Orkla ASA (ORK) Earnings Call Transcript & Summary

How will Orkla continue to create long-term value? During the next 2 hours, we will answer that question by outlining our strategy, our plans and our updated financial targets. My name is Kari Lindtvedt. I'm Head of Investor Relations, and I would like to give you all a very warm welcome to our Capital Markets Day. We start off with our CEO, Jaan Ivar, who will outline the long-term strategic direction for Orkla and also share the road map of how we are going to deliver on that strategy. Our CFO, Harald, will then take us through our newly updated financial targets. And then our business area leaders will elaborate on some of the core elements of our strategy and also share some examples of how we are working to deliver on our targets. We will also go through our approach to portfolio management and our M&A strategy. Through the program today, we encourage you to post questions on the live chat and to join in on our conference call in approximately 90 minutes. And I would also like to remind you that some background material for this event can be found on our website. But now let's get started with Jaan Ivar.

Good afternoon. I've been really looking forward to our Capital Markets Day. And based on our announcement this morning, I will, together with my executive team, describe our strategies and priorities going forward and how to deliver on that as well as our financial targets for the next 3 years. I believe that our targets, top line and EBIT growth, are very clear as well as the ESG targets. And it's also important to me that all the priorities and the strategies are linked to long-term thinking and long-term value creation. I also believe that our organization is coming out of the pandemic as a strong organization with lots of self-confidence and braveness. And hopefully, over the next 2 hours, you will have more insights into our strategies and priorities and also feel confident that we will deliver on those strategies and priorities. Since 15th of January this year, I've had my new team in place, and they come with a good mix of internal and external experience, different skill tests, different backgrounds, but they have 3 things in common: one, a proven track record for delivery; two, a strong sense of team spirit together; and three, they are passionately committed to deliver on our plans and our road map for the years ahead. Also, when I joined Orkla, I saw a lot of talent internally and more potential for internal promotions in addition to selected external hires. I'm glad to say that of our top 100 leaders, 38 of them are in new roles, and all 100 of them with braveness, energy and a passion for Orkla. Also, I'm glad to say that of our total leadership pool, 42% of our leaders are female leaders, and we aim to get to 50%. No doubt about it. Also, when I joined Orkla, I saw a lot of passion internally from the first day at work, a strong passion for the sustainability agenda, a genuine passion for our brands and for the digital agenda and a passion and a desire to take Orkla to the next level. At the same time, there was a need to reduce corporate overhead, which we have done and to give more energy and nurture a brave mindset into the organization, combined also with a new incentive system based on both profits and growth. Orkla has a long history dating back to 1654. Therefore, there is always a need to look at things with new eyes, continuous renewal. But having said that, Orkla has a very strong foundation. We're a value-based company, purpose-driven with some 3 core values: being trustworthy, being inspiring and brave. And we can allow ourselves to be even braver based on our strong foundation of trust readiness. So what does this mean for how our business model is changing and the priorities going forward? Well, there are 3 main priorities: #1, winning locally; #2, embracing change; and #3, building tomorrow. And let me start with the first one, winning locally. We will have a step up in profitable organic growth. Today, we have 300 strong local brands, and we'll put even more prioritization behind these brands. For example, within the marketing investments. And these brands also come with strong pricing power. Moreover, we'll expand some of these brands more aggressively internationally, such as Möller's and Jordan. And we'll utilize our local consumer insights to be more agile, more innovative, closer to the market than our global peers. But at the same time, we will utilize our scale advantage versus local peers through more collaboration across business units, business areas, also utilizing our strong knowledge and competence within sourcing. And over the next 2 hours, you will hear more from my BA leaders on how to create a step up in organic growth. The second priority, embracing change. We will double our digital revenue share from 7% today to 15% over the next 3 years. And actually, today, we have a higher online market share than an off-line market share. I have a passion for the digital agenda and probably some of the reasons why I was brought into Orkla. And we come from a very good starting point. So we'll just accelerate this success. We are working very well with our online customers. We have our own web platforms. And also, we're well established on Amazon, whether it's in the U.K., in India, Germany and now also in the Nordics based out of Sweden. But another key driver for growth will be our sustainability agenda. For 14 years, we have published our sustainability reports in Orkla. We are in the forefront on the sustainability agenda. Now we will have even more commercial impact from our sustainability work towards our consumers and towards our customers. We will utilize this position. We will be a local champion for sustainability. Again, a key driver for organic growth and doing good for the planet. The third priority, building tomorrow. Over the last 12 to 18 months, we have acquired businesses with high-growth potential, and not being margin dilutive. Examples include Eastern in India, where we have geographical expansion into a high-growth market we know very well. But also on the category dimension, NutraQ, as another example, subscription-based direct-to-consumer model. And also through New York Pizza, out-of-home, we'll be wherever the consumer is, whether it's in-home or out-of-home. And we'll continue this shift in the portfolio, but not losing focus on our core markets. We'll continue our profitable organic growth in Norway, 25% of our business today, through, for example, Foods and Confectionery & Snacks, but the relative share of Norway will probably be significantly lower when we see 5 years down the road, also because we have more potential in our other home markets, such as the Baltics, Finland, Denmark and Sweden. But we will build additional platforms into high-growth markets and high-growth categories from our core. Examples of this, you already see, plant-based, out-of-home and consumer health. And based on this, we have set some clear financial targets for the next period. The first target is to achieve at least 2.5% profitable organic growth per year during the period. And this will be a combination of price and volume. Our second target is to achieve mid-single-digit underlying EBIT growth due to good cost control as well, but with a lag effect during the first quarter of 2022, primarily driven by high raw material prices. But we also have some clear sustainability goals. We'll reduce our greenhouse gas emissions by 65% Scope 1 and 2 by 2025 and including Scope 3 by 30%. 100% of our packaging shall be recyclable by 2025. Of course, we have a big focus on 2040 and 2050, the long term. But to us, it's really important that we are committed to some concrete tangible goals for 2025. This is urgent for Orkla and for the planet, but there is more to come from our side. We'll have a dynamic approach to our portfolio. We'll continue to expand into high-growth markets and high-growth categories but not losing focus on our mature markets and mature categories. But we'll only expand in markets we already know very well today or in markets very close to our existing markets, but we'll have a dynamic approach to our portfolio. We will consider stock listings, exits or divestitures when that's meaningful. And in the same way, as Orkla moved from being a conglomerate to a BCG company, we'll have the same dynamic approach within our BCG portfolio. So what should make you confident that I, my team and the rest of the Orkla organization will deliver on this year-by-year quarter-by-quarter? Well, there is no single answer to this. It's a combination of a highly motivated top management team, a firm commitment from my side and the whole Orkla organization coming out from the pandemic with braveness, self-confidence and a passion to take Orkla to the next level, but also a passion around our sustainability agenda and our digital agenda. And this, in combination with an incentive system based on both profit and organic growth, will contribute. And I also believe that we have very specific, concrete, tangible plans for how to achieve a step change in organic growth and continue the underlying EBIT growth. And to me, winning locally is not a word. There are real actions behind this already taking place with good momentum. And embracing change is also happening through our direct-to-consumer journey, our focus on our digital agenda and our sustainability agenda, where we will have even more commercial impact to our customers and our consumers. And finally, building tomorrow is already taking shape through our recent acquisitions and we'll continue this journey, focusing on plant-based, out-of-home and consumer health. And hopefully, over the next 2 hours, you will feel confident that we will deliver on this and create shareholder value, both for the short term and for the long term. I will now leave the floor to Harald, who will take us through the financial targets.

For the next 3 years, we have set some ambitious but realistic targets. I will now share some insights with you on how to improve organic growth, important building blocks for reaching our EBIT target and M&A as an important part of our value creation model. I will end my presentation with an outline of our capital allocation priorities. But first, let's have a quick look on how we have performed against our Capital Markets targets from 2018. The financial target communicated back in 2018 focused on organic growth at least in line with the market and margin expansion of 150 basis points and a reduction in working capital by 300 basis points to net sales value. Summing our performance over this 3-year period is challenging because of the corona pandemic has affected our business for almost 2 years. But let's try. Currently, we estimate our organic growth to be somewhat below market growth, but the trend is positive. We will not reach our margin target short term, mainly due to negative development this year, a huge increase in raw material prices that in the short term has affected and will affect margin negatively. And we have chosen to increase our A&P spend to support our core brands and secure long-term growth. We will meet our working capital targets, which corresponds to approximately NOK 1.7 billion in reduced capital employed. Moving on to the financial targets for the next 3 years. My preference is to set realistic targets and then work hard to deliver on this. I think it's important to have a close attention to details and a close follow-up on our numbers as well. And of course, internal and external target must be aligned. In internal business reviews, I like us to be brutal honest in describing our performance and challenges so that we quickly can assess where and how to improve. And as a CFO, I'm also enthusiastic and passionate about delivering on these targets for the next 3 years. I will now walk you through our targets, starting with organic growth. During the last 5 years, our organic growth in our Branded Consumer business have been 1.6%. We have, of course, businesses with good performance, but the overall performance is not satisfactory. So let me be clear. We have to improve our organic growth going forward. We are targeting an organic growth of at least 2.5% for the next 3 years. And this represents a step change in performance, but we think this is both necessary and achievable. So what are we going to do differently? As Jaan Ivar said, we have a very good starting point. We have strong brands, strong market positions and people that really wants to deliver. Second, we have our growth initiatives like plant-based, out-of-home, health and increased exposure to high-growth markets such as India, which adds up approximately 20% of our portfolio and should all contribute to good growth going forward. Third, we will prioritize the core. We will make our products more relevant for the consumer and more accessible by innovation and channel expansion. And we will invest more in our core brands. Examples of channel expansion could be out-of-home, increased sales to pharmacies and increased online sales. Let's have a look at our EBIT target. Our second goal is to deliver a mid-single-digit underlying EBIT growth, but with a slower start into 2022 due to the lag effect from increased raw material prices, the ramp-up of our new biscuit factory in Latvia and increased A&P. The EBIT target is somewhat higher than our performance over the last 5 years. The main EBIT driver is, of course, organic growth, including both volume and price. But it's also important to continue our focus on cost improvements across the value chain. We will improve our terms with our suppliers. We will improve efficiency in our sites and organizations, and we will continue to consolidate factories when it makes sense. Over the last 3 years, we have realized around NOK 2 billion in cost reduction and cost avoidance. And we plan for this performance to continue for the next 3 years. Let's move on to M&A. M&A is an important part of our value creation model and our history, and will continue to be that for the years going forward. Our targets on 2018 included both M&A and portfolio management as an important part of value creation. And we have, over the last 3 years, invested in new businesses of NOK 10 billion, and we have divested businesses of NOK 800 million. These recent acquisitions are very much in line with our strategy to grow in categories and channels with higher growth, such as Kotipizza, New York Pizza, NutraQ and Eastern. This is a good foundation for growth and value creation going forward. We have completely transformed the company over the last 10 years. We have divested assets of NOK 49 billion, and we have acquired Branded Consumer Goods company of NOK 28 billion. Our dynamic approach to the portfolio will continue going forward as Sverre later today will tell you more about. Let me end my session with some comments on our capital allocation priorities and funding considerations. We will not change our priorities, which means priority #1 is to provide an attractive dividend. We have always paid dividend and never lower dividend, and the payout ratio should be in the range of 50% to 70% of earnings per share. Priority #2 is a value-accretive M&A and organic investment to build future Orkla. And priority #3 is to return excess capital back to shareholders by extraordinary dividends or share buybacks. The most important funding consideration is to maintain an investment-grade status in the credit market. Let me summarize my presentation. We have set some ambitious but realistic targets. We are delivering on at least 2.5% organic growth, it's very important to be able to deliver on long-term value creation. We expect mid-single-digit underlying EBIT growth, and M&A will continue to be an important part of Orkla's value creation model. Alongside these targets, we have set some very clear ESG targets. As CFO, an important part of my job is to secure that all we do is aligned with long-term value creation and building Orkla for tomorrow. And with that, I will hand back to Kari for a closer look on how to deliver on our targets. Thank you.

In the next part of the agenda, our business area leaders will take us through their strategy and plans to deliver on the group targets outlined by Harald. We will start by sharing a film where Ingvill from Confectionery & Snacks and Atle Vidar from Foods will talk about how we work with our core categories to compete in the current marketplace. [Presentation]

I'm now joined by Atle Vidar and Ingvill to elaborate on some of the topics from the film. Let me start with you, Atle Vidar. We are targeting higher growth rates the next years. What has changed now that makes you more confident that we will succeed going forward?

First of all, we have a forceful strategy plan in place for the next 3 years, clearly focusing on accelerating growth. And then I must say that Jaan Ivar has infused a healthy change to our culture in Orkla, building on the value of being trustworthy, but encouraging us to be more brave, act more like a challenger even though we have many strong market-leading positions. And I think he has proven his execution power in his first 2 years in office. We have reorganized and downsized the headquarter and the business area level. We have established consumer and financial investments. And we have executed many important strategic M&As, even though it was challenging times during the pandemic.

So both a cultural and an organizational change to help fuel the progress. Can you also elaborate on the importance of skewing our portfolio towards faster-growing markets, categories and channels?

Yes, I can take some example from Foods. We have, over the last 2, 3 years, acquired Eastern, a spice company in India, and we have also acquired a few strong companies in the out-of-home channel. So this will position us more into faster-growing markets and into faster-growing channel. And then over the 3 years, we have seen tremendous growth in our plant-based area. So today, the platform to grow from is much higher than just 3 years ago. So I think this illustrates the point you made, Kari.

Another question we often get is related to market share development. Would you say that we're able to overall maintain our positions and grow market share?

The market share development has been mixed over the last year, but I am confident that we will be able to both grow the categories and increase our market share as we go forward. And we see -- when we invest more behind the core brands and we do product launches and innovations based on the dominant consumer trends, we see that we succeed with increasing market shares.

Do you have any examples?

Yes, I would like to mention Paulúns, our health position brand in -- coming out of Sweden. This is breakfast cereal products. They have no sugar added, no artificial ingredients, and they are just loaded with nutritional ingredients. And we launched this in 2010 in Sweden, having no position in breakfast category at all. And just over a few years, we became the market leader in the category. And of course, this inspired us to do more of this in more markets. We have launched in Finland, also with the same results, and later in Denmark and in Norway. And we see that we have growth and we take market shares in a category with strong global competitors.

And I just need to say it is a fantastic product. I'm a big fan of it Vidar. Every morning...

That's good to hear.

Very tasty. Yes. Do you have any other examples maybe from a different category?

Yes. I can mention the ketchup category, which many probably think is a mature category. By taking out sugar, doing sugar-reduced launches or no sugar at all, we have taken a very big portion of that segment, and we see that, that drives the category. And then we are able to take market shares. We have seen this development in Austria, for instance, where we dominate this space and also in Sweden. And of course, this is backed by strong investment behind the launches.

Ingvill, did you want to comment on any of this?

Yes, I definitely want to comment on when we talk about market share, because growing market share is really a key priority for Orkla going forward. And you, Atle Vidar, you talk about increasing the investments in our brands, and I very much support that. And going forward, we will increase the investments in our brands and specifically the A&P investments. But then it's not only about increasing the investment. It is also how we use that investment. And we will have a very clear prioritization on which brands to support based on long-term strategic portfolio management. And we will also have a very clear and optimal media mix so we make sure that we have the best ROI on our media spend. Going forward, we will win in the market. We will grow market share by making sure that we have the best both mental and physical availability for our brands, independent of channels and media.

And maybe you have an example for us as well?

I have a great example of that. I love chocolate. And one of the leading Norwegian chocolate brand, Stratos, has actually doubled its market share over the last 3 years. And there are 3 main drivers behind that growth. First of all, we've done excellent brand building with high media investments based on a very clear and distinct brand positioning. And then we've done strategic innovation in the core and we've invested in new technology that really enhances the taste experience. Have you tasted the new chocolate?

I have...

Yes. I love the new Stratos variants and you know the Stratos caramel. I just eat it all the time. It's way too much. And thirdly, it is also about a strong and consistent in-store activation. And that bodes on those new fantastic variants as well as the core products. So I believe that these 3 elements are really a winning formula: Innovation, brand building and in-store activation. And this is a winning formula that we will drive across our brands and across our markets going forward.

In the film, you both also mentioned top line synergies. Can you give some examples of that, too?

Yes. I think for Confectionery & Snacks, I think the biscuit category is a great example of driving top line synergies across markets. And as I mentioned earlier, we are building a new biscuit factory to serve all our markets. But it's important to say it's not only about optimizing production. It's also about developing a joint biscuit category strategy to win in the market. I think collaboration is a key word here. And by collaborating, we can leverage the fantastic resources and expertise we have across markets to really drive and identify those future new growth platforms as well as drive real innovation, and using these innovations and growth platforms to drive strong growth with the local brands in the market.

Maybe you have some examples from other parts of Orkla as well?

I think we have a number of examples. You talked also about some good examples already, Atle Vidar. But I think 1 example I would like to talk about is the Grumme brand in Orkla Care. And I think here, Hege and her team has done a great job in driving top line synergies. Grumme is a Swedish cleaning brand that came into our portfolio in 2015 when we acquired Cederroth and the Care team quickly identified opportunities and potential to really grow the category by introducing a number of new products from the Norwegian home care portfolio. So these launches really strengthened Grumme's position as a strong home care brand, but is also a modernized brand and very much made it the most environmentally friendly Swedish cleaning brand.

And I guess you did some cost synergies as well?

Yes, definitely, because when you increase the volumes on the same formulations, then you drive cost synergies across the value chain. And I think just that this very nicely illustrate the beauty of Orkla's operating model. We have the very strong local consumer insight. We are close to the local consumers, and we have also strong local brands. But then at the same time, we realize scale, both to drive strong innovations as well as optimize cost. And I think that's exactly what we see in the Grumme example. We have the same formulations. We have the same packaging. But then at the same time, we launch and serve all these products to the consumer under local strong brands.

We keep mentioning scale advantages as well. Can you give us some examples of what we mean and where we see those potentials?

As Ingvill clearly stated, we come from a -- predominantly a local business model. We need to win locally, right? But at the same time, it's very important of our value creation formula to exploit the scale advantages we have across our group, both to drive top line and to drive cost efficiencies. And another example of top line synergies is the way we have rolled out our plant-based products from market to market to get the high growth we have on that category. On the cost side, I would like to highlight the Orkla Group procurement, our centralized procurement function. Of course, they basically act as 1 large buyer to our supplier to get our prices down and get good cost improvements.

And very important these days.

Very important these days. And then, of course, competence and capability is important in Orkla, and we have some central teams within marketing and innovation, within group sales, within digital sales and also within net revenue management. And they work across Orkla with all the BUs, or the business units, to make sure our capabilities are on the top all the time.

In previous periods, a lot of the value creation potential has been identified in supply chain. You know that. You seem to put slightly less focus on this now. Is there still more to go for?

Believe me, Kari, there is still more to go for. Even though it may be perceived as a lower focus now, it is not. We have a target of NOK 2 billion in cost savings over the coming 3 years. So we have clearly high ambition on this level this year as well. And I have, as you know, spoken about this in previous Capital Markets Day sessions. And the formula is very much the same. It's improving the sites we have. Supply chain cost is more than half of the overall cost base in Orkla. We've improved the sites, doing continuous improvements all the time. That's a big part of our DNA. And we do redesign products where we need to do a step change to get the cost base down. And of course, we always do a factory consolidation whenever that makes sense. The biscuits project you mentioned, Ingvill, is a very good one on that, a good example. And I will also say, in vegetables, we have consolidated all our production in Central Europe to a factory in Czech Republic, which now also serve, in addition to Central Europe, big parts of the Nordic area. And I can also mention the drinkables factory in Kumla in Sweden, where actually 3 factories was merged into 1, and is serving all Orkla Foods market and drinkables these days.

Orkla also communicates quite an ambitious role when it comes to sustainability. But surely, you will meet some dilemmas on the topic balancing the ideology and also the commercial arguments?

First of all, Kari, I just want to say that sustainability is really high on the agenda here in Orkla. And we want really to take our share of responsibility and contribute to solve the global health and sustainability challenges we see. Already in 2005, we committed to UN's Global Compact. Over the 15 years that I've worked here in Orkla, and I know -- I'm sure you will say the same, Atle Vidar, but I really have seen that the focus on sustainability has really increased year by year in Orkla. And I feel now it's very much an integrated part of how we do business. And then your question, you talked about the dilemma between the commercial side and the ideology. And I'll just say that for me, I don't really see it as a dilemma. Most of all, I see sustainability as a business opportunity. We see that consumers, increasingly, they are seeking sustainable solutions. And I believe that we in Orkla are really well positioned to deliver on these new needs and also that we have actually a competitive advantage here. When we reduce and work to reduce energy, water consumption or reducing waste, that is also actually driving the cost agenda that you just talked about, Atle Vidar.

It is.

So it does go hand in hand. And then in other cases, there might be increased costs or required investments but I do believe that these investments will pay off over time.

So how is sustainability a good business opportunity for us?

Well, definitely, as I just said, on the cost side, but also very much on the top line as well. And I think actually you and your team in Orkla Foods, Atle Vidar, has done a great job in how you make the portfolio more transparent to consumers by introducing climate labeling, both for Felix and TORO. And I think this is a really nice way of how you integrate sustainability in the brand purpose.

Absolutely.

And I think then for Confectionery & Snacks, what we worked most on has been on the nutritional value of the product. So it's been about reducing sugar, reducing salt, without compromising too much on taste, of course. And then also taking out palm oil. And we communicated this strategy very clearly as part of our brand communication, both to our consumers and to the customers. So I think that's 1 side of it. And then just I have to mention just 1 -- another business opportunity as well because what we really see is growing these days is consumers' need for healthier snacking. And I think that will be a very significant trend and a very interesting business opportunity for all of Orkla going forward.

Well, thank you, Ingvill and Atle Vidar. It's good to hear that we still have lots of growth opportunities in our core portfolio. Now we will deep dive into our 3 prioritized new growth areas, which we believe will accelerate growth. Let's start with a 5-minute film on plant-based, out-of-home and consumer health. [Presentation]

I'm now joined by the 3 business area leaders responsible for delivering on these targets. And Johan, can you start by outlining our strategy to grow plant-based? What is Orkla's winning formula?

So Kari, first of all, being close to consumer needs will be vital to winning plant-based, just as Ingvill and Atle talked about earlier. And we will continue to build on our strong positions and momentum in our award-winning plant-based brands, Naturli' and Anamma. And we will leverage the asset of having strong local organizations in 12 European markets. And in addition to our winning local recipe, we have built a dedicated unit that will secure, that will leverage the full power of Orkla combined with an even more focused and innovative approach.

Can you share some further details on this?

Yes. So we are currently investing heavily in plant-based technology development, product innovation, production capacities and capabilities. And total amount of CapEx within plant-based amounts to over NOK 500 million during the last 3 years and plant-based products are now coming out from 6 of our factories. Furthermore, we will explore upstream opportunities as well as expansion beyond our traditional home markets and new forms of partnerships.

So we're building on our local winning formula and combining this with our innovative thinking. Can you give some more flavor on how you will reach the consumers?

Well, we know that consumers want to eat less traditional meat and dairy products for their own health, for animal welfare and for the environment. At the same time, there are still many barriers for choosing plant-based such as awareness, taste, texture and not at least cost. But we believe that we are uniquely positioned to help consumers overcome these barriers.

In which way would you say?

Well, first of all, we have the local insight on taste preferences. We have the technology and innovation capabilities. We have the combination of scale and flexibility in our plant-based value chains and to make products visible and inspiring. We also believe that having strong branding and marketing capabilities at local levels gives us a head start versus many competitors. And remember, our portfolio of plant-based products cover tasty alternatives to traditional meat, dairy, ready meals and snacking products. So to sum it all up, we will deliver really tasty plant-based products that consumers want to buy for themselves and for the planet.

You also say that you want to become one of Europe's leading players when it comes to alternative proteins. Can you say a little bit more about how you're working to reach this ambition?

Well, plant-based, specifically and more broadly, alternative proteins is an important building block in the future of Orkla. Earlier this year, we established Orkla Alternative Proteins as a dedicated unit to strengthen focus on technology and long-term development. The objective is to secure a step change in innovation, superior taste and texture. And the establishment of Orkla Alternative Proteins is fully aligned with our strategy, but also reflects Jaan Ivar's ambition to elevate speed capabilities and dedication to the plant-based agenda. And we see great opportunities to fuel Orkla's growth journey through technology investments, but also through cultivating partnerships with start-ups, and that includes venture investments. We target to have NOK 3 billion in sales from plant-based products in 2025. The growth will mainly be driven by organic growth and supported by smaller acquisitions.

Consumers are also valuing convenience and a lot more of consumption now happens outside the home. And Kenneth, you've talked about the pizza franchise platform that we are building. What you believe makes Orkla the best owner of a European pizza franchise?

Just like in other parts of our business, local consumer insights is key. 47% of our consumer sales are through our own digital channels and our loyalty club is growing by about 1,000 members every day. That provides us with unique insight, which we use to improve our product development and also customize our marketing messages. I'd also like to add that our financial strength and the sheer size of our network adds digital capabilities and marketing resources well beyond the reach of independent chains. At the same time, we comfortably compete head-to-head with global peers.

But how do these independent and geographically spread outlets fit together?

So while we use strong local brands in each of the different markets, our operations have scale benefits. For example, we have an in-house pizza dough factory that delivers to both New York Pizza and Kotipizza as well as to third parties. There's overlapping ingredients and supplier bases across the chains. And we also strongly encourage to sharing our best practice between the various chains. An actual example of this is the approach to new store openings developed by New York Pizza is now being deployed in Kotipizza. We also see sharing of recipes and coordinating marketing tactics.

And how will M&A support your growth strategy?

So the addressable market for our franchise operation is about NOK 80 billion. We see M&A and partnerships as the primary tool for further international expansion. We will focus on proven concepts and strong local brands. We seek market with attractive growth and also companies or chains that have strong strategic fit. A good example of this is the 3 chains that we just acquired in Germany. These will, over time, be converted to New York Pizza, and there will be service from our logistics hub in the Netherlands.

And you also have ambitious targets, Hege, when it comes to consumer health. Can you start by expanding what you mean when we say consumer health?

Yes, I'll do so, Kari. The core health business in Orkla today is an essential part of the Care business area portfolio, with strong positions in categories like food supplements, weight management, sports nutrition and wound care. So when we talk about consumer health as a growth area in Orkla, this is where we come from. This is our starting point. However, we also see large opportunities in a much wider health and wellness space and will look into adjacent categories like over-the-counter on the one hand and functional food on the other. And we will also look into services as serving consumers' health-related needs requires us to take a more holistic approach to health.

In the film, you say that we have an ambition to increase our exposure by over 50% in the next years. What does this imply? And what are your plans to succeed on this target?

Well, yes, you are right. Our ambition is to grow our consumer health business by more than 50% over the coming 3 years, both through organic growth but also through acquisitions. And this implies reaching a turnover of NOK 7 billion by 2025. And there are several building blocks for driving this growth, and let me highlight 3 of them here. One is revitalizing and growing the current core today. That is investing more behind our brands like Möller's, having a position also in other markets than Norway and also investing in several other of our local health brands. This is very much in line with what all my colleagues have been talking about today, namely building our current business stronger by investing behind our strong brands. On this same matter, I would also like to highlight how we will continue investing in pharmacy-specific concepts and also continue building the local organizations serving the pharmacy channel. Then as I mentioned in the film, online is the fastest-growing channel when it comes to consumer health and strengthening our presence online and direct to consumer as well as continuing our international growth journey are important drivers for growth. With the recent acquisition of NutraQ, we now have in our portfolio an organization and a platform, enabling us to launch health and wellness concepts across Europe. We are investing behind web shops for several of our health brands in the Nordics, and we have also set up a team dedicated to handling our business on global marketplaces like Amazon. And then last but not least, we will also look into new growth areas for health, consider expanding into over-the-counter or functional food. And we will also consider exploring opportunities for how we can take a larger role considering health by utilizing our position as a trustworthy partner.

So 3 main building blocks then: investing in our current business, increased presence in online channels, and also being a trustworthy partner. Now that other players also see these opportunities, what would you say are our competitive advantages?

Yes, you are right, Kari. Health is definitely on the rise and we are not the only one trying to capture our stake in this growing market. We do, however, see 2 key elements to why Orkla has the possibility to win. One being the fact that we have been a trusted partner in consumers' life for generations. And when it comes to health, trust is really essential. The other one being a unique combination of capabilities, having traditional fast-moving consumer goods capabilities on the one hand; brand building; consumer insight, as you talked about, Johan; innovation and taste; and health capabilities on the other hand; omega-3; immunity and also strong knowledge on local regulatory requirements. And the combination of these 2 capabilities in addition to our position as a trusted partner is what we believe to be our competitive edge in growing our business on consumer health.

One final question then. What do you mean when you say that some of our health brands has potential outside the Nordics?

Well, definitely, the Möller's brand is an area we strongly believe to have opportunities in growing outside our home markets. Möller's is a unique brand, having a unique position, being a natural product, having a strong heritage. And the Möller's brand has also grown with a CAGR of more than 30% over the last 5 years, if we look outside our home markets. And we are already the #1 brand on food supplements in markets like Greece with strong and growing position also in other strong big markets like Romania and Turkey. We are working together with our local distributors in building the brand, and this work, we will continue going forward. And as of November 1, we have also set up a separate organization for handling this business, Orkla Care International, who will be responsible for driving this growth.

Hopefully, our business area leaders have given you a clear outline of our strategy and plans to deliver on these targets. You might also be pleased to know that from Q4 2021, we will start to report on progress on these initiatives on a regular basis. Please also remember that through the program today, you're welcome to post questions on the live chat, and we will address them in the Q&A conference call. We will now take a 5-minute break. And when we are back, Sverre, Head of M&A and Strategy, will give you an outline of our approach to portfolio management and M&A strategy. [Break]

Welcome back from the break. Our next speaker on the agenda is Sverre, Head of Strategy and M&A. He will take you through our approach to portfolio management and outline our M&A strategy.

The vision outlined by Jaan Ivar is a great starting point to help you all understand the Orkla strategy. As you already heard, we're keen to make changes happen, but recognize that it will take time as well as substantial efforts. We believe that the growth targets that we have set are both ambitious, yet achievable. However, in the longer run, we clearly want to deliver even more. And the best way of achieving this is by both optimizing the existing asset base as well as facilitating a transformation, a transformation of the business mix as well as the corporate culture by being more brave as Jaan Ivar has said. To illustrate this transformation, I will take you through a few key subjects. I will talk about partnerships, and I will touch on our geographic footprint. I will also share with you how we're thinking about making our portfolio more dynamic, both the thought process as well as the M&A agenda supporting it. To be clear, Orkla has a great set of strong local positions, and we're investing in these. However, maintaining this competitive advantage requires us to keep up with the changing world around us. You see evidence of this through our great work on sustainability and also our focus on digital tools and trends. What has been given less attention is Orkla's ability to be a great partner. In this increasingly complex world, it is critically important to have the ability to seek out trust-based and long-term partnerships like we have with Jotun, who you'll hear from later today. Other examples include Dragsbæk in Denmark or our cod liver oil manufacturer in Lofoten. In both cases, we have collaborated successfully with the local partners for more than 30 years. More recently, we entered into an exciting new partnership with 2 key family members and the owners of Eastern Condiments. They're reinvesting the majority of their stake into the new company and will be our long-term partners in Southern India. Even more recently, the founders of New York pizza in the Netherlands will be retaining a significant minority stake and will be joining us on our out-of-home expansion journey. Our willingness to enter into these partnerships and make them work for the long haul is a real competitive advantage versus our larger global competitors. We just have to do more of them, and we need to get even better at it. Earlier today, Hege, Kenneth, Johan talked about 3 new growth initiatives, but we also see significant growth potential through geographic expansion. As you know, Orkla's exposure to Norway and the Nordic markets have been declining over time. But the concentration of sales and, in particular, profits are still in these traditional home markets. And we do really well in these markets. We leverage our positions and our local insights to get a foothold in new segments and categories like we have in plant-based. However, in order to significantly increase organic growth, we need to also have an exposure to higher growth geographies with long-term momentum. However, this doesn't mean that we're willing to take on significantly increased risks but rather that we're focusing our core capabilities on a few new geographies. We've proven repeatedly that the Orkla model works where we deploy the Orkla brand building capabilities to strengthen and professionalize already healthy positions in smaller markets. Combining that with category knowledge, we've seen that this has been successful in the Baltics, in Czech Republic and Southern India. So we will focus on 3 geographic clusters: Nordic and Baltics, Central and Eastern Europe and South Asia. So in other words, the countries where we're already strong and similar or adjacent countries. The exception, of course, are the businesses which have exposure to a broader European catchment area, like food ingredients, wound care or out-of-home who are all successfully expanding in the European markets. So what this means is that we're focusing on what we know works for Orkla, but still stretching ourselves to capture some of the growth and value creation opportunities around us. Now what else are we doing to make sure that Orkla looks different and better in the future? To give you some insight into how we're approaching this challenge, we have a simple framework to help us think about and to define our portfolio over time. Hold and grow. Some of our largest businesses have capabilities and positions that are critical to Orkla. It is important for us to grow and nurture these. So our focus here is on organic growth. Clean up and divest. Some positions will, over time, no longer be strategic, and we will therefore seek to divest those. They may not be large, but they might be. And if so, we're comfortable with making those tough calls. Build and monetize. Some businesses lend themselves to grow through acquisitions, but with the intention of selling either part or all of those positions over time. Finally, new growth areas. These are the businesses, the categories and geographies, which is given extra focus, resources and capital because we believe they are the growth engines of the future. Over time, some of our assets might move between different categories in the framework, depending on our assessment of each of the assets. So something might start off in hold and grow, but move to build and monetize if we think that, that gives us flexibility to reallocate capital or resources. But most importantly is for us to always keep an objective view of all our assets. That should give us the ability to have a dynamic portfolio where we are rigorously reallocating capital to where we see the greatest value creation potential. As you can see, there are close links between the growth strategy and the M&A agenda. So therefore, let's take a quick look at how we're approaching M&A. We summarize our approach maybe a bit simplistically with 3 key words: bigger, faster, better. Bigger. We focus on doing larger transactions with a greater impact on our strategy. As an example, we have, in the last 2 years, done larger transactions at twice the rate of the previous 8 years. Faster. We're investing for growth with the objective of building a platform with higher organic growth potential. To illustrate, during the last 2 years, we invested 80% of our acquisition capital in growth cases versus 21% historically. And better. We specifically aim to extract more synergies more rapidly. We're investing in capabilities in our M&A team to extract more synergies and deploy the benefits of Orkla ownership more effectively and more rapidly. And we think that over time, this would yield significant benefits. To wrap up, we have a clear and specific strategy inspired by the aspirations laid out by Jaan Ivar. It is designed to ensure that we deliver on growth in 3 focus areas, in addition to geographic expansion and growth in our core. At the same time, it opens up for a much more dynamic portfolio, sometimes in partnership with others, but always empowered by a highly competent and progressive M&A team. In sum, we're confident that the strategy in these areas will contribute to the long-term value creation for Orkla.

I'm joined now by Jaan Ivar, and our next topic on the agenda is Jotun. Jotun is a global manufacturer of paints and coatings, where Orkla has a 42.6% ownership. And many people are curious about our investment in Jotun. Jaan Ivar, maybe you could share comments?

Absolutely. And Jotun has a long history with Orkla. One of Orkla's subsidiaries, Lilleborg, was 1 of the 4 founding fathers back in 1971. And while others reduced their shareholding, Orkla increased the shareholding and it's now, as you say, 42.6%. And our fun fact, Kari, actually, the accumulated cost price for Jotun for Orkla is around NOK 189 million. So a good investment. And then Orkla has 300 local brands focused on both M&A and organic growth, while Jotun has 1 global brand, both to business to business and business to consumer, and focus on organic growth. Two different business models, but I believe both of them are working very well. But we do have 1 thing in common, and that's a strong corporate culture. And I believe Morten will talk more about that, and that's really exciting. And also, as many people know, Jotun is a family-owned business, and we enjoy great relationships with the Gleditsch family both on the Board and in shareholder meetings. And led by Morten Fon, the President and CEO for 16 years, and he has a strong team around him. So I'm really confident about Jotun in the future as well. It's been a great value creation journey, and it will continue to be a great journey. So I'm looking forward to this session as well.

Note that Jotun's growth journey has been impressive and value creating for Orkla. It is, therefore, a great pleasure to introduce our next speaker, President and CEO of Jotun, Morten Fon. [Presentation]

Jotun is a story of organic growth. And I see 3 main reasons for the success we have had. First, that we have a fantastic organization working together in a very good corporate culture. Secondly, we have a strategy that stays firm over time. We don't change much. The third part is that we have a fantastic footprint giving us growth opportunities all over the world. Orkla is running a combination of M&A and organic growth. In Jotun, we do only organic growth. At the bottom of everything we do is our corporate culture and our values. The values are loyalty, respect, care and boldness. In short, we think long term about everything we do. The pandemic has, of course, affected us. But again, we think long term, our organization has been kept intact. And we believe we are prepared to compete and to take market shares again after the pandemic. Jotun is a global company with strongholds. Our strongholds is in Asia, in the Middle East and in Scandinavia. In 2020, Jotun had a consolidated turnover of NOK 21 billion. If you look at the totality of our operation, we sold Paints & Coatings for NOK 28 billion. We call it our 100% numbers. On those numbers, we had an EBITA margin of 16%, which is good in our industry. Today, we have 10,000 employees. We have 39 factories around the world, and you can buy our paint in 120 countries. Our strategy is based on 3 pillars: First is the 4 segments: Marine, Protective, Decorative and Powder. This has given us security and safety in the organization that is very helpful developing Jotun going forward. Number 2 is organic growth. Everything we do, we do organically. We don't buy companies. We simply build brick-on-brick market-by-market. The third part is differentiated approach because we believe that our local organization know best how to handle challenges and how to take opportunities. So we build Jotun based on these 3 strategic pillars. Our organization today is handled in the 4 segments and in 7 regions. We believe it's a natural hedge in operating with 4 segments and in 7 regions, and we have seen that historically. We have built value based on this over the years. Jotun is today operating in a global market. That global market is approximately USD 100 billion. Jotun has gained strong positions. In Powder Coatings, we have approximately 3% of the global market. And by that, we are #3. In Protective Coatings, we have 8% of the global market. And by that, we are also #3. In Marine Coatings, we are #1 in the world with approximately 23% market share. In Decorative, we measure the regional market shares. And starting in the Middle East, we have approximately 40% of the market, and we are #1. In Scandinavia, we have approximately 27% of the market, and we are also #1. And then in Southeast Asia, representing the biggest growth opportunity, we are #3 with a 12% market share today. In Jotun, we have a proven track record of profitable growth. The last 15 years, we have grown the business in average 9.5%. We have done that with good EBITA margins. Up to 2005, the EBITA margin in Jotun was never above 10%. From 2005 onwards, it has been above 10% EBITA margin all years, but one. This is not only because we are doing great today. That is because Jotun invested in the '60s, in the '70s, in the '80s and in the '90s into new markets that is giving good profitability today. Our targets long term going forward is to deliver at least 8% growth organically; to deliver at least 12% EBITA margin; and last, to deliver more than 25% return on capital employed. So far, so good. 2020 was a very good year for Jotun. 2021 will be a decent year for Jotun. But we have uncertainties. First, the raw material markets has started to increase fast. Secondly, the new building of ships has come down dramatically. Thirdly, the oil and gas business invests less and do less maintenance, that's affecting us in Jotun. The last uncertainty is, of course, the pandemic. We don't know what will come after the pandemic around the world. So we see uncertainties, but we will continue to develop Jotun organically and to create value. I mentioned the raw material markets and the raw material market is causing us trouble these days. The raw materials, the first 8 months of 2021, has risen 40% compared to the first 8 months last year. That means that our second [ tertiary ] result is coming down somewhat, but we are still delivering record results so far for the year. Raw material prices has now stabilized. That is good news to us. But we need to continue to work hard on increasing our prices to compensate for higher raw material costs. Digitalization and sustainability will be very important for Jotun going forward. I would like to share a small example with you. Ten years ago, we launched our hull performance system. That is the combination of a good antifouling, good technical service and onboard measurement. So far, we have painted 1,300 ships. Those 1,300 ships, they have saved $4.1 billion in fuel. That's important for our customers. And we have saved the world for 38 million tonnes of CO2. That is quite a lot and compared to the Norwegian car fleet that emits 4 million tonnes, you can see the savings. Now we have moved into Phase 2. We have developed robotics, a robot that will clean the vessel under water and make sure they always have a clean hull. That will give financial savings and it will give environmental savings. Environment and finance goes hand in hand. Going forward, we see great growth opportunities. We grow into new markets like Bangladesh, Cambodia, Kenya, Ethiopia, Algeria and Morocco. We do that by creating distribution. Today, we have approximately 10,000 painting machines spread around all the markets we operate. That will ensure good growth also in the future. So to summarize, we have proven the ability to grow. We have a fantastic footprint in the markets of this world that is growing. We have a strategy that stays firm, and we will continue to follow that strategy. And cut it short, we will continue to create value.

The presentation of Jotun concludes our program today. I'm joined now by Jaan Ivar and Harald to sum up the main messages before we move on to the conference call. And let me start by asking you, Jaan Ivar, what do you want your audience to remember as the main message today?

Well, I hope we have conveyed the message around the step up on profitable organic growth, and I really believe in this, and we are very committed to the step up. And first of all, we have some very strong brands, 300 local brands in #1 and 2 positions, and we are investing a lot in these brands going forward. And then taking our local insights, the local empowerment to really reach out to the younger generations and also the way we reach out on the geographical expansion. And we mentioned a couple of examples on that as well, Möller's and Jordan. And then we are coming from a solid momentum on the digital agenda with good growth, and we'll just accelerate that even more. And then the sustainability agenda. We have set some clear goals and then also how to be even more commercial in that area to customers and consumers. So really excited about that part of the portfolio. And then we have the other part moving into fast-growing categories and markets. And 20% of our revenue base is actually in that space already. So this is already happening today.

And a follow-up question, I assume many of our listeners are eager to ask then, is organic growth of at least 2.5% per year an ambitious target?

Yes. So here, it's really important to compare to pre-corona figures, where we historically have been around 1%, and we are now stepping up to 2.5%. And in my view, then we are winning in the market, and that's really important. And then during the pandemic, it's not that much visibility around underlying growth. So for next year, 2022, we will see some normalization of in-home consumption, especially in the grocery channel but we might also see some positive effects through the price increases we do on the organic growth numbers. So 2.5% -- at least 2.5% should be seen in the context of the historical figures.

Another question related to the targets we announced today is why we have left the margin target. Would you like to comment on that, Harald?

Thank you, Kari. A relevant question. First, as we have communicated today, the main target is long-term value creation and this is not always aligned with optimizing or maximizing operating margin. Of course, we would like to improve and work to improve our margins, but we will not turn down projects or business opportunities with a lower margin if the expected rate on the investments is above our cost of capital. And second, I guess our underlying EBIT growth target is much more aligned with how we operate and focus in Orkla.

You also talked a lot about your M&A activity and how you will support new growth initiatives through M&A. How will your M&A activity affect your profitability, your return on capital employed?

First, our return on capital employed in our Branded Consumer Goods area in 2020 was approximately 13% pretax. And normally, in acquisition cases, they are dilutive in the short term. For instance, if you pay 15x EBIT, that's give you approximately 6.7% in the first year pre-synergies. But of course, we have a long-term view on our investments in Orkla. And I'm very confident that these acquisitions will add the value and will also contribute positively on the return on capital long term.

Thank you, Harald. It will be exciting to see how our newly acquired businesses will develop and contribute to value creation. I guess then the big question is, are you confident that our strategy will add value, Jaan Ivar? And do you believe the actions taken are sufficient?

Yes, I'm confident, Kari, and very committed. And throughout this session, you've heard from myself, from Harald, Atle, Ingvill, Hege, Johan, Kenneth and Sverre, that we are very committed to a step up on profitable organic growth of at least 2.5% per year compared against historical levels of around 1%. And this will be driven by a combination of both price and volume. And with good cost discipline, we will have a mid-single-digit underlying EBIT growth. Moreover, we have some clear and good momentum around the digital agenda. We have good growth, and we'll just accelerate this growth going forward. And for the sustainability agenda, big passion in the organization where we now have some clear targets, both short term and long term. And we will utilize this as a commercial advantage, both to our customers and consumers, a key competitive advantage for growth. You also heard Harald and Sverre talking about M&A and the value creation potential. We'll also have a more dynamic approach to our portfolio. Sverre described in detail how we will do bigger transactions, and we'll do transactions into faster-growing markets and categories from our core and then also quicker, better synergy realization. So bigger, faster and better. And I believe that the value creation potential we have highlighted today will not just significantly move Orkla for the next 3 years, but for the next 10 years towards 2030. And myself, my top team, the 100 top leaders in Orkla and the rest of the organization are fully committed to deliver on the targets, the road maps and the strategies. I also believe that during the pandemic, we have come out strong as an organization with lots of self-confidence and also braveness. So with those closing remarks, I guess now, Kari, we'll open up for Q&A.

We will now have a 5-minute break before we are back with our Q&A conference call. [Break]

Welcome back. I'm now joined by all our Orkla speakers today, and we will open up for Q&A. We have got some questions on the chat, and we also have a conference call open. [Operator Instructions] For those of you who want to ask a question, and please also limit yourself to 1 question at the time.

We will start with a couple of questions from the web. First up is 3 questions actually from John Ennis, Goldman Sachs. First question goes to you, Harald. Margin mix impact. Of the 20% of sales you identified as high growth, are these businesses margin accretive or dilutive to the group? Can you give details by the different business units within this 20% of the portfolio you identified as high growth?

Great question. First, the current growth initiatives are not dilutive to margins. I cannot go into details in every segment of these new growth initiatives. But I can say our out-of-home and also the consumer health will be margin accretive while the plant-based business are more in line with the average margin in Orkla.

Thank you. And then we have a second question. I think that goes to you, Jaan Ivar. Are these new targets going to be reflected in the management incentive structure?

Yes. So first of all, we have already had an incentive system in place for the last 2 years based on profit growth and organic growth, and that will continue. And when we set the targets for next year, that will be reflected in the incentives for the top 100. And then there is an individual component as well where we can target plant-based, out-of-home, consumer health but also the current core. And then, of course, we have a long-term incentive systems based on shareholder value creation and the share price development over the next 3 years. So I would say it's very well aligned to the targets.

And the third question from John Ennis goes to you, Hege. What is the e-com share of sales, excluding the out-of-home pizza business? And what would the 2025 target be excluding the out-of-home pizza business?

I don't have the exact answer to that question. But I could say as much that the online share varies a lot across the different business areas. And if I use my own responsibility business area as an example, here, we had an online share of 13% in 2020, and the aim for an online share of 35% at the end of this period. But I can say as much as our ambition to double our online sales goes across all business areas within Orkla.

Let's hear if we have any questions on the conference call. Operator, can you hear me?

Yes, we can hear you. There are no questions on the phone line [Operator Instructions].

Thank you. Then we continue with the questions from the web. First one from Tom [indiscernible]. Plant-based focus, but what about cultured meat technology and alternative proteins?

So within the alternative protein space, we're looking at 3 different sources. It's plant-based, it's precision fermentation, and it's lab grown. But when it comes to lab grown, we think it's further out in time before we have commercial products in that space. which means that initially, we will look for partnerships within lab grown, and we expect that it will be a part of the future solution. But it again will take some time before it happens.

And then we have a question from [indiscernible]. To you, Jaan Ivar. Do you have a strategy for increasing shareholder value through a stronger share price?

Well, I think my focus and the whole team's focus is on shareholder value creation over time and doing the right things, reaching our targets. And by doing that, I think we'll then have an increase in the share price. So to us, it's shareholder value creation, both short term and long term.

And Ole Martin Westgaard from DNB is asking, on your organic growth guidance of at least 3.5%, how much is coming from your key growth initiatives? I think that's for you, Harald.

That's a great question, Ole Martin. As I said -- no, first, let me remind you, our target is at least 2.5%. I mean it's not actually 2.5%, okay? And as I said in my presentation, these growth initiatives like plant-based, out-of-home and consumer health should contribute to a strong organic growth going forward. And if we succeed, it will be a big part of the total target for organic growth. I won't quantify it.

Next question from [indiscernible]. Can you elaborate any plans you might have regarding divestments and company listings? Stein, maybe that's for you.

Yes. Obviously, we can't go into details in terms of what specific assets we would sell or the targets that we're looking at. But the idea with the framework that we presented today was to give you a much more systematic approach that we can follow in order to both give us opportunities to find new targets, but also be very objective about how we look at our existing assets. So we're hoping that can contribute to creating a more dynamic portfolio over time.

Thank you. Then we have a couple of questions from Markus Heiberg, Kepler Cheuvreux. Can you please elaborate on how you define digital revenue accounting for 7% of sales? What are the key drivers outside the HSNG? In which digital channels should we expect growth? Hege?

Well, if I start with the first question then, how we define online sales. That's the omnichannel sales that we have with our off-line customers. It's the sales together with local e-tailers. It's sales through global and regional marketplaces. It's sales through our own web shops and it's also sales through the app, as you also mentioned, on out-of-home pizza. So that's how we define online sales and how we have come around to 7%, that is today. And then the second question that was...

Drivers outside HSNG.

Drivers outside HSNG. Well, when we have the ambition of doubling our online sales? That's a key driver, would obviously be to continue the omnichannel journey together with our current customers because that is a journey we continue or expect to be quite high also going forward. But it's also growth through local etailers. Its growth together with global and regional marketplaces, and it's also growth on our own web shops and new track an example for driving this growth as well.

And if I may add, Kari, we -- as we said in our presentation, we have great momentum with higher online share than off-line and working very well with the online etailers. So we're quite confident to reach those targets, I must say.

It's great to hear. Did you also want to comment, Hege on the digital channels that would you expect most of the growth to come in?

Yes. I think maybe I mentioned that because I think growing omnichannel journey together with Orkla's current customers is going to be a key driver. If you look to some of our big categories, food, confectionery, snacks, a lot of the growth on online will come together with omnichannel and local etailers. But if I look to the canned categories, we will also see a huge growth in our own platforms, own web shops and also together with global and regional marketplaces.

And then a second question from you -- to you from Markus. What are your first learnings from integrating NutraQ? Where do you see synergies going forward?

First of all, I'd say I'm very pleased to have NutraQ onboard. It's an exciting new member to our family. When we acquired NutraQ, we said this is not first and foremost, the synergy case for Orkla. But we expect this to be a new platform for us to really grow within consumer health. And as I also mentioned previously today, I said together with NutraQ, we now have an organization and a platform enabling us to launch new health and wellness concepts across Europe, and that we look very much forward to going forward.

Some more questions from Markus. On the plant-based target, what is the expected organic growth rate? What rate do you expect the market to grow at towards 2025?

So for the first question, as we have commented on before, we are roughly at NOK 1 billion in sales. And the target we have set in 2025 is NOK 3 billion, and that will mainly be organic growth. And for the growth rates, this will, of course, look different depending on which market we discuss. But if we take the Nordic perspective, for example, of the Nordic markets, the growth rates will range between 10% and 25%. That's at least our expectation.

Thank you. One further question from Markus on pizza franchises, Kenneth. Do you see opportunities in Nordics outside Finland? And do you see potential for working closer with Orkla Foods?

Okay. So as new market entries will primarily be driven by M&A., we can't comment on specific markets that we'll target next. As for the question on collaboration with Foods, we already have exchange of the consumer insight. We are pooling our procurement. So for example, on tomato sauce. And we're also exploring market opportunities, for example, taking the dough from New York Pizza in Netherlands into the Nordic markets.

I believe we have 1 caller on the conference call. Operator, can you hear me?

I can, yes. The first question from the phone lines comes from the line of Andreas [indiscernible] calling from [indiscernible]

I just wonder if you -- maybe Mr. Semlitsch, if you could give some flavor in the main strategy that was chosen when one sold out all the companies to become a more focused and nuclear company if that has actually been successful or not?

Yes. So I could give some comments to that. I of course, don't have all the history, but Orkla used to be a very big conglomerate. And there was a need from the Board and the owners to become a more focused FMCG company, a BCG company. And I think if you look at the value creation of Orkla over the last 10 years, it's been significant year-by-year. So I think based on that, it's been huge value creation of Orkla for decades, also the last 10 years and moving from being a conglomerate BCG company. So a dynamic approach to the portfolio. And in the same way, we like to think that within the BCG setup as well. And then you could always argue what's the value of some of those spinoffs today versus 10 years ago, and that becomes a bit of an academic exercise, I think. So I fully understand why that strategy was chosen. And I would probably have gone the same route of that strategy. It makes a lot of sense.

Was that the final question on the call, please?

Yes, we have no further questions on the phone line.

Okay. Thank you. Then we continue with Ole Martin Westgaard from DNB. Can you please elaborate on where you see the biggest potential for the implied margin improvement? How much is coming from the supply chain? Maybe you could answer that, Atle Vidar?

As we stated during the -- earlier today that we have delivered NOK 2 billion in cost improvements and cost avoidance over the last 3 years, which is higher than the target we set 3 years ago. And we have the same targets going forward. And this is a mixture of the procurement savings, cost improvements in factories and in organizations and also factory consolidation. To translate that into margin improvement is pretty tricky and to do in real life. And but it will help. And it's also important to be able to invest more in A&P behind our strongest brands to fuel growth.

And I guess we have the same ambitions going forward for the supply chain in the next 3 years, the historical 3 years. Atle described that also during the presentation. So the ambitions are still very high on the supply chain, and more optimization is one factor into that as well.

[indiscernible] has a question. Is it possible to go into detail on what segments and businesses you are looking at selling, divesting or listing? I think you already answered that question I guess. So we'll -- yes, we don't need to elaborate. Then we have Øyvind Mossige, SpareBank 1 Markets. What do you consider to be a satisfactory return on capital employed level for branded consumer goods? And if acquiring at enterprise value of EBIT of 15x, how many years should the investments start to be accretive?

That was some great questions. Just to start with, we have a cost of capital at approximately 7% pretax, 5.5% after tax. That's our weighted average cost of capital. That's the starting point. You have to return above this level to be value accretive. And the current return on our branded consumer goods portfolio is approximately 13.3% in 2020, and we expect this level to continue. Of course, in the short term, these acquisitions will be dilutive to capital -- return on capital employed. But we will, over time, secure both value creation and the return. It's impossible to say if it's going to take 3 or 5 years as he probably knows, but it will take some time.

Charles Eden from UBS has 3 questions. First of all, thank you for the presentation. He says, what is your assumptions for the underlying market growth for the next 3 years in context of your 2.5% organic sales growth target? Given your ambition is to double your digital sales, does that imply your sales in the retail channel will see very little growth?

I could probably start off. I think now during the pandemic, it's difficult to sort of have full visibility on market growth. But I think what we have said earlier is that the markets we operate in, we estimate the growth to be around 2%. And then, of course, it varies by market by market and category by category. But in our plans, there is -- there are clear plans also to have organic growth on our core -- in our core markets, profitable organic growth and also winning market share. That performance has been mixed over the last couple of years. But back to our presentation, we believe in our brands, strong brands, #1 and #2 positions, investing even more behind those brands. They come with also high pricing power. But also the digital channel, we see good growth momentum also in our sustainability agenda to utilize our position more commercially. And then, of course, what we also indicated is that for some of these brands, we see international expansion like for [indiscernible] and Jordan but also from India, where we have our MTR brand and Eastern brand, we see expansion opportunities into Middle East and into the U.S. So a mix of different factors, but we're not quantifying the split of at least 2.5%.

Perhaps I should or could add something on the way. It will be -- and in the short term, there will be some special effects. Well, in next year, we expect huge price increases in raw materials. So we will add perhaps these price increases to the customers. So we will have extraordinary high price increases. And -- but on the other hand, we will have more normalized -- we expect to have more normalized market development in the grocery market. So in the short term, there will be some special effects, I guess.

Yes, true. And the second question from Charles. Will a sharper focus on top line growth result in higher CapEx requirements going forward?

The question was higher?

Higher CapEx requirements. So I guess he is asking for a CapEx guidance.

Yes. We said that we will be in the range of 5% during this year and next year, and then we will have a level of approximately 4% going forward. This will also include the necessary ERP investments over the next 7 years.

Yes. And third and final question from Charles. Do you intend to alter the short-term and long-term bonus components to place greater emphasis on organic sales growth?

Yes, I think I partly answered that, that we have short-term bonus incentives, both organic growth and the EBIT target as well as an individual component, which depends on which area you're working in. And then the long-term incentive program that's based on the share price development. So it's well aligned with the strategy.

Thank you. [indiscernible] has a question for you, Jaan Ivar. Do you see your job as a capital allocator or running the day-to-day business of Orkla?

I would say it's both, and it's even more than that. It's a fantastic company to work for. We have -- we are purpose-driven value-driven company. We come from a very solid base. It's creating value for our shareholders, but also doing good for the planet. So it's a very meaningful job, not just myself, but I think the whole team and the whole Orkla organization. So yes, we could probably elaborate on that question. It's a great question.

I guess the short answer is yes.

The short answer is yes. Got it. That's true.

Good, good. Petter Nyström from ABG ASA on capital allocation. You do not mention share buybacks. Is that not on the agenda? I think actually, you did mention it.

I think I mentioned it, yes, that was priority #3. Excess capital back to shareholders by extraordinary dividend or share buybacks.

Yes. [indiscernible] has a question, I guess, that goes to you, [indiscernible]. On M&A, how much can you spend? How much debt are you willing to take on?

Yes. I get told by Harald how much I could spend on that. So we have a sort of a ceiling of 2.5x EBIT to sort of the debt that we're willing to take on. So that gives us a fair bit of flexibility in terms of investing in the things that we think is value creating. So from my perspective, I feel that we have a fairly good flexibility in terms of pursuing opportunities that we think is good and supporting all our core businesses. So we're well funded and able to do what we think is creating value.

And if I may add, with Sverre and his team, they have created a very good M&A pipeline also during the pandemic and also now. So we say no to a lot of requests or objects. So that's important as well that we have a rather high hurdle rate when we take on new opportunities, also rather strict due diligence process from that point.

Yes. And then [indiscernible]. Can you talk about what you've seen with regards to supply issues, logistic issues and price inflation? How is the situation now? And what do you see going forward?

Well, I can start off, and Harald, you may add in. This is a dramatic situation. I mean we are at decade high cost inflation rates. And when we look into the future, we don't really see an easing of this challenging situation. So it's -- most likely it will prevail throughout 2022. In terms of logistics issues, I think they are well aware. There are data points that over 60% of the vessels are over 7 days late across the globe. And of course, that has a huge impact. So far, we have been managing. So we have only experienced minor issues in terms of supply issues impacting our productions. But that's something, of course, we need to stay very, very close to. Want to add something, Harald?

No, I think that's very good.

No. If I could add, we said in Q3 that our year-to-date service delivery rate has actually been 97%. And I think that's close to world class or world class, but it's challenging. So it's hard work in sort of continuing that journey.

Absolutely. [indiscernible] has a question. Is it reasonable to expect that both repricing and rate of exchange may contribute to help the 2.5% growth target already over the next quarters to come? I think you actually answered that in your last comment.

Yes, this is an underlying development organic growth.

Yes. Kristoffer Pedersen, Nordea. Your pizza business currently exceeds 600 franchisee restaurants. Can you comment on the scale that you are targeting in the coming years?

We don't guide specifically on the targets that we're looking for. And that's primarily due to the fact that a lot of the international expansion again is driven by structural activities, and it's a bit binary, which assets we will eventually end up acquiring. But we will seek to grow the network, both through additional M&A and also rolling out stores across all of our markets where we see continued potential.

We have another question from Ole Martin, DNB. You state that you have a higher market share online. Can you please provide a reference for how much higher this typically is? Is your online growth margin dilutive?

I could start maybe and you can elaborate a little bit more on that. I think this is, in particular, when we look to our online share on local e-tailers, we see that we have a quite strong share together with this. And that's one of the reasons why we claim to have a higher online share than off-line. And when you ask about the margin dilutive effect, that depends a little bit about on how you read it. Obviously, if you look to HSNG, which is a pure online e-tailer operating more on an online e-tailer margin level than the rest of our business. But if we look to how we are selling our products together with local etailers or omnichannel or through our own web shops, I would not say that online is dilutive to our margin. Maybe you would elaborate.

No, it's nothing to add.

Okay. What seems to be the final question from the web, Eirik Rafdal, Carnegie. You seem confident in your ability to grow market share within core brands that you invest in. Is this solely versus other BCG companies or also versus private label? Your general thoughts on private label and its market share gain versus branded consumer goods over the past years would be greatly appreciated. Do you want to attempt an answer to that, Ingvill?

Yes. I think growing market share is very much about having very strong brand positions. And I think that is what is unique at Orkla that we have these really strong local brands. And I think that is a way both to compete against the global players as well as the private label. And I think brands is really what we will compete with towards private payers. And I think I talked a bit earlier today also about how you can drive that market share growth. And I think it's very much about the combination of the strong brand building, about innovation and about the -- also the e-store activation. I think that is really a winning formula and a combination that we are very good at and that they really think to make us competitive towards private label. So I'm confident in our future opportunities to drive market share growth.

That seems to be the final question on the web. Are there any other on the conference call? It seems not to be -- okay. Thank you. Thank you all for joining today. We look forward to seeing you all back when we report our fourth quarter results in February.