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Good day, and welcome to the Greencore Q3 Trading Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jack Gorman, Head of Investor Relations. Please go ahead, sir.
Okay. Thank you very much, and good morning, everyone. My name is Jack Gorman, I'm Head of Investor Relations at Greencore. I'd like to thank you all for taking the time to join us this morning for our Q3 trading update conference call, which covers the period to June 29, 2018. I'm joined on the call today by our CEO, Patrick Coveney; and our CFO, Eoin Tonge. In a moment, I'll hand you over to Patrick, to give an overview of the training in the period, and after that we will open up the call to Q&A. Finally, I would just draw your attention to the forward-looking statements at the end of today's release. With that, I'll pass it over to Patrick.
Thanks, Jack, and good morning, everyone. It's Patrick Coveney here, and as Jack mentioned, I'm joined by Eoin Tonge as well and together, we're going to spend hopefully the next 45 minutes with you. Before turning over to questions on the statements that we released this morning, we thought it would be helpful to ink in a little more color on today's trading statements to update you on some organizational developments during the quarter, and after that we'll go into questions. Since our first half results, we've progressed our strategy, our team and our performance agenda to build a leading convenience food business across the U.K. and the United States. Specifically, we're executing against the strong growth opportunities that we see available to us. I'd like to draw out 5 key themes, if I may, over the next few minutes. Firstly, the continued strong revenue growth across our portfolio. Second, good progress on our U.S. strategy and commercial pipeline. Third, the senior management appointments that we made in the U.S. and the U.K. Four, some refinements that we've made to our U.K. portfolio outside of Food to Go; and 5, the reiteration of our EPS outlook for 2018. Let me draw out each of these 5 things a little more now. Starting with strong revenue growth. We delivered pro-forma revenue growth of 8.1% across the group in quarter 3, building on our first half momentum. In the U.K. and Ireland, pro-forma revenue growth was 7.8%, driven by Food to Go. In the U.S. pro-forma revenue growth was 8.6%, driven by the former Peacock Foods business. If I turn now to the U.K. the Food to Go division or the Food to Go part of our business reported pro-forma growth of 10.5%. Growth in third party distributed goods was the main driver here, but I'll come back to that in the second. With regards to underlying category growth, this improved modestly from the levels seen during our second quarter -- the quarter up to the end of March. In the third quarter, the value of the Food To Go market grew by just over 2% with sandwiches growing a little faster than that at about 3%, that being for the 12-week period to the middle of June. While a rebound in growth was expected, its extent was not as much as we would have anticipated given the warm summer weather. Furthermore, the period has been characterized by volatility across the quarter within retailers and across periods during the quarter. It is really only since July that real momentum, category momentum has returned to this part of our business, which is now bringing us back into the more traditional year-on-year growth range that we've spoken about in the past. Importantly though, Food to Go continues to be a focus category for all of our U.K. customers, and we are comfortable -- confident, I would say, that the long-term dynamics of the marketplace are as previously guided. It's also worth noting in the context of our U.K. portfolio that the revenue mix has been a little more weighted to lower priced and lower-margined businesses than was evident in previous periods. This is apparent in the strong relative contribution of revenue from the distribution of third-party products and Food to Go growth. But it's also relevant in the context of other categories outside of Food To Go, where we've seen stronger sales and lower-priced products versus the premium ranges that we manufacture. Turning now to the U.S. We are encouraged but what has been a very strong Q3 performance. Pro-forma revenue growth was 8.6%, driven by strong performance from the former Peacock Foods business, which grew by 19.4% in the quarter. The growth in the former Peacock Foods business was underpinned by strong underlying category growth, new business win activity over the last 12 months and several new product launches in the quarter itself. We've previously referenced mid-single-digit category growth across our main portfolio of lunch kits, frozen breakfast sandwiches and salad kits, and in aggregate, this has continued during quarter 3. With regards to new business, the key contributors were in lunch kits at our Carol Stream facility, together with several new wins and product launches with key branded food partners in the salad kits and breakfast cup areas. This strong overall volume momentum was delivered whilst absorbing the previously announced rate of volume decline, approximately 25% in the original Greencore part of the business. This nicely links me to the broader update in our U.S. strategy and commercial pipeline. New business development continues to progress well in the United States. Our refined U.S. strategy focuses on identifying and executing on opportunities in food industry outsourcing, in particular, with the Branded Food Partner channel. Regular and recent dialogue at all levels with our key customers in the U.S. has strengthened our conviction in the potential of this strategy. Product launches during the quarter have been well executed, play to our strategy, and we are excited to see how these develop over the rest of this year and into FY '19. Looking ahead, we are making excellent progress in developing business with key Branded Food Partner customers across the areas in which we're engaged. I wanted to turn now to the senior management appointments made in the U.K. and the U.S. Anton Vincent has been appointed CEO of Greencore USA, effective July 9. Anton joins us as a former senior executive at General Mills, and during his 20 years there, he led businesses across more than 16 different product categories, most recently as President of their $3 billion Snacks division. Anton brings extensive business leadership, deep commercial expertise, strong strategy skills and great values to Greencore. Reporting to me, he will be charged with accelerating business momentum, improving Greencore USA's market position and building returns. In the U.K., Peter Haden will transition from his current role of group COO, to take up a new role of CEO of Greencore U.K., effective the 1st of October. Reporting to me, Peter will lead a single U.K. leadership team charged with delivering an integrated U.K. strategy, performance and organizational agenda. We expect that this U.K. change will set us up for strong further growth and returns in the years ahead. It will enable us to better leverage our scale in the U.K., and allow us to interface more effectively and efficiently with customers in the context of a rapidly changing business environment. Peter will be well known to many of you. He joined our group 4 years ago, and is an outstanding leader with a proven track record in strategy, business development, performance improvement and people leadership. He'll work with me and Eoin over the next 2 months to shape the organization and operating plans for Greencore U.K. Turning now to our portfolio in the U.K., outside of Food to Go. We have now exited Evercreech and disposed of that site. The disposal was completed in June. In every respect, this exit has been flawless. From a customer-service perspective, from a execution of our site closure plan and them the rapid disposal of the site out of our portfolio at the end of the quarter. This marks our exit from cakes and dessert manufacturing in totality which has been phased, for those of who know us, over the last 6 years. Separately, we are also proposing to close 1 unit of a 3-unit facility at our Kiveton site. This a part of a broader evolution of our strategy in ready meals, where we are working with customers to strengthen and build out the aspects of our business with them that are concentrated on the fresher part of the ready meal proposition. We're now going to employ consultation on the site, so it's not appropriate for me to be definitive on financial impacts, although it is fair to say that any impact we anticipate being modest at a group level as regards to P&L. And this will not affect the continued production of quiche and soup at what is an important site for us in Kiveton. I'll conclude then with a brief commentary on outlook for the rest of the fiscal year. With 2 months to go before year end, this is always a critical period of performance for our group. Also as always, there's still plenty to do to achieve our goals given the seasonal weighting in our businesses in both in the U.K. and the U.S. That said, we reiterate our adjusted earnings per share guidance range of 14.7p to 15.7p, and we also reiterate the improving outlook for underlying cash generation and returns for the group. So hopefully, those comments have helped provide a little more color behind the statement that we released this morning and with those key things outlined, Eoin and I will now open up the call for questions.
[Operator Instructions] We are taking our first question from Jason Molins from Goodbody.
If you don't mind, just on the margin progression. Patrick, you called out that there's been a shift towards lower-price, lower-margin products in the U.K. side, and how should we think about the trajectory of margins, given what you've previously called out, for the full year impact? And then just secondly, on the non-Food to Go part in the U.K. and the 2.5%, it's obviously a bit of a step down from where you were. And -- at the half year stage, it was closer to 6%, 7%. And can you maybe just talk about what's going on there, is there a volume mix and price mix change that we should be thinking about?
Okay. Jason. I mean, inevitably -- and we want to be careful here that we don't overanalyze 1 quarter in the context of the trajectory of our business in terms of either by a category growth or margin progression. But I mean the broad themes that we've been speaking about for some time in the U.K., we -- we anticipate continuing. But -- I mean, specifically, I mean what we're seeing, as we outlined in the statement, is that the very strong level of overall growth that we're having in the U.K. is coming from lower-margin items. In Food to Go, that's a strong step-up in revenues in our distribution units, which is a reflection of a lot of different things, including the competitive set weakening there, our customers wanting a more integrated service proposition combining manufacturing and distribution. So as you know the percentage margin that we take on some of those factory goods or nonmanufactured items, is less than we would earn on products that we manufacture ourselves. And in the non-Food to Go part of our business in the U.K. across Ready Meal, Sauces and so forth, the growth that we seeing is coming at more price competitive lower -- lower-priced items within the range. In other words, the private label ranges at the entry level, our core ranges are doing more strongly than some of the premium private label ranges in some of those categories. I mean, what that means, as we think about margin, is that we expect the margin themes that we outlined in our half year results to continue. Namely, we will see good margin progression through the year, and we expect that overall the U.K. will have margin progression that's underpinned by the restructuring, the operational effectiveness and the anticipated seasonality of our business. But it might be a nudge different than we expect it to be, given some of the factors that I've outlined. Eoin, you want jump in?
Yes. So Jason, just on your second question on 2.5%. So if you remember back in the first half of the year, the non-Food to Go business grew just over 6%, which is made up of about half volume, half price. In the quarter, we had 2.5% of growth, which was similar in volume terms, a little bit behind because, obviously, some of the weather would have impacted some of those categories, but a little behind -- but only moderately behind and then there was more of an impact of what Patrick's spoken about in terms of mix, which offset some of the price that you would have seen in the first half of the year. So volume and the growth were more in line.
We are taking our next question from Fintan Ryan from Berenberg.
Just 2 questions for me please. Firstly, I'm wondering if you could comment on any impacts, either current or anticipated, from the hot weather that we've seen in the last few weeks in the U.K. Specifically around your supply chain, cost inflation and is there -- is there any sort of margin impacts from that. And then secondly, in regards to the strong like-for-like pro forma growth pickup that we saw in Q3, is there any sort of seasonality or one-off effects in that? And then particularly given the strong step-up from the page one momentum which I think includes 12% growth hiccup, what -- do you expect that to be the run rate for that particular part of the business for the rest of year?
Okay. Well, I mean, on the part -- I don't know -- I guess if I -- in my introductory remarks, I made one point on demand, which was that as we had -- as we transitioned into July, the -- we've seen the Food to Go category step up towards those kind of more traditional mid-single digit levels. So we might even frankly consider them, expecting to be a nudge more. But we're pleased to see that kind of -- that building and step-up of incremental sales there in July, which is obviously not captured specifically in the quarter that we just reported on. In terms of the impact on the supply chain of the hot weather, I guess you're principally -- I expect talking about the yields or otherwise of -- across agri commodity areas in the U.K. associated with -- or items, for that matter, associated with lower levels of rainfall and so forth. I mean our best sense is that, that's going to have no impact on us in FY '18 because of how we've contracted and secured supply for the rest of this year. We'll have to see what it means for FY '19. I don't want to -- I think there'll be puts and takes there and -- plus -- and I don't think it'll be -- we're certainly not seeing anything that causes us to be concerned about our ability to source the ingredients that we -- for products as we go into FY '19. We'll have to see what it means in terms of availability and inflation as we go into '19. I mean, on Peacock, the -- I mean, our sense here, and if you saw either from the statement or from the comments made on the call is like we feel really good about the path that we're on in terms of the volume performance in all respects, right. So most importantly -- and Eoin pushes oftenly on this all the time -- is the underlying category dynamics are positive in terms of the kind of blended category growth rate in the market across the key areas in which we're assembling, being strong, consistent with the sort of growth that was reported in the first half. In Q3, we were still -- if you remember, the comparative period was when we really began to step up the incremental lunch kit business in 2017. Now clearly we were comparing against very little in the first half. But we still had a relatively soft comparison in Q3, so some of the growth that we have there in lunch kits comes from there. But we have also seen in the quarter itself a decent level of contribution from business that actually was coming more or less for the first time in that quarter, whether that be in salad kits area or in some of the breakfast bowl propositions where we've -- where we've really seen very good performance. So difficult to be -- frankly -- and difficult to cite those factors too much in the kind of one-off category but I think prudence would dictate this, an ability to continue to grow at the 20% level is unlikely. But we certainly feel good about the performance that we've got and the visibility that we have in terms of revenue to volumes, through the rest of this year and beyond.
And just 1 point of confirmation. Just in terms of the -- within the U.K. business, the lower margin mix coming from lower price points and some of the private label volumes. Do you -- would they still have same type of pass-through mechanism in terms of the core material inflation, or is there any sort of difference in the actual way the contracts are structured based on the products being used?
It's exactly the same. And in fact, you -- I know we've talked about this before, you may have -- I mean, it's got broadly comparable percentage margins, but of course, the cash margin on some of those items may be a bit less, which goes to -- be it the whole way through the P&L, so fixed price recovery and overall percentage margin across the group. But again, like I think we want to be factual in terms of what the drivers are for performance in the quarter but, as we touched on, there are a lot of moving parts in quarter 3, both -- whether that be the kind of extension of winter into the first part of this and the very strong warm weather at the end of it and different retailer trading strategies and all that. So I think it's going to just be best to see how quarter 4 and the full year unfolds, for some -- but I think we are discerning some trends, right, which is where we're delighted with the overall step-up in our distribution business, but that has a consequence for us in terms of what that means for blended margin, and we're noting that consumers are buying some of the more aggressively priced propositions at retail and that's having some impact for -- in terms of the drivers of growth within individual categories.
We are now moving to Gaurav Jain from Barclays.
Gaurav Jain from Barclays. I have 2 questions. Firstly on the Peacock Foods business. Based on the trajectory that you are seeing so far, would you have any commentary on FY '19?
No.
Okay. That's pretty short. But when I look at a lot of the meal kit companies that are out there, and I hear there are some companies that are listed, they -- they seem to be struggling. So is that a risk on your Peacock Foods growth business, as you look out over the next 2 years?
We don't think so because the core customers that we have are large Branded Food companies that are truly multichannel in terms of how they're executing the -- their commercial strategies with product categories that consumers really want and brands that really resonate in those categories. So I think there -- you inevitably will see some of the newer entrants into the categories, into U.S. foods, some will be successful, some won't. But there's -- the core of our business is around well-established, well-regarded brands where those brand owners are outsourcing more and more of their assembly of those products to us.
Okay. My second question is on the U.K. business outside of Food to Go. So there seems to be capacity closures or divestitures of businesses, every year or every other year, and the revenue there has been stuck at around GBP 600 million to -- between a GBP 500 million to GBP 600 million range for a number of years. So should one think about this line item?
Yes. Gaurav, it's Eoin here. I mean, I think it's fair to say it's been predominantly this year, right, where we've actually done some active -- or certainly in the last 12 months, some active paring back, and the focus of our effort, in truth, has been in a category that's -- is -- it's quite frankly different to the rest of our categories, which is cakes and desserts. First of all it's a sweet category, it has a different type of ingredient set and there's a different type of consumer profile. So we been working pretty actively trying to make sure we exit out of those categories in an effective way over the last 12 months, which we believe we've done in an effective way. The ready meals piece is very much a kind of structural piece of ready meals, which continues to be a core part of our portfolio. And over time there's been a move in terms of the change of the manufacturing process there into more fresher production. And we have just -- capacity in longer-life production that we just need to consolidate. So I think that's a pretty sort of kind of neat tactical -- or sorry, neat strategic solution to sort of the route that the ready meals are going to. So I think I wouldn't necessarily take a view on the non-Food to Go just because of all the activity we've done in cakes and desserts, which is quite a specific category exit that we've been pretty clear on for the last 12 to 18 months.
I mean, maybe even longer, since you -- with the -- as you think about what we've done in that category going all the way back to Ministry of Cake and some of the frozen desserts, I mean we've -- one of the things we've had to balance here is a -- I don't want to be too philosophical on this call -- is this balance of category strategy with customer strategy in the U.K. and indeed everywhere. So where we are providing an important service to customers, but those categories don't quite work for us, you have to phase your exit from that in a way that continues to protect your overall business brand with our key customers and that's -- and part of how we've exited in a phased way from what, in effect, has been 6 different desserts and cakes factories of one form or another over the last 6 or 7 years has been to do that in a way that has continued to protect and ideally strengthen how our customers think about us across the other areas in which we serve them.
Okay. Lastly, on the distribution business, which contributed significantly to that [ NFL ] growth. Can you just remind us as what is the size of the distribution business now as a percentage of your U.K. Food to Go sales?
12%, 10% -- 10% to 11%
About 10% of Food to Go sales.
Yes, and let me explain what we mean by that because it will help it a little bit. We're doing 2 different things with our distribution business. The first is, it's a route to market for sandwiches that we manufacture. So we have significantly more than 10% of our -- of the sandwiches we manufacture go through our distribution business, right? So there are some of our customers whereby every sandwich we make for them, it goes through the Greencore distribution van system, 300-plus vans that you will see driving around the U.K. And the 10% or so that we're referencing here is that where we are distributing sandwiches that we manufacture for these customers, increasingly, we are supplementing that with other chilled items which we can very easily distribute alongside the sandwiches that we choose to manufacture -- and that could be things from other manufactured items that are made by other players in the U.K. market through to other chilled items. And we've seen as some of the other routes to market for chilled distribution in the U.K. have struggled, be that Palmer & Harvey or Fresh to Store or some of these other businesses that were competing against us in the U.K., as they've come out of operation, some of our customers have asked us to do a bit more alongside the sandwiches that we're doing for them. So it's -- but it's important that you understand, we're -- we think about this as a way of distributing products that we manufacture. It just so happens that we can put some items alongside those products in -- through to customers in the U.K.
We now have a Charles Hall from Peel Hunt.
Can I just ask on the U.K. Food to Go business. It sounds as though you're now trading in line with market growth. Is that the best way to think about the business moving forwards given the scale of your market share now? Secondly, you mentioned, Patrick, that sandwiches was growing faster than the overall Food to Go market. Are you just able to share what segments are growing slower, just to make those numbers add up? And thirdly, could you just comment how much inflation was at that 2% market growth?
Yes, sure, a couple of things. So we would hope -- and indeed, we plan for -- to grow a little faster than the -- than the market overall. But I think you're into marginal levels of difference now, because of the market share that we have in the grocery channel lapping about 60%. So the -- we think we can execute well and extend channels and things like that, and so there are -- there's some initiatives and some customers that we're picking up at the margin of mainstream grocery that we think will enable us to do that. But you're dealing with relatively small levels of potential for outperformance versus market given just how much of the market we actually are, is how I would describe it. And that's a different dynamic than the last 6 or 7 years where we've had these explosive levels of market share growth as we've both won new business and as customers had a given us a greater percentage of their business. So it's really important, as we're running our business, that we recognize that the kind of profit growth for us in Food to Go will come from a combination of more modest volume and market growth as we normalize more towards the market but also a greater percentage of our profit growth will have to come from margin improvement than has been the case in the past. And specifically on your question, the way -- what we define as Food to Go is the mix of categories that we assemble in the Food to Go area, right, which the 3 principal components are sandwiches, Food to Go salads and sushi. And what we've seen in the period is that sandwiches did a little better than the other 2 categories and so that's why, broadly, in the period to mid-June, in that 12-week period, we had a little over 2% for the blended Food to Go category and about 3% for sandwiches. So the other 2 would've been a nudge lower in the period.
And on inflation?
And the...
Yes, I mean inflation sort of stabilized a bit through the year. I mean, if you remember, we had circa 3% net -- or sorry, gross inflation, we were expecting integrated pricing. It stabilized a bit. There's a bit more inflation that's come back into the marketplace in some element of dairy. I think overall in the year, it'll probably end up in the level that we expected, i.e. in or around the 3% level. And then obviously, as Patrick mentioned before, sort of we will have to -- sort of remains to be seen in terms of what inflation sort of materializes from supply issues in relation to costs, et cetera, and so on with the dry weather.
Yes, I think, Charles, as it relates to your earlier question, about 1 point of the -- of that market growth was price. The balance was volume.
We are now moving to Nicola Mallard from Investec.
Couple of questions if I may. Number one, getting out of the long-life meals at Kiveton, can you give us an idea of what the annual impact on revenue that might be? And also, new products launches you talked about in the States, I just wondered if you could provide an idea of what sort of products they were, or maybe whether they were with new customers or whether they're products with existing customers?
So on your long-life question, I mean some of this is -- the net is, we'll probably end up with about GBP 15 million to GBP 20 million of less overall sales in ready meals after than we had before. Plus the moving parts, Nicola, just -- without overly complicating, is we're going to see a step-up in our fresh ready meal volumes and production, which we will locate into Wisbech, and then we will see us -- we'll see the fallout of what we're currently doing in Kiveton. And so where we end up is a somewhat smaller overall range for the principal customer that we've been using from those 2 sites. But with a greater preponderance of that being in fresh products and a greater preponderance of that being in Italian. So we have a -- we end up with a slightly more concentrated range in terms of the ethnicities that we're serving for them, but all of it fresh. And the residual retorted volumes that we have across other customers consolidated into our facility in Consett. So that's the broad shape of it. On the specific products that we're talking about, I mean the 2 areas that we referenced in -- and some of this we touched on back in the -- when we did our results announcement, where one -- we had a -- what for -- 1 our large customers has been a very successful consumer and channel-driven launch to date in the breakfast bowl area, where we are assembling all of those breakfast bowls for that customer. And that product came to market in the States as we kind of finished up Q2 and went into Q3. And we've been delighted with the consumer reaction to those products, and we're assembling all of that for that customer. So that's a decent driver of performance in the quarter, and it will continue to be a feature of growth as we go forward as well. The secondary is in the salad kits area or salad components area, and they're the ingredient master packs that we put into bagged salads for some of the -- well, for most, actually, of the large salad companies in America. And we have -- we've seen a significant step up with one of the large salad players there where we've gone -- they've gone from being a very modest customer of ours to a much larger one, and Q3 was the big step-up period there. So they would be the 2 in-period new business areas, in other words, that were actually commercialized for -- pretty much for the first time in quarter 3. The other impact, as I say, is that we've -- we're really flat out in terms of the incremental kids' meal -- or kids' snack kit business where we had that step up in terms of our relative share of that customer in Q3 of FY '17, but we're just trading that harder than we were a year ago.
Our next question comes from Darren Shirley from Shore Capital.
What stands in the dilutive effect from the distribution sales? Can you tell about how much of your portfolio in the U.K. is actually being impacted by the trading down that you talked about? Is that -- I mean, have you seen this across the board, or is it localized in ready meals? And could you also give us an indication of sort of how you've seen that develop? Has that been a step change in terms of consumer habits or is it a trend that's accelerating?
Yes, so Darren, the effects that we're describing here in terms of the lower price or entry-level priced products trading harder than the mainstream private label or the premium private label. This is principally occurring in the cooking sauce and ready meals business as we're looking at it now. I would be -- we're noting that and I'm talking about it because it's an explanation in terms of our performance, but I'd be cautious about being too definitive that, that trend is really there as we roll through the rest of the year. And the reason for that is these types of categories tend to be more -- a little weaker in the summer than the winter anyway. And they probably are also impacted by consumer habits, impacted by the warm summer weather. So we're noting it, we'll see how they trade. I want to be careful that I don't get too much kind of specific customer observations here, but you -- as I know you know, there are specific range reset strategies and initiatives in individual customers to try to rebrand or reset premium private label and things like that are yet to unfold. So the simplest way of putting it is that we are observing in the non-Food to Go parts of our business, at least for the moment, more volume strength in the entry level priced products than we are in the premium end. How shoppers and retailers react to that and how that trades as we kind of get back into the -- with schools coming back and all that in September, we'll have to see.
Darren, Eoin here. Darren, Just to add to it. I would say, there is different dynamics across cooking sauces and ready meals actually in the different categories, just to kind of add to that point. So I wouldn't -- we wouldn't take from it a sort of trend of trading down, per se. And -- but it's quite specific things that happened in those categories. For example, in cooking sauces there's been sort of a -- quite an active deflationary period, in relation to cooking sauces, for a period of time. And ready meals, as Patrick said, is a little bit more sort of fluid.
So in terms of -- I mean, we should take away in terms of your Food to Go business, you're still comfortable with sort of the mix dynamics you see in this? I'm just wondering whether the relative strength of sandwiches against salads and sushi, could that be termed as a similar sort of trend. Would they be higher-priced items, your salads and sushi?
Not necessarily, no. And again, in terms of materiality for us, Darren, I mean we're -- 80% plus of our total Food to Go sales are in sandwiches. It's where we're heavily weighted towards that part of the business.
Yes.
We are now moving to Cathal Kenny from Davy Research.
Firstly on the productivity initiative in the U.K., I guess you called out a gross savings of GBP 15 million. I'm just wondering, does Kiveton impact the timing of those savings. That was my first question. Secondly, in terms of the moderation of growth in the quarter in the manufactured end of the Food to Go business. Just wondering was there any insights by channel there or store formats where you saw particular, maybe, different growth patterns emerging. And finally, just looking for an update on Jacksonville, please, if you have it perhaps.
And the -- Cathal, why don't I take the sort of the first and the third one of that one actually maybe Patrick, you might want to talk about the Food to Go growth. The first one, I don't think the Kiveton decision impacts the overall U.K. planning and activity. I mean, it relatively -- I mean, obviously we've got employees to consider here, so I'll just be careful what I say. But it's relatively modest in the context of the overall U.K. group, and we've got to actually perform and do right and do well and do right for our employees. But it's relatively modest in the context at the overall group. And I think in relation to Jacksonville, we're in good route there, and the plans that we sort of outlined at the sort of the beginning of the year, we're still on track for those. And we've obviously been spending most of the first half of the year sort of repurposing the site, but that's complete, and we're gearing up for new business into that site. And -- as we speak, so we feel we're on a good route there. And do you want to...
Yes, I'll pick up your points on them -- on growth. So the -- I mean, on Food to Go growth, Cathal, it's not that we've seen a moderation versus the first half or particularly the second quarter, it's that we haven't seen -- and then maybe we're being -- dancing on the head of a pin here, I'm not sure. But we would've expected the level of market growth to have been stronger in Q3 than it turned out to be, particularly with the knowing what we know now about the decent weather particularly from May onwards. So we just noted that it's -- that it is improved, that there is better growth in Q3 than there was in Q2 but not as much as we might have expected. And that is what it is. We can get into the -- and have done as you'd expect internally on what that's meant for individual weeks, for individual retailers and so forth. And what I think is -- we take some reassurance from is being -- being that as the -- as we got the sustained stability in terms of warm weather patterns as you ran from late June and through July, you have seen the uptick in volume that we would have expected and that's reassuring. Although, it still might have been -- it's up to the -- that kind of mid-single-digit volume growth for July, not any more than that but up to that sort of level. So we're -- that's what we've seen. The simplest way to put it is that we have seen a level of growth come back into the category but a little less than we might have expected.
And Cathal, just on your channel point, I mean we haven't seen any particular shifts in channel in that quarter. We've looked at it pretty closely and there's no particular dynamics there. We continue to work with our customers on all formats that they have and obviously, as we've spoken about previously, we have a very much kind of a multiformat approach with all of our customers. But actually, factually, we haven't seen any particular shifts in that quarter.
Just 1 quick follow-up on the breakfast bowl opportunity. I know you called that out at the interim stage. I think you gave a range of 25 million to 50 million units. Have you grown into that opportunity now, or are you still scaling up with that customer?
Yes and yes.
[Operator Instructions] We have a question from Martin Deboo from Jefferies.
Just a quick question of clarification to the response, to the answer you gave earlier on to the Barclay's question. You said 10% of U.K. Food to Go sales are direct. I assume that is the direct channel in total and a significant proportion of that 10% is sandwich, i.e. non-sandwich third-party volume is a handful of percentage points of the U.K. Food to Go sales. Is that how I should think about the number?
Yes. Let me try to be -- I mean, very roughly here, we have about GBP 1 billion of sales in Food to Go business area in total. Of that, a little less than 10% of that is product that we don't manufacture but we do distribute. And then you've got -- then of the GBP 900 million-ish, a bit more, that we do manufacture, a significant portion of that is actually distributed to customers through our distribution vehicle, so it's both manufactured revenue but it's distributed by us. Does that make sense?
Oh okay. It's not what I said then, Patrick? So it's a little less than 10% is non-manufactured volume? Okay.
Correct.
A little less than 10% of the Food to Go sales, not of the total. So again just to put this in total. We have roughly -- about GBP 1.5 billion of U.K. sales in total in the -- in a fiscal year, a little less than GBP 100 million of that is food we distribute but don't manufacture.
[Operator Instructions] We have no further questions at this time.
Great. In that case, we'll finish up. Thank you, gentlemen, for joining us. Enjoy the rest of your summer. And we look forward to talking to everyone when we release our full year results on the 4th of December.
This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.