Welcome to our Investor Day. We are thrilled to see you here and to share with you our vision up to 2027, and to share our strategic insights. Before diving into the slides, we have this legal commitment, written with very small font. Please be aware that the presentation contains future statements, and they are forward-looking statements. These statements are based on our best judgment and current expectations and assumptions regarding future events. Please consider them carefully and read here or after the event. With that in mind, I'm very happy to present Vasile Tofan, the Chairman of the Board, who will start the day.
Yeah, good afternoon, and thank you so much for making the effort and making this trip to come and visit us. We are fortunate to be in a business where tasting the product, feeling the product, smelling the product, actually helps you understand our business better. So there's no better way to understand our business than being here and being surrounded by our assets, the nearly four hundred hectares of vineyards, prime vineyards we have here, which is only a small portion of our vineyards, but at this Purcari location, the historical cellars, the wine-making facilities. So I hope all of this will help you better grasp what we are doing here, but also really get a sense of the brand we have built. You know, because it's a Lovemark brand.
It's a brand that we want to communicate not only a set of functional benefits to the consumers, but also the emotions attached to it. So that's why really there's no better way to engage with our company than being here. Thank you so much for making the trip. Look, I'll keep my introductory remarks short, but I personally have been involved with Purcari now for nearly fourteen years. Actually, I started as an MBA intern, so that serendipitously ended up doing his MBA internship at Purcari, and many years later, you know, I somehow got so much attached to this company that had stayed for so long.
For me, it's truly personal because I even got married here on the lawn downstairs, and when we decided on the date of our marriage, my wife proposed August sixth, and I said, like, "I cannot do August sixth. Let's do it on August five, because on August sixth, we have a board of Purcari Wineries," which also took place here, so you see, it's somehow deeply, deeply intertwined, and being with the company for nearly fourteen years also gives you the long-term perspective on things, and in my mind, we are at the third, already third kind of critical juncture for this company, and that's why I'm so happy to... for you to be here and understand these junctures with us. The first one was in September two thousand and thirteen, when Russia imposed an embargo.
It used to be the largest market for our company, and we had to reinvent the business at that time. Back in the autumn of two thousand and thirteen, we had to reinvent it from scratch. For those of you who understand numbers well, and all of you understand numbers well, right here, because you're our investors, the financials of Purcari in two thousand and thirteen looked the following way: We had Russia, the largest market, we had sales around $10 million, we had an EBITDA that was negative, we had debt of $20 million, and we had accounts receivable frozen that we couldn't recoup from Russia of about $7 million. We had arrears on salaries of about four months. You understand, it was like a disaster. All the recipe for a failing business.
Yet still, this company found the strength to reinvent itself and build a very successful business, so that five years later, it already IPO'd in Bucharest with a set of very strong financials. And I think this IPO was the second juncture for us when we set ourselves the goal, you know, to build this regional champion, right? So the second juncture was in 2018, when we became a public company. We had to learn to live as a public company. We had to learn to live with open set of accounts when our retail partners can come to us and say, "Hey, guys, how come your gross margin is so high? We didn't know you were making so much money on our accounts," and so on.
So that was also, that was also a challenge for us, but we learned to live with it, and we learned to make the most of it. So I think over the last more than five years, we did well as a public company, and we focused on building and executing on our strategy of building a regional champion, and I think we succeeded at that. Today, Purcari is the largest wine company in Central Eastern Europe. So we delivered on that part of the strategy. Today, though, I'm very excited because we are at this third juncture, so we are again looking to reinvent ourselves.
We are looking to build a company that will last, a company that will be nearly two hundred years three and a half years from now, and we're looking to build a company that will last for another hundred years, a company that will go beyond its founder. That's why I'm very excited, you know, to present the team today that is going to take you through our strategy. It starts with the board. I'm very happy with the board we have. So the board you voted in. We have nearly our entire board today, with the exception Ana Maria, who kindly excuses herself given a medical urgency.
But we have our entire board here, and I would kindly ask the board to stand maybe, so that you all see them. Yeah, so here we have our board. Please come to them. They represent your interest as shareholders. Come to them. Thank you, can sit. You can come to them, ask them questions, tell them what you wish for as shareholders. Like, ask them also difficult questions, but this is why they are here, to represent your interests. And the people who deliver on the board's agenda are these guys. So these are the people doing all the work. It's an incomplete slide yet because we're lacking a number of key women here. I...
I want to say it immediately, you know, but that's the management team present today here. I would like also to. Then for the management team to stand here again, so that you see them, so that you know the people you have to address questions today. Right. Yeah, I'm very privileged that we managed to attract some top talent to Purcari Wineries. So maybe I'll start with the old-timers, the people who bring the you know, the expertise over the years. So very quickly, I'll run so that you get a sense of the people. Grigore, maybe I'll start with you. So Grigore actually started in the same month with me. When I was starting as an MBA intern, he was starting as a junior sales manager.
Grigore, today, he is the head of our Bulgarian operation, and I am very proud that we have stories like this of people who rise through the ranks, and from a very junior roles, now he is leading an entire country. Marcel is our hero. Marcel is the man who is the GM of Romania, so he is the person that accounts for more than half of our business, and has been with us for since the very beginning. He has been with us for nearly 20 years. Marcel is the person that got his 100% bonus almost every year, because every year, he is delivering and over-delivering on the Romanian target. Somebody like we really want to make sure we keep happy for many years to come.
You know, going with the team, Mihai, again, it's a second-generation winemaking. So his father used to be the head of Bardar, you know, our brandy operation. And Mihai got into the shoes of his father, Boris Duca, you know, and further over-delivered, took the Bardar even further. He's the guy who had the vision of, "Hey, we're selling bulk brandy, so let's build a brand out of this." And jointly, we delivered very well on this strategy. So now Bardar is not a bulk producer. Bardar is like a top love mark brand and the most successful brandy brand in Moldova, and now increasingly, Romania. And Nicolae. Nicolae, where are you? Yeah, Nicolae is here.
So Nicolae is our head of production. Again, he, Purcari is his first job. He grew through the ranks. He's, you know, he's responsible for an extremely complex side of our business, you know, because you understand, he's responsible for a thousand four hundred hectares of vineyards and at least seven production platforms across three countries: Moldova, Romania, Bulgaria. So you can imagine, like, he's somebody who gets very little time to sleep. And last but not least, Gheorghe Arpentin and Eugen. Eugen is somebody you know very well, so maybe of all the people present here, Eugen is somebody you know the best, but you don't know...
I think Gheorghe might be the person you know the least, because he's in our R&D team, so he's behind the scenes. So he's the person cooking the wines and setting the tone for our future winemaking. And a legendary figure, Gheorghe, where are you? Where are you? La. Yeah. Gheorghe is a French speaker in our team. You know, he was also on the board of the International Wine Organization, so somebody who's respected not only in Moldova, but also globally, so a legendary figure in global winemaking. Okay, at the same time, look, we're not complacent. We like to have the people with the experience in the team, but we need to bring fresh blood.
That's why I'm very, I'm very happy about the new people who joined Purcari. And guys, I'll spend... On the new ones, I'll spend less time on you also, because we're running a little bit out of time. Very, very quickly, but I really want you to stand again so that the people get to know you. So Bogdan joined us from Heineken. We're always worried of these big corporate people, right? Because we have the impression they're not hungry enough, and so on. But Bogdan was not the typical Heineken guy. He was a Heineken guy who worked in Sierra Leone, right, and Democratic Republic of the Congo.
If you know anything about the geography, you understand it has to be an adventurous, like, hungry person that would go to these kind of geographies, and he's done well there. Thank you, Bogdan. He's our Head of Sales. Anatol is... Bogdan is Romanian. Anatol is a Moldovan established in Romania. Anatol, where are you? Yeah, Anatol is our CFO. You're going to see him increasingly. You're going to see him increasingly as the CFO. He's going to be one of the key faces of the company. Anatol is also on the adventurous side, so he's been with Nestlé and AkzoNobel, combining big corporate, but also family businesses. He's worked for a business that was acquired by AkzoNobel, you know, and has also worked in Ukraine.
So, Anatol is going to strengthen our financial function. So he's somebody you're going to see a lot. Ștefan Chirițescu. Ștefan is our new marketing head. Again, very important person, given that we are a brand-focused company first and foremost. And what we like about Ștefan, he's combining, you know, the company side, right? So he's worked for some key brands in Romania. He also worked for a major competitor, Cotnari, which is, like, the iconic Romanian wine brand. At the same time, he's worked a lot on the agency side with the likes of McCann Erickson, right? And it's very important, you know, we believe that being able to understand the agency side, so is a prerequisite for making you a successful marketing director.
So that's why we're very happy, you know, Ștefan agreed to join us. And who didn't I mention? We have these two gentlemen. So both of them joined us from McKinsey, Anton and Ștefan. Don't if you roll your eyes now, and you're thinking, like, "Oh, my God, like, McKinsey people appear here," so don't. Like, they are the kind of McKinsey people we want to have at Purcari. Both of them Hungary, both of them kind of took pay cuts. Both of them primarily are motivated by our share incentives plan, so take a long-term vision. And both of them came here because they want to do things, they want to do things, you know, beyond the slide decks, right?
Very happy to have Ștefan Catină, who's our head of strategy and transformation. Ștefan kind of hit the ground running very quickly. Another person you will see a lot, I think, on our side. And Anton Fortunatov is our chief information officer, so again, somebody who's been extremely successful at McKinsey as leading the, you know, the digital engagements. And he's with us because we understand that any business will have to be also a digital business to be successful, be it banking, but also winemaking. We have no illusions that we are one of the businesses that can go kind of in a without investing heavily in technology, and that's why Anton has a crucial portfolio in our company, too.
Apologies for the long intro on the people, but ultimately, I think, as you'll see these numbers today, and you'll see our plans, it's very important for you to understand who are the people who are going to implement it, implement it. And the board shares my view, so we as a board think like the, you know, the Jim Collins way, the Good to Great way. So the first thing you have to do is to get the right people on the bus, right? And then focus on other things. And I think we've got the right people on the bus, and that's why I'm so excited about this next chapter for our company, and I'm very excited to pass the word to the driver of this bus, you know?
So, like, the guy who actually has to deliver on these numbers, Alex Filip, our future CEO as of January 2025.
Thank you, Vasile. Good morning, everyone. Thank you for making the journey here. I'll try to be brief, but I won't be as brief as Vasile, just because of the content. Getting a bit into the content. First of all, for those of you who don't know us or do not remember the key, you know, the vital signs, who are we today? We are a group operating production facilities in three countries: Republic of Moldova, Romania, Bulgaria. Our key markets are the three home markets, plus Poland, other key countries like Czech Republic, Slovakia, the Baltic countries, but also Asia and Western Europe, and the U.S. We reached RON 330 million in 2023, and we bottled more than million bottles.
Fundamentally, the results that you see here are the contribution of the team that has delivered these numbers over the years. Just to give you a sense, we grew significantly since the IPO, and we are showing something that it's very unique. We've shown that we can grow while maintaining the profitability, and this is something that very few businesses are able to do. We believe that we have cracked the recipe to show that scale can work both for efficiency and quality, and this is a very important credo for the company. I would like to extend my congratulations to the team who has shown this many, many years in a row, that we can do this. Now, if we talk about the market, just to get again, everyone on the same page, what is happening in the global wine market?
There are a few trends, and we picked up the key ones. First, there is premiumization, and we see this in many categories. Wine is no exception. People drink slightly less, but they tend to drink slightly better wines, okay? Which is shown in the secular trend that we see here, that we see a slight decrease in volume, but compensated by increase in value. We expect this trend to continue. Another important trend is climate change. We see it in many aspects of our lives. It's no exception for winemaking. It's actually even harder for winemaking because it makes everything unpredictable, unstable, and having access to know-how, to technology, being resourceful, matters more and more. We believe that this is gonna be an increasingly higher bar for many producers to be able to sustain consistently year after year.
The third thing that is happening, we see that there is a shift in consumption patterns. Red wine consumption is going down. White, and particularly sparkling wine, is growing, and this is something that we expect to continue. Organic wine, low alcohol, no alcohol are, again, other important trends. Of course, they start from a small base, but we expect this trend to accelerate. And these are important trends that we take into account when we think of our strategy for the next years. Now, the journey since the IPO, and I alluded to it a bit earlier. We've fundamentally doubled the size while maintaining the profitability in, you know, around 30%. I think another thing to celebrate, to the point that Vasile made, since the IPO, we have more than 10,000 retail investors.
So we have 10,000 individuals that have vested their confidence in us, and we feel very responsible for delivering the results. An important point for us, it's also that we are all, and Vasile alluded to this, we are all vested in this journey. The management, motivated by delivering the results, and we will continue to do this, and we have approved a new share incentive plan for the management team for the period that we're describing today. So what you will see here, the management is fully committed and has skin in the game to deliver. Do we-
You can switch to this.
Okay. Hopefully, it works now. You see, technology matters. So this is a bit our journey so far, who we are today. Now, why are we presenting a new strategy? You might ask. You know, "You're doing so great. Everything is fine. You're delivering the numbers. Send us the dividend. Let's not talk about it." But we actually thought that it is important to set a clear vision, a clear ambition for the company, a vision that would give everyone the opportunity to stand behind. First and foremost, the employees. Second, but equally important, the shareholders. We want you to know what we aim to do because we want you to know whether you actually like the direction that we'll follow, and it is important that we see this. I think it's also important that we...
When we set the goal, we understand whether this maximizes shareholder value, and everything we do is through this lens. We try to understand what is the impact that we can expect. Thirdly, and it's an important point for a capital-intensive business, is that we align our investments with the goals that we've set, and this is an important check that we will run through again and again, and then another point is, if you set a direction, you also immediately start thinking whether you have the resources, and you know what it takes to reach that point. Okay, and that's, that's why we took this step now. We said, "Okay, we have a new management team. There's a new momentum. Let's define a new cycle for the company, and a cycle that we think will excite all, all stakeholders," and I'll get into details now.
Now, the purpose, this is a very important point for us because it should be the catalyst of everything we do. And Vasile mentioned that we've become a Central European champion. We actually think that we should aspire long term to become a global, and I'm aware of the word, global winemaking champion. And we actually believe, having been born in this part of the world, that this is actually nothing inherent in us, preventing us from setting such ambition. You know, my parents' generation, during communism, knew that ambition didn't help much because there was not much to do with it. It actually was counterproductive sometimes. Then we grew up... I don't know. I was born in nineteen eighty, so I experienced the first inflow of Western goods in the nineties.
It felt that everything that came from the West was amazing, and that everything that we produced in Central Europe, it's shit. And I actually think that this doesn't need to be this way, and we can compete on every ground, and there is no reason why we could not look in the eye other competitors. And if there is one thing that we have that I think many people somewhere out there lost, is the hunger. Because we come from, you know, times that these things were not for granted, and we don't take anything for granted. And we believe that New Europe, as we define it, and I'll show it in a second, both the employees and consumers share this belief, and this is what we wanna show.
And to the point of the love brand, we want you, as investors, also to feel that beyond the rational decision of, "Do I get the right return?" You're also supporting a company that has the ambition to set an example for the societies in which we operate. And this is something, when we started wondering, what is it that we have in common? You know, if you think Moldavians and Romanians, you might find easy things in common. But when you start thinking about what Bulgarians and Romanians have in common, it's not that straightforward. But I believe that this point of, you know, we are a region of underdogs.
We are a region of people that have been looked down by history, but this wasn't the case, and we tend to forget, and I'll show you a bit the map of what is New Europe for us. New Europe, for those of you who like history, overlays roughly with the Byzantine Empire. I guess many people know roughly when the Byzantine Empire fell, but very few think that this outlasted the Western Roman Empire by roughly a thousand years. Western Roman Empire fell four hundred seventy-six. Byzantine Empire fell fourteen fifty-three. Okay? So we were not always the last of the class in this part of the world.
We've been this for the last five hundred years, but there is nothing predetermined that prevents us from aspiring to be, you know, on par with the others, assuming that we do the work, and we think we can work harder than everyone else because we know what it is to have, you know, few things at hand. So stopping on the point of New Europe. New Europe is a region that has tradition. If you think about it, and you know, a quick Wikipedia search would tell you that the first evidence of winemaking was actually in Georgia, not in Bordeaux. Okay, so heritage is here. We have grape varieties that are quite powerful, and this is something that we do not believe until Western sommeliers, Masters of Wine, start telling us. Okay, we have that.
We have it in Romania, we have it in Bulgaria, we have it in Moldova, we have it in Croatia, we have it in Georgia. Every country has grapes that have the potential to be, you know, world-class and to provide variety, diversity to global wine consumers. Okay? We are also. You know, due to this heritage, we are countries that consume higher than average wine. And these countries, as they grow richer, they move from house-made wine to bottled wine, and then to far, you know, better bottled wine. And this is the trend that we wanna capture, because we believe that once we do this, and we know that consumers in these countries are loyal, once you build strong brands in this region, it will be very difficult for others to come in.
And this is, if we're able to build the platform in this part of the world, then we're set for the next stage. Okay? And that's the vision and the purpose. But it will take more than 2027 to deliver, but this is the direction that we've set for ourselves. And there's one point to bear in mind, is that these countries are roughly relatively small in population, which means that even leading wine producers in each of these countries are, by definition, small. Okay? So when we talk about climate change, when we talk about technological flexibility to adjust to changing consumer taste, when you're small, it's tough. It's tough to, you know, deal with a couple of bad harvests. It's tough to invest in new technology.
We believe that by building a regional platform that pulls together technology and expertise, from wine making to tech, you know, IT, digital marketing, international sales, we can build something that no individual competitor can match. Even the largest player in the largest country in the region would struggle to match our capabilities, and we believe that this is the only way for players in our region to thrive, by pulling together resources and building capabilities that then would allow them to compete beyond the region. So there is. It's not just the emotional side of the vision, there is also a rational side, that we believe that it's a fragmented market that doesn't need to be that way. Of course, you need to take into account national preferences, you know, loyalty to local brands, and so on.
But what happens under the hood can be subject to, you know, significant synergies. And we started exploring this. We have them in between our operations, and we think we can do this even further. Now, our midterm target, as we call it, and 2027 is an important year for us because we would be celebrating the two hundredth anniversary of Purcari. We set the vision to double the key operational and financial metrics, okay? And this is also, for us, it's just a milestone, it's not the end game. So we will continue to invest throughout this period to then unleash a subsequent growth cycle.
So many of the things that you will see will not peak and deliver the full results by 2027, but there are things that we believe we need to do if we wanna build a sustained competitive advantage. Okay. Now, how do we plan to deliver this? This is the important part. And let's see if the pointer... Okay, good. So for us, and the ambition, it's laid out there, you know, we wanna reach 200 million RON EBITDA in 2027 on 600 million RON sales. Okay? And there are three important things that will get us there. First is to grow profitably, and I think here the two words are very important. We wanna make sure that we continue growing, but we wanna make sure that we do it profitably, because we are committed to maintaining the profitability that we have delivered so far...
For us, finding additional growth opportunities that can deliver the same profit margin is very important. Now, at the same time, we understand that some of the investments that we'll need to make in this market will take time. We will not necessarily reach the profitability goal in year one, but we wanna make sure, precisely for this reason, that we bet on the right markets, and we make a decisive bet that will get us midterm to the volumes and margins that we aspire, and we will keep looking and exploring, adjusting to market reactions in each of the geographies that we play with this goal in mind. We wanna grow profitably. It's very important for us.
We're playing across different price segments, so we're trying to balance the portfolio and the profitability, but the ultimate goal is that we remain profitable because that's the only way we can keep investing in improving ourselves. Then an important, and this is the core upon which the company was built, is winemaking excellence. We want to get even better at making wines, and we believe we have room to improve, and we believe that scale will help us become even better in making our wines. 'Cause we can attract better people, we can invest more, and we can bring more know-how, and this is an important element for us. Then, commercial excellence, it's a reflection on the gap of capabilities, commercial capabilities between wine as a rather traditional, fragmented industry and other fast-moving consumer goods categories.
We believe that there is no reasonable explanation for this to remain the case. We believe that if we invest in the right capabilities, we can deliver additional growth and additional margin versus our competitors, who do not have access to such capabilities, and that's an important pillar. Now, what would it take? Vasile mentioned about the team. I think for us, the key thing, it's gonna be the team beyond the people that you've met. Our ability to attract high-caliber talent across all the areas in the business, it's gonna be the key to us delivering this strategy. It may sound foolish, but I'm not that worried about the direction. I'm more worried about our ability to execute, and our ability to execute will depend on our people and how they work together.
So for us, talent and culture is the main priority in the implementation plan. And of course, once you get scale and you wanna extract further synergies, tools and processes become essential. Ability to steer a 100 million EUR business is different, way more complex than managing a 50 million EUR. It's not two times more complex. It's probably five times more complex, and then it goes beyond as you add more countries. So this is. And I'll walk you through each of the elements. Profitable growth, you know, we'll. And I won't go through each step, but we're looking at continuing the portfolio optimization, premiumization. We're looking at promoting indigenous grapes across all our geographies. So we have been very successful, as you might know, in Moldova with Rară Neagră lately with Viorica.
We're now started bottling this year Floricica, which is another indigenous grape variety from here. We know that Romanian grape varieties have high potential for Fetească Neagră, Fetească Albă, Fetească Regală. So for us in Romania and also in Moldova, we focus on build, you know, making great wines out of those grapes. We're looking similarly at Bulgaria. We know that there are local grape varieties that have potential. We also believe that this is our contribution to local winemaking development, so we take that responsibility also for Bulgaria, and we are constantly looking when also looking at new geographies, that the potential that new grape varieties can add. And this is a unique competitive advantage that we can build for us versus any other international competitor.
For Rară Neagră, only Moldovan producers can compete, no one else. Yeah, and this is something that, if sustained, can be very important, and we seek to do that, and we'll talk more about it later. We're looking at expanding into new markets through M&A, and, you know, the map that I showed you before is a pointer for the countries that we look for. We're looking at M&A through a two-pronged lens. One is to get access to new markets for and, you know, build local brands, but also as distribution opportunities for our other brands in the group. The same way that we through Crama Ceptura, not only sell Romanian wines, but also manage the imports for Purcari, and we've started doing similarly in Bulgaria.
This would be the strategy that we would follow for the other markets as well. And we believe that having a local presence is an important advantage in distributing also our other brands. We're looking just to give you a sense, we've built by now 170 different brands, if you want, which we've developed for many, many markets. We're looking to streamline that portfolio so we can develop brands that are can be replicated in different countries with the local twist or can be tailored to specific customer segments also for export markets. And this is a bet that we're making, that for some segments the brand and the quality of the wine matters more than the geographical association of that respective brand.
We know that there are segments like this, especially for less traditional wine markets, and we bet on that. We are, and we mentioned about sparkling. As you know, we have invested in classic sparkling wine production line. You will see today. You may not know it clearly, but we've also developed sparkling wines, sparkling wine brands, for Charmat method, so for the lower priced range that we actually produce from third parties, and we've actually built quite a lot of volume that we think we can insource at some point through our own capabilities and then build on that production flexibility and improve quality to develop this range further. Same way that we've done for non-alcoholic wines.
We have our own brand that we would like to promote further, and at some point, at the tipping point, we will also invest in own production facility. So this is an important trend for us. Then customer experience. You know, as Vasile mentioned, coming here, it's an important part of the brand experience, and we want to improve that. We wanna replicate this for Romania, we wanna replicate it for Bulgaria, both, let's say, on-site experience, but also through dedicated wine bars, wine shops that we are exploring to develop in, you know, capital cities like Chișinău. I mean, Chișinău we have the store, but we're looking also Bucharest or Sofia, and this is. We believe it's an important point. And then we're looking also the online version of that.
And lastly, I allude to the complexity of the portfolio. We will seek to simplify it so that we also re-improve production efficiency and time to market, because the more products you have, the more complex operations become, and we believe that we should make fewer but bigger bets on specific brands. Now, if we look at winemaking excellence first, and one of the key things that we will need to do, and we have a clear plan to do, is to extend irrigations. One of the best ways to handle climate change is through irrigation, and irrigation is a method to reduce volatility in the yield and ensure the vitality of the vines.
It's not a means to increase productivity, it's a means to protect the vines and to ensure that we get a minimum volume every year. So you need to think, and you will see, they will explain it when you visit the vineyards, irrigation is an emergency method. When there is hydric stress, and the plant is about to stop developing, that's when irrigation kicks in. Okay? And we have an important project in the south of Moldova, where we have our largest vineyard, roughly 700 hectares that we plan to irrigate over the next two years. It's dependent on a public works project that would bring water close to the vineyard, so this is the dependency that we have on others. Otherwise, we would have moved sooner.
But there is a plan and a commitment that this will happen, and this will be an important boost for us in terms of grape availability and quality. Then an important project for us, and please, when you have a break, go to Mr. Arpentin. He will explain you. He's the wizard behind what we call Rară Neagră 2.0, which is said to be almost a decade-long research and development project that we've set on. Fundamentally, we are embarked on a journey to identify the best Rară Neagră vines, the best plants across Moldova and Romania, and try to then replicate our plantations using the best clones out of the entire selection. We have identified some of the vines that are even fifty years old, if I'm not mistaken.
So quite vigorous and you know very interesting in terms of the grape quality. And this is something that we believe can be a unique competitive advantage that very few competitors, even from Moldova, will be able to match. So this is one of the key things we're doing in winemaking. Then also Mr. Arpentin is the challenger behind precision viticulture methods. We are looking. When we started experimenting with many of them, we're looking at expanding the use of these innovative methods across all our vineyards and also to introduce more of these methods. Then we have a program to plant or replant new vines and to make it you know this is one of the points that I mentioned earlier, that some of the things we do, we do for the long term.
None of the vines that we will plant in the next three years will bear any fruits or have any impact, positive impact on the results up to 2027. These will help us deliver growth beyond 2030. Okay? But we are making this investment because we need to keep the company fit for growth, and this is an important action for us. Then I mentioned earlier, you know, what we're doing with Rară Neagră. We're looking to figure out how we can contribute to preserving local grape varieties, also in Romania and Bulgaria, and this can be either through viticulture or through winemaking. We are figuring it out for the other markets, and we're engaging experts in each of these geographies to figure out how we can contribute.
And then an important project, and if you grab Mr. Bostan, he will explain a bit more. The cusp of the pyramid for us, what was gonna be for the next five years, is to build a dedicated winery for what we call our emblematic wines. Wines that we should be able to put on any specialized or, you know, five or whatever, three-star, Michelin-star wine menu with no hesitation. And this is not a vanity project. It's actually a catalyst both for our reputation, establishing ourselves as a global player, and also as a catalyst for our winemaking excellence, because whatever we innovate in this project should be cascaded further down through across the organization.
This will be a project that starts from dedicated plots of vineyards to dedicated winemaking facilities and an entire winemaking cycle that would be, let's say, world-class in terms of practices. This is. We believe that by developing this, we'll also strengthen the broader reputation of the group. If we move on. On the production side, of course, we will need to increase production capacity. Bear in mind that production is not, or production capacity is not a continuous function. You cannot increase it just by 5% if you need only 5%. It goes in jumps. It's a discrete function. So at times, we'll increase production capacity to get us the production headroom that we need for the next five years.
But this is something that we need to do, and by doing this, we'll also improve the quality. We're looking at optimizing the technological flows to handle bigger volumes and to get more of the assets that we handle. I mentioned about the dedicated winery. We are also aware of our footprint as we get bigger, so we're looking at how we can reduce energy consumption, how we can reduce water consumption, how we can reduce CO2 emissions, how we improve treatment of the waters that we use, and this will be a priority for us. And then we're looking also not only to reduce the, let's say, the byproducts of our processes, but also how we can monetize it further. Sorry, let's see. Okay, commercial excellence. There are a few points here.
We, as Vasile mentioned, we are a brand-driven organization, and we plan to invest even more in promoting our brands. In order to do this effectively, we need to measure more thoughtfully and more thoroughly the impact of our in-market investments, and this will be an important element for us. The same that once you become a relevant player in a market, for example, like Romania, the way you approach pricing and promotions becomes very important. The same way that once you've established yourself, executing on the point of sale, you know, just making sure the wine is on the shelf, becomes a very important value creation lever. These are things that you'd say are almost invisible to the end consumer, but can bring a lot of value to the company.
Same thing for export markets, where we are not, let's say, an established player. How we can work effectively with distributors, how we can develop the partnerships that would allow us to confidently invest in developing those markets, is gonna be crucial for us. And figuring out what is the right route to market, you know, to where does it make sense to go and have our own team versus working with partners. This is gonna be critical, critical for us. And then direct-to-consumer channel, we put it at the bottom, because we don't expect it to save the company at any moment in time.
But we believe that it is very important to have a direct engagement with consumers as much as we can, to also provide the brand experience that is important to us, and also facilitate access to our products from each of the markets to those wine consumers who are interested in exploring our brands from other markets. So to take an example, we are producing extremely high-quality wines in Bulgaria, but as we know, some of us who are Romanians, there is not a big love between Romanians and Bulgarians yet, and not a high appreciation among Romanians for Bulgarian wines. But we want those people who trust Purcari, who want to experience other wines, that they can also buy our Bulgarian brands and vice versa. Yeah? So this is important element. As I said, it's in line with our brand strategy.
Now, for talent and culture, for us, it's very important on the culture side, how we can maintain the entrepreneurial spirit that has defined the organization so far as we grow and get bigger, on one hand, and on the other hand, is how we develop from a Moldovan company to a Central European company. How we can bring Romanians, Bulgarians, Croats, Serbs, Moldovans together and feel that we're writing a, you know, a common history. It's no longer just about Moldova or Romania, and this is gonna be very important for us as we grow. Likewise, you know, this company has been in business for twenty years. Many of the key individuals have been with us for almost twenty years.
We need to prepare the next generation of leaders for those key positions where we have specific needs, and we also need to prepare to have a generation that is ready to go out there in the world and join our businesses as we expand into other countries, so we need to find our new Grigore, and not one, because actually, Grigore is one of the three key guys that have gone from Moldova to Bulgaria, right, Grigore? There are three. Okay, so we would need, you know, three or five or 10 for each market. Do we have that generation of leaders waiting to be groomed to go out there? This is gonna be important for us. Improving our employer branding is gonna be key to attracting people because we are competing for global talent, and global talent has many choices.
Developing our employees is gonna be key because you will see in the... Also, in the financial projections, we believe that we can improve profitability significantly. In order to do this, we will need also to increase productivity, and we acknowledge that to do this, we need to improve the skills of our people. We need to invest in them so we can then expect better results, and this is something that we take very, very seriously. Then, a lot of the things that we need to change will require collaboration between different departments. It's not business as usual that we need to do. It's change on top of business as usual, okay? So people will need to work harder and have the flexibility to cooperate with others that are not necessarily like-minded because they handle different things outside the project.
And this is gonna be important, and when I say collaboration between departments, I can extrapolate it and make it a bit more complex and talk about collaboration between different countries. This is gonna be the next frontier for us. Performance management is gonna be key for us because we will need to empower people to deliver, and in order to do this, we need to be able to hold them accountable for the results that they need to deliver. Give them the means, but then also make sure that they, they deliver. Now, if we talk about enablers... Give me a second, I'll just drink some water. You don't realize how hard it is to hold a microphone for so long. I need to switch hands. I need to go to the gym as well. Okay.
So tools and processes, what I mentioned before. For us, it's fundamentally, if you think about how things are done, what we do is we get grapes, or we grow vines to get grapes, to turn them into wine, that we then bottle, and then we sell. And we believe that technology data can help us turn this production cycle into a virtuous cycle, in which information from one end flows to the other and helps us become better, okay? What you wanna do every year is you wanna sell all the wine that you can sell, not less, not more. You don't wanna get into the situation that you need to find more wine because you don't... You've actually planned wrongly and you don't have it.
Or vice versa, you're preparing for harvest, and your tanks are full because you have not sold as much as you thought you would. Okay? So for us, getting better at the scale that we are aiming for would require a lot of tools, data, and technology, and this is what we aim to do. The foundation for us, it's gonna be a robust cloud infrastructure, so we're moving from physical infrastructure to cloud. That would give us the flexibility to scale and also the security. Then an important point is to start capturing all the data that we need in a way that we know it's reliable, because this is important.
Getting to the point where there is a single source of truth, as one might call it, in the organization, is gonna be very important, and making that data accessible, it's gonna be critical. And here, we're looking at any data point that we could capture, from the vineyard to the shelf. Any data point that we can collect and analyze effectively will be very helpful. And, you know, if you think of grapes, what do you want? You want to make sure you get the right quality and the right quantity, and that you can prepare your wine-making protocols and capacity in line with the harvest that you expect.
Then, when you move from, let's say, grapes to bottle, you wanna make sure that you have as an accurate plan as possible, so you can treat the wine-making process with the right attention and time that is needed. And then when you actually make the final, but vital step from the bottle to the glass, you wanna make sure that you can deliver on demand and adjust to demand fluctuations as needed. So for us, you know, having an accurate sales and operations planning is gonna be very important, 'cause we want to be able to deliver all our wines as they're needed. You know, yeah, and this is for us on, you know, it's a very simplified picture, but this is what we aim to do for tools and processes. Yeah. Now, key markets.
I'll try to go one by one with the key ones. Romania, and before I go into the details, I want to explain something to all of you, which is, I think, applicable to all Central European markets. When you think of wine, you need to think that wine is one of the alcoholic drinks that people consume. Okay? So wine has a certain share of throat. Then when you think of wine itself, you need to think that people drink all type of wines. They drink bottled, you know, what we call commercial, bottled, PET, Tetra Paks, or they drink homemade wine. To give you a number, in Romania, and we've run the research now also for Moldova, only three out of four consumers of wine drink commercially made wine. Okay?
So one quarter of the people report that during the last month, they drank homemade wine. Okay, so first cut, one quarter still drinks homemade wine. My bet, and I'm ready to take someone else's counter bet, is that this percentage will go down as the years come. It's gonna be increasingly difficult for people to make wine at home, and very few people will take on the challenge to do that. Now, when you think of commercially available wine, for Romania, according to Nielsen, bottled wine accounts for only 57% of the market. Fifty-seven, okay? Now, for the last twelve months, in Romania, the total commercially available wine grew by, I think, 1.8%. The bottled wine grew by three point something. So bottled wine is growing faster than other forms of wine, okay?
And then we are, with our wines, a fraction of the bottled wine market, which is a part of the total commercially available wine, which is a part of the total wine consumption. So when we talk about, you know, flat volumes, wine consumption going down, and so on. If you think of the waves, the impact waves, all the way to what we do, there are a few hoops to go through, and we actually bet on the market turning more towards bottled premium wine. So whatever volumes are lost on the way would actually be to our benefit. Now, for Romania, we are by now. Well, last year, I think, was the first year, and this year it confirms we are the largest wine producer by value in the market, and we continue to outgrow the market.
We plan to continue doing this fundamentally through two means. One is, you need to imagine a supermarket shelf. You need to think that we are not equally strong on all the shelves. We, on some shelves, we don't wanna be. The shelves where you don't earn enough, that's not the shelf we wanna be. But there are shelves that we think we can make a profit, and we are not as strong as on others. So one of the focuses for us, it's gonna be to improve our market share and our presence across all the key shelves. Second, we aim to improve our distribution, so we are present in more shops across the country. Without getting into numbers, I can tell you that we are probably out of the top five players in the market in Romania.
We are the only one who has still significant room to grow the numerical distribution, the number of stores in which we're present. Of course, this will pose a challenge for us to do it profitably, because, you know, getting the distribution to the very end actually is becoming more and more of a challenge to do it profitably, but we believe that there is still room to grow. Okay? So commercially, when you think, and we get this question often: "Do you still have room to grow in Romania?" The answer is yes, and some of the reasons are the ones I laid out. First, we believe that our relevant market will still grow, and second, we believe we could execute even better. We know this, and we know even the third dimension, that geographically, we're not evenly represented.
And we will need to get more granular in our sales approach, and this is what we plan to do. Otherwise, you know, wine-making, we're expanding. You saw the announcement. We bought another 50 hectares two months ago, I think it was end of April. We will continue to look for opportunities to get high-quality vineyards, especially if they have, you know, operational synergies with our own operations. We're looking also at some wine-making facilities, if they make sense, if they complement our product range, also to invest further in the capacity at Crama Ceptura. And, I mean, this is roughly Romania. We'll get into Q&As later. Moldova, it's a slightly more than one story because we're looking at a country that it's two million, I think, roughly, by now.
I don't know what's the latest census. Three. Okay. Good, but still it's three versus 18, but it's three that are on the process of E.U. accession, hopefully, and those of us who are Romanian know what this means for the country. Accelerated growth of disposable income that should generate further consumption of bottled premium wine, and this is a country of winemakers and grape growers, and we believe that as population gets richer, they will switch from homemade wines to bottled wine, and we believe that we can take advantage of that secular trend in the market. For us, Moldova, it's an important market for our production facilities and vineyards, and we will continue to invest here because we have the scale, and we have the synergies to develop further.
This is something that we will continue. The Rară Neagră, I mentioned. If we move to Bulgaria. Bulgaria, for us, it's an accelerated growth story. We took over a winery. I think it's now our second year of operations. A vineyard that it's in an amazing location with an amazing asset. The winery is extremely beautiful, very modern, has a lot of potential to become a touristic hotspot in the country, and we believe that also the terroir there is very special, and we can make great wines. The brand reputation is actually quite good, but the awareness is relatively small. What we aim to do is to revamp the brand portfolio and relaunch the...
also the winery brand and invest in making our presence more visible in the market for Angel's Estate, and also to accelerate the distribution of Purcari in top locations, HoReCa, key accounts, specialized stores. And then we will. One of the places where we believe it's needed, and we might experiment with e-commerce is Bulgaria because there are fewer online wine sellers than in Romania, and we think that there is an opportunity for us to experiment for the group with this. Now, if we look at export markets, and I will just go through some of them. Poland, for us, has been historically a key market in terms of volumes.
We've been there for more than 10 years, and we have established brands that command or drive a lot of volumes but do not command, at the moment, a high pricing power. And this poses a challenge for us to continue growing these brands profitably. So here we will. We have started investing in consumer research to understand how we can do this profitably, be it by repositioning the existing brands or launching different brands. Here, another element that we will need to tackle and will also be a good precedent for other markets, we went with both geographic and non-geographic brands, meaning one of the leading brands that we have there, it's Moldavska Dolina, which gives away the origin of the wine. Another one is Daos, and we have also Black Doctor, which are less about the geography.
We will see how we can grow, and, you know, kind of move on the upper shelf with some of the brands so that we earn a good margin, and we can drive volumes, so that's an important one. Ukraine, for us, it's a long-term bet, and we believe that we are very well-positioned geographically and, let's say from a brand perception in Ukraine to benefit from any positive outcome of the current war. We are, of course, extremely grateful for the Ukrainian people for what they're doing, and I think as Moldova, we stand by them, and it's important that they prevail.
But also commercially, once this happens, we see this as an opportunity, and we will continue to invest wisely also today and in the coming years, to you know build a strong presence, to have the launching pad for more prosperous times. In other CE, it's a game of optimizing the margin or you know building the brands that can command the margins that we want. Western Europe, for us, it's about pushing the Purcari brand as a premium brand in the market, and we will continue to find ways to expand the distribution. Otherwise, the other markets, it's a lot about finding profitable niches because the markets in themselves are huge.
So for us, finding the right distribution channels to push, especially Purcari, but also some of our more premium brands in Bostavan and Bardar will be very, very important. I will not go through each of them, but we can tackle them in the Q&A. Now, this is the final slide before the break. M&A. Why do we believe we need M&A in the first place? We believe we need M&A because in this market, first of all, consumers. So I explained that these markets are actually quite large wine consumers in terms of wine consumption per capita. They're also markets that are very loyal to their local brands. So coming in with an international brand, it's a very difficult endeavor.
We also see that the loyalty is reflected in relatively high margins for local brands, and we see this as an opportunity for us to grow profitably. We see it also as an opportunity to bring the other brands, as I mentioned earlier. So that's why we are looking at M&A, also because it's much faster than to go greenfield. Okay? Many of these countries have limitations in terms of planting new vineyards, so you must buy vineyards. Having access, you know, wineries that have access to high-quality grapes, that's straightforward. So M&A is the way for us to get into these markets. We believe that we can do it in a way that we extract benefits, economies of scale, and we can also accelerate growth.
We have specific approach to the key markets, so we have fundamentally done proper, you know, scanning of every market. We know every winery that is of relevant size. We are engaging in all the key markets with relevant stakeholders from, you know, equivalents of Mr. Arpentin on the, let's say, more scientific side, to advisors specialized in M&A, to traders, you know, distributors. We are also investing our time and going and proactively meeting some of these like-minded wineries, yeah, because we have a specific profile of targets. So we take this very, very seriously, and we do it very thoroughly because we know that for each of these markets, there are probably a handful of relevant targets, and these targets may not be available at any moment in time.
It's not like going to the supermarket whenever you feel like it and buying a leading winery in this market. So we take it quite seriously, and we actually have, you know. We cannot put a timeline, but we are committed to pursuing these opportunities. We believe that we're building in Bulgaria a successful story that can be relevant for other targets in Central Europe. Because I would like to remind you that in Bulgaria, we have retained the seller as a minority shareholder, who is part of our success and can benefit from that, and we have a successful collaboration with them so far. And we believe that this can be a model that could be relevant to also other leading wineries who would like to make sure that their legacy is retained and developed.
And also, our presence on the stock exchange give us the opportunity to provide them liquidity for their shares if they wanna trade their equity for ours. This is also an instrument that others don't have. Yeah, because one of the things that you may have thought about it or not, but these wineries are mostly family businesses that will eventually struggle with succession issues, and we wanna be a preferred partner for them to work with us. Being a, you know, a founder-led, founder-inspired company, still, we believe that... And, you know, focus on quality, we believe that this is an appealing argument for many, and we'll try to make this argument by meeting as many as possible of these targets.
I am totally out of time, so I don't know how we're doing, but I think this is time for a break, no? Okay, but let's. I would say we take the break now, and if you can come back in 15 minutes, so half past, okay.
Ladies and gentlemen, the most interesting part is about to start, the numbers part. Okay, let me close that. Okay. So we mentioned earlier that we wanna double the key financial results by 2027. What does this mean, and how do we plan to do it? Okay. So here are the high-level numbers, and then we'll have a slide with more details. There are two important mentions to be made. We do not include any impact from additional M&A transactions in the next years. Whatever will come will come on top of that, okay? So we have not included, we have not done any scenario on that one. Second important point is we're looking at scenarios which very much depend on how the markets, the key markets will develop.
We have what we consider the base scenario, which is light blue. Basically, markets develop as we expect them to do. Fundamentally, marginal volume decrease in line with what I described earlier, but premiumization at the market level continues. This is the base scenario we work for. Conservative scenario is the one in which we deliver the results, but more challenges come from the way the market evolves. Fundamentally, there is a drop in both volume and value for the wine markets, the key wine markets that we would compete, okay? So that's why you see the ranges there, 580-630 million revenues, 280-318 gross profit, 210-230 in EBITDA, and 120-130 in net profit. Yeah?
And for us, the key is to deliver double the EBITDA, no matter what. This is how we look at it. We will adjust commercially, financially, to deliver the right combination of sales growth and profitability improvement to deliver the 200 million plus EBITDA. 'Cause we believe that having a profitable operation is the best basis for any further growth, okay? And this is the way we plan, and I'll show you details in a second. Key things to bear in mind: We plan to grow sales, and we plan to do this by both growing in the core markets where we're already present, but also expanding geographically. We plan to improve profitability, and those of you who are good with ratios, you might see that there is an improvement in gross margin.
We will show it in a second, and when you look at EBITDA margin, we also plan to gain the scale effects that I mentioned earlier, so we're able to grow without increasing the cost base at the same pace. There is also an element, and when you look at the, you know, the X's at the top, you see that there is an element on net profit that grows a bit slower than the EBITDA. This is also because we finance a lot of the growth that should come beyond 2027. Bear in mind, this, you know, wine making is a long cycle investment. A vineyard starts giving you grapes in five years.
You plant now, you get the grapes in five years, and then depending on the aging of the wines that you make out of that grapes, you can add one, two more or more years. Okay? To the point that Vasile made earlier, we're building an institution that should outlast any of the individuals in the team, and hence the asset base should provide the basis for further growth beyond 2027. We are a small sect, but we do not believe the world ends in 2027. Hence, we plan for beyond, and that's why the cost of additional CapEx is reflected also in the net profit. Now, if we go into details, you see there, gross profit, 2023 was 42%. We plan to reach what is for us, a golden number, which is 50%.
The way we think about it is we should be at 50% gross margin. This is, as I mentioned earlier, it's meant to be an average of our brand portfolio and countries. It doesn't mean that everything we sell everywhere has a 50% margin, but overall, this is what we aim to deliver. And you see the improvement in gross profit should be a result of both the premiumization of the portfolio, but then also the impact of the investments that we will make in technology and processes that should deliver also lower operational cost, reflected as COGS. Okay? So this is an important element. Then, if you look at EBITDA, you see that we plan a significant improvement also there. Even beyond the, you know, the variation that the different market scenarios can bring, 'cause we believe that we can adjust.
We should have the flexibility to adjust our cost position and our market investments depending on the market developments. The scale effect that I mentioned earlier should also be reflected in the improvement in EBITDA. On the net profit, the point that I was making earlier, we are looking for an improvement in the net profit, and we plan for that. At the same time, we also know that we need to finance the CapEx, and you see there a significant increase in the annual CapEx, reflecting both you know the need to invest further on a bigger asset base already and the diversification of our businesses. Yeah. So that's the link to net profit.
Now, ROE, assuming a constant dividend policy, because, you know, you can improve ROE not just by improving the return, but also by reducing the equity. Assuming a constant distribution policy is expected to improve to 23%-25%, and we plan to do everything here and including the organic CapEx, while leaving what we believe is sufficient headroom to finance any significant M&A transaction that we would have. So there is headroom in what we would consider prudent leverage ratios to finance any acquisition, and of course, if needed, we... There are also some CapEx plans that we could delay if needed. So there is the flexibility to finance M&A in our plan.
Earnings per share, assuming a constant capital, would double, and the dividend, assuming a 45% dividend distribution rate, would be 2.3 times higher than it was in 2023. Yeah, these are the high-level numbers. Now, if we look beyond the numbers, and this is an important point for us, we have also quite clear ambitions in terms of environment, social and governance. I mentioned earlier, improving the water treatment and consumption of water, electricity, reduction of CO2. Development of irrigation, as I mentioned before, a key thing. Investing in ecological and biodynamic vineyards, it's important. Solar panel expansion, we will continue. We're aiming to reach 80% across our different sites, and we have the investment plans in place.
We and you might have noticed on your way here, most of our production facilities, if not all, are in rural areas, and we are most likely the most relevant employer in the areas where we operate, and this binds us very closely to the communities, and we believe that we need to help the communities develop, and by doing this, we also benefit from having access to a stable workforce, and this is gonna be very, very important for us. We want to also encourage the people of these areas to pursue education, you know, tertiary education in wine making and viticulture, so that we can then offer them opportunities to work in their home areas. We will continue to invest in our development, both for white-collar and blue-collar people.
We know that different groups have different needs, and we will try to cater to both, because both of them are essential to our success. I mentioned on the governance side the need to secure the key positions. The other things we will continue to report transparently, and I think we have done a very good job so far, as reflected also in the ratings that we get. Board diversity, again, it's important for us to have our non-executive independent directors engaged, and yeah, compensation, I mentioned earlier.
Now, if we look at the implementation, and this is the critical part I mentioned a bit earlier, what you don't see, and we didn't think it would be relevant for you, we have behind the strategy, what we call a transformation plan, that by now has reached more than 150 initiatives, that would require the involvement of at least 50 colleagues owning the different initiatives across the entire organization, and this will be a key challenge for us to get those teams working effectively and delivering on top of the day-to-day results that are needed. We have a timeline for every initiative, that it's linked to the financial results that we showed. Our ability to abide by that timeline is gonna be key.
And we have, to a certain extent, prioritized for the impact, but our ability to measure the impact of that is gonna be very key. We are, of course, working in an uncertain environment, and you see that, you know, the world somehow seems to change from one month to another, and not necessarily for the best. We have also some backup scenarios that we're working for, to build flexibility in the business. And yeah, we're building. Now, it's the point for us to communicate also the plan to the organization, and then get going with the implementation, and that's gonna be the hardest part for us because, you know, coming out here and setting a bold vision seems easy versus doing the day-to-day job.
But I'm confident we can do it. Yeah, and now it's time for, you know, Q&A. Just to recap, midterm ambition, grow, you know, double by 2027. Expand to five, so go from three countries to five countries. Reach 200 million RON in EBITDA. You know, pushing for profitable growth, investing further in winemaking excellence, building, you know, world-class commercial capabilities, investing in our talent and culture, and building, you know, strong processes and tools. The markets, the key markets in a three-year horizon will remain Moldova, Romania and Bulgaria. The point for us is to build additional markets and diversify further, but it won't change.
The picture will not be that in three years we'll have, you know, two leading countries that will appear out of nowhere, unless we're talking about M&A, and which is not on the page here. Yeah, so with this in mind, thank you very much for bearing with me until now, and we're opening the floor for questions. I think there we have already a question there, if someone approaches Mr. Stolojan.
Just to start on this aspects.
Yeah.
You can hear me? Great!
Yes.
Now, Victoria and Alexandrina will help us to share the microphone in the room. We have around 100 people here and around 90 people online, so we're going to pick, first of all, questions here in the room and after that, questions online.
Thank you.
Thank you very much, and thank you very much for this presentation. Thank you very much for inviting us for Investor Day here in the beautiful Chateau Purcari. Okay, my first question is, we have already irrigated area here in Purcari, and we have non-irrigated area. What is the difference now? How do you deal with this difference in quality? You said that non-irrigated, that means higher alcohol and also less quantity. Now, what is the result of irrigated versus non-irrigated? Do you think that investment in irrigated area is playing all... Is covering, investing, and so on? How do you do now? I mean, in my understanding, now you have, let's say, Chardonnay from irrigated and Chardonnay from non-irrigated area.
How do you proceed?
Okay.
And my second question, I fully agree with the new strategy. I like very much. It's very interesting presentation and very good guidelines by two thousand twenty-seven. I hope that in two thousand twenty-seven, when you celebrate two hundred years, you'll invite us again for Investor Day. Yeah, we feel very well here. And, I fully agree with you regarding the. T o keep quality of your, staff. Yes, successions, and I congratulate you for your new position starting from first of January. I wish you all the best for you and your team on behalf of our shareholders, yes? And, I'm very glad after listening to these new strategies, that I increased my number of shares in Purcari this year, and I congratulate myself for this decision. Okay.
Now, the second question is this one: You didn't mention anything about the incentives for the people who are building this Purcari, keeping this Purcari company on a growth way. I know that you had this kind of stock options in the past. My only request to you is, I fully agree to incentive your staff. It doesn't matter what kind of method you will choose-
but any kind of method, I would like to ask you to keep our percentage shares in the stock of Purcari. I mean, do not use a method which decrease our percentage of shares, of ownership in Purcari. Thank you.
Okay, thank you very much. Let me answer the second question, and then I'll ask my colleagues to address the first question. So first of all, in terms of performance management, there is a management stock option plan that was approved at the AGM at the beginning of this year, covering the next four years. This plan is covering, I would say, roughly 40 people across the organization, in key positions across the three countries that we operate. In addition to this, every employee beyond these 40 people have a share of their salary, ranging from 15% to 50% of their annual compensation, related to annual performance objectives, which will be linked to a large extent to the delivery, their involvement in the transformation program that we will set out. So from this perspective, this is covered.
Now, to your point on how we fund the management stock option plan, this is a discussion that we've had, and we will keep having every year somehow, and we'll figure out what is the right thing to do, because there are two ways for the company to acquire the shares needed to reward the management. One is to buy them from the market, the other one is to issue additional shares. Okay? Now, what we aim to do, and this is something that we get as a request from some institutional investors, is that we try to expand the market capitalization, and what we see is that when we issue shares, the share price does not react by as much as the number of new instruments issued, and by extension, the market capitalization increases further.
Now, this is something that we'll continue to assess in the board of directors, what we do. Technically, the stake that each of you own does not change. The value is not affected. But point taken, and we've heard this from other investors before. Nicolae, do you wanna address the first question, please, on the impact of irrigation? And I would say also, maybe you can address how many years it takes to get the investment back from irrigation, I think.
Okay. So, if you speak about irrigation, I don't think we are doing it just to increase the yield or to do bad wines. So we are doing it just to keep the vines alive and to give this sustainability to the vineyards. So that's why we are doing. And we are implementing the last technology, last generation technology in irrigation, which means that we are not. We are doing very, with a very-
High precision.
High precision irrigation. So, it doesn't mean that a wine from an irrigated plot will be with a bad quality, and a wine from a non-irrigated plot will be a high quality. So we are balancing this. But for us, the most important thing is to keep the vines alive, and because of the climate change, and that's the big issue that we are. If we speak about the cost and the,
Return on Investment
return, yes, it depends on the year. If I remember 2020, when the yield was very, very low, I think the investment in that year.
You could have recovered it in one year.
Yes, just in, just in one year. So it. When you had a, when you have a very, very low yield. Normally, I think three, four years, the, the, the investment.
Is recovered.
Is recovered.
Okay.
Thank you.
Thank you, Nicolae. Any further questions? Okay, there's one in the back.
Hello, my name is Damian Dan. I'm a little stockholder.
Sorry, can you speak up a bit? I, I personally can't hear you.
I'm being.
Yeah
better heard now?
Yeah, yeah.
Hello. Thank you for your presentation. I'm afraid I have a series of questions.
Okay.
So the first. It's kind of linked with Mr. Stolojan's questions about diluting the percentage of stocks each of us own. And it was a known issue since two thousand and twenty-two when it first started, and but the same reunion that happened two years ago, we had one stockholder who asked that if Mr. Bostan sold a part of his shares because his percentage was going down. It was also due to increasing stock in numbers without capital demand from the stockholders that exist already. I don't mind. I personally don't mind to bringing money into the business-
but I would like very much to keep my percentage constant throughout the years. That was the first remark. Now, for the questions, I was wondering if Purcari as an entity is planning on multiplying stock that exists on the market, either by the growth of share capital or by splitting or by any other means available. So,
How many questions do you have? Because I wonder how many I can remember. Or we take them one by one.
That's why we're saying I have a list.
Okay, so let's try to go one by one. I mean, at the moment, we have not had a need to issue additional capital to raise money 'cause we've been able to fund it through banking sources, and we've also paid attention to the return on equity that we can generate by doing that, so at the moment, it's not needed. We retain this possibility also on a relatively short-term basis to fund fundamentally M&A transactions, and we renew this flexibility every year at the AGM, so that's one option in terms of new shares. There is a discussion on the split, and that one, we did it once in the past. We might do it in the future.
It is an option that we contemplate as the value of the share increases, also to increase the liquidity. We will assess it. I mean, it's on our list of potential things.
It's on the table.
Sorry?
It's on the table.
It's on the table.
Okay. The second question, regarding irrigation, we've all heard that irrigation is a means of saving the plants- not increasing the productivity. But, I was wondering because I know for a fact that up until now, only surfaces in Moldova are being irrigated, if I'm not mistaken. It's, it's-
300 hectares.
Yes, but only in Moldova.
Yes.
Not in Bulgaria-
Well, no, no, no.
Not in Bulgaria, not in Romania.
No, no, in Bulgaria as well. Actually, the vineyard that we bought there is fully irrigated. Was implemented already by the previous owner.
Because, the yield, even though it was irrigated two years ago, it was about, 5,000 kilo to the hectare- if I'm not wrong. I was wondering if that productivity increased because the medium is 10-12 tons to the hectare, usually.
I think you're quoting a high number. But the productivity, I mean, vineyard productivity does not depend only on the irrigation. It's only about also the viticulture, how you actually prune the vines and how you take care of them. So one of the explanations for the low yield back then was not necessarily the lack of irrigation. Second, we have improved the viticultural practices in Bulgaria. Now, if you press me for a number this year, I could not demonstrate that the yield has improved because we had this year hail that affected us significantly in Bulgaria. Yeah? So the productivity just from hail, you know, a natural event that we cannot prevent, has gone down this year. Okay?
Okay. Recently, it was announced that Purcari is interested in opening a new joint venture in Turkey.
We actually... Yes, okay.
Does it concern only commercial aspect of the business?
or also the production, potential production facilities?
Okay. It's just for now. So first of all, it's not an intention. We actually acquired a vehicle, a commercial, a legal entity for commercial purposes. It's supposed to serve as our importer in the country, allowing us to manage the requirements of import quotas into Turkey, and then to handle the distribution amid a high inflation environment. Yeah, so where we need to manage the lira depreciation and recover the value of our imports there. So for now, it has only commercial purposes.
And, the next question regards the brand distribution and their potential growth.
Because, of course, the leading brand of Purcari Group is, of course, Purcari, but, we should not leave aside the Bostavan, we should not leave aside the Bardar. And, I was wondering, in terms of growth, with having in view the targeted results we all want for 2027, I was wondering, how would each of them is projected to grow?
Okay, good. Bogdan, do you wanna take that question?
Thanks. So great question, and definitely, we need to have a mix in our portfolio. Broadly, I would say, just to try to explain it in a very superficial way, because it's a very broad topic. As Alex said in his presentation, we have some brands that are already selling on some markets, but not with a very high margin. Those are mostly from the Bostavan portfolio. Purcari, of course, being the high outlier, which is sold in premium. That portfolio, we need to use as leverage to build on top of. So it already gives us scale. That scale helps us with diluting fixed cost, it helps us with the distribution part, with giving us scale in the market.
We have to use it, we have to protect it, but there we have to increase margins as much as possible. Then, we have the Purcari brand, which has proven it can be a success in a highly competitive segment, which is premium. Highly competitive across markets. But Purcari, through its quality, through its positioning, through the historical work that has been done on it, has been a success in that competitive segment, and we have big opportunities of pushing it in export, for instance. We have several markets where we have launched, where we are very small. We have several markets where we are not even present.
And then we are looking at building, and Alex also alluded to this, a brand or a portfolio of brands rather, that don't necessarily connect so closely to Moldova, that can attain or can require a higher price, that will probably not be in as high as Purcari, that has some intrinsic qualities that make it really stand out within the premium segment, but that can help us go against Georgian wine, go against maybe Spanish, Italian. So there is a big need for brand building, and we will invest behind those brands, and we will grow that portfolio. Some of them we believe we might have in the portfolio, some of them we have to create from scratch.
Thank you.
Okay. Thank you, Bogdan.
The next question regards the key markets.
Of course, we know the percentage of sales acquired in Romania is the highest one. On the second place is, of course, Moldova, and on the third is Bulgaria. But, during your presentation, you also mentioned the Asian market.
That at one point in time was a very rapid growing market, and me personally, I had high hopes about it. Ever since, the volumes are not. I cannot hazard myself to say lower, but they're not growing anymore.
So I was wondering if Asia, e.g., China, is still in the views for a growth in sales.
So yes, you're right about the history. I think Chinese wine market went into COVID in one dynamic and went out of COVID in a very different dynamic, especially regarding import wines. And we kind of went through the washing machine together. Now, we came out, and I think we reported over the last three quarters consecutive increases in sales in China. We are looking at Asia beyond China, so we have a dedicated person covering Southeast Asia and China. We're looking also Japan, South Korea, Philippines. So we are looking fundamentally for Japan and South Korea, the premium segments.
China, especially red wines, is an area where we try to grow, and we try to grow profitably, but it's also something to be determined, how much of the growth the market can deliver. I think it's one of the markets where we're still assessing the long-term strategy. Asia as a whole, if you want, we do have it in focus, especially for Purcari. How much can it deliver in China alone? It's a question mark, and we're exploring also different routes to markets. We're trying to find different partners to go into that market, to have that distribution advantage that Bogdan mentioned. Because we believe that China is a market where having the right partner, I mean, everywhere this makes a difference, but in China even more.
In China, I think we also. One of the challenges that we set for ourselves is to break it down in smaller pieces, because even one region in China is more than a European country alone. So, you know, we might figure out that in a few months' time, that it's not a China strategy, but it's, I don't know, a Shenzhen strategy. And this is something we're working on.
Alex, thank you. By the way, we are doing the great progress. We are on the second page of questions. But please allow us to take few questions from online, and then we will revert to you, as well. So, we have one question from Mihai Dumitru Paverman. I will read, first of all, in Romanian, and then afterward I will translate into English. " în vederea scăderii costurilor și atenuarea lipsei de forță de muncă. Dacă da, în câți ani aveți în plan investițiile în mecanizare?" So the question short: Do you plan to do investments in mechanization of viticulture processes in order to reduce the costs? And if yes, what will be the investment plan and the payback for that? Nicolae, can you-
Yes. Of course, we are doing it. It's not a new subject. We are doing it for the last five years, and we plan to continue doing this, to invest in mechanization, in treatment. Yes, treatment of the vineyards. For example, last two years, we already started to implement treatment with ultraviolet lights to avoid the treatments with chemicals. So, we are doing it for two years, almost 50 hectares, and we are planning for the next year to increase these plots. Tractors, I don't know. All that you mean mechanization we are doing, and we still do, and we will do, so it's a normal process.
Nicolae, thank you. Another question, and, I think we have to see, Anatol in action, our finance director, right now, because the next question is for him. So why you don't talk about ROIC? We all know that ROE, it can be easily manipulated with debt.
Yeah, because I think here is not a... We are not speaking about ROIC. Yeah, we are trying to focus on ROE. Yeah, so for sure, ROIC now it's... It will increase, yeah, because we have great plan of CapEx. But in line with return of investment, yeah, it will be increasing in 2027.
Of course, not to say, forget, but we are monitoring as well net debt to EBITDA index, and this is internally as well one important KPI, which comes together with ROE.
Yeah, yeah. So, about net debt to EBITDA, for sure, we have great plan. Yeah, and this will increase for sure in 2026 and 2027. But in the meantime, we need to know that we really have a great plan to increase our top line, yeah, and also gross margin. So, for sure, this will have dilutive impact, let's say, on our capital investment.
Thank you. Now, next questions in the public.
Thank you very much. My name is Stolojan. I am. So, I think it's a great and a very ambitious presentation and strategy. Four years ago, I looked on what were the numbers of Bostavan at that time, and I look at the past, and I saw that there is a very good perspective to double in about four or five years. I'm very glad. I congratulate myself and Mr. Bostan that I foresaw that. Of course, the share price didn't keep pace with that, and that's. I wouldn't say a failure of the market, but it should have, normally. But I.
Anyway, I'm proud of foreseeing that. Now, I'm not. At that time, there was not a strategy in front of us, but now it's one. And I'm a little bit less confident because I see the market in Romania, which was an almost empty market at that time of inviting a strong player. But I see now the market is very different. But I won't come back with my old mantra of how will you grow further on. But I saw on your presentation that you plan to increase, or you put on the last between the countries there, you put UK and Netherlands, and I think that that's...
I would reverse the table down. I would think that those would be determining factors if you're gonna succeed with your plans. Now, what I wanna ask you is how much of your strategy is based on growing, or what percentage of your growing you foresee to be on your established markets? And what percentage will come from the markets that are not so much developed, but you put it there, like Poland or U.K. and Netherlands? How can you do that? And if you can give us some details of how you see how you plan to increase those markets. I again have the market in U.K., especially in mind, because you started from down to...
Not from top to down. You started from the bottom, trying to get up, and it was very successful, I would say. So, how you plan to tackle those markets?
Okay. So overall comment, we plan to outgrow the home markets in the next three years. Home markets, we consider Moldova and Romania, because Bulgaria, it's a new market. We're, you know, on an accelerated growth path there. As we, as you said, we just entered like we did a few years, many years ago, actually, in Romania. We plan to outgrow Romania and Moldova, so the rest of the countries should grow faster, and the weight of these two countries should go down when we look at 2027, without necessarily having a different hierarchy in terms of top three, top four markets, given the size of what we sell today already in these markets. On how we do it, Bogdan, if you wanna address this point, and I think you can comment briefly on U.K. and Netherlands as well, since they're mentioned.
Yeah. So it's a mix, and it all starts with prioritizing. And what you see here, as Alex said, is just a snapshot. So we've gone through quite a lengthy exercise of prioritizing markets, and we've defined markets based on growth potential, and some we expect will grow very fast, and we will invest behind that, and some are gonna be more profit-generating, where we try to extract every ounce of profitability. So that was the starting point. Then we went further, and actually, right now, we're in the process where we define by market the detailed three-year plan. And that's gonna be a mix of factors from portfolio, having the right brands, pricing at the right price, execution in the market, in the right places, visible in those places. So a mix of factors, knowing that we are gonna
We are. We have a clear intent to invest behind those growth markets. We have a clear intent to not treat everything the same and to go beyond what we've been used to, which is good quality wine from Moldova. So we have this global outlook, and we are gonna act accordingly. We wanna create global brands.
So that means that you will definitely, so, to double the top line would be easy if you just double each market you have. So doubling Romania, that I think it's almost impossible, but if you try it, okay. So you will have to increase those markets strongly, so not double, but-
Much faster.
Five times.
Yes.
Ten times. For sure.
Yeah.
Yeah.
Those markets where you are low.
Yeah.
So, that's how-
Yes.
That's what I'm asking. You are trying to increase those markets by that much?
Yes. So definitely we don't go for the first option, where we try to increase everything more or less the same. We prioritize, and some markets, yes, we do intend to increase by a very high double digits-
Say a number.
30%-50%. The, actually, that-
Which one? Which one?
For these big markets-
Big markets.
Okay, I can name them. So U.K., the Ukraine, when the situation will stabilize, Turkey, the U.S., where we have a certain, a certain strategy, China, to a certain extent, but there, as Alex said, it's more of a regional view with South Korea and Japan. Japan, for instance, this year is already growing triple digit. And then we have Nigeria within Africa.
Thank you.
Yeah, doubling Romania, I think we will have to steal some steak from milk producers then. Okay, another question from online. Give me a second, please. "Have you been contacted by the big players in the industry regarding partnerships, for example, Pernod Ricard or Diageo?" I think we have to get back to our disclaimer page on that.
I think you can answer the question.
Yeah. Well, as far as I know, at this moment, no. So yeah, next question, please. Yeah, yeah. And you'll have a mic soon.
Hi, thank you for your presentation and inviting us to this beautiful château. My question concerns the margin. You're guiding for a very strong margin expansion, so first, conceptually, what's behind that? And secondly, your margin stands out as being much higher than peers on the EBITDA level. For example, it's like twice as much as Concha y Toro. So what's your explanation? Where does that margin competitiveness come from?
I think we should first celebrate what you just said, no? Something is done right. Anatol, you wanna answer?
Yeah, yeah. So about margin, for sure, this is a big, big dispute between me and Bogdan. For sure, we need to grow but we need to grow profitable, yeah, like our main pillar. So first disclaimer is, yes, our current level of margin profit, yeah, it's impacted by Ecosmart, which is already publicly announced that it will be discontinued, and for sure, after this, we expect increase in our margin. This is historically, let's say, one-off. But looking forward, for sure, we are looking to grow, let's say, in a profitable way. We have to be very focused on our portfolio. For sure, yeah, we need to understand that, as Alex already mentioned, that now the trend is all in premiumization. So we will be focused on premium brand, and this will be first, let's say, key driver of improvement in margin.
Second one, yeah, is for sure, geographical mix. Yeah, now we are looking for, to grow in the country with higher price per liter per unit. This is second point. The third point, yeah, we have, I think, very, very big plan in terms of CapEx investment, yeah, and starting with irrigation. Once again, irrigation is not about to increase the volume, yeah? Irrigation is about to fix our, let's say, yield, yeah, and all this together to avoid any impact on weather. So all this together and also investment, big investment now, close to 40% it's about equipment, yeah, and to, let's say, to increase the scale and, yeah, to have the economy of scale. So all this together allow us to be very optimistic about this 50% and maybe better. So it's, let's say, mix of all these aspects.
And to clarify the way we go, we have achieved this through brand building and through operational excellence, and we will continue to invest in brand building and operational excellence. That's the mantra. Okay, more, more question there? You can pass the microphone if you still have it. Oh.
Hello, everyone. Thank you a lot for your presentation. Especially, I appreciate the slide with financial details. And, giving this, you have mentioned some scenarios, base one and conservative scenarios, and I am wondering what makes the difference in terms of assumptions besides the conservative and the base scenario? What I mean is, what is the drivers which you go from the conservative to the base scenario?
There are two differences. One is the way we would expect top line and margins to evolve. Fundamentally, we would in the conservative scenario, we have assumed that our ability to premiumize further the portfolio will slow down, hence, the average gross margin would not increase as fast as we do in planning the baseline scenario. Then the counter effect that we would aim to have is that we would become even more frugal on the operational side as a reaction to that, and slow the investments in the market and in the expanding, you know, capacity build, building the foundation for further growth in that specific context.
So the combination of the two gives you the results that you saw, that you see, that we are confident that even if the margin evolution is less positive than we imagined, we have the means to react by adopting a more frugal cost position to still deliver the growth that we have. So these are the two, two elements.
Another technical question from my side will be-
It scares me every time I hear technical from you, but-
Not such complicated one. It will be on CapEx intensity. You have mentioned an average CapEx for a period 2024 to 2027.
My question is, what will be the CapEx intensity year by year? Meaning, will be the most intensive starting from 2025, or do we expect the, much expanding on CapEx on 2027 or, or it will be gradually increasing?
I mean, it's. I understand what you would do with the answer, but I think that it very much depends, and I hate telling you that it depends, but you need to think that CapEx is driven by specific projects that have their own timelines, and these timelines often depend on regulatory approvals. When you get a construction permit to do something. When, for example, for irrigation, when the public work will be done so that then we can connect our irrigation system to the public system, and these are big numbers, and if one of these projects shifts from 2025 to 2026, it can change the picture, so I think fundamentally, we aim to have a sustained growth also.
To the extent we can, we are trying to build it in line with the market response to our growth plans. Okay? So we don't build too much ahead of time. But at the other on the other hand, we know that, as I mentioned earlier, these expansions are not linear. I need to take another jump in capacity increase, and it takes time to do it. So, I would not say that it is either everything at the beginning or everything at the end. It's a constant thing because we need to keep investing as we grow. And if you think about it, 10% on 330, it's 30. 10% on 600, it's 60. So the amount of additional capacity that we would need to constantly add as we deliver on the numbers goes up.
So if we want this business to grow, CapEx cannot stop because we need to have the right balance of own grapes and third-party grapes. We need to invest in capacity, so everything needs to scale. And if you take into account the time lag between a CapEx decision and the impact that we see, something need to be planned ahead, as in the biblical story, Noah built the ark before the storm. This is a bit what we need to do.
Okay, thank you. It's clear now. And, regarding harvest-
Yes
... this year, given the extraordinary sort of high temperature which we have seen in summer, what is your expectation in terms of CapEx? And...
In terms of CapEx?
Sorry, not CapEx, in terms of harvest-
Okay
the yield of the grape.
Would we see a pressure on the COGS?
We kind of saw that question coming. So first of all, the harvest is not done yet. Let's say first and foremost, the harvest was a hard one, across our geography, Romania, Moldova, and it's hard for everyone, not just for us, yeah? Second, we are still in the middle of the harvest. You will see as we go through the vineyard that we have not finished harvesting the red grapes, so we're still assessing the impact of that. Clearly, the yields on many plots have been lower, especially those where we don't have irrigation. Now, we have taken measures to secure the supply of grapes that we need for our sales. We have also taken measures to extract more value from every ton of grapes that we process.
Inflation and increase of, you know, cost of grapes does not translate one to one as increase in cost of wine. And then we are also assessing how we can pass on some of the increase in price to retailers and consumers. But this is something we assess. You need to remember that our portfolio reflects a multi-year composition of COGS, because we are still selling, and next year we'll sell red wines of the 2022 harvest, and we'll be moving to whites and roses from 2024 harvest. So there will always be, you know, rolling over of the different COGS structures from one season to another. So we're first of all, harvest is not completed. Second, we are assessing still the impact, and we will provide updates as we have them.
As you know, since you're following the company, we normally provide guidance or updates on the harvest when we release the quarter three results in November. We will aim to do that as well.
Okay.
The numbers reflect also what we expect this harvest to be, so we think we can weather whatever outcome the harvest will bring.
Thank you, and you have mentioned that you are planning to plant new vineyards.
Yes.
Where will be geographically located?
It's a combination. There will be to a large extent in Moldova, also because we have the lands, and it makes more sense to add vineyards to existing operations, 'cause it makes more operations more effectively. We plan to expand significantly on relative terms in Bulgaria, to replant some of the vines that are there, and also to expand the total surface. We have a multi-year plan there. We're looking. Romania, it's more a game of adding, buying vineyards that are already planted. Now, again, if you think of the weight of the vineyards today, the share of the vineyards in Moldova and Romania and Bulgaria, this will not change as we increase the surface in every country, and there are some grapes that can only be planted in one country.
If we need Rară Neagră, if we need Viorica, if we need Floricica, must be done here. So, if these are growing faster, then. And of course, Nicolae is pointing out a very important thing. Once you got access to water in one spot, like here in Purcari, if we get in the south, it makes so much more sense to try to get as many surfaces connected to the source of water.
Thanks a lot. That was a good answer.
You're welcome.
Yeah.
Okay.
We have another question from online, and believe me, the gentleman in the first two rows will listen carefully for that. So apart from salary compensation, are you considering issuing new shares, especially if the growth will be as strong as predicted? Damian, please.
Okay.
Look, maybe I'll not put Alex in the tough spot of addressing this one also because he's a beneficiary of this. So first of all, maybe I'll address some of the questions raised by Mr. Stolojan, and after that. So historically, we financed the management stock options plan nearly exclusively through buybacks. So if you look at the number of shares, it actually has increased, just to put the exact figure, by 0.8%. So our total number of shares, so the dilution you have had, was 0.8% from that small increase that we did. So by and large, just to settle the score on this one, the management stock options plan has been financed via buybacks. The current program we have approved actually runs until 2027.
So for the next, say, until two thousand twenty-seven, we don't foresee the expansion of that product, right? Only maybe in some extreme situation, we maybe find some, I don't know, the Elon Musk of wine making and decide to bring that person to Purcari, and we may need to increase the program. But at the base case, we do not expect to increase the program. So the program is set until two thousand twenty-seven. We still have some room there to bring new people on board. And as a base rule, historically, we have been financing that via buybacks. So maybe-
we'll stick to that practice going forward.
Okay. Thank you.
If that addresses the question.
Okay. Other questions? Victoria. Ah, okay, sorry. Go ahead.
Thank you. My name is Benedict Mathias. Thank you for the event and for the presentation. My question is about M&As. If maybe you expect new M&As in the near future, and if yes, maybe you can tell in which countries or?
And the name, no? How do you define near future?
In one year, maybe?
Feasible. If you take into account the timeline of a typical transaction, it could be within a year. But it very much depends, because these transactions is... I don't know how familiar you are, these are normally not exclusive discussions up to a certain point. Afterwards, they become an exclusive discussion, but it's normally a competitive process, and we don't always control the timeline. I can tell you that we are in discussions with a couple of targets that we would consider attractive, and the discussions are transparent, let's say, in terms of the purpose of that. But we are... We do not expect to close anything this year, this financial year. Okay, you're welcome.
Maybe we can consider. Question in the our next investor day at one of
Yes
newly acquired companies.
There's a question in the back? Yes, clearly, we should get this rolling.
Hi. It's Robert Maj from Ipopema Securities. My question is about the strategy and the M&A, especially in the nearby countries. On the twentieth of October, there is a referendum here in Moldova.
I just wonder if in any way the result of the referendum impacts your plans to expand more into EU countries rather than growing your surface of vineyards here in Moldova. Is it connected in any way, or do you just have any other limitations of growing the vineyards in Moldova?
Okay. Is that the only question?
Yes, and then on the M&A, how are you going to finance it? Is it only debt, or do you-
Okay
... consider, like, issuing
Okay
via equity?
Good. So first of all, I will not comment on the result of the referendum, because it's hard to predict, but I think the feeling is somehow that there is a strong momentum behind the, let's say, accession to the EU. We see the momentum that Moldova has only as an upside from where we are today. So the M&A for us, it's an offensive move, not a defensive move, and it's a move to give us access to these markets, to give us access to these wines, and to help us diversify and make our operating model more resilient. Because one of the things that was not clearly mentioned, the moment you're able to build a non-geographic brand, you can provide the wines for that brand from whatever country you want. Okay?
So if we're able to build a brand where consumers value the quality of the wine and the story that the brand tells, the values that the brand embodies, we can then leverage the flexibility that we would have by accessing vineyards and wines from multiple countries, and that's an important element. Plus, if you think long term, and this clearly goes beyond 2027, if we're able to build a portfolio of wineries across Central Europe, and we can bring from each of the countries the most distinctive wines made out of local grape varieties that are hard to replicate, we're building a portfolio that is very unique and very compelling to any wine merchant, wine lover in the world. So this is the main reason why we do M&A, not because we wanna move away from Moldova. And then how we wanna fund it. Sorry.
This is very much a question on the size and also the interest of the seller. Because we are open to do a, you know, either a full acquisition or a partial acquisition, like we did in Bulgaria, so we can leave the seller as a minority shareholder. We can fund it with, you know, debt, or we can also fund it with shares if the seller was interested in swapping some of their shares for ours, for example, and then they can manage succession planning and inheritance and all these things the way they want it, or they wanna be part of our success going forward.
So it very much depends, and it can be a mix of different you know, our cash, bank financing, additional equity. We will see. Okay, there is a follow-up question there, Victoria. I guess I stirred up the interest.
Yeah, yeah. Just one more about growing the vineyards in Moldova. In theory, how much you can grow your premises in Moldova, like?
In theory, there is no limitation today to plant additional vineyards, and the available surface is actually quite big. There are many grape growers who do not have wineries that we could acquire, you know, vineyards from. So either existing vineyards or new vineyards, this should not be a limitation. I think it's just a matter of price in some areas, depending on how strong the competition among different wineries is to secure... Okay, I think the screen is getting tired. To secure access to grapes in that region.
The last one from my side.
Yes.
The profitability of the vineyard-
Yes
in Romania or in Bulgaria
compared to the Moldovan one.
Yes.
Is it like, I can imagine that the cost, labor cost in Moldova is way cheaper than the EU countries. Is it not diluting the profitability, like acquiring and running a vineyard in Bulgaria?
I think the answer to this question is actually more complex. First of all, labor, it's only a part of the COGS, and it's not necessarily the most important. Second, some markets actually command a higher margin than others. So Bulgaria, for example, it's actually not a cheap wine market. The average shelf price, it's actually higher than in Moldova or Romania. So this is, you know, the relationship is clearly not one-to-one. Plus, there is a point that Nicolae mentioned somehow, but it's... You need to think that for us, automation is something that we review constantly, depending on the evolution of labor cost, and up to a point, it still makes sense to have labor. At some point, it makes sense to leverage automation.
So this is something that we are constantly reviewing. So it should not, in a nutshell, it should not dilute the margin.
You already saw the signs with the screen. It means that we have time only for one last question, and this question separates us from wine tasting and lunch.
Sorry. Let's go from the most important to the least important.
Okay, so the most important, judging from the plans of increasing the surfaces in Moldova. Two years ago, I asked a variant of the question I'm going to ask now. At that moment was about irrigation versus the right of ownership of land in Moldova.
In 2022, and I don't know, I admit to my ignorance, I don't know if the law has changed, but at that time, it was illegal for an entity registered abroad to own land in Moldova. I'm not sure if the law has changed, but you were talking about increasing the surfaces that you intend to plant vines on. Is their acquisition made through a vehicle registered in Moldova? Because that would be the legal way, or how do you plan to do it?
To my knowledge, the law has not changed, and the approach that we would follow to land purchase and land ownership is the same that we have had, meaning that the lands are acquired by Mr. Bostan and leased on a long-term basis to the company, with a preemptive right to purchase as soon as the law changes. So at a nominal price increase. From this perspective, there is no departure to the approach we have followed so far.
Judging by the Ecosmart issue.
it was an issue two years ago, and apparently still an issue now, an even bigger one. It's going into insolvency, so finally stop impacting the profit margins. Is there a plan of shifting the recycle business from Romania to Moldova?
Or will Ecosmart will cease to exist, and that would be the end of it?
Okay. So first of all, Ecosmart might have been an issue two years ago. It was actually delivering, contributing to the company's profit last year. So it was actually on a good turnaround path. Now, for everyone's context, 'cause we explained it on a few occasions, but I'm glad to hopefully put it to rest today. Ecosmart, the main business was to recycle, and the main reason why we went into that is because we, as winemakers importing and selling wines into the country, had the responsibility to recycle specific materials on given percentages, quotas that the state imposed. So we had to collect, I don't know, 60, 70, 80% of the bottles, of the corks, of the labels, of the boxes, of the pallets, of the plastic wrap, and everything else.
At the end of last year, those of you living in Romania know that there was a new recovery, recycling scheme introduced that is called Sistem Garantat de Retur, that on an exceptional basis, compared to other European countries, covers also white wine bottles. I'm saying as an exception, because it's normally supposed to cover fast-moving articles like water, beer, soft drinks, stuff that people drink on the road, throw it in the river, and so on. That meant that a large chunk of the Ecosmart business, and the main reason why we had invested into it, had disappeared at the end of last year. That business no longer was relevant for Ecosmart, no longer relevant for us.
What happened this spring is that there was a Supreme Court decision reaffirming a fine that had been actually suspended by two previous courts that makes the company unviable. The amount of money, it's 22 million RON. The company would need to operate at a, you know, extremely fast pace for many, many years just to pay that back, and we were the main shareholders, but only one of the shareholders, and the shareholders unanimously voted for insolvency, so that Ecosmart, for us, is no longer an issue because our exposure was limited to the social capital, the equity of the company. It was a limited liability company or a limited stock company, I think. We have no further responsibility than what we announced, I think already with the annual results in April.
So Ecosmart is a done story, unfortunately, because we put a lot of effort to turn it around operationally, but there is no plan to do this in Romania or Bulgaria or anywhere else. We wanna focus on our core business.
Thank you.
Okay.
The last question or we are going to lunch? Yeah. Vasile, please.
Yeah, maybe some parting thoughts with your permission. We're fine on schedule, so I'll... Look, I'm a numbers person, so maybe I'll allow myself the chance to comment on three key numbers that we shared today and give you examples so that you can internalize them. So the first was very much about growth. So we've set a certain growth target here, and I'm quite confident we're going to deliver, and I hope... I'm also pushing the team to make sure to over-deliver on those numbers. And maybe just to bring one example and to show to you the growth potential we have, I'll actually talk about Romania, looking at Marcel, our GM here.
So for those of you who think that we're hitting the ceiling on Romania, I actually think we're just still at the beginning of Romania. And I'll give you the numbers you have to internalize. Our market share in Romania is about 14%, one four, give or take. Just to give us a comparison, the number one beer player in Romania has 40%, four zero, market share. And typically, wine champions in mature markets have mid-20s market share. Concha y Toro has about 25% market share in Chile. E. & J. Gallo has in the 20s market share in U.S. So purely from a market share perspective, we still have a long way to go, only in wine. But then, there are categories where we only started, which are very large categories.
Sparkling, we have de minimis market share in Romania, so we have to build the sparkling category virtually from zero. Brandy, we are de minimis still in Romania. We just started with Bardar two years ago. So we have to build the Bardar category in Romania. So Romania is going still to be an important growth driver for us because market share-wise, we still have a lot of room to grow, and in two key categories, sparkling and brandy, we just started. So that's how you... Maybe this example will help you think about growth. And I'm not talking about other key markets, of course, like Poland, you know, or Bulgaria, which are markets of much higher growth for us.
Second, number that we show to you as a target related to margins. Yes, we plan to go from 42% to 51% gross margin, and this is in fact going back to normal, right? In 2018, 2019, 2020, when you look at our margins, actually, our gross margins were in the 50s, right? So for us, this is actually reverting back to normal, and given the ongoing premiumization of the portfolio and the operating leverage we have, because our sales are supposed to grow faster than our SG&A, right? So we are not too concerned about the ability to return to 50s for the gross margins and 30s, so low to mid-30s for the EBITDA margin. And last thing is on investment.
So I think we spoke a lot about making smart investments and picking our battles. And, as a board member, and my fellow board members share this, we actually take quite a tough approach to, you know, to judging the CapEx, because, you know, the wish list for CapEx is quite long there. And maybe I'll bring to life some of the numbers Nicolae was sharing. And again, you're numbers people here, so let's talk some of these numbers, just for you to understand how high the bar for CapEx for us is. Let's take irrigation. To irrigate one hectare of land, you need to invest about EUR 2,500-EUR 3,000, depending on the bells and whistles you want.
We have an irrigation system from Israel that has all the bells and whistles, which means the irrigation is underground, right? It takes a little bit more labor to install it. It has a centralized computer where you can direct the amount of water for various parcels. Because it's underground, it's feeding the root, it's not feeding the weed that is growing on top of the land. So it's much economical from a water perspective. And it's better for the plant because it's not fueling the weed at the top. So it goes straight to the root. So this kind of irrigation costs you, on average, EUR 2,500-EUR 3,000 per hectare. We emphasized today that what this irrigation system does, it allows you actually to avoid the high drought periods, right?
So typically, when a hectare of vineyard. And I'm going to use round numbers so that you internalize them. You do 10 hectares, 10 tons per hectare, right? Say, 10 tons for a Cabernet Sauvignon. You can do 16 tons for a Sauvignon Blanc, and so on. It varies, but for the simplicity, let's take 10 tons. Now, on average, we believe that irrigating a parcel of land will give you 3 to 4 extra tons per hectare, right? So by hedging you against the drought periods. So 1 kilo of grapes is about EUR 0.40. We multiply, say, 3.5 tons, right? So 3.5 tons per hectare by EUR 0.40 gets you about EUR 1,400 extra generated per hectare, right? So I recall the numbers.
So you invest 2,000-3,000, and you have a gain per hectare of 1,400. Of course, many of you will say that, "Wait a minute, but did you calculate the electricity you need to pump the water? Did you calculate some of the operating costs?" So even taking those operating costs down, it still gets you to about three-year payback period, right? But now you see, it's not an abstract number, three-year payback period. I also gave you the numbers so that you can internalize this. And when we have these discussions at the board level, we really set the bar high. So you're coming with an investment, say, in solar panels that will have, say, a five years payback period. Okay, but here we have a project with three years payback period.
But then the head of the ESG committee will say, "Yes, but we have ESG targets, right? So let's still do some solar panels despite the payback period that is higher," and so on. So that's the kind of debates we have. So the assurance I want to give you is that, look, we may get some things right, we may get some things wrong, right? But in terms of the process, the way we set up, the rigor we impose to the teams, you know, and the basic numbers fueling, you know, our plans, it's really robust. It's really, like, thought out. Because these are not just round numbers there. So for every single growth number, you understand, there's a bottom-up approach where you have per SKU, per market, per sales- salesperson, you have individual targets. So that's how it was produced.
I want to conclude by saying that, look, we've been a company that always tried to, you know, set ambitious target and hopefully over-deliver them. These are ambitious targets, right? But I want to assure you that internally, we have even more ambitious ones. We hope that, like, in 2027, when we all meet here to raise a glass for the 200-year anniversary of Purcari, you know, we'll raise a glass and say that, "Look, guys, thank you for meeting those ambitious targets, and hopefully thank you for over-delivering on them." And on our turn, on our side, we want to thank you for backing us and for trusting us on our vision. And I'm very proud as Moldovan. Look, this is really, really exciting.
Like, I never thought that a corporate presentation slide can get so much excitement, so the people take so many pictures. But I'm very excited and also privileged as a Moldovan, you know, that today, by the way, Mr. Stolojan, you'll be interested. In Moldova today, we have two prime ministers of Romania, right? One actual and one former. And I'm very proud that the former one, which is from a party I sympathize a lot, is actually with us and increased his shareholding in the company, as he admitted today. So thank you all for your backing. The discovery of our strategy doesn't stop here. On some aspect, it only starts.
It only starts because you're going to see the production facilities, you're going to see the vineyards, you're going to talk to the people, you're going to taste the product, you're going to visit the cellars. So you'll see what makes this company so successful. Thank you for being with us, and have a great day going forward.
Vasile, I think we can continue.
Of course, now I have a friendly advice to all fiscal residents of Romania. Don't forget that you have to declare your dividends to Ministry of Finance, because Purcari is the only one company where we have to pay in Romania.