. Moving next to slide seven and the Taste & Nutrition business review.
Volume growth of 6.8% was driven by strong growth across most developed markets, while recognizing a number of these had slightly lower prior year comparatives. Pricing of 4.6% reflected high single digit increases across our raw material basket in the period. Within our food end use markets, we had excellent volume growth in meat, in particular across all regions, with very strong overall growth in bakery and snacks.
From a channel perspective, growth levels in retail remained strong, while growth in food service represented continued momentum well above 2019 levels. Overall volume growth in emerging markets was 7.9%. This represented excellent growth in LATAM, the Middle East and Southeast Asia, partially offset by China. Now turning to the regional overview on slide eight. Starting with the Americas, which had overall volume growth of 6.7%.
This performance in North America was led by meat and meat alternatives, with strong growth through increased demand for food protection and preservation, taste innovations, and increased production levels at our new Rome, Georgia facility. We also had strong growth across bakery and meals, particularly in the food service channel, with further innovation activity in reducing back of house complexity and an increase in seasonal menu offerings.
In LATAM, we delivered strong growth with performance in Brazil led by meat and ice cream, while Mexico was driven by meat and snacks. In Europe, we had overall volume growth of 8.5%, driven by new launch activity in meat and dairy, while growth in the beverage end use market was driven by innovations in the nutritional and low, no alcohol categories. Growth was strongest in the UK, Central and Southern Europe, while recognizing softer prior year comparatives.
In APMEA, overall volume growth of 6.2% was driven by strong growth across the Middle East, Southeast Asia and India, partially offset by negative volumes in China as a result of the local restrictions introduced in the period. In snacks, we had excellent growth with regional leaders, while growth in meat and bakery was strong across both the retail and food service channels.
Moving now to slide 8 and the business review for Dairy Ireland. We had solid overall volume growth of 0.7% in the period, with increases across both dairy consumer products and dairy ingredients. Pricing was significantly up versus the prior year at 18.7%, reflecting increased dairy prices and raw material costs.
Within dairy consumer products, we had good volume growth right across the dairy snacking range, led by Cheestrings, partially offset by lower volumes in spreadable butter due to reduced promotional activity. In dairy ingredients, overall performance reflected significantly higher prices resulting from constrained global supply dynamics.
Turning to slide 10 and other matters, beginning with raw materials and looking at these by business. In Taste & Nutrition, we expect the high single digit inflation we saw in Q1 to rise to double digit levels in the second quarter.
At this point, we are looking at the second half continuing with inflation at double digit levels. In Dairy Ireland, we expect prices to remain firm while current supply constraints persist. On Ukraine, Russia and Belarus, overall, the region amounts to circa 1.2% of group revenue.
We will incur exceptional one-off costs associated with the suspension of our business in Russia and Belarus, both of a cash and non-cash nature. We are currently working through the details and we will update you further at our interim results. Finally, on currencies, which continue to be highly volatile, we are currently expecting a tailwind of circa 6% for the full year.
To sum up, before I hand you back to Edmond, I am pleased to say that we delivered strong business growth through the first quarter, and we continue to actively manage the inflationary price environment with our customers. With that, I'll hand you back to Edmond.
Thanks, Marguerite. Finally, moving on to slide 11 and the outlook and future prospects. Our markets are highly dynamic and currently there is a good overall demand environment despite uncertain market conditions in places. We remain confident we will manage through this current inflationary cycle with our well-established pricing model and cost initiatives.
As we begin our new strategic cycle, the progress we've made in recent years positions us strongly for growth, and we have a very good innovation pipeline. Today, we are reiterating our adjusted earnings per share guidance for 2022 of 5%-9% growth on a constant currency basis. With that, I'll hand you back to the operator, and we look forward to taking your questions.
Thank you. If you wish to ask a question at this time, please press star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will now take our first question from Cathal Kenny from Davy Research. Please go ahead, sir.
Good morning, all, and thanks for taking my questions. Two questions from my side. Firstly, on margin, the ten basis points increase in margin in the quarter. Could we get a breakdown between T&N and Dairy Ireland?
A related question on margin, just in the context of pricing, how should we think about margin, for FY 2022? My second question relates to food service, looking for commentary around performance of the food service channel by region in the quarter, and just a comment then on the outlook for that channel as well for 2022. Thank you.
Good morning, Cathal. I might take the food service question and Marguerite will take the margin question. Just on food service first. Like I said in the prepared remarks, we're very pleased with the progress that we've made through the first quarter, which you know basically was carrying forward the momentum that we had in our business in Q4.
With strong double-digit growth, you should think about it in the mid-teen zone. I think in terms of, let's say, where we are now versus 2020, 2019, well ahead of those levels, maybe to the tune of around maybe high single digits.
From a regional perspective, Europe had a very strong performance here in the quarter, ahead of the average performance for T&N. Americas was in line with the overall performance and APMEA tracking a little below, primarily due to China. In terms of the outlook, we do expect to continue to outperform our markets.
We're seeing more and more innovation coming through the channel. You know, I think we're seeing the benefit now really of the engagement that we had right through the pandemic. I think we've been gaining market share right through that period.
I think for us right now, that's really coming to fruition. The channel will still be volatile. Those constraints that I talked about previously in terms of labor particularly is still a factor in the industry.
The innovation pipeline as we look out still continues to be primarily driven by reducing complexity in the back-of-house. Overall, it's a channel that we're very well placed in. I believe we're winning market share, and we see that continuing here in the medium term.
Good morning, Cathal. A couple of parts to that margin question, so I'll take each of those in turn. Firstly, our overall group margins improved by 10 basis points, and we're pleased with that margin performance in the context of the current inflationary environment.
The expansion of the 10 basis points reflects primarily the positive effects of the recent strategic portfolio developments, as well as operating leverage and mix. Then obviously that is offset by a significant mathematical pricing effect given the recovery of costs in the current inflationary environment of circa 80 basis points in the period. They're the moving parts within the overall group margins.
I think if you look at the margins by segment, firstly on Taste & Nutrition, I would say again, in the context of the current inflationary environment, we are pleased with the resilience of the margin performance. While overall Taste & Nutrition margins were lower at circa 60 basis points in the quarter, again, this is driven by the mathematical effect of pricing, which was circa 80 basis points at the T&N level in the quarter.
That was partially offset then by margin expansion, due to the positive effects of the recent strategic portfolio developments, again, as well as operating leverage, in the period. In other words, for Taste & Nutrition, excluding the mathematical impact of pricing margins, they would have been up circa 20 basis points.
In relation to Dairy Ireland margins, Dairy Ireland margins were lower in the quarter on the like-for-like basis, and that was due fully to the mathematical pricing effect of passing through input cost inflation. Excluding this impact, the margins in Dairy Ireland would've been flat in the period. That gives a perspective of the performance in Q1.
On the second part of your question in relation to group margin expansion for full year 2022, obviously there's a number of moving parts, as I mentioned in February, particularly given the current inflationary environment.
To give you some context and again, using the framework that we outlined at the capital markets day, firstly, I would say that we will be looking for some operating leverage and mix benefits, as well as a substantial improvement from the portfolio development that we completed last year in the zone of 60 basis points.
Again, given the current inflationary environment, there will be a meaningful mathematical denominator impact on margins. As I said in the prepared remarks, we'll update you on this as the year progresses. Again, just to give you some context, as you know, if pricing got to 6%, this would have a mathematical effect on group EBITDA of in the zone of 90 basis points.
It is a meaningful impact in the overall year. As we normally would do, we will have cost initiatives and we will reinvest in the business. In summary, I would say there are a lot of moving parts as you can appreciate right now. Hopefully that gives you a sense of how we're looking at the overall evolution of margins in the current year and also the performance in the quarter.
Thanks, Marguerite. No, that's very helpful.
We will now take our next question from James Targett from Berenberg. Please go ahead.
Hello. Good morning, everyone. Couple of questions. I say firstly, just on sort of cost outlook. Thanks for the color on the sort of raw material cost inflation development. Could you, I mean, two questions on that. Could you just talk about any particular areas in the supply chain where you're seeing material constraints which could be, you know, a problem to your ability to fulfill customer orders or anything like that.
You know, you talked about raw material inflation, but anything you can talk about overall cost inflation outlook for the year, including things like, you know, energy and logistics costs, that would be very helpful. My second question is on, Edmond, you mentioned the very strong innovation pipeline.
You know, are you seeing any signs that, you know, in the inflation, consumer pressures on consumer expenditure, you know, is that impacting the type of inflation or, sorry, type of innovation or the appetite for innovation at all? Is there, you know, a difference particularly between what you're seeing in retail channels and food service channels when it comes to sort of demand for innovation? Thank you.
Thanks, James, and good morning. I might take maybe the supply chain questions and the demand and innovation and Marguerite, maybe you can come in with some comments then on costs.
Yeah.
Maybe on the supply chain side first, James, I would say that there's nothing I can really point to that would suggest that we're going to face some issues later on in the year. I think on raw material availability, yes, there are a few, let's say well-known factors, and some well-known raw materials that come from the Russia-Ukraine region, but they're not a major impact on Kerry's business. Sunflower oil, for instance, is one in particular. And let's say what we've seen there actually is some of our customers coming to us wanting to replace sunflower oil in their formulation.
That subsequently leads to, you know, a situation where maybe the product has emulsification issues, maybe it has some taste or some performance issues, and we would work on that. Directly, as it relates to Kerry in terms of raw material supply, I wouldn't be calling out anything major right now.
The logistics side is something we're keeping a very close eye on. China is a major supply hub for everyone in our industry. We have all seen, you know, let's say the significant backup of containers and container ships in ports in the China region. That is something we're keeping a very close eye on.
You know, we are taking some steps, and we have been taking some steps for the last several months to try and de-risk what we've been seeing there. You know, there's no complacency here at all whatsoever. It's something we're keeping a very close eye on, but nothing specific I could call out right now beyond the logistics issues that I just described. In terms of innovation.
Strong innovation pipeline. You know, let's say maybe on food service first, you know, we're seeing the return of LTOs and seasonal products. Reduction in back-of-house complexity continues to be there. We see plant-based becoming more mainstream. A lot of activity there in food service.
On the retail side, nutrition on the one hand, and let's say healthier products on the one hand and indulgence on the other hand are both driving the innovation pipeline. In terms of that, let's say customers looking at, and consumers looking at trading down or, you know, let's say looking for value opportunities. We're seeing some elements of that.
You know, today I would say demand is proving highly resilient. You know, that innovation for value hasn't really increased in any significant way. So there seems to be a fair bit of resiliency out there.
We are seeing some maybe family deals and things like that appearing on the food service side. As we sit here today, the inflationary impact on demand is not something that we're really seeing coming through the system right now. Of course, it's something that we're keeping a very close eye on.
Maybe James, on your question on inflation on non-raw material costs, it's fair to say, for the other non-raw material costs, we're continuing to see material inflation, probably most notably, I would say, on the energy and distribution costs. On distribution and energy costs, we've seen strong double-digit cost increases in 2021 and into 2022.
It's difficult to call it for the full year, but we do see that continuing. Labor is a bit more varied depending on the local market dynamics. I think what is important though, in the overall context of the inflation on non-raw material costs as well, is that we're managing these costs, and we continue to manage these costs via combination of pricing and cost initiatives.
There is a very significant amount of work underway right through the business in terms of managing the inflation as we pull various levers to recover the cost increases. Again, what I would say here is that, as we said in the past, our objective is to maintain our cash margins just as we move through what is an exceptional inflationary period. We're pleased that our model, our pricing model is proving quite resilient in the context of that inflation.
That's great. Thank you very much.
We will now take our next question from Jason Molins from GoodBody. Please go ahead.
Hi, good morning. A couple of questions if you don't mind. Just in terms of the pricing recovery, are you managing to get pricing recovery faster than normal or is it pretty much where you've normally been? Just layering on from that, are you noticing any customer reaction in terms of their purchasing?
Are they necessarily bringing forward purchasing? Are you allowing them to do that? That's my first question. Secondly, just around food waste performance. You call that out as a driver in the period. Maybe just a bit more color in terms of your portfolio there and what you're seeing. Thanks.
Thanks, Jason, and good morning. Maybe firstly on the let's say pricing and the impact there. Clearly, the level of pricing that we're at at the moment is unprecedented in my time. I would say that I'm very pleased at the I suppose the way we are executing in terms of let's say passing those price increases through, obviously we've had to lean heavily into the models we have in place. We had to lean heavily into the relationships we have.
This is something now that's been going on steadily for more than six months. I wouldn't call out any let's say major change. Of course, the big change being the scale of pricing, but no major change in ter ms of how we're, I would say, executing on price increases itself. Your point on, you know, let's say customers potentially, let's say, ordering ahead and things like that, it's something that is, let's say, hard to measure, but it is something we're keeping a very close eye on.
We have seen it at, let's say, in different places, but not to a meaningful level that I would call it out as something that, you know, let's say we need to be flagging. It is something that we do engage with customers on if we feel that they are overstocking.
I mean, the supply chain still is tight, so it's something that we do keep a very close eye on to ensure that, let's say that we're not seeing too much overstocking. It's not a factor, but something nonetheless that we're keeping a close eye on.
In terms of food waste, we have seen a step up there in the level of innovation, I would say. It is a heightened focus. And I think, you know, of course, the sustainability, let's say, impact of reducing food waste clearly is a factor, but there's also a cost factor here as well. Certainly for customers, we're seeing a renewed focus.
It has been there, but I would say a step up in focus on food waste, yes, driven by sustainability, but also driven by, you know, cost mitigation initiatives at customers. I think we're extremely well-placed to engage with customers there. We have seen a step up in the pipeline.
I think the acquisition of Niacet in combination of our, the previous investments we've made has enabled us to develop hybrid solutions for customers to help them to continue to make progress on the whole area of food waste. One area that we continue to be excited about and a step change in terms of the level of engagement with customers.
Thank you very much.
We will now take our next question from Faham Baig from Credit Suisse. Please go ahead.
Morning, guys. Thank you for the question. I have two or three, but pretty quick ones, I hope. With food service growing mid-teens, if my math is right, you're growing in retail at around 3.5%, which is still pretty resilient, given you suggested that you are now at a high single-digit % ahead of pre-pandemic levels when it comes to food service.
Could you kindly help us understand that despite food service recovering well into pre-pandemic levels, how you're able to continue to maintain the growth in retail and the outlook there going forward as well? Secondly, I want to come back to plant-based. Now we're seeing a slowdown when it comes to the market growth across a number of categories.
I know it's still a very small percentage of your sales, but could you give us an outlook for that category? If you also expect it to slow down or you remain optimistic for various reasons that you can see in the market. One final one.
Could you remind me your sales exposure to China within T&N, and whether you've needed to close facilities in the region that could impact sales going forward in the year. Thank you very much.
Thanks, Farhan. There's a lot there. I'll try and get through them as fast as I can. Thank you for the questions. Maybe just taking China first. You should think about it in the zone of 5%-6% of group revenues.
Let's say, as we said in the prepared remarks, volumes were lower in the first quarter in China. Volumes were lower in the zone of double digits down in the first quarter as a result of the impact of the restrictions.
We did flag that we did see some softening in China as we were turning into the year, and we did indicate that at the full year results. We have quite a geographic spread in China, Farhan. It is, we have five manufacturing facilities, all of them outside of Shanghai.
I would say, as we sit here today, despite the lockdowns that are quite severe in parts of China, four out of the five of those facilities are actually performing very, you know, quite well, very, you know, very well. One of the facilities is running maybe at 50%-60% capacity. That's more driven by supply chain issues as it is rather than anything else.
I would say certainly we're not insulated from the lockdowns or anything like that, but there is a resiliency there based on the geographic spread and based on the breadth of portfolio that we do have in China. Back to retail.
Yes, your mathematics is thereabouts. We came in on the retail channel just under that 4% target that we have there. I think it's important to note that, you know, this is something we've been flagging for the last year or so, that we will outperform our historic growth rates in the retail channel.
You know, I just talked previously on food waste. Emerging brands continues to be a factor here. We've seen a lot of innovation coming through, especially in North America. Retailers are continuing to be very open to giving retail space, shelf space to innovation.
We've had a number of new launches. You mentioned, you asked me about plant-based. We actually had a number of new launches in plant-based in North America. Actually, a new emerging brand launched.
Plant-based offerings across four categories, in meat snacking, in meat alternatives, in beverage and prepared meals. We were their key partner as they launched into North America.
You know, which brings me on to the plant-based question. I think, you know, whenever there's a new category emerging and plant-based still is a new category, there can be some ups and downs, pluses and minuses. Fundamentally, consumers want to eat healthier.
Consumers want to consume less animal-based proteins. They're absolutely open-minded as it relates to trying different options in the plant-based space. When we look at our pipeline, our customer engagement, plant-based continues to be.
We see it as being an important opportunity for Kerry going forward. Still growing double digits, yes, absolutely off a low base. There continues to be, you know, challenges there in terms of the taste of the product, the quality of the product, the label of the product.
These are all things I feel we're very well positioned to be able to help that sector to move forward. Yes, there'll be some ups and downs, but in any new category. It continues to be an area that we're optimistic about and feel we're well positioned to enable the industry to move forward.
Thank you, Edmond.
As a reminder, to ask a question, please press star one on your telephone keypad. We will now take our next question from Lauren Muller from Citi. Please go ahead.
Hi. Thanks for taking my question. Yeah, Lauren Molyneux from Citi. A couple questions, please. Firstly, just on your expectations for pricing in H2 in T&N, I was wondering if you can give a bit more color on that, and whether you're seeing any more visibility compared to when we last spoke.
The second question would just be around M&A. Obviously there's a lot of volatility on the backdrop, and I was wondering whether this means any more opportunities for you, and just what you're seeing there and expectations. Thank you.
Good morning, Lauren, and I might take the pricing question before Edmond comments on the M&A question. So as it relates to pricing, we had overall like for like pricing as you would have seen of 6.6% in the first quarter with Taste & Nutrition pricing of 4.6%.
It's quite difficult to call the pricing for the second half, just in the context of the uncertainty in relation to the inflationary environment, as I mentioned. But given that we expect raw material input cost inflation to be higher in Q2, and that continuing into the second half, we're also looking at pricing being a little higher as we move through the year.
It's just too early to be specific for the second half, and as we have to see where we are with new crops, and we need to complete our pricing for the second half of the year with a large number of customers, which is very much in progress.
A couple of key points though that I would give you, we expect pricing to be similar or higher in the second half. We'll obviously update you further at the interim results when we have firmed up much of the pricing for the second half of the year. Hopefully that gives you that, those comments in combination with the comments earlier on our outlook on raw materials, gives you an indication of pricing as we move through the year.
Good morning, Lauren, and thanks for the question. Just briefly on M&A, I would say we haven't seen any meaningful change in our pipeline. There continues to be good opportunities coming in our direction. At the best of times, it's hard to predict, you know, timing of transactions. Like you said, there is uncertainty there. It makes it even harder to predict timing. I'm not calling out at this stage any meaningful change in the landscape as such.
Thank you.
As a reminder, to ask a question, please press star one. We will now take our next question from Heidi Vesterinen from BNP Paribas. Please go ahead.
Good morning. If we step back, your guidance is unchanged despite losing 1% from the Russia situation, and China is probably a longer drag than you had expected. What parts of your business are you more optimistic about now that enables you to maintain guidance for the year? That's the first question.
Second question. Could you talk about your outlook for the emerging markets, please? I wondered if you see any risk of trading down or price elasticity effects in these sorts of regions. Lastly, we talked a lot about raw material inflation. Could you talk more specifically in terms of what are some of the key raw materials which are impacting you most? Thank you.
Good morning, Heidi, and I'll take maybe the first couple of those questions and Marguerite can give her comments. Maybe just on the outlook first. As you know, everyone knows, there are always many moving parts when it comes to the outlook of the year. We have called out that we have reaffirmed our guidance.
We do see a good overall demand environment. I would particularly call out the North America market as you well know is a very important market for us. That demand environment continues to be strong. I suppose then, you know, in terms of China, you know, yes, we did call it out in February. We are seeing impact of restrictions. You know, we had factored that in at the beginning of the year to.
Not to the extent that we've seen, no, but we did have it baked into our guidance at that time. Like you say, the Russia-Ukraine war in Ukraine, we have factored in that impact into our guidance as well. Clearly we have had a good start to the year. We do have a strong innovation pipeline. Food service is coming back probably a little bit ahead and a little bit stronger than we expected. Areas like food waste also have ticked up.
With you know a lot of moving parts, but looking at everything, we feel comfortable reaffirming the guidance. In terms of emerging markets, you know, it's 27% of our overall business.
Overall emerging market growth in the quarter at 7.9%. Usually that's more in the double digits. Obviously there's a China impact there. But that emerging market growth, you know, does represent excellent growth in LATAM. Middle East, India, Southeast Asia, they are offsetting, you know, let's say, to some extent the impact of China.
Heidi, just on your raw materials question. I guess my first comment I would make is that right across the categories, all categories, we're seeing inflation, very limited decreases. Maybe perhaps vanilla is an example. Where we're seeing the most significant increases are natural oils, spices, dairy ingredients and cereal crops. Obviously on the non-raw material side, predominantly on the energy side.
Thank you.
As there are no further questions at this time, I would like to turn the call back to your speakers for any additional or closing remarks.
No, just to say thanks to everyone for joining us on the call this morning. If there are any further follow-ups, reach out to myself and the IR team here and we all hope, wish you a good day. Thanks very much.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.