Earnings Call: Q1 2020

May 7, 2020

Good day, and welcome to the Nomad Foods First Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Taposh Bari, Head of Investor Relations. Please go ahead. Thank you for joining us to review our Q1 2020 earnings results. With me on the call today are Chief Executive Officer, Stephane Deschenmaker and Chief Financial Officer, Sami Zekout. Before we begin, I would like to draw your attention to the disclaimer on Slide 2 of our presentation. This conference call may make forward looking statements that are based on our view of the company's prospects at this time, including consideration related to the impacts of COVID-nineteen. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which includes cautionary language. We will also discuss non IFRS financial measures during the call today. These non IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. Users may find the IFRS to non IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation represents adjusted figures for 2019 2020. All adjusted figures have been adjusted for exceptional items, acquisition related share based payment and related expenses as well as non cash foreign exchange gains or losses. All comments from here on will refer to those adjusted numbers. And with that, I will hand the call over to Stephane. Thank you, Taposh, and thank you all for joining us on the call today. On behalf of our entire organization, I would like to extend our thoughts to those affected by COVID-nineteen and hope that you and your families are staying safe. At Nomad Foods, we have been working hard to ensure the continuous supply of frozen food to consumers across Europe during this time of need. From day 1, we have done this with the health and safety of our employees as our top priority. I'm extremely proud of the collective effort our entire organization has made to act quickly and decisively. I speak for all of us when I say that we are humbled to help our communities navigate this crisis. Turning now to Q1 results, which came in well ahead of expectations due to an unprecedented level of consumer demand beginning in early March. Highlights from the Q1 were as follows: organic revenue growth of 7.7 percent, driven by a 6.3% increase in volume and mix and a 1.4% increase in price. Gross margin of 29.1%, which was in line with our expectations adjusted EBITDA of €120,000,000 and adjusted EPS of €0.33 per share. Based on our first quarter results and our expectation that sales growth will remain elevated for at least the next several weeks, we now expect to exceed our full year guidance. Samir will walk you through the details of our guidance in his remarks. I'm sure many of you are looking to better understand how we're managing the business throughout this crisis and what we are doing to ensure that we will emerge in an even stronger position. I will address these points in 3 sections. First, I will cover the near term, outlining how we have adapted our business to service an elevated level of demand throughout the home confinement period. 2nd is the medium term and how we plan to navigate through these next few months as restrictions gradually ease. And third, the long term, specifically what we are doing to ensure that our business is on an even stronger foundation once we ultimately return to some sense of normality, whenever that may be. Let's begin with the interim on Slide 4. Given the unprecedented nature of the current environment, we thought it would be helpful to provide you with a weekly view of the sellout progression across our branded retail business, which represents 90% of our sales. The remaining 10% of our sales are comprised of private label and food service, which each represent roughly 5% of the total sales. It's important to note that the data on this slide represents branded retail sellout growth, which may not align perfectly with the organic revenue growth for a variety of reasons. But this should give you an indicative directional view. You will notice that we had an okay January and saw sales beginning to accelerate in February, which was our original plan. And clearly, the surge which followed in March as stay at home orders and school closing went into effect. Since the growth peak in mid March, it was likely driven by pantry loading. We have experienced a continued elevated level of demand throughout April, which we believe reflects growth of in home consumption. You will notice a dip in UBIC16, which was depressed due to Easter phasing. When triangulating this sellout data with our 5 week of actual Q2 sales results, it's clear that performance continues to trend ahead of plan. And while we expect this may continue for at least the next few weeks, it's very difficult to project the future trajectory with accuracy. Turning to Slide 5, I'd like to provide some more color on the near term. As you recall, our original expectation for Q1 was that organic revenue growth would be roughly flat versus last year. We were firmly on pace to deliver against these plans as of late February. However, the pace of demand increased meaningfully throughout the month of March, with organic revenue growth for the month growing roughly 20 percentage points ahead of our plan. In terms of insights, it's clear that early on, the growth spike was a result of consumers stocking up. However, as time has passed and people have remained relatively confined to their homes, our research is showing that people are opening their freezers and consuming our products. Another insight is that we are seeing an influx of new consumers into the category. This is largely driven by the significant shift to at home consumption, natural role that our leading and trusted brands play in serving family meal. And finally, our brands have observed a disproportionate uptick in market share. This has been evident fairly broadly at both country and category level across our business. During the month of March, our market share was up 1 percentage points, notable improvement versus being roughly flat over the preceding 52 week period. We believe the increase in market share has primarily been driven by the fact consumer tend to buy brands they trust in moments of uncertainty. This is particularly the case for new consumers entering the category. In all, this progression is a validation of the power and awareness that all brands have in the local markets. This brings me to our supply chain, which has done an incredible job in not only keeping up with demand, but doing it in a way that has protected the health and safety of our factory employees. We took a number of decisive actions at the onset of these crises to ensure that we can deliver against our goals. In Italy, we were one of the first companies to use demographic cameras at factory entrances. In January, as we noticed delays in Chinese production of Pollock, our procurement team quickly increased our cover position from other countries to ensure adequate raw material stocks. These examples, plus many more, have allowed us to maintain a high service level throughout the crisis. Despite our best efforts to keep up with demand, the reality is that there is a significant amount of pressure on our supply chain. As such, we have reduced near term marketing and promotion plans with the goal of reactivating these programs in the back half of the year. There has been a lot of coverage lately around how COVID-nineteen may impact agriculture supplies, given farmer dependence on migrant workers and potential labor shortages. This is a risk that we have been monitoring for some time and one that we do not expect to impact our business for 2 important reasons. First, our main crops, peas, spinach and potatoes, are picked using machinery and are not labor intensive like certain other fruits and vegetable crops. 2nd, we have strong relationships with our farmers, many of which have spanned multiple generations. These farmers tend to have secure labor forces and as a result, are not as dependent on immigrant labor. To recap the new term, we have observed strong demand since March with elevated growth remaining into April. Our factories are all operational and are working at full capacity to maximize throughput. Let's now shift to how we're preparing for the medium term outlook over the next several months as restrictions ease and out of home consumption begins to normalize. As you can imagine, there are a lot of unknowns as the progression will be dictated by global and local health authorities. Certain European countries have recently announced plans to gradually reopen schools and restaurants. With that said, it's probably fair to say that this next phase will likely be prolonged. We will navigate through these next few months with a strong set of plans that include merchandising, innovation, promotions and traditional support to help sustain demand. Another consideration is the macroeconomic backdrop that we expect to see once restrictions begins to ease. Given the number of puts and takes, we are preparing for a range of scenarios, including the probability of a recession. As we've seen throughout this crisis, frozen food is a resilient category with a stronger consumer value proposition. History shows that during periods of economic uncertainty, consumers trade down into frozen while also being more price conscious. Taking these factors into consideration, we expect that our business will prove resilient in the recessionary environment as it has throughout the COVID-nineteen crisis. Finally, the long term implications. While our current focus is on managing through this crisis with solid day to day execution, we are also planning and acting to ensure that our business exits this period with a healthier foundation than when it entered. There will be some permanent changes that we will lead into. These include the step change in e commerce, where our category and our brands have structurally higher market share. Another is the fact that freezer capacity has increased at the consumer level. We also recognize there has been an influx of new shoppers into the frozen food category, with many of them trying frozen food for the first time in years. While some of the eating occasion are likely to return to out of home as schools, work and restaurants gradually reopen, we do believe there is an opportunity to convert new frozen food eating habits into permanent repeat consumption. We know that frozen food has a lot to offer, not only in crisis time, but for everyday life. And we're confident that as consumers eat more frozen food, and they will recognize the many benefits, whether they be nutrition, convenience, quality improvements or innovative meat free solutions. Speaking of meat free, I'd like to provide you with an update on Green Cuisine, our new meat free sub brand that we are launching across Europe. At CAGNY back in February, we announced our intention to develop this into at least a €100,000,000 business by 2022. As we sit here 2 months later, I'm pleased to say that we remain on track to deliver our near and long term targets despite some timing shift, resulting from the COVID-nineteen crisis. Our original plan was to have distribution of green cuisine across at least 8 markets by midyear. This is still the plan, albeit with some modifications given the general deprioritization on innovation as retailers and suppliers focus on the highest volume SKUs. Year to date, we have launched Green Cuisine in Germany, France, Netherlands, Italy and Spain. Belgium and Austria will soon follow. One adjustment that we have had to make around Green Cuisine is the timing of media, which was originally scheduled to go live this spring, which will now take place during the second half of the year. The performance of Green Cuisine in the U. K, where we first launched a year ago, continues to be very strong and encouraging. Sales are tracking ahead of plan, and our market share continues to grow. Further, we are driving solid incrementality to the category through the recruitment of new consumers. In all, green cuisine remains a key strategic priority of ours. And while our plans have shifted a bit this year, we are exceeding our near term sales expectations and remain on pace to deliver our 2022 target. In summary, we reported strong Q1 and now expect upside to our original guidance. Our business has demonstrated extreme resilience throughout the COVID-nineteen crisis. This is being driven by solid execution and the fact that our portfolio is highly concentrated in frozen foods sold in Western Europe. Further, our exposure to food service is only 5% of our revenues. We're gaining new consumers and are seeing growth in market share, and our supply chain is working hard to keep up with strong demand. Finally, our strong balance sheet and liquidity profile created a unique opportunity to repurchase shares during the Q1 amidst the valuation dislocation in our share price. We're pleased to be in a position to deploy cash to shareholders in a value enhancing manner. Our company is well positioned to not only navigate the current crisis, but emerge in a structurally stronger place. With that, I will hand the call over to Sami to discuss the financials and guidance in more detail. Sami? Thank you, Stephane, and thank you all for your participation on the call today. Turning to slide 7, I will provide more detail on our key first quarter operating metrics, beginning with revenues, which increased 10.5 percent to €683,000,000 driven by 7.7 percent organic revenue growth. Revenue growth also benefited 3.2 percent from a trading day benefit, including an extra day due to the leap year. Foreign exchange translation was 40 basis points offset to revenue growth during the Q1. In all, organic revenue growth exceeded our expectation in almost every country due to the aforementioned factors related to COVID-nineteen. First quarter gross margin was 29.1%, down 180 basis points versus last year and in line with our expectations. The year on year decline was driven by the timing of inflation relative to price increases. Moving down to the rest of the P and L. Adjusted operating expenses increased 14% year over year, reflecting phasing shifts, which we had planned for. Within operating expenses, A and P and indirects both increased double digits. Adjusted EBITDA was €120,000,000 representing a 2% decline versus the prior year. This was better than our prior expectation, which called for adjusted EBITDA to decline double digit. Upside was primarily driven by increased sales. Adjusted EPS was €0.33 for the quarter. In Q1, we repurchased 4,700,000 shares, which had a limited effect on the Q1 weighted average share count as the program commenced late in the quarter. Turning to cash flow on slide 8. We generated €74,000,000 of adjusted free cash flow in the quarter as compared to €93,000,000 in the same period a year ago. Factors contributing to adjusted free cash flow performance included: adjusted EBITDA of €120,000,000 a 2% year on year decrease a working capital inflow of 1,000,000 dollars CapEx of $10,000,000 representing 1.5 percent of sales cash taxes of $19,000,000 dollars and cash interest and other of 18,000,000 dollars due primarily to year over year impact of interest swaps. We converted 110 percent of our adjusted EBITDA into adjusted free cash flow. During the Q1, we announced a €300,000,000 share repurchase program, which we consider to be unique and accretive use of capital due to the dislocation in our share price. Since that announcement on March 13, we have deployed US91 $1,000,000 of capital towards buybacks, acquiring approximately 3% of our shares outstanding at a weighted average price of $16.78 Looking forward, our approach to capital allocation remains consistent and unchanged. We continue to prioritize excess cash for potential acquisition, while retaining flexibility to mobilize share repurchases where unique opportunities like the one we saw in March present themselves. Finally, our balance sheet remains strong with leverage in the mid-2s, €828,000,000 in cash and short term investments and total liquidity of nearly €1,000,000,000 when factoring other undrawn lines of credit. With that, let's turn to Slide 9 to review our 2020 guidance, which is based on foreign exchange rates as of May 5, 2020. For the full year 2020, we are raising our guidance and now expect to achieve adjusted EBITDA of approximately €450,000,000 to €460,000,000 and adjusted EPS of €1.24 to €1.27 Full year guidance now assumes organic revenue growth at the mid single digit percentage rate. Given the wide range of potential outcomes for the remaining of 2020, we have made the following assumption in formulating our guidance. First, the guidance assumes an elevated level of organic sales growth in Q2, where we already have 5 weeks of strong organic revenue growth behind us. Due to the inherent challenges in accurately modeling the future commercial impact from COVID-nineteen, our guidance currently assumes organic revenue growth in the low single digits range in the back half of the year. In terms of quarterly phasing, given strong sales performance in H1, coupled with the delay of marketing and promotion to the second half of the year, we now expect adjusted EBITDA to be more balanced between the first half and the second half of the year versus our prior guidance, which was Q4 weighted. Finally, guidance now assumes a weighted average share count of 200,000,000 for the year, down from our prior expectation of 204,000,000. This reflects the share repurchase activity conducted since mid March and does not take the possibility of future potential share repurchases into consideration. That concludes our remarks. I will now turn the session over to Q and A. Thank you. Operator, back to you. Thank you. We will now begin the question and answer session. Our first question comes from Andrew Lazar with Barclays. Please go ahead. Great. Thank you. Good morning, everybody. Good morning, Andrew. Good morning, Andrew. First off, I guess, obviously, Nomad chose to provide specific full year guidance above initial expectations. And I guess my question is what gives you the I guess the confidence to be able to do this when really the vast majority of peers have either withdrawn guidance for the full year or perhaps only reaffirmed full year guidance in a more vague sense? That would be my first question. Thanks, Andrew. It's a very good question. As you know, forecasting with accuracy and especially right now with this COVID-nineteen, it's a difficult exercise. At the same time, our portfolio is really uniquely positioned visavis when we compare with many of our public company peers. So it's simple. The simplicity is 1 category, which is frozen, is one channel, which is retail, which is equal to at home consumption. It's one geography, which is Europe, and it's leadership with all our brands. And at the same time, we have, as we said, very few exposure in terms of foodservice. It's 1 it's 5%. So with that, again, it's difficult to predict exactly how the trajectory will play out throughout the rest of the year. This is why we've taken a position of low single digit organic revenue growth in H2 as a baseline, as Sami mentioned. So that's why. But again, to your point, it's unusual, which is great. Great. Thank you for that. Yes. No, please keep going. Thank you for that. The second one would be, it's going to be fascinating to track how for the industry many of these new users of which you're clearly getting a lot of given the stay at home restrictions ultimately convert into let's say ongoing repeat purchasers and such. You talked about some of the numbers around the magnitude of new use of the incremental volume and how many of those are new users to the brand, if you will. And I'm curious, how does this compare maybe to the type of new users that you would see the brand under more normal circumstances? In other words, there's always some churn for all brands like these between new users and lapsed users in a more normal environment. And I'm curious if the levels of new users are even well beyond those more normal sort of churn numbers. And then it's early, so we may not have a great read on this at all, but what would be even if there's any anecdotal evidence around and maybe what some portion of consumers have suggested they might do in terms of repeating when things normalize? That's a tougher one, I realize. That one is a bit tougher. But again, I think it's really extraordinary times. And back to your the baseline, the penetration historically has been roughly flat. And to your point, what we see now is absolutely new consumers coming by the way from different backgrounds. Great. Thank you very much. Our next question comes from Steve Strycula with UBS. Please go ahead. Hi, good morning. Just to actually piggyback off of Andrew's question, Stephane, do you or the broader team have any numerical data to just reference what new household penetration is right now, maybe for some of these key products relative to maybe how it was just a few months prior? And how does that change that we've seen just recently compared to maybe what we've seen in like the past recession? I know, O809 is probably the data maybe is not the cleanest today, but any type of historical context might be useful. I think you also said something about consumers having additional freezer capacity relative to the past. We've read a few articles on that, but any elaboration would be helpful. Thank you. Anastasia, I think we may have lost Stephane. Okay. Please be patient as you Sami, are you still here? Yes. I'm here. I'm here. Sure. Yes. Why don't we try to reconnect, Stefan? Yes. Hello? Can you hear me? Yes. Okay. Sorry. Okay. Excellent. Thank you very much. So, Stephen, the question about the new household and obviously the new consumers, too early to say. At the same time, anecdotally, I can tell you what we've seen in terms of qualitative, if people are very impressed by the new Frozen, so people were expecting something which was all about convenience and all about price and affordability and they've seen something which is nutrition, taste, new trends, sustainability. So that's absolutely fantastic and is obviously something we're as we're very much focused on at this stage. So that's one thing. The freezer capacity in Olfer and Steve, it's too early to say. We know that these those freezes are not going away, but we don't know exactly by how many new freezers. So the point for us is that has always been to get more consumers to open the freezer door more frequently, And that's exactly what we're expecting to see, especially with the new way of consuming. So that's where we are. It's too early to say in terms of real quantitative, but it's going to come very, very soon. And I can imagine that our inside department is really fully busy with this. But what we've seen so far qualitatively very, very, very good. And at the same time, what we also see is these people will not leave anytime soon because what we also see is that the deconfinance will take time. And the more this time, obviously, the more these people will obviously use our products. We also have seen is that these people want to cook more from home and that's also absolutely very good for us. Great. And then I have a quick follow-up before I pass it along. Stephane, I know Wayne has been in charge of the Sweden business more recently. He did phenomenal work with the repairing the UK business a few years back. Can you help us understand strategically what's maybe now going into place right now to stabilize or fix the Sweden business? And the same commentary for Aunt Bessie, as you had mentioned at CAGNY that a few of your initiatives were to get back on shelf starting in around the April timeframe. And I'm just wondering if the busyness that you're seeing right now with COVID related demand, does that shift the time window for Amvesys getting some of that new distribution back until the summer? Thank you and I'll pass it along. So let me start with Amvesys. DESE. It's quite simple. You remember, Steve, we had an issue in 2019. Actually, we lost distribution with 1 of the top 4 guys in the UK. And we're very pleased to see that for our mushroom bottle, which is the key piece, which is roast dinner, we're back on track with the one with this top guy. Actually, I think it started back in on March 11. Obviously, it's a bit too early to see the results, but it's there. So that's very good news. And we also know that we're going to increase our distribution with another 2. So again, 2019 was a bit more difficult with on Besse's. But for what really matters, which is our must win battle, which is the key piece of the organization, we're very pleased with, again, what we said and it's happening actually. More difficult to read across all these things with COVID-nineteen, but that's a reality. So that's very good. In terms of Sweden, now you know what the first thing that Wayne has done is to put in place a new management team. I think it's a very strong one with very, very good team. The second piece is really about it's about repairing the relationship with the trade. And as you know, WEN is very, very strong. It's really I mean, he's fantastic at doing these things. It takes time. It really takes the time to create a joint business plan together with these guys. And that's exactly what we do what he is doing, adding more presence, obviously, no screen presence, video presence with these guys, which probably something we didn't have enough in the past. And he's just applying the mushroom battle framework that's proven so successful with the UK, Italy, Germany and lately with Spain. Spain last you remember in 2018 was difficult, lack of focus, new team as well. We started in 2019 and we've seen the results. So we know it's going to take time. It's only representing at this stage 2.5% of our EBITDA. But definitely for us, we think it's an important country. And we hope that we're going to see improved performance later this year and obviously a good momentum in 2021. So that's the idea for Sweden. And to your point, we are very confident that Wayne is going to do a great job. Great. Thank you. Our next question comes from Rob Dickerson with Jefferies. Please go ahead. Great. Thank you so much. Hopefully everyone, a nomad is doing well, staying safe. So I guess, just a quick question on green You too, by the way, Rob. Yes. No, I'm doing my best. We're okay, but that was okay. Thanks for staying. In terms of Green Cuisine, I know you had mentioned a shift in media timing. It sounds like A and P is shifting a little bit more to the back half of the year overall. But specific to Green Cuisine, I guess on the media timing piece, is the strategy there basically we have it it sounds like in most countries, right? It sounds like the innovation is there. I think you called out maybe Belgium and one other market where it still needs to enter. The trial, I would assume, is much more elevated than it probably traditionally would have been, which is obviously should be a great driver of repeat potentially. So I guess the question is, do you shift that media spend later to try to put the switch once you have trial to increase the possibility and the probability of sustained consumption of the new brand? Or was it basically, hey, we just don't need to spend the media now, so let's wait till later and the brand seems to be doing okay. So I'm just kind of broadly trying to understand, has there been any shift in the way you're thinking about green cuisine as it phases through the year? And then the potential carryover effects of that shift as we kind of emerge from this from the pandemic effect? And I also asked because a company like Beyond Meat this week, that you really didn't see revenues grow that much because they have foodservice exposure. The margins are a little bit better. The stock is up almost 90% in a month. So to start with, Rob, we're not changing our short term expectations. So we're very pleased with what we're seeing. To Sami's point, there was a bit which was expected, it's normal by the way, bit of deprioritization during this crazy March from the retailers. And so in some countries like Belgium for example, we've moved the back to the shelves or let's say starting with on the shelf from week 18 to week 23. That's an example. But again, you're not going to advertise at that time. So it's just a shift. It is just a shift in terms of timing, in terms of A and P, but what we see is definitely more than ever, Mead 3 and back to what the CEO of Beyond Meat said, it's on trend. It's going to only accelerate with what we're seeing right now. And that's exactly what we're experiencing with Green Cuisine. So in this year, to your point, we have U. K, Ireland, Germany, France, Netherlands, Italy and Spain. Belgium is coming. Austria is coming. And I definitely believe other countries will also be coming in the course of this year. So it's definitely a fantastic product, great trends. So we're only positive. Stephane, if I may just add as a compliment, I mean, to the question. The reality is you really want to advertise when you have the right level of distribution as well. I mean, Rob, I mean, it's very important for us. And in a context like the one we are going, if you want, the distribution is geared towards affecting the needs of the consumers per the retail expectation. And so we are trying to balance, if you want, when will we have the appropriate level disruption to really accelerate growth and this is when the support is going to kick off. So I think what's really important for us is we've seen Green Queen outperforming versus our expectation and we clearly, I mean, in good shape for the year. Okay, super. And then just very quickly and simplistically on the cost side, we saw gross margin pressure a little bit in Q1 that was expected. I know there were some cost inflation that came through probably all the fish side, I think you had mentioned before some pepperoni, there's currency. As we think through the year into Q2 and then the back half, is the expectation still for that gross margin cadence to improve quarter to quarter? That's all. Thanks. Yes. We expect inflation actually to moderate. And I would say for the rest of the year, yes, actually, gross margin will be down less in Q2, and we are looking for gross margin to improve into the second half of the year overall. Okay, super. Thanks so much. Thanks, Todd. Our next question comes from John Baumgartner with Wells Fargo. Please go ahead. Good morning. Thanks for the question. Hi, John. Yifan, I wanted to come Hi, John. How are you doing? I wanted to come back to the comments about the broader environment here. What is your understanding about your competitors, both branded and private label suppliers and their ability to respond to the demand spike? Your shares were up solidly across the board here in Q1. Is it your sense that those market shares can be sustained either through supply chain advantages or marketplace execution? How do you think about the relative positioning there? I think it's a combination of 2 elements, Don. 1 is, in the short term, we acted very early decisively on supply chain. From the procurement standpoint, for example, we could see that there would be some issues in terms of fish, for example, and we've been able very early on to come with alternatives. That's one thing. And second, in terms of, again, the factories, the obsession was obviously to keep all our 13 factories open and that's what we've been able to do through a combination of obviously of many initiatives all centered around the health and safety of our people. So they've responded fantastically well. And so we're very, very, very pleased with that. At the same time, that's the offer. On the demand side, it's very clear that the consumers are moving to brands they trust in terms of crisis and that was the beginning of my introduction. All our brands are A brands. They're leading brands. And it's very reassuring, obviously, in crisis time to come back to these brands. So the 3rd piece is, as you remember, it's of poultry is quite simple. It's 40% is fish, 20% is veg. And so, these two categories, again, are very reassuring and doing extremely well doing this category. So that's that. Again, helping us is obviously, so it's 90% brand and everything is about retail. And when you go back to new consumers, I'm not talking about the existing ones, the first thing they want to do is, okay, let's try with the brands we know. And Birds Eye, Glo, Fintus are great brands and that's their starting point. It's our job obviously now to make sure that they're going to see what has improved over the last 6 years, which is in terms of nutrition, in terms of sustainability, in terms of innovation, and we have so much to offer. So that's at this stage, that's what we've seen where we've seen and it's our job is obviously is to keep most of these consumers. That's going to be the big job. That's our focus for the coming weeks months. And then if I could just build on that, when you think about the promotional environment as well, I think given especially in frozen fish because your promoted price points tend to be maybe fairly deeper than both brands and private label even under normalized conditions. And you mentioned the portfolio of A brand. So I mean, do you think there's an opportunity to use this market dislocation to maybe migrate the depth of your deals higher on a more permanent basis coming out of this in conjunction with the net revenue management? Or do you think there's a need to continue promoting the way you do for competitive reasons when you're trying to retain some of these new consumers coming into the portfolio? Samir, do you want to take that? Yes, sure. No problem, Tapan. Yes, I think we're clearly considering promotion as a key vector, I mean, to drive the business, I would say, of all this part of our NRM framework. And that's part, frankly, of our, let's say, strategy in terms of growth. We're measuring it We are measuring our promotion as part of the total price proposition price quality proposition to the consumer relative to competition. So we don't intend at this stage to frankly make a fundamental change to that. I think what we want to do is to make sure that frankly we're coping with the current reality, which is repromoting when it's needed and making sure that we have a relative price index to competition and to optimize the proposition that is attractive enough for the consumer. Great. Thank you. Our next question comes from Faiza Alwy with Deutsche Bank. Please go ahead. Yes. Hi. Thank you. So I wanted to pick up on this private label point also. And I was wondering if you had some data as we went through sort of this crisis starting from the original stocking up phenomenon. And then more recently, have you sort of seen consumers continue to gravitate towards brands or have you seen as recessionary pressures build, have you seen consumers sort of go more towards private label? So to your point, short term, what we've seen is people gravitating towards brands and preferably A brands like us. And that's why we're gaining share. Long term, to your point, over longer term, I would put it that way, we know that the likelihood of recession is very high, it's going to have 2 impacts. 1 is the fact that people are going to stay more at home. So yes, they will go back to work, but at the same time for recession reasons and other reasons by the way, people will stay more at home and will have dinner at home. So that's a good news because for us because again in terms of category, we know that frozen food is doing extremely well during recession times. At the same time, to your point, private label is always something that we're focused on. So there will be a price question, and that's our job, obviously, to make sure that we're offering the right value price and value equation. So that's that, but nothing new from that standpoint. It's going to come at some stage. And probably what's going to happen to come to On Top is there might be some SKU rationalization, which then probably will impact B and C brands and probably will lead to very interesting conversation with the retailers because as long as we're coming with the right day brands and right innovation, we believe that it's going to be more a plus for us than anything else. Okay. Okay. Makes sense. I just also wanted to ask about costs and cost inflation specifically around fish. So we've been hearing about meat packing plants, where there has been virus spread and there's been sort of supply constraints. Can you just talk a little bit about the fish supply chain and if you see any risks there as we go out to the balance of the year? I'll take that. I mean, we have had no impact on our supply chain, I would say, from fish. And the chicken and beef issues in the U. S. Appear to be U. S. Specific. We haven't seen anything happening of that sort in Europe. And we entered, I would say, 2020 with a a 2nd year of inflation, but we saw actually inflation moderating back in February. We have the scale as well to be fairly active in the market and make sure that we are taking advantage of our position to get some of our inventory at a very effective cost actually. Our next question comes from Brian Holland with D. A. Davidson. Please go ahead. Thanks. Good morning. Can you tell me what consumption was in the quarter? I guess my context here is obviously very strong Q1 on the shipment side, but I would have assumed some of that initial consumption would have drawn down on your trade retail inventory. And just wondering as we go into Q2 as we're still seeing consumption very strong, should that if I'm right and consumption was faster than shipments in Q1, does that reverse in Q2 or do we have more room there? Okay. Let me take that one. Hi, Brian. So just a little some math here, Brian. So remember that the 20% for Q1, which is the sellout the way you have seen it, But obviously, it gives you just part of the explanation. What you have to take off is, we mentioned and Steve mentioned Nordics and on Besseys, and it represents something like a 5%, let's say, a Hertz. Then foodservice, it's only 5% of our business, but we've been declining by 15% Q1, which is quite moderate, and it represents another 1%. You remember those also that we had a shipment question between Q4, Q1 in terms of phasing, which is another 1%. We have 2% of LEAP here. So we left with 11% to be compared with the 7.7%. And quite frankly, the delta then is really sell out, leading, sell in, which is the answer to your question. There is a bit of interesting upside ahead of us. Okay. That's helpful detail. Thank you. And then to the extent that you have any insight on this, what is the state of the consumer pantry right now at home? Obviously, we have a demand surge, but unlike in a typical pantry load situation that might be driven by a storm, what have you, where folks are buying excess of how long they're actually going to be home or the impact of the storm, something like this. Folks don't have options other than to eat at home, so they are working through what they're buying. And I guess one of the thoughts here was when we come out of this, people would still have a lot of inventory. But as you're pointing out here, this is a demand surge that are consuming the product. As consumer mobility improves, just wondering what your sense is as to how much inventory is working out of the home to the extent that we might have a normal second half as opposed to a lag here with people drawing down on that inventory? Thank you. So, when you see the numbers, again, we had an extraordinary spike in the middle of March. But then since then, obviously, people have come back to a new normal. And so we're still in the region of 20% plus. So that's that. At the same time, freezers in Europe are smaller than the U. S. We also have, by the way, fewer storms. So the banshee loading is much less of a number of phenomena in Europe than it is in the U. S. So what we know is by definition again, Brian, people are consuming frozen more because 25 in Europe, 25 percent of food is normal time or at least pre COVID-nineteen time is was eaten away from home, 50% work, 25% schools and the rest is restaurant. And so that's not happening. And so that by definition people are eating more at home, which is exactly what our market is. So yes, there is a budget for retail to build up given the selling versus sell out comment, as you saw to your point. And the key question for us in the coming weeks months is how this back let's say the confinement process is going to play out between school, work and restaurant. What we see is schools it's starting to deconfined, but it's going to be limited until September, very limited. I can see that my wife is Director of a school. I can tell you it's going to be probably something like 10%, 20%. Restaurants, again, are going to respect social distancing. So again, it's going to be very limited. And work, I don't know about you, but what we can see even with NoMad is we're going to be very, very, very cautious. And at the same time, long term, what we see is people, oh my god, it's working, it's working from home. So it doesn't mean that it should replace fully the office, but definitely it's going to be more important, which means more consumption at home, which means then more consumption of frozen food. So that's a bit where we see. So we see the midterm is going to be how to monitor this staggered movement to a new normal. When is it going to be a new normal? We don't know by vaccine time probably. And then beyond this new normal, there will be new patterns coming in, which we believe are going to play out in our favor. Did it answer your question, Brian? Yes. That's excellent color. Appreciate it. Best of luck, gentlemen. Our next question comes from John Tanwanteng with CJS Securities. Please go ahead. Good morning, gentlemen. Thank you for taking my questions and congrats on navigating through just an extraordinary unprecedented crisis. My first question and maybe you've addressed this already, but do you still view your shares as attractive compared to M and A at this point? And then maybe as a follow-up, discuss the status of the acquisition pipeline and your ability to diligence and pursue deals in this environment? Well, the fact is, we're not going to comment as such on M and A. I'll let you know Sami comment on the repurchase, which is, I think, the right thing to do. And at the same time, it's fantastic. We have the balance sheet the way it is right now, which is great. So I'll let you comment maybe a bit more on the share repurchase maybe, Sami? Absolutely, Stefan. Thank you. Yes, I think as we had mentioned, I would say for us, I would say the share repurchase has been opportunistic. We've been buying back in total up to now 5,400,000 shares at an average of 16.78 price and since virtually we announced the program on March 13. As Stephane would say, my only comment frankly is just to reiterate fact that we have a very strong balance sheet as we have seen. We have cash on hand and we can mobilize, I mean, up to about EUR 1,000,000,000. So I think we feel clearly that we are ready to frontage up on the right opportunity at the right time. And for the time being, this has been in the area of share repurchase. Okay, great. Thank you. And then I was just wondering if you could comment on your relative position in your supply chains and the strength there versus, I guess, food in general. Maybe one getting at, are you going to benefit from impacts in the global supply chain that's a meat and harvest and fish and all of that that are being caused by the pandemic? Are you in a position advantage packing plants are closing down or harvest are not getting enough labor and issues such as that? Yes. I'll take that. I mean, Stefan, feel free to intervene. I think the point that we highlighted was that we've been asking very early overall to secure our factories and our people. I mean, making sure that we have the right just a petty structure, I mean, in the plant to allow our people to come and continue to work in order for us to produce and deliver to our customers and consumers. And we've acted as well on the whole supply chain. So we have we did have already a very good cover, but we even strengthened it, I would say, overall and can say that we have a very good cover overall today, I mean, on our raw material. The reality on the issue that we see in the U. S. Effectively is that the protein issues in the U. S. Do not seem to be occurring in Europe. And on the harvest, I would say that the biggest issue are with lettuce, fruits, which are very much labor intensive and that there's not a where we have exposure. I mean, our own processes from a harvest standpoint are pretty well automated, And we're fairly well protected from that standpoint and have all of the material that we need to ensure the supply for now and for the rest of the year. Got it. Thank you. And then finally, just maybe to build on a prior question about inventories coming out of the pandemic. Maybe from a more psychological perspective, do you think it's possible that consumers just they veer away from frozen foods after having come out of isolation for so long and maybe back towards fresh or extent that it's possible. I'm wondering if you've been able to think about those possibilities and how much it could impact you, if that's something that might be in the cards? You always have to think about a range of possibilities, but we definitely think that what we have with Adelodovus is more important than anything else. We always know that the freezer opening the freezer has always been an obsession of ours. And it's compared to the fridge, it's the difference is huge. And what we're going to monitor very soon is, obviously, if we see that it's changing over time. So that's one thing. The second thing is we've seen a lot of people. We're monitoring these people. We our department our inside department is really monitoring what they think about our product. And it's what's happened is really when you think about it, a lot of people left frozen with these ideas that it's about convenience, affordability. But what they're discovering right now is, oh my god, it's great taste, nutrition is fantastic, meat free is part of frozen food, sustainability with waste, all these things that are important by the way for the new generations and beyond. That's the kind of thing that they didn't know. So that was our job to make it known. And whether we like it or not, what the current situation that these people discovered frozen food and we definitely believe that's going to help. So I see much more opportunities than anything else ahead of this. The point I would add probably is the fact that what we have seen, what we have observed is in the new, let's say, shopping pattern that we see from consumer, they're coming back to frozen food in a much more regular basis. I mean, historically, they were going and buying some frozen food and then putting them in their fridge, waited. And then as Stephane was highlighting, effective what was very important for us is to make sure that they open up the door on the freezer. But what we are seeing right now is effective that they're using frozen food in a much more regular basis. They're coming back to the store, purchasing again and again. That's extremely encouraging for us. Now the question is whether that pattern will stay. But given the period of time during which they will adopt their pattern, it's very likely that effective dose changes remain for quite some time. I mean, it's a habit usually, I mean, change for about 3 to 4 months period. I mean, so I think it's quite encouraging on our side. One additional point, John, is you probably have seen, and it's not limited to us that online has literally exploded during this time. And again, it's going to stay. So some people may even said it's been 10 years in 3 months. So it's big and it goes to all the categories of people by the way. And what we're also very clear is that Frozen is over indexing with online. So it's another reason why we believe this combination is going to help us. Got it. Thank you very much guys for the color and good luck out there. Thanks. Our next question comes from Bill Chappell with SunTrust Robinson Humphrey. Please go ahead. Hi, this is Zack here on for Bill. Thanks for taking the question. Just kind of following up with the last question. Is there a world where you mentioned that consumers are talking about an old way of looking at frozen food versus a new way of looking at frozen food. Is there a possibility where retailers maybe need to increase shelf space or maybe provide more support to the category if that takes place? Thank you. The simple answer is, yes. It's actually it's a very good category for the retailers. It's a good margin for them. We know that they are understributed versus the aborted tea in the sales that comes with frozen. So that's what's going to happen. It's not going to happen overnight at least in terms of total fixtures, But definitely you can imagine that they could equip with second replacements in terms of freezers and we believe it can we can make it work. But it's kind of it's going to be part of our joint business plan with all these guys. But definitely, it's on the agenda. Got it. Thank you. This concludes the question and answer session. I would like to turn the conference back over to Steve Steishmaeker for any closing remarks. Thank you very much, operator. So thank you all for participating on our Q1 earnings call. The past 2 months have been an unprecedented moment of time for many of us. Our entire organization has adapted to a new way of working while working hard to ensure that we can continue to supply our beloved brands grocery stores across Europe, while protecting the safety of our employees. In times like these, we are humbled to be serving our communities with nutritious food. Our business is proving to be very resilient throughout this period of uncertainty and is poised to emerge on an even stronger foundation. Thank you for your time. Stay safe, and I look forward to updating you when we next report Q2 earnings in August.