Good day, ladies and gentlemen, welcome to the Kerry Group first quarter 2018 IMS conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. William Lynch. Please go ahead, sir.
Thank you, operator, good morning, ladies and gentlemen, welcome to our conference call following the release of our 2018 Q1 interim management statement. My name is William Lynch, I am Head of Investor Relations. With me is Brian Mehigan, Kerry Group CFO, and Marguerite Larkin, Group Financial Controller. I will hand over to Brian, who will take you through a brief presentation capturing the key points of our Q1 IMS. The presentation is available on the investor section of our website, www.kerrygroup.com. Following that, there will be a question and answer session, which will be facilitated by the operator. Before commencing the presentation, let me draw your attention to the usual disclaimer regarding forward-looking statements. I will now hand over to Brian.
Morning, ladies and gentlemen. Thanks, William. I am just going to take you through, as William said, five or six slides, just to point out the highlights. I think you might even have had a chance to read it already. I will jump straight in. Q1 highlights for 2018 on a volume basis, 3.7% overall. Taste & Nutrition coming in at 0.3%, Consumer Foods 1.6%. Adding to this, 0.9% on a pricing basis. Trading margin was maintained flat with the same quarter in 2017, which represents underlying margin expansion offset by the transaction currency that we would have mentioned back over the 2017 period in relation to GBP. Overall, Taste & Nutrition came in +20 basis points in Consumer Foods. Underlying growth was back 60 basis points when the transaction currency hit and taken into account.
Our net debt is at $1.3 billion, same as at the end of the year, we retain our full year earnings guidance. Just for a moment to focus on the environment and the markets that we are operating in. The developed markets, firstly, continue to experience significant churn and significant fragmentation from the consumer backwards. The continued impact of personalized products, better for you products, the drive towards local and authentic continues to impact the change in what consumers are choosing and drive significant activity and significant churn in our business, which we see as a significantly positive thing. In developing markets, the underlying fundamentals continue to improve, driven by organization and the growth in the middle classes. I think it is fair to say our business model, particularly in developing markets, is really resonating and driving our business forward.
The highlights overall in terms of our volume growth across the patch represents good growth and pretty much in line with our targets across all end-use markets. That's the resonation of the partnership business model across all customer sets. In food service, we continue to win with menu extensions and better for you launches, as well as limited time offers. We've had significant activity again in the first quarter with roughly EUR 100 million spent on acquisition in Q1 of the year, that continues to be a busy area for us.
In terms of the overall business performance in Taste & Nutrition, as I said, continue to deliver across all end-use markets and our four key strategies that we called out at the capital markets day last year in terms of taste, nutrition, food service, and our focus on developing markets all continued to be significant focuses for us and significant winning areas. Indeed, in Consumer Foods, the adjacencies we called out around food to go and snacking are delivering good growth as well in the period. Move on to the next slide and just look at the analysis of the revenue growth, which at 0.1% reported and 8.5% on a constant currency basis, comprises a number of moving parts.
The like for like of 4.5% comprises volume of 3.7% and price of 0.9%, offset by transaction currency of 0.1%, with the acquisitions in the period and coming through from last year delivering an additional 4% to the revenue growth line when measured on a volume basis. Just to spend a couple of moments on each of the two divisions, start with Taste & Nutrition revenue growth of 4.3% and up 20 basis points in terms of trading margin. That 4.3% represents an increase of 9.5% in developing markets and 2.6% in developed markets. The key end-use markets here that I'd call out in terms of being standout performances in the period would be meat, beverage, and the snacks end-use markets. Food service and retail channels continue to deliver well as well, with 6.1% growth in the quarter over the same period last year.
It's fair to call out that we are investing significantly across the customer base, but particularly to develop our in-market and local connectivity with the winning customer base in terms of the medium and smaller customers across the developed and indeed the developing marketplace. The raw material environment has eased somewhat from 2017, where we saw 4% inflation being recovered pretty much in the 2% pricing activity, which is down in the first quarter to 0.9%. That continues to ease as we go into the second quarter. At this point, we will be seeing that at flat to slightly deflationary on a full year basis, maybe low single digits by the time the end of the year comes.
In terms of margin progression of 20 basis points, good underlying margin progression, probably double that offset by the investments we're making in KerryConnect and indeed in the localization of development capability and applications capability serving the fragmentation that's going on in the marketplace. Across the three regions, good growth, as we said, generally across all end-use markets and calling out meat, snack, and beverage really across the patch. Brazil performing well, Mexico solid. The acquisitions we made in 2017 in the Americas, like Kettle, Gaffney's, [Whey] and Ganeden, all traveling pretty well at this point in time. In Europe probably fair to call out Punto, that continues to be a really winning segment for us.
Just to mention, a recent acquisition of joint venture that we've done called Aisa, which is a significant plant-based protein technology that we would be very excited about as well into the future. In APMEA, performing very well across the countries. Pretty much broad-based performance with the acquisitions of cress and Seasoned Solutions starting to being integrated, as well as the Hangzhou Lanli business that we completed in the first quarter as well in that region. Moving on for a moment now to Consumer Foods. Revenue growth at 1.6%, pretty solid and slightly behind maybe what we would have expected due to maybe some weather issues in the first quarter in Ireland and U.K. Nonetheless, a pretty robust performance and ahead of the marketplace in terms of our 1.6% growth number.
The trading margin was flat to slightly positive on an underlying basis and offset by the sterling rate issue in terms of the exports of three particular product lines out of Ireland into the U.K., which is something that we've called out that we are working very hard in terms of reducing that exposure through our Brexit mitigation program, which is progressing very well. From a market perspective, the performance across everyday fresh, driven by Richmond, Fry's, Smoke, [Inaudible] , performing very solidly in the period. Convenience meals probably a little bit challenged in terms of the significant reduction at customer level and retailer level around promotional activity. The frozen category continues to be challenged as well. Good progress in terms of our significant innovation capability and a number of important and effective launches around better-for-you ranges.
Food to go and snacking, in particular around meat and dairy, performing very well, as well as our rollover technology into entertainment venues. The margin, as we said, underlying performance pretty solid and that currency issue coming in at negative 60 basis points. That's the two divisions, Taste & Nutrition and Consumer Foods, performing, I think, overall pretty solidly and to expectation. As we look forward for the rest of the year at this point, I guess it's early days yet. We continue to win in the global markets, both developed and developing, with our taste and nutrition technology and our focus on food service and developing market strategies. We're confident that that performance will continue in Taste & Nutrition through the year, as well as continuing to win in Consumer Foods in terms of our adjacencies and food to go strategies.
The one thing that continues to be a call-out is the U.K. market. [Backspire] has performed very solidly for us in the first quarter, but with the continued uncertainty around Brexit, we continue to be watchful in relation to the U.K. consumer and how that will perform through the rest of the year. Indeed, in Taste & Nutrition, lapping some significantly good performances, particularly in food service in Europe as we go through the second half of the year as well. We continue to invest for growth and the localization of some of our application technologies in country around the world. We continue to focus on the opportunities in the fragmented industry that we operate in relation to M&A opportunities, and that pipeline continues to be robust and pretty busy for us. The balance sheet, as you know, is pretty strong at this stage as well.
In relation to translation currency, as we called out back in February, that's a significant headwind from a reported perspective in 2018, where it was a headwind of 7% approximately back in February. That's eased somewhat, particularly in the last week, in relation to the U.S. dollar, and now it would be around 6%, or maybe slightly below that, if you take yesterday's rate. That's not something that we as a team feel we're going to predict for the rest of the year. We're saying 6%-7% is roughly where we see it at this point in time. The underlying business and the projection for the rest of the year in terms of 6%-10%, we're very confident that we'll deliver against that target as the year progresses. That's a quick run-through the fundamentals and the highlights of the performance in the quarter.
With that, I think William has some comments to make at the end, but I'll hand over back to the operator for some questions at this time.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that's star one to ask a question. We will take an opening question from Arthur Reeves of Societe Generale. Please go ahead.
Good morning, everyone. Two questions from me, please. The first about Consumer Foods. Is pricing easing in Consumer Foods? Do you expect that to make life slightly easier as the year progresses? My second question is about America. You refer in your statement to ready-to-eat cereal being difficult. Does that make a material impact to your growth rate in that region, please? How long will it continue, do you think, to be a drag? Thanks.
Thanks, Arthur. Good morning. Two good questions to start. Pricing in the U.K. has eased a little bit in relation to our input costs in 2018, particularly around protein and some vegetable inputs. Obviously, pricing coming down is better than pricing going up because there's always a little bit of a lag effect. Again, we still needed to recover the inflation that was there through the back end of last year and into the first quarter. I think that continues to be an active area. As we cycle through the year, I would expect that to go past neutral and actually be deflationary into the second half.
Thank you.
Your second question on ready-to-eat cereal. I think that's just a very good example of the significant change that's happening in the marketplace. It's something we see across most of our categories in the Americas. Given the very strong position we have with the leading brand category and as a significant change in fragmentation happens across those categories, we're working very hard with our clients to reinvent the product offering. Indeed, in ready-to-eat cereal, as we reinvent into more snacking, more food to go, more better-for-you, high protein type offerings. While the overall volume impact continues to be negative, there is a benefit certainly in terms of pricing and positive margin mix impact.
It's something that will probably continue for another, I would say, maybe a year or 2 years, but certainly as we help our clients to reinvent that business in that category, we'd be excited that there's some very good business to be done in terms of that whole health and nutrition, food to go, food snacking category as well.
Thanks. I know this is difficult, but could you quantify that at all in terms of without cereal, what your growth would have been in Americas?
Yeah, look, I think it's fair to say that our cereal business has been flat to possibly negative across the last couple of years, but it was a positive quarter in the first quarter of 2018.
Okay
It's one of eight end-use markets that we serve.
Yeah.
It wouldn't have been fundamentally different if it was-
Okay
3% rather than 1.5%.
Okay. Thanks very much.
Thanks, Arthur.
We'll take our next question from Fulvio Cintra of Goldman Sachs. Please go ahead.
Yes, good morning, gentlemen. Thank you for taking my questions. I've got two. Firstly, on the breakdown of volume growth between food service and non-food service, I make it out to be around Just under 3%, your volume growth outside of food service for Taste & Nutrition. I was just hoping that you could either confirm that, and if it's accurate, can you just highlight what the drivers versus the industry are? When we compare that performance to say like a Nestlé, that delivered around 2.6 in the quarter, does that kind of imply that some of the smaller, more regional players are not perhaps as active in Q1 in terms of innovation? Are you seeing the bigger players basically holding share, as opposed to what we've seen over the last few years? I guess that's question number 1.
The second question is on the transactional FX headwinds. Can you give us a bit of a sense of how this is likely to phase as 2018 unfolds, i.e., is H1 going to bear the bigger part of the impact on a full year basis versus the second half, or is it going to be fairly evenly split between the quarters? Thank you.
Thanks, Fulvio. Good morning. On your first question first, you have the Taste & Nutrition overall of 4.3 comprising 6.1 in food service, and it's actually 3.7 in the rest of the business, which would be mainly into retail. That's been a decent performance into the retail category, and I think it's fair to say that the split between let's say CPGs and the rest of the business and the regional leaders and the local players continues to see a significant amount of churn, with the regional and local categories probably still net winning. We are seeing green shoots in terms of it's more like repositioning than true innovation at this point in time.
Certainly, the CPGs are very focused, very aware, and very active in terms of new product development, in terms of looking at what their possibilities are to address what is a significant opportunity now in the market to meet the new demands of the new consumer. It's not come true materially yet from a volume perspective, but it's certainly a focus area for our bigger clients and indeed for ourselves. In relation to the sterling transaction impact, it's pretty much going to be even across the year. It's sitting at 2%, which would make the 6%-10% more like 8%-12% in terms of our EPS forecast for the year. It's going to be pretty even across the quarters.
Great. Thank you very much for that.
Thanks, Fulvio.
We will take our next question from Jason Molins of Goodbody. Please go ahead.
Thank you. Good morning, Brian and William. A couple of questions, if you don't mind. Food performance, you obviously call that a relatively strong performance in the quarter. How does that compare, do you think, to the overall market growth? Just on Consumer Foods, early days, I appreciate, but just wondering your thoughts on potential impact in the U.K. with the Asda Sainsbury's tie-up. How do you see that playing out for Kerry, given they've been pretty clear that they're looking to equalize terms across their supplier network? Thanks.
Morning, Jason. In relation to food, you're asking globally. At 4.3% volume growth, that's against global markets that's probably growing at roughly 1%-1.5%. Significantly outperforming the market, that probably breaks down about 0.5% in developed markets and maybe 4.5% in developing markets. It's fair to say that our model is winning against what is pretty flat, particularly in developed markets in terms of the underlying market growth rate. In relation to Consumer Foods and the overall marketplace, including the Asda Sainsbury's tie-up, that's something that we would have seen as an organization many times in our careers, particularly in the Taste & Nutrition business, where many of our customers merge together and very often de-merge as well.
We're very well positioned around that kind of activity to be of significant assistance to our customers. A new combination like that in terms of our total footprint and the innovation we bring individually can be significantly enhanced when we bring it in terms of more critical mass. It will put Asda Sainsbury's in the U.K. context up alongside Tesco in terms of market share, that's certainly something that we believe that we can win with into the future.
The Taste & Nutrition performance there, particularly around food service, the 6.1%. Any sense of where the market was on that versus your own performance?
I would say the market probably is about 2% globally. In terms of foodservice, I'd say growing at twice the rate at least of the Retail side in developed markets, and I would say maybe even faster than that in developing markets. Maybe overall 2.5% market growth against our 6.1%.
Okay, perfect. Thanks.
We will take our next question from James Targett of Berenberg. Please go ahead.
Hi. Good morning, everyone. Two questions from me. Firstly, just coming back to foodservice. You mentioned that your comps get tougher as we go through the year. I just wondered if you could give us some color on what the foodservice grew in the first half of last year versus the second half of last year, so we can see how material that is versus, I guess the 6.7% you did in Q1. Secondly, just on Americas, sorry if you're repeating yourself, but just could you give us the growth rate in North versus Latin America? And particularly regarding Mexico, you mentioned some disruption from customer order timings. Just wondered how significant that was. Thanks.
In relation to foodservice, James, good morning. Yeah, it was a really good year last year in foodservice and we called out particularly the European market as a standout performance. I would say globally it was in excess of 7% last year, and that was probably a little bit higher in the second half than it was in the first half. It can be a little bit up and down in relation to what comes on and off in relation to limited time offers. Nonetheless, a very strong performance last year and continuing into the first quarter in relation to foodservice. Sorry, can you just repeat the second question you had, James? I missed it down.
Yeah, I will do. Just can I just check on the foodservice. You're saying there wasn't a big difference in growth rates between Q1 and Q2 last year in foodservice?
Maybe 1%.
Okay. Sure. Second question was just on Americas, just the difference in growth rate between North and Latin America, and then within Latin America, how significant the impact of the customer order timing was for Mexico.
Look, I would say the performance in both North America and LATAM was very solid through last year. I would say picking up in LATAM in Q1, we would certainly be optimistic for accelerated growth in LATAM across the year in 2018. Mexico has been the standout performer for us over the last three or four years in the LATAM context with Brazil being significantly more volatile. Brazil, while it is actually optically better in the quarter, it is more in recovery mode than what has been a very solid business for us in Mexico. I don't know, does that answer your question?
Sure. Thanks.
Thanks, James.
We will take our next question from Ian Hunter of Investec. Please go ahead.
Good morning, gentlemen. Moving to a couple of questions from myself. Brian, you called out that you were growing in your food side of things 4.3% global versus 1%-1.5% for the kind of global rates. I'm just wondering how much of that volume growth is new client wins and how much is increased business from existing clients that you mentioned to build on? Maybe also as well on a regional kind of side of things, are you in a position to be able to break out how you're doing in the old, I'm a dinosaur, in the old APAC region within APMEA? Not only APAC, but maybe give us a feeling of how you're doing in China at the moment.
Good morning, Ian. The overall growth rate of 4.3% versus 1.5% is, I would say, significantly focused on new wins with existing clients that we have. We have a significant, I guess, customer position and partnership right across the leaders globally, regionally, and indeed locally. However, it's early days, but the reinvestment back into market and the repositioning of applications capability and sales capability into country is resonating very well in terms of that move back to local. There's a number of new clients coming through at that level and the new routes to market in terms of how we access and choose and win with local customers, which is something that we see as being quite a long road, but certainly early indications that there are investments in that category are winning.
Then in relation to the resplit of our AMEA business or our EMEA business into APMEA, that's only about 3% overall in terms of the Middle East and Africa, which is, I guess it's a slower growth rate than what Asia Pacific was, and it's a faster growth rate than what Europe was. A slight dilution of both numbers, but nonetheless a very good category for us and geographical region, which we continue to see opportunity to invest in. Overall, China continues to perform very well. I think at this point, the spread of our technology, the recent investments in terms of Tianning and Hangzhou Lanli, in terms of our taste positioning is resonating already. The opportunities around the CS facility to build out our positioning in northern China is something we're quite excited about as well, and we'll be putting significant CapEx in behind that opportunity.
Overall, China continues to do well for us.
Okay. Thanks very much. I just want to be a follow-up on your capital allocation priorities for FY 2018, because you did say you've got a strong balance sheet. Brian, a couple of times you've talked about investing for growth and investing for client contact, et cetera. I'm just wondering what your priorities are, that versus M&A, versus returning capital to shareholders.
Yes, Ian, the priority is reinvestment for growth, which we've laid out, I think, pretty clearly at our capital markets day, that we see significant growth opportunities and indeed the need to put CapEx behind the organic growth opportunities around Taste & Nutrition from a technology perspective, and Foodservice and developing markets from a market perspective. We continue to do that. We indicated that the CapEx for the year would be in the order of 5% of revenue, which is higher than we would've traditionally spent around 3 or 4. We're certainly investing in capacity for growth in those strategies. Then in terms of M&A, we still see our industry as being significantly fragmented. Both small, medium size, and indeed large acquisitions are something that we've built a model and a platform with our One Kerry investment to continue to be the consolidator in our industry.
We'll continue to deploy capital in that regard, and probably less likely in terms of doing any significant returns to shareholders other than continuing to increase our dividend double digits on an annual basis.
That's great. Thanks very much.
Thanks, Ian.
We will take our next question from Heidi Vesterinen of Exane BNP Paribas. Please go ahead.
Hi. A couple of questions. I was positively surprised by the U.S., as many others have been talking about a weaker environment so far this year. Can you talk about what drove the strength, and did you see any changes in the environment at all relative to maybe end of last year? On that region, some have talked about higher costs, for example, around freight or cold weather-related costs. Has that been an issue for you? The other question is on Foodservice. You do have quite a big exposure, I think, to the U.K. in Taste & Nutrition. Should we be concerned about the restaurant closures that we've been hearing about in the U.K.? Thank you.
Good morning, Heidi. Firstly, just to take the U.S. questions. The U.S. marketplace continues to evolve. When we talk about churn, it really is about change. The focus and the acceleration around personalization, better for you, clean label, nutrition, wellness, and healthy aging, they're all significant drivers of change. Indeed, the millennials and Generation Z, in our view, that's not going to change. That's not going to stop. We will see, and we are seeing a response from the winners and losers in every market, and definitely the losers of the last couple of years are responding. As you said, it's not necessarily a true innovation yet. It's more about repositioning, and a certain amount of it is brand and marketing investments as opposed to a true new product innovation.
Certainly, we have a healthy interaction and a healthy pipeline in terms of all of the drivers that I just called out. In relation to costs and indeed transport costs and the availability of labor and the impact of weather, sure, all of those things are a little bit more negative than they obviously have been positive. They haven't been significantly negative impacts on our business in 2017 or indeed in 2018. Then in relation to Foodservice, there will be changes in relation to footprints in various different customer sets and chains, and moves between chains and independents in different marketplaces. Overall, the trend for Foodservice, Heidi, is increasing. It's different in each different market. We're evolving. We have phenomenal capability to service the Foodservice industry across both their food menu board and their beverage menu board.
Our focus area is around increasing our access and increasing our commercial effectiveness around making that capability available more and more broadly across the customer set, across the individual marketplaces. I wouldn't worry about individual chains closing some stores from time to time.
Thank you.
Thanks, Heidi.
We will take our next question from Liz Cowen of Baillie research. Please go ahead.
Morning, Brian. Good morning, William. Thanks for taking my questions. A few questions from me, please. Firstly, on Europe, are you able to comment please on the growth of Russia? My understanding there, Russia is now included within or has remained within Europe. Secondly, can you just talk a little bit more on the, I think it's a JV you mentioned in the Netherlands, a plant-based protein manufacturer, Ojah. Thirdly, in terms of clean label, it's clearly a driver in terms of the Americas and is the demand for clean labels still accelerating for you in that market? Thank you.
Good morning, Liz. It's a good topic to start with. Russia has always been a pretty good marketplace for us, and indeed, while it is part and remains part of our European business, it is a marketplace that we serve and can serve from many different parts of the world, including our Asia Pacific region services into that marketplace as well. We currently are in progress in terms of completing a facility on the ground to manufacture locally in Russia. It's showing good growth. Okay. There has been various different accelerators and decelerators, I guess, across the last three or four years in Russia, but overall and fundamentally, a really good growth market so far and someone we are going to continue to invest in the future. In relation to Ojah, this represents a further expansion. It's not completely new for us.
It is a technology that we're quite excited about. It's a further expansion of our protein business. We've had obviously for many, many years, a significant investment in a variety of different proteins. We believe this is a significant enhancement to our overall protein portfolio and will be of assistance to indeed to both businesses, both our Consumer Foods and our Taste & Nutrition business. In relation to your question on clean label in the Americas, absolutely, Liz, in terms of the current recipe deck across the core food and beverage offering in the U.K. market, I would say, we're probably only 20% along that journey in terms of what's possible into the future. We would be quite optimistic about the future of that as a significant trend into the future.
Okay. Thanks very much, Brian. If I may have one follow-up question, just regarding CapEx, just as you mentioned there, the new facility, manufacturing facility going into Russia. Are there any other key projects you'd call out for 2019? Just in general, your outlook for CapEx for full year.
Yeah. As I said, Liz, it'll be significant this year, up around 5% of revenues and as in the last couple of years. We focus on developing markets and putting capacity on the ground to meet that 10% growth projection we have in the Asia Pacific region or the APMEA region, as we call it now, around countries like Malaysia, Indonesia, the significant CapEx that I mentioned in the new acquisition in CS in Northern China. The continued investment in our taste facilities in the U.S., supporting the Red Arrow acquisition, which has been storming ahead since we acquired it three years ago. Indeed, our footprint in our New Jersey facility as well. It really is backing the Taste & Nutrition technologies and the developing markets volume capacity challenges we have.
Okay, great. Thanks, Brian.
Thanks, Liz.
Just a reminder, that's star one to signal for an audio question. We have a question from Jamie Norman of Societe Generale. Please go ahead.
Good morning, Brian. Morning, William. Just a slightly deeper delve into the U.S. In terms of the larger players, you talked about some welcome brand repositioning. If you look, for example, at Kraft Heinz numbers yesterday, North America volumes are down by 4.1%. In your view, does something much more fundamental need to happen? Is it in their gift, and is it in your gift to help them really to move that needle more significantly and to sort of redress the balance between the giants who've been struggling and the small and medium-sized businesses where you've been gaining? Just be interested, just a deeper delve.
Look, Jamie, I guess every company is different, every company has its winning categories and challenge categories. Certainly, the customers that we're focused on the center of the store have been more focused in the last two, three years on margin rather than growth. That's obviously something that they failed as opposed to something that they can share. I would say exclusively those companies are refocused on growth. It hasn't happened yet, but they certainly are trying to figure out how they can generate connectivity with the consumer, speed. As the time to innovate becomes a more and more important feature as the market changes, if things are changing every six to 12 months, it's taking 12 to 18 months or two years to develop a new product, obviously that's not quick enough.
We can play a significant role in accelerating that new product development capability across that whole industry. It's something that we'd be going to get traction on. It's early days yet, but we'd be quite optimistic.
Interesting. Thank you very much.
Thanks, Jamie.
We will take our next question from Alex Smith of Barclays. Please go ahead.
Hi. Morning. I just had a follow-up on the question you had on clean label in the U.S. I think you said clean label in the U.S. is around 20% through the journey. I was wondering if you had a similar stat for that in Europe. My impression is the U.S. is playing catch-up in Europe, but where are you on this journey in Europe? Do you still see tailwinds from that dynamic, or is growth in Europe really more about production, consumer fragmentation, and just general health and wellness? Thanks.
Yeah, look, I think, Alex, my own view is that the U.S. over a good number of years has become a more sophisticated food and beverage marketplace in terms of the evolution and development of packaged foods and indeed food service. I think from a consumer perspective, they've probably gone a little bit too far in terms of what was natural and farm to food-type ingredients and is reversing a lot of that in terms of the clarity of what's in the media in relation to what's actually in the food products. I don't think Europe has gone that far. Different markets are different. Possibly the U.K. has evolved more than mainland Europe and has less to reverse in mainland Europe.
Nonetheless, the core Consumer Foods developed markets have a long way to go to achieve the needs of the consumer or the desires of the consumer in terms of what they'd like to see on their labels, in terms of it being very much along the lines of what I said in terms of farm to food principles. I would say it's a busy category for us in Europe, but not as busy as it is in the U.S.
Got it. Thank you.
We will take our next question from Virginie Boucher-Faurion of Deutsche Bank. Please go ahead.
Yes, good morning. It's Virginie Boucher-Faurion from Deutsche Bank. Can you hear me?
Yes, we can, Virginie.
Okay, perfect.
Please continue.
I have a question on M&A. Apologies if someone asked the question already, I joined on the call slightly late. You reiterated that M&A remained a priority in your capital allocation strategy. However, M&A valuation multiples seem to be reaching records, especially for larger deals, as we've seen with Givaudan and Naturex, certainly materially above what you have been willing to pay in the past. Can you give us your view on asset prices currently? Do you think you can still find relatively attractively priced targets, especially when it comes to big M&A? Can you still create value in this high price environment? Thank you.
Thanks, Virginie. Every acquisition, every target is different, is the one thing I would say. Yes, the headline numbers in terms of certain, which would be scarce enough resources or scarce enough targets in certain categories do command a higher price because of their market position or because of the scarcity of assets. There's many other opportunities that are not as scarce, and they can still bring good value in terms of integrating them into the bigger players. For instance, many smaller acquisitions don't command anything like the same multiples as some of the ones that have hit the headlines of late. The other thing I'd say, look, the entry multiple is only one part of the equation. It's what will that do for your business.
Certainly, we look at it on a return on investment basis and what would an acquisition do in the Kerry folds and operating off the Kerry platform. Some great examples are Red Arrow or Ganeden or Wellmune or even technologies like Island Oasis that we can buy in a certain region that has a certain reach under their existing ownership, and then we can take it onto our platform and take it around the world into all of the markets that we serve. We believe that the investment that we've made in the One Kerry Platform gives us the ability to continue to do that and indeed leverage at a significant return value to the shareholder in terms of taking that in and leveraging across our footprint.
Thank you.
Two answers. One is that not all acquisitions are the same, they command different prices. Secondly, it's about the return more importantly than the entry price.
Is there any post-synergy valuation multiple level you wouldn't want to exceed after synergies?
Yeah. Look, we look at each one individually, we have a very robust process of matching targets to our strategy, both short-term, medium-term, and longer-term. Our financial ratios are pretty strict as well in terms of all aspects of that. I wouldn't call it a particular hard read, Virginie, just that it has to deliver against our group metrics.
Okay. Thank you very much.
Thank you, Virginie.
We have no further questions, I would like to turn it all back to the speakers for any additional or closing remarks.
Okay. Thanks, everybody, for taking the time to join us this far and indeed your questions, which were very insightful with that. I'll just hand you back to William, who has a few comments before we close.
Thanks, Brian. Before we finish, we're delighted to announce that we'll host an investor day at our regional technology innovation center in Singapore on the 25th of October. On the day, Edmond, some of the group exec, and our local Asia team will give color and insights into the ongoing evolution of the consumer landscape and how we will continue to deploy our business model to deliver growth in the region. We hope that you'll be able to join us, and we will be in contact in due course. With that, we would like to say thank you for joining us on the call today, and we hope you have a great day. Thanks.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.