Nomad Foods Limited (NOMD) Earnings Call Transcript & Summary

Hello, everyone. Good morning, and good afternoon. Thank you all for being here. We're pleased to welcome Nomad Foods to the conference. Nomad is the largest pure-play frozen food company in Europe with over EUR 2 billion of sales and brands such as Birds Eye, Findus and Iglo, among others. Nomad is certainly seeing outsized growth as consumers stay home, and the company provided an update yesterday indicating that it expects double-digit organic growth for the June quarter, better than earlier expectations. We're fortunate to have with us Chief Executive Officer, Stéfan Descheemaeker; and Chief Financial Officer, Samy Zekhout with us. And I'll turn it over to them to present a few slides before we get into Q&A. And if anyone in the audience has any questions, please send them over, and I'll incorporate them. With that, Stéfan, I'll turn it over to you. We really appreciate you all being here today. Thank you.

Thank you very much and it's really great to be with you today, even if we're not all together in Paris, but so is life. So 2020 has been an interesting year for us, and it's really amazing to think that we're already halfway through the year. We entered this year with 3 consecutive years of organic revenue growth behind us and with ambitious plans to accelerate a new plant protein range, Green Cuisine, we'll talk about -- more about Green Cuisine later, and this, obviously, across Europe, which is our natural playfield. We also had a strong balance sheet, equipping us with significant capacity to pursue M&A and then COVID-19 hit. So since then, our entire organization has responded with agility, with perseverance, with courage and humility. Our supply chain has worked really relentlessly to protect the health and safety of our front-line workers, but also while ensuring continuous success to our brands across Europe. Frozen food, specifically, our portfolio, has been in very high demand throughout this pandemic. And while we're making daily progress in increasing capacity, we're still not able to service all of the demand that we're experiencing. Nonetheless, our business continues to perform at a high level. And as you heard announced yesterday, our Q2 organic revenue growth is running ahead of our expectations that we shared just last month actually. We're seeing, thankfully, the curve flatten across many countries, and societies are beginning to open up. So with this new phase, it's likely to be gradual, it is clear that it will inevitably return to some sort of normal. And while we don't -- we certainly don't think that 14% growth is sustainable, we do believe that our long-term algorithm of low single-digit percent growth should benefit for 3 specific reasons here. The one and the first one is that there is a significant amount of trial that continues to take place. Second, there is a big shift online in grocery, where our categories and our brands overindex. And third, our efforts in plant protein, which are still early days, but are gaining very good traction with retailers and consumers. Moving to the next page. We're going to spare you, obviously, the disclosures. You know that very well. And we're going to go directly to our agenda. So I'll be covering today 3 areas, in today's presentation. Number one, for those less familiar, I'll start with a brief overview of our company. I will then dive deeper and provide some insights around our experience throughout this crisis and why we are well positioned. And finally, I will provide an update on Green Cuisine. Next page. You see -- you have a snapshot of our company, very simple. We are the undisputed market leader of branded frozen foods in Western Europe with over EUR 2 billion of revenues. As I've just mentioned, we have reported 3 consecutive years of organic revenue growth. We have offices in most of Europe's major markets and operate across a number of categories with fish and vegetable and that represents around 60% of our sales. And last but not least, we have nearly 5,000 employees. One thing I'd mention is market share. And you can see from that slide that we are the undisputed frozen food leader in Western Europe. So it's obvious. You will notice that the next largest competitor is half of our size. And another important aspect of the slide is that most of our competitors are either regional, like Orkla, for example, or category specialists, like McCain. No one has the multicategory or pan-European scale that we have. Moving to next. Sustainability. Our leadership position is not about size only, but increasingly so is also by the work behind sustainability. We've been doing a lot, but probably not enough in terms of media. So this is something we want to correct. For us at Nomad Foods, sustainability means many things, including improving the way we source our products. Today, over 90% of our fish is sustainably certified. So we're contributing to the health of our oceans. It's also improving the way we make our products. Over the past 3 years, we have significantly reduced our CO2 per ton of finished goods. And last and more specifically, providing consumers a growing portfolio of sustainable food products. Our portfolio is already anchored in fish and vegetables, you remember 60%. With Green Cuisine, we are building out a third leg of sustainable foods. Going to the next slide. You will often hear us talking about how we invest disproportionately in our core, which we internally refer to as our Must Win Battles, MWB. Here you see a visualization of the types of products that our core represents. These are power SKUs like fish fingers, recent acquisitions like pizza and major innovations like Green Cuisine. Core products represent 70% of our sales and are historically growing mid-single digit helped by full A&P support. Well, if you're going to the 3 distinct layers, the other 3, 10% is comprised of secondary branded products, which are strategic, but we -- where we can't afford to provide TV advertising. There is another 10% related to other branded products, which we are managing mainly for cash flow. And finally, there is roughly 10% of our business, which is nonbranded and managed with a different model altogether. So based on this 4-pillar strategy, we continue to expect outsized growth from the core and slower growth, sometimes even declines in the rest. But ultimately, we consider this the best way for us to drive sustained LSD percent growth with the right GM and the right EBITDA. The next slide is a very important slide because it's really one that I believe differentiates us from many other food companies who are experiencing unprecedented growth throughout this pandemic. At Nomad, our business was already on a healthy growth trajectory before the impact from COVID with 12 consecutive quarters of organic growth leading up to Q1 of this year. Since March, our business has experienced an unprecedented acceleration demand, which led to nearly 8% organic revenue growth in Q1. And as we announced yesterday, growth has continued at an elevated pace and ahead of our prior expectations. Organic revenue growth was up 14% through the first month -- 2 months of the second quarter. It is now expected to grow in the low-double digit percentage range for the entire quarter. What we've seen -- so this provides consistent growth from April to May, reinforcing the gradual pace of the deconfinement phase across Europe and the key role that our brands play at home, family mealtime. June is expected to moderate somewhat as consumers resume some of their old social routines, but we do expect growth to remain at an elevated level versus history. With that, I'd like to spend a few minutes sharing some important insights throughout the COVID-19 pandemic, starting on Slide 9, next one. We can spend a lot of time talking about COVID-19 insights, and you can imagine that we certainly do this internally. So the insights department is very busy as we speak. But for the sake of simplicity, I'd like to keep the message to 4 important points. One is, frozen food has been one of the fastest-growing categories for the obvious reasons, convenience, value, nutrition and preservation. Second, there has been an influx of new consumers into the category with household penetration, the key driver of growth. We're seeing a significant amount of trial, repeat purchasing and, hopefully, habit formation taking place. Number three, growth of online has exploded, again, for obvious reasons, and I will spend more on this in a minute. And finally, we're seeing stabilization of commodity prices which is a welcome development for us, following 2 years of unprecedented inflation in 2018 and 2019. Next page. You see a snapshot of frozen food consumption in the U.K., pre and post-COVID. And there are really 2 interesting observations here. First is the fact that our category naturally overindexes to evening meals, which pre-COVID accounted over 70% of meal occasions in the U.K. And second is the noticeable growth in frozen occasions during lunch, which is quite logical, given that schools have been closed and people are working from home. However, there are also being strong growth in usage across all other eating occasions, notably evening dinners, which bodes well for our ability to convert trialist into repeat users. The shift to online has accelerated meaningfully throughout this pandemic. Prior to COVID-19, this channel has been growing double digits for us and represented approximately 5% of our sales in 2019. What you see here is the growth -- that the growth has sharply accelerated since COVID-19, which has brought online sales up to 7% of our business as of the month of April. It's also interesting to see growth acceleration from March to April, which speaks to the demand constraints that online retailers encountered early on during the pandemic. There has been since a significant increase in capacity to fulfill orders. For example, capacity in U.K. has doubled and -- over the last 2 months, allowing more online demand to be fulfilled, which is great for us. Back to us, there are key -- few key reasons why online growth is good for our company. First, the frozen food category overindexes online. Shoppers give the category greater consideration online versus in-store and then tend to buy more at full price. And second, again, with strong brand line like ours, online tends to obviously favor these kind of brands, and that's why our share is 40% higher online than it is in store. The next page is about other insights over the last -- that we have seen over the last -- over the past few months. As you can see, insight is very big on our agenda. Demand for our products has been strong, and in many cases, has outstripped our ability to supply, despite the fact that our supply chain is doing extremely well. If we can't find, that obviously will be something else. So with the confinement, we're going to see exactly what's going to happen. And I'm sure that a lot of you are wondering what growth will look like over the coming months and quarters. Obviously, time will tell, but what we can see is, we do believe that our business is well positioned to experience an enduring benefit for one simple reason. Despite its growth, frozen remains one of the most underappreciated categories in grocery by both consumers and retailers. One interesting fact, the freezer door is only opened 8 times per week, this compares to 24 times for kitchen pantry and 42 times for the refrigerator. When it comes to waste, sustainability, nutrition, innovation and value for money, frozen cannot be beaten. And as a former retailer myself, I can tell you that the margin profile for the retailers, net of shrink, is quite healthy. And while we know the category has proven extremely essential through the COVID-19 pandemic, we also know that there is a more regular role for our products in consumers' ordinary routines once we get back to a new normal. This information gap is something that we intend to narrow over time through effective advertising and stronger joint business plans with our retail partners, where we know the opportunity for more shelf space and greater features exist. Breakthrough innovation will also play a critical role, which brings me on to Green Cuisine. As many of you know, we launched Green Cuisine in 2019 with a goal of becoming the leading plant protein brand in Europe in frozen. We know the field is more crowded, but we also do believe we have a unique and differentiated product for a few reasons. First, Green Cuisine is a mainstream brand. It is priced at a premium to private label, but it is more accessible than many other brands in the market. Second, it will leverage all of the scale and infrastructure of the parent brand, whether it be Birds Eye, Iglo or Findus, very important. Third, and maybe we should have started with that, is it's a great-tasting product. Without naming names, our recent formula launching are still superiority to some of the high-profile brands out there. And finally, this brand will be supported by media, the Must Win Battle way. So we started in -- with Green Cuisine last year in the U.K., moving extremely well and most of our countries will be covered in Europe in 2020. You heard me mention earlier that fish and vegetable represents 60% of our sales. And with Green Cuisine, we have a unique opportunity to create a third leg to our portfolio, which leverages our strong presence in nutrition and sustainable foods. I mentioned earlier that Green Cuisine launched last year in the U.K., where we started with 3 SKUs, only 3 SKUs: burgers, meatballs and sausages. And you can see what it is now. We have since expanded our range in the U.K. with products targeted across various need states. You will notice 2 shades of packaging, dark green and light green. The dark green products are meat analogs made from pea protein. They're made for, what we call, people that obviously want to -- don't want to stuff with meat, but they want to have some -- a healthier alternative, that is what it is, and they want to reduce the intake of traditional protein. In 2020, we have reformulated the original 3 products while also introduced new products, including a range of innovative meal kits under the Green Cuisine brand. The light green products, which is called visibly -- I mean veggie, as you can see, SKUs which appeal to those who are eating vegetarian products as protein sources. Examples here include falafels, veggie burgers and veggies fish fingers. In some cases, like the veggie fish fingers that you can see on the screen, we are just rebranding existing products from the main brands, in this case, Birds Eye to Green Cuisine. And since doing in the U.K. earlier this year, we've seen a 25% uplift in sales velocity of this SKU prior to COVID, which further reinforces the power of the Green Cuisine platform. Here is a snapshot of where we currently stand in the U.K., which is by far the largest market for frozen meat free in Europe. Since launching Green Cuisine in April of 2019, we have achieved 5% market share in a category that was growing double digits before COVID and even faster since. Green Cuisine has separated itself as the largest of the other brands and is now the #3 meat-free brand in the U.K. frozen food market. Overall, it's a very exciting start, but we're only still only scratching the surface here. Many more exciting innovations still to come down the road, and we look forward to making those announcements public in due course, pretty soon. When it goes beyond U.K. -- so Green Cuisine was launched in U.K. just over a year ago with -- as we said, and we've seen, very encouraging results thus far. In 2020, we have expanded the range to a number of markets across Continental Europe. Two of our larger launches include France and Germany, whose range are represented on this slide. Importantly, you will notice similar branding across the U.K., French and German markets, but with locally adapted designs and packaging. This is a great example of our global local model in action, and our ability to leverage our group level scale in infrastructure with the agility and execution of our local market expertise. Just a quick update on the time line. We told you at CAGNY that we would be in 8 markets by midyear. I'm happy to share that we've since added a few other countries to our launch schedule and are now expecting to have Green Cuisine live in 10 Nomad markets by the end of this month. This is a fantastic achievement, especially when considering the amount of disruption that's occurred at retail throughout most of the year. In summary, the movement towards meat reduction continues to grow, and it is here to stay. Our portfolio is already well positioned, and our efforts around Green Cuisine will provide a new and exciting dimension. We have ambitious plans to develop the Green Cuisine business, which will be GM accretive. All in, we expect Green Cuisine to generate over EUR 100 million in revenue by 2022, and are well on our plan with our performance running ahead of plan so far this year. Next page. That was the update on our existing business, which has performed well throughout the COVID-19 crisis and is poised to sustain long-term organic growth for the reasons we discussed. The other element of our growth strategy is M&A. It is also worth being mentioned. Our playbook is to acquire businesses where we believe we can generate shareholder value, either through cost synergies and/or by applying our playbook and capabilities. We have a robust balance sheet with over EUR 800 million in cash on hand, providing us with a significant financial capacity to self-fund the acquisitions. We look at acquisitions targets throughout -- through 2 verticals. One is the consolidation of European frozen food assets. Most of these will be midsized and bolt-on, and this's our near-term focus. And given our long-term ambition to build a global food portfolio, we have always and we'll continue to evaluate unique and attractive acquisition opportunities beyond European frozen. The common link between the 2 verticals are: First, that they have to be compatible with our purpose to serve the world with better food. When we say better, this means advancing the nutritional ingredients' operation foundation from the base that we have acquired, and the Goodfella's Pizza is a great example of how we can apply this model. This is a pizza business, which by the end of 2020 will have 50% of its portfolio deemed as healthier food choices. And it goes without saying that our acquisitions need a strong business case, which can help us deliver top key TSR. In summary, while our business has clearly outperformed throughout the acute phase of the COVID-19 pandemic, we believe Nomad Foods presents a unique and compelling growth story outside of this crisis. What I hope you take away from this presentation is the following: number one, our business has a healthy foundation before COVID-19 with 3 years of organic revenue growth leading into 2020. Since the onset of this crisis, we have attracted an unprecedented number of new users and trialists into our brands, and we plan to convert them into repeat users. The shift to online has accelerated, likely for good. Our category and brands both overindex to online, which makes this trend a favorable one for our portfolio. Number four, we're making great progress on our plant protein innovation, Green Cuisine, with plans to grow this into a EUR 100 million business by 2022. And after 2 years of elevated inflation, we are now starting to see signs of commodity cost stabilization. And finally, we have a balance sheet that is ready to be deployed towards accretive value-creating acquisitions. And with that, Samy and I and Taposh would be happy to take your questions.

Great. Thank you so much for that update, Stéfan. The first thing I was just hoping to talk more about is, is your base case around reopening. It's very encouraging to see sort of trends -- very solid trends through the month of June. How are you thinking about the back half? I think previously, you had talked about low single-digit growth in the back half. But I'm wondering if there are any updates? And if there are any differences by countries that you think are worth highlighting?

Samy?

Thank you, Stéfan. Good afternoon, everyone. I mean I'm again thrilled, I mean, to be part, let's say, of this communication to you. And to answer the question, I think we -- the guidance we've provided at the time of the last earnings release, I mean, at this stage, is unchanged. I mean, there is a fair amount of volatility. I think we've been clearly meeting the needs of retailers, clearly trying to stay on the momentum, very strong momentum as you have seen. What we clearly have observed in June is a bit of effectively smoothening down of the upward demand simply driven by the fact that there's a gradual deconfinement happening. I mean -- but the reality that the growth that we see in June, as we communicated, is still way higher than the past year's growth that we have seen in the same month. So at this very stage, to be fair, we are monitoring the progress on a week-by-week basis. We have our own projection at this stage, but probably we'll need more time to frankly elaborate a stronger point of view. So the guidance we provided at the time of the earnings release and, let's say, when we clearly disclosed effectively where we were heading is unchanged.

Okay, great. And then can you just talk, Samy, sticking with you, some of the puts and takes around flow through to profits? I imagine that there are incremental costs. Do you see these costs as temporary or structural? And I know you'd mentioned sort of you do expect commodity costs to stabilize. Sort of what's the leading driver of that? And how sustainable do you think that is?

Yes. Thank you for asking, especially because it's very important that we look at both sides of the equation, on the upside definitely and on the -- certainly the downside, but on a number of elements that were needed to make effectively the production happen, and frankly, the go-to-market being realized with excellence. A couple of observations there. So obviously, we are benefiting from stronger demand, stronger volume. Fixed cost pickup in the manufacturing side, there's clearly there. We leverage scale. I mean, effectively, leverage factor, it's important to note. At the same time as well, as we have communicated earlier, staying really at the gross margin level, we have been looking at our promotion in a very thorough way and really worked with retailers as to where it made sense to frankly keep promotion, where it made sense not to keep promotion, and we've been reducing our promotion level, particularly in the first half of the year. Nevertheless, I mean, I'm hearing sometimes people say, well, you moved to no promotion. No, no, we kept some promotion working simply because there's still competition out there. I mean, there's competition with branded goods. And even though effectively, the trend is more towards the A brand, which we are, and the retail brand, there is competition as well with retail brands. So promotion is an adjustment element, if you want, that we have been definitely decreasing. But over the second half of the year, we're clearly continuing to intend to maintain a strong competitiveness because, again, we want to make sure that we continue to be growing share, we keep our consumer the best we can. Going really beyond the top line dynamic that I have just disclosed, I mean, on the cost side, I mentioned, effectively, the fixed cost pickup, I mean, there. But there are effectively some negative adverse effects, I mean, driven by the necessity for us to, frankly, protect our employee when they came on to the site, making sure that we were clearly meeting all of the regulatory requirements and beyond. We talked about thermal scan, separation, gel, mask, and even reconfigurating effectively our production planning process to make sure that we are producing SKUs that clearly were meeting the criteria of separation and distancing between employees. And that has a known cost as well. We had to hire temporary people whenever there was some absenteeism. And our productivity probably during these month of, let's say, confinement and extreme demand have been effectively negatively impacting our costs. On the positive side as well, there has been procurement opportunities driven by the fact that the market has suffered a lot from food service, let's say, shutdown, from restoration shutdown and a number of other items hurting effectively the food business that has led some of the producers of, let's say, veg and other material we use to clearly be, let's say, some stock that we've been taking advantage on, provided indeed that they met the quality requirements that we have, which you know are very high. And so from that standpoint, we definitely had benefited from lower costs that are going to help us in the second half. So when you restart the puts and calls, I mean, on that one, you probably are gearing towards a more positive picture, but there's still a lot of variable that we are trying to identify to your question. What is there to stay, and I think social distancing will stay. We will have to really run the manufacturing site in a very articulated way to make sure that we meet those criteria. And there are things that probably are one-off. Once you put a thermal scan, we put a thermal scan, once you effectively have reconfigurated your planning process, it's there to stay. And so there's clearly an element where we have to distinguish the 2, and that's what we are assessing at this stage. On the inflation side, you know as much as I do, that there's a bit of a deflation as we see over the second half of the year, driven by exactly the phenomenon I was describing. However, I think we believe it's an epiphenomenon that is going just to be stay here for the second half of the year. That's probably going to be reverted as people adjust their production or fishing capabilities moving forward, getting into 2021.

Okay. Excellent. That was really helpful. And then I just want to go back a little bit on the consumer insights that you talked about, about new consumers entering the category. Sort of what are you hearing from those consumers? Are they -- do you see them sort of staying in the category? Are they pleasantly surprised by the products? I'm curious of what their -- what is the direct feedback from those consumers?

Let's say, you have the qualitative side and we have the quantitative side. The qualitative side is what we see through the social media with most of the time people pleasantly surprised, either because they are discovering the category and our products or they are rediscovering the category where the left the category which was probably just affordable and convenient, and they see that the category is also offering some great nutritious products and also products that are very much in line, in tune with the sustainability program in terms of waste and the rest of it. So that's what we see -- what we're hearing. In terms of penetration, what we've seen is that we have, over the last 2 weeks -- 12 weeks, we've seen the penetration growing by something like 2.5%, 2.6%, which is big. And then out of this, we also have seen people again trying, in May, I think, something like a repurchasing retrial, something like 1/3 in May, which is again -- which is good by any standards. And especially in frozen, which is, as you know, and I've mentioned this, when you open not that often the freezer door. So all of this, at this stage, early days, but what we've seen is encouraging to say the least.

Okay. Great. And then just could you touch on the retailer environment in Europe. We know that it's very -- it's been historically very competitive market. I know you talked about the shift to e-commerce. How do you see -- what's your outlook for the retailer environment, not just in the interim but sort of more longer term? Do you see any structural changes in the environment?

The first thing is, it is going to be less competitive? The answer is no. But that's been our battleground for many years. So it's not going to change. And the only thing is, we are the leader. We have brands and that's our game plan. Our game plan is always to come up with something which is ahead of the curve compared to private label. So that's not going to change. In terms of -- is it going to be to restructure even further? It's too early to say. I think a lot of that has been done already at the country level. So there will be some restrictions at some stage as well as we have seen in the U.K., for example, with Sainsbury trying to do something with Asda. So it's been blocked. At the same time, what I think we see aside from any restructuring is, there will be a recession, and the recession comes with different features for us. One is frozen is doing well in recessionary time, whether it's a U or a V or L-shaped recession. It's doing well because, again, there is a convenience side, then there is affordability side. And so, let's say, frozen overall is gaining market share in the food market, that's one thing. Then at the same time, private label is going to be, obviously, -- is going to benefit from this recession. But we also do believe that we are brand leader with the A brands. We have everything that it takes to -- and we're going to be well equipped to go through this and to benefit again from this. We obviously have to raise the game. We have to invest, which is something we know we're ready to do, and we have the right programs. So overall, what we see is macro side, some very interesting features for us.

Now just on Green Cuisine. I think when you had reported your 1Q results about a month ago, you had indicated that you expect Green Cuisine to be more sort of back-half weighted because some of the -- maybe it's the promotional programs that you had, you weren't really able to execute on just given the disruption. But today, I'm sensing a slightly different tone because it seems like you're tracking ahead of plan. So maybe like, is my sense correct? Has anything changed on Green Cuisine?

You're right. You're right. We saw that way because that's normally what happens with innovation. Green Cuisine is an innovation, and in crisis time like this, the last thing that the retailers want is to be disrupted with, let's say, lower SKUs. They want to focus, rightly so, behind the key SKUs, which is what we've been doing, by the way, by really going, focusing on the A SKUs as opposed to the B and C SKUs, which is how we're resuming the trend, by the way, with this. At the same time, interestingly enough, we've seen at the consumer level that it's doing extremely well, and the retailers have seen that as well. So yes, we've lost here and there a few weeks in terms of implementation at the store level because just maybe for an obvious reason since any major changes was just very restricted, but we see that it's catching up now. And so where there was an expected launch, for example, in Belgium, week 28, now it's going to week 34. But we see that the level of intentionality from the retailers is unchanged or maybe probably even -- is probably even higher. And at the same time, we also see that where we were expecting to go with almost all our countries by the end of the year, now all our countries are going to go there. So -- and it means something. Global local model, which is very important to us, you need to buy in from the countries. Otherwise, you're going to fail. And what we see is these guys want the product, which means a lot in terms of intentionality. So it's a different level, consumers, retailers, countries and sales organization, makes us much more confident than we used to be something like a month ago. But things are changing. This is crisis time, it's very volatile, moving up and down.

Yes. So what does that imply for your advertising and promotional spending for the year? Are you -- should we assume that perhaps you don't need to spend as much as you might have previously thought you wanted to spend? Around...

Yes. It's too early to say. But the only thing we know is, we've saved money in Q2 in terms of advertising and in terms of promotion. And definitely, we want to turbocharge Q3 and Q4. And we definitely believe that strategically it's going to be important to do this. So I'm not going to get into the details exactly how much it's going to be, still more to do. But definitely, part of all of this money is going to be reinvested in Q3, Q4.

Okay. Great. And then just on M&A, obviously, that's a big part of your story. The investment community, I think, has been waiting for an M&A deal for some time. I'd love to hear how you're thinking about M&A in the current environment. Are there opportunities that are presenting themselves? Has there been a change in valuations? Are you -- is there a change in terms of whether you're more -- whether you're desiring to do a larger deal or a smaller deal? Sort of just more color around how you're thinking about M&A at the moment?

Directionally, nothing has changed. So we keep our natural priorities behind how can we first complete the game in terms of frozen retail in Europe, branded. It's not going to be something transformational. It's going to be probably a series of mid-sized deals, and nothing has changed from that standpoint. And the only thing is M&A-wise, that's not limited to frozen and that's not limited to food, it's -- overall, it's a more global phenomenon. As you can imagine, the first -- let's say, from March to now, let's say, the priority was to make sure that we would do everything that is right organically. And second, we also have to, to some extent, reinvent, beat the game in terms of M&A, how to organize ourselves, how do we organize a due diligence process in the middle of confinement or semi-confinement. But overall, nothing has changed. Our priorities remain the same. But the only thing is, we could imagine, for example, in the way you guys are trying to understand exactly what is the long-term sustainable growth for us after this COVID-19, what is there to stay, what was more a peak. We're going to apply the same logic for the target, and we may imagine -- we could imagine doing the same, by the way, in all those categories, not necessarily retail-driven, for example, in food service, where we just tanked a lot. And we also need to understand in a symmetrical way what is the new normal. So nothing has really changed. The only thing is, we -- more than ever, we have a very solid balance sheet, which, if necessary, it's -- more than ever, it's going to be a strategic asset in the coming weeks, months and years.

And how far sort of outside of your core are you willing to go in terms of M&A? Would you do -- are you going to stick to frozen? Do you want to stick to Europe? Sort of how far outside of that zone?

Let's say, the priority number one, but in M&A, first, you never know exactly what the right -- what timing is. Sometimes M&A is coming when M&A is coming. So you have to be agile enough to accept that. But let's say, in a perfect world, we would complete the game first, and then we would go to a second leg. Second leg would be defined as another category, potentially in Europe, where we believe that we can play our game the right way with scale and best practice. So that's how we would consider a second leg. And that's definitely something that we are still considering, together with the rest of the M&A program.

Okay. We only just have maybe time for one last question. And that's just taking a step back from the current trends. I think you highlighted yourself that you're approaching 14 consecutive quarters of organic revenue growth at a time when other packaged food companies have been struggling. Just love to hear a little bit more about sort of what your sort of secret sauce might be? Sort of what do you think has led to your success?

I think you need to first -- standing back, you need to keep a certain level of humility. And the humility is based on the legacy of the brands. The brands, when we started in 2015, the business has started to tank because it was strategically misaligned, going in too many directions. But the brands were still very good, and that is the base of the success. The brands are not only traditional brands, but they are also brands that are very current, recognized as such by the different generations. And that's a great, such a fantastic asset. The second piece is, I would say, a very disciplined implementation of this strategic -- strategy of focus behind our Must Win Battles. Must Win Battles based on -- selected based on market share, gross margin and growth potential. And we know that this 70% of the business is growing much faster than the rest, which needs obviously more resources. And we accept that the rest, as we said, it might remain stable or sometimes even decline, but that's a decision we've taken, and we stick to it. And the number three point is that we are continuously enriching these Must Win Battles with net revenue management, with space in place, with innovation programs that will make them stronger and stronger. I think that is the combination. Legacy, very, very disciplined approach in terms of strategy from the whole organization and then continuous improvement of the tools available in the countries for the Must Win Battles. I think in all fairness, that's -- if I want to summarize the 3 things, that's probably what it is.

Great. Thank you so much. I really appreciate you all joining us today and stay well, and we'll talk soon. Thank you.

You're welcome.

Bye.

Thank you.