Earnings Call Transcript - NOMD Q3 2020

Operator, Operator

Good day, and welcome to the Nomad Foods Third Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Taposh Bari, Head of Investor Relations. Please go ahead.

Taposh Bari, Head of Investor Relations

Thank you for joining us to review our third quarter 2020 earnings results. With me on the call today are Chief Executive Officer, Stefan Descheemaeker; and Chief Financial Officer, Samy Zekhout. Before we begin, I would like to draw your attention to the disclaimer on Slide 2 of our presentation. This conference call may make forward-looking statements that are based on our view of the company's prospects, expectations, and intentions at this time, including considerations related to the impacts from COVID-19. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC, and this slide 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 a replacement for and should be read together with IFRS results. Users may 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 this presentation does represent adjusted figures for 2019 and 2020, and all adjusted figures have been adjusted for exceptional items, acquisition-related expenses, share-based payment-related expenses, as well as non-cash FX gains or losses, and all comments from here on will refer to those adjusted numbers. With that, I will hand the call over to Stefan.

Stefan Descheemaeker, CEO

Thank you, Taposh. And thank you all for joining us on the call today. I hope you and your loved ones remain well as we all continue to manage through these unprecedented times. As has been the case since the initial onset of the COVID-19 pandemic, we continue to prioritize the health and safety of our employees while ensuring the continued operation of our factories and meeting the needs of our consumers. With the number of confirmed cases rising across Europe, we will need to remain vigilant more than ever by sustaining the discipline and agility that has enabled us to navigate this far. Moving on to our results, we reported third quarter earnings earlier today, which demonstrate the continued momentum in the business with robust growth in our branded retail portfolio offset by declines in food service and private label. Third quarter financial highlights were as follows: organic revenue growth of 5.4% driven by a 4.2% increase in volume and mix and a 1.2% increase in price. This performance was in line with the guidance of mid-single-digit organic growth for the back half of this year. Gross margin of 30.4%, reflecting 90 basis points of expansion. Adjusted EBITDA growth of 13% to €109 million, and adjusted EPS growth of 20% to €0.30 per share. We sustained strong performance in the third quarter even as countries began to relax their restrictions and consumers learned to coexist with the virus. Offices, schools, and restaurants gradually reopened across Europe this summer, while other factors like unseasonably warm weather in the U.K.'s Eat Out to Help Out campaign reignited out-of-home consumption during the month of August. As a result, there was a clear moderation of growth in packaged food, frozen savory in our business relative to the extraordinary growth that we experienced in Q2. Nevertheless, we were pleased to see Nomad outgrow in both total frozen savory and packaged foods during the third quarter, a testament to the value that our portfolio of family favorites is providing consumers during these unprecedented times. While COVID-19 continues to create a tailwind for companies like ours, we estimate that its uplift to our Q3 result was relatively small and a fraction of what it was in Q2 due to some of the aforementioned factors. What that implies, however, is that the underlying momentum in our business has accelerated every quarter this year. With that said, as the number of cases surges across Europe, governments are resuming restrictions, and we are beginning to see early signs of reaccelerated rates of consumption growth. This is something that we will continue to monitor closely, and we have prepared our supply chain with high levels of safety stock across the board. Let's turn to some additional highlights of the quarter on Slide 5. As the COVID-19 pandemic extends into its eighth month, it's increasingly clear that many of the new consumers who went to our portfolio during March, April, and May are repurchasing our brands and recognizing the value that frozen food has to offer. Our aim is to directly engage these new consumers through increased A&P investment in the coming months and to ultimately retain many of them in 2021 and beyond. Between the significant amount of new trials that we are experiencing and the enhancements that we have made to our portfolio in the Nomad ownership, we believe we are uniquely positioned in a post-COVID world. Our gross margin expanded 90 basis points during the quarter, driven by a combination of pricing, favorable mix, and fixed cost leverage. I'm also happy to share that our peas and pea harvest met our expectations this season, providing the necessary supply to help achieve our goals for the coming year. We're pleased to see an upward trajectory in our gross margin as the inflationary headwinds for the past 2 years abate. Moving on, we continued the expansion of Green Cuisine during the quarter. In the U.K., our largest and most advanced market, we demonstrated growth on growth by reaching a new record market share of 7% within the frozen plant-protein category. We're building on our position as the #3 brand in the space and establishing strong strategic partnerships with many of our top retailers. From a distribution perspective, we entered 3 new markets during the quarter: Portugal, Sweden, and Finland, and are now happy to announce that Green Cuisine is currently available across 12 of our European markets. We activated a new multichannel advertising campaign across several European markets during the quarter to drive trial and awareness. And finally, we launched a new range of chicken-free poultry products, which are demonstrating strong initial sales velocity early on. As you know, Green Cuisine is a multi-country, multi-demand dimension of brands whose goal is to make meat-free mealtime easy and affordable for consumers. By the end of this year, we will have 28 Green Cuisine SKUs across Europe that we have either developed or rebranded. It's quite an achievement, and we look forward to elevating this part of our business even further in the coming year. Finally, we returned $467 million of capital to shareholders during the third quarter, the majority of which was executed through a successful tender offer in mid-September. Year-to-date, we have repurchased approximately $600 million of our equity, which represents a 14% reduction in our share count versus the start of the year. Our capital structure is now realigned to our strategy of consistent organic growth coupled with complementary acquisitions within European frozen. We remain active on the M&A front and look forward to updating you in due course. We have the financial flexibility to pursue this objective and, in the meantime, continue to generate strong free cash flow. I'd like to provide an update on our sustainability commitments, where we're making great progress. I'm proud to share the news that we recently joined the 10x20x30 initiative, a collaboration of more than 10 of the world's biggest food retailers and manufacturers, each committing to engage in a whole supply chain approach to halving food loss and waste by 2030. We believe that our influence within the food industry has made us perfectly positioned to raise awareness of the issue and lead the way in achieving the UN sustainable development goals for a 50% reduction in food loss and waste worldwide by 2030, and we're looking forward to sharing future updates on our progress. We have also achieved the SAI Platform, Farm Sustainability Assessment Gold Level for the pea farm management group. I'm incredibly proud to confirm that we are the first U.K. farm management group and the first globally in frozen foods to be awarded the Gold Level. This is a major milestone for our agriculture team in the U.K., underpinning our commitment to sourcing 100% of our vegetables and potatoes through sustainable farming practices by the end of 2025. We're pleased with the progress we're making along the sustainability goals, which we expect will help drive our societal objectives and support longer-term financial performance. Staying with the theme of sustainable financial performance, I would like to share some preliminary thoughts on 2021, which I'm sure is an area of interest for many of you. There are a number of moving pieces, including how the pandemic may affect the balance of this year. And the guidance that Samy will outline in his remarks does not yet include the potential impact from the recent COVID-related restrictions across Europe. Having said that, we have strong underlying momentum supported by investments behind our core portfolio, Green Cuisine, and consumer retention. And we expect these actions to yield a strong return next year. Taking all this into consideration, I am pleased to share today that our current 2021 plans show organic revenue, adjusted EBITDA, and adjusted EPS growth when compared to the current 2020 consensus. This outcome will build on the extraordinary performance achieved this year while making considerable acceleration on a 2-year basis. Importantly, it would make Nomad one of the few companies delivering growth before, during, and after the COVID-19 pandemic. As we always do, we will share more detailed guidance when we report Q4 results in early 2021. We plan to articulate our long-term strategy and growth drivers when we host our first-ever Investor Day to be held virtually next Tuesday, November 10. This will be a unique opportunity for the investment community to hear from members of our management team beyond myself and Samy and to learn about the breadth and depth of our business model. We're excited to bring the Nomad story to life, and I hope you can join us for this engaging and unique session. Now over to Samy to review our financial performance and guidance in more detail.

Samy Zekhout, CFO

Thank you, Stefan. And thank you all for your participation on the call today. Turning to Slide 6, I will provide more detail on our key third quarter operating metrics, beginning with revenues, which increased 6.7% to €576 million, driven by 5.4% organic revenue growth and a 1.7% benefit from calendar timing, offset by 40 basis points from foreign exchange translation. Organic revenue growth was in line with our expectations, led by our branded retail business, which represents 90% of our sales and grew just over 7% during the third quarter. This was offset by a 2 percentage point drag from food service and private label, which declined 23% and 5% respectively during the quarter. Second quarter gross margins expanded 90 basis points to 30.4% due to a combination of pricing, favorable mix, and fixed cost leverage. This marks our second consecutive quarter of gross margin expansion as we realized the benefits of supply chain productivity and opportunistic raw material purchases. Moving down to the rest of the P&L. Adjusted operating expenses increased 4% year-over-year, reflecting growth in indirect and a modest decline in A&P. Adjusted EBITDA increased 13% to €109 million and adjusted EPS increased 20% to €0.30 for the quarter. Turning to cash flow on Slide 7. We generated €237 million of adjusted free cash flow during the first 9 months of the year, equating to 122% cash conversion. This is an exceptional outcome when taking into consideration the rebuilding of our inventory stock this summer and the fact that the third quarter is seasonally depressed due to the harvest and other factors. We continue to make significant progress on our cash breakthrough intervention focused on all parts of working capital, a true testament to our entire organization's commitment to creating value across both the P&L and the balance sheet. We continue to expect to end the year with robust cash generation and cash conversion above 100%. With that, let's turn to Slide 8 to review our 2020 guidance, which is based on foreign exchange rates as of November 3, 2020. For the full year 2020, we continue to expect organic revenue guidance in the high single-digits range, which implies mid-single-digit organic revenue growth in the fourth quarter. Consistent with our original expectations, we expect organic revenue growth to be offset by a 3% headwind resulting from an unfavorable calendar shift in Q4. In addition, based on current foreign exchange rates, we expect FX translation to create another 2% headwind to the fourth quarter reported revenue, given the relative strength of the euro versus the pound sterling and the Norwegian kroner versus the prior year. In summary, we are reiterating our guidance for adjusted EBITDA in excess of €460 million, which will be subject to how the impact from COVID-19 transpires over the coming weeks. This now equates to adjusted EPS guidance in excess of €1.31 for the year, which is higher than our prior EPS guidance due to the successful completion of the tender offer in September and share repurchases to date. Our guidance assumes a weighted average share count of approximately 180 million for Q4 and 194 million for the year. When translated into U.S. dollars, the currency in which our shares trade, full year 2020 adjusted EBITDA guidance equates to at least $538 million, and adjusted EPS guidance equates to at least $1.53. Finally, gross margins are expected to increase year-on-year in Q4, and operating expenses are expected to grow significantly ahead of revenue growth due to the phasing of A&P into Q4. That concludes our remarks. I will now turn the session over to Q&A. Thank you.

Operator, Operator

Our first question comes from Rob Dickerson from Jefferies.

Robert Dickerson, Analyst

All right, great. Stefan, I have a clarification question. I recall you mentioned something about 2021, specifically regarding organic revenue growth, EBITDA, and EPS. I might have missed the details, but it seemed like you indicated that we could either be in line with consensus or that there could still be growth in 2021. This ties into the comments made about Nomad's growth before, during, and after the peak of the pandemic in 2020. I’d like to clarify your comments about 2021.

Stefan Descheemaeker, CEO

Yes, let me clarify, and then I will allow Samy to elaborate further. Our goal for 2021 is to achieve organic revenue growth, adjusted EBITDA growth, and adjusted EPS growth, all in comparison to the 2020 consensus. It's important to note that our outlook is based on what we have observed so far and does not account for the potential impacts of the second wave, which remains highly unpredictable. Nevertheless, that is our ambition, and to reach this goal, we must overcome the significant effects of COVID-19 experienced in 2020.

Robert Dickerson, Analyst

Okay. And so I guess then obviously the expectation is, and maybe you said you would point to this or discuss this in more detail at the Investor Day next week. You must have, right, some visibility on new innovation and distribution. And maybe it's around Green Cuisine because obviously the lap is really significant, right? So if you still expect organic sales growth, there are at least some clear drivers of that growth that you see that can get you to growth on top of growth.

Samy Zekhout, CFO

Rob, I'll take that one. Actually, you're absolutely right. I mean we do have a perspective on retention for new consumers, I mean coming in. Green Cuisine definitely, I mean, which will continue to be a growth driver for us. Recovery in food service and frankly continued, let's say, investments, the return of the investment that we have made, I mean, this year carrying over into the next year.

Operator, Operator

The next question comes from John Baumgartner from Wells Fargo.

John Baumgartner, Analyst

Samy, could you comment from a supply chain perspective, sort of the setup as it pertains to contingency plans relating to hard Brexit at this point, which I guess is still out there in addition to the COVID volatility? Anything different year-on-year relative to plans last year, how you feel about the inventory situation going forward? Just any thoughts there would be appreciated.

Samy Zekhout, CFO

Yes, I'll probably give you a general overview on the supply situation. And maybe Stefan will add some further perspective on the Brexit-specific element of the question. So we definitely took the learning of the wave 1 into account in the way we are managing, if you want, the rest of the year relating to effectively rebuilding our safety stock. We continue to carry a challenge because that means the demand is fluctuating a fair deal. But definitely, the situation we've taken the time, I mean, over the summer to rebuild our inventory in order for us to start, if you want, Q4 with a much better visibility on our safety stock, okay? All of that is taken into consideration as well with the preparation of the Brexit, I mean, timing that's going to come off, if you want, planned for at the end of December, early January. So that's where we are. I mean, Stefan, do you want to add maybe any further perspective on Brexit?

Stefan Descheemaeker, CEO

Yes, John. As you can imagine, the combination of Brexit and COVID is quite interesting and volatile. We have planned for this very well, particularly in terms of how to do business and preparing for worst-case scenarios. We're planning our inventory accordingly. The situation is very dynamic and could change frequently in the coming days. At this stage, our inventory plans are based on the assumption of a deal rather than a no-deal scenario.

John Baumgartner, Analyst

And maybe just a follow-up, your emphasis on sustainability really seems to be ramping up at this point. And I'm curious as to what you've seen or heard, or maybe your expectations as to how the sustainability efforts may lead to any sort of direct cost improvements tied to the waste initiatives. And maybe on the revenue side, the extent to which you think the program can provide a competitive advantage, incremental appeal for your brands relative to competitors or even other frozen food categories. Any thoughts there would be helpful.

Stefan Descheemaeker, CEO

Yes, I believe that on November 10, we will discuss sustainability extensively as it is essential for our business. The positive aspect for us is that sustainability aligns well with frozen food in terms of waste management. Taking a proactive stance is crucial commercially. Ultimately, this benefits retailers by addressing waste issues, and it also advantages consumers regarding nutrition, preserving vitamins, and promoting our label as beneficial for the planet and for personal health. This approach encompasses the entire organization and impacts the overall profit and loss statement, sometimes requiring additional costs while at other times yielding cost savings. More importantly, it contributes to revenue growth. We are gradually noticing that our consumers are starting to recognize the value of our category regarding sustainability, especially in the current climate, and there will be more details shared during our Investor Day.

Operator, Operator

The next question comes from John Tanwanteng from CJS Securities.

Peter Lukas, Analyst

It's Pete Lukas for John from CJS. I wanted to ask about mergers and acquisitions. Could you discuss the number of opportunities you're encountering and whether sellers are willing to sell in the current environment?

Stefan Descheemaeker, CEO

It's a very good question, and I think let me start by providing a bit of background on where we stand. So as you know, as together with the buyback, we also redefined and even focused even further our strategy in terms of M&A. So it's really focused on frozen food consolidation in Europe. So that's the real backdrop. And we believe with the cash flow generating, including, obviously, the right allocation of our capital, we can do this. And so that's one thing. Second, M&A-wise, it's quite simple. You have to be ready because you have to be flexible, you have to be prepared. And then from the moment an owner decides to sell, you have to be there. As simple as that. And that's what we're doing. Sometimes you can be more proactive, sometimes a bit less. But things are coming. So back to your question about, let's say, how is it possible to do M&A? Time will tell. It's a volatile world, it has an impact on M&A as well. But you can see in the rest of the world, M&A is still going on.

Operator, Operator

The next question comes from Rob Moskow from Crédit Suisse.

Ariel Altaras, Analyst

This is Ariel Altaras on for Rob. Just on the reacceleration in your consumption growth as consumers are set to spend more time at home now because of new lockdowns, are you seeing any meaningful distinctions across geographies? And also, how has consumer behavior changed in the second lockdown period in terms of what they're buying and how much they're buying compared to what you saw earlier in the year?

Stefan Descheemaeker, CEO

To your first question, the answer is not really across the board in Europe. Consumers are generally the same. When people are at home, they tend to appreciate frozen foods more, whether they are in Finland, Portugal, Spain, Italy, or Germany. The actions taken by governments have affected the intensity of buying, depending on whether schools or restaurants are closed. That's expected. Regarding your second question about the second wave, it's still early to tell. However, what we observe so far, beyond just frozen food, is that there is less panic buying. People seem to have learned to manage COVID better; they know what works and what doesn’t. Therefore, it is easier to balance demand and supply from that perspective.

Operator, Operator

The next question comes from Bill Chappell from Truist Securities.

Grant O'Brien, Analyst

This is Grant speaking on behalf of Bill. I have a question about the increase in investment in A&P going forward. Have there been any changes in your plans regarding how you will allocate that spending based on the current economic environment for consumers? I would expect a decrease in promotional dollars and a shift towards advertising, but I would like to hear your thoughts on this moving forward.

Samy Zekhout, CFO

I mean it's a very dynamic environment, as you can imagine. And we have to remain super agile in the way we manage our own spending there. Clearly, at this very stage, the current plan is to spend the proceeds. And for us, it's all focused on maximizing the mix across the product lines and the different vectors of spending, if you want, in order to clearly end the year with a very strong momentum, investing to the next year with a strong momentum as well. So I mean at this very stage, it's all about managing allocation, I mean, on spending.

Grant O'Brien, Analyst

Got it. And then just one on the cash flow, sorry?

Stefan Descheemaeker, CEO

No, no, please keep going. I was just about to say that it's really this very delicate balance between navigating through Q4 and obviously how to make sure that we are up for a fast start with the right level of A&P in Q1. Because again as we said, growing organically sales, EBITDA, and EPS is what we want to achieve in 2021.

Grant O'Brien, Analyst

Got it. Thanks for that. That's helpful. And then one on the cash flow, very strong so far, especially the free cash flow conversion. Just a question on your comments on more safety stock, inventory investment going forward, just to have a little bit of cushion. Should we expect to be more of a cash investment going forward with that dynamic? Or should we expect it based on some of the other initiatives that you have in place on payables, etc., to continue to be a cash generation?

Samy Zekhout, CFO

We continue to be committed to clearly converting more than 100% of our profit into cash, I mean, at this stage. So the factors you're describing have already been taken into consideration, to end the year with a strong momentum. And I think we've been clearly stating that we want to continue to return, I mean, a significant, let's say, cash level, I mean overall. And 100% is what we are after. So we're trying to balance all of the items from the cash part. And that's frankly what the cash breakthrough intervention is about. So definitely, all of these have been taken into considerations.

Operator, Operator

The next question comes from Jason English from Goldman Sachs.

Jason English, Analyst

Congratulations on the strong quarter. I have a couple of questions. Aside from the second quarter where you pulled back, you've indicated an increase in investment for the third and fourth quarters, yet we haven't seen that reflected in the P&L. Is the spending being deferred, or is it not as significant as I initially expected?

Samy Zekhout, CFO

Well, at this stage to be clear, Jason, I mean we are managing really our P&L. If you look on a full year basis at this stage, we were planning it effectively to start in Q3. I mean some of it has started in Q3, and the majority will be effectively Q4 focused as we had laid out. But we intended to continue to spend, if you want, the amount of investment that we had planned for, as we said because it's delivering good return and is the right thing to do to exit the year with the right momentum going into the next year.

Jason English, Analyst

Okay. On the cost side, we have noticed some weakness in the spot market for fish, likely due to food service challenges. Can you provide an update on whether you're experiencing any cost relief and how your input costs are standing, both in absolute terms and taking into account currency transaction impacts?

Samy Zekhout, CFO

Yes. I would say regarding costs, while your example is relevant, I think it's important to highlight that we've been very focused and opportunistic with all critical materials in our cost of goods. There have certainly been some opportunities in the spot market for certain ingredients, and we've capitalized on that this year. However, when we look at projections moving forward, our current expectation is low single-digit inflation for the next year, which aligns with our long-term history. So, in this regard, there is no change.

Stefan Descheemaeker, CEO

And it would be back to more normal years to some extent, Jason.

Samy Zekhout, CFO

And then on your question on FX, effectively I mean we do see some effectively slight help, but it's not going to be, I mean, that significant, given the fact that we have a rolling hedging program there. And most of it is being reflected, if you want, in the economics as we look at this year and the next year as well.

Operator, Operator

The next question comes from Faiza Alwy from Deutsche Bank.

Faiza Alwy, Analyst

I wanted to discuss private label shares, specifically some data we've observed in frozen fish. I understand that the data from Nielsen is not comprehensive, but it does indicate a slight increase in private label shares over the past few weeks. I would like to hear your thoughts on the performance of private label compared to branded products in the fish category.

Stefan Descheemaeker, CEO

Let me begin, Samy, and feel free to add your thoughts. I believe I grasp your concerns. Honestly, several weeks can often be related to promotions. There are times when we have a week or two where last year we had promotions, and this year we do not. Overall, fish continues to be an exceptionally strong category for us. Regarding the earlier question, we are making significant investments in Q4 and beyond. This does not alter our strategy concerning private label. We are fundamentally a branded company, focused on delivering superior products. We also need to consider managing price gaps, which is crucial. However, we are committed to being a leading fish company and intend to maintain that position. So, there is no need for concern.

Faiza Alwy, Analyst

Okay. That's helpful. Just to revisit the strategic investments you mentioned in A&P, did you plan for most of these investments to materialize in the fourth quarter? Or did you make that decision while entering the third quarter, choosing to defer spending until the end of the year to maximize returns for next year? I'm curious about your reasons for not spending in the third quarter.

Stefan Descheemaeker, CEO

As Samy mentioned, we are allowing the operators to make the decisions. We believe that implementing it in Q4 will have the greatest impact for their respective markets in each country where we operate. Regarding the earlier question about our planned investment of an additional 10 million for retaining new consumers, it's still early to draw conclusions, and we will keep you updated. We are exploring various solutions, not limited to television, but encompassing a broader approach. We are monitoring the situation closely and will share information as it becomes available. However, I wouldn't overemphasize the significance of Q3 or Q4, as our business management doesn't revolve around specific quarterly timelines; it depends on the preferences of the countries and their respective markets regarding when they choose to invest.

Operator, Operator

The next question comes from Ryan Bell from Consumer Edge Research.

Ryan Bell, Analyst

For understandable reasons, we continue to see that manufacturers in various countries are focusing more on meat alternative plant-based protein products in their pursuit of incremental growth. Can you provide some insight into how the competitive landscape in Europe is evolving and how Green Cuisine products are positioned within that context?

Stefan Descheemaeker, CEO

That's a great question. For us, it's a crucial issue because Green Cuisine and plant protein are significant areas of investment for Nomad. We are committing substantial resources, including cash, time, and talent. To give you more detail, we began our efforts last year in the U.K. and Ireland, with the U.K. being one of the most advanced markets in Europe, starting essentially from the ground up. We are very pleased with our progress; in just about a year, we have secured a 7% market share, making us the third brand in the market, and we continue to strengthen our relationships with retailers. Many of our retail partners have ambitious goals for this category, and we aim to collaborate with them on this journey. Looking at other countries, particularly in Continental Europe, where the market is less developed, we see various new initiatives emerging, especially in Germany, which is encouraging as it indicates a growing category. It's important to approach these markets differently than we would with more mature categories; the first step is to foster category growth. We're excited about these new opportunities, and it's our responsibility to distinguish ourselves through the quality of our products, effective marketing, and in-store promotions. In some regions, we are essentially becoming a market leader starting from a low base. Our challenge is to help consumers recognize the advantages of plant protein. There's plenty for us to tackle from different perspectives, including making significant advancements in research and development. We recently launched a new range of poultry-free nuggets, which are fantastic products. If you happen to be in the U.K., I highly recommend trying them. We expect these nuggets to make a notable impact, and the early results are very promising. I could go on about Green Cuisine for a long time, as it's a crucial focus for us.

Ryan Bell, Analyst

That was very helpful. And then could you speak in a little bit more detail about how the COVID retail landscape is impacting your SKU assortment? Essentially, what learning was provided about your brand and the package architecture? And then maybe how innovations are being able to get to market recently, in the context of increasing cases and how retailers are positioned to handle that going forward?

Stefan Descheemaeker, CEO

It's well known that during crises, retailers usually rely on standard SKUs. However, we haven't observed this pattern with Green Cuisine, and it's challenging to make comparisons since we're performing well. We don't believe that the innovations and new product developments from Green Cuisine and other sources have been hindered by our retailers at this point. While that could change in the future, we haven't seen any evidence of it yet. Looking ahead and anticipating a recession where frozen food performs well, we plan to collaborate with retailers to optimize our SKUs. Nonetheless, this is a dynamic process that varies by country and retailer.

Ryan Bell, Analyst

Okay. And so it's sounding a little bit like Green Cuisine is an innovation that may be uniquely successful. And is it fair to say that maybe some of your competitors aren't having the same level of success driving innovation? Or am I interpreting that wrong?

Stefan Descheemaeker, CEO

It's challenging to comment on our competitors, as competition is a two-way street. The competition exists in frozen food as well as in chilled and fresh categories. We need to consider both aspects to ensure that frozen products are adequately presented. Additionally, it's tough to speak on behalf of others. However, I want to emphasize that this is a long-term structural trend. We believe that collectively, we first need to ensure that this category can grow and become sufficiently large.

Operator, Operator

The next question comes from Peter Saleh from BTIG.

Peter Saleh, Analyst

I think this was mentioned briefly, but could you elaborate on it? You indicated that consumers are developing new purchasing habits and buying more frequently. Do you have any details or insights on how much of this change you believe is permanent compared to temporary? I understand this might be challenging to determine at the moment, but any information you could share to reassure us that some of these changes in consumer habits are likely to persist would be helpful.

Stefan Descheemaeker, CEO

Let me start with a general comment. We are monitoring these repeat rates on a monthly basis and have set some targets for ourselves. It takes some time to see the results because the frequency in frozen products is generally lower than in chilled or ambient products. That said, we are pleased with our current observations. I encourage you to attend the Investor Day, where we will share more about our ambitions and progress. I prefer not to disclose too much ahead of our conversation on November 10.

Peter Saleh, Analyst

Can I ask about the plant-based meat category? When you look at it as a whole, where do you think it is taking market share from? I assume consumers aren't eating more food overall, so there must be some share loss occurring. Is this loss coming from actual meat products? Is it coming from fish? Do you see any evidence of where the growth is taking market share from?

Stefan Descheemaeker, CEO

In response to your question, when we look at our innovations in the western markets, there is an inherent level of cannibalization, which is just part of the landscape. The good news for us is that this cannibalization isn't coming from our own products. It's still early to determine exactly where it's coming from, but on a broader scale, meat seems to be more stable than before. We'll need some time to fully understand the sources of this change. It will also be interesting to gather insights from retailers, who have indicated their support by allocating more space to plant protein in their frozen products, primarily at the expense of lower-value offerings that don’t overlap with our category. This likely reflects a shift away from lower-value products and potentially some reductions in meat content, which is logical. For us, this innovation presents a perfect opportunity as it brings in higher margins that align with our expectations. So far, everything is on track. However, as you can imagine, it’s important for us to invest proactively in this category, which we have been doing since 2020 and will continue in 2021.

Operator, Operator

Next question comes from Andrew Olsen from UBS.

Andrew Olsen, Analyst

I just wanted to touch a little bit on the Nordic region. I believe you started to lap the challenges there in Q2. So just wondering what you're seeing now and how you're seeing that recent turnaround?

Stefan Descheemaeker, CEO

Yes, as you know, I won't focus much on the Nordics, but I will speak specifically about Sweden. The rest of the business is performing well and meeting our expectations. In Sweden, we need to rebuild nearly everything. While it might seem like starting from scratch, we have been significantly involved in this process with Wayne Hudson, who is now overseeing the U.K., Nordics, and Ireland. We have a new team in place, and there has been a shift in mindset towards a more customer-driven approach. We are beginning to see progress, which means building better relationships and an increase in allocated space. This improvement will gradually unfold in the upcoming quarters, so I don't anticipate any dramatic changes in a single quarter. However, we're already noticing some positive trends, including promising results in cost optimization, particularly regarding logistics. Though I don't expect a rapid turnaround, our focus is on rebuilding the top line, and that is exactly what we are working on at this time.

Operator, Operator

There are no more questions at this time. I would like to turn the conference back over to Nomad's CEO, Stefan Descheemaeker, for any closing remarks.

Stefan Descheemaeker, CEO

So thank you, operator, and thank you for joining our third quarter earnings call. Our business continues to perform well amidst the COVID-19 pandemic. I'd like to reiterate the comments that I made in my prepared remarks: we're having an exceptional 2020 and are planning to build on that momentum in 2021 with organic revenue, adjusted EBITDA, and adjusted EPS growth. We're generating a significant amount of cash and remain active and well equipped to pursue M&A agenda or strategy. And we look forward to hosting you on our Investor Day next week to be held virtually, as you know, on Tuesday, November 10.

Operator, Operator

Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.