Glanbia plc (GL9) Earnings Call Transcript & Summary

Good morning, and welcome to the Glanbia plc Q1 2021 Interim Management Statement with Siobhan Talbot, Group Managing Director; and Mark Garvey, Group Finance Director. Today's conference is being recorded. At this time, I would like to turn the conference over to Liam Hennigan, Group Director, Strategic Planning and Investor Relations. Please go ahead.

Thank you very much, operator. Good morning, and welcome to today's call. During the call, the directors may make forward-looking statements. These statements have been made by the directors in good faith based upon the information available to them up to the time of their approval of this interim management statement for the first quarter of 2021. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The directors undertake no obligation to update any forward-looking statements made on today's call, whether as a result of new information, future events or otherwise. I'm now handing the call over to Ms. Siobhan Talbot, Group Managing Director of Glanbia plc.

Good morning, everyone, and a warm welcome to you to our first quarter '21 inter management statement call. I hope you're all safe and well. I'm joined today by our Group Finance Director, Mark Garvey. On the call, I'm going to run through the operating highlights for the first quarter, talk to how our operating segments have performed and the outlook for the remainder of the year based on the trends we are seeing today. I'll then hand to Mark, who will speak to the finances, and we'll conclude with a recap and indeed, your questions. Overall, on behalf of the team, I'm delighted that Glanbia has had a strong start to 2021. None of this, of course, could have been achieved without the hard work of our people across the globe and our partners. And now over a year into the COVID pandemic, I continue to be very humbled by their dedication in helping Glanbia to deliver such an operating performance, which puts the group in a strong financial position. Turning to Slide 3 and the results summary for the first quarter. Our key platforms of Glanbia Performance Nutrition and Nutritional Solutions both had a strong start to 2021, which helped our wholly owned revenues to grow by 10.5% on a constant currency basis. On that basis, in the first quarter, GPN grew like-for-like branded revenue by 17.6%, while Nutritional Solutions had volume growth of 10.3%. I will speak to the drivers of this performance in a little while. Globally, as we emerge from the pandemic, there's no doubt that health, wellness and nutrition are prominent consumer trends, which is benefiting our portfolio. While we appreciate that the challenges of COVID-19 are not behind us as yet, we have seen some very encouraging trends in the first quarter, which have continued into the second quarter, and that gives us confidence today to update our full year 2021 guidance. We now expect adjusted earnings per share growth to be at the upper end of the 6% to 12% growth range that we have previously guided on a constant currency basis, with the half year well ahead of the prior year. Turning then to Slide 4. I want to speak a little more in detail about the components of that full year guidance. Key to that will be the improved GPN margin year-on-year. Good revenue growth across both GPN and Nutritional Solutions and continued navigation of the pandemic, which we all know, of course, is ongoing. As we've stated previously, the GPN Transformation Program, which commenced in late 2019, remains a key piece of delivering our double-digit EBITA margin ambition, both in 2021 and the 12% to 13% range in 2022. This program has continued to progress well in the first quarter across both demand and efficiency drivers. As you will have seen from the numbers, we had a strong start in revenue growth across both GPN and Nutritional Solutions, this momentum continued into Q2. And while Q1 was a blend of consumption-led growth and inventory rebuild as markets reopened, we are now confident that GPN is on track to deliver low double-digit branded revenue growth for the full year. While Nutritional Solutions, we believe, is on track to deliver high single-digit volume growth. As a team, of course, we're not at all complacent about the pandemic and remain very vigilant to its risks as we have seen that it has the tendency to flare up in certain regions. However, as Mark will speak to later, the group is in a very strong financial position, particularly in terms of areas like cash conversion, and this gives us significant protection against potential risk. Turning then to GPN on Slide 6. Before we get into the operating performance, I'd like to specifically update on the GPN Transformation project. At its core, this project is all about efficiency improvements and driving of demand, which will deliver sustained profitable growth. Building on the progress in 2020, we have made good further progress in Q1 of this year and now have very good visibility on the timing of the delivery of key project benefits. On the efficiency work streams, we will have exited contract manufacturing in North America in Q2. We have a significant project well underway to consolidate our supply chain footprint in North America, and that is on track to be largely completed by the end of this year. On the growth initiatives, our brand plans are well developed, and we are materially increasing marketing reinvestment this year to drive demand, recycling some of those efficiency savings, while the project is ultimately delivering that without compromising our margin targets. As we'll have said previously, our route-to-market optimization in a number of key international markets is now largely complete, and that too, is having a positive impact on performance. Finally, when I previously outlined the project to you, I noted that we had responded to the challenges of COVID by expanding the scope of the project, allowing it to provide a sharper geographic focus for the business. To this end, we now have an organization in place to focus on growth across the Americas and international, with our leadership teams aligned to those growth opportunities. The Americas region covers all markets across North and Latin America, and the International business covers sales in all other markets. Our teams are now fully focused on driving our brand portfolio and reaching our consumers in the most optimal way, while also driving consumer insights back into the marketing and innovation plans. This is a strong functional model, which we believe will drive growth and performance in GPN for the longer term, and we will report our revenue externally based on these geographic regions. We continue to have a dedicated direct-to-consumer team, which is driving sales via the pure-play direct-to-consumer Body & Fit platform as well as being a key enabler to various brands.com sites we have around the world. We have seen strong growth across e-commerce channels again in this quarter, and we are leveraging our own direct-to-consumer capability as an important part of our overall global e-commerce strategy. As we have moved to a geographic reporting model, we will ascribe the relevant direct-to-consumer revenues within those geographic regions where the sales take place. As again, many of you will be aware, today, the majority of our direct-to-consumer sales are in International. An outlook as a result of the strong Q1, the successful delivery of the transformation benefits, we expect GPN to have a strong half year performance, with Q2, of course, lapping the severe COVID constraints of Q2 2020. Based on our trajectory to date, as I said, we now believe GPN can deliver low double-digit branded revenue growth for the full year with low double-digit margins, both in the first half and for the year, and we remain on track for our GPN margin target in 2022. Turning now to Slide 7. You can see that in Q1, GPN had strong volume and price progression in the period, with like-for-like branded revenues up 17.6%. The price improvement reflects the price increases we implemented in the second half of last year across the portfolio. We were particularly pleased that volume growth was broadly based across both the Americas and International markets. Within the Americas, the ON brand in particular, had a strong performance as consumer activity levels pick up. Our lifestyle brands overall were flat in the period as the diets and ready-to-eat categories continue to be impacted by COVID restrictions and consumer mobility. But we've seen those trends improve in recent weeks and are confident that they will deliver growth for the second half of the year as mobility, office-based working and indeed more dieting trigger events, such as social occasions, return. Q1 was a blend of consumption-driven growth and some market inventory rebuild in the quarter, and we expect there to be a similar dynamic in Q2 as more markets and channels reopen. This is a return to more normal levels of inventory in our markets, and we would don't expect inventory changes to be a materially part of the revenue growth for the second half. In the International portfolio, we saw strong growth across Asia Pacific as a result of the easing of COVID-related restrictions. Of course, in EMEA, we had ongoing headwinds as the restrictions really are largely in place. across the region. From a channel perspective, we continue to see good growth in the e-commerce channel with the stabilization of the specialty channel in the Americas. Turning then to Slide 8 and the performance, in particular, of our Optimum Nutrition and SlimFast brands. We've seen very positive consumption trends, particularly for the Optimum Nutrition brands. It had a strong start to the year. And the most recent data we have for our measured channels for the 12 weeks up to the 18th of April show Optimal Nutrition consumption of 23.6% in North America measured channels. Performance-orientated consumers have returned to their routines quickly as restrictions have eased. And supported by increased marketing spend, we have seen strong growth for Optimum Nutrition across online, FDM and indeed, the specialty channel. We're pleased to see that the specialty channel has stabilized this year for the first time in a number of years, which is, of course, very positive. We are increasing investment in Optimum Nutrition brands globally this year with a focus on digital engagement with our consumers, and we're getting traction on that. As I said earlier, the SlimFast brand did face category-related headwinds in the beginning of the year, but we've seen these trends improve. And for the same 12-week period to the 18th of April, consumption was back 0.5%. SlimFast has a strong pipeline of innovation focused on snacking occasions, and they will be launched over Q3 with the rollout having strong customer engagement. We're confident, therefore, that again supported by marketing investments, this innovation, coupled with increased consumer mobility as we move through the easing of COVID restrictions, will be the driver of growth for SlimFast for the second half of the year. Turning then to Slide 10 and Glanbia Nutritionals. It had another strong performance, growing volumes 12.4% in the first quarter, which was driven by both Nutritional Solutions and US Cheese. Pricing was negative, as expected, driven by lower cheese markets year-on-year. On Slide 11, Nutritional Solutions. You can see we had strong growth in the period with volumes up 10.3%. We are seeing continued strong demand from mainstream food and beverage customers as well as smaller niche brands with demand broadly based across our various technologies in both dairy and nondairy solutions. On dairy, we continue to see strong health and wellness halo ascribed to dairy as consumers globally. And in nondairy, we're seeing strong demand across both vitamin and mineral premix. The Foodarom flavors acquisition completed last August continues to perform well, and we remain ambitious to add further acquisitions to Nutritional Solutions. On Slide 12, our US Cheese business had strong volume growth, delivering 13.4% in the first quarter. This volume growth was related to the commissioning of the new joint venture facility in Michigan as that has come on stream with -- and is expected to be fully commissioned during the second quarter. We expect this joint venture volumes to be strong contributors to the US Cheese volumes for the remainder of the year, and we have placed that project well with good end market demand for our cheese products. Pricing, as I've referenced, declined by 6.9% as a result of lower year-on-year cheese markets. It can, of course, be difficult to anticipate the outlook for cheese prices. But as you know, we have a very robust model within our US Cheese business, which largely changed -- moves those pricing through the supply chain and protects our margin. With that, I'll hand over to Mark to cover some finances.

Thank you, Siobhan, and good morning to everyone on the call. As Siobhan noted, the group had a strong first quarter, which resulted in a continuing good cash flow conversion. The rolling 12-months conversion of EBITA into operating cash flow to the end of Q1 was strong and well ahead of our target of converting 80% of EBITA to operating cash flow. As expected, there was a modest working capital outflow in the first quarter as business activity rebounded, and we expect this will continue into Q2. During Q1, the group spent EUR 30 million on the previously announced share buyback program. Net debt at the end of the quarter was EUR 499 million, broadly in line with the 2020 year-end level of $494 million and was EUR 192 million lower than at the same time last year. Net debt to EBITA was 1.5x, well within our covenant of 3.5x. The group is in a strong financial position and has EUR 1.1 billion in committed debt facilities with a weighted average maturity of 4.6 years with the earliest maturity date of January 2024. We completed a EUR 50 billion share buyback program in April, a total of 4.8 million shares were repurchased at an average share price of EUR 10.44. Post completion, there are 291 million shares in issue. The buyback would be approximately 1.5% accretive to adjusted earnings per share in 2021. At today's AGM, the Board is seeking approval to renew the group's authorization to implement a share buyback program so as to have this option available for the coming year. The final dividend for 2020 of EUR 0.1594 per share will be paid on May 7. The total dividend for 2020 was EUR 0.2662, in line with the prior year's dividend and represented a payout ratio of 36.1% of 2020 adjusted earnings per share. For 2021, we would expect to pay a dividend within the group's targeted payout ratio of between 25% and 35%. Capital expenditure for the year is expected to be in the range of EUR 80 million to EUR 90 million with the consolidation of GPN's North American manufacturing facilities being the most significant project. We also continue to look at acquisition opportunities in both GPN and Nutritional Solutions. Finally, in noted currency, the average euro-dollar rate for the first quarter was $1.20, which compares to $1.10 rate for the first quarter last year. Should the euro-dollar rate remain at a similar level to Q1 for the remainder of the year, then that would represent an approximate 6% headwind for the group's reported comparative versus constant currency. And with that, I will hand it back to Siobhan.

Thank you, Mark. So ladies and gentlemen, I'd like to conclude that having started well, the group is well positioned to deliver good growth this year. The trends that we have seen in Q1 have continued into Q2, and our key strategic initiatives are very much on track. We have a strong balance sheet, and we are ambitious to put that balance sheet to work to fund future growth. The strong first quarter results and positive outlook for the half year, which we expect to be well ahead of the prior year has given us the confidence to update our guidance. We now expect that adjusted earnings per share growth will be at the upper end of the previously guided range of 6% to 12% on a constant currency basis. With that, operator, I'd now like to take any questions.

[Operator Instructions] We will take our first question from Jason Molins with Goodbody.

Firstly, well done on a good start to the year. A few questions, if you don't mind, just firstly, kicking off on GPN. In terms of the growth that you saw in Q1, and you mentioned a few times in terms of the inventory rebuild. How should we think about that in the context of the growth that you achieved? And I'm just bearing in mind the data that you then provided in terms of the consumption data that particularly in Optimum Nutrition at 23% was particularly strong. So just trying to understand the couple of levers in terms of the consumption, but then the stock rebuild. Second question really then in terms of Europe, and Europe may be a bit softer, understandably. But I guess, with the likes of the U.K. that's maybe reopening faster than other markets, can you give a sense of early trends that you're seeing in that market? And then finally, just switching over to the cost side. In terms of the input cost inflation that you mentioned, can you talk to some of the dynamics around the whey pricing and the various different grades that you're seeing at the moment? And the sort of magnitude that you're expecting in terms of that inflation piece?

Thank you, Jason. I'll speak to the first 2 questions, and I'll get Mark to speak to the input costs. In terms of the branded like-for-like growth for GPN for the first quarter, as we would estimate probably the inventory build was at least 1/3 of that, Jason, I would say. And in terms -- when you calibrate that with the consumption, as you can see, the consumption for ON particularly strong in the measured channels in North America. One comment I would make with that is that we've given the most up-to-date data, which is the 18th of April, and clearly, the last 4 weeks of that, because we're lapping the severe restrictions of COVID last year, will be particularly strong. But overall, very pleased with the consumption start and recognizing that there was a logical inventory build as certain channels reopened. Ultimately, the way we have calibrated that, Jason, and bringing it all together is that we now expect that GPN-branded like-for-like will be that low double digit for the full year, with the half year, as we said, well ahead of the last half year, as you would expect lapping that Q2. In terms of Europe, yes, it's fair to say that Europe itself, of course, different regions are moving to a different pace. And the early indications, for example, in the U.K. are good, no doubt. And so while that has been somewhat of a constraint in the first quarter. I think as we move through the quarters, we will see Europe opening up as well at a different pacing. But the early indications where we have seen things open up like the U.K. would be similar to other markets and therefore positive. So I'll turn to Mark on input costs.

Jason, so as we spoke with you the last time, we have seen whey costs firm more particularly in North America. So we are seeing higher whey prices coming through. I mean the thing we always look at is how sustained that will be, and sometimes that can spike and then come back. But right now, we are looking at higher wage prices than we would have done last February, for example. From our perspective, the guidance we gave you today, we're very comfortable where whey prices are in terms of us meeting the guidance that we have. So that's important, firstly, to say that. However, if we continue to see a firming, I would say to you, that in the second half, we'd start looking at price increases, and we will be assessing that. I mean that will be an important factor as we've done before. We were able to show that we can push price increases through in our brands last year, for example, when we didn't have such a spike. So with the inflationary pressures we're currently seeing input costs and other costs, frankly, I expect we'll be looking at that in the second half.

And sorry, Mark, any sense of the magnitude on that delta on the pricing?

Yes. When you -- sorry, good point you asked as well. And in terms of WPI90, for example, we're seeing that 15%, 20% plus up actually compared to where we were last year.

And we will now take our next question from Alex Sloane with Barclays.

Siobhan, Mark and Liam, congrats on the strong quarter. A few questions from me also. I mean we're seeing obviously renewed interest from multinationals in the VMS sector, I guess, highlighting confidence that increased consumer interest here can prove structural. I guess within your premix business, which you called out as strong in the quarter, can you remind us where you are in terms of capacity utilization and your ability to continue to capture potential strong growth driven by consumer interest in health and wellness? That's the first one. And then second one, good to see continued strong cash conversion trends and the net debt-to-EBITDA coming down year-on-year even after the well-timed buyback. At the full year, I think you talked about potential M&A focus maybe around plant-based performance nutrition today. You've talked about continued ambitions around Nutritional Solutions. I wonder if you could talk more about your priorities for use of cash from here.

Thank you, Alex. I'll speak to the first question, and Mark can speak to the M&A opportunities. Yes, very pleased with performance in premix. We have a really strong business there, as you know, a strong player globally, actually, and that continues really good business for us. From a capacity point of view, we're in good shape, actually. We've continued to invest across our facilities in North America, in Asia and indeed in Europe. And the acquisition of Watson, of course, has increased both our capacity and capability in that space as well. So yes, Alex, you're absolutely right about the structural growth opportunity, and we believe that we're very well placed to participate with that with our premix business.

Alex, so in terms of cash flow, yes, very happy that we've continued to see, frankly, the strong conversion rate coming through in the first quarter. Probably, the working capital headwinds, I was expecting have come -- have not been as strong yet, but we expect to see some of that as we go through the year with business picking up. In terms of priorities for the year, we have a CapEx program of EUR 80 million to EUR 90 million. A significant part of that, as I mentioned earlier, is the manufacturing consolidation we're doing in GPN, which is a fundamental part of making sure we get those margins up to that 12% to 13% range into next year as well. So that will be an important program for us. We're also doing a number of programs in our Nutritional Solutions business to make sure we're meeting customer demand as well as you can see we have good activity there. From an M&A perspective, looking at both NS and GNPN currently and Nutritional Solutions has had a nice set of bolt-on acquisitions. We'd like to see more of that, adding more capability, potentially a further geographic reach as we see some of our customers continue to expand with activity coming back on now in the emerging markets, for example. And in GPN, yes, I did mention plant the last time. That is an interesting area for us. We'd like to have more plants in our portfolio. Certainly, D2C as you see more consumers interacting online with the D2C businesses as well, and we're looking at that also. So a number of things we keep in the pipeline. We'd like to do some more acquisitions this year. So -- and that's very much a target for us.

And we will now take our next question from James Targett with Berenberg.

Three questions for me, if I may. The first one, just coming back on the input costs and I guess pricing in GPN. 4.6%, that's, I think, the best sort of pricing I've seen in GPN since about 2014. So how -- are you comfortable with that sticking going forward? And as way prices -- developers -- as you see them right now, what do you expect the pricing contribution to be within that double-digit like-for-like GPN growth for the full year? My second question is on your new kind of structure of the Americas and International. Just wondering what the rationale was for sort of recombining if you like, the performance business and the lifestyle business in North America, I think splitting it to give it more sort of dedicated marketing and go-to-market focus was a big part of your strategy, but now is back in sort of 2019. So I just wondered kind of why you're kind of bringing those back together. And then thirdly, just on -- it's interesting that a few of the large food companies have sort of perhaps being showing less interest in sort of sports nutrition recently. We, obviously, been on selling Vega, Nestle buying Bountiful but not buying the sports nutrition assets. So just wondering if you're seeing any change in the industry more generally about the interest from big food companies in assets or in the category, and whether you see that as being an opportunity for you from a competitive perspective or for M&A?

James, I'll start with the pricing point that you asked and then pass back to Siobhan. We're very confident we're on a positive pricing for the year. I mean the pricing we took last year was absolutely the right thing to do. And you can remember the time, there's a lot of questions as why you're taking pricing in an environment that wasn't necessarily so inflationary, but it was the right thing to do, and it's clearly lapping. There is some impact to the first quarter with some promotional activity not being as strong first quarter this year versus last year. So that is having some impact on that 4.6%. But overall for the year, there will be a positive price for the GPN business. Now as we look at other inflationary pressures, as we look at potential input costs being sustained, as we get to the back end of the year, we may have additional pricing, as I mentioned earlier, that we might want to put through. We haven't made that determination yet. We do that over the next number of months. But for the full year, you would expect to see positive pricing coming through from GPN.

James, on the structure point. Really, it's actually a natural evolution, I think, to the increasing scale of the organization. We were delighted to bring Wendy Davidson in as President of Americas, relatively recently. And what we have done now is moved really to a strong functional model. We a Chief Growth Officer, and we have a new Chief Commercial Officer. And under that structure, you're absolutely right, the brand focus will absolutely remain within that Chief Growth Officer structure. So we will have a clear brand focus on brands like Optimum Nutrition, like SlimFast and indeed, our other brands. So what this allows us leverage as we scale, we are now is capability, for example, across the customer channels through the Chief Commercial Officer. We'll be able to leverage that across all our brand portfolio, while through the Chief Growth Officer, keeping very much a brand focus. And all of that, of course, supported by global and regional marketing functions as well. So really a logical evolution, I would say, James, that very much keeps the focus and builds our capability. Very aligned to the momentum project itself, which is a lot of that is about driving demand, driving areas like revenue growth management. So very pleased actually with the evolution of that, and it is really aligning the resources to the growth opportunities. On the International side, a lot of that had been affected, as we've spoken before, through 2020. And again, a relatively new Head of International and delighted with some new team members that have joined us in the last 12 to 18 months. On your question about the larger food companies and interest in sports. Yes, I guess again, it's an evolving space. We are very optimistic about the trends within sports nutrition, and particularly the portfolio of brands that we have. I think in a post pandemic environment where consumers are very, very calibrated to the connectivity between general health and wellness and fitness and activity levels, I think structurally, that bodes very well to the category. Of course, different organizations will have different priorities at points in time. So I don't read anything majorly significant into that. And as you say, it may well throw up opportunities for us. But today, we have a great brand portfolio as we have across both sports, weight management and then indeed more lifestyle brands. So we continue to drive those forward. And if good opportunities come our way, absolutely, we will give them a good look.

We will now take next question from Cathal Kenny with Davy Research.

Two questions, please. Firstly, on Optimum Nutrition. Can you speak to the performance by format, please? And second question relates to e-commerce. Just interested in the performance within that channel, both in the Americas and International.

Thanks, Cathal. I think I mentioned on the call at the full year that actually the powders format has been very resilient through COVID, and that continues. Actually, we've seen that across a number of our brands, not least Optimum Nutrition, but also, for example, Isopure powder's doing very well in the current environment. So I would say our -- the former trends have been positive to a lot of our SKUs being in that powder format. Clearly, as you know, the ready-to-eat category, just as a category, has been more challenged due to COVID-related restrictions. But again, in recent weeks, we're seeing more optimism as more consumer mobility comes our way, particularly in North America, which is the key market for us. And clearly, the opening of North America across a number of different dimensions is positive for Glanbia, which we're very pleased to see. On the e-commerce channel, very continued, very good growth. Increasingly, again, as I think I've spoken to previously, Cathal, we're thinking about e-commerce as a holistic strategy across a number of different areas, both our own D2C platform, but also relationships with the e-commerce players and marketplace players globally across different regions. Indeed, the question that one of your colleagues asked earlier around the talent, a lot of the new talent that we brought into Glanbia has been with a strong e-commerce capability. And as we've said before, I see a lot of our growth opportunity in the International markets will have an e-commerce bias. So very pleased with the evolution of that, continue to see very good growth in that channel. And I think that will be further opportunity for us as we look forward. As we've said previously, the fact that our portfolio of brands have such a strong proportionality already in that e-commerce channel, I think, has been a real strength for us through all the challenges of 2020 and will continue to be a strength and a more magnified strength, I would imagine, as we come now post-COVID into '21 and beyond.

Just one follow-up on innovation. I think you called out innovation in SlimFast, expect to be a feature in the second half of the year. I'm just wondering is there anything for Optimum?

Yes, nothing as dramatic maybe as some of the innovations that we have in SlimFast. But innovation continues to be part of the overarching agenda. There will be different flavors, there will be innovation across different formats. I would say actually a focus of Optimum Nutrition, as you know, in recent times, actually has been decomplexing and simplifying the SKU range, and that has served us very well. So driving on some of what we would call those hero SKUs across the protein, across the gainers, and that has worked very well for us. So we -- there is a natural innovation agenda rhythm in the business that we will work. We work different customers, if they want exclusive ranges, et cetera. But our -- I think [ quarter ] has been very good about the growth that we in the first quarter and the growth that we expect to see for this year, a lot of that, Cahal, while there will be elements of innovation, it is really with those core hero SKUs, which I think, again, bodes very well for the future.

We will now take our next question from Lauren Molyneux with Citi.

Just a couple of questions. Again, just picking up on the last question where it left off. So on your initiatives in GPN. I was just wondered if you can talk a bit more about how this increased marketing is actually resonating with customers. Whether -- I don't know whether you have any metrics that you can give us, for instance, return on marketing spend or any new customers that you've recruited into the segment. And then -- or into your brand, sorry. And then if you could talk more about maybe the timing of when we should be expecting to see these innovations with SlimFast will be quite interesting. And then I guess just looking at International. I was just wondering if you could remind us how big your business is now in India and China. I know you've made exits last year. And then how much of the strength of Asia Pacific is actually due to China? And then finally, just relating to International, how much of your portfolio in GPN is related to channels, I guess, that are currently closed, so it could see some reopening benefits.

Thank you. I'll speak to the first 2, and Mark will pick up on the International piece. I would say that we're very pleased with the marketing spend and the returns. We don't disclose particular metrics. But as we go through the year, we actually will have more -- we do some consumer tracking at different points. And when we're talking at the half, you will have more consumer tracking that we may speak to more specifically. But overall, we're tracking on, as you can imagine, on an ongoing basis, the return on our spend. Again, I think as I spoke at the early part of this year, we had recalibrated a lot of our marketing to above-the-line spend, focusing on brand awareness. We can see very clear returns on that, actually. A lot of that engaging digitally, as you would expect with our consumers. We have recalibrated the amount of our spend across different channels. So we watch -- the team watches that literally on a weekly basis, as you can imagine, and we've been watching for the appropriate times to spend as well. So you'll see in North America now increased spending, for example, on SlimFast as that opens up. There's been an ongoing spend on Optimum Nutrition as we were seeing things opening up in recent weeks. So very pleased overall, and absolutely believe that when we look at the return metrics internally that, that is part of the story of the consumption growth that we're seeing as we have specifically engaged with customers in the Americas and internationally, as I say, to drive the awareness. Because in brands like Optimum Nutrition, as I've said before, we know that the conversion is very good. So where we get people into the funnel through driving awareness, we know we've good conversion. Clearly, we know our brand like SlimFast is different, the awareness is already very strong at 95%. So there, it is about maintaining that connectivity and reengaging with consumers. And we have a number of really good taglines across our marketing activities, encouraging people to get back to their former selves, et cetera, for both Optimum and SlimFast. For SlimFast, yes, on the innovation, the amount of that will come through in the natural retailer resets in Q3. So we have a number of really interesting pieces on the snacking side, a number of things across the Keto range. So we'll see that coming through with the normal resets. On the International?

Yes. On the International point, again, remember, about 30% of our GPN sales are in the International part of the business. About half of that is Europe, but the rest of that -- the other half is in Asia and Australia, for example. But to your question, Asia, Australia has actually doing very, very well. We've seen nice reopenings in those markets. The exception really probably will be India, where we've seen India sort of go through a very difficult time over the last number of weeks. Our expectations for the year for India sales are probably 1.5%, 2%. So they're not significant in our overall scheme of things, and we know there are going to be 1 or 2 markets that go through some volatility with COVID. That's one of the reasons why we talk about that risk still being there. China actually doing quite well, and we're encouraged to see the progress we're making in that market. East Asia also doing quite well for us. Europe has been slow. I think Jason mentioned the U.K. earlier. But the U.K., for example, is certainly coming back, and we're seeing that come back and very happy to do that. I think as we see vaccinations continue to roll out over the next quarter or so, and we would hope in the second half, you'd see a much better trajectory in Europe as well.

[Operator Instructions] We will now take our next question from Karel Zoete with Kepler Cheuvreux.

Yes. I have one follow-up question and then 2 others. As a follow-up, on the -- yes, the European D2C business, can you share with us the level of growth you've seen during the first quarter? And also within the European market, if you've seen much change to the competitive activity here? Now then the second question is on the ingredients business and the margin profile given the somewhat inflationary environment for whey pricing. Can you speak on the outlook for 2021? And a bit on the spread of WPI versus more base weight prices? And then lastly, there's some -- yes, some first indications on U.S. taxes potentially rising. When this would indeed -- the tax rate would increase in the U.S. quite substantially? What could that mean on the group level to Glanbia? I know it's early days, but yes, still.

Karel, I'll take those questions, and hopefully help you out there. Our D2C business, as you know, is based on the Benelux, you're very familiar with that, given your own location as well. And that has been a fairly shut-down area of our business, frankly, over the last a number of months with the lockdown. So we were back a little bit in D2C for the first quarter. But our plans in terms of expansion and moving into other countries have absolutely continued. As we've talked before, we have the platform. We think we have a lot of potential in D2C. So we're very confident for that business, notwithstanding it's been a difficult environment for us with our employees not able to come to the offices they would like to do. But we would hope that the Netherlands, for example, where we have our key office, will be opening up pretty soon. And as we look to the second half, you'll see improvements come there. On your question on whey pricing, of course, the dynamic that we have in the Nutritional Solutions business is not just where the high-end whey prices are, it's where the lower end whey prices are, frankly, that challenge that we get in terms of the differential between the 2. So as we look to the full year, we think we'll see some squeeze in that actually go to the full year. That will probably cause a little bit of a reduction in the overall margin compared to where we were last year in Nutritional Solutions. I think it's very manageable for us. But that's where we think it will come through right now, we'll have a better view on that, I would say, by August in terms of where we've seen the markets come through. And then on the question on taxes, yes, of course, we're waiting to see where the new U.S. government will make a determination on their infrastructure plans and the resulting ability to pay for that with taxation changes. I think we have to wait and see what's going to happen in terms of that. And as you know, a number of years ago, we had a reduction in taxes and that has an impact, as you know, in terms of overall tax rate. If the taxes go up a certain percentage, that will also have a potential increase in our tax rate. But again, it's very hard to know what that's going to be. And of course, we have a structure that enables us to have a fairly mitigation of that in terms of how we manage our overall tax rate globally.

And we will take our next question from Martin Deboo with Jefferies.

Can you hear me?

Yes, Martin.

Okay. Just a bit of a technical question on cheese pricing. I know that margins are sort of formula protected. But it's been quite hard to understand what's been going on with cheese prices over the last year. And I see they're down in Q1 relative to a whey protein price per the questioning was going up. Can you just help me to understand just what is driving these strange price swings in cheese? And why it's moving in a different direction to the whey price? I mean I would have thought with quick-service restaurants, rebuilding rapid in the year to be demand-driven pressure upwards on the cheese price. So can you talk to me about that?

Yes, Martin. It is much a function of the prior year as it is actually of the current year because I don't know -- you may well remember that in the prior year over -- relatively limited period of weeks, we actually went from all-time lows to all-time highs on the Chicago Mercantile Exchange. So that was a very volatile year last year. So cheese will run to its own dynamics, as you say, separately to whey, for sure. But structurally, as things like food service, you would actually say that pricing should be pretty strong, but it's down year-on-year because of the period last year when they very high. So I appreciate, indeed, that it can be very difficult to calibrate. And indeed, it can, the CME can move about quite dramatically. The main piece for us, Martin, within that, is that we effectively recalibrate our milk cost to that on a daily basis. So for us, so the margin might bounce about, but our cash margin is substantially protected because of that path to a model that operates in our business.

And that concludes today's question-and-answer session. I would like to turn the conference back to our speakers for any additional or closing remarks.

No, it just remains for me to hope that you all remain safe and well, and thank you for your attention this morning, and we will talk soon. Thank you very much.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.