Kerry unveils four-year growth plan with sustainability emphasis

14 Oct 2021 --- Global taste and nutrition company Kerry has unveiled its financial targets for the period between 2022-2026, with a strong focus on expansion, including within its health and bio-pharma sector. The group is also setting ambitious sustainability targets, aiming to responsibly source 100% of priority raw materials by 2030.

The new targets revolve around overall margin expansion, which will be achieved via a wider portfolio mix, operating leverage and operational efficiencies. 

In a presentation attended by NutritionInsight, Marguerite Larkin, chief financial officer, explained that the company has evolved its portfolio organically and inorganically.

“We have also evolved our business model to enable us to create differentiated solutions to address these opportunities and we will continue to do this.” 

Where the portfolio mix is concerned, the expansion will be realized by an increased depth of technology solutions, innovation support and focus areas.
The group is aiming to responsibly source 100% of priority raw materials by 2030. 

Streamlining operations
With operating leverage and operational efficiencies being key drivers for margin expansion, Kerry highlights they are part of the company’s attempt to achieve their ambitions in a balanced way.

“As we grow our business, we will leverage our asset footprint and overall business structures to generate further incremental margin expansion. On operational efficiencies we will continue to build on our continuous improvement initiatives,” Larkin notes.

The group is also announcing its “accelerate operational excellence transformation” program, with a €120 million (US$139 million) investment for the program’s duration slated for 2022-2024. 

The aim of this program is to focus on manufacturing and supply chain excellence, seeking to optimize the warehouse and distribution network, raw material category, digital analytics, as well as asset and footprint.

The recurring annual benefit is slated to be €70 million (US$81 million) upon completion. 

Shifting financial growth targets
Kerry is also moving from three growth targets to two primary growth targets as its revenue and margin targets capture the company’s overall ambition in a balanced way, notes Larkin. 

“While earnings per share (EPS) will continue to be an important metric for Kerry we believe that revenue growth and EBITDA are the best growth targets to support and encourage decisions that are right for Kerry in the long term.”

The company has also updated its margin target from trading profit to EBITDA to be “more reflective of how it manages and drives performance in its business and the measure most used in industry.” 

By 2026, the group set the EBITDA margin target at 18%+, underpinned by the expansion of the EBITDA margin in taste and nutrition to 20%+. 

Larkin notes that Kerry’s group revenue currently stands at €7 billion (US$8 billion). Kerry notes cognitive health is a growing industry, with a retail value of US$2.8 billion. 

Strategic growth areas
Kerry has identified four key growth platforms that it will focus on: authentic taste, plant-based, food waste, and health and bio-pharma.

Within consumer health and wellness needs, Kerry notes that in the supplements market, cognitive health is a growing industry, with a retail value of US$2.8 billion. 

Though it is smaller in size compared to bigger industries such as immune health, which has a retail value of US$16.4 billion, cognitive health appears to be the fastest growing. 

Tied with immune health in terms of retail value is also weight management, followed by joint health valued at US$11 billion. 

Over the summer, Kerry highlighted that consumers have never been more proactive when it comes to health through nutrition, with 42% of global consumers purchasing more functional or fortified foods and beverages since the COVID-19 pandemic broke out. 

Sustainability efforts
With the aim of creating sustainable solutions, the company announces that 100% of priority raw materials will be responsibly sourced by 2030.

“We are working with our customers to help them move along the sustainable nutrition spectrum so they too can reduce their carbon emissions, food waste or water usage. The range and complexity of challenges our industry is facing right now is unprecedented with every product requiring its own specific Kerry solution,” Scanlon says. 

Additionally, Kerry is accelerating its sustainability targets to align with the Paris agreement goal, aiming to reduce carbon emissions from 33% to 55% by 2030.

The company’s packaging commitments will ensure that by 2025, 100% of all plastic used will be reusable, recyclable or compostable and that virgin plastic use will be reduced by 25%.

In the next 12 months, Kerry aims to move to 100% renewable electricity, implementing energy efficiency programs and reducing onsite fuel consumption. 

Expanding portfolio
This new strategy follows a host of significant moves from Kerry. Earlier this year, it acquired Spanish-based Biosearch Life for €126.9 million (US$150 million) to expand its portfolio of health ingredients, such as probiotics and omega 3s.

It has also signed a licensing partnership with Japan-based Pharma Foods International (PFI) for the development, application and global sales of joint health ingredient technology  and has honed its focus on the gut health market by acquiring Bio-K Plus International probiotics in Canada and Jining Nature Group, a leading savory taste business in China last year. 

By Andria Kades

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