Kerry is now among a host of major food suppliers bearing the weight of inflation across global markets, according to figures from the company’s newly released Q1 financial overview. To reflect this significant surge in costs, the company has increased its prices by an average of 4.6% in its Taste and Nutrition business, while its dairy business in Ireland and the UK has increased prices by up to 18.7%.

Despite this, the Ireland-headquartered taste and nutrition company recorded an increase in revenue of 8.1%, with food-related end-use markets (EUMs) of Meat, Bakery and Snacks leading with “excellent growth” despite these inflationary pressures.

Kerry saw an uptick in its retail and foodservice channels post-pandemic.The company also reaped significant earnings in its retail channel. Its foodservice segment also saw similar gains as consumers moved to more normalized work environments and increased their social engagement.

“Our markets remain highly dynamic with a good overall demand environment, despite current uncertain market conditions in places,” details the company. “While our industry is experiencing a period of heightened inflation, we remain confident in our ability to manage through this current cycle with our well-established pricing model and cost initiatives.”

“Kerry remains strongly positioned for growth with a good innovation pipeline. We expect to achieve adjusted earnings per share growth in 2022 of 5% to 9% on a constant currency basis.”

CEO commentary on performance
Kerry’s CEO Edmond Scanlon is “pleased with [Kerry’s] start to the year despite challenging conditions in a number of markets.” The company’s Taste & Nutrition achieved continued strong growth, particularly in developed markets, he highlights.

Kerry also reports “good progress” on the strategic front, enhancing its biotechnology portfolio with the acquisition of c-LEcta, while expanding its local presence in emerging markets with the acquisition of Almer in Southeast Asia and further enhancing its footprint in the Middle East and Africa.

“As overall market conditions remain highly dynamic, we are actively managing the inflationary environment in close collaboration with our customers,” Scanlon comments. Globally ballooning costs this year have prompted other F&B heavyweights, including Nestlé, to similarly hike up the prices of their goods as a counterbalancing measure.”

“As previously announced, we have taken the decision to suspend our operations in Russia and Belarus and we continue to work through the challenges presented in China since the introduction of localized restrictions,” Scanlon adds, referring to the mass exodus of global F&B brands taking place in protest of the Russian invasion of Ukraine. 

“As we commence a new strategic cycle, the progress we’ve made positions us strongly for growth. We are reaffirming our full year earnings guidance.”

Market dynamics and financial overview
The overall demand environment remained positive through the period, Kerry outlines, as consumers moved to more normalized work environments and increased their social engagement.

The group benefited from overall consumer mobility approaching pre-pandemic levels, with travel and out-of-home eating occasions continuing to increase.

The group reported revenue increased by 8.1% in the period. This consisted of business volume growth of 5.6%, increased pricing of 5.8%, a translation currency tailwind of 5.4% and contribution from business acquisitions of 4%, partially offset by the impact of the business disposal of the Consumer Foods Meats & Meals business of 12.7%.

“As consumer preferences continue to evolve with increased demand for new food and beverage experiences, sustainability remains a key factor in purchasing decisions, while overall price inflation has now moved into the consciousness of many consumers,” the company stresses.

Meat, snacks and bakery led in Kerry Q1 performance.Group EBITDA margin increased by 10 bps primarily driven by accretion from recent portfolio developments, operating leverage and mix, offset by the impact of passing through input cost inflation.

At the end of March, the group’s net debt of €2.3 billion (US$2.4 billion) reflected overall acquisition spend. As announced on February 16, the group has proposed a final dividend of (US$) 66.7 cent per share for approval at its Annual General Meeting.

Taste & Nutrition performance
Overall volume growth in this category hit 6.8%, with “strong growth” across many developed markets. Kerry’s foodservice channel achieved strong double-digit volume growth, reflective of continued business momentum and lower comparatives at the beginning of the prior year

“Pricing of 4.6% reflected the pass-through of increases in raw material input costs,” details the company.

The retail channel delivered “good growth” levels driven by Meat, Snacks and Bakery markets.

“This growth was supported by continued strong demand for Kerry’s food waste solutions as customers continue to evaluate the sustainability credentials of their offerings, while good growth was achieved within authentic taste with a number of new business wins,” details Kerry.

Business volumes in emerging markets increased by 7.9%, as strong growth in LATAM, the Middle East and Southeast Asia was partially offset by challenging conditions in China.

Dairy prices pushed up by inflation
The company reports “solid growth” for its Dairy Ireland category in spite of significant price inflation across the period, which led to the price hike of 18.7%.

Overall volume growth in this segment was at 0.7% with increases across both Dairy Consumer Products and Dairy Ingredients

Within Dairy Consumer Products, “good volume growth” was achieved right across the dairy snacking range, led by Cheestrings with increased out-of-home consumption.

Volumes in spreadable butter were lower due to reduced promotional activity, while the cheese category had “strong comparatives due to a higher level of at-home consumption in the prior year.”

Dairy Ingredients performance reflected significant higher prices as a result of constrained global supply dynamics.

Dairy prices continue to be impacted by global inflation.In March 2022, Kerry completed the following acquisitions related to dairy: 100% of the share capital of the company Almer Malaysia; 100% of the issued share capital of the company Natreon; and 93% of the issued share capital of the company c-LEcta.

Regional performance
North America delivered a “very good performance” led by Meat and Meat Alternatives, as strong growth was achieved through taste innovations and increased demand for Kerry’s food protection and preservation solutions. This growth was supported by the group’s new manufacturing facility in Rome, Georgia.

Overall growth in North American foodservice was “strong in the period, underpinned by innovations to reduce complexity in back of house operations, targeted menu development and increased seasonal menu offerings.”

Within LATAM, Brazil and Mexico delivered strong growth. Volume growth in Brazil was driven by performance in Meat and Ice Cream, while growth in Mexico was led by new launches in Meat and within the Snacks category with regional leaders.

Growth in Europe was strongest in developed markets in the period, led by growth in the UK, followed by Central and Southern Europe, while performance in Russia and Eastern Europe was impacted by the war in the region.

Overall growth was strong across Food EUMs. “Excellent growth” was achieved in Snacks with regional leaders across the Middle East and Southeast Asia. Growth in Meat was led by local authentic taste and texture solutions, while growth in Bakery was supported by new launch activity and increased demand for functional systems.

Meanwhile, Kerry continued its expansion in the Asia Pacific/Middle East/Africa region with the opening of its Jeddah, Saudi Arabia operation.