I must also advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. William Lynch, Head of Investor Relations. Please go ahead.
Thank you, operator. Good morning, and welcome to Kary's full year 2020 results call. As in our previous calls, we are presenting from different locations. So hopefully, things run smoothly again. But please bear with us in the event of any technical issues.
On the call is our CEO, Edmund Scanlon and our CFO, Marguerite Larkin. Edmund and Marguerite will take you through the presentation, 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 Edmund.
Thank you, William, and good morning, everyone, and thank you for dialing in today. So we'll get right into it. And turning please to Slide 4 and the overview for the year. 2020 was A truly unprecedented year where all our daily lives changed overnight, and we're really proud Carrie, to have played our part through the pandemic. When we spoke this time last year, we highlighted the impact we were seeing in China from COVID-nineteen.
And as it spread globally, it had a profound impact on our customers and on consumers. What's been most impressive for me is the strength of our recovery through the year. So if you look here at the left hand side of the slide, You can see the trajectory of our recovery. After the significant impact in the second quarter, our volumes improved strongly in Q3 And return to growth in Q4, in line with our guidance on our last results call. And the key dimension to get An insight into our performance in Taste and Nutrition is to look at our business by channel.
So our retail channel, Which now accounts for 3 quarters of our Taste and Nutrition revenues had sustained volume growth, strong volume growth Threw the year at 4%, primarily through growth in authentic cooking, plant based offerings and health and wellness products. Volumes in our foodservice channel decreased by 19% overall. But what I'd highlight here in particular Is the continued recovery we made through the second half of twenty twenty with volumes back 8% in Q4, Representing a significant market outperformance and really emphasizing that proactive nature of our business model As we continue to work closely with our customers right through the period. And then on strategic developments, We made really good progress across a number of strategic fronts in the year, despite the challenges posed by COVID-nineteen. We commenced the strategic development of our Jardo U.
S. Facility, which will have a world leading manufacturing capability for integrated solutions Across a variety of protein applications. We also moved into our new innovation center in Shanghai, where we've Seeing really strong in person customer engagement and innovation with both international and local customers, especially across The second half of twenty twenty. I would like to commend our people for how seamlessly they have adapted to virtual engagement with our customers globally, Again, right through the year. And I must say personally, I can't wait to get back out there to meet customers face to face in the not too distant future.
We also officially launched our new sustainability program, Beyond the Horizon, which is centered around innovation, Enabling sustainable nutrition. We're really excited about the drive for sustainability from our customers, Again, very much in line with the evolving consumer demands, which we'll talk a little bit more about later on. This provides a fantastic opportunity to showcase Kari's true breadth of capabilities. And we're presenting at CAGNY in a couple of days, and we're going to show you exactly what sustainable nutrition means for Kerry and how we're working from ideation right through to launch and now beyond this right through to impact. Finally, we made a number of strategic acquisitions in the year.
We previously announced the acquisitions of Gilling Nature in China, Technispice in Guatemala and Bio K Plus International based in Canada. And I'm pleased to say that the integration of these businesses is progressing well. And we've just announced our intention to acquire BioSearch Life, which is a leading biotechnology company based in Spain. And we're really excited about the capabilities that these companies bring to Kari. And we'll give you a little bit more color on So with that, I'll turn to Slide 5 And the overview of Taste and Nutrition.
So reported revenue for Taste and Nutrition came in at €5,800,000,000 which represented an overall 3% reduction in business volumes in the year, But most notably, it returned to volume growth of 0.7% in Q4, which you can see here on the chart on the right Slide. Trading margin at 14.2% was back on the prior year Due to operating deleverage and net COVID related costs, which Marguerite will go into in a little bit more detail later on. And as I said in the previous slide, our foodservice performance recovered strongly through the second half of the year, And our retail channel delivered sustained growth, particularly in beverage, snacks, meals And Pharma. And we had a really strong performance across our Nutrition and Wellness portfolio Through solutions incorporating our broad range of protein solutions, fermented ingredients, Probiotics and Immunity Enhancing Technologies. And finally, business volumes in developing markets were back by 1.2% in the full year And up 3% in Q4, led by performances in China, Brazil and also in the Middle East.
So then turning to Slide 6 and the performance by end use market. And as we said back in Q1, we've tried to give you as much of a line of sight as possible of our business performance Right through the period. And this slide gives you the breakdown of our performance by end use market. But as restrictions and lockdowns impacted our performance across our UMs in the foodservice channel, we've also included the volume performance by end use market for the retail channel on the slide here. Just a For the retail channel on the slide here, just to help you to understand the dynamics of the year.
So just to call out a few highlights from my perspective on the retail channel. Beverage had an excellent performance Through nutritional, plant based and low or no alcohol innovations in the Americas and Europe, Snacks had a very strong growth through an increase in demand for healthier snacking options and also, of course, increased at home consumption. Meals had a very strong growth through clean label innovations incorporating our natural stocks and broth capabilities With also a number of plant based launches in the year. And our pharma business had strong growth driven by Cell Nutrition and Immunity Enhancing So then moving to Slide 7 and our regional performance within Taste and Nutrition. The Americas region reported revenue of €3,100,000,000 which represented an overall volume reduction of 2.5% And a return to volume growth of 0.5% in Q4.
Performances in North America was led by beverage, snacks And Neals, within LatAm, Brazil also returned to growth, while market conditions in Mexico and Cacar Remained a little bit more challenged. Reported revenue in Europe was €1,400,000,000 With overall business volumes back 5% in the year. The region recovered well through Q3 and Q4, But at a slower pace than the other regions, with Q4 back 0.4% As growth here in retail was offset by the impact of restrictions on the foodservice channel at the close to the end of the year. APMEA reported revenue of €1,200,000,000 representing an overall volume reduction of 1.9% in the year. Volume grew by 2.8% in Q4, with the region having already returned to growth in the previous quarter.
The retail channel performed well, particularly in China and the Middle East, while Foodservice continued to recover strongly And ended the year with the strongest exit rates of each of the 3 regions. And finally, we made good progress in expanding our And deploying our technology capabilities both in China and the Middle East. So turning to Slide 8 and our Consumer Foods division. Reported revenue for the year was just under €1,300,000,000 which represented And overall volume reduction of 2.6 percent and underlying volume growth of 2.2% excluding the ready meals contract This growth included a particularly strong last quarter with volume growth of 8.8%, Driven by a good performance right across the portfolio and some retailer stocking at the end of Q4. Trading margins in the division increased by 20 basis points with efficiencies partially offset by COVID related costs.
And finally, we had really strong growth in need free categories, and we're particularly excited about the upcoming new plant based innovations Under both the Richmond and Refrigerators brands. So with that, I'll hand you over to Marguerite to give you some more detail on the financial performance.
Thanks, Edmund, and good morning, everyone. Over the next 10 minutes or so, I will take you through our financial performance. We delivered a resilient performance in the year with revenues of £797,000,000 and adjusted earnings per share of £345.4 despite The challenges posed by COVID-nineteen during the year. Now to look at our financial overview in more detail On Slide 10. Reported revenue of €7,000,000,000 reflected a reduction in volumes, up 2.9 percent, trading profit £797,000,000 and trading margin of 11.5% were lower year on year, which I'll expand on when we look at the margin bridge Shortly.
This resulted in an adjusted earnings per share of €345.4 Which was a reduction of 9.4% in constant currency terms. Return on capital employed was 9.8%, And we generated £412,000,000 of cash in the year. So now turning to our revenue performance on Slide 11. And taking each of the components in turn. Overall, reported revenue reduced by 4% in the year, Comprising a number of elements: reduced volumes of 2.9%, which I will give you more detail on momentarily A translation currency impact of 2.3% and a transaction currency impact of 0.1% Price increases of 0.3%, principally driven by increases in our Consumer Foods business And a positive impact overall from acquisitions of 1%.
Moving to Slide 12, and the breakdown of our revenue volume performance. On the left hand side, you will see our overall group revenues by business. And on the right hand side, you will see Taste and Nutrition's quarterly volume performance by channel I am pleased to say that the retail channel has continued to perform strongly over recent quarters, Supported by launches in immune health and plant based products across a number of end use markets. Within the foodservice channel, you can see from the trend line the trajectory of recovery since Q2. Key to the continued recovery in volume performance through the second half has been a number of new innovations Targeting evolving consumer needs within the channel.
So now turning to our margin performance and the group trading margin bridge. Overall, group margins were down 100 basis Given the impact on our volumes due To our foodservice customers having to dramatically reduce their operations, particularly during the initial period of And restrictions. We incurred significant operating deleverage in the second and third quarters, Resulting in an overall decrease of 60 basis points in the year. The net effect was neutral from a portfolio mix perspective. During the year, we incurred additional costs in relation to COVID-nineteen, including costs on PPE, Zoning and safety protocols on our sites, additional labor to cover absenteeism, alternative sourcing and stockholding and These were partially offset by a number of short term cost management initiatives, Including the suspension of all nonessential and discretionary expenditure, resulting in an overall net impact Up 30 basis points.
There was a 10 basis point reduction on margins due to pricing, driven by our Consumer Foods business And a net positive margin contribution of 10 basis points from our KeryExcel program. And we incurred 10 basis points reduction from currency, Driven principally by U. S. Dollar weakness in the second half of the year. This resulted In overall margins being 100 basis points lower in the year, comprising 140 basis points in the first half, seventy basis points in Q3 and 40 basis points in Q4.
With the return to volume growth in the 4th quarter, The driver of the 40 basis points reduction was the ongoing net COVID costs. And as we look out into 2021, we're looking forward to good margin progression. Turning now to free cash flow on Slide 14. Overall, we generated a free cash flow of €412,000,000 with a cash conversion of 67% in the year. Firstly, with lower trading profits As a result of the impacts of COVID-nineteen, average working capital increased by £103,000,000 in the year.
Our inventories increased due to carrying additional security stock for our KeryConnect deployments in North America. And we also invested raw materials and finished good stocks during the year To ensure continuity of supply throughout periods of highly fluctuating customer demand. And our receivables increased in the first half of the year, in particular as we supported a number of customers in navigating short term challenges. Finally, we had capital expenditure of £311,000,000 which included the continued expansion of our technology capabilities in China And the Middle East as well as the commencement of our investment at our Rome, Georgia facility in the U. S, which Edmund referenced earlier.
The overall cash conversion for the year of 67% represents an improvement in performance across the year, With a cash conversion of 46% in the first half and a good recovery with 81% in the second half Now moving to our debt profile and credit metrics On Slide 15. Net debt was €1,900,000,000 at the end of the year. We have a good net debt to EBITDA ratio of 1 And our overall debt profile continues to be in very good shape with no significant repayments until 20 23, with the average with Oasis average maturity profile of our debt at 5 point 2 years. And overall, we have a very strong balance sheet with a long maturity profile, which will enable future Moving now to Slide 16. I would like to outline our plans to evolve and Extend the scope of Kery's global business services.
A key part of our vision is to be our customers' most valued partner And to further advance our business enablement strategy and support optimal resource allocation, we will be expanding the role of There are 3 main elements to the increased scope to drive added value to our customers and our business. Firstly, for our existing Kery GBS Finance and H2R activities, We will broaden the current services to integrate more knowledge base and decision support activities. In finance, This will provide real time performance analysis to support our commercial and supply chain teams in resource allocation and value enhancing In an agile way, we will further enhance our employee experience through HR self-service Delivery. And secondly, we will build next generation customer experience services revolving around regulatory and marketing initially As well as procurement and supply chain. An example within our regulatory system is product technical documentation provision In real time to our customers via self-service portal.
And thirdly, we will further invest In innovative digital analytical solutions to ensure that the expanded activity scope Is delivered through optimized processes and enabled by technology, delivering insights and analysis to support Decision making as well as deepening virtual ways of working. Kerry Global Business Services will primarily operate from 2 locations in Malaysia and Where we will leverage the skills and experience of teams already in place. The cost of the program will be circa €30,000,000 in 2021 €20,000,000 in 2022, with an anticipated overall payback period We see this very much as a step change in Kari Global Business Services and a logical next step In leveraging our Kerry Connect platform and key to enabling our business, enhancing continuous excellence and building and developing talent For Kerry in the future. And finally, before I finish, I would like to cover off a number of other matters on Slide 17. On KeryConnect, I'm pleased to say that our deployment in North America is progressing well.
We completed deployment at 22 locations in 2020, and we have plans to go live in a further 20 locations in 'twenty one. We will continue to review the go live dates at a number of facilities in 2021, as we did in 2020, To ensure that we safely enable ways of working in light of prevailing COVID restrictions and conditions. Finance costs Decreased by £9,000,000 primarily due to lower interest rates, with cash generation being largely offset by acquisition Our pension deficit of €44,000,000 increased in 2020 as a result of lower discount rates. On non trading items, we had a net charge of £16,000,000 primarily due to acquisition integration costs. Raw materials had minor input cost inflation in the year.
And on currency, the translation impact On adjusted earnings per share in 2020 was a headwind of 2.9%, and we are currently estimating A translation currency headwind of circa 4% on earnings per share for 2021. And finally, on an unrelated matter, last Thursday, a short note was published on Kery Group. The note is full of inaccuracies and errors, and we strongly refuse the points raised. We have reported the note to the relevant Financial regulators, the Central Bank of Ireland and the FCA in the U. K.
We look forward to engaging with our shareholders over the coming weeks. And if any shareholder would like to discuss in more detail, please contact our Investor Relations team. And to conclude on the financial performance before I hand over to Edmund, I'm pleased to say we delivered A resilient financial performance and strong recovery through 2020, especially given the impact COVID-nineteen Had on our foodservice customers in the year. So with that, back to Edmund to take you through future prospects.
Thanks, Margrece. And so moving on to Slide 19. And like we've said many times before, at Kery, we always start with the consumer. Today, food is playing a more important role than ever in consumers' life experiences. And we're seeing an acceleration Of many of the pre COVID trends and consumer diets continue to shift at pace to include more environmentally friendly and sustainable food practices.
Today, 85% of consumers want to know what their foods products contain. They may want to learn more about how their food is made. And this is leading to an increased desire for locally produced products. Consumers are also mindful of nutritional benefits of their food. And trust is more important than ever, With 60% of consumers influenced by how trustworthy the product feels, demanding consumers seek Socially responsible companies that not only use clean and natural ingredients, but also follow ethical and sustainable practices.
If we look at the right hand side of the slide and some of the opportunities that these changes present, Consumers want to see evidence of the food industry players taking clear steps to reduce food waste and carbon footprints. There are also increased expectations around supply chain integrity and community involvement. And our customers are looking for partners on this journey and Kerry is leading with our beyond the horizon sustainability strategy. As consumers demand more, customers are reassessing how they best meet these evolving needs to win in the market. And despite the challenges our industry has faced, we have witnessed a renewed focus on innovation.
So So to conclude in this slide, our industry continues to evolve at a pace. And what's key for Kerry when Co creating with our customers to meet these changing consumer demands is having the technology capability, the business model And the local capabilities to deliver further. So turning to Slide 20, and this slide details How we've enhanced both our technologies and local presence in 2020. M and A is a key part of our strategy, And we will continue to create significant value from M and A. We completed 3 acquisitions in the year for a combined consideration of GBP 280,000,000 So now taking a minute just to look at each of these businesses and their strategic fit for Kari.
Firstly, Ginning Nature, based in the Shandong province in China. This business brings us leading capabilities In the area of savory taste for the local meat, snacks, meals markets. And we see great potential to enhance Kerry's savory taste capabilities in China, which will continue to be a key market for us going forward. In LATAM, we acquired Technispice based in Guatemala and also its sister company Global Spice in Costa Rica as part of the transaction. This is a strong fit for us in the region and similar to nature, a local leader in savory taste, providing us with Strong capabilities to further grow our business in the Cacar region.
Then moving on to Biocape Plus International based in Canada. This is a leading biotechnology company with a number of probiotics in beverage and supplement applications. It has a really strong science foundation with a number of clinical trials and unique claims around Digestive Health. It currently serves the North American market, and we see significant potential to expand this business and leverage it into a broad range of food and beverage This brings me on nicely to BioSearch Life. This business based in Spain is a leader in the nutraceutical and functional with an extensive portfolio of capabilities spanning probiotics, botanical extracts and omega-three ingredients.
The portfolio is underpinned by a range of clinical trials that supports its strong positioning to address a number of consumer needs states, Which I'll touch on here on the next slide. So moving on to Slide 21, and I want to talk for a moment to you about Kerry's proactive health positioning, particularly in the functional food and beverage category, where we've been investing in And adding to our capability in recent years. Today, almost 40% of global consumers are actively seeking out Functional food and beverages to help satisfy their specific health needs, which means they're twice as likely To look for a food and beverage option over nutritional supplement. And we're seeing this drive for functional food with consumers across All life stages and demographics and these functional claims are also a key driver of growth across Mainstream Food and Beverage Products. So just to touch briefly on the 5 different needs dates on this slide and to give you some examples of How and where we are working.
Firstly, we support our customers in a variety of ways under Digestive Health Using our ranges of probiotics, hydrolyzed proteins and enzymes. There's been a huge demand for immune health, particularly this year, Where we've supported customers in launches within snacks, ice cream, tea and coffee, just to name a few applications Using our Wellimmune technology. In Women's Health, BioSearch, as I mentioned on the previous slide, adds strong capabilities In the areas of natural extracts and omega trees. These technologies also support cognition, stress And mood along with our beta glucan across all life stages from infants to the elderly. And under healthy aging, which includes heart, joint and muscle, just to call out a few areas in particular.
We recently agreed a strategic partnership with PFI in Japan, enabling us to leverage their leading joint health technology For food and beverage applications, which helps reduce discomfort and stiffness in knee joints and benefits people with Osteoarthritis. And just one final point that I'd like to highlight is a white paper we recently published on the area of protein absorption, Which is particularly important for the aging category. The study found significantly greater quantities of amino acids In those who had consumed our Ghanaian BC Turkey ingredient versus those who had not, thus supporting protein absorption. These examples of technologies, partnerships and research give you a feel of what we're doing in the space. And I'd recommend our Kary Health and Nutrition Institute website for anyone that's interested in the science behind health care food.
So to close out on this slide, what's key for our customers is the combination of our technologies And our expertise in working across all food and beverage categories to enhance their offering. The area of functional foods And proactive nutrition is one that we will continue to focus on, and you will see further developments here in the coming years. And finally, turning to Slide 22 and future prospects. As we've outlined in our release this morning, We are conducting a strategic review of our dairy related businesses in Ireland and the U. K.
And we'll And now moving on to the outlook. In Taste and Nutrition, We see strong growth prospects in the retail channel with continued recovery in foodservice, underpinned by A very good innovation pipeline and strong customer engagement. In the short term, given COVID-nineteen is continuing to impact The foodservice channel, we're expecting flat to positive volume growth in the Q1. And we have an overall outlook for strong recovery and good growth Within Consumer Foods, we expect continued category variability and strong performances within the portfolio. And finally, we will continue to invest for growth and enablement of our business model, while continuing to pursue M and A opportunities Aligned to our strategic growth priorities.
So with that, I'll turn it back to the operator for your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. And your first question comes from the line of Kehal Kenny from Davy Research. Please ask your question.
Good morning all and thanks for taking my question. Three questions. Firstly, Can you elaborate on the outperformance of your foodservice business, particularly into the back end of 2020? My second question It relates to M and A. If we take the 3 deals completed in 2020, can you outline The P and L impact from a revenue and profit perspective as you see it in 2021?
And final question is just on current trading. Just wondering could you provide Some added commentary around what you're seeing in your key end markets within T and N at the moment? Thank you.
Thanks, Kahul, and good morning. And I'll take the first and the third question, and Marguerite might take the middle one. Firstly, on Foodservice. Yes, we're back 8% in Foodservice. I guess the market consensus on Foodservice is probably in the zone of 15% on a like for like basis.
So as you say, a significant outperformance. What I would, I suppose, remind us of is that when we were here Back at the half year in Q3, we did talk about that, I suppose, the proactive nature and the proactive nature of Our engagement right through the COVID crisis, and that then subsequently led to a strong performance In LTOs and seasonal time offerings as it's as we kind of transition there towards the end of Q3 and into Q4. But I think it's important to say that we have seen significant uptick in engagements, Especially with the global foodservice operators as it relates to clean label opportunities, Improvement of the nutritional quality of their offerings and also plant based offerings. And the third point that I'd make is that we're seeing foodservice in China Growth almost back to pre COVID levels, primarily driven by A combination, I would say, of health and wellness opportunities and authentic taste opportunities in the channel. So right at the core of what we're good at.
In terms of, let's say, the beginning of the year and how the Beginning of the year is shaping up. We've had a solid start to the year. What might be most useful maybe Just to share a regional perspective, perhaps starting with North America first, where we have seen a softer In the Foodservice channel, happy to say though that this is being offset by a stronger performance in retail due to Some new launches kicking in, especially in the snacking and beverage side. In Europe, We are having a slightly slower start, again, due to foodservice, which effectively is a continuation Of what we saw in December due to the restrictions being reintroduced in December and those continuing. And in Appia, we've had a really strong start to the year, strong recovery and good growth In both Foodservice and Retail.
Good morning, Cathal. I might just take your question on the financial impact of the acquisitions. So in respect The 3 acquisitions, we spent a total consideration of €280,000,000 And in the context of the impact on the profit and loss count, on a full year basis, looking to revenue first, The revenue contribution is circa €75,000,000 And we expect The FY 'twenty one impact to be approximately €50,000,000 From a margin perspective, The margin for these businesses are broadly in line with the Taste and Nutrition margin, And we expect EPS accretion of 0.5% in 2021.
Thank you.
Thank you. Your next question comes from the line of James Targett From Berenberg, please ask your question.
Hello. Good morning, everyone. Three questions from me. First, just starting off with current trading sorry, not current trading, sorry, the full year outlook. You haven't given sort of, I guess, quantitative guidance for the full year.
I'm just trying to understand if that's just based on your uncertainty over the rate of unlocking in different Countries throughout the year or was anything else giving you a bit of caution on guiding an absolute level of growth at this stage? And then secondly, on the Dairy Business strategic review, could you just give us some idea of the Remind us of the size of the business and the rationale for this review, that would be helpful. And then finally, on M and A. Thanks for the Detail on the financials for the deals done in 2020. And I think in the past, you've outlined your rationale for combining M and A transactions rather than sort of detailing the individual purchase prices and financials.
Could you perhaps remind us of your reasoning for still doing so, Particularly as that strategy now appears to be affecting market sentiment on the company. Thank you.
Good morning, James, and thanks for the question. I might I'll take the three questions in the order that you have asked them, Jen. Firstly, on guiding. I think you should think about it just on the basis that we're being pragmatic in terms of our approach to guiding. The reality is that we just don't have the same level of visibility that we would normally have at this time of the year.
Obviously, that's COVID related. So we're trying to be as helpful as possible by giving guidance For Q1, on the volume side, we do remain optimistic about the year. I'm sure I get into reasons around That later on, but it's really about being taking a pragmatic approach. There isn't the same visibility as there normally is, And we will resume guidance as soon as is practical. Then in terms of the Dairy business, I suppose there's 2 elements of the dairy business.
Firstly, the business has revenues of about €900,000,000 And the business breaks down roughly fifty-fifty between Taste and Nutrition and Consumer Foods. And I would say from a rationale standpoint, Maybe just to give some context on that. Clearly, within our Case Nutrition business, Our strategy has been centered very much around that value add co creation partner that we've talked about today and talked about In several of our sessions and having that technology capability to enable that strategy And you've seen that again today from the recent acquisitions and investments that we're making, and you Continue to see that. So clearly, the Dairy Processing activities have a different profile. And I suppose the rationale of combining, let's say, the milk processing assets with Consumer Foods Dairy Business.
There are some synergies there, and that's why that we've put that perimeter around those two elements. Then back to your question in terms of our approach to M and A. I think the first point I'd make is that our M and A activities should not be seen as a stand alone independent transactions. But they're an element of a well thought out, multi step systematic approach to get from point A to point B In executing against our strategy. And we'd have laid out for ourselves maybe a 10 step approach to get from point A to point B.
That might they might Those steps might entail organic innovation investments or reallocation resources or hires or CapEx And perhaps 5 or 6 different acquisitions. Clearly, we don't get all we always don't get the Acquisitions done that we or the number of acquisitions done that we want to do, but we do have a high success rate. I'll come back to that point again. But we have shared with you this approach In the past, when we brought you through our clean label preservation journey, back at the half year results, And we touched it again briefly when we touched on our proactive health journey here in the presentation. So look, based on my own time in M and A and I suppose my experience over 25 years now, The way we conduct ourselves before, during and after any transaction is critical.
I've said many times in the past that The majority of our transactions are bilateral in nature, and we've built up strong relationships with owners. And many times, there are individuals and there are family members. And in many times, They've asked us not to disclose different aspects of the deals, whether it's the consideration, The earn outs, the non competes, the employment agreements, whatever it is. And they understand and respect the fact that we have to make certain disclosures, But we also respect their wishes as best we can. And I would suggest that this approach has Not only unlocked opportunities for us, but also led to, I would say, subsequent transaction opportunities coming our direction.
And from my engagement with shareholders, I believe they understand this. They support our approach and encourage us to continue doing what we're doing. And I'm sure I'll have the opportunity over the next days weeks to discuss this topic and I'm sure other topics in the upcoming roadshows. So I hope, James, that helps.
Okay. Thank you.
Thank you. Your next question comes from the line of Graham Hunt from Morgan Stanley. Please ask your question.
Thanks and good morning. Just two questions from me. Again, on M and A, maybe I'll just ask slightly differently, Whether you could talk about some of the deals that you haven't done over the last few years and maybe what the main reasons for walking away from those were? And into that, what your process is for maintaining capital discipline? And then second question on returns.
I just wondered if you had any sense of What the path back to your target level is around 12% is and what your expectations are for 2021? Is this just a case of volume recovery? Or are there some other moving parts to that, that we should be thinking about? Thank you.
Thanks, Graham, and good morning. I think there was 3 questions there. And I think what you're asking is effectively how does that mean working carry and what are the reasons we walk away from deals. And maybe to take the second part first. Look, we walk away from deals in for many reasons.
And I would call out the strategic fit being the number one reason. And that rules out the vast majority of, Let's call them unsolicited approaches. So perhaps 90% of what we see, where entities approach us, Get ruled out of this hurdle. So I mean that we might look at more than 200 Opportunities in a year and 90% of them are ruled out on the basis of strategic fit. But other reasons could be culture, financials, environmental, customer relationships, IP issues And regulatory in our space is probably the other significant watch out for us.
But I think the main point here is and I have my own personal experience from working In that specifically in M and A transaction management for the company is that Look, we have built up a significant capability, a very strong capability over the decades As it relates to the identification, evaluation and integration and subsequent value creation As it relates to acquisitions. And then in terms of, I suppose, how it works, I would say it's very much a bottom up process. And I'm talking here now more in the context of bolt ons, But it's very much a bottom up process. And at the local business entity level, whether that is at An end use market level, a sub end use market level, a country level, a sub region level, regional level, The management teams are absolutely mandated to know their the market, to know their peers, their competitors, The players in adjacent areas. And those potential opportunities then are discussed in the normal Monthly cadence.
And acquisition targets or candidates are identified During that process. So look, from a governance standpoint, I suppose the identification of targets Sits with the local management teams. The evaluation of transactions is cordoned between local management And Central Regional Strategy and M and A teams, we've been oversight And engagement as acquired from a global level. And the integration then is also corned. But the execution of the integration plan as well as the targets are owned by the local management team.
And we feel that this approach has served us well over the years. Perhaps, Margaret, you can touch on the return
Sure. And thanks, Graham. So just on returns. Returns were impacted During the year by trading due to COVID, as we look to 2021, we're looking at The returns on capital employed of somewhere between 10% 11% zone, and we look To build on that in 2022 and going forward.
Thanks very much.
Thank you. Your next question comes from the line of Alex Sloane from Barclays. Please ask your question.
Yes. Hi, morning all. Just first one on cash conversion. I mean good to see that stepping up In the second half, as you laid out, but obviously for the year overall, we're 67% below the Over 80% target that you have for the medium term. I just wondered if you could kind of flesh out the levers you see to getting consistently Above that 80% level, I mean, when I look at your CapEx to sales level, it has been more elevated over the last Few years and going back to the earlier part of the last decade, I guess there's been a heavy spend on Kerry Connect and building out your R and D centers Globally, I guess, with that investment having taken place, do you see any scope for kind of more Moderation in CapEx to sales going forward, will that be a lever to improving free cash conversion?
And then Just secondly, just for Marguerite, hopefully, just a quick one, but useful to clarify, I think. Can you just confirm that the purchase of business line In your net cash used in investing activities, over the past decade, I think it's cumulatively more than 3,000,000,000 Eurospend there, it would be useful just to maybe confirm that is a fully audited cash outflow. There's been no material revisions to this line historically and It represents spend on brands, IP and other assets that you legally own in no cases represents prepayments. Thanks.
Good morning, Alex. Maybe on your last point first, obviously, fully audited, included in our financial statements. Maybe just then to take the cash conversion point. And very much as we guided In terms of our performance in FY 2020, clearly, cash conversion was impacted significantly As a result of COVID-nineteen and the conscious actions that we took in relation to Investment in stocks, ensuring continuity of supply and So the investment that we made in inventory and stocks in relation to Terry Connect, Our cash conversion, as you will also have seen, improved As we anticipated in the second half with the recovery of volumes and we delivered 81 And cash conversion in the second half. As we look forward into 2021, We are looking at that continued significant improvement year on year and a cash conversion in the zone of 80%.
Just a couple of points that I would add to some of the comments that you made. You're correct In the context of us making investments in relation to the rollout of KERRY Connect, as we have done, very much to derisk The deployment of KERRY Connect. And you'll have heard from my earlier comments that we rolled out KERRY Connect In 20 locations during 2020, it's important to remember that we will continue To roll out into a further 20 locations in North America towards During the course of 2021, so we will continue to derisk and hold investments in Inventory. So hopefully, that gives you color just in relation to our future cash conversion.
Yes. Thank you.
Thank you. Your next question comes from the line of Jason Molins from Goodbody. Please ask your question.
Hi, good morning. Edwin, just on firstly, 2 or 3 questions here. But I guess the first one just on the dairy business, You mentioned €900,000,000 of revenues. Can you give us a sense of profitability for that business? And then in your closing remarks to that, the dairy business, I think you mentioned the remaining two parts of the Consumer Foods business.
Can you just clarify, Is that something that you're hoping to keep on within the broader business and the synergies that has within the wider group? Second question is back to margins. Marguerite, I think in your comments you referred to good margin progression Expected in 2021. Can you maybe give us a sense of framework in terms of how we should think about that Thanks, Gulf, where you were in 2019 and typically the margins that you were able to deliver in that year. And then final question really is around M and A.
I guess it's a year since you missed out on a pretty strategic acquisition from the business. And bearing in mind, you look at 200 deals in a year, how should we think about size of deals that you're contemplating going forward? Is there anything Within the pool, but I guess could be seen more strategically or large scale? Thanks.
Thanks, Jason. It was hard just to hear the last element. I think it was about the size of the deals In M and A. But just back to your first question first and I'll let Marguerite take the question on margins. But in terms of the dairy business, the business has revenues of, like I said, of about €900,000,000 It's a bit about fifty-fifty.
Look, from a margin perspective, we're I think it's important to say, first of all, that it's still early in the process. But from a margin perspective, we're not going to get into specifics. But it's fair to say that Margins overall are much lower than the group margins, and that's probably as far as we'll go on that And there is a mix. There is a mix, as you can appreciate, because of different elements of the portfolio between the, Let's say the Consumer Foods branded element and let's say the more commodity type dairy ingredients that you'll be familiar with. In terms of Consumer Foods, like we've consistently said, Consumer Foods is a good business.
You had a great last quarter, Continues to perform well and a good momentum coming into the year. And we'll continue to selectively invest On the growth areas that we've outlined in the past, whether it's plant based, whether it's the DTC element Or snacking. And that's as far as we're going to comment on that. In terms of M and A, I would say that the bolt on strategy that we've been on over the last several years Has delivered significant shareholder value. I think the examples we have brought to life for you both in The examples we gave with our clean label preservation strategy, with our proactive health strategy Represent, I would say, a very strategic systematic process of combination of bolt on M and As With, let's say, organic investments.
Those platforms Represents in the region from a scale perspective, mid single digit From a scale perspective, mid single digit percentage of our business. So 2 really strong platforms, which We can really kick on, Fran. And I think in terms of what you should expect from Kari going forward It's a continuation of that bolt on strategy, while at the same time, remaining open minded to larger deals. As you are aware, we've participated in larger deals in the past. I'm sure we'll continue to look at larger deals in the future.
And we'll continue to retain our discipline as it relates to What we do, but nonetheless, we won't be found wanting To take advantage of opportunities that represent a very strong strategic fit. And I think our shareholders You all expect us to do that, and we will continue to do that. So Marbury, I'll hand it over to you.
So good morning, Jason. Just The margin question. Yes, we do expect a significant improvement in margins in 'twenty one versus 2020. Obviously, we're not guiding at this juncture, but we expect to have a number of moving parts within the margin. So firstly, we will have operating leverage as volumes recover significantly.
Secondly, maybe some mix enhancements. And importantly, to note, We will continue to have a net COVID cost just in light of the current environment. And we may have some incremental investments in some areas where we are seeing accelerating consumer trends And bigger growth opportunities, as Edmunds referenced. I'd say at this Sage, our expectation that the net COVID costs will be more weighted to the first half of twenty twenty one. And from an overall perspective, while we do expect a significant improvement in margins year on year, Not quite back to 2019 levels in light of ongoing COVID costs.
But clearly, we'll give you more color on our expectation around margins as the year progresses.
Okay. Thanks. Presumably then again, if I was to think of your bridge for the year ahead, Operating leverage is going to be the key bulk of what's going to drive that margin enhancement. And then from, I guess, That's split H1, H2, given COVID costs, etcetera, it's still going to be very H2 weighted in terms of seeing that real margin improvement come through. Would that be a fair assumption?
Yes. That's probably a fair assumption, Jason.
Thanks.
Thank you. Your next question comes from From the line of Farhan Baig calling from Credit Suisse. Please ask your question.
Good morning, Team, thanks for allowing me questions. Most of them have been off, but I've got a couple remaining. I just want to understand the dynamics with regards to retail and the recovery in foodservice. I know you saw something similar In FY 2020, but you're suggesting a continued strong growth in retail, along with a Recovery in foodservice. I just want to understand the dynamics.
Should one not be offsetting the other if consumption in foodservice increases, That's likely to put some pressure on retail, particularly in end use markets such as Beverages, I just want to understand that dynamic and how we see it playing out in 2021. Is there a category mix that we should look out for, etcetera? Secondly, probably a shorter question. Could you just give us your commodities outlook for FY21 as well, please. Thank you.
Thanks, Faham, and good morning. And I'm Just struggling a little bit with the line here. I guess it's probably at our side. But In terms of Retail and Foodservice, maybe just to put some color on that. And I think firstly on the Retail side, And I think it's important that I kind of bring to light Two significant developments that we've seen since the Q3 results.
And we've seen a significant acceleration in engagement around emerging brands. I would say especially in North America, we've seen a lot of PE money coming in behind emerging brands. I think we've built an excellent reputation in North America to be a massive enabler Of emerging brands and to help them come through bring products through right from ideation all the way through to launch. And a new term that I have heard in the last few months coming through from that cohort of customer Is this concept of low risk rapid innovation. And this level of activity I haven't seen before With this particular category of customer, what is really driven around that low risk rapid innovation, Getting the products to market really quickly, and we're extremely well positioned there.
The second point I'd call out that We'd be really positive on in terms of the trajectory of the business on the retail side is what's happening on Functional Food and Beverage. I think it's fair to say it's not new, but we've seen a huge acceleration in engagement. And again, I believe we're very well positioned here as well. We have built up a very strong portfolio Of proactive health ingredients that incorporate functionality in a real meaningful way into food and beverages. So I think that's going to be a really important growth driver for us going forward.
And we have seen a step change level of engagement around that. On the Foodservice side, I would say, maybe just to put some color on that. And clearly, we have been in recovery mode. Both, like I said at the very beginning of the Q and A session, we've been very consistent Trying to explain the proactive nature of our model. And we were extremely proactive right through all the COVID crisis and really going shoulder to With our foodservice customers, especially the global foodservice customers who have been highly active.
And we have a number of global approved launches for a number of global foodservice operators, Both for new core items and for upgrades to new core and upgrades to existing core menu items, Very much around the areas of key label, plant based and nutritional improvements, Whether that's salt or sugar or calories or what have you. So these platform launches Have already actually been signed off. They've been agreed, ready to go. But the reality is nobody has done these type of launches in a pandemic scenario. So the legacy processes for bringing these products to market It don't necessarily work.
So we are seeing the timing of these launches being a little unclear. So but they will probably come in the second half. So that's Kind of our thought process on foodservice. We have a very strong pipeline. We're excited about the fact that we have these global launches ready to go, Well, we can't tell you exactly when they're going to come.
We're more we're kind of, let's say, saying more second half at this stage, albeit But they're already signed off. So maybe I'll hand it over to Marguerite then to pick up the other question.
Yes, sure. So just In terms of outlook on raw materials, the outlook is for low single digit inflation as of Today, obviously, there's variations across the basket, and we'll update you As the year evolves with new crops as we move through the year.
Thank you. Your next question comes from the line of Ryan Tomkins from Jefferies, please ask your question.
Yes. Thank you. Good morning, everyone. Being partly covered already, but Two questions. Just on the commodities one you mentioned there, low single digit inflation.
Is it fair to translate that through to pricing and have any Kind of negotiation for that passing through began already in the year. And then secondly, just one on, again, Being talked about the capital allocation, I mean, in a scenario where perhaps you don't feel your strategy in terms of bolt on acquisitions It's being fairly rewarded. Would you consider other capital allocation options? I know you've spoken about larger deals there, but Anything else potentially? Or are you quite set on your strategy for now?
Thank you very much.
Thanks, Ryan, and good morning. And I'll probably take the second part of the question first. I would say that Our bolt on strategy has been very robust. I think we have a long Track record of capability here. I think we have a long track record of significant value creation.
We have brought you through some of these examples at various investor days and various presentations over the Several years. And we're not calling out any change in capital allocation strategy at this time. Of course, we always remain open minded to what's happening. We do have a strong M and A pipeline in front of us Of various sizes and of various, I suppose, strategic fits. And we'll continue to execute against our strategy.
And M and A will continue to be part of that Both on and larger as and when they come up.
And maybe just on your first point, You're correct. As you know, we've a very well developed pricing model over many years With our customers where we pass through the impact of those costs that I
Thank you. Your next question comes from the line of John Ennis from Goldman Sachs. Please ask your question.
Hi, good morning, everyone. My question is a follow-up to Faham's question on the 2021 retail growth outlook. You mentioned that customer engagement and the innovation pipeline are big contributors to your 2021 growth for the Retail segment. I just wondered, can you maybe break down what proportion of your future growth is related to these new product launches versus the underlying end market growth? And maybe to help us quantify this, could you give us the contribution from new launches to your growth in retail for a normal year or for 2020?
Thank
you. Thanks, John, and good morning. I think that's the level of detail That I don't have right now in terms of, let's say, the percentage of new launches. I mean, in different aspects of our business, We would expect typically a maybe a 10% churn rate from time to time. That's kind of, let's say, a very generic, let's say, guidance there, John, that we would typically give out.
But it would vary from a technology to technology basis. In terms of, I suppose our underlying markets. And we have shared with you our performance by end use market For the full year in the presentation, and it's something we do every year. I'm happy to go down through that in any detail, but we're not calling out any specific, Let's say weaknesses in terms of any market that we any weakness of note, let's say, that we would call out that concerns us at this point. There are always challenges from time to time within specific end use markets that I touched on Within the presentation.
But in terms of, I suppose, what's happening in the marketplace, The trends of sustainability, of value, of convenience, of nutrition, And we see customers as they're looking at their opportunities balancing and trying to get the right balance between those For, I suppose, trend areas. I believe we have the right technology portfolio, capability And business model to be able to adapt and then actually really grow into those If anything, I feel those trends are coming more in line with our capabilities. And I one shouldn't think of, let's say, when food service goes down, retail goes up, Retail goes down and foodservice goes up. I don't think that algorithm is the right algorithm for Kerry, frankly. I'd be quite optimistic here in the medium term that the growth rates That we're achieving in our retail channel now in the 4% zone, which are significantly ahead of, let's say, our Historic growth rates in retail can be maintained, will be maintained.
And I think our foodservice channel will continue to pick up. And one of the reasons I'm very Optimistic about that is what we've seen in China. And China, I see, because it is of a scale now, As being a bellwether for the rest of the organization. And frankly, We saw foodservice performance in the mid to high single digit growth in China in Q4. We saw retail growth in the high single digit level, and we see continued momentum there.
And there's really platforms of growth for us in China emerging Around Nutrition, Health and Wellness and around Authentic Taste. And I think it's a fair, I would say, bellwether for us for the other for the rest of the organization as restrictions lift, As vaccinations get rolled out and there's some return to, let's say, let's call it the new normal.
That's very helpful. Thank you.
Thank you. There are no further questions. So I will hand the call back to Edmund Scanlon.
So thank you all for joining our call. I'm sure we'll connect with many of you over the next Few days and the next few weeks. I would like to take the opportunity just to remind everyone that we will be presenting at CAGNY on Thursday. So thank you, and all the best for the remainder of your day.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.