I must 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, sir.
Good morning, everyone, and welcome to Kerry's half- year results call. As per our first quarter update, we're hosting today's call from different locations, so please bear with us if things are not quite as smooth as they would normally be. I'm joined on the call by our CEO, Edmond Scanlon, and CFO, Marguerite Larkin. Edmond and Marguerite will take you through a brief presentation capturing the key points of this morning's results update. Following the presentation, we will open the lines for 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. Thanks for dialing in this morning. We're going to spend the next 25 minutes to 30 minutes or so updating you on our H1 performance. As we did in April, today we're going to try to give you as much of a line of sight as possible on our business performance as we continue to manage through these unprecedented times. Before we get into the slides, I just wanted to touch on a few important points from my perspective. Firstly, our food service business continues to recover well, while our retail business had a strong Q2 performance. Secondly, the nature of engagement with our customers has been at a different level than we've seen before. Finally, the absolute pace of change in the last two to three months has been truly incredible.
COVID has accelerated a number of key consumer trends, from natural, authentic cooking to online and delivery, and also the acceleration of the proactive health trend. Just to summarize, a really dynamic marketplace, a lot of change is going on, which to me presents many opportunities for Kerry as we emerge from this pandemic. Moving on to slide number four and the H1 overview. Firstly, let me start by saying I'm immensely proud of the tremendous efforts of our COVID response teams and indeed of all of our people in supporting our customers and supporting in our local communities over the last six months. Very much aligned to our values and guided by our purpose of inspiring food, nourishing life. Looking at the performance of our business by channel.
Food service was back by two-thirds in April, as you can see on the trend line here on the slide. This has been recovering well across the second quarter, corresponding to the lifting of restrictions, and was back 26% as we exit the quarter. We've seen further sequential improvements since then, with volumes back in the mid-teens in July. Our retail channel had a strong performance in Q2 with a 5% volume growth, which was a significant improvement in Q1, where we had the impact from COVID in China. This growth was also above our average in the channel for the last couple of years. This strong performance was driven by our solutions incorporating our broad protein portfolio, including plant-based offerings, authentic taste solutions, fermented ingredients, and immunity- enhancing technologies.
We've continued to perform well in this channel in July with growth at the lower side of mid-single digits. Moving on to slide number five. Our key priorities throughout this period have been our people, our customers, and our community. To give you a status update on the impact of COVID on our business. In North America, we've seen our strongest rate of recovery in the foodservice channel as restrictions were lifted sooner and many of our customers were able to pivot their offerings pretty quickly for more drive-thru, curbside pickup, and delivery options. Our retail channel delivered a very strong performance with increased demand for health and wellness, and also authentic cooking products. For Europe, the rate of recovery has been slower than it was in North America, with the lifting of restrictions being more on a phased basis.
I would note that there was a good improvement in the region in June. In APMEA, we had a steady improvement in China, while India and South Africa were significantly impacted later on in the period. There also has been some resilient performances in other parts of the region, but overall, it's very much on a country-by-country basis with quite a bit of volatility and variability. On our Consumer Foods division, it has seen some impact from COVID-19, but it was limited relative to what we've seen in our Taste & Nutrition business. On margins, we've seen a pretty significant short-term impact in the second quarter, as many of our facilities are set up for multi-technology manufacturing, serving both the retail and foodservice channels.
We kept all of our plants running throughout this period, albeit many plants were running at a much lower capacity, resulting in significant operating deleverage, as we still had to incur the fixed costs. This impact will be greatly reduced in the third quarter as we continue our volume recovery. We have taken a number of actions around the safety of our people and the security of supply for our customers. We've also implemented cost actions to try to mitigate some of the impact. We've also been working with our customers on a number of different fronts to manage through the short term and also to plan for launches for the new norms.
To conclude on this page, and I'll talk to this in a little bit more detail later, COVID is having an impact on our entire industry, with the robustness of supply chains being more important than ever. Customers are currently reviewing their product portfolios and changes in new product development, meeting new challenges for our industry and more importantly, meeting significant new opportunities as we work through this period. Moving on to slide six and the overview of our Taste & Nutrition performance in H1. Revenue for Taste & Nutrition was EUR 2.8 billion in the first half, while trading margin at 11.6% was 170 basis points lower due to the operating deleverage I just referenced.
Overall volumes were back 5.6% in the half. This was driven by lower volumes in the foodservice channel of 27%, which you can see from the panel on the right-hand side. These have been recovering well as we've moved through the second quarter. The retail channel delivered good growth through Q2 after being particularly impacted in China in Q1. Performance was best in beverage, meals, and snacks, with good demand across our nutrition and wellness portfolio. Developing markets declined by 3.8% as a result of the restrictions in various countries in APMEA. Pricing was pretty flat in the period, reflecting relatively neutral input costs. Now turning to slide number seven and looking at our Taste & Nutrition performance from a regional perspective.
Firstly, to the Americas, which had reported revenue of EUR 1.5 billion in the period, with overall lower volumes of 3.9% due to the impact of COVID-19. Food service in North America was particularly affected in April, but has been recovering well since then. We had strong mid-single digit growth in our retail channel, driven by our broad beverage offering, increased demand for natural stocks and broths in the meals category, while snacks continued to perform well through healthier options. LATAM was impacted later in the period, with Brazil being more challenged.
In April, we completed the acquisition of Tecnispice in Guatemala, which is a local leading savory taste business serving both the meat and snacks end-use markets. Moving on to Europe. We reported revenue in the period of EUR 657 million, with volumes 8.8% lower, with a more pronounced impact from restrictions here.
The retail channel performed well, driven again by beverage and snacking, along with meat, where we had a number of successful plant-based launches. Russia and Eastern Europe continued to deliver very good growth in the period. In APMEA, we had reported revenue of EUR 566 million in the period with lower volumes of 5.9% as the impact from COVID in China extended to a number of other countries in the region. On the retail side, SSA, sub-Saharan Africa, and India were also challenged due to local conditions, while performance in Southeast Asia and the Middle East were more robust. On the strategic front, we continue to make good progress in expanding our capacity and deploying our technology capabilities in the region, most notably in China and in the Middle East.
We also moved into our new technology innovation center in Shanghai, a state-of-the-art facility which will be a key enabler of future business development for us in the China region. Now turning to Consumer Foods on slide eight. Reported revenue was at EUR 647 million in the first half, with the volume decline here primarily reflecting the ready meals contract exit in the prior year. COVID had a positive impact on some of our categories earlier in the period, but this was offset by lower snacking and impulse purchases in some categories in the second quarter.
Trading margin was maintained as efficiencies offset any COVID and pricing impacts. We're very pleased with the performance of the recent meat-free launches under both the Richmond and Naked Glory brands. Where they've been rolled out to date, they're performing very strongly and achieving category-leading positions.
With that, I'd hand you to Marguerite to give you a little bit more detail on the financials.
Thanks, Edmond, and good morning, everyone. Over the next 10 minutes or so, I will take you through our financial performance for the first half of the year, which was clearly impacted by the global pandemic. In the period, we delivered EUR 3.4 billion of revenue, trading profits of EUR 316 million, and adjusted earnings per share of EUR 1.321. Now, to look at our financial overview in a little more detail on slide 10. As expected, we had a reduction in reported revenue, which amounted to 4.3%, reflecting the impact of COVID-19. Our trading profits of EUR 316 million and trading margin of 9.3% were lower year-on-year, which I will expand on when we look at the margin bridge shortly. This results in an adjusted earnings per share of EUR 1.321, which was a reduction of 19.8% in constant currency terms.
Return on capital employed was 10.5%, and we generated EUR 107 million of cash in the period. Turning to our revenue performance on slide 11, and taking each of the components in turn. The reduction in reported revenue of 4.3% was driven by a number of elements. Reduced volumes of 6%, which I will give you more details on in the next slide. Price increases of 0.4%, principally driven by increases in our Consumer Foods business. A translation currency impact of 0.1% and a positive impact overall from acquisitions of 1.2%.
Moving now to slide 12 and looking at our revenue volume performance by business. On the left, you will see our overall group revenue performance by business, and to the right is the Taste & Nutrition monthly volume performance over the last six months. The trajectory of recovery through the second quarter is evident from the trend line.
We started the year strongly prior to restrictions on movements, which impacted performance as we moved through the first quarter. In April, our volumes within the foodservice channel were back two-thirds, and this was the driver of overall Taste & Nutrition volume being back 17% in the month. We have seen volumes recovering well since then, very much aligned to the lifting of restrictions in the foodservice channel, and we have exited the quarter with Taste & Nutrition volumes down 5% in the month of June. Turning now to our margin performance and the group trading margin bridge. Overall, group margins were down 140 basis points in the period due to the impact of COVID-19.
Given the impact on volumes in the period, we incurred significant operating deleverage of 110 basis points, which reflects, as Edmond referenced earlier, the impact of our decision to keep our facilities open through this short-term period of disruption as our food service customers dramatically reduced their operations with the introduction of mobility restrictions. From a portfolio mix perspective, the net effect was neutral in the period. During the first half, we incurred costs in relation to COVID-19, the impact of which we sought to minimize by actioning a number of short-term cost management initiatives. Overall, the net impact was 30 basis points. The additional COVID- related costs can be classified into two main categories. Firstly, to ensure the safety and well-being of our employees, including personal protective equipment, zoning, segregation, and other employee support costs.
Secondly, to ensure continuity of supply, including additional labor, raw material costs, stockholding, and distribution costs. We took a number of decisive short-term actions to reduce the impact of these on costs, which included the suspension of all non-essential and discretionary expenditure, reallocation of resources, and optimizing production runs while continuing to support our customers with planned stocking arrangements. Moving to pricing, the 10 basis points reduction here was driven by our Consumer Foods business. Finally, there was a net positive contribution of 10 basis points from our Kerry Excel program. Just to summarize where we are from a margin perspective. As we expected, clearly our margins were materially impacted in the second quarter. As we look forward, given the good business momentum and the continued recovery trajectory, we expect operating deleverage to significantly reduce in the second half of 2020.
Turning now to free cash flow on slide 14. The actions we have taken to ensure continuity of supply in the short term and to support customers during the last number of months are reflected in the first half free cash flow. Free cash flow has been impacted in the period by a number of factors, including lower trading profit as mentioned, increased working capital in the period of EUR 116 million, with the key drivers being inventory and trade receivables. We invested in additional raw materials and finished goods stock to carry contingency stocks of key raw materials, while we also worked with our customers and carried contingency finished goods to ensure continuity of supply through a period of highly fluctuating demand. In addition, aligned to our KerryConnect deployment in North America, we had planned to carry additional security stocks at this time.
Our receivables increased in the period as we supported a number of our customers in navigating short-term challenges. Finally, we had capital expenditure of EUR 129 million, 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., where we are creating a world-leading manufacturing facility to meet the increasing demand for integrated solutions across a variety of protein applications. As we look out to the second half of the year, we expect free cash flow to be much improved as volumes continue to recover. Now moving to our debt profile and credit metrics on slide 15. Net debt was just under EUR 2 billion at the end of the period.
We have a good net debt to EBITDA ratio of 2x . Our overall debt profile continues to be in very good shape, with no significant repayments until 2023, with a weighted average maturity profile of our debt at five point six years. All in all, we continue to have a very strong balance sheet with a long maturity profile to enable future strategic development. Finally, before I finish, I would like to cover off a number of other matters on slide 16. On KerryConnect, I am pleased to say that our deployment in North America is progressing well. We have pushed out the go- live dates by one or two months at a number of facilities to safely enable ways of working during current restrictions. We have proposed an interim dividend of EUR 0.259 per share.
On raw materials, we had low to mid-single digit inflation within our Consumer Foods business, while raw materials in Taste & Nutrition were broadly neutral. At this stage, the overall group outlook is for relatively neutral input cost inflation for the remainder of the year, with low single-digit inflation within Consumer Foods. Finally, on currency, we are currently estimating a translation currency headwind of circa 2%-3% on earnings for the full year. In summary, before I hand over to Edmond, our financial performance in the first half, and most notably the second quarter, reflects the significant volume impact of COVID-19, most notably in our foodservice channel, with an encouraging sequential improvement in volume from April through the second quarter. Now back to Edmond to update more broadly on future prospects.
Thanks, Marguerite. Before I turn to the future prospects, I'd just like to take a few minutes to look at the evolving marketplace and industry landscape and how we're engaging and partnering with our customers. Moving on to slide number 18. We've always said that everything starts with the consumer, and this slide gives you a good framework of how we look at our marketplace. Here you see some noteworthy current market dynamics, and one point I wanted to highlight at the outset is that sustainability has now become a primary factor for consumers and for our customers. There are four key consumer trends outlined in the slide, and I touch on a couple of them in more detail in the following slides. Firstly, online and food delivery in the foodservice channel has seen a step change over the last few months.
There's been an increased consumption with existing customers, but more importantly, a large number of new consumers are experiencing food delivery for the first time. Customers are responding at a pace, and while this is a major opportunity, there are challenges to be addressed, and food service customers are looking to partners for support to overcome these challenges. The second consumer trend is plant-based. Plant-based has continued to establish itself and is proving very resilient, even through this pandemic. We've seen a step change in plant-based innovation as customers who were previously monitoring this trend have crossed the line and are now planning new launches in this space.
Next, we have a heightened focus on reducing food waste, leading to natural shelf life extension coming even more to the fore. Customers are reassessing their offerings with a lot of engagement of how they can renovate their portfolios.
The other trend I just wanted to touch on is well-being and immunity. This has become very much top of mind for consumers and has been a major focus from an innovation perspective so far this year. To conclude on this slide, and as I referred to earlier, there are a lot of changes happening in our marketplace, meaning new challenges for our industry to address, but also providing significant new opportunities. Turning now to slide 19 and looking at the growth of online and food delivery in the foodservice channel. customers here are fundamentally relooking at their businesses and the growth opportunities ahead of them for the next three to five years. They're reviewing their footprint and their operating models, with a good example being operators investing more in the likes of cloud kitchens.
They're also looking at their menu offerings and how they can address the multitude of challenges to deliver a winning home delivery consumer experience. If I take the example here in the middle of the page, the challenges here apply to almost all delivery products, whether it be stability, consistency, taste, or texture. What's key for our food service customers is that Kerry has the broadest technology portfolio to address these requirements. With our holistic partnership model, we develop solutions to meet our customers' needs and the needs of their consumers. Moving on to slide number 20, just taking a moment on the important trend we've seen accelerating through COVID-19, which is the increased demand in the area of food protection, with customers looking to maximize food safety, minimize food waste, and reduce the overall environmental impact.
Over the last 10 years or so, we've been building out our capability through systematic strategic investments, both organic and through acquisitions, to become the leader in clean- label food protection. Keeping food safe over a long shelf life is a complex and multifaceted challenge. It's never just a case of simply switching or adding an ingredient. Our core focus is on enabling customers to keep their food safe while at the same time cleaning up their labels by replacing chemical preservatives with cleaner alternatives. We've outlined our clean- label strategy to you in the past under our 5R framework, where Kerry, we believe, have a distinct advantage. Our clean- label food protection portfolio comprises five technology platforms, as you can see here on the slide. Fermentation metabolites, protective cultures, smoke distillates, vinegar antimicrobials, and bioprotective plant extracts.
Each of these technologies has a unique mechanism of action that can be used individually or in combination that can offer protection across multiple applications and in multiple environments. The value we bring to our customers is very much about how we deploy our food protection portfolio with our broad Taste & Nutrition technology capabilities to create solutions for a variety of applications across the food and beverage landscape. I'm particularly excited about the potential here as we see this as an area that will continue to grow in importance for our consumers and for our customers for the coming years. Turning to slide 21 and future prospects. Within Taste & Nutrition, firstly in our foodservice channel, I'm very encouraged by the progress we've made, and we're continuing to partner with our customers on new menu developments.
Our retail channel continues to deliver strong growth, and we have a strong innovation pipeline and enhanced customer engagement to meet the demands of the post-COVID consumer. Overall, in our Taste & Nutrition business, we're seeing continued good recovery and momentum. Based on the current prevailing environment, for the third quarter, we're estimating lower year-on-year volumes in the range of low single digits to flat. Our Consumer Foods business is currently seeing some short-term changes in consumer purchasing behavior, with variability across some categories as we continue to selectively focus on growth opportunities. We'll continue to invest for growth and pursue M&A opportunities aligned to our strategic growth priorities. Our unique business model, broad Taste & Nutrition portfolio, and industry-leading integrated solutions capabilities are more critical now than ever before as we support our customers through this changing environment.
With that, I'll hand you back to the operator, and we'll be glad to take any of your questions.
Ladies and gentlemen, we will now begin the question-and- answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take a few moments. If you wish to cancel your request, please press the hash key. Once again, that is star one if you wish to ask a question. Your first question comes from Cathal Kenny from Davy. Please go ahead. Your line is open.
Good morning, Marguerite, Edmond, and William. Two questions from my side. Firstly, to Marguerite, on your comment on margin. I think you spoke about a significant reduction in operating leverage in the second half. Perhaps you could maybe quantify that a little bit more, please. Second question relates to emerging markets and one for Edmond. Looks like a mixed picture there. I think overall volume's down close to 4% in the first half. I just wondered, could you give us the drivers behind that volume outturn? Secondly, I guess, has the whole dislocation in emerging markets related to COVID, has that influenced your kind of thought process on the region looking out over the medium term?
Thank you.
Thanks, Cathal. I might just jump in there first and then hand it back to Marguerite. Like you said there, Cathal, yeah, we said in the presentation our developing markets was back by about 3.8%, and it's been very much a country-by-country story. Maybe just to put some color on that first, maybe starting off with China. If we go back to February, we said at the Q1, we had volumes down by more than 80%, and by the time we got to April, volumes for the month were similar to that of last year. Now, as we stand here at the end of July, we're looking at a month where we're looking at volumes being positive year-on-year. Clearly, over the last five or six months, we've seen continued recovery in our business in China.
The decline in APMEA was greater than the average, while the decline in LATAM was less. The impact from COVID was greater in APMEA in the first half, whereas in LATAM, we were kind of more into the second quarter before we started to see the impact. In APMEA, like I said, India and South Africa remain the most impacted, while in LATAM, Brazil is the most impacted. As we stand here today, pretty much all of our developing countries that we operate in have turned a corner at this stage, with Brazil really being the only one, the only callout where we're later in the cycle. Maybe just on the second part of your question, and maybe taking an overall kind of higher- level look at developing markets. Clearly, the requirements in developing markets are going to evolve in response to COVID.
Maybe two areas I'd like to call out in particular is the whole area of localization. I think localization will be an even accelerated trend. It was there pre-COVID-19; we've talked about it in the past, but clearly supply chain did get exposed during the COVID-19 crisis. I do see an acceleration in localization. The second area I'd like to call out is the whole area of nutrition and wellness. Already in a very short amount of time, we're seeing a significant acceleration in projects and innovation around nutrition, around immunity, across both retail and foodservice channels. Look, from our perspective, we continue to see great growth opportunities ahead of us into the future. Maybe the last point before I hand it over to Marguerite, I believe that our in-country strategy and our local footprint, that whole strategy is a proven strategy.
I believe it'll be more important than ever. I believe our ability to execute against that localization strategy, nothing has changed there. I still continue to believe we have a strong ability to execute against that strategy. The second point is from an overall business model standpoint. Our business model is very appropriate. It works effectively in supporting right across customer segments in developing markets, whether it's global customers, whether it's regional leaders, or whether it's local giants. I believe we're well placed to support those customers there.
The third point is, look, we're still very early days in our overall journey in terms of rolling out technology into developing markets. COVID crisis could be a potential catalyst there for some step- change opportunities. I touched on it briefly on the slide there on delivery. I also touched it in food protection and on plant-based. There are three areas where we've seen an accelerated level of interest coming from developing markets. Look, at an overall level, there's no change to our strategy. There's no letup in our drive forward in our overall developing markets journey.
Cathal, I will take your question on margins and deleverage. As we currently think about margins for the second half, and in the context of the continued recovery trajectory that I spoke about earlier, we do expect operating deleverage to significantly reduce in the second half, and we are looking at a significant improvement in margins on the back of the continued recovery. As we see things today, we would expect margins to be slightly negative in the second half, and the change in operating leverage will be the key driver of this improvement.
Thank you. Your next question comes from James Targett from Berenberg. Please go ahead. Your line is open.
Good morning, Marguerite. Good morning, Edmond. A couple of questions from me. Firstly, on food service. Thank you for giving us that color of the exit rate. Very helpful. I wonder maybe if you could talk about that June figure or the July figure you gave, how that was trending by the regions, just to get an idea of where food service was down in the three regions. That'd be very helpful. Secondly, on innovation. Edmond, thanks for your comments on where your focus is and the opportunities that you're seeing right now.
I guess specifically, a lot of the CPG companies have been flagging a couple of things like, a more rationalized approach to innovation, a less scattergun approach, fewer bigger innovations, and also talking a lot about SKU reductions. We're talking 20%, 25% SKU reductions. What specifically does that strategy mean for Kerry?
That'd be useful to get some color there, particularly if there's a big difference between what you're seeing on innovation with your local versus your global customers. Maybe just one third one, if I can, just on Consumer Foods. Actually, sorry. Yeah, on Consumer Foods. You say there was no big impact from COVID-19; ultimately, volume swung from being up three in the first quarter to, I think, down four, excluding the Tesco contract. Is that just due to footfall issues and schools being closed, et cetera? Is there something fundamentally changed for demand for your products that you expect to see weaker growth in Consumer Foods going forward? Thank you.
Thanks, James. Maybe taking your first question first, James, on food service. If you don't mind, I might just take this opportunity just to maybe frame our food service business, then I'll answer your question specifically. Like we said before, our foodservice channel represents 12% of our Taste & Nutrition business. Of that, about two-thirds is with chains. That's made up of QSRs, coffee chains, fast casual dining, and contract caterers. We're primarily weighted towards QSR, coffee chains, and fast casual from a sub-channel perspective. That's about two-thirds. The next 20% is orientated towards independent operators, where we have a specific targeted strategy. Then the remaining 10% is orientated towards convenience stores. 75% of the channel is orientated towards larger players, being convenience stores, and QSRs, and coffee chains. The profile is quite similar by region.
Just moving in specifically to give some color on each of the regions. Look, North America was recovering strongly as we moved through May and June, very much aligned with the lifting of restrictions. The impact in LATAM commenced later than North America and has continued to be significantly impacted in May and June. In Europe, the recovery has been slower than in North America. Firstly, I would say that lockdowns were more severe, and secondly, the lifting of restrictions in Europe had been slower and had been done in a more phased basis. There's a lot of variability country- to- country. In the APMEA region, as we've kind of moved through the quarter, we have continued to see a lot of variability country- by- country. Again, very much aligned to movements on restrictions.
Like I said, we saw China continuing to improve across the quarter while countries like India and South Africa had more significant impacts in May and June. Maybe to come to your question on innovation, absolutely, James, we've seen what you just referenced there in terms of SKUs. I think the story for us here is it's very much a customer-by-customer story, frankly. You're correct. Especially at the earlier phase of COVID-19, there was a significant reduction in the number of SKUs by many players. I suppose the reality is that, as customers were looking at these SKUs, I think there was a bit of a realization that the level of differentiation that was seen amongst these SKUs at a consumer level probably wasn't there.
As we are engaging with customers now, and I have to say that the level of openness and transparency with customers has gone to a new level, we're kind of seeing three, let's say, big buckets of factors influencing innovation at this stage. The first one is we are seeing, like I said, more openness, more collaboration towards innovation, and more partnership-type discussions going on. The second point is we're seeing more meaningful , purposeful innovations being talked about. A number of customers are talking about real, in inverted commas, initiatives as it relates to their new product development approach. Real meaning, real functionality, real nutritional improvement, real clean label. The point there is, I think, bigger, more impactful, more purposeful innovation.
The third point is localization has just really accelerated in terms of that whole push because the reality is COVID did show up some weaknesses in the supply chain. Localization has been a factor. From a Kerry perspective, frankly, we're pretty indifferent as it relates to the types of approaches that customers take in innovation. If I was to go back, maybe 10 years ago, it was about bigger innovation, it was about more purposeful innovation. It was about bigger reference sizes. Over the years and in recent times, it was probably more incremental innovation. From a Kerry perspective, we're somewhat indifferent in terms of how that plays out because I believe we have an inbuilt agility in our business model that we'll be able to pivot, and we have that track record of being able to pivot to where the opportunities are at.
For us, we look at every project on a standalone basis to understand the level of investment in resources versus the return. From our perspective, this wouldn't be a bad outcome, and I think overall, I believe we're actually well- positioned to enable customers to continue to bring innovations to market that are aligned to consumer requirements. Maybe moving on to your last question in Consumer Foods. Look, there's been a lot of moving parts there over the last six months. Like we said, we had several of the categories that we operate in Q1 accelerated. There was a little bit of a pullback in Q2.
I would say, as we look at July, let's say it's a little bit more normalized, where we've seen the ready meals category improve, and maybe some of the tailwinds that were there in our sausage category and in the spreads category ease off a little bit. A lot of moving parts. It is a fast-moving set of categories that we're operating in, so it's harder to predict how things will play out. The view that we've given, we stand by that H2 will be somewhat similar to H1 when you factor out the ready meals contract exit that you mentioned. Great. I hope that's useful, James.
Yeah, it is. Thank you.
Thank you. Your next question comes from Graham Hunt from Morgan Stanley. Please go ahead. Your line is open.
Good morning, Edmond and Marguerite. Just two questions from me, if possible. First one's on M&A. I just wanted to ask how you're thinking about capital allocation priorities today after maybe what you've seen over the last six months, whether the demand online implies some kind of an investment, or if it's going to be additional spend. On deals going forward, would you expect them to come at a similar run rate as you've had in the past, or if there's been a kind of shift in priority there? Then, the second question is on plant-based. I just wondered if you could give some color on how the Radicle platform performed in the half and how that might have been against your expectations, where they were in January. Thanks.
Yeah. Thanks, Graham, for those questions. In terms of M&A, what I would say here is that there's no change in our strategy here. You shouldn't think about Kerry in a different way as it relates to M&A. We continue to have a strong pipeline there ahead of us. We haven't put in place any self-imposed restrictions as it relates to M&A. There are practical issues. There are practical issues as we stand here today and look back over the last six months, just in terms of the obvious travel restrictions and what have you. It's not something that I'm concerned about. Look, as it relates to our M&A strategy, we'll do the best thing for our shareholders and all stakeholders as it relates to long-term value creation.
No change there on our strategy or no change in our ability to execute against our M&A strategy, I believe, and the pipeline remains strong. In terms of plant-based meat alternatives and the Radicle platform that you mentioned, look, frankly, it's an area we're very excited about. Like I mentioned on the prepared remarks, there has been an acceleration in plant-based launches. We did see several customers that were standing in the sidelines, maybe coming into 2020 , who were kind of thinking about, "Well, is this a real trend? Has this got real staying power?" Clearly, what we've seen during COVID is that there's a lot of resiliency here in this category. Those customers, and it maybe goes back to the innovation question that I answered previously. Where customers have made a decision to do something, and this plant-based area is a good example.
We've seen customers be very focused, prioritize the launch, align resources behind it, and really drive forward. That's been a change. That's been a really positive change. Launches that would've maybe historically taken 12- 18 months or even longer those launches being done in three months. I think the plant-based area is a good example for us, where customers made a decision in April or May timeframe and are targeting launches here in September. That's the first point. The second point that I'd like to just touch on is that we started to see plant-based alternatives move into new categories. Categories like desserts, categories like meals, both frozen and chilled. The third point is that we've seen a step change in engagement in developing markets as it relates to plant-based meat alternatives.
Frankly, if we were having this discussion six months ago, I just didn't see that happening as quick. Overall, we're really excited about that Radicle platform. We will be relaunching Radicle 2.0 here in the coming month or two. It's an area we're really excited about and have significant customer engagement here.
Thanks very much.
Thank you. Your next question comes from Jason Molins from Goodbody. Please go ahead. Your line is open.
Hi. Good morning, guys. Edmond, just looking to clarify your comments in terms of the trajectory for Q3. Did you say low single digit to flat? If you can just clarify that, and also in terms of the splits within the Taste & Nutrition. Obviously, food service, you've gone into a bit of detail, but how should we think about the retail channel, or how are you thinking about the retail channel developing over the coming quarter? Maybe one for Marguerite. In terms of COVID costs, just wondering if you could put a quantum on the additional costs that you've had to absorb in the year so far. Then, just sort of finally, on the Consumer Foods, obviously, the CEO's left that business recently. There's been mounting speculation around the dairy processing business and perhaps some of the dairy elements of your Consumer Foods business.
Just wondering how we should think about that. Would setting up a JV that's been mentioned and speculated would that make sense in your eyes? Maybe some comments around that would be helpful. Thanks.
Maybe the last point first, Jason. Thanks for your questions. I would say, first of all, we're not going to comment on any media speculation that's out there. Maybe just moving on to your other questions, I would say in terms of the retail channel, look, we're pleased with the performance in the retail channel in Q2. On the zone of 5%, I would say that it's an accelerated performance from Q1. Like I said, the Q1 performance was impacted by China.
Maybe just to put a little bit of color on that, take a place like China, where we've only been in China for the last 20, 25 years, and we didn't have an exposure or a significant exposure to categories, traditional categories like fried noodles, which had a bounce in Q1 in a place like China. That wasn't an area of focus for us.
We didn't see that bounce in China. Because of that under-indexation in that category, it impacted the retail channel for us in Q1. When you compare Q2 performance to the last couple of years, clearly that's an acceleration as well. That's something we're pretty pleased about. In terms of overall performance, maybe just to take a 30,000-foot view there, just because there's an awful lot of detail there. In our Taste & Nutrition business, in April, we were back 16% from a volume perspective. As we moved to June, we were back 5%. As we look at July, and just to clarify the comments that I made on Q3, we're talking to about flat to low single digit back. This is the recovery. This is the progression, and that's why we're pleased with this progression.
Just from a margin perspective, it's very much linked to that volume story, because the margin is all about the deleverage. Maybe just to put just a little bit of color on that, because I touched on it briefly in the presentation. We made a very conscious strategic decision about three years ago to set up our manufacturing footprint for multi-technology manufacturing. That very much enables our integrated solution strategy. It is the right thing to do for our customers. It enables faster innovation. It enables faster deployment of technology into those solutions. I suppose, therefore, we didn't have the option, really, to close down facilities in this phase or anything like this. Because we have those multi-technology facilities, they work right across end-use markets, and they supply right across channels.
One should think about our volumes and our margins very much linked in terms of that deleverage. I hope that's useful, Jason, in terms of giving some color. Jason.
Maybe, Jason, I'll deal with the additional COVID costs. To give you a little bit more detail on the COVID- related costs, they can be classified into two main groupings. Firstly, costs to ensure the safety and well-being of our employees, and costs in this category include personal protective equipment, zoning, segregation, and other employee support costs. Secondly, and importantly, costs to ensure continuity of supply, including additional labor, raw material costs, stock holding, and distribution costs. They're the primary components of the additional COVID- related costs.
Obviously, we took a number of short-term actions to reduce the impacts of these costs, and that included, as I referenced earlier, suspension of all non-essential and discretionary expenditure, reallocation of resources, and stocking agreements with customers to facilitate longer production runs. The net impact of the additional costs was a reduction of 30 basis points.
Hopefully, that gives you, Jason, the color that you need.
Thanks, Marguerite.
Thank you. Your next question comes from Arthur Reeves from Barclays. Please go ahead. Your line is open.
Good morning. A couple of questions from me, please. Could you scope out how big your plant-based and food protection businesses are compared to the whole thing, please? Looking beyond this year, do you think that overall COVID is going to be good for Kerry, or do you see some fundamental changes that mean that you will have to change your 4%-6% volume growth midterm forecast, please? Thanks.
Yeah. I'll take that on, Arthur. I would say in terms of plant-based first, like we've said in the past, that business represents about 1%-2% of our overall Taste & Nutrition business, and it's growing strong double digits. Like I said earlier, there are a lot of underpinning factors there that we see in the marketplace that I believe that growth will continue well into the future. I would say in terms of the food protection and preservation, that business is, I would say, substantially larger than our plant-based business. Again, it's an area that we're really proud of, really proud of how we've put together systematically and strategically a really strong portfolio, a breadth of portfolio, and an ability to be able to work right across a broad breadth of end-use markets and channels.
I think we're just at the early phase of that whole area. I think linked to your question on COVID and whether that's going to be an accelerator or decelerator, I think when we look at the underpinnings of our strategy, be it authentic taste, I think as we look at the trends that were there pre-COVID, as we look at the trends that were underpinning our strategy pre-COVID, if anything, those trends have accelerated through COVID. I think in terms of where we look at our four strategic growth priorities, while we have reviewed in terms of should we be doing anything different from a strategic perspective, I think we've landed that it's about doubling down.
We believe we're on the right track. We believe we have the right strategy, and there's nothing changed in terms of our ability to execute against that strategy.
In terms of the 4%- 6%, look, the reality is that we are in the midst of a worldwide pandemic. If you asked me that question back in January or February, we were absolutely on track. I would say in the midst of a worldwide pandemic, I think we need to get through 2020 and then see what the future holds. A really important point here is that we're pleased with the progression. I've outlined our progression from a performance perspective. It's been very much aligned to restrictions easing. From an overall trend standpoint, we haven't seen anything to change our minds as it relates to the underpinning of our strategy going forward.
Thanks. Very helpful. Thanks.
Thank you. Your next question comes from Faham Baig from Credit Suisse. Please go ahead. Your line is open.
Good morning, guys. Thanks for the opportunity. Most of my questions have been answered. Being a bit more precise on Q3, have I correctly heard and calculated that you said June Taste & Nutrition volumes were down 5%, and July it improved relatively substantially and was down about 2%? Also, in the current sort of period, with increasing number of cities, particularly, and states in the U.S., seeing COVID cases, and going into lockdown, is that impacting the business? Is the impact anywhere near what you guys saw in the March and April months? The second question is, just to better understand the dynamics from a consumer standpoint and a customer standpoint, and how that might be impacting your business, are you seeing a rapid shift in your customer portfolio with regard to smaller and bigger players?
Are the bigger players currently winning in the market versus the smaller players, given their supply chain footprint and strength? Similarly, from a product standpoint, are you seeing consumers trade down to lower value propositions versus higher value propositions? How should we think about those two different elements impacting Kerry's fundamentals? Thank you so much.
Thanks, Faham. I think you've got the record for most questions. Thank you, though, all the same. I would say, first of all, in terms of the performance that you've outlined right there, your calculations are correct. As we look out into Q3, and we're a month into Q3, what we said is that our performance will be in the zone of low single digit back to flat. I suppose maybe a couple of points on that. While you're absolutely correct, there continues to be a lot of volatility out there, a lot of variability. We can't see into the future in terms of what's going to happen with COVID-19. What we can say is that based on restrictions being lifted, our progress has progressed as those restrictions have been lifted. That's the first point.
The second point, as it relates to Q3, is, we do have visibility near in of some significant launches in the middle or towards end of Q3, that we know we're going to have some pipeline fill. This goes back to, and it's somewhat related to, the next part of your question about how customers are operating during this phase. I give two examples. The first example is that maybe about three months ago, we had a significant engagement with a customer in North America, where they wanted to quickly launch a nutritional dry beverage right across the U.S. market in many locations that had an immunity functionality. In the space of three months, we're going to go from ideation all the way to launch. This product is going to be launched towards the end of August.
That speed of launch with that particular customer at the scale that they're talking about is unprecedented. That's a very specific response to COVID-19. We have the portfolio as it relates to immunity, we have the portfolio as it relates to taste, and we have the business model from a speed perspective to enable that customer to achieve what they want to do. That's one example. A second example, and again, if we were here six months ago, I wouldn't have foreseen this, is that we have a C-store customer in developing markets that's launching a dispensed beverage with immunity claims, where the consumer will have the opportunity to choose whether they want an immunity shot into their coffee, into their latte, into their tea. Again, if we were sitting here four months ago, I just didn't see that as an opportunity for Kerry.
Again, it just goes to the speed and the dynamic nature of what's happening in the marketplace at the moment. Again, this will be a significant launch for us in Q3. That gives us some sense of what's going on in Q3, and I hope it gives you some sense in terms of what's happening from a customer perspective. Specifically to your point, though, in terms of the larger players versus the smaller players. Clearly, we have seen almost a revert back to consumers going back to bigger brands, a lot of center-to-store brands, pantry filling, and what have you. We certainly have seen that the same as everybody else.
The reality from our perspective is that we do feel that there is opportunities for any customer, regardless of size, to launch products that are appropriate and that meet the demands of consumers and meet the trends that consumers want met. From a Kerry perspective, frankly, we're indifferent in terms of whether it's larger players that are winning or more local players or regional players. From our perspective, we have that ability to pivot. We've shown that through our history, that we can evolve and move quickly to support customers regardless of size or regardless of location.
Your last point in terms of trading down, I would say we haven't seen that yet. We do expect to see it, though. I would say that we do expect the recession to kick in here at a point in time. We're probably a bit early for that yet.
Again, I suppose there will be a difference from a food and beverage standpoint in this recession than the last recession, in our opinion. If you go back to the last recession and compare that to now from a food standpoint and a food and beverage consumption standpoint, consumers are a lot more, let's say, sophisticated as it relates to their food and beverage consumption. I don't believe they'll be prepared to compromise to the same extent that they compromised back 10 years ago or so. Time will tell. Again, from a Kerry perspective, we do have the ability, we do have the business model, we do have the portfolio to be able to work with customers to value engineer their products if that's what's required.
I wouldn't say that as we go into this recession, I wouldn't expect to see the same trends as we saw the last time. I think that level of sophistication from a consumer standpoint is a factor.
That's very helpful. Thank you.
Thank you. Your next question comes from Heidi Vesterinen from Exane. Please go ahead. Your line is open.
Hi. Good morning. Just one clarification question, please. In Q2, it was surprising that food service improved, but retail didn't decelerate to compensate for that. To me, it suggests that, well, we're either eating more, which is possible, or that there's some inventory effect, or maybe you're taking share in retail. How do you explain this trend, and what do you see so far in Q3, please?
Thanks, Heidi. I suppose your question certainly is thought- provoking in that one would expect a shift. Frankly, it's very hard into the specifics of that at a macro level. I suppose what we're trying to do is to share exactly what we're seeing. You're absolutely right. There could be some, I would say, parts of the supply chain that are seeing a little bit more volume. There is a lot of moving parts. There is a lot of variability, a lot of volatility. It's not a perfect science here in terms of watching that transfer between in-home consumption and out-of-home consumption. That's kind of a general point.
What I would say, though, is that if we were to go back and look at the momentum that we brought into 2020, and especially the momentum that we brought into 2020 in North America, and I suppose the breadth of our business in North America, there are a few underpins there in terms of the whole area of authentic taste, culinary foundations, authentic cooking methods, flavors, and what have you that have underpinned our retail performance coming into 2020 and have continued through the last six months. Because they are kind of pretty foundational, fundamental trends that were there pre-COVID and have kind of accelerated through COVID. Look, it's one that we're keeping a very close eye on. Clearly, we're highly motivated to keep this performance in retail going.
I touched on a couple of examples of new product launches, one in retail and one in food service, that we see coming here in the third quarter. Look, at an overall level right now, we're, I suppose, fighting on all fronts. We're driving forward on all fronts. We are looking to gain market share in this phase. We believe we have the right to do that. We believe we have the firepower to do that, and we have the strength to do that, and we have the ability to continue to execute against our strategy to achieve that. Look, time will tell. There continues to be a lot of volatility and variability, but I would go back to the kind of resiliency that's been built into our business model, our ability to pivot, our ability to shift, our ability to evolve.
I think culturally, these are all important attributes that exist within the company that will see us through this crisis.
Thank you. Your last question comes from Charles Eden from UBS. Please go ahead. Your line is open.
Hi, good morning, Edmond, Marguerite, and William. Thanks for sneaking me in. Just one quick follow-up. Just in terms of the key consumer trends which you highlighted in your prepared remarks, Edmond, and we've discussed them a little bit, but just particularly with respect to food delivery, do you see this as a core competency for Kerry already, or will this require additional investments to meet these needs? I guess the context of my question is just trying to understand the potential upside to T&N margins over the medium term. Thank you.
Thanks, Charles. I should have probably rounded back and clarified some of those comments. There's no doubt that delivery will be a bigger factor in the new kind of reimagined foodservice channel. I suppose in places like China and places like the Middle East, frankly, where out- of- home consumption or, sorry, delivery was a significant factor of our customers' business pre-COVID-19, and in other regions that has clearly accelerated. In some of the regions that we operated in pre-COVID-19, our customers had up to 40% of their business that was already delivered.
There's no doubt we're taking learnings. We're taking examples from places like China, from places like the Middle East, to other areas. What's exciting for us about it really is the fact that it enables us to actually accelerate, well, to potentially accelerate the deployment of technology into applications that are challenged.
Like I said in the presentation, whether it's taste, whether it's texture, whether it's just the visual of a particular product. I gave the beverage example on the presentation. That specific example is the China example, whereby to try and bridge the gap between the out- of- home dine-in experience and the at- home experience. Customers are really trying to bridge that gap, so they're really open now to technologies and ways of trying to bridge that gap because those customers in the past relied heavily in their dine-in experience being a differentiator for them. Now they have to relook at that and reimagine that. There's an openness there. There's an engagement there.
We talked about some of these technologies in the past as it relates to crispiness, and we talked about the soggy French fries and things like that, and the fact that we have technologies to deploy into those applications. It's something that we feel we already have the technology. We already have the holistic partnerships that are required in a situation like this. We believe we're experts in that three-way relationship between the end user, the operator, and Kerry, and the processor. Look, overall, we feel well- positioned. We don't foresee at this stage any further investment to be made. This foodservice channel will continue to be quite dynamic going into the future. It's not really easy to predict how it will play out, but fundamentally, we believe the demographics are on our side here.
We continue to be optimistic about the channel, but how it plays out from a kind of a week- to- week, month- to- month, quarter-to-quarter perspective will be harder to predict. Overall, we feel good about it, and we feel we're well-positioned to enable customers to achieve their goals. I hope that answers, Charles.
That's great. Thanks very much, Edmond.
Thank you. As this is our last question, we will close the call and thank you for dialing in today.