Good day and welcome to the Kerry Group Q1 2021 IMS conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to William Lynch, Head of IR. Please go ahead, sir.
Thank you, operator. Good morning and welcome to Kerry's Q1 2021 results update call. I am joined on the call by our Chief Executive Officer, Edmond Scanlon, and our Chief Financial Officer, Marguerite Larkin. Edmond and Marguerite will take you through today's presentation, and following this, we will open the line to 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, thank you for joining our call a little earlier than usual this morning. Beginning with slide four and the overview of the first quarter. Before I get into the detail of the slide, my key takeaway and what I'm most pleased about from the first quarter was the strong business momentum we saw as we progressed through the quarter. The first quarter has seen dynamic market conditions right across the period. We've seen a number of countries with increased mobility, substantial reopening activity, and increased consumer confidence, while other countries continue to adapt to changing local conditions. We've also seen a lot of variability across our end-use markets with some standout performances, beverage being the most notable from my perspective.
Looking at the slide here, as highlighted over the past year, a key dimension when analyzing our performance is through the channel lens, and firstly, the retail channel, which amounts to circa three-quarters of our Taste & Nutrition revenue. It had a very strong growth of 5.9% across the first three months of the year. This is notable outperformance versus historic levels. Growth here was led by beverage, snacks, and meals, which had excellent performances, particularly in the Americas and APMEA. In the food service channel, our volumes were back 8% in the first quarter, and growth in the channel in APMEA was led by China. We saw increased restrictions in Europe, which had a significant effect on our performance there, while the Americas had a strong recovery back to growth for March.
This meant our food service channel returned back to overall growth by the end of the period, which we are pleased with. The combination of this continued strong performance in the retail channel and the improvement in food service meant we exit the quarter with very good momentum and strong mid-single-digit volume growth in Taste & Nutrition in March. This performance was supported by good business development with our customers, where we saw a lot of innovation activity, particularly in the areas of proactive health and immunity, plant protein, and supporting our customers right across the sustainable nutrition spectrum. We also made good strategic developments on a number of fronts. We made progress across our new facilities in Rome, Georgia and Durban, South Africa, both of which will be commissioned and operational over the coming quarters.
We announced the construction of a new taste manufacturing facility and R&D center in Indonesia. We also announced our intention to acquire Biosearch Life in Spain, which is expected to finalize in the second quarter. Overall, to summarize, we're pleased with the momentum we saw through the first quarter. With that, I'll hand you over to Marguerite for the overview of the business performance.
Thank you, Edmond, and good morning, everyone. Starting with slide five and the Q1 financial overview. Firstly, we had overall group volume growth of 1.9% in the period, which I'll give you more detail on in the coming slides. Pricing in the period was 0.5%, which reflected increased input costs. Group trading margins decreased by 50 basis points, which was principally driven by net COVID-related costs and adverse foreign currency movements. Overall net debt decreased slightly to EUR 1.9 billion. Turning to slide six and the breakdown of revenue components. Overall, reported revenue reduced by 3.5% in the period, comprising a number of elements. Group volume growth of 1.9%, reflective of 2% volume growth in Taste & Nutrition and 1% volume growth in Consumer Foods.
Pricing, as I mentioned, was 0.5% for the period, and we are expecting this to be higher in the full year due to increased input costs. Transaction currency had an adverse impact of 0.2%. Translation currency was adverse 6.7% on revenue in the quarter, driven primarily by currencies in the Americas. Based on the latest exchange rates, we're currently expecting a full year headwind of circa 2%-3% on revenue and just north of 3% on earnings in 2021. Finally, the acquisitions we completed in 2020, Jining Nature, Bio-K+ International, and Tecnispice, contributed 1% revenue growth in the period. Moving now to slide seven and the Taste & Nutrition overview. Overall volume growth of 2% in the first quarter reflected continued momentum with a strong improvement through the period. The main driver of performance in the first quarter was our retail channel, which achieved volume growth of 5.9%.
This was led by the beverage end-use markets in the areas of tea, coffee, and refreshing beverage, in particular. In snacks through savory taste systems and healthier snacking, and in meals through culinary taste systems and health and wellness meals incorporating Kerry's proactive nutrition portfolio. In the food service channel, volumes declined by 8.2%, which represents its continued market outperformance and notably a return to volume growth in March. Finally, on this slide, developing markets grew by 10.7%, with good overall growth across each of our three regions. Turning to slide eight and our regional business performance within Taste & Nutrition. Beginning first with the Americas, which has overall growth of 0.4% in the period. The retail channel in North America delivered strong growth driven by beverage, snacks, and meals.
Food service recovered from a slow start to the year, resulting from bad weather across the country and capacity restrictions in place on food service operators before returning to growth in March. Within LATAM, we had strong growth in Brazil, most notably in beverage and ice cream, while Mexico had overall growth in the period, and CACAR remains challenged. In Europe, overall volumes were back 2.4%, as this region continued to be the most impacted by COVID-19. Retail delivered volume growth given strong comparatives in the prior year, while food service was significantly impacted by restrictions throughout the region. In APMEA, we had volume growth of 11.7%, which was driven by performances in China, the Middle East, and Australia, while Southeast Asia continued to be impacted by ongoing restrictions.
The retail channel in APMEA delivered strong growth in the beverage, snacks, and bakery end-use markets in particular, and growth in the food service channel was led by Beverage and meals end-use markets, supported by increased limited time offer activity and new launches across the period. Finally, turning to our Consumer Foods division. Overall volume growth for the division in the period was 1%. This performance represents a strong underlying volume growth given a stocking benefit of circa 3% in the previous quarter. Meat snacking delivered very strong growth through the Fridge Raiders range, while Kerry's award-winning meat-free offerings continued to grow very strongly, supported by range extensions and a number of new innovations. Overall trading margins improved by 20 basis points, primarily through enhanced product mix. In summary, I'm pleased to say our performance overall reflected a strong improvement in momentum through the quarter.
With that, I'll hand you back to Edmond for the outlook and future prospects.
Thanks, Marguerite. We'll now turning to slide 10 and the outlook. Within Taste & Nutrition, we continued strong growth prospects in the retail channel, underpinned by very good innovation pipeline, strong core engagement. We've outlined the good progress we've made in food service, while there continues to be a lot of variability in the channel across regions, we expect further recovery and market outperformance in the channel given the strength of our offering and the nature of our business model. Within Consumer Foods, we see a good growth outlook supported by continued innovation and our strong brands.
Overall, the good business momentum we've seen and the improvement in conditions in a number of our markets means that we are providing guidance today for the full year, where we're expecting to achieve strong volume growth and are guiding adjusted earnings growth of 11% to 15% on a constant currency basis. With that, I turn it back to the operator for your questions.
Thank you. If you would like to ask a question on today's call, please signal by pressing star one on your telephone keypad. That's star one to ask a question. We will pause for one moment to allow everyone to signal. Again, that's star one. We can now take our first question from James Targett from Berenberg, p lease go ahead.
Hi. Good morning everyone? Great start to the year. Just a real question on your guidance, particularly on the volume side. Could you maybe sort of quantify where you see volumes landing for the full year right now as things look and maybe talk about some of the things that are creating, I think we still think there's limited visibility as it relates to the reopening for the food service recovery, other particular countries, which are the particular markets where you think there's particular uncertainty in terms of the outlook. Give us an understanding there. Then maybe we could talk also about the shape of margin for the full year, obviously down as expected in the first quarter. I know the guidance was more for back-end weighting, how you expect margin to progress over the next few quarters would be helpful.
Finally, just in terms of the obviously very strong retail channel volume growth in Taste & Nutrition, can you just sort of talk on a regional basis, were there some sort of markets really kind of lifting that, or we could talk about kind of double digit growth in China or something, which is really boosting that. Just how broad based is that growth? Thank you very much.
Good morning, James. Thanks. I'll take the growth orientated questions and Marguerite can take the margin question. Maybe just picking up on the last part of your question first on retail. What was particularly pleasing about our retail performance, I would say in Q1, albeit we must recognize that we had, let's say, a somewhat challenging Q1 in 2020 in the retail channel, is that we achieved around a 6% growth, each of the three months in the first quarter. That was particularly pleasing. While we don't expect that to continue in retail over the coming quarters, I think it is fair to say that our growth in retail will be at a higher level than what we've seen historically. Historically, we've seen growth maybe in the three zone.
We do expect growth in the retail channel to be somewhere around the four zone going forward, but particularly pleased with the consistency of growth for the first three months, albeit off slightly softer comparatives for Q1 2020. Maybe just looking a little bit at the food service channel. I suppose, like we said at the full year results, it is the channel that we're, let's say, concerned about in terms of visibility, and there's quite a bit of variability there still. That said, we've had a huge level of business development. I would particularly call out in the beverage area and the plant-based meat alternative area where we've seen a lot of activity.
Probably the area where we've seen most activity on food service recently, and this is somewhat of a change since we talked about it the full year, is this concept of reducing complexity at the back of the store for food service operators. How that's manifesting itself for Kerry is that we're engaging with customers around, for example, cooking method flavors, where customers are trying to speed up the back of house, reduce complexity at the back of the house. We're talking to customers about wok-fried flavor, sautéed flavors, and we're also seeing a reemergence of sous-vide as a cooking method. We're working with customers at developing various taste components that can deliver in that type of environment. What we're seeing from an activity standpoint, especially North American food services, is operational simplicity trumping everything else right now in food service.
All of that put together, looking out into Q2 and looking out into the full year, I think we have baked the level of variability and volatility into the guidance that we've seen. I would say from a volume perspective, we're expecting somewhere in the region of strong mid-single digit growth from a volume perspective in the full year, and that's baked into the guidance that we have shared.
James, I'll take your question on margin in the context of guidance. We expect significant improvements in margins in 2021 versus 2020. Clearly, there'll be a number of moving parts within margins this year. Firstly, I would call out we will have good operating leverage and some mix enhancements also. We continue, though, to have net COVID costs and some supply chain costs to manage in the short term, just in light of the current environment. As I said at the full year, we will have some incremental investments in those areas where we are seeing accelerating consumer trends and good growth opportunities. Overall, we expect a significant improvement in margins, although we won't be back at 2019 levels. Obviously, we'll give more color at the half year on the component parts of our margin.
Thank you.
We can now take our next question from Alex Sloane from Barclays, p lease go ahead.
Hi, good morning, Edmond, Marguerite, and William? Two questions from me, if that's all right. Just firstly, on the input cost inflation outlook that you referenced, can you give a guide at this point on your thinking here for the full year? Just confirm that you're happy that in Taste & Nutrition, you'll continue to be able to pass that through given your pricing model. Then just secondly, I appreciate you don't give cash flow details with Q1 IMS. Marguerite, at the full year, you indicated you thought that for 2021 you could be in the zone of 80% cash conversion. Just wondering after the performance year to date, is anything at this stage that would sort of change your view on that? Thanks.
Good morning, Alex. Maybe your last question first, and you're right, we don't update some details on cash at the quarter. I would say, consistent with what we said at the full year announcement, we are looking at a significant improvement year-on-year with cash conversion, as you mentioned, in the zone of 80% for the full year, and we're on track in relation to that expectation. Just to take your second question in relation to input cost inflation. It's fair to say, as of today, we're looking at low to mid-single digits inflation on input costs for the full year. Again, I would say that this is an area that we have a long track record of managing, and we've managed it very well.
As you've mentioned, we have a very well-developed partnership pricing model with our customers, and these costs will be managed with our customers via pricing and cost initiatives. That being said, in times of significant inflation, there can be a lag up to a quarter in terms of that pass-through, but nothing that I would call out very much a short-term timing impact.
That's very helpful. Thank you.
We can now take our next question from Charles Eden from UBS.
Hi, good morning? Two questions from me, please. Just firstly, you mentioned a lot of variability by geography in the food service channel. I just wondered if you could give us a little bit more detail of how that 8% decline for the quarter ranged by geography, that would be helpful. My second question is just a bit more longer term. You mentioned the plant-based opportunity and you compared to [inaudible] Edmond, c an you just give some color there? How big is that for you today? What are the growth rates you're seeing? Maybe if you could split out the growth between your branded portfolio in Consumer Foods and what you're seeing through your Taste & Nutrition offering and plant-based, that would also be very helpful. Thank you.
Thanks, Charles. Good morning. Firstly, on the food service. Just to put some color on that by region. We were, I suppose, first and foremost pleased with the progress in the quarter, ending up that 8.2% versus the market that we've estimated at around being back roughly in the 11% to 12% zone with quite a bit of variability by region. You should think about Europe, Charles, back in the mid-teens zone. The Americas were somewhat similar, let's say, to the overall reduction in Taste & Nutrition. In the APMEA region, food service returns to growth in the period in the low to mid single digits. Good momentum. Clearly there was, let's say, quite a challenging start to the year. We flagged that at the full year results. Overall culminating in growth in volumes in the food service channel in March.
In terms then of plant-based, look, it's a space that we're really, really excited about. There's a huge level of innovation and customer engagement in, I would say right across the regions, but primarily in Europe and in North America. We are seeing a relentless drive to take plant-based meat alternatives to where there's no discernible difference between real meat and the meat alternative. The meat alternative must be more sustainable and healthier. That is the goal. When we're engaging with customers, and we have a really differentiated offering for customers, we can help them get there. Now, customers are at different levels of, I suppose, achieving that ambition. Some customers are at, let's say still at generation 1, other customers are at generation 2 or 3.
I would say from a Kerry perspective, from when we look at our innovation programs, our internal innovation programs, our teams are working on generation five, six, and seven as it relates to plant-based meat. We see a lot of runway here ahead of us. We feel we can really participate really strongly in areas of taste, texture, clean label, natural preservation. It's right now from a size perspective within our T&N business, it's 0.2%. It's growing rapidly, it's a space that we're really excited about. In terms of Consumer Foods, the performance of the brands are continuing to perform well. We're continuing to gain market share. It's a great example of the collaboration between our Taste & Nutrition business, where those brands are powered by the technology within our Taste & Nutrition business.
Overall, the space that we'd be really excited about for the long term, and it's a space that we're continuing to allocate resources and have a strong innovation pipeline, a strong short-term, medium-term, and long-term innovation pipeline around.
Super. Thank you very much.
Thank you. We can now take our next question from Heidi Vesterinen from BNP Paribas. P Lease go ahead.
Morning? I've got three questions. The first one is, do you have any view on when food service will get back to pre-COVID levels across all regions? Any perspective you can share on that. Secondly, could you talk about the sustainability of the recovery you're seeing in the emerging markets please, perhaps by region. What are you seeing in India, if you have exposure there? Last one, what is your latest thinking on M&A please? We hear from many others that perhaps private targets are more willing to engage given valuations are high. Do you see that as well? What's the outlook for you for the coming year? Thanks.
Thanks, Heidi. Maybe taking your last question first on M&A, I would say first and foremost that the pipeline is strong. I think it's fair to say that we predicted that we would see a significant level of, let's say perhaps unsolicited types of opportunities coming onto our desks. We are seeing that. We have seen some of that. I would also say is that when we look at the pipeline and look at some of the opportunities that are coming across our desk, they have benefited from the, let's say, a COVID bounce, for the want of a better term. Look, we have a consistent approach to our M&A activities. If you look back over the last several years, it gives a good indication of the types of opportunities that we're looking at and continue to look at.
We continue to be busy, I would say, on an M&A pipeline. As usual, it's hard to predict and even harder to predict these days in terms of executing against particular M&A transactions, but a strong pipeline overall. In terms of your first question as it relates to the food service channel and when do we expect to see that channel come back to pre-COVID levels. Frankly, it's a little bit too early to call that right now. Let's say looking at China as somewhat of a proxy, and I'm not suggesting it is a perfect proxy for the rest of the world. We've seen a huge acceleration on innovation in the food service channel in China. My second call-out would be Australia. As you're aware, Australia is, let's say, back to so-called normal with a significant level of outdoor activity and things like that.
That's another region where we've seen a significant acceleration on the level of innovation back to pre-COVID levels in that country. Again, another somewhat of a proxy for the rest of the world. I would still be cautious in the short to medium term about actually committing to where I see that panning out. It's something we'll touch on again, I'm sure at the half year. In terms of developing markets, let's say more broadly, I suppose in some respects one could say we're back at the 10% level. We're back at double digit level in developing markets. There is a huge level of variability there. Clearly, China is the standout performer. Also we've had good performance in the Middle East, good performance in Russia, good performance in Brazil. It's more than China, which is positive.
We are seeing growth in those other regions as well. On the other side of it, you mentioned India. Clearly, it is very sad and very concerning all what we're seeing coming across the TV about that in India. I would say that we actually had a solid start to the year in India. It's somewhat a smaller proportion of our business, as you can appreciate. We would expect some challenges in India here in the short term until things, let's say, normalize and the current crisis alleviates. Generally speaking, I would say we'd be quite optimistic about developing markets. As you've recently seen, we have just announced another investment in developing markets with a new facility coming on in Indonesia in the wholesale space. Others, Durban, South Africa, for instance, will be coming online here sometime in the next few quarters as well.
We continue to be very optimistic, but quite a bit of variability, and I'm sure we'll give you some more color at the half year.
Thank you.
Thank you. We can now take our next question from Cathal Kenny from Davy Research, p lease go ahead.
Good morning, all? Two questions from me. Firstly, on the beverage end-use market within T&N, I know this is a critically important market for Kerry. Can you expand on that? Secondly, it's thesis, but how does the overall pipeline and innovation pipeline inform your view on kind of the full year outlook for volume within T&N? Thank you.
Thanks, Cathal. Just on the line wasn't great there. On beverage, I think first and foremost, I call out two key drivers to our performance in beverage. It's all around this concept of functional beverage. The first thing we're seeing is drinks that are strictly formulated with specific functions. That might be immunity, digestive health, sleep aids, stress alleviation, et cetera. Highly, strictly formulated, very specific, and we've a very strong pipeline of extracts and science-backed immunity and digestive health portfolio that is fully aligned to what's happening there. That's kind of let's say one end of the spectrum. The other end of the spectrum then, still within the same, let's say, subcategory, is this concept of functional boosts.
We're seeing this particularly in the food service channel where, just to share an example, we're seeing operators with maybe perhaps simple juice offerings where they may have two dispensers of juice offerings, and they're converting one of those juice offerings by simply adding, let's say, an immunity boost by way of stick pack or some powder addition in at the top of the dispenser. That's enabling them to have a more premium functional beverage that is fully aligned to what the consumer is looking for. I would say there's taste opportunities there for Kerry. There is modulation, sugar modulation opportunities there, and also proactive health opportunities. It's a very exciting set of developments.
From a customer segmentation standpoint, we're seeing that level of innovation right across all customer segments from emerging brands on the one end, maybe to global CPGs on the other end of the spectrum. In terms, I would say, of the pipeline, we would regard our pipeline as strong. Clearly, we benchmark ourselves versus previous quarters, previous years as we look at our overall pipeline. We would be quite excited about our pipeline. There continues to be some element of variability and volatility in terms of how customers are engaging in terms of getting products to market and the speed of getting products to market. Clearly, Europe, continental Europe specifically, we are experiencing some delays in the conversion of the pipeline. As a general comment, I would call out the innovation pipeline and the growth pipeline as being quite strong.
That's great. Thank you.
Thank you. We can now go to our next question from Graham Hunt from Morgan Stanley, p lease go ahead.
Hi, everyone, thanks very much for the questions. Just two from me, please. Just coming back to the plant-based division. Just trying to understand how you think about the competitive environment there and where you really see Kerry's edge in terms of winning contracts and growing ahead of the market, or whether eventually it's just a large enough market for all of the players involved from an ingredients perspective. The second question just comes back to the strategic review of the dairy-related business. I wondered if there was any update on timing there, and whether the announcement around negotiations with your cooperative have been stopped, whether you could add any color to that in terms of whether it affects the strategic review process. Thank you.
Thanks, Graham. Look, as you can appreciate, it would be inappropriate of me to comment on any specifics around the co-op. What I would say is the strategic review continues, like we said at the full year results. We saw this progressing through the second half of the year. I'm sure we'll come back with more details on how that review is going at the half year results. In terms of plant-based, like I said previously, there is a relentless drive and focus to get to a situation where the meat alternatives are effectively indistinguishable or indiscernible to real meat. What does that mean from a Kerry perspective? Where we participate is on taste components, texture components, clean label, and in preservation.
From a customer perspective, none of our customers are particularly happy with the products that they have in the market because they haven't yet achieved that goal of no distinguishable difference. So we're seeing many new customers come into this space. It's a space where we have seen probably the biggest, I would say, influx of new customers into Kerry. And secondly, we're seeing, let's say, more traditional players, traditional meat players, larger traditional meat players really, I would say, start allocating and reallocating resources to this space. So a huge amount of activity there. And in terms of, I think, our position within the meat space and the meat alternative space, there's no doubt that we have a benefit of having our Consumer Foods business that is focused on plant-based food with us as well.
That has been an advantage in this particular time frame, where we have both the front end, let's say, and the back end connected. We have effectively real-time feedback from the market that we can learn from that and continue to both enable our Consumer Foods division, but also enable other customers to get to where they want to get to. It's a space where we're really excited about. I think it's a space we'll be well-positioned to continue to grow right out over the next 10 years-15 years, frankly.
Thanks very much.
Our next question comes from Jason Molins from Goodbody, p lease go ahead.
Thanks very much, Edmond and Marguerite. Just firstly, Edmond, I think you mentioned exit rates being up mid-single digits in the recent quarter. Just wondering how that splits across retail and food service. I'm not sure I picked that detail up. Second question is really around any commentary you can give in terms of performance within your customer set, whether that's the global CPG customers down to more local and regional players. My final question, again, back to the strategic review of the dairy business. Appreciate that's still ongoing, but maybe you can give us a sense of the current relationship with the co-op. Bear in mind there's a few newspaper articles talking about the milk supply agreements and whether that contract gets terminated and obviously the milk price arbitration process. Any commentary on that would be helpful. Thanks.
Yeah. Thanks, Jason. Maybe taking your last question first. Pardon for me to say here that, look, we've made our position clear on this many times in the past. We have an ongoing relationship with the co-op and with our milk suppliers for the last 50 years. We discuss milk prices on a monthly basis, and you'll appreciate that it's not appropriate to comment on the specifics of those supplier commercial terms. In terms of media speculation, well, I'm not going to comment on any speculation. Our position is that we have paid the leading milk price on a like for like basis, and there are no other outstanding payments due. That has been consistently our position, and that continues to be our position.
In terms of the customer segmentation and, let's say, the various performance levels of our customers, I think maybe taking a step back for a second and looking at what's happening from a consumer perspective, and this is happening right across both retail consumers and food service consumers, is there is a really strong desire for innovation, and there's a real thirst for innovation and just new products and trying new things. I think consumers are agnostic in terms of where that innovation and new product development is coming from. I mentioned at the full-year results that we had seen a significant acceleration from the emerging brands, particularly in North America. That is continuing.
We're also seeing a significant level of innovation coming from both regional and global customers, especially as it relates to functional food. I already talked about functional beverage, but also on areas like snacking, a significant level of innovation. Just on developing markets, the level of innovation is primarily being driven by local taste experiences. I think we've seen an acceleration in the local and regional fairs, I would say, since we last discussed that at the full year. Pretty broad-based in terms of innovation. I believe that consumers are somewhat agnostic about where that innovation, where the new products are going to come from.
In terms of March and how that is performed. Look, I'm not going to get into the specific of every month here. There has been, I would say, a strong acceleration, or a strong recovery I should say, on food service. Like I said, retail has performed consistently across the first three months at that 6% zone. What might be useful is just to make a quick comment on Q2, which we expect from a T&N perspective to be in the mid-teens zone from a volume growth perspective.
I'm sorry, Edmond, in terms of that sort of mid-teen growth, what should we think about, I guess, you sort of alluded to that retail performance. I guess that the delta then is really on the food service front, if we should think about retail in that, I guess forward?
Well, I'm not going to start splitting out by channel here for quarter- to- quarter, but I think, look, mid-teen growth, in that zone, Jason, of mid-teen growth for Q2. Like I said previously, the retail performance of the 6%, that's not something we expect to continue to see going forward. We'd probably be more in the fours zone, and then the balance then will be food service.
Perfect. That's it. Thanks very much.
Thank you. Our next question comes from Faham Baig from Credit Suisse, p lease go ahead.
Good morning team? I'm going to keep it short. Two from me as well, though. Firstly, we've spoken a lot about innovation and the demand for innovation from your customers, as well as Kerry proactively helping food service operators with innovation. Could you maybe give us some quantification in trying to help us understand how big innovation actually is today? Maybe you can discuss what proportion of your sales were launched five years ago or three years ago, just to give us a bit of idea how meaningful this is. The other way you could maybe help us try gauge it is, as you discussed strong mid-single digit volume growth this year, what proportion of it will be coming from mix and what proportion of it will be coming from volume to try and help us understand this innovation dynamic.
Secondly, we're now sort of 12 months into this pandemic. I just wanted to understand whether, I guess two parts. Firstly, is there anything that has surprised you so far? Secondly, have we seen any down trading at the customer or consumer level that you'd like to call out as well? Thank you.
Thanks, Faham. I'll try and answer those questions as best I can. Maybe on the second part of your question, I would say it goes to the fact that it's really hard to draw conclusions on the last 12 months yet, because there continues to be a huge level of country to country variability and volatility. Obviously, we're in a very different place in, let's say, even in a two-month period in North America from where we were in January versus where we were in March. That's kind of an eight to 12-week period. Things are evolving really quickly.
I would say continental Europe continues to be a challenge for us and is somewhat challenging, whereas in the U.K., we would expect, let's say, an acceleration in the U.K. over the coming months on the basis of where the U.K. is from a vaccine perspective and things like that. It is super difficult, I would say, to draw conclusions at this moment in time due to the level of variability. Our approach is to stay really agile and to stay really nimble. We are seeing some elements of down trading. We are seeing, let's say the real lower price point type products perform quite well in some developing markets. We're also seeing the premium level also perform really well in other markets. It's probably at both ends of the spectrum that we're seeing growth opportunities.
For customers that are looking at their specific offerings and trying to pitch at both ends of the spectrum. We are seeing customers being really conscious that they don't go too far in the cost side in terms of removing benefits and removing features from those low-end products. There's a lot of, let's say, specific formulation going on to a particular price point as opposed to rather just cheapening a product. In terms of innovation metrics, it's not something I'm going to get into, Faham, in any great detail. I would say that the market is dynamic, and every quarter that we have these sessions, there's something slightly different. The big areas of clean label, plant-based meat alternatives, nutritional improvements, localization, all those, let's say, innovation-driven trends continue to be there.
What's new maybe this quarter that wasn't there in the past quarter, especially as it relates to food service, is opportunities to work with customers to drive less complexity and some simplicity in their back-of-house operations. That's manifesting itself in taste opportunities, like I said, cooking method flavors, and things like that. That's as far as I'm prepared to go today in terms of, let's say, what's happening from an innovation standpoint, and I'm sure we'll put more color on that at the half-year results.
Thank you.
Our final question comes from Lauren Molyneux from Citi, p lease go ahead.
Hi there? Thanks for taking my question. I guess just a final one around food service. I know you talk about food service being back to growth in March. I was just wondering whether you could give us an idea of what it did in March last year so we can kind of get more color on the comparison and what you're growing off. I just wanted to maybe get a bit more color also on if you're seeing any rebuilding or restocking ahead of food service operators reopening, whether you've seen any of that in Q1 and you're expecting that in Q2. Finally, kind of still on food service, you talk about taking market share. I'm just wondering what you see in the actual market, maybe can you give us any growth rates of how fast the market is growing?
If what's driving these market share gains, do you think is it more both existing customers or are you taking new customers? Thank you.
Thanks, Lauren. Lauren, in terms of the March comparables, I just don't have that to hand right now. Clearly March 2020 was impacted in certain regions. I'm sure William can get back to you on that particular answer. In terms of performance, generally speaking, in the food service channel and the performance versus the market, I suppose we've seen some, let's say, results coming through from some of the larger players in food service. What's been interesting for us to see is the, I suppose, the divergence that has happened in recent months and quarters between same store sales growth on the one hand and traffic and guest count on the other end. We've seen a much larger divergence there in terms of what would be normally expected, and time will tell if we see a coming together of both those metrics going forward.
Our sense of it is that tickets are very high right now, and time will tell whether they will continue to stick. The reason that's important obviously is from a Kerry perspective, we measure volume growth and, let's say, real growth. Where we're pitching the market right now, and this is not a perfect science as you can appreciate, but where we're pitching the market right now in food service is back about 11%- 12% zone versus our own performance in the 8% zone. I think the reason I believe we are outperforming the market is due to several things. Frankly, there is a realization and recognition amongst our food service customers that from a health and wellness standpoint, they must move their products further along that sustainable nutrition spectrum. We're seeing customers being a lot more, let's say, aggressive around that.
That requires a capability to work with those customers to move them along that spectrum. Whether that's taste modulation, whether that's including cleaning up labels, clean label preservation, improving taste and texture. All these things are opportunities in the market, consumer-driven opportunities in the market that we feel we're extremely well positioned. That in combination with our proactive approach to food service channel is continuing to, let's say, contribute to that outperformance. There continues to be variability. It is part of our business that we'll be continuing to keep a very close eye on in terms of variability and volatility. We would say the European market is still quite, I would say, challenged in terms of that level of innovation. It's something we keep a close eye on in the coming quarters and bring more color to you at the half year.
Great. Thank you.
That concludes today's questions and answers. I would now like to hand the call back to Edmond for any final or closing remarks.
Thanks, everyone, for joining the call this morning, and have a very good remainder of your day. Thank you.
Thank you. That concludes today's conference. Thank you for your participation, ladies and gentlemen, y ou may now disconnect.