Essity AB (publ) (ESSITYB) Earnings Call Transcript & Summary

Welcome to Essity Capital Market Day 2021, which is virtual. We are broadcasting from our headquarters here in Stockholm. I'm Josephine Edwall, Head of Communications for Essity, and I will be your moderator today. Also today, we'll have our CEO, Magnus Groth, and we have on our other colleagues from the Essity leadership team. In today's world with an extremely fast change process, hygiene and health is more important than ever. And Essity's purpose, breaking barriers to well-being, is also more crucial than ever. So today, we will talk about our transformation journey. The theme is actually breaking barriers to well-being and also delivering shareholder value with profitable growth. Today's agenda is divided in 3 blocks. We will start with the transformation of Essity with Magnus Groth, our President and CEO. Also, we have our Executive Vice President, Fredrik Rystedt, CFO of the company; and Sahil Tesfu, Senior Vice President, Strategy and Business Development. The next block is about innovating leading brands, accelerating digitalization and leading in sustainability. We have a break, and we end the day with people -- winning with people and culture, growing in emerging markets and a group Q&A. You will also be able to have questions in the first session to Magnus, Fredrik and Sahil. So with this, Magnus and Fredrik, please join the stage.

Thank you, Josephine, and welcome, everyone, to this Capital Markets Day, and thank you for participating. I'm so happy to be here. And actually, for the first time in 1.5 years with the entire executive management team of Essity, and I really look forward to having all of them meet you here today. But before we look into the future, we're going to start by looking back what has happened since our last Capital Markets Day, which was in May 2019. So let's have a look. [Presentation]

So very busy times, and we ended 2020 with the highest operating profit ever. And this was no coincidence. As you can see from the picture here, this has been a steady development over the last 6 years. Top line has been growing on average above 5% and operating profit with above 10% over the last 6 years. So a very steady, stable as-you-go development. But Fredrik, you're going to talk about volatility and how we manage that.

Yes, I will, Magnus. So Essity's underlying structural margin has improved over the last several years, and this is a consequence of increased scale, improved mix and higher efficiency. And in fact, if you look at all -- almost all of our categories and geographies, they all have improved structural margin and, in particular so, for Consumer Tissue, for Incontinence and also for Baby. So the nature of our business results in a fairly low volatility of net sales, but we have had some volatility in our results and in our margins. And this has increased considerably from 2018 and onwards as a consequence of fairly extreme movements in raw material. Now lately, of course, COVID and in the very late period, also very high and strong movements on energy and distribution. So Essity has always recovered cost inflation through pricing, not through price and mix, but actually just through pricing. So the volatility is a function of the time it takes us to adjust pricing for cost inflation. And that time horizon can vary from anything to more or less immediately to several years, depending on category, on geography and, of course, market situation and competitive situation. So volatility has little or no impact on the net present value of our company, but we nevertheless work intensively to reduce volatility. And you can see on the slide here, to the right, you can see what the activities we have within our volatility toolbox. And in the longer time frame, portfolio transformation into more asset-light businesses, premiumization, innovation of brands and potentially also more alternative fiber usage, that will be the important in the long term. And in the short term, price agility and shortening of contract length is the more important activities. So one may potentially believe that we are faced with more volatility than our peers. But that is, in fact, not true. So if you look at the slide that I have here, you will, in the chart to your right, see a comparison between the volatility in earnings and margins of Essity and the peers that we're most often compared to. And there are 2 charts here. The upper chart shows the longer time horizon between 2014 and 2021 and the lower chart from 2018 to 2021. And regardless of which period you look at, you will see that the volatility in Essity is actually lower than what we have seen in our peers. And of course, as I already mentioned, the increase of volatility after 2018 in comparison to before is very significant for Essity, but actually, it has increased even further for competition. And that, to us, is a sign that the activities we have within the volatility toolbox is actually working.

I think that's fascinating and some new insights there, Fredrik. So we are actually less volatile than our peer group and many other companies. Actually, we made the same comparison to companies on the Stockholm Stock Exchange, where we are the eighth biggest company from a sales perspective and in terms of -- that also here, we have lower volatility. But throughout this period, we have continued to invest with the aim to be stronger post-pandemic. And we can see today that we start looking into the future with higher market shares than ever before, a very strong and leading presence online, which is, I think, a key winning capacity going forward, with a highly efficient supply chain that has really been a stable foundation for our business over the last 1.5 years and a rapid recovery in the 2 businesses that were most negatively impacted by the pandemic, that's Medical and Professional Hygiene. And based on this starting point, we recently raised the target for our sales growth to above 5%. And this is an increased ambition that builds up from the insight that the general increased awareness of health and hygiene will probably grow our categories slightly quicker. We also see an economic recovery in the short term that we think will help us. We aim to continue to gain market share. And finally, we have a strong pipeline of M&A targets that will also contribute to this over 5% growth target. So what about adjusted return on capital employed, where we changed the target third quarter last year to aim for -- to be above 17%?

Yes, exactly to your point, we did change it in quarter 3 of last year from more than 15% to more than 17%, no later than 2025. And actually, in 2020, we reached 15.7%. And now since then, return on capital employed has come down as a consequence of falling margins, while actually capital turnover has improved somewhat. And now as we execute on our pricing actions in the current environment, we will restore margin and return on capital employed levels or to the levels that we had in 2020. But of course, that's obvious that we also will do more to reach our target by 2025. And of course, as we grow faster in our asset-light businesses and as we generally improve in asset utilization, capital turnover will contribute to that goal of reaching our target. But as you can see on the slide here, the margin-enhancing initiatives are far more important to get to that target. And later today, through my colleagues, you will hear more about innovation of brands, digitalization and many other things that you see on this map. But I will start to talk a little bit about efficiency and what we are doing in that field. And so if we look at the Manufacturing Roadmap program that we launched at the end of last year, this is aimed at reducing, on an annual rate, our cost of goods sold with somewhere between SEK 0.5 billion to SEK 1 billion per year. It covers the full supply chain in all business areas. And we've divided into 5 specific areas, the first one being digitalization of oil production and, of course, also logistics. The second one is optimization of factory footprint. And here, the creation of the Consumer Tissue private label division is a good example. The third is further production efficiency. The fourth is a fully integrated supply chain, and the fifth and final relates to various sustainability initiatives. And here, one example is the usage or creation of manufacturing of pulp from alternative fibers. We are currently engaged into a very large digital platform project, where we are reengineering most of our processes that we have within the company. And further to that, we're also changing our ERP platform. And this will bring further efficiencies within our SG&A cost. It's not about reducing what we spend in terms of A&P. On the contrary, we expect our A&P to remain at the level of net sales as it is today and potentially increase even further as we go forward. And so finally, I think it's important to mention that all of these activities are extremely important, but, of course, the continuous and relentless cost efficiency efforts that all of our 46,000 employees do every day is equally important. And of course, that will continue to bring value also going forward. Starting next year -- so from the beginning of 2022, we will report the business in 3 new business areas: Health & Medical, Consumer Goods and Professional Hygiene. And this is actually an adaptation to how we have increasingly been working throughout the last couple of years. And what this means is that we have moved from more of a product perspective in how we're organized and how we go-to-market to a consumer and customer perspective, with different go-to-market, different needs with the fast-changing channels. And if we map our existing categories on these 3 business areas, I think it looks quite natural how they fit together. So starting in Health & Medical, consists of Incontinence Care Health Care, the 3 medical categories, compression therapy, orthopedics and wound care. And of course, the whole logic behind the acquisition of BSN Medical a number of years ago was to realize the synergies that we are really benefiting from in this part of the business that has a fantastic momentum, the entire Health & Medical business. The second business area is Consumer Goods, consists of what you would find at a retailer, whether on or off-line and also the division -- the private label division for Consumer Tissue in Europe that we are preparing to put separately from beginning of next year. That work is progressing according to plan. We are making this division slightly bigger than we initially announced. As you can see here, we have split Incontinence Care into 2 parts, health care and retail, and it's becoming more and more obvious that the need states are different in either Health & Medical, where institutions are many times our customers or in the Retail channel. And increasingly, we're also seeing similarities between incontinence care retail and feminine hygiene, which we are defining now internally as Intimate Care. And this is just to show some of the new growth opportunities that we see going forward. Finally, Professional Hygiene, very much associated with tissue, but actually around 20% of the business is now solutions, skin care, cleaning and wiping, and associated products. So also a lot of interesting and positive development opportunities. Financially, Health & Medical Solutions and Professional Hygiene are approximately, after 9 months this year, 20% each of overall sales, while Health & Medical has a significantly higher part of profits. Going forward, we believe that Health & Medical and Professional Hygiene will be a bigger part of both sales and profits as we move out of the pandemic, since it's in these 2 business areas where we had the biggest negative impact from lockdowns and restrictions. Current addressable market, maybe enough to say that this is a sizable EUR 120 billion. So growth opportunities in all the 3 business areas. And of course, we aim to grow with our leading brands, Tork and TENA, the leading brand in Professional Hygiene and Incontinence Care and all the other strong position, which are typically #1 or #2 in the markets where we are present. With that, let's move over to long-term trends, and I'd like to invite Sahil to talk about how we aim to win based on these strong underlying trends.

Thank you, Magnus. So let me start by having a quick look at the favorable trends that are shaping our business environment. We're aiming to particularly capitalize on 4 key trends that we consider most relevant for Essity's profitable growth across all 3 new business areas. Those are digitalization, sustainability, demographics, hygiene and health. And since all these 4 trends are playing out slightly differently in each business area, let's now take a closer look at each business area. Starting with Health & Medical. You can see here an overview of some of the key trends that are affecting our Health & Medical business environment. Firstly, the pressure on health care funding and staff is increasing. Therefore, prevention is key. And we expect that by 2040, 2/3 of health care spending will likely be on well-being and early detection of diseases. Secondly, we can also see an acceleration of home care due to population aging around the world and an increased patient preference for value-based health care and comfort. Moreover, there is also an increasing threat of anti-microbial resistance, in short AMR. The World Health Organization has actually declared that AMR is one of the top 10 global public health threats. Also, there is an increasing importance and demand from our customers and consumers for sustainable innovations. And finally, we also observed the consumerization of health care. Patients are asserting more influence and control over their medical and wellness care. And in line with that trend, with our loyalty platform, LymphCare, we have created an online community, where people suffering from lymphedema and lipedema can educate themselves and interact with each other. My health and medical colleagues will later elaborate on some of the other great examples of which you can see some on the slide here that show how we have been successfully leveraging these trends. So let's now talk about Consumer Goods. In Consumer Goods, we also see several trends that are changing our business environment. We can see consumers shifting towards more sustainable living. A significant share of global consumers already makes actions to shop more sustainably. But there's also an even bigger share of consumers who would like to shop more sustainably, but don't do so yet. This value action gap is a huge opportunity for our brands to bridge. As for the rising interest in self-care, COVID-19 has significantly increased the self-care trend. This opens very attractive growth opportunities, especially regarding digitally enabled and pure digital solutions. We also observed an increased hygiene awareness. For example, most global consumers express that they plan to wash or sanitize their hands more often than they did before the pandemic. And moreover, there is also an increasing relevance of purpose-driven brands, which can be explained by the increasing spending power of millennials and Gen Z, for whom purpose is a core filter when making purchase decisions. And finally, the rapid adoption of digital technologies and evolving shopper behaviors are transforming the e-commerce landscape. Particularly, we see an evolving role of social media. Consumer spending in social apps is booming, and social apps that offer live streaming as a prominent feature account for most of the spending in those apps. As a reference, Vinda, already in 2015, tested live stream shopping in China. And today, TikTok is one of the fastest-growing sales platforms for Vinda. As for all the other great Essity examples, you will also hear more about those later from my colleagues. And now over to Professional Hygiene. On the one hand, we see circularity as a step towards sustainability. Also, we see an accelerated growth of omnichannel as B2B customers increasingly demand similar experience as in B2C. And moreover, we see an increased emphasis on connectivity and IoT as customers' connectivity is increasing, which is driving an increased interest in connected solutions for replenishment of Professional Hygiene products. And in addition, we also see this business area being impacted by an elevated awareness of hygiene. And in line with that trend, under our Tork brand, we're offering virtual reality-based hand hygiene training and education. Hand hygiene is one of the most important tools in the fight against health care-associated infections. And the solution is specifically designed to make hand hygiene training more engaging and inspiring for health care professionals. Later today, my colleague, Don, will tell you more about all the other exciting innovations in Professional Hygiene. Overall, we see profitable growth opportunities in each business area that we compete in, which will enable us to expand the size of our addressable market. So let's look at how this will play out in Health & Medical. As for strengthening our performance in our Health & Medical core categories, we're already present with skincare products, for example, under our brand TENA, and we are convinced that we have opportunities to expand further in this area. Washable absorbent underwear is an example for a sustainable solution already in our portfolio. Also in this area, we believe there will be further growth opportunities. And looking at the next 2 growth horizons, we aim to expand alongside the continuum of care. We currently have many great offers in our portfolio for managing and treating different conditions, but these products only stand for a fraction of the cost of care of a condition. By expanding into, for example, prevention, supporting care delivery and monitoring of the condition, we can tap into an even bigger piece of the total cost of care. We're convinced that the platform that we are building in Health & Medical will enable us to later also enter into new categories, potentially through an acquisition. However, we also believe that for the time being, we have a lot of opportunities in the categories that we're in. So with that, let's have a look at Consumer Goods. As for strengthening our performance in core Consumer Goods categories, we aim to disproportionately grow the higher margin, lower capital Personal Care categories, particularly FemCare and Inco, through building leading and trusted brands. We're convinced that by leveraging our brands and by driving product performance, we can drive further premiumization and thus profitable growth. We will continue to develop and launch sustainable innovations in our branded portfolio, like we have done with reusable solutions like washable absorbent underwear and period cups. And moreover, we will continue to bring new hygiene innovations to market. And looking at the next 2 growth horizons, we aim to grow through new intimate hygiene products and services. Here, we aim to, most and foremost, target women across all different life stages, covering menstrual health, pain management, motherhood and menopause. We aim to do so particularly with digitally enabled products and solutions to tap into the booming femtech market. For the time being, we're not focusing on entering any new Consumer Goods categories. And with that, finally, let's have a look at Professional Hygiene. When it comes to strengthening our performance in core categories in Professional Hygiene, we will continue to develop and launch sustainable innovations. A recent example would be the launch of our reusable cleaning cloth. As for the second growth horizon, growing into adjacencies, the growth priority is skin care. We have already secured additional production capacity and launched innovations to meet the rising demand for soap and sanitizer products. The second growth priority is wiping and surface cleaning. Consumer expectations for cleanliness in restaurants, offices and other public spaces have risen. And to help our customers achieve those higher standards, we see an opportunity to enhance our core portfolio of wiping products. As for the third growth horizon, launching new business models, our Professional Hygiene portfolio of digital services and solutions, including Tork Vision Cleaning, optimizes our customers' efficiency and cleaning resources and dramatically improves also end customer experience. And we are convinced that we have opportunities to also expand further in this area. And now as for the last growth horizon, we're also exploring opportunities to leverage our strong reputation in hygiene, specifically wiping and cleaning, to bring a range of margin-accretive cleaning chemicals to our professional customers. And that actually concludes my overview on our priorities for profitable growth across all 3 new business areas. And I hope you share my excitement for the path that lies ahead of us. And when it comes to actually realizing some of these just shown priorities, M&A will play a crucial role. And with that, I hand it over to Fredrik for an update on our M&A agenda.

Thank you, Sahil. And since the last Capital Markets Day, we have made several acquisitions. And starting with 2 in the areas of Health & Medical, you see here ABIGO and Novioscan, and both of them contributes with good market positions, exciting technology. So we're very happy about those 2. We have acquired Familia in Latin America. And that acquisition will help us enable our ambition to become the fastest-growing health and hygiene company in the Latin American market. And Pablo will talk about that a bit later. And finally, we've also acquired the Australian and New Zealand-based company, Asaleo Care. And today with us, we have Sid Takla. He is the Managing Director of Essity Australasia, formerly Asaleo Care, and he will talk a little bit about the journey -- the value-creating journey that we've gone through there in recent years.

Thank you. After conducting an in-depth strategic review of all our categories, we have been on a journey over the last 3 years restructuring our portfolio towards higher growth, higher margin and less capital-intensive categories. In addition, we wanted to reshape our portfolio towards those categories we believe we have a clear point of differentiation. The first step in this journey began back in 2018 with the decision to divest our Consumer Tissue business here in Australia. This reduced our percentage of Consumer Tissue in our overall portfolio from 43% to 17%. The proceeds from this divestment not only allowed us to pay down debt, but importantly, allowed us to focus our investment and our energy towards those higher-growth, higher-margin categories of Feminine and Incontinence Care as well as Professional Hygiene. We continue this strategic intent in 2020 with the divestment of our baby diaper business in New Zealand. This was a category where we did not have any competitive leverage in this region and, although relatively small, was diluting our critical resources. As you will see, post these 2 divestments, our portfolio now comprises of 42% Personal Care and 41% Professional Hygiene. This more efficient portfolio has allowed our team to focus on the key categories. And as a result, over the last 2 years, we have increased market share across all our brands. With a stronger balance sheet and our brands in growth, we turned our focus to how do we accelerate this growth through inorganic activity. Our research supported the view of a growing global mega trend of products that are better for you and better for the planet. This also happened to be the fastest-growing subcategory in Feminine Care. Our aim was to create immediate scale and credibility in this subcategory, which we achieved through the acquisition of the market leader, TOM Organic in February this year. TOM has delivered double-digit growth over the last 5 years, which we have continued this year under rest of the ownership. Unlike the other mainstream players, TOM Organic has a purity of purpose. Its whole consumer proposition is based on being better for you and better for the planet. This simplifies the consumer message on what the brand stands for and delivers unquestionable credibility. This credibility is further enhanced through TOM Organic's sustainability credentials, in particular through the use of certified organic cotton and our reusables portfolio, including menstrual cups and washable period underwear. Clearly, TOM Organic delivers a compelling consumer proposition, but we wanted to make sure that we delivered a compelling financial story as well. TOM Organic was immediately margin-accretive, and we are on track to double profit by the end of the second year of Essity ownership. On all metrics, TOM Organic has been a great acquisition for Essity Australasia. But what's really exciting is the opportunity to take TOM Organic global through the Essity network and into adjacent categories, leveraging this global mega trend of products that are better for you and better for the planet. Thanks for the opportunity to share with you the Essity Australasia journey.

Thank you, Sid. And talking a little bit about the future in M&A, and we have generally strengthened our M&A activities quite considerably. And we believe that we have a strong pipeline of potentially value-adding acquisitions that we are looking at. And primarily, those targets are within the new Health & Medical business area. But there are also interesting opportunities within Consumer Goods and also in Professional Hygiene. And so we have identified what we believe are the topmost interesting 10 candidates for all of these business areas. We have also changed the way we work with M&A, and we have now involved the business leaders of our group to a much larger degree than we did historically. So if we look at our business leaders, they are instrumental in, for example, target identification, maintaining a dialogue with potential targets that may not be for sale at this moment, but may become for sale at a later stage. And of course, third and finally, very important in the creation of business cases in concrete cases. So we don't do acquisitions just for the sake of doing acquisitions. Each acquisition need to be value-creative, and it needs to have a good strategic fit and, of course, needless to say, yield a return higher than the cost of capital. And we always compare any acquisition to other capital allocation alternatives, and acquisition needs to be equal or preferably better than other allocation alternatives.

Yes. And Fredrik, I think this is a perfect example of the types of acquisitions we like to do. This was announced just this Monday. It's the leading brand in professional sports tapes in the U.S. as it is already the global leader in sports tapes. And with this, we also become the market leader in the U.S. And why is this so attractive? Strong underlying trends. I think Sahil covered a few of them. This is typically a line of products that's moving from a medical thinking to consumerization. It's moving from treatment to actually prevention and self-care. And of course, when you move from treatment through the continuum of care to prevention or self-care, the market becomes so much bigger. And in addition to that, these are very, very strong brands, leading brands. We know how to do this type of business and of course, in a very, very attractive and growing market. So it's a great example of the type of acquisitions that we would like to do more of. So we're coming to the end of this first part of our Capital Markets Day, and we've been focused very much on the bubble that you see there to the left, continuing the transformation journey and also how we are working to improve efficiency. But we will hear more about this in the next part, also about innovating leading brands, accelerating digitalization and the other important areas where we are doing big investments. But before handing over to the Q&A session, I would like to have a quick glance at where we are today, and we might be 5 years ago in a framework that many of you will -- remember, this is Fredrik's favorite framework that he brought to Essity many years ago and where we have all been trained internally. So what this framework shows is on the x-axis growth and on the y-axis returns or margins. And this is just an illustrative example of where the 3 new business areas that we will start reporting at the beginning of next year, 2022, where they would approximately be currently. And of course, with the transformation journey, all the things we've been talking about, our aim in 45 years' time is to move all of these up to the right, with higher growth, higher returns. Even though I would believe that Health & Medical and Professional Hygiene will move further than Consumer Goods, but many opportunities also there. So I will leave you with this picture of above 17% return on capital employed, combined with a growth of over 5%. Josephine?

Yes. Thank you, Magnus. Thank you, Fredrik. Thank you, Sahil. And now we will start the Q&A session. [Operator Instructions] So with this, operator, please start with the first question.

[Operator Instructions] And our first question comes from the line of Karri Rinta from Handelsbanken.

Karri Rinta, Handelsbanken. A question on incontinence and incontinence retail in the U.S. In light of the new organization, are you still pursuing the retail market for incontinence in the U.S.? And if so, would it be possible that at some point in the future, you would extend your offering with, for example, this top organic that you discussed?

That's a clear possibility. So the answer to the first question, Karri, is, yes, we are still pursuing incontinence care retail in the U.S., even though, as you know, that's one of the few markets in the world where we are under challenges. In Incontinence Care Health Care in the U.S., we are doing really, really well and continuing to gain share. But these are definitely the types of opportunities that we are looking at. And of course, the United States is a very attractive market from a hygiene and health perspective.

Our next question comes from Charles Eden from UBS.

Just when I look at the new organization and thinking back to the 2019 Capital Markets Day, where you clearly set out which businesses would be run for growth and which would be run more for profitability. Now obviously, they are combined in certain cases under the same division. Does that in any way impact the way you think about the various product categories? Or is it still very much that approach even under the new reorganization?

Yes. So the logic that we described, I think, with the strategic pyramid in 2019 is still valid. So priority growth in Medical, Incontinence Care, FemCare, Professional Hygiene while instead safeguarding margins in Consumer Tissue and in Baby Care. So that still applies. Having said that, a big differences to 2019 is how we're now seeing, actually, Incontinence Care as partly two quite separate businesses, health care and retail and how Inco retail is merging together with the Feminine Care into an Intimate Care category. So same, but slightly different.

[Operator Instructions] And as we have no more questions registered, I'll hand back to the speakers. We do now have a question registered from the line of Celine Pannuti from JPMorgan.

I wanted to ask -- you talked about your recent M&A. Can you give us a bit of your view of how you perform with BSN? Because I think the growth probably hasn't been as good as we thought. Obviously, they have been COVID and the business has been a bit of a roller coaster between 2020 and '21 rebound. But in general, how would you -- what would be your conclusion of how you fared on this acquisition?

Fredrik, do you want to talk to that?

Yes. Celine, I'd be glad to do that. So you're absolutely right. We performed really well with BSN from the start when it comes to margins. But we had a bit of growth issues in the first few years, and we worked very intensively to address that situation. So actually, at the start of 2020, we felt very confident with what had been accomplished. So we felt that this was going to be a great year, 2020, for the whole medical business that we had. And then, of course, COVID had a big impact. But as we have now reported in 4 consecutive quarters, as you have seen, growth has been very, very strong now. And this is not just related to the recovery, this is an underlying and, also from our perception, a relative growth versus competitors. So we feel that the issues that we had, they have been addressed, and we're very happy about the performance. So overall, that's for net sales. And of course, as this is also bringing scale advantages, margins have also done -- been doing really well in the last several quarters.

Our next question comes from the line of Linus Larsson from SEB.

On your transformation journey and with regards to the -- I think it was very interesting to hear the Asaleo presentation, where Asaleo has changed its mix quite fundamentally in the short period of time. When we look at Essity's product portfolio at this point in time, even if we take into consideration the work you're doing in private label, Consumer Tissue will, as it seems, remain a very significant part of the group. How do you see that developing over the next 5 years or so in terms of potential for differentiation in terms of repositioning or scale down?

Yes. Thanks, Linus, for catching that. Of course, there was a reason for putting that material into the presentation, could former Asaleo, now Essity Australasia, be a proxy for a future Essity. Of course, a big difference is the relative sizes, where Essity is so much bigger. So it takes more to move the needle. Having said that, large parts of our Consumer Tissue business is very, very value-contributing and will be even more so as we continue to work with efficiencies with the new fibers, sustainability, building the brands. So there's a very healthy future for Consumer Tissue in Essity. But of course, it fits very well with our strategic intent to grow what we in the future now will call Health & Medical and Professional Hygiene and FemCare and Inco retail in the Consumer Goods category more than the tissue business. So very much in line with our strategic intent.

Our next question comes from the line of Oskar Lindstrom from Danske Bank.

I'd like to follow up a little bit on Linus' line of questioning there. I mean the headline of this section is transformation, and you talk about a transformation journey and a lot about the acquisition opportunities. Now over the past 4 years or so, exits some various parts of your business have also played a quite significant role, primarily for profitability reasons, I mean that certain businesses were deemed to be low profit. I mean what role will disposals and exits from various business segments play in the coming years in the transformation journey? I mean is that going to be an important part of the transformation you foresee.

Fredrik?

Yes, Oskar, thanks for the question. Of course, the alternative is really not to transform in principle with divestments. It is actually through acquisitions and stronger organic growth for those areas that we prioritize. We never rule out anything. And of course, divestments could be an alternative. If we have, as an example, underperforming businesses, but that's not the general direction. It's much more acquisitions and organic growth.

Our next question comes from the line of Karel Zoete from Kepler Cheuvreux.

Follow-up on M&A and specifically for the Health & Medical channel. Particularly within medical, you're active in a selective number of segments or categories. Are you considering to enter more categories, given the synergies you will have in your sales network? And also, would you potentially be looking at larger deals in medical? And to what degree would you want to leverage the balance sheet?

Okay. So I will start and hand over the balance sheet question to Fredrik. Of course, the starting point is that every acquisition should be value-creating and, having said that, of course, also entering into new categories. I mean, it could be possible, and also finding other sources of capital as long as it's value-creating for the shareholders. Currently, and as Sahil, as he referred to, we are currently primarily not looking into new categories. However, when you look at larger acquisition opportunities, they typically contain some other categories where there are synergies that we are currently not operating in. So it's not unlikely that eventually with midsize to larger acquisitions that we could add on also other categories. But then, of course, preferably the ones that have synergies with our existing business. Fredrik, the balance sheet. How are we doing?

Yes. Thank you, Magnus. Now the new growth target of more than 5% is basically based on our belief of what we can do, so to speak, in terms of acquisitions with a maintained capital ratio. So of course, that's the outset. We can always potentially fund also larger acquisitions, but it would take other funding solutions than just kind of debt financing.

So thank you for the questions for this block, and there will be an opportunity also in the last session. So if you didn't have time now, you can come back in the third session. So let's have a short break and be back at 3 p.m. Central Europe Time. See you then. [Break]

So lots of innovations from all our different categories and brands all over the world. Welcome back, everyone, to innovating leading brands. I hope you have noticed the last couple of years that the digital elements and the sustainability impact in our products and our innovation has actually increased, which is better to serve our customers, consumer, but also for people and the planet. So to set this in for this block, Magnus, I hand over to you.

Thank you, Josephine. And as you already know, this is my favorite topic. And that every quarter when we report the financial results, we always sneak in a few slides about our innovation. It's so important for us, and I'll get back to why. And also through the pandemic, we've been able to design, develop and launch a number of successful innovations. And we see this as an important positioning to come out stronger after the pandemic. But also, we see that we are benefiting from an increased demand for sustainable products and of course, from an increased health and hygiene awareness. And some examples on the next slide, which fulfill both of these criteria. And all these investments are really paying off. If we move to the next slide, it's clear that we are seeing in the numbers how our innovation is leading to leading market positions in 90% of our branded sales. So this includes both business-to-business and business-to-consumer. If you look specifically at the branded part of our retail sales, we are growing market shares in about 70% of our market positions, which we have never done before. So a fantastic achievement through the pandemic. And these are some numbers. What we also actually see is that we're doing this with improving mix and an improving margin, which comes, of course, from the premiumization that's a part of this. So a very positive development.

Great. and I will now walk over here to some of my colleagues. Let's hear what you have to say. So here, we have Tuomas Yrjölä, President, Global Brand, Innovation and Sustainability; Volker Zöller, President, Consumer Goods; and Ulrika Kolsrud, President, Health and Medical Solutions. So hi. Welcome, everyone. Glad to see you. To kick off the discussion. Tuomas, how do we drive innovation at Essity?

So we base all of our innovation, a very deep consumer and customer insights. And what we do is we translate those insights into superior solutions or products. And we actually have a very simple measure for it. We look at what percentage of our sales is in products that consumers and customers like to use. We call it consumer preferred products or superior products. And in fact, if you look at it, it's working really well for us. Because over the last 4 years, and you can see it here in the chart, we've in fact, with all of our innovation transformed our portfolio from 40% to over 60% of sales in superior products. And you can see to the right of the chart, how that's impacting our brand equity.

Can you give some more examples?

Yes. Let me give you 2 specific examples. So let's maybe start with Consumer Tissue, which is -- some might say one of the more challenging categories to differentiate. And in fact, if you look over the last 4 years, all of the focus on premiumization driving superiority is driving the premium assortment and segment. And we've, in fact, over doubled the size of sales in the top tier, which is a great proof point that we can actually, with innovation, drive value creation by trading up consumers. And one good example of this is a product that we call Just 1. Here you see example from Mexico. And in fact, it charges 50% higher pricing than the average product in the market. So yet again, a good example of premiumization. I have one more example, which is Baby Care, where we understood from the consumer that there is a consumer who's looking for high-performing products is willing to pay for it, and we created a super-premium segment called the Libero Touch. And that was launched about 4 years ago, and it keeps growing and going from strength to strength. We now have over 25% of sales mix in this premium assortment and it helps to grow the overall brand. So when we started the journey, Libero had a 60% market share. And today, just crossed 70% market share. So great examples how innovation drives trade-up and that drives value creation.

I know you love brand building. You are actually the expert. Can you tell us a little bit more about brand building within Essity.

Yes, sure. So innovation is, of course, one way to drive growth, but brand building is a great way to drive demand creation. And we're very focused on building purposeful brands that the modern consumer is looking for, and we build trust on our brands. And the way we do that is we've built a significant capability in digital brand building. We've been very early on in using ad tech, being very targeted in the way we reach the consumer and customer, and that is increasing our return on investment. On top of that, what we're doing is we're using a lot of the latest technologies to cut down the development time and cost on advertising. So that's been a big driver of growth for us. And the other thing we're very focused on is be very purposeful in the brands that we drive. And I think one of the greatest examples we have in the company is on Feminine Care, which is a category that's gone from strength to strength, and it is one that's been really championing purposeful advertising. So let me bring Tanja Grubner, who's our Global Marketing Director of Fem Care to tell you a bit about that story.

Let me tell you our fearless journey of our Essity Feminine Care brands like Libresse, Bodyform and Nana and how we built one global brand. It all started by discovering toxic taboos and social stigma around women's bodies and their periods. So we wanted to create conditions for women to live better lives. So we started developing campaigns to break those harmful taboos. The first one was normalizing periods in sports and it was called no blood should hold us back, which then followed by blood normal, which showed periods in their true color, red not blue because women bleed blood not blue liquid. And then we called out the culture of body shaming with Viva la Vulva. The results speak for themselves, Essity Fem Care brands are the fastest-growing brand in the market, outperforming key competitors. In the last couple of years, we've won 29 [ Cannes ] Lions, which are the Oscars of the marketing industry, including the Grand Prix for Health and Wellness. And this has put us among the most creative brands in the world, ahead of industry heavyweights like [ Dove ], Nike or Apple, and we couldn't be prouder.

Great. So thank you, Tanja. And I hope you got the idea that how this advertising and taboo breaking really not only improves the lives of millions of girls and women around the world, but it's also a great accelerator of growth. And in fact, on Feminine Care, we've added over EUR 300 million of sales since 2014. We're growing market share in over 70% of sales, and our average growth is significantly ahead of the market. So clearly, it works with consumers, but it also drives a great value creation.

I think this is excellent, Tuomas, and thank you, Tanja. I know you are looking at this, and this is really about breaking barriers to well-being and as you said, empowering girls and women. So Volker, what innovations would you highlight from consumer goods that actually generate great value for the consumers and Essity, but also for the environment?

Maybe let me start emphasizing something Tuomas said at the very beginning that all our innovation is based on strong consumer insights. And usually, we are targeting for product superiority or sustainability or combination of both. If I should pick some of the highlights, then I could start in Consumer Tissue with our coreless products, which we have successfully launched in France and in Germany, and they are going to triple our capacity during 2022. Another exciting example from the Consumer Tissue categories, of course, our alternative fiber project in Manheim, where we are going to relaunch in 2022, [ save our planet ] in the German-speaking countries with a 30% of whetstones content. On the Personal Care side, I think we have also a very exciting, [ in example ] we talked about this already in the formal presentation, washable, absorbent underwear addressing the needs for reusables. And we have been launching this new category in 6 European countries and direct-to-consumer retail and also in Latin America, very, very successfully. And we are continuing to be fast and agile based on the insights we have been generating there. We have been launching a new category, which is washable, absorbent underwear for men. And I think we have been -- it has been really taking from idea to solution until we have been on shelf exactly 100 days. I think this is a nice proof we're agile. And the example I was speaking are very nice examples how Essity brands are contributing to the overall aspiration of Essity.

And the consumers today are they willing to pay more for sustainability?

They're definitely a higher awareness around sustainability and by that, also a higher willingness to pay for that. Hygiene in the area of pandemic is very often seen as an enabler for well-being and for health. I think this is really a sustainability is seen as an enabler for hygiene and health. We have been doing some research in the U.K. We have been posting Essity's green recovery report in 2020. And consumers have told us that they are an average willing to spend 12% more for sustainable solutions. And I think what is very important, the consumer is not willing to compromise with the product performance.

So Ulrika, Volker mentioned the washable underwear, what innovation would you highlight in addition to this for Incontinence Products and Medical Solutions?

Well, we have plenty of highlights, but let me share just a few examples. And as you know, focus our innovation in areas that are highly relevant for patients and for health care payers as well as clinicians. And I think one good example of that is skin health. Elderly skin is often fragile, and our research shows that health care professionals, they consider protecting the skin and maintaining a natural skin health as the most important parameter for continence management. And therefore, our TENA ProSkin range, where we have textile like materials and breathable materials and moisture reducing technologies is highly appreciated both by patients as well as by caregivers. And we continue to innovate to strengthen this offer and to expand this offer. And also the premium skin care products in this range where we have the washes and creams, they offer good opportunities to improve our mix. And I would say, skin health and skin integrity is also highly relevant for wound care. I think we can all relate to that it's quite painful just to take off a normal Band-Aid. So to save the patient from unnecessary pain, and to avoid unnecessary health care costs for restoring damaged skin, we have leveraged our superior adhesion technology to innovate dressings and fixations that are gentle to the skin, of course, without compromising on the adhesion properties. And I would say this is a true differentiator for Leukoplast and also something that justifies our price premium. And if I may talk about one more category.

You may.

Thank you. Because I would like to talk about compression therapy as well because also there, it's important to have products that are doing the job while being gentle to the skin. If you live with lymphedema, you need to have lifelong management of your condition. And then, of course, if you use compression garments every day, you want to have products that fulfill the medical needs at the same time as they are comfortable to wear. And our latest innovation jobs confidence is delivering on exactly those needs. It's based on a new innovative knitting method that makes it possible for us to give the garment a contour fit that is tailored to the individual body shape, almost like a second skin. And also, it has quite advanced moisture management technology that gives another level of wearing comfort. And we've even heard patients saying that they forget that they are wearing this government, and that is music to our ears.

I truly agree. I really like that the products are much more comfortable. I also noticed that they are actually more appealing today with different colors and so on. So is there a fashion in this area?

Yes, it certainly. Actually, we are launching new color collections for JOBST compression garments every season. And you might want to know that the trend colors this season that we just launched our palm green and magenta rose. So there is fashion in compression. And actually, colors and patterns are becoming increasingly important. Both for users to get their products reimbursed, but also for users that pay for their products themselves. And on that note, when we talk about users that pay for the products themselves, I want to mention that we expand our offering into a self-care and self-pay situation. And thereby expand our presence more and more, not only for JOBST but also for our other brands. In Wound Care, for example, our Leukoplast Red assortment is now available over the counter in the pharmacies, and it's growing very nicely. And also, with Actimove, we have launched a pharmacy edition and that pharmacy range or sports range that we have in the pharmacy that is now possible use when you come home from an injury and you start going back to sports. I mean you can use not only Essity products when you are in the hospital and get treated for your injury, but also pay for them yourself when you get back sports at home.

Excellent. And I have to say, innovating leading brands. It's not only about our products and solutions. We all work with different educational programs, with partnerships to really break barriers, so people can actually have a better life. Thank you, Tuomas. Thank you, Volker. Thank you, Ulrika.

Yes.

Thank you.

Thank you.

So accelerating digitalization. Magnus, when you became the CEO, digitalization was one of your priorities and a lot has happened since then. Can you elaborate a little bit?

Yes. Thank you, Joséphine. And at that point in time, we focused very much on e-commerce and talking more about that in a minute. But as a starting point, we look through the entire business. And if I could have the next slide, please, yes. We started through interacting with our customers and consumers, but very quickly added, of course, the opportunity to sell our products also online and moving forward to really providing life-changing digital solutions to our customers and consumers. Increasingly, in recent times, we have invested more internally in the efficiency of our own operations, digitalizations through automation and robotization and building capabilities and skills also in data analytics. And this is just the beginning. This will give us a lot of advantages and opportunities that are even difficult to actually foresee at this point in time. But coming back then to e-commerce, we have had a very positive development. It looks as we started 2019. Actually, we started 10 years ago, and this is the result of all that work. And I think a big opportunity for us was actually when the pandemic struck, and we were extremely well prepared and took the opportunity to grow market share. Our easy logic 10 years ago was that let's try to always overtrade in the winning channels and with the winning customers. If we do that, we will grow. And this is exactly what happened. And what makes it even more attractive now is that it doesn't only fuel our growth, margins are similar online as off-line. And typically, we have a better product mix with a higher share of premium branded products the online channel. So another reason why -- to keep on focusing here. But let's hear more about the other digital digitalization initiatives we have in the group.

Yes. And here with us to talk more about those. We have Robert Sjöström, you are President, Global Operational Services; Donato Giorgio, President, Global Supply Chain. Welcome.

Robert. As the CIO of the company, you are responsible for Essity's digital strategy. So what are the benefits of our different digital initiatives?

Yes. Thank you, Joséphine. And as Magnus just alluded to, we've been on a journey for many years already. And this goes across the whole company. And the objectives are quite simple, is to drive top line growth and operational efficiency. We have 4 building blocks in the digital strategy. The first one is to interact and transform how we interact and work with customers and consumers. The second one is innovate digital products, solutions and business models. The third one is to improve how we operate our business across all -- processes. And the third (sic) [ fourth ] one is to build up the capabilities needed to continue to drive our digital transformation.

And what does this mean from a customer and consumer perspective, would you say?

Many things. One example is that data -- thanks to data and analytics, we gain much better insights -- customer consumer insights. By leveraging the insights we can innovate and develop better products and solutions that fit for the needs of our customer consumers. Also, it means that we can communicate with customer consumers in a much better way leading to stronger brands and improved loyalty. But digital also drives solutions, and we are developing solutions across the company, like SmartCare in health care, Tork Vision Cleaning and Professional Hygiene. In consumer goods, we are accelerating our direct-to-consumer approach also we gain a lot of more impact on social commerce.

Magnus mentioned the growth in e-commerce, what possibility does this create from your perspective?

Yes, we have been on the [ journey ] already 10 years, but I still believe it's the beginning of it. E-commerce is the fastest-growing sales channel in Essity. I think that future is brilliant. We see that as we speak, emerging ways of solving the last mile issue in the biggest hit is how to deliver our products to the consumer. Once that is solved, the customer consumer experience will improve and will also contribute to our sustainable target. Our digital strategy has much more -- cover much more and bigger perspective than only e-commerce. And we are building scalable solutions in the company. We are driving operational efficiency. It will enable us to grow the business without adding the same kind of cost, it will enable us to bring on acquisitions in an effective way.

And I would also say that thanks to what you have done within digitalization, it has helped us a lot with logistics and distribution that many companies today are having challenging with. So now I will hand over to Donato. Donato, you are sale for Essity's end-to-end supply chain. How is digitalization transforming Essity's supply chain? And how is it better serving our customers?

Joséphine, the digitalization is essential to set Essity as a leading health energy company. Not -- I mean, primarily for our manufacturing road map because we have a state-of-the-art maintenance system based on cloud-based artificially intelligence and remote-based monitoring in our tissue machines that are quite intense from a maintenance point of view. Another example, we have a very advanced process control based on the latest data analytics in our personal care line, in our converting lines to ensure that we have a constant top quality to our consumer and continuously optimize raw material utilization, which is very important particularly in this moment. So as I said, to keep Essity on the forefront of the Industry 4.0 in our industry is essential, and we are proud of that. Important is also automation in our logistics operation. When we manage as also Robert said our logistic operation in a very efficient and effective way is very good for visibility end-to-end.

One concrete example on how digitalization has helped us with performance improvement and efficiency gain in the supply chain.

Yes. As I said, we have many examples that we are proud of. But if I have to pick up to just one, is building on what Rob said, is to what we do in our control tower center with advanced analytics in Barcelona, where we monitor and coordinate global transport. And particularly now for Europe, we prepare the truckload filling system. And just to give you a really concrete example, practically, we know that every 50 trucks that we ship save 1 truck on the road due to optimization of space and allocations. This is a great advantage for CO2 for traffic management and also for Essity value creation.

Thank you now. Let's move over to this room, where we will talk about innovative, life-changing digital solutions and e-commerce with my colleagues; Ulrika, again, Volker again and Don Lewis, President of Professional Hygiene. So great you're here.

Thank you, Joséphine.

To start with Health and Medical, Ulrika, how important are digital solutions in your area?

Well, it's very important. We have a growing and aging population in the world. And with that comes an increasing demand for health care. And at the same time, as we heard Sahil talk about earlier, health care budgets are under pressure and also some markets experience that there is a lack of staff in health care. So that's a quite difficult equation to solve. It requires transformation of health care with new ways of working and new tools. we believe that our digital solutions can play a key role in that transformation. And I think one good example of that is our TENA SmartCare solution. This is based on a sensor technology indicating when it's time to change the incontinence protection and giving notifications to the caregivers. And I think what that means the caregivers is that, that reduce the unnecessary checks, the unnecessary manual checks that you have to do and that saves or frees up a lot of time for the caregivers. Time that they can spend on other patient care tasks. It also certainly improves the well-being for the residents to get their parts changed needed. Not too soon, not too late. And also the users, they are not disturbed as much for these turns and checks and product changes. That's very positive.

And how is the low launch of TENA SmartCare proceeding?

It's going very well. Thank you. The case studies that we see now as we commercialize this solution is really confirming all the great benefits. There is a significant reduction of the manual checks. There is a significant reduction in the number of product changes and also in leakages. So then you don't have to and wash the bed linen as much. And that is, by the way, an environmental benefit as well. And I want to emphasize that although this solution is, of course, highly relevant for professional caregivers, it's equally valuable for caregiving relatives. And for this group of people, we have also launched a family care app to support them even better. And someone who is very good at explaining this is our Brand Director for IQ Solutions, Axel Nordberg. So let's listen to him.

Thank you. If we look upon the demographics, we see that approximately in 2015, there'll be 1 billion more seniors over 65 million. About 80% of them wish to age at home. And we already today see shift to home care. This means not only that we have a higher workload in institutions but also that family care members, to a larger volume and to a larger degree, will take responsibility for the care of the loved one. And a family care member is typically around 40 years old. They have their own kids, their own career, hobbies and they're untrained. And all of a sudden, they're thrown into this care situation of taking care of someone. And they also expect at-fingertip support, so they don't have time to go over course. And that's what we're addressing with this app. We support them at their fingertips with their core needs, which is reassurance of good care, access and care advice, collaborating with other family care members, documenting events and planning for good care ahead. And if we take a look at the app, we see that we have to do list. We have a care team, we can access care advice. We can go and check the history. We can, of course, also order products from the TENA web hub. And of course, we also have this one connected to our SmartCare device, which gives the full care team a knowledge about when to change the absorbent product. And this is further increasing the reassurance of good care of the family care members. [Presentation]

Another digital solution that we have in our portfolio is the TENA bladder sensor. This is also a technology that is relevant both in the institutional setting as well as in the home care setting. And I suggest we go directly back to Axel so that he can explain more.

Thank you. With the acquisition of Novioscan, we got access to a very interesting technology for continence management. It's a wearable ultrasound sensor that measures the urine in the bladder. This is in line with our strategy to expand our offering along the continuum of care, they also include prevention and wellness has the potential to be relevant in nursing ones in the hospital settings as well. We also believe that this solution would contribute to more optimal use of our products and a more sustainable use of our products going forward. This has potential to be a real differentiator for it, but also a game changer suffer from incontinence in their daily life. This device is already in the market for kids today. And now we will start to pilot this also for adults.

As you can tell, we are very active with digital solutions in our incontinence care area. But we also developed digital solutions for our other brands. And one good example of that is the Cutimed Wound Navigator that we just recently launched. And I would like to invite 2 other colleagues to talk about this solution. Anand Chandarana and Sofia Heddson Fransén, who work with digital solutions in medical. Over to you.

Thank you. The Cutimed Wound Navigator is a mobile application that we developed in partnership with the Swiss start-up Imito AG. It supports health care professionals in assessing and documenting wounds and then supporting them in the selection of appropriate product from Essity's portfolio.

Earlier this year, we launched the app in Germany, and we are already receiving encouraging feedback from the users. A typical user like a home care nurse needs to document a number of parameters before deciding on the right treatment for the patient. This can be done in the app through a simple and intuitive interface. An important feature of the app is the ability to capture an image of the wound and put that into the documentation. The app will automate the wound measurements and give length, width and surface area. Over time, this gives the ability to objectively follow up on healing progress. The entered information is summarized in the digital report, which includes the suitable products from the Essity range.

Our goal is to keep developing the app in line with user needs. We are even considering in parallel a more comprehensive solution, which includes clinical decision support, treatment recommendations and education, which can be applicable for a broader set of users. We are convinced that technology and market readiness has evolved to an extent where solutions like this can really succeed. And we believe that Essity has a part to play in shaping the future of wound care.

So now you have seen a few examples of how our digital solutions support health care in improving patient outcomes at the lower cost. And for us, these offers a strengthening of our overall value propositions, it offers opportunities to improve our mix and also, in some cases, generating new revenues streams. And I dare to say that this is only the beginning of our journey. We have high ambitions when it comes to expanding our offering with digital solutions in prevention and monitoring of conditions.

Exciting journey, Ulrika.

Certainly.

So I also know you have an exciting journey within Tork. And how would you say that the Tork digital solutions are helping your customers?

It's a perfect time for Tork digital solutions with our customers. I don't think anybody would deny that there's an increased focus on hygiene, especially hand hygiene. And our recent data shows that 1 out of every 4 people that go into public facilities or washrooms are just going in to wash their hands. So that's a bit of a change, and it shows how this has increased. So it's very important to visitors and to the people that have the facilities. We recently launched Tork Vision Cleaning, and this is an extension of our Tork EasyCube that we spoke about before. And this allows facility managers to use data to ensure cleanliness of their washrooms. And it's really the perfect match when paired with our Tork PeakServe system. And we've gotten a lot of recognition from an innovation perspective and really good customer feedback, especially of this time with increased hygiene awareness.

And how does Tork Vision Cleaning work?

So Tork Vision Cleaning is an offer that we have that has smart technology in our dispensers. It's very interesting, and it provides real-time data. And it's not just the data, it's actually the insights that come from the data that are important for those people that are owning buildings or stadiums or so forth. So they get a lot of data, which helps them clean and maintain the facility in a much more efficient way. Maybe rather than talk about it, it's easier if I show a video, and I think the audience will see exactly what it's like.

Yes. Great idea. [Presentation]

So you recently made a survey among Tork Vision Cleaning customers. What did you learn?

Well, certainly, the best feedback you can get is from your customers. And when we recently surveyed our Tork Vision Cleaning customers, we learned a few things. First of all, every single one of them felt that they were able to provide a more hygienic environment with our products. Secondly, 82% said that it improved their efficiency. And this is important because you want to be able to go to the right spots to get the dispensers that are low of product to make sure that the customers are happy that they always have products because you certainly don't want to be out of products. And it allows them to make their cleaning plans in an efficient way, which saves a lot of time and labor cost, which is super important. And training is also expensive if there's turnover. So the morale actually goes up, too. So that's a great benefit. 85% said that it made them feel like they were in a safer environment. And 100% of our Tork Vision Cleaning customers said they would recommend it to others. So that's really good feedback from our customers. I'm proud of it. And I really hope that someday. And I believe that all devices will be connected the way the world is going, and we're in the front of this.

And we have it in this building. We love it.

We do, we do.

So at the Investor Day 2019, you spoke about omnichannel. How has this developed?

It's developed very quickly, and I'm very, very happy with it. I want our customers to be able to buy any way they want. If they want a Tork product from Essity, they should be able to buy in the most convenient manner. So we've really prioritized work with our distributor partners where we've worked on really robust content so that we can drive activity and good, clear information on our products. We find that about 50% of people that buy our products, did research in advance online. And out of these, 67% actually made a buying decision without an intervention of a live salesperson. So it's really a trend that's increasing as we see. So we're really looking at doing a lot of work to enhance this implementing new KPIs, and tracking this because share and search is so important to us. And with our strategic products, which is our innovative products that you hear us talk about, we found that we've been able to double that in the last year from 20% to 40%. So we've really made big strides in that.

Great. So thank you, Don.

Oh, I have 1 more point, if you don't mind. We have 3 priorities that we're working on for this year, and it's -- one is DCX, is digital customer experience, which really allows our customers to be loyal to us, leveraging the power of data to be predictive in what customers buy and also looking at expanding our offering so everything's online. So this will really fuel our growth in the future. So thank you for that opportunity.

Fab. Volker, consumer goods, how is your e-commerce developing?

Well, e-commerce continue grow in a fast pace. I think historically, we have seen double-digit growth in retail Europe slightly above 10%. During the pandemic, this trend has been accelerated very much. Every shopping trip was perceived by the consumer as a potential risk for an infection. And consumers have chosen click-and-collect solutions or even home deliveries instead. We have been growing last year, some 43% in e-commerce. And this year, year-to-date, we are even plus 4%. So how are we doing that? I think omnichannel retail, we are focusing on so-called fair share plans with our retail customers, i.e., want to have minimum, the same market share online as we have off-line. Secondly, we have an increasing focus on pure play and marketplaces. And last but not least, I mentioned it before, and we have the direct-to-consumer proposition where we're going to extend our assortment during 2022. The social commerce, I think in the introduction, we have mentioned that with Vinda, doesn't play yet a big role in Europe.

Tell us a little bit about the business model direct to consumer.

Direct-to-consumer is for us, much more than the sales platform. It's a where we are engaging with our consumers and where the consumers are engaging with our brands. And we are generating super important data and insights, which we are translating then in trends and innovation projects. And last but not least, it's also a possibility for us to try new things because the go-to-market costs are relatively low compared to classical retail. I think we have prepared a little movie.

You have?

Direct-to-consumer. Here we go. [Presentation]

So how do you expect this developing going forward?

E-commerce is and will be the fastest-growing retail channel in Europe. We might see a shift from omnichannel retail more into marketplaces and pure play, but we count on double-digit growth also in the coming years.

Ulrika, e-commerce also relevant for the health and medical business?

Yes, very much so. Many of our customers like pharmacies and medical device shops, they sell online in parallel within their in-physical stores. And we, of course, want to be their best partner to serve their consumers wherever they choose to buy. In fact, I would say we are very well equipped to be the preferred partner to, for example, pharmacies. Thanks to our quite rare combination of B2B and B2C competence. So we make it easy for customers to do business with Essity, and we provide them with the medical expertise that they need to, for example, train their staff. At the same time, we have a lot of consumer know-how. So we know how to create consumer preference and how to pull consumers and patients into their stores, whether they are online stores or off-line stores. And besides these multichannel players, there is an increasing amount of customers who sell on online only. Online pharmacies, expert e-shops, third-party marketplaces and then we have this very interesting trend of e-prescriptions that will push sales online also for reimbursed products. It's tiny today, but I think it will grow in the future.

Fantastic. So with this, we'll end the digitalization session. Thank you, Ulrika. Thank you Volker. And thank you, Don. And soon, we will start with leading in sustainability.

So this week, the climate meeting in Glasgow have started. We all know the whole world is behind the United Nations sustainability goals. Sustainability has always and is core for Essity. Magnus you are committed. You were the first actually to sign our science-based targets. You have been very much for that we should set an ambition for net zero and also with [indiscernible]. So here with us to talk about sustainability, it's Magnus, Don and Donato and Tuomas. So Magnus, please start to elaborate a little bit as an introduction.

Thanks, Joséphine. And I think it's obvious to by now how important we think that sustainability is -- And there are some very clear reasons. It's a way to better meet our customers and consumers' demands. I think that's number one. But it's also an excellent way to reduce resource consumption. So it's a good business. We save money. And I also believe that it attracts talent to be a sustainable company. So that's important, but that could all just be talk. But of course, we have very tangible targets in a number of important sustainability areas, and you see some of them here behind me. And maybe most important now is the science-based targets initiatives which shows that we are aiming to reduce our carbon emissions by 35% according to scope 1 and 2 by 2030 and by 18% by -- for scope 3. So very important, and that's an increase in the target level that we did just a few months ago. But as you can see here, we follow up and we are also making good progress. We are very proud of this, and it also shows in all the recognitions and awards we're winning. I know that these were already in the movie we had earlier today, but -- so happy to show them that I think this really proves that this is also driving business for us because, in many cases, investors choose investing companies that fulfill these criteria. And as you mentioned, we have also quite recently signed up for the global net-zero ambition -- the business ambition for 1.5 degrees as set out by the United Nations. And for us, it's more than an ambition. It's a target, and we have clear plans on how to reach it. And that's why we reached -- increased some of our targets for 2030 already. And here are some of the areas -- focus areas that we're working on to achieve these targets. I'm going to Glasgow tomorrow, and this is an initiative in the consumer goods industry to look at ways of collaborating to reduce carbon emissions also in areas where it's difficult for individual companies to make a difference, but maybe jointly, both producers and retailers, we can make a difference. So that's something we're going to talk about and announced later this week.

Good. Donato, you are passionate about this area as well, not only producing great products and having a digital element. Lately, we have announced some really good breakthroughs and initiatives, how we actually can help with the environmental footprint. Tell us about some of these.

I would say, first of all, that we are committed at Essity to set the new standard, the new industry standard for the hygiene industry in the circular economy in the net zero, and to deliver the target for the 1.5 and then later to the net zero as Magnus said. In our continuous operation, we work on energy save and water save and in every day, and we make sure that we have a state-of-the-art technologies that bring us continuous CO2 reduction and also in the way we make the products. Then moving more on the breakthrough, as also my colleague said, very happy and proud to say that we have started the agricultural waste integrated mill in Manheim, which we announced in the latest Capital Market Day 2 years ago. And this has started quite well, is a unique development that we did with a new American start-up for agricultural waste processing. And I remind that this will deliver to our consumer even a better product in a full environmental way, up to 50% CO2 reduction. And we also will deliver out of our Manheim plant, a co-product, which is lignin base is going to replace oil-based material. And this is definitely a breakthrough for the future. Then now we are setting as a reality.

And you brought it yesterday, and it feels fantastic, and it looks great.

Yes.

So reducing our carbon footprint. I know that's on top of your agenda and in the plants. Tell us.

As I said, we are doing many activities on the end-to-end supply chain to really set the standard for the new industry. And in the raw material and tissue, clearly, the agricultural waste material is the element on the raw material. But then we have many fantastic new initiative. For instance, we have [indiscernible] the plant and the machines are running fully with biogas and it's the first plant in the world, which is fossil fuel free and it's a great achievement in our setting of the process. Also something we are very proud working with seed in New Zealand from Asaleo acquisition that we are setting up the first paper machine worldwide fully on geothermal energy, which will be, again, CO2 neutral. And exactly in these days, we are finalizing the project for having in Kostheim in Germany, our -- and I would say paper machine in the world on green hydrogen. And this is already the future of CO2 zero that is already present today, and we are setting as a future standard. Also, last but not least, very important to mention that in all our personal care factories, we are set to use green electricity in order to have already today as a reality to be able to go to carbon neutrality in weighted use of green electricity in our personal care factories. So this is some example that says how we set the new standard for the future.

And I know your head are full with hundreds of more ideas that we want to hear in the future. So how do you see the future of tissue production, Donato?

The future of tissue production in the world of net zero is I see fantastic because it's if you put all these things together that I'm mentioning, you see that we are trying to create to reset this type of industry to an industry, they use local available material, which is -- can be the agricultural waste, they would throw or the recycled fibers, which we use also a lot of recycled material in the world. So local available material with a process, which is net zero, it is much, much more capital and resource-efficient process. So we are working, collaborating with different start-ups around the world develop the process of the future where we don't need to use so much water. So then we don't need to use so much gas. And we can really set much smaller operation, carbon neutral and easy to be plug and play, I would say, on the type of personal care style. And this will be fantastic because the planet needs it and would really help the Essity value creation journey.

Great. health and safety, Donato.

Yes. Exactly. If I may add because for us, internally, most important thing in the supply chain is to make sure that everyone working in this beautiful company, goes home health and safe. And I'm very proud to reinforce that we are good on the way to deliver a 75% reduction in total recordable injuries until '25, after having been reduced more than 50% reduction in the last 6 years. This is telling how we bring our company to the state-of-the-art in a best place to work and safest place to work. And also to share with our competitors in the industry how to make the tissue industry and the personal care industry a safe place. Last thing, if I may, Joséphine, I'm very proud to say during the pandemic, we managed to protect all the health in a very benchmark way, the health of our people coming and working in the factories every single day to produce essential products even during lockdown, even during the most difficult period. They came every day. We never stopped our production. We never had an interruption and we protect their health in a great way, and we are really proud of this.

Yes. Kudos to you and your team. Tuomas, one of your areas of responsibility is also sustainability. What initiatives would you say are most important to reach scope 3 regarding the science-based targets? Which -- what would you highlight in order, which include post-consumer waste and reaching net zero?

Yes, sure. So for us, I see a big opportunity when we unleash the innovation engine to really tackle the capability we have to go against these targets. And we have, on a high level, 2 big priorities. The first one is we call it more from less and the second one is circularity. And just deep dive on each of them to give you a bit of concrete examples of what we're doing. So more from less, I mean, this is not something we've started now. I mean if you actually look at -- For example, our TENA Pants product, and you would go back in time to 2008 and compare the product to today, what you'd find out is that we've actually reduced over 30% material and CO2 impact of that product without compromising at all the performance to the consumer customer. So I believe we will do more innovations like this, where you basically deliver better performance with less material. And we do it across categories. I mean another example, which is 1 of my favorites is actually on Consumer Tissue. And it's -- you can see it here on the slide, it's coreless tissue, where basically, what we do is we took out the cardboard core out of the product and we're able to wind double the amount of paper into the same roll. And actually, the outcome of that is you've got 40% less plastic, because you need less packaging, you've got less trucks on the road. And not only that, the consumers love it. So it has the highest repeat rate of any product that we make in Consumer Tissue. It has a higher margin and it's actually growing twice as fast as the market. So again, it's an example where you have a win for the consumer, but also win for the environment. And I think we're going to see more of those. And I understood Magnus actually is a big fan of the product.

Yes. I think many on this call have heard Magnus talking about this really with passion also.

Yes, because it was a tough process, but now we're way ahead and 3 years on, no one else has launched a similar product. So it shows that innovation really gives you a competitive advantage for the long term if you decide not to give, but to continue keep on investing and sort out the issues, which we did in this case. And now it's a big and growing part of our business.

Excellent.

Absolutely. The other area where we're innovating is on circularity. And I think through the call already today, you've seen a lot of examples of reasonable products. And I just want to highlight how important those are reach our sustainability commitments. Because if you look at, for example, the product that Volker talked about, the washable absorbent underwear, any consumer that we convert to this product, you'll have 75% less waste in their lifetime. You have 50% less CO2 impact. So significant drivers of sustainability, but yet again, a value driver and something that the consumer loves, so a true win-win.

Perfect. So Don, Professional Hygiene, how important is sustainability for your customers?

It's very important to Professional Hygiene customers as it is to us. I'm also passionate about it. So the pandemic hasn't slowed us down in Professional Hygiene. Certainly, the European green deal and millennials' interest and sustainability is helping to fuel this, but we're very focused on it. You mentioned the COP26 earlier. And I'm really proud to say that we were awarded the business there as a sustainable partner for the hygiene product. So it's fairly timely of that. Also, Tork helps our customers. And we get a lot of awards from our customers and recognition for what we do in sustainability, but we also partner with them. We've had many customers join us in our work with the United Nations on the sustainable development goals, and this continues to snowball, which is great for all of us, the focus. So I'm really happy with that.

Good. And sustainability has been built into Tork products for years. What's new this year?

Well, we have a lot of products. Let me name a few that are both innovative and sustainable. First of all, the PeakServe that I mentioned the last Capital Markets Day, much as Xpressnap on the napkin side really is 1 at a time dispensing, which reduces usage. PeakServe has the highest capacity dispensing system. Part of the reason for that is we actually are able to compress the towels. Well, not only does that fit more in a dispenser, but it fits more in a truck, which means that we use less fuel when we ship it. So that's been very appreciated. As we expand our skin care offering, we have a couple of new things there. We've been able to make soap out of 99% natural ingredients. We've recently been able to make hand sanitizer, not out of traditional alcohol, but lactic acid. And we're also -- came out with the first completely biodegradable wiper that we have in our line. So a lot of things that play to the expanding categories that we talked about earlier today, but also playing to the innovation and sustainability.

Good. And talk PaperCircle, I think that's an excellent of circular service. Can you please tell us a little more?

I agree. I think it's perfect. So Tork PaperCircle enables a full closed-loop approach. It was always thought for years that wash and waste was at its lowest form. But actually, now we can take towels that are disposed of in the washroom and we can recycle these. We work with outside logistics partners and with our mills, so that we can actually take this, what could be known as trash, and make it into usable product and bring it back to our customers. So we're getting a lot of traction on this, a lot of interest. We're expanding the markets that we can do it in. And it actually also ensures us a good source of supply for our fiber. So it has some good consequences on that side too. We'll expand the 10 markets. And to give you an idea of the impact this could have, if you look at our customers and the visitors that come through, everybody would do this. We have the potential of 35 million people that could dispose of this, and we could recycle this into usable products. So there's a huge opportunity ahead of us. I'm very excited. And as we get the fiber source, it's a win-win for our customers and it's a win-win for Essity. So if you don't mind, maybe I'd end with a video and show everybody a little bit about PaperCircle. [Presentation]

So I love this solution. We have it also here in the building, and I think it's a great ending of leading on sustainability. We have run a little bit over time, because we are so excited about this. So let's take a break and we'll start 4:10 Central Europe time. See you then. [Break]

So welcome back. So now we're going to talk about winning with people and culture. And if we are to deliver on what we have spoken about this day, our employees are crucial. And if you're going to receive shareholder value, we need to attract and to develop the best talent. So with us to discuss this, is Anna Sävinger-Åslund, Senior Vice President, Human Resources; and Pablo, President for our business in Latin America. So let's first hear from some of our employees. [Presentation]

We have more than 46,000 employees globally. And, Magnus, how do we secure to have the best talent in order to deliver on our strategy?

Yes, Josephine, we're saving the best for last, aren't we? People and culture.

We are.

And I'll answer that question in a minute, but of course, whoever has the best talent wins. It's that easy and this is the talent we already have in the group and we saw some fantastic examples here in film clips. And I think it shows that our employees, they feel that we are a purpose giving company and they are highly engaged. That brings us a long way, actually. But we've also been able to successfully recruit talent, both, of course, from the schools, but also recently from competitors, digital companies, the type of competence that we need for the future. And that, I think, proves that we are seen as a very, very attractive employer also from the outside. So -- but the part of that is, of course, also to develop the talent that we have inside the company that everyone realizes that this is the place where you can realize your full potential basically. So over to you, Anna.

What would you say makes Essity's culture so strong?

Yes. As you said, Magnus, I think basically, what we do, what we deliver to our customers and consumers, that's really the foundation for our culture. And working in Essity, you really feel that what you do matters. And we heard about sustainability, our work in sustainability. People really have a passion about this. And this is what talent is looking for. And our ability to attract the right talent and to develop their capabilities is core for us going forward. And the core of our culture is expressed in our beliefs and behaviors. And it's based on 4 cornerstones: care, collaboration, courage and commitment. And this is really what we expect from ourselves and also from everyone in the company. And what makes them so strong is that they are developed by our own employees in the company, and it states really well, who we are and what we would like to build on going forward.

And in what way would you say the culture is visible in our organization?

I would say it's visible in what we do every day. And it has proven to be very strong during the pandemic. And one very good example, I think, is in the beginning of the pandemic, when it was really hard to have protection equipment to find that. Our teams came together and developed facemasks in record time, collaborating across all functions and delivered to colleagues in the plants, delivered to customers and to governments. And we also say that a strong culture creates a strong engagement. And we measure this in our regular pulse surveys, where we score well above global benchmark on engagement. So I really believe that our culture is a key differentiator for us in Essity and also something that is visible for our employee experience.

You just mentioned our employee experience. What is that?

Essity is very much about well-being and not only for our customers and consumers, but also well-being for our employees. And what we would like to provide to our employees is a sustainable working life and also an inclusive working culture. You heard Donato earlier talking about physical well-being, and this has been always a priority for us. But we also know that mental well-being is an increasing challenge in the world. So we take a more holistic approach to our employee experience in this area and cover physical, mental and social well-being. And practically, what we do, one example is that we assess all our major workplaces based on these 3 criteria. So locally, action plans are developed to meet the needs of our employees here.

Thank you, Anna. Another area which is important for us in Essity is diversity, equity and inclusion, and you can always do more. Pablo, I realize I didn't introduce you properly, because it felt like you've been with us all day, but you are Pablo Fuentes, our President for Latin America. And you have been working very much with diversity, equity, inclusion and especially on gender equality, internally and externally. Please elaborate.

Sure, Josephine. I think, as you said, we, as a company, have a responsibility to enable a more diverse society. And a good example of this is the alliance we did with UNICEF and our FemCare business in Latin America, where we have educated millions, really millions of young school boys and girls around intimate hygiene, which is still a taboo topic in many places in Latin America. So by doing this, we are clearly enabling a more inclusive society. Another good example is what we did with our workforce. In the past, many of our managerial positions were filled by men. We did a big effort to turn this around. And today, 54% of our managerial positions are filled by women. So with this, we have a more diverse and much better workforce in Latin America.

And I have to say I am happy because you invited me with UNICEF to actually be on these educational programs in schools and to see how these girls developed and get some power is fantastic. So keep up the good job. Anna, the ambition for Essity regarding diversity, equity and inclusion.

Yes, we have a high ambition in this area. And I would say we are really doing a lot of good work already, but we want to do more, of course. So we have set ourselves 3 priorities. We would like to provide an inclusive working environment for all, and we would like to achieve a gender balanced leadership everywhere. And the target we have put ourselves there is to have a 40/60 gender balance on all leadership levels by 2025. And the third priority is to accelerate transition to reflect underrepresented groups. And in order to accelerate this work globally, we have appointed a head -- Global Head of Diversity, Equity and Inclusion, who will drive this on a global scale.

Good. So you are on your way. Yes. Thank you so much, Anna, Pablo and Magnus. So Growing in Emerging Markets, extremely important. And of course, you will stay, Pablo, and we will also hear from Karen Li, the CEO of Vinda. Magnus, to start with, what is Essity's strategy regarding emerging markets?

It's quite straightforward. The emerging markets accounts for 38% of our sales, but to grow with the global growth, it should be 50% of our sales. So we are still under trading even when we see the fantastic development in Latin America, in China and Southeast Asia and in Eastern Europe. So grow, grow, grow. But of course, we talk about the value creation journey, which means that it has to be profitable growth as well. And that has been a focus area for us in emerging markets for the last 6 years, and you clearly see the results here. I think it's an amazing development. Pablo, thank you so much for your contributions here in bringing the margins in emerging markets much closer to the margins we have in mature markets. And of course, that gives you the license to grow because you also contribute from a value creation perspective immediately. So this is a very positive development. And a few years ago, I would say we had to be careful with growth in emerging markets because it's margin dilution -- diluting. That's not really the case anymore when you look at this slide, and I think it will be even less going forward. And this is the result of hard work in emerging markets with efficiency improvements, but also with premiumization and innovation and all the good things we've spoken about today. So that's the ambition, grow to 50% of sales.

So Pablo, to get in the right mood, should we start with a little film? [Presentation]

Last year, Latin America was 13% of Essity's net sales. Pablo, please tell us a little bit more about your ambitions and the trends and the markets?

Sure, Joséphine. As was shown in the video, Latin America is a quite large region. It's more than 600 million people, and it's a quite diverse population. We have a rising growing middle class. We also have a quite important addressable upper class, and we have millions of consumers also as low-income consumers. Most of our categories are still underpenetrated, underdeveloped, and there's still a good growth opportunity. And of course, e-commerce is growing tremendously as it's happening in other places as well.

And you have many leading brands and market positions and you work very agile. What is your secret recipe?

Sure. As it's shown in the slide, we have very strong leading brands in Latin America. We are the #1 in Incontinence Care, the #1 in Feminine Care. We are the #3 in Consumer Tissue as a total. But when you look at our brands, Regio and Familia are #1 leading brands where we are. We also have growing strong positions in Medical, in Baby Care and in Professional Hygiene. You asked me about our secret recipe for success. And I think it has to do with the long-term commitment to invest behind the brands, to invest in communication and advertisement for DNE consumers. It has to do with a passion to be agile, flexible and be faster than the market to execute innovations, execute consumer news. It has to do with a very strong go to market. We are very strong in the modern trade, and we are also very strong in the millions of mom-and-pops that we serve daily across all Latin America. A good example of this is the many customer awards we have received. Last year, we were awarded as the #1 supplier for Walmart in Mexico. This was among all the thousands of suppliers that Walmart has in Mexico. So we're really proud of this.

Good. And you have a great innovation pipeline also. Can you tell us a little bit?

Sure, Josephine. I think we have been quite successful in delivering innovation that really has contributed into positive market shares. Our innovation model is, of course, leveraging the global innovations that Tuomas talked about earlier, but we also do some developments or adaptations for DNE consumers. Also some good examples of innovations are in the go to market. As Volker presented, direct-to-consumer, for example, is a huge opportunity for us, and we already have 17 direct-to-consumer platforms. A good example is in Brazil, where we were one of the first FMCG companies to have a successful direct-to-consumer inco platform. And today, we have thousands of subscribers really engaged and buying from our platform in Brazil. Another good example is what we are doing with startups. There's already many start-ups in Latin America, and we created, 4 years ago, an ecosystem for start-ups, and we have engaged so far with 400 startups. And out of those, we have 31 that we have direct partnerships or relationships.

This is why I love going to your region. One of our latest acquisitions is Familia. How would that further strengthen Essity's business?

As we have said, Familia is a great company with a very strong geographical footprint in South America, very consumer oriented, innovative, entrepreneurial, agile company and with very strong brands. For example, they have more than 68% market share in feminine care in Colombia and more than 90% market share in inco retail. So really strong brands, and this will be a great addition for our LatAm and global business.

And what are your ambitions and priorities going forward for Latin America?

Yes, as Fredrik said before, our ambition is to become the fastest-growing health and hygiene company in Latin America. And to do this, we will continue leveraging our very strong brands to grow faster than the market. We have tremendous opportunities, especially in e-commerce and direct to consumers. So I'm absolutely convinced we will deliver on our ambition to be the fastest-growing health and hygiene company in Latin America.

I guess you are satisfied with that, Magnus.

Sounds great. I love the picture as well. So I know that you will be successful for sure.

Thank you, Pablo. And now I will hand over to Karen Li, our CEO for Vinda.

Hello. I'm Karen Li, CEO of Vinda. It is my pleasure to welcome and introduce you to Vinda, a regional hygiene products company with leading brands and market positions in high-growth markets across Asia. Vinda started up in the tissue business 36 years ago in China, where the Vinda name has since grown into a renowned household brand and respected industry player in the world's most populous market. I'm very proud to share that today, Vinda commands a broad hygiene products portfolio across tissue, baby care, incontinence care and feminine care categories, with a solid presence in 10 countries across Asia. Revenue for the year 2020 amounted to HKD 16.5 billion, which equals to approximately EUR 1.5 billion. Vinda's strong investment potential and commitment towards value creation for our shareholders is well reflected in our inclusion in the Prestige MSCI indexes. Of course, our long-standing collaboration with Essity in many areas of business and operations since 2007 continues to be a strong contributor to Vinda's journey of value creation. With a clear focus on profitable growth, in the last 7 years, Vinda consistently delivered remarkable revenue and profit growth. Due to the extraordinary effects of the pandemic, the relatively flat growth of circa 2020 was somewhat expected, especially across Asia, where extensive COVID lockdowns were imposed in many markets. Nonetheless, by staying on the course of our premiumization strategy while driving continuous efficiency improvements, Vinda was able to successfully close the year with our strongest ever profit level and EBIT margin. As the global economy rebounds from COVID-19, the Chinese hygiene market continues to offer high-growth opportunities across all categories we can pit in. China's aging population is reflected in the increasing consumption of incontinence products among other consumers. At the same time, tissue consumption per capita and the size of premium feminine care market continues to grow on the back of increasing affluence, hygiene awareness and modern lifestyles, especially among younger generation and the emerging middle class. Vinda's premium products are well positioned to capture this demand for innovative, high-quality, hygiene products. In particular, our Libresse brand is seizing this growth opportunity in the premium feminine care markets and has demonstrated a solid year-on-year development since its mainland launched back in 2018. In just 3 years, we have successfully taken market share from major competitors to now holding a joint #4 position in the premium Feminine Care market. I am extremely confident that the Chinese market will become another success story for Libresse in the near future. Innovation in product development and marketing is a key differentiator for Vinda's brands. Our Vinda Innovation Center in China and Malaysia combine the global experience, innovation and knowledge from Essity, with Vinda's own valuable consumer insights adaptations and technology applications locally. This is a win-win formula that enables Vinda to roll our uniquely differentiated innovations that are highly relevant and responsive to our consumers' behaviors and demands. Together with our impressive speed to market, impactful 360-degree marketing activations and, of course, execution excellence. Innovation is also a key in our brand strategy to inspire consumers to trade up to premium purchases, and this approach is clearly paying off. If we take a snapshot of our tissue category as an example, we see that our premium offerings across all brands amounted for over 30% of the group's total tissue sales in 2020. China's e-commerce market not only is the largest, most diverse, but also the most advanced in the world, and it is now the most important channel in China for growth. Leveraging our digital capabilities and long-standing collaborations with major e-commerce players, Vinda has been highly successful in capturing this evolving consumer shift. Our e-commerce sales reached the highest ever contribution of over 35% of the group's revenue in 2020. This contribution was even higher in China alone at over 45%. In the fast-changing increasing fragmented digital landscape, our agility to effectively tap on digital trends from live streams to influencers, has enabled us to retain our #1 tissue online shopping ranking across all leading platforms in China. Despite the increasingly tough competition across all channels, categories and markets, while tackling the extraordinary pressures of a global pandemic, Vinda has not only maintained our dominant leadership positions in key markets across Asia in 2020, but has even done so with the market share gains across the region. This is surely one of the clearest testimonies to the strength and resilience of our well-loved popular brands. Of course, the work continues to make Vinda an even stronger and more successful company. Our priorities are to carry on strengthening our profitability and leadership in the household tissue category, while being more aggressively seizing and driving growth in the attractive China Feminine Care, Incontinence Care and away-from-home segments. Naturally, ESG factors are integral to being the sustainable growth into the long term. What we have always worked in a way that is aligned with our core principles of sustainability and innovations for years. Vinda took a major step forward in 2020 to formalize our sustainable development goals for the next 5 years with the blueprint covering areas such as energy savings, emission reductions, product quality as well as people and community together with our overall corporate governance and compliance. Ultimately, I see that the work of ensuring Vinda's sustainable growth requires us to always keep Vinda's everyday mission at the top of our minds, and that is to provide quality hygiene products and services that improve the health and lives of our consumers now and into the future. Thank you for listening.

Thank you so much, Karen. And now we will end the day with a Q&A session with our whole management team. [Operator Instructions] So with that, please, operator, let's open up the question, and we have Fredrik and Magnus here, but we have whole team that also can answer your questions. So please, first question, go ahead.

[Operator Instructions] And our first question comes from the line of Karel Zoete from Kepler Cheuvreux.

I am sorry, but we cannot hear you. Are you muted? So while waiting, why don't you take another question, operator?

Sorry. Can you hear me now?

Yes. Perfect.

Okay. Yes, sorry for that. Yes. I had one on the Latin American business where you are combining 2 sizable business. Now you've looked into that a bit longer. Can you discuss a bit some of the synergies on the commercial and cost side, you think that are possible to reap for Essity going forward?

I think that's the question perfectly suited for Pablo.

Yes, Pablo.

Sure. I can gladly answer. Familia has a very strong geographical footprint in South America and very strong brands, as we have said. There is also very limited geographical overlap between the existing Essity LatAm business and Familia. So we see little synergies from that perspective. But of course, we see tremendous growth opportunities as we share similarities in terms of consumer behavior, market understanding. So together in Latin America now, we have a much more important scope and scale to drive growth and win.

Our next question comes from the line of Karri Rinta from Handelsbanken.

You have previously discussed $1 billion brands as a key goal. And you have TENA in the Health America and you have Tork in Professional Hygiene, but more specifically, in consumer goods, is that still a sort of a goal that's worth pursuing? And if so, what would be the -- maybe the 2 or 3 key brands besides Libresse that you see as critical going forward?

I will start and hand over Tuomas, who is the expert in this area. But we have a third $1 billion brand, which is Vinda. And as we have stated before, we'd like our FemCare business to be our fourth billion dollar brand, even though it's a collection of different trademarks. With that, please elaborate, because we also have some smaller brands now in our portfolio. We had Tuomas' part of the presentation here today, for example.

Yes. We certainly have a lot of opportunity to scale many of our brands. And as you said, on Feminine Care, there's a big opportunity to further expand our footprint. And what we're trying to do is scale as much as possible behind the brand, both our product innovation, our brand-building efforts as well as our strategies and reapply what works. And I see the opportunity in Feminine Care, also in Consumer Tissue. We might have different brand names, but we drive a lot of synergies across. So big opportunities across categories to scale up what works, where it makes sense, and I'm sure that's going to drive further growth.

And maybe a very quick follow-up on that. You mentioned that you are not looking into new categories at the moment. So for specifically, consumer goods, why aren't you looking at, for example, home care at the moment?

So maybe I should answer that. Currently, we see more -- I'm sure there are opportunities in consumer goods, but we see even more -- even better opportunities in health and medical and in professional hygiene.

Your next question comes from of Oskar Lindstrom from Danske Bank.

Thank you for a very interesting section here. I have a number of questions. I'll just take the top 2 since we're a little bit behind on time. And the first one, I think, is for Donato on switching to... [Technical Difficulty]

Oskar, now something happens, so we can't hear you.

It seems we've lost Oskar. So we'll get to the next question in the meantime, which comes from Charles Eden from UBS.

I'll limit us up to two questions, if that's okay. Firstly, just talking around sustainability, and obviously, Essity has been leading the way here for some time. You touched around an increased consumer demand for sustainable solutions. But I just wanted to get your thoughts on the willingness and the ability to pay for those solutions. Is it something you think you can price through when delivering on this? Or do you think it might end up having to be at least initially margin dilutive? That was my first question. My second one is more just a sort of follow-up on the earlier section. And with the new divisions that you're going to be reporting under from 2022, when I think about your above 17% ROCE target, historically, you've talked around delivering 13% to 15% margins in Consumer Tissue and 18% to 20% in the other 2 current divisions, so in Professional Hygiene and Personal Care. As I look at your new divisions, obviously, Professional Hygiene is unchanged, but the other 2 divisions, are you able to give us a margin objective you anticipate for those divisions to deliver on your great 17% ROCE target?

Fredrik, do you want to start with the second question?

Yes, Charles, thanks for that question. And so we have not specifically set targets for the old business areas, as you know, but rather provided a guidance for where we need to be to get to the ROCE targets of more than 17%. We have chosen not to do that for the new business areas. What is important is the totality and not specifically what each individual area will actually reach in terms of margin or ROCE. So we will not do that, but we have, of course, a firm commitment to the overall target for the group.

And regarding the first question, for sure, we -- with every new innovation, we aim to have lower costs and be more efficient than what it replaces. And this also goes for innovations related to sustainability. If we can price higher based on sustainability claims, I think that's a question for Volker.

I think as I said during the presentation from my side, it's a clear yes. I think consumers are willing to pay for sustainability. The younger generation even more than older generations here. And I think we are really leading the game. So I'm really confident that sustainable products get really significant market share. And you have seen today a couple of very exciting, truly sustainable -- It's not about marketing claims. It's about truly sustainable products and solutions.

Good. And I have to be the boring person, and I have to say, please only one question per call going forward. So next question, please.

Thank you. We have Oskar reconnected, so Oskar Lindstrom from Danske Bank.

Sorry for losing the line there. So my top question here is, again, it's for Donato, sorry. And he mentioned switching to locally available raw materials for tissue production. And I guess this at least partially refers to reducing the exposure to imported pulp. At the same time, we can see that availability of recovered paper, which is the other main raw material for tissue production at the moment is difficult in many parts of the world. So what raw materials do you foresee switching to? And what share of [fiber] do you expect to come from market pulp in, let's say, 5 or 10 years' time compared to today, what's feasible in terms of finding alternative to pulp?

Donato, yes. Of course.

Thank you for the question. So first of all, as I said, we have many mills running with recycled fiber. And what we are doing, we're also doing a lot of intensive process working and advancing in innovation and in-process improvement in our mills in order to be able to use more and more of low grades to produce high-quality product, and this is a clear competitive advantage. Because with the e-commerce, there is a lot of availability, much more availability of low grades, and we are developing on that. On the other side, really, for the breakthrough and for the development for the future, what the process that we qualified as a breakthrough and unique in the world in my Manheim for the way we do it, is a process that can use local available agricultural waste, is agricultural waste that contain lignin. Then in Manheim and in Europe, of course, to start with wheat straw, because it's the most locally available and offers us the best option on this. But when we validate and qualify this process going forward more and more, we can expand also in other parts of the globe with different type of available agricultural waste material. The important is that they contain lignin. And our material like miscanthus and all kind of residuals of this development. And it's very interesting, because it really makes the process circular economy. Because, again, you put in the local available agriculture waste material, and you get directly connected to the machine, the pulp to produce high-quality paper, and you get the lignin-based co-product that we are trade marketing to sell as a biochemical, which will be a new trade market product from Essity.

Just following up quickly on that. Would you need to invest in those plants for refining the local agricultural waste into usable fiber and Lignin products?

Yes. Maybe then I start and then Fredrik can help me in the continuation. Yes. Of course, at the moment, we are starting, we are developing it. We have developed this process with a start-up company from U.S., a very innovative and environmental advanced start-up company, and we have put all our knowledge together to develop this unique process, which is unique in the world. And we invested in our own production. We are qualifying our own production. But then I think we reserve for the future to see what will be the best financial way forward. Fredrik, for sure, you can help me on this.

Yes, thank you, Donato. I'll be glad to do that, but I think you gave the answer perfectly here. So we have just started up, and it works really well. And of course, it looks very promising. So future expansion is, of course, within reach, which is great and exactly we fund that expansion is for us to come back to.

But maybe to note that we are already defining the next sites and that we see a potential of maybe around 5% to 10% in the medium-term of the fresh fiber pulp that could be replaced with alternative fibers and that there's a big interest from governments to provide subsidies for these types of investments. So actually now, we are, to some extent, competing different sites against each other where we can get the best subsidies for the next installation. And hopefully, we have learned from this first pilot installation and can do the next one, more cost efficiently than the first one.

Our next question comes from Linus Larsson from SEB.

Thank you very much for...

Sorry, operator. I think Donato just wanted to conclude.

I wanted to link to the previous question. This is a fantastic example of an innovation where we reduce definitely the CO2. We go in circular economy, and it will not require higher cost in production. So this is how to set our way forward for the circular economy.

Yes, now we can have the next question.

Very interesting. But maybe I'll switch to a different question nevertheless. You flagged for increasing costs for a major digitalization project, which is ongoing. It's impacting the other EBIT line from a financial analyst point of view. And maybe Robert can help out here. I'm curious to hear a bit about where we are in this process? I mean in terms of the phasing of investments? How long will this go on? Is it still increasing? Or is it decreasing from here? And also relating to this investment, when and how might we start to see the benefits from it?

So I'll just make a short introduction before handing over to Robert, that just to make it clear to all the listeners that this is something we flagged for already some time ago. So this is not something we flagged for today. This is, I think, we flagged even last year for this multiyear program. With that, I hand over to you, Robert.

Thank you, Magnus. And that was actually my starting point as well. This is an ongoing program since years. And for sure, we are investing more and more in digital, but it's not a drama in it. And I will not give any numbers, but this -- whatever we do, we do it in full cost control and also quality control. And we run all the initiatives very well, both from a business side, IT perspective end-to-end processes. But for sure, investments are needed. But also, if you would look into our digital investments today compared to some of the benchmarks, we probably still have to catch up a little bit in terms of how much we spend on this, and we are doing a lot of good stuff there. So no drama in this, slowly increased year-over-year. And we will get the benefits already today, of course, as we heard earlier today in supply planning, for instance, and supply chain, and we see more also coming into the business going forward. So already evidence this works and it will work even better going forward.

Our next question comes from the line of Victoria Nice from Societe General.

My question is going back to an earlier question, actually, on what you said in terms of the 5% sales growth, including M&A being targeted within current capital ratio target. And I just wondered if you could remind us what they are in terms of what [indiscernible] you to go up to as a maximum on day 1 of doing a transaction, please?

Yes. Maybe I can take that question, because we have a capital policy that states that we should always be solid investment grade. So if I translate that into, for instance, Standard & Poor's terminology, that means that we need to stay below 3.0 in terms of net debt-to-EBITDA. So fundamentally, if one assumes that we would stay on a certain level, and we are below that, of course, today, we're below the 3.0 threshold. And if we assume that we can stay constant on where we are currently, then, of course, then that would enable the 5% of growth that Magnus has talked about earlier today. So we will maintain solid investment grade.

So operator, now we will have time for one final question. So please go ahead.

Our final question comes from the line of Oskar Lindstrom from Danske Bank.

Oskar, if you're on mute. Could you please unmute your line?

Yes. I have a final question. And 2 things which were mentioned here in the presentation were growing in emerging markets and sustainability and also growing in the Personal Care segment. Now in your personal -- a lot of your personal care products contain plastics and other nonbiodegradable components, which I would presume are -- the waste generated by that is a problem. And perhaps, especially in some emerging markets where refuse collection isn't that well developed. Is this -- do you see this as a challenge or a problem for your business or for your products that you, in a sense, are contributing to nonbiodegradable waste through growth in the segment?

Absolutely, but it's just as much or even more an opportunity, I would say. And we have shown some of the ways forward here today, because this is a challenge for everyone providing FemCare, incontinence care or baby care, personal care products today. And I mean we are working with this step by step. One example from today was that all our personal care plants are using green energy, for instance. Another thing we didn't talk about today, but earlier is that a lot of the plastics currently in the bags is coming from recycled plastics or renewable plastic. And we're also switching from plastic to paper packaging. A third example is that we are using less materials year-over-year, as Tuomas spoke about. And of course, now the renewable assortment or reusable assortment, I should say, which is, of course, something of a game changer. In addition, we are constantly looking at composable materials, recyclable materials, other ways of collecting and reusing the materials in the product. So it's a step-by-step approach, but I think we are seeing clear progress also in Personal Care towards a higher level of sustainability. And I agree with you, it's especially important in emerging markets where, in many cases, the recycling and waste management facilities are not as advanced as in some mature markets.

Okay. Did you have 1 more? If you 1 more, I might be nice. Okay. So thank you so much, everyone, for your question and for calling in today. We know it's been an intense day, and we hope you found it fruitful. So before we end the day, Magnus, some final remarks.

Thank you, and I made some notes here during the day. First of all, of course, thank you for listening and participating today, and I hope that you learned more about Essity and that you found the time well spent. My takeaways from today is, firstly, again, it's so good to see the entire team here, and I really feel that we have a fantastic management team, strong talent. And as mentioned earlier, this is the key to success. We have seen a lot of commitment and courage today in the different presentations that will definitely help us lead the way forward. I also hope that takeaway is that we have high and ambitious targets for profitable growth and that we have the initiatives and priorities in place to achieve that. Our new business areas will enable faster growth. So we'll contribute to that improving profitable growth, and it gives us more opportunities, both organically and through acquisitions. And we will continue to grow in emerging markets, especially now that the margins are also starting to look quite value creating, where we benefit from leading brands and market positions, as we've heard, to some extent, and even higher -- even more than in some of the mature markets. And of course, sustainability, that has been a theme throughout the day, where it's clear that this is increasingly creating a competitive advantage for Essity in many ways, and that's why we aim to continue to stay in the lead. And finally, we have a winning company culture and a clear purpose, which is our leading star and so important for everything we do. So again, thank you for listening. Thanks for participating. Take care. Stay healthy. And of course, wash your hands.