Lotus Bakeries NV (LOTB) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to presentation of our annual results as a result of Lotus Bakeries Group, Emanuel Boone (sic) [ Jan Marcel Matthieu Boone ] , CEO of the group. And next to me is Mike Cuvelier, the CFO of the group. He is still in very good shape, although [ it were ] Tough weeks closing the annual results. We are always one of the first to release our results. So I'm very grateful to Mike and his team to again have a smooth closing of the annual results. Most of you have probably a press release that has been launched this morning. And so we're very proud on the results. I'm very proud to present them. The revenue growth in 2022 was unseen. We realized a growth of EUR 127 million. Hence we were able to combine this with a very strong profitability. The EBITDA -- recurring EBITDA for the full year, and it's 19.4%. And this brings us to a total revenue of EUR 877 million. So we are proud on the internal growth that we could realize in combination with a strong profitability. That also brings us to a EUR 100 million-plus net profit for 2022. So the first time that the net profit went over to EUR 100 million. And you can also see that the cash conversion was strong. We have invested more than ever -- we have invested more than EUR 150 million last year. And although that record year of investment, we were able to keep the net debt EBITDA level below 1 being 0.9, which is the same as last year. And we also are proud of the fact that our 2 most important strategic pillars being Lotus Biscoff and Lotus Natural Foods realized strong growth -- consistent growth. And now if we go back and look back, Lotus Biscoff realized an average growth rate of 15% and Natural Foods even 16%. So that brings me to the next slide, and that gives you an overview of the revenue of the group of the past decade, past 10 years. And you see that our average growth of the group amounts to 12%. That's a higher percentage than last year where we also looked back in time where we also look back to the last 10 years and we were able to increase that average growth rates to 11.8%, which is challenging because the numbers become every year a bit higher. On the next slide, we have our time line. Of course, the past year didn't change. And this year, and we've put some highlights being the record revenue growth of EUR 127 million. Also the fact we come back on that point later. The fact that we announced our third Biscoff plant in Thailand for the Asia Pacific region and also the acquisition -- the full acquisition of Peter's Yard. These are some highlights. Some of them I did discuss already a minute ago, and you can see the organic growth of 17%. We see also that the EBITDA increased to 12.5% in absolute value, that's EUR 19 million. Although in turbulent times, challenging times, we were able to increase our EBITDA. And as said, and that's something has, which is important as a company, that's the cash flow generation and the ability to invests more than EUR 150 million in our company and still the net financial debt remains very low and remains less than 1x EBITDA. And also the dividend increased from EUR 40 to EUR 45 per share, which is an increase of 12.5% and it's more or less the same increase as our net recurring earnings -- net earnings so that's Pretty much the same increase we see on that level. If we look now at our 3 strategic pillars. First of all, we have Biscoff and you see 54% of the total branded revenue consist on this graph. We will see on the next slide that the year before, it was only 51%, which means that the Biscoff parts increases year by year. Same can be set of Lotus Natural Foods, there you see 23% of the total branded revenue consists of Lotus Natural Foods, which is the same level as a Local Heroes. So the same level as our brands in Belgium, Netherlands, France and Sweden, and that consists of the waffles and cakes and the Gingerbread and 6.43 [indiscernible]. So it's quite a unique moment in time for us that Natural Foods equals and revenue to the local U.S. We also see the difference in growth rates. Last year, Biscoff grew at 25%. Natural Foods almost with the same growth rate with 24%. And you see the Local Heroes and remained stable. That's also the strategy. We put a lot of investments into the global Biscoff growth and same counts for Lotus Natural Foods. This being said, we still invest in the Local Heroes. We are convinced that we need to support the local brands to give them at least at the same revenue level, preferably with a slight increase, which was also the case in the last 10 years, local heroes that increase but 2%. At the next slide, here you see the comparison with last year. Biscoff parts and our branded sales increases from 51% to 54% and Natural Foods from 22% to 23% .Besides a decrease now and the Local Heroes. And then if you look at our total branded revenue again, you see that one order been realized and the U.K. And that's, of course, Biscoff and Natural Foods all together. You also see that the top 5 countries to represent almost 75% of our total branded sales. And if you look at our top 10 countries, being the U.K., U.S. Belgium and France, Netherlands, China, Spain, Germany, Switzerland and Korea, if you take all of these together, you see that in that top 10, 7 countries are considered as larger consumer markets. And it's good to see that in that top 10, we see more and more larger markets in larger consumer markets with great potential for our company. And this is a global production footprints, not a lot of changes there. And Mike will also elaborate on that. We have made partial investments in Lembeke , Mebane, Wolseley. And we are about to make strong investments, significant investments and building the new Biscoff factory in Thailand. So than as a general catch-up. If we zoom into Biscoff. Here you see that 1/4 of the Biscoff revenue has been realized in the United States of America. Second country is U.K. and France is #3. And also here, you see that the top 3 is more or less 50% of the total Biscoff sales. And again, if you look at the top 10 -- top 10 Biscoff countries, here again, you see that 7 are larger consumer markets. So again, that shows the potential, and you also see some large consumer markets coming up and entering the top countries of Biscoff. And just to show you and amount of cookies -- total number of Biscoff cookies that we have been signed in 2022. The total is almost 7.2 billion Biscoff cookies, and that's without spreads. If you add the spreads, you have to add more or less 2 billion more cookies. So you see in North America, produced 1.7 billion cookies, Europe 3.7 billion; and then Asia, almost 1.5 billion cookies. So that gives you also a good idea where cookies are being sold, and that makes us also very logical that the third Biscoff plants has to be built in Asia. You see very clearly, Europe has been in Europe, Middle East, it's really an important area for us and volume same counts for North America, and you see also more and more Asia Pacific being important. And to anticipate on that, we decided to buy a piece of land in Thailand and the land that we have bought is very close to the Laem Chabang port. It's only 40 minutes something like that from the ports. And that port gives us access to all these countries that you see on the slide without opportunities and with less transport costs and we can enter with fresher Biscoff cookies. So lots of advantages. We are only at the beginning of that project. It's a large project. And we certainly do not want to underestimate it. We -- it's a greenfield literally. And we need to find the good people. We have to build the plants accordingly to the local standards. And at the end of the story, we want to have Biscoff cookies that taste exactly the same as the one in landing in the U.S. So the consumer can only taste maybe fresher Biscoff cookies and can update the difference compared to the Biscoff cookies he/she ate before. That's our mission. And as you know, for us, quality is very important. So we have a good base in building the factory in Thailand and we're still according to the time lines that we have shared before. So 2026. We want to be operational. There's still the clinical time line. And we -- and if we go too fast, the quality and the performance of the plant would be effect. And on the next slides, we have here an overview of pretty much other countries where we are active at Biscoff and that's almost in 70 countries that are plotted here. And certain countries are -- got a great circle around the flag. That means that they moved up a step -- that they moved up a Phase. Good examples are Korea, Canada, Australia and Spain, and that moved from create to build . So they crossed the 5% border. Same counts for Singapore, Qatar, Kuwait, Lebanon. They cross the board from build to accelerate. So they are now part of the accelerators. These are some examples also from create to build, Sweden, New Zealand, Emirates. So Saudi Arabia, quite important for us. So you see, quite some countries that's moved further down to the right. So that's good news, and that confirms also the volume growth that we have seen in these different markets. And that brings me to the ranking, you know that every year, we calculate the ranking -- cookie brand ranking. We were #7 and great news. We moved up a position, and we moved up to position #6, end of 2022. Still, far away from our ultimate division to become cookie [ laboratory ] of the workout, okay? We're moving in the right direction. So that's good news. Other exciting news is the fact that we will bring a new design, a new Biscoff design on our original Biscoff cookie, also on the spread, ice cream and all the Biscoff products. On the left side, you see the current design and where you see Lotus and Biscoff almost equal in size. And we wanted to take the decision. And we've chosen and it's certainly probably not surprised. We have chosen Biscoff as main brands, endorsed by Lotus. And you can see the execution on the right-hand side, that's the new design. And you see Biscoff also the logo is different. The logo is a bit more contemporary, more modern. And we think it's jumping out of the shelf made some exercises where we brought new and old design and shelf and it looks really nice. We have done some studies in a couple of countries to test the reaction of the consumers. They are very enthusiastic. And also internally, if we share it now that our teams just before the weekends and everybody it's very enthusiastic. So that's a good confirmation. It's a massive work to really change all the packs and we have lots of SPUs. As you know, we sell in more than 70 countries which means different languages, and we are starting to execute all that work. And you can expect end of this year the first new design, 250 grams and other packs in store, okay? So that concludes the part of Biscoff. Just one thing I'd like to add is this is pretty much the same design but here, this is for Belgium, France and the Netherlands, where we put The Original Speculoos underneath Biscoff. So point of an additional, point of recognition for the consumers in these 3 countries. That brings me to next chapter, Natural Foods. So good news there, at the moment that we acquired the venture food brands, They are all U.K. brands. they only sold within U.K. They realized about EUR 60 million and almost 95% of the sales was within the U.K. capital. What we did as Lotus recruit the brands from EUR 60 million now to EUR 175 million, whereas the U.K. parts increase but also international part is becoming quite in reports . And that was always the strategy as from the start . You can see that also in this slide on this slide, besides U.K. outside of U.K. So we're looking at the international part. You see that the U.S. is 40% mainly Netherlands, France, Australia and Belgium, These are the top 5 countries. And we see more and more international spread of our Natural Foods, France, which is good news. Another way to present EUR 175 million here is on the dark green you see our internationalization of Natural Foods to the U.S. to Australia. Another highlight of last year was the acquisition of Peter's Yard. Peter's Yard entered in Lotus Bakeries through the funds. We had a minority stake. And we were in their boards. We followed the company, And we really like the brand. We like that it's a very specific product. It is specific because of its taste but also because its process, SOURDOUGH CRACKERS are quite a unique position. Peter's Yard has assessing in most U.K. retails, Sainsbury's Waitrose and Ocado. So -- but still a lot of potential. It's still a lot of potential within the U.K., and that will be the short-term focus to really grow in the U.K. And then we can look also outside of the U.K. and to come. But we are proud that Peter's Yard is now part of Lotus Bakeries. And another important event last year was that we brought all the teams of Natural Balance Foods of BEAR and of KIDDYLICIOUS and Peter's Yard. We got them all together in ST.ALBANS , more than 100 employees. We not left the idea of; focus teams. So they are in one building and they were in [indiscernible] 23:26. But still, there is a focus and company-for-company and by a managing director and marketing team. This being said, being together in one office brings dynamics, brings our increases in creativity amongst, each other share values, share ideas, share data of the category. So we are more than ever convinced that there was a good idea. So we closed a couple of offices. And now everybody together in ST.ALBANS. ST.ALBANS is also -- well, okay, it's for people who live in London with in transports24.18 [indiscernible] successful. So our teams we're very happy also with that decision. And KIDDYLICIOUS will move in a couple of months also there. So KIDDYLICIOUS is not yet part of the ST.ALBANS team. But soon, they will move to and then everybody is together and that's one of the space. And then our funds, FF2032 assets historical moments. First, investment has now been acquired and fully part of Lotus Bakeries. So that leaves us with 5 other minority stakes and Love Corn, Partake ,OOT The Good Crisp and IQBAR. So 4 of which are U.S. investments and one in Holland. We are looking in Europe, intra-Europe and U.S., Canada and -- today, there are lots of interesting companies to look at, but we are very selective. And we are now in total with these 5 participations, doing well. They're all growing, but we want to increase our amount of participations to 8 to 10 and no hurry there and priority is to make the right investments. And then probably rather than the last investment was in IQBAR, a functional food bar and strong growing brands. It's part of the protein bar shelf, but it's more than just a protein bar. It's really a function of food bar hence and doing well, doing really well and growing strongly and so we are very happy that we could take a minority stake and thank IQBAR. They focus on the U.S. I think that's wise. It's large enough for these smaller companies to focus on. And hopefully, we can help more so further grow the years to come. So this concludes the first part of our presentation. I will now give the floor to Mike and we're going to discuss the financials and non-financials partly of 2022.

Thank you, Jan. And also from my side, welcome, everybody. On the first slide, we summarized the highlights of our, again, strong financial performance of 2022. And as Jan already mentioned a couple of times, it's a strong performance on -- actually, all financial performance indicators of the business. We realized an unprecedented growth of EUR 127 million, 17%. We were able to translate that into a strong recurring EBITDA growth of almost EUR 20 million, 13%. We were able to keep a lot of the cash flow free by controlling our working capital and limiting the working capital increase given the volume growth and also given the fact that there is net inflationary pressure, of course, on all its components and also the maintenance CapEx remains stable, well below the 2% of sales. That means that we've been able to execute a record investment program over a 12-month period of EUR 153 million. The majority of that is expansion CapEx. And very importantly, we've been able to do that timely and successfully. The investments as we laid them out before have been commissioned and running and are extremely important for the future growth. At the same time, given that free cash flow conversion, we've been able to keep the net financial debt below 1x EBITDA. And the strong operational results have also fallen through in our net results and allow us to increase also the dividend again with EUR 5 per share to EUR 45. If we put the revenue growth into perspective, it's, of course, massive, EUR 127 million. We were already extremely proud of the EUR 87 million last year. But this is, of course, from another -- this is raising the bar again and I think important, as already mentioned, it's quality growth. It means it's a good combination of strong volume growth and at the same time, also the responsible pricing actions that we've taken. It's also very broad-based geographically. We've grown in a lot of different countries. We've grown in all continents, both with Lotus Biscoff and with Lotus Natural Foods. And we are able to do that with an EBITDA percentage level that remains very high. If you go back in time, 5 years, and remember, those 5 years have actually approximately 2 COVID years. And then the recent 2 years are years with high inflation, years also with challenging supply chain conditions. So in that challenging 5-year period, we have been able to grow our revenues double digits. And also, we've seen our profitability -- our recurring EBITDA grew double digits. And that's, of course, again, outperforming also the industry and a lot of our peers. If we take a bit of a deeper dive into our income statement, and more specifically, our cost by nature, then the first line is, of course, a very important one, the line of raw materials, packaging and co-manufacturing. You can see a percentage increase of more than 20% with at company level, a volume growth of about 8% for the full year 2022 means that we've seen double-digit cost inflation on ingredients, raw materials, packaging and co-manufacturing. But we have been able to offset those EUR cost increases by price increases. That's exactly also what we were set out to do at the beginning of the year, and that's also what we confirmed at half year, and that's also now playing itself in the full year figures. On the services and other goods and employee benefit expenses, our percentage increases are a little bit lower than the top line, 17%, which is actually a combination of, on the one hand, being able to leverage still on the volume growth but at the same time also, we continue to invest, and we must continue to invest also in the brands, in the organization and in the people to maintain that growth going forward that remains, of course, a priority for us. If you look further down the income statement, our operating result EBIT is growing and is increasing with 14%, EUR 136.4 million. Our profit before tax is increasing a little bit more, 14.3%. So just a few basis -- well, 30 basis points below the last year. So with an income tax rate just south of 23%, which is in line with company guidance, we end up with a net result. And as already said, well above EUR 100 million for the first time and a growth of almost 14%. This again gives these cost components as a percentage of net revenue and basically confirms what I was referring to before. We see the inflationary pressure on all components and we have been able to leverage on those components in the -- through the volume growth and the efficiencies. Our recurring net profit grew with more than 13%, again above the 5-year CAGR of 11%, and that's also the basis for our dividend's policy distribution. Our investment program, as said, was unprecedented also, we spent in capital expenditure alone -- expansion capital expenditure alone, EUR 120 million and I think we talked about that in detail before. We also referred to it in the press release, again, what it all entails. But basically, very importantly, is that we've been able to timely and successfully implement the projects that we were working on because they are extremely important, again, for our growth going forward. Our maintenance CapEx remains stable at 1.6% of sales. And for 2023, we estimate CapEx in the range of EUR 100 million. This EUR 100 million is the range hint that is -- that can be higher if the greenfield in Thailand is moving faster than expected. But according to the current planning, that's our estimate. Again, that will be primarily focused on Biscoff and, of course, on Lotus Natural Foods. We will continue to invest or see investments in Lembeke, we will see significant investments in U.S. And we will, of course, also see the start in Thailand. The total CapEx projects which is for the phase that we described, the first phase in the period 2023 to 2026 is estimated between EUR 125 million and EUR 150 million. And then also importantly, is that in 2023, we will continue with capacity expansion projects for our Lotus Natural Foods activities in South Africa and in the U.S. Again, a record investments, both CapEx and EUR 19 million of acquisition and fund investments. We talked about the cash flow generation. So basically, we've been turning 87% of our EBITDA into free cash flow, which, as already mentioned, a small increase in working capital, especially given the inflationary impact, of course, which is important to point out. And also the maintenance CapEx still stable and below 2%, which allows us still to do this EUR 120 million of expansion CapEx and still alluded from the revenue that we generate. Our net financial debt remains at the same level as in June at 0.9, obviously has increased in absolute terms somewhat -- and this is the number excluding the IFRS 16, the lease obligations. Our balance sheet remains strong and as strong as ever. We basically, of course, see in our long-term fixed assets, a significant increase through the investments that we did. Our retained earnings and other equity, of course, is supporting that primarily and our working capital requirements and our net financial debt remain well under control. That means, of course, that we are creating strong shareholder value. Our earnings per share increase of about 14% is above the 5-year CAGR, again, and it is the 21st consecutive year for 21 consecutive years that we're increasing the dividend. This time with 12.5% to EUR 45. And this is in line with the policy that we started now 5 years ago, dividend policy stating that we will at least take 1/3 of the recurring net profits and distribute to the shareholders means that the majority of the net profit is being reinvested in the business. ESG, very important, still very much at the heart of what we do. I think also deliberately referring to financial and nonfinancial reporting at the start of my part of the presentation because it is becoming more and more integrated. And that's also, let's say, in terms of reporting requirements and legislation, what is going to happen. On the environmental side, a couple of call-outs. We still have, of course, the ambition to have our packaging 100% recyclable by 2025. We are close and we have a number of projects defined now to close the gap. We are and remain carbon neutral, Scope 1 and 2 and also our sites. We also have a CDP rating since this year and which is available, we have -- and this is more towards financial reporting or integrated reporting. We've done our first communication on progress as being a signature of the UN Global Compact. And we've issued together with our annual report of 2021, we published that in April 22 and so-called GRI reports. The GRI will -- or is becoming, let's say, also the basis or the foundation for the nonfinancial reporting requirements that are set at the EU level. On the social side, we remain very much top of the pack in gender diversity. On the community side, may be important to call out that we keep our sustainability score, and we've increased it a notch or improved it a lot, a notch in the recent years. We are in the top 5% of the packaged food companies, it's just the sub industry that we found. We are 100% RSPO certified in terms of palm oil and we continue to invest in educational projects as part of our corporate social responsibility, both in Belgium, South Africa and around the world where we think we can make a difference for young people. This concludes the presentation of the results. I want to thank you for your participation. And at this time, we would like to open the call for questions.

Yes, we can take the first question, [ Maxi Strano ] from ING.

A couple of questions on my side. First of all, if I do the math, looking at your results, it would imply that your revenue of private labels have increased by 10% compared to '21. Do you see any trend in terms of down trading in your key markets for the time being? That would be the first one. Secondly, looking at energy costs, could you shed some light on what's the percentage of cost actually, well, linked to energy prices? And finally, looking at your guidance, you mentioned in the past, an adjusted EBITDA margin of at least 20% and revenues of Biscoff between EUR 465 million and EUR 530 million by [ 2025 ]. Do you stick to this guidance or you see some up or downside to the guidance in the near future? That would be all for me. Thank you.

First of all, in relation to private label. You've seen that in the 3 pillars. We've talked about our branded products being Biscoff, Natural Foods and Local Heroes. And so that excludes the private label business, which is about 10% of our total revenue. And also there, there are no disruptive elements last year. Otherwise, they would have been mentioned in our press release. Your second question in respect of energy costs and [ first ] in general, as discussed today to the presentation and also in the press release, indeed, all costs have increased last year and will also continue in 2023 having an impact on that annual year. Energy cost is a part, is only one part of the increased cost that had be clear and the impact of the raw materials and packaging and labor is more significant for us than the energy costs. We think that at the end in 2022, we made a correct agreement with our customers. I think we have put forward a correct price increase, whereas we could deliver these results. We have always said that it's important that we, as a company, make sure that we organize ourselves as efficient as possible, supply chain-wise, commercially that we look at every cost to make sure that all cost increases are limited, and that's what's executed last year. And therefore, the price increases were a bit more moderate, thanks to the good efforts we have done. A couple of examples are the fact that we brought all the U.K. teams, Natural Food U.K. teams together in one building. There is still a very strong focus on each brand, but here resources is now one team for the Natural Foods , France and U.K. I think other efforts are more supply chain focused. I think in the factories, you always find little details that you can do just a much better. And that's important. And that's also our responsibility towards our customers and towards our consumers. And then your last question. Respect of guidance, I think in the press release, we elaborated on our vision for the next years. We stick to the fact that we want to increase 10% with Biscoff and we find it also important to have that same increase in Natural Foods International and in respect of EBITDA, today, we are at 19% EBITDA, just a much higher than 19%. I think -- I think that's a more than correct figure to aim at in the future. And importantly is also that for 2023, we really have to support our [ brands ] commercially and marketing-wise. And in the last 2 years, where for everybody, for the whole society for different companies, for consumers and customers quite turbulent. And we have seen that our consumers and customers love our brands, support our brands and that gives us also the confidence that we are willing to invest in the future. And on the one side, that's capacity. And on the other side, that's also commercially supporting our brands and probably a much higher than the last years. And then I'm talking about the marketing investments.

Next question, maybe Alexander Craeymeersch of Kepler Cheuvreux.

Yes. And congratulations to Jan and Mike and whole team on the nice results. I was just wondering, could you maybe give us a bit of a time line or a view over the time of the expansion plans in 2023? When can we expect this to be operational? Second question would be regarding the retailers. So how are you right now in terms of pricing power? We've heard competitors saying that they've had tough negotiations going into 2023. So my question is a bit like, is that the same for you? And just to know like what do we pencil in or what are you aiming for as price increases? That's it from my side.

Yes. Maybe on the expansion plans for 2023. So as we mentioned, we estimate CapEx in the range of EUR 100 million for 2023. That's focused on a couple of things, but primarily, again, also on Biscoff and also on Natural Foods. As far as Biscoff is concerned, the investments are focused on the U.S. and of course, the start of Thailand. And to the extent that the greenfield investment in Thailand would proceed faster than anticipated, we would go a bit beyond the EUR 100 million. So that would actually be good news, in fact. So those would be the 2 main investment polls for -- for Biscoff. And then, of course, we continue also to invest in Lotus Natural Foods, both in South Africa and the U.S. And also in...

And to confirm, is that then the time is in Q4 2023? all live? Or is it a bit earlier? For example...

No, that's not necessarily earlier. But there's not -- we don't give a very specific timing on every part of the investments. There are also investments that are continuing, let's say, throughout the year. But I think very importantly is that for 2022, the investments that we've made in 2022, today are all operational. So those have all been going into production, meaning we have the 2 lines in the U.S. We have the [ dorm ] in Belgium. And we have the additional sandwich line here in Belgium, which is operational. So those are adding capacity as of today.

Okay. In respect of the retailers in your question, I have the tough negotiations -- always tough negotiations with retailers, high or low price increases. And so we are quite satisfied and happy with the outcome. And also, our customers, I think, are satisfied with the outcome that we have. One important element is that our customers know by now that if we come with a price increase, that it's a correct one, and that we keep our works and that we keep the price for 1 year done. So we only come once. And whatever happens, we keep the price for 12 months. And so we have done in 2022, and so we are doing now for 2023. And that's important for our customers, that reliability and also responsibility on these prices. With respect of price increases, it's a bit more complicated than that just to call out one number. You have -- in certain countries, price increases starts from the 1st of March, like in France. In Belgium, it starts beginning of this year. And in the U.S., it's also a different time line. So it's not -- look, that's the price increase you will see in the figures. And we have disclosed that for 2022, the foreign exchange and inflation effect was more or less 9%, 8.9% to be exact, and with the foreign exchange effect that was positive. We expect for 2023 a rather negative foreign exchange effects on our revenue figures, mostly related to dollar and pound effect. So in total, that 9% in 2022 foreign exchange and price increases included, we expect more or less the same effect in 2023. Again, price increases and foreign exchange effects included. This being said, and that's also for us difficult to assess what will be the reaction of the consumer, prices will increase. We have the position of affordability, mainstream products. So we hope and we think that the consumer will still find our product, buy our product at the same velocity as before, but that's not guaranteed. And as you all know, and Mike and I showed you the figures in respect of which countries are important, and for us, the U.K. is very important. And you see, 1/4 of our business -- our branded business is in U.K. And in the U.K., today, the economic situation is maybe a bit more difficult nowadays. But on the other hand, [ assets ] in 2022, we [ agreed ] the prices with our customers. We kept our words, and that helped a lot in our relationship with our customers. So that was very important to them. And we have a good feeling about the relationship today and also the willingness to work together and to work on further growth to realize our 10% growth in Biscoff and our 10% internationally on Natural Foods.

Next question, [indiscernible] from [ KBC Securities ].

Two questions from my side. First is on the labor cost and the effect of the indexation in Belgium. How much of that already did you see in 2022? And will you see kind of a jump in 2023 as for some segments, I think, like yours, the effect will be 11% in January? And the second question is on Biscoff. You were talking on the repeatable model of success that you saw some countries going from the left to the right. But did you ever see a country going from right to the left? So from accelerate to build or from build to create again? And how would you react on that if something like that would happen?

Indeed, labor cost, that increased significantly everywhere and a bit higher in Belgium with that 11%, and more or less 50% of our salary costs are located in Belgium. So it has a significant impact on our costs. That would be clear. So as discussed before, we've made our calculations. So the 1st of January, 11% was not a surprise. So we could [ compare ] and we could [ compare ] that also in our pricing for 2023. But it's an important aspect of the price increase. On the other hand, we are more and more automated in our factories. And I've always said, to be successful internationally, we need to have very automated plants. And if you want to have plants in Belgium, Netherlands and France, you need to have automated lines and the labor part should be as low as possible. Otherwise, you can never be competitive around the globe. On your second question in respect of Biscoff and our repeatable model, of course, you have countries that stabilized, [ only 70 ] countries, but most of them do grow. I cannot remember today did one go back [ a face ]. Looking at Mike, not really. Maybe it will in the future. Let's hope not. But today, they are all going to the right-hand side. But note that all countries increased. But we've seen that the key and crucial markets, we've seen an increase. Also, it's based on the cookie consumption. And it helps, of course, to add the sandwich cookie. It helps to generate more traction and to attract more families -- more younger families. So to be able to offer the original Biscoff cookie and Biscoff sandwich [indiscernible] and to have that wider scope of household penetration.

Next question [indiscernible].

Congrats on the results. Actually, one, in this strong volume growth in the second half, clearly, [ it's celebrating ]. If there has been any front buying or front loading ahead of this price increase that you were planning to pass through. That's the first one. The second one, I'm not sure, but did you ever provide the penetration household rate in the U.S.? That's the third one -- the second one. And on the 10% growth, because I had been a little bit away [indiscernible], this 10% growth you give for Biscoff and your international natural business, Natural Food, is that volume or is that price plus volume?

Yes, the second half of the year was extremely good. And there was no front loading. It was in the whole second semester that showed a very good performance. And overall, we realize that the 17% of increase, which was spread over the year, with a very strong second half. But no front loading there to take into account. Household penetration in the U.S. is quite close to the 5%. So results were very good in the U.S. So we hope maybe next year, we will cross the bridge of that 5% in the United States. It would be a nice moment. And in respect of your question of the 10% growth, that is a mid/long-term targets, and that includes volume and price. So it's on revenue.

Okay. Maybe one last question, if I may. I think that in the past year of '22, actually, palm oil prices came down. I think also sugar. But I guess [ you're ahead ]. So actually, you will still see relatively high palm oil prices and sugar prices in your accounting in this year?

I think all raw materials are at the very high level. Certainly, sugar and palm oil maybe had a little dip. [ In United States, they ] remain at the very high level. So all these prices are included in our pricing, in our calculation. And we try also to hedge when we think it's a good momentum to hedge. That has a couple of advantages and important advantages. Once you have your pricing ready, you also know that, that pricing is pretty much correct because you know your costs and you know your raw material costs that are hedged. You know your packaging costs, and you know your labor. And that's why we also can give 12 months commitments to our customers because the majority of the variables are hedged.

Maybe one last question, [indiscernible].

I have a question on the Local Heroes. So nobody has asked anything about it, so allow me to do that. Of course, you have been increasing prices of this local product, but there's no sales growth. So in fact, volumes have declined. What can you say on that? Maybe, have you lost some part of your market share in that field? And then are you, in fact, prepared to lower your price in order to protect your market share? Or do you say, "No, we stick to our prices. Lower or higher market share is not a problem for us?" And in that field or in that -- here with this Local Heroes, what about the Netherlands again? So I asked also last time the question in this field.

I'm going to answer both of your questions in one answer. Indeed, Local Heroes remained stable in euros. Also, almost all Local Heroes are in euros, so they don't have any foreign exchange effect there. And so no positive foreign exchange effect there. We did increase prices, and the same rules apply for Local Heroes as they do apply for Natural Foods and Biscoff. We calculate and we come to a correct price increase. So prices have been increased for Local Heroes, too. And in some countries, because with Local Heroes, we talk about Netherlands where we have Peijnenburg and Snelle Jelle; Belgium, where we have the waffles and cakes; Sweden, pepparkakor; and also France. In these 4 countries, we increased prices in a correct manner. But this being said, sometimes the supermarkets did not list the full assortment. And then you see, indeed, an effect on the total revenue of the Local Heroes. And you also have to know that in some countries, Local Heroes, we have close to 100 SKUs in certain retailers. And then you can have the discussion in prices that they say, "Okay. Look, we're going to decrease the assortment with 5 SKUs." And then you have -- then you see a bit of that effect. And to answer your question, will you not increase prices to protect your market share, no. I think it's important to have correct margins. That has always been the long-term policy within the group. The profitability level is where we want it to be, and it gives us also the possibility to invest commercially and invest in additional capacity. And that applies also for Peijnenburg, of course, in the Netherlands, and Snelle Jelle.

Thank you. I think this concludes the presentation and the Q&A session. Thank you, everybody, again for your participation and your questions, and we will talk soon.

Thank you.