Prepared remarks
Good day, ladies and gentlemen, and welcome to Nomad Foods Third Quarter 2024 Earnings Conference Call. At this time, all participant lines are in the listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I would now like to turn the conference over to Jason English, Head of Investor Relations. Please go ahead.
Hello and welcome to Nomad Foods third quarter 2024 earnings call. I'm Jason English, Head of Investor Relations, and I'm joined on the call by Stefan Descheemaeker, our CEO; and Ruben Baldew, our CFO. By now everyone should have access to the earnings release for the period ended September 30th, 2024 that was published at approximately 6:45 a.m. Eastern Time. The press release and investor presentation are available on Nomad Foods' website at www.nomadfoods.com. This call is being webcast and a replay will be available on the company's website. This conference call will include forward-looking statements that are based on our view of the company's prospects, expectations, and intentions at this time. Actual results may differ due to risks and uncertainties that are discussed in our press release, our filings with the SEC, and in our investor presentation which includes cautionary language.
We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered replacements for and should be read together with IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within the presentation represents adjusted figures for 2023 and 2024. All adjusted figures have been adjusted primarily for share-based payment expenses and related employer payroll taxes, non-operating M&A related costs, acquisition purchase price adjustments, exceptional items and foreign currency translation charges or gains. Unless otherwise noted, comments from here will refer to those adjusted numbers. With that, I will hand it over to Stefan.
Thank you, Jason. Nomad Foods delivered another quarter of solid top- and bottom-line performance. I'm pleased with the progress our teams continue to make in accelerating profitable volume growth. The third quarter was our ninth consecutive quarter of organic sales growth and our second consecutive quarter of volume growth. The growth continues to be concentrated behind our profitable Must Win Battles and Growth Platforms which are yielding healthy margins with mixed benefits. The mixed tailwinds, combined with productivity and price net of cost benefits due to promotion timing favorability drove our gross margin up 390 basis points year-over-year to a new all-time quarterly high of 32.3%. Adjusted EBITDA rose 19% year-over-year and adjusted EPS rose 28% year-over-year to EUR0.55 as a result. This solid margin performance gives us the fuel we need to reinvest back into the business to keep the commercial flywheel that we first introduced to you last year spinning.
The investments associated with the flywheel are beginning to bear fruit, validated by our return to market share growth this quarter. The third quarter results are even more impressive when put in the context of greater-than-expected temporary headwinds related to our ERP implementation that we faced in the quarter. Our service levels suffered for a period of time and caused us to reduce in-market support to dampen demand and limit out of stocks. I'm proud of our team's ability to overcome these obstacles and happy to report that our service levels are returning to near-normal levels. We were able to nimbly adapt to the challenges and deliver strong bottom-line results this quarter as we pulled back promotions and changed the volume price mix at the top line. The impact, however, has caused us to lower our full revenue outlook. We will not cut down on the investments in our brands and business and have therefore modestly lowered our full-year EBITDA and EPS outlook as a result.
We will continue to fuel our growth for both the short and the long term. Our recovery to positive market share in the third quarter is a result of our commitment to invest behind all categories, brands, products, and people. Our volume sales and share growth have accelerated further so far in the fourth quarter. We are seeing improved momentum in the market now and are committed to spending behind that momentum to ensure that it translates into more robust organic sales growth in the fourth quarter and into 2025. As we detailed at the recent conference, our portfolio remains growth-advantaged. First, we are in a relatively healthy market. Unlike the US, European consumers pulled back meaningfully during the cost of living crisis which weighed on industry volume and boosted private-label share. European consumers are now rebounding off that pullback. Volume for the FMCG industry is growing across all major European markets year-to-date and private-label gains have slowed as brands have accelerated.
This backdrop becomes even more favorable when you zoom into our frozen category. As we illustrate on Slide 4, volume growth for the frozen category continues to outpace the overall food industry. While we saw category volume growth slow in the quarter against tougher prior year comparisons, we are beginning to see re-acceleration in the fourth quarter. Category volume and value growth was up 2% and 2.6% respectively at retail in the most recent four-week period and our brands are driving much of this growth while private-label share is now contracting across our aggregate market footprint. As we illustrate on Slide 5, our actions have returned our market share to growth in the third quarter. We show value share on this chart and the story is the same through the volume lens. Our marketing, merchandising, and innovation efforts are driving these results and the improvement is even more impressive given that we curtailed in-market activity in the UK and Ireland this quarter to limit out of stocks as a result of the ERP disruption.
We're achieving this success with concentrated marketing, merchandising, and innovation efforts behind our growth platforms which grew net sales by 11% in the third quarter and our Must Win Battles where sales rose 2% this quarter despite the ERP disruption in the UK and Ireland. On Slide 6, you can see a handful of innovations that have just recently been launched across our Western European markets. The team continues to build on our successful Must Win Poultry Battle in the UK with new chicken shop items while investing in our potato growth platform with the launch of new Birds Eye chips. And while potatoes are growth platforms in the UK, they must battle in France, and here you can see the seasonal items we are bringing to market under the Fingers brand. In Italy, we're building on our early poultry success with the launch of new chicken crunchies in the third quarter while also expanding our range of premium fish products which is a growth platform for us in this market.
And in Germany where fish is a Must Win Battle, we are investing behind our recently launched regionally inspired varieties such as Crusty and Mexicana crusted fish. In Belgium, we're launching exciting vegetable-rich meal products in a bowl and launching wok-based vegetable and meat solutions in Portugal. This twin engine of innovation behind Must Win Battles and Growth Platforms is speeding up in our Southeastern European markets as well. As a reminder, we entered Southeastern Europe with the acquisition of Fortenova's group frozen food business in late 2021. Like prior M&A, this has proven to be a great deal for us. Our full-year 2024 sales and adjusted EBITDA in Southeastern Europe are tracking high-teens above our forecast at the time of the acquisition. Momentum is sustained with net sales up 8% year-to-date, purely in part by innovation. We highlight some of these new products on Slide 7.
We command leading share of the ice cream market in the region and our focus earlier this year was on maintaining that strength into the peak summer season. Our team has achieved just that. The King brand hit a record-high share of the impulse ice cream category in Croatia driven by innovation and a highly effective marketing campaign and we're seeing great growth behind the brand in Serbia as well with a similar playbook. Innovation is driving this growth and being recognized more broadly. At this year's International Ice Cream Consortium Conference, the King Supreme in Layers won first place in the Best Ice Cream category while the King Obsession in Layers won second place for most innovative ice cream. We're winning awards and, more importantly, winning more sales and our differentiated innovation behind our Quattro brand is driving share in the multi-serve segment as well. We are successfully growing our business in Southeastern Europe with new premium offerings and gaining share from brands like Ben and Jerry's, Haagen-Dazs, and Magnum.
And our investment is not isolated to ice cream. Premium fish and prepared vegetables are two of our growth platforms in this market where we are lifting out products, concepts, and capabilities from other markets to launch here. For context, the average household penetration for fish fingers in Serbia and Croatia is half of what it is in Germany while being only a third for frozen fish. The frozen fish segment in this market has historically been dependent on lower-margin natural fish, and we are changing that with innovation. Over the past year, we have invested in a full 360-degree campaign centered around premium innovation and it has yielded results. Year-to-date our fish sales in Croatia are up 16% year-over-year and up 30% in Serbia. In the fourth quarter, we will leverage our Sardines Eastern European model, our direct store delivery network, and over 120,000 owned threesomes that retail to replicate the success in vegetables.
Prepared vegetables account for more than one-quarter of the frozen vegetable market in Western Europe, but are virtually non-existent in Southeastern Europe. Our research tells us that the demand is there and we intend to unlock it with marketing innovation including the new products you see on the slide. These products began to hit store shelves in October. This could become more than a EUR30 million new segment in the category if it evolved to look like Western Europe over time. We have a lot of actions underway to keep our momentum in Southeastern Europe going. These are just some of the examples that have made me excited about our future. We are in a great category with leading brands that are aligned with secular convenience, nutrition value, and taste trends. We are investing to maximize our growth potential and I'm pleased to see the commercial flywheel delivering market share growth.
Our marketing and merchandising is improving and our innovation framework is only just beginning to deliver a multi-year pipeline of products to market. I'm pleased with the progress we're making and confident in our growth trajectory. With that, let me turn it to our CFO, Ruben Baldew to work through our quarterly results and outlook in more detail.
Thank you, Stefan, and good morning, everyone. I'm approaching my five-month anniversary with the company and can honestly say that I'm increasingly confident that I made the right decision to join Nomad. We are in a great category with fantastic nutritional credentials and a great team of top-tier talent. Our brands are strong and our plans drive growth with compelling innovation, impactful marketing, and the leveraging of our platform are robust. We are well-positioned to continue delivering strong results in a sustainable manner. Before I go too deep into the results, let me address the transitory headwind we faced this quarter. As we discussed last quarter, we began to upgrade our ERP system to S/4HANA at our UK and Ireland businesses, including at four factories in August. As with all major ERP transformations, we had a planned shutdown of operations. However, we faced some challenges with the system changeover and the related ramping up again of our production capability.
To minimize out-of-stocks, we began to curtail in-market promotional activity. I'm happy to say that we have successfully been working through these problems. Our service levels are getting back to near-normal levels and we see progress on various processes week after week, so we believe we have worked through this. Let's also be absolutely clear that we are capturing the learnings of this to prevent repetition in the future. First of all, albeit painful, we have gone live on our ERP system in our biggest business, including four factories, future waves will be smaller. Secondly, the learnings we are seeing on the system and processes will be of great value for the implementation of the rest of the plan, allowing us to improve our various processes and system applications. We know the system much better now and this will help us enormously. Lastly, we will replan the go-live of waves for other countries and factories in a way that we believe will help us to ensure that the transition goes more smoothly in the future.
In short, we have suffered some growing pains with the first wave of upgrade implementation, but we have worked through them and taken steps to ensure we learn from them. Turning to results now. As you can see on Slide 8 and 9, for the third quarter, reported net revenues increased by 0.8% to EUR770 million. Organic growth was 0.3%, which marked our ninth consecutive quarter of organic growth despite an estimated 2.5% headwind related to our ERP implementation. The underlying growth platform of nearly 3% shows that our strategy in the market is successful and working. Volume growth remained positive for the second consecutive quarter rising by 0.7% while price mix was minus 0.4% to volume growth. The ERP transition caused us to rebalance promotions resulting in less of a price mix headwind than we had initially expected. The lower promotional support combined with favorable mix and ongoing net productivity could drive gross margin up 390 basis points year-on-year to a new quarterly record high of 32.3%.
Roughly 200 basis points of our gross margin expansion this quarter came from more favorable price net of cost than we had expected as we curtailed promotional support to mitigate the ERP disruption. The remainder was driven by a combination of mixed benefit as we win our Must Win Battles and also from our supply chain productivity efforts. This quarter's robust gross margin drove a 15% increase in gross profit which was amplified by a more modest 7% year-on-year increase in SG&A to drive a 9% increase in adjusted EBITDA. A&P was roughly flat year-on-year as some of our planned investment was deferred to the fourth quarter while indirect expenses rose less than expected due in part to a bonus accrual adjustment given weaker-than-expected revenue growth and various other cost control efforts. Adjusted net income rose 22% year-on-year while adjusted EPS rose 28% to EUR0.55 as our diluted share count shrunk 5% year-on-year.
Turning to Slide 10. Our strong profit performance continues to translate into healthy cash flow, which we have increasingly returned to shareholders in the form of our recently established dividend. Year-to-date adjusted free cash flow was EUR105 million which was down year-on-year mainly due to higher working capital. Working capital seasonally rose as we acquired what proved to be strong harvest inventory and began to rebuild production inventory late in the quarter ahead of fourth-quarter sales. We also saw a drag on our receivables due to shipment timing. August sales in certain markets were negatively impacted by ERP and we began to catch up later in September which caused some timing distortion in receivables. Both of these working capital dynamics are expected to reverse in the fourth quarter. Turning to our guidance for 2024 on Slide 11. We are pleased with the progress the team has made improving in-market results and restoring our market share to growth.
However, we do not expect to recover the ERP-related sales which we lost in the third quarter. This, combined with some disruption that carried over into the fourth quarter and slightly more conservative growth assumptions, has caused us to lower our full-year organic sales forecast to plus 1 to plus 2 from the 3% to 4% previously anticipated. And as Stefan mentioned, we remain committed to investing behind our business and have not pulled back on investments, resulting in a modest reduction in our profit outlook. We believe that the decision to maintain our investment levels will prove to be the right one over time. We now expect full-year adjusted EBITDA growth to be within a 3% to 5% growth range and adjusted EPS of EUR1.72 to EUR1.77, implying growth of 7% to 10%. Based on the US dollar Euro exchange rate as of November 7th, this translates into 2024 adjusted EPS of $1.86 to $1.91. Regarding the fourth quarter, the guidance implies a meaningful sequential acceleration in sales growth but also a sequential step down in profit margin.
As a reminder, our fourth quarter has a seasonally lower gross margin than the full-year average given a smaller contribution from our high-margin Southeastern European business. The favorable gross margin benefits of promotional timing are also expected to reverse in the fourth quarter and we expect a combination of sequentially higher A&P and indirect expenses due to some effects of bonus accruals and phasing of activities to translate into a low single-digit year-on-year increase in total SG&A expense for the quarter. Still, at the midpoint, our guidance implies EBITDA and EPS growth of roughly 10% and 19% respectively in the fourth quarter, which I'm sure you will agree are healthy growth rates. Turning to cash flow. We are on track to deliver 90% to 95% adjusted free cash flow conversion for the full year and remain committed to returning capital to shareholders. Year-to-date, we have returned EUR110 million to investors as we have now returned EUR67 million year-to-date through our newly established dividend and EUR43 million through our share repurchase program.
We declared our fourth quarterly cash dividend of EUR0.15 per share two weeks ago, highlighting our strong, consistent cash flow and our commitment to consistently deploy cash in value-creating ways for our shareholders. Overall, I'm pleased with the progress we are making. Our teams did a fantastic job overcoming hurdles this quarter and I want to personally thank them for their hard work and accomplishments. We exited the quarter on more firm footing and are off to a strong start to the fourth quarter, and with that I will now turn the call back to the operator to open the line for questions.
Questions and answers
Thank you. We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. The first question comes from Andrew Lazar with Barclays. Please go ahead.
Great. Good morning, everybody. Can you hear me, Stefan?
Yes, we can hear you loud and clear, Andrew. Thank you very much.
Excellent. Thank you. I guess in the past few weeks a bunch of packaged food companies, while not providing detailed guidance yet for 2025 have sort of said they already know enough to know that next year is still going to be a sort of below-algorithm year for a lot of them. At Nomad, excluding the ERP impact in 3Q and looking at your implied organic sales guidance for 4Q, your organic growth would already be within your 3% to 4% long-term algorithm in the back half of this year. So I guess my question is, does that give you sort of the visibility that this sort of trajectory can continue into next year, even though I know you're not likely prepared to give sort of formal 2025 guidance yet?
Let me start with your final words, Andrew. I will avoid providing any guidance. The reality is that frozen food in Europe is a robust category, consistently showing sales growth year after year. Over the last 10 years, it has averaged about 3%, fluctuating with inflation variations. When inflation is higher, growth tends to be slightly above 3%, albeit with lower volume, and the opposite occurs when inflation is lower. Currently, as we transition away from high inflation, we're experiencing more subdued inflation, which likely puts the market slightly below the 3% mark. Additionally, we have multiple programs in place that are performing well. While there was a one-time situation, we've begun to regain market share in terms of both value and volume over the past four months. Starting in Period 8, equivalent to mid-July to mid-August, we noted an increase of around 30 basis points in Period 9 and 40 basis points in Period 10.
We have received nearly all our data for Period 11, with only a couple of smaller markets missing. It's also worth mentioning that, even including the UK and despite our challenges, the results are promising. This reflects the effectiveness of our programs focused on Must Win Battles and Growth Platforms. We're beginning to see innovation returning after a lower performance last year, which is typical during this time. We're seeing positive results with our new launches across several countries, particularly in poultry. Thus, we are encouraged by our current performance and outlook for the coming year. However, to reiterate, I will refrain from offering any guidance for 2025.
Yes, understand that. And then one last one, you did mention and Ruben mentioned it, in addition to just the ERP issue, which I know you're largely through, you did talk in the release about a little bit more of a more conservative growth assumption for the rest of the year. So that's kind of separate from anything ERP-related. And I'm just curious what's sort of underpinning that. Thanks so much.
When you analyze Period 4, there is a range between three and seven, but it's clear that these are healthy figures. We are very encouraged by the first six weeks, as we are seeing gains in market share and strong sellouts in Periods 8, 9, 10, and now 11. There's still some residual impact from ERP. It's common for us to be cautious because the markets tend to be more volatile as we emerge from a crisis. We prefer to provide comfortable numbers with a broader range, which remains healthy.
Yes, makes sense. Thanks so much. Appreciate it.
You're welcome.
Thank you. The next question comes from Steve Powers with Deutsche Bank. Please go ahead.
Great. Thank you so much. I guess building on that a little bit, just as you describe the ERP experience this past quarter, it does sound like things are getting back on track with learnings being applied to future waves, which is all great, but I'm curious just, talk about them as a transitory step back, but when you step back and look at it, is it truly transitory or do you think there's been some more lasting impacts such that it's going to take you a little bit longer to get on the acceleration plan and program that you had laid out for yourselves back in July and August. I'm trying to figure out how much of this is really just a one-and-done thing or it really has altered the go-forward planning. And perhaps related to that, if you could give us an update on what the overall timeline to roll out S/4 HANA is enterprise-wide from here, that would be great.
Yes. So the short answer is no, this has not altered our plans. So also just take a step back to clarify what happened and where we are now to what Stefan said and what I said is we are getting out of this. Stefan just shared the Period 11 shares; we've gained market shares in the UK in Period 11. Now that wouldn't be happening if we still would have major issues. So week after week, as I said, we're improving; our service levels are getting back to the near-normal levels we had before. So we're getting out of this. I think that's one point. Then to your question into 2025, there are two, three elements there. The first element is we have gone live, like I said, in our business and you see in our interim statement we disclosed that the UK business is sized, but they can say it's roughly a third of a business, the size of a billion with four factories, out of which a couple of big factories.
Future waves will be smaller. So just in terms of the size and the risk profile, that will be quite a different size. That's the first one. The second point: this was the first go-live and with all go-lives, and I think you've also seen other companies with ERP, this is where you really learn how the ERP works, and we really have learned now how the system works and we will apply, albeit painful, but we will apply these lessons for future waves. So that's the second point. The third point is that we will also plan and it links to your question, the future waves in such a way that we can prepare, do testing, and design properly. So that also lowers the risk. Now that means that there will be a longer transition. So this ERP waves won't end in 2025. I think it's not here in this call to say and give an exact date, but we will do this properly and make sure there's no disruption. I think the other point you raised: Will this alter our plans?
No. You've heard Stefan talk about performance in the market. Things we've already done and we have continued to do so. Like RGM plans, we will continue to drive those into 2025, into 2026. Our CRM tooling, allowing us to have better execution at shop floor, we will just continue to do that. So we don't see an impact on any plans.
That's very helpful, and to build on that, regarding the 200 basis points of price net of cost favorability observed this quarter, as we look ahead to the fourth quarter, should we expect a return to normal, or do you foresee an adjustment where you’ll invest more in pricing and promotions to offset some of the decline from the third quarter?
Yes, that's a good question. So just if you compare quarter four versus quarter three, so you look at margin sequentially, you have to, and probably you noticed, but just for the avoidance of doubt, that over the last three years, there's roughly a 200 basis points decrease in quarter four, first quarter three, which has to do with mix because there's a lower element of our ice cream business which is higher gross margin. So there's around 200 basis points drop on average, which you will see in the last three years. That's the first point. The other point is exactly what you said, we had 200 basis points net of cost benefit. Out of that, 100 basis points goes over different base promo element. And we don't expect that to continue into quarter four. So you're right on that point.
Okay, very good. Thanks so much.
Thank you. The next question is from Rob Dickerson with Jefferies. Please go ahead.
Great. Thanks so much. Stefan, I just wanted to go back to the chart. You guys have been kind of showing at least the past couple of quarters just around frozen, it continues to outpace total food within Europe. And then I think you made a comment earlier where you said all European markets were actually growing. And then the commentary just kind of around seems like the consumer is getting a little bit better. So kind of while I understand there's kind of a shift in Q3 to Q4, ERP seems to be clearly better in Q4 and you're not guiding, right, for next year. When you step back though kind of more on that macro basis where the consumer is, do you feel like there should be some kind of clear momentum and just consumption rates kind of as we get through, I mean, sorry, the next six weeks, right, until we hit 2025, such that, yes, there should be some momentum just on the base excluding ERP, kind of excluding expansion markets, new products, just kind of getting back to a normal level of consumption growth given all the pricing and the volume pressure over the past couple of years?
Well, to your point, let me step back, because that's exactly your question, Rob. When you're taking the category, the frozen food category in Europe, and we are the category, we mostly very healthy protein, chicken, fish, and then veg. Two-thirds of our business is this, which is quite different from what you see in the US. So that's the first piece. So we definitely represent between frozen food and what we are, we have really good food. And I think this good food, together with affordability, together with healthy and tasty, is really becoming a competitive advantage. And I think we mentioned that the frozen food has been doing well over the last 10 years, has been outperforming food, and I think we keep it that way. When you see the fundamentals, then again, back to the comparison with the US, well, the US says we have a long way to go in Europe. When you compare, let's say the per capita consumption, which is pretty high in the US, the UK is midway, then you have all the other countries which are probably something like 50% lower than what you have in the US, and it's definitely, we've seen this.
It's definitely considered a category that is expandable. People are planning less frozen food, planning more other food. So the combination of all these things. Yes, we love frozen food. I think we love the fact that we are focused behind this category, and obviously, we think as a leader, we definitely want to lead the category. Then on top of that, you obviously have all our programs in terms of Must Win Battles, in terms of Growth Platforms, including chicken, which is a big thing for us. And then something that we're really lifting up now, which is innovations. For all these reasons, we are the category leader in the green category. Yes, we are very positive about this category in the future.
Okay, good enough. And then I guess just coming back to the ERP conversation for a second, it sounds like maybe there were some out of stocks, right? There's some dislocation demand relative to kind of your shipment ability. Just pretty simplistically, right, we think about Q4, maybe even early part of next year, like is there a need for any kind of inventory build, I guess especially it sounds like kind of more focused on the UK or maybe more in chicken? That's all. Thanks.
No, I don't think it is an inventory build. What you've seen and what we've seen in quarter three was the impact on the supply and as we mentioned. That's also the reason why we lowered promotion. We're getting out of that week after week. We have positive shares, but the mix is not fully yet where we want it to be. And we see that in the year to date, we've quite some margin mix benefit. Maybe quarter four will be a bit different because we're getting out of there. But we expect that into the next year to be normalized.
Okay, great. Yes, makes sense. Thank you so much.
Thank you. The next question is from John Baumgartner with Mizuho. Please go ahead.
Hey, good morning. Thanks for the question. Stefan, I wanted to come back to the retail sales. You're still on a positive trajectory. The market share is growing, as you noted. And I'm curious, as you now lap the increase in reinvestment that you began in Q3 and Q4 last year, how does the execution change? Is the plan that brought you to this point in the recovery, are those same initiatives poised to continue? Are there changes you have to make in terms of programming, size, or type of investment that we should expect going forward for this next phase of recovery? How do you think about the marketing investments from here?
Well, I think we said that we're going to grow A&P. We started Q4 last year, and we keep doing it. And we have all the intent obviously to make sure that we're going to keep it that way, end of the year, but also, obviously, more importantly, even in 2025. So far, year-to-date A&P is up something like 17%, which is significant. And what we want to do is obviously to keep this pipeline of A&P for next year. The rest is very much in line with flywheel. A great example is Italy in fish. We've been through the whole flywheel. We knew that our fish fingers were probably a bit too high. So we've reduced promo in price. That's one thing. We also came with a significant increase in terms of A&P with renovation, with activation at the store level, and we see the numbers. So it's really responding extremely well. So that's facts based. And then it's basically the same model that we repeat and repeat and repeat again based on this flywheel and the Must Win Battles and the Growth Platform, which are doing extremely well as you may have seen.
Is there anything Stefan in terms of the lift on promotion? You're doing different things now, putting the shelving into the fresh produce part of the store. Thinking back to 2016 when you had the last big increase in marketing and the Must Win Battles, has anything changed in terms of lift on promotion or lift on investment, anything stand out that's possibly surprised you over the past year? Just curious how you think about that in terms of the lifts on a relative basis.
I believe we have gradually completed the program year after year. For instance, when we started in 2016, revenue growth management was primarily focused on promotional activation. Now, it encompasses a broader strategy that includes pricing, promotions, price points, and trade margins. While you may not notice any drastic changes, it is evident that our situation has improved. Fundamentally, we have a comprehensive approach that addresses various elements, which may differ by category and from one Must Win Battle to another, each with its own requirements. This flexibility is a strength of our model, and the different regions are applying it quite consistently.
Okay. Thank you.
You're welcome, John.
Thank you. The next question is from the line of Jon Tanwanteng with CJS Securities. Please go ahead.
Hi, good morning. Thank you for taking my question.
Hi, Jon.
Hi, I was wondering if you could explain more about the ERP challenges and whether you faced significant costs in addressing them. Are there elements in your contracts or service level agreements that might cover any potential costs associated with this?
No, there were no material additional costs versus what we had planned. I think what we've seen is that the ramping up took longer than planned. You go live with a new system. I don't want to go in all details, but you learn a system and can give one example, for example, how the system interacts with third parties, with suppliers and what that means in terms of onboarding suppliers and third parties. And that took a bit longer. That took longer than expected in the ramping up again, that is an example. So it comes back to the point it's only when you really turn on the new engine in the car that you learn how that engine works. And we prepared quite a lot, but that's where we got a couple of those learnings. And let me also be clear, we wouldn't have been gaining market share in Period 11 if we were now not overcoming this. So back to your point. There were a couple of learnings like how do you onboard the third parties? But nothing out of the ordinary and also in terms of cost, that is still aligned with what was planned.
Okay, great. And then I was wondering if you could preview a little bit just your thoughts on pricing, both your negotiations with your retail customers and from an input pricing perspective heading into next year, especially as we're seeing a little bit more currency movement in the dollar and how that impacts seafood?
Well, I can start and please, Ruben.
Yes. So at this stage where traditionally we always have one or two disruptions here and there with retailers, we're not in that position at this stage, which is a good thing. The second piece is obviously in a subdued inflation environment, you always have negotiations. So that would be almost strange not to expect a negotiation with the retailers. But definitely when inflation is lower, these conversations are obviously a bit different. And I think on top of that, when we as retail suppliers, we come in with more innovation, with more new products, I think that the conversation is changing because it's not limited. You remember back in 2022 and 2023, it was all about price, price, and price and people were not interested in innovation, and the A&P was a bit lower. I think we're changing this, and that makes the whole thing much more manageable, I would put that way.
Perfect. Thank you.
Thank you. The next question is from Peter Saleh with BTIG. Please go ahead.
Great. Thanks for taking the question. I was hoping maybe you could just comment. I don't know if I missed this on the health of the consumer and some of your key markets. I know that consumer has been under some pressure over the past several years, but I think last quarter you mentioned you're starting to see some of that ease and starting to see some modest mix shift towards some more premium products. Can you just give us an update there? Are you still seeing some mix shift towards more premium products? What's the health of the consumer looking like in some of those key markets? That would be helpful. Thank you.
Yes, you're welcome. Well, the thing is, when you think about this inflation caused when the growth crisis, I think it probably started earlier in Europe, and then we had an impact definitely in 2022, 2023, and then what we can see is we're getting out probably faster. And we see this not only in terms of a global market which is doing better. So you've seen the numbers. Let's say the sellout is in the region of 4% to 5% at this stage, which is fine with low inflation, but it's also within the market. We also see private label losing market share, which is for us good news. And again, it's exactly in line with what I said, which is that we come in with more innovation, we come in with more new products. Sometimes we're tweaking a bit the price the way we did in Italy, but we did it in the full flywheel with all the other elements, and that's working. So that's the reason. And on top of that, as I said, frozen food in Europe with a lot of vegetables, a lot of poultry, a lot of fish; there we have the protein. It's a very good combination.
Great, thanks for that. And then I think you mentioned A&P Investments up about 17% for this year. Any thoughts on 2025? Just the rate of investment next year. I'm not sure if you're ready to provide that.
We are not going to share a specific number, but A&P is certainly a crucial aspect for any brand leader. It's essential for us to maintain the appropriate levels of innovation, A&P, and overall strategy because the market will remind us not to be complacent. A&P is a significant element, and we intend to keep it that way. As the brand leader, we recognize its importance not just for us, but for the entire category.
Understood. Thank you very much.
You're welcome.
Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Stefan Descheemaeker for any closing remarks.
Thank you, operator. So, as we committed to you at the start of the year, our growth flywheel is beginning to spin faster, as evidenced by our return to positive volume growth this year. Our market share has favorably inflected in the third quarter, and we are seeing acceleration in retail and net sales growth so far in the fourth quarter. We believe we are on track to finish 2024 with strong sales growth and are excited about the momentum we are building into 2025. So thank you for your time, and I will now turn it back to you, operator, for finalizing the conversation.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.