Good morning, everybody, and welcome to Pandora's Capital Markets Day. We should maybe even say sawasdee khrap from here, because that's what you say, at least if you're a man here in Thailand. It's good to see you, and thank you all for taking the journey to this part of the world. I know for us coming out of Europe, at least, it's more a treat than the opposite to be here with the nice weather. We have an extensive program for today. The most important thing that we're going to show you today is the heart of our company, which is our crafting facility here in Gemopolis.
The agenda, as we put it together, is starting with me talking about Pandora and how we are becom8ng a truly global, full jewelry brand. We're going to talk about Australia, what has happened in Australia, how is it developing? Then, we are going to talk about the growth in Asia, and then Thomas Touborg is going to introduce us to the crafting facilities, and then we'll have a tour of the facilities. We'll also have lunch in our canteen, so you're going to be treated exactly the same lunch as all our employees in the company. When we get back and you've seen what this is all about, we'll get into the development of the operational part of the company, and then we'll have a conclusion and a final Q&A.
Gemopolis actually dates back to the 1980s, or actually more to the 1990s, where Per Enevoldsen, who is our founder, he set up his first crafting facility in Thailand. In the beginning of the 2000s, actually, the Pandora brand was introduced in the year 2000, so it is 16 years ago that that the adventure of Pandora started. But in the beginning of the 2000s, in Gemopolis, Per, he rented one floor and soon ran out of capacity, so he built the first building that is actually still operational with us, and he did that in 2005. When we got to 2015, we shipped more than 100 million pieces of jewelry out of Pandora.
We have stated our guidance on the right-hand side of the slide that you see, and as most of you have noticed, we have decided to announce our revenue number for 2015 last night. We had a guidance of more than DKK 16 billion, but we think it's reasonable to notify the market that we ended the year of 2015 at DKK 16.7 billion in revenue. We actually had a discussion on whether the level was sufficient for an announcement, an upgrade, and we decided it was. If we look at the development, it was actually driven by a strong Christmas sales in all geographic regions, and consequently, we also had double-digit growth in local currency in all regions for the fourth quarter. All the remaining guidance items remain unchanged.
We are, of course, happy with the strong end to the year, and we can give you more flavor to the numbers when we report for the year in February. Anyhow, I would say that before we start the presentation, I'd like to give you the opportunity to ask any potential questions, knowing that we cannot really comment beyond what we've already said. But for the good sake of order, is there any questions regarding the upgrade that we made yesterday? Good. Yes
I think we will get back to how the division between the region is when we announce our full-year results. I can say that, Peter and his department have been pretty, pretty toughly occupied to try to put together a number in this very short period of time, and a lot of praise to them for doing that. But, the more flavor we can give when we have the year report. We'll get into the presentation, and I'll start by introducing myself, a little bit. I have a background actually in marketing. That's where I started my career, and over the years, I worked myself more and more into general management until I, a little bit more. Actually, 10 years ago, became the CEO of a tobacco company.
I joined Pandora nearly a year ago, in March of 2015. I worked with branded goods my whole life and worked with a lot of different product groups, like shampoo, bread, crisps, and before I joined Pandora, tobacco.... One of the things that we established in 2015 was a management board in Pandora. I thought it would be a good idea to show you the management board, also because some of the members of the management board is here today. Unfortunately, the first person that you see here should have been here today, but is not here today. David Allen, who has been instrumental in developing our business in Australia, joined us in Copenhagen in the autumn, moved with his family to Copenhagen to head out EMEA, Europe, Middle East, and Africa.
Clearly encouraged by the cold weather, he decided to go on a skiing vacation in Italy over Christmas. He fell and had a complicated, well, yeah, break of his leg, so now he's put together with screws and a lot of metal things. So they've been able to transport him back to Copenhagen, but unfortunately not to Thailand. So David will not join us today, and unfortunately, you will have to cope with me. So I'll give you the presentation on Australia the best that I can, even though it is something that I've learned about and not something that I've experienced myself. I'm very happy to say that Kenneth, who is representing Asia and the president for the Asian region, is here today, and he will talk about Asia.
Scott Burger is not on the program, but is heading Americas. Peter is here today, our CFO, and he will also give a small update on what has happened since our last Capital Markets Day. Stephen Fairchild is not presenting today either, but responsible for our product development. Thomas is, of course, present today and sitting up here, and Thomas is heading operations and is really thrilled to talk about what we are doing to make sure that we can also supply women across the world with beautiful jewelry in the years to come. So this is the team.
The way we put together our management board is to have the different commercial, regions represented and also all the different functions, and I think we've had a very, very good start, and the purpose of this is, of course, also to be able to learn from each other across the world. Now I'll give the word to Peter, who'll give an update on, the development since last time we had a Capital Markets Day.
Yeah, thanks a lot. So before jumping into the details on the plans for the years to come, we thought it would be a good idea just to reflect a bit on the accomplishments since the Capital Markets Day hosted in London in 2013. At that time, we focused on the four strategic pillars, and we outlined ten horizons that would be our focus for the years. And the short version of what we have accomplished is that we have delivered, and we have delivered on all ten horizons. But allow me to elaborate a bit on some of the details.
On branded retail, our focus is, as we have explained many times, on concept stores and shop-in-shops, and we have increased our share of revenue from 68% to 76% coming from concept stores and shop-in-shops. Also, we have built our e-stores globally, so we have added another 11 markets, so now we have e-stores in 14 markets globally. Most recently, we have launched in the U.S., in Australia, and also in Hong Kong. On our product offering, we have expanded and built a second core on top of our charms and bracelet business in the form of rings, and ring share of revenue increased from 6% to 13% of revenue.
But one thing is, is percentages, but if you look in absolute numbers, then year to date, end of Q3 this year, we actually had DKK 1.4 billion in revenue from rings, and that's actually more than we had for the full year of 2014. We have also entered into a very successful partnership with Disney, so offering a Disney collection of products in Americas and also in Asia. We have launched also a Pandora Rose collection in the U.S. and in the U.K. So all in all, a lot of success around our product offering. In terms of our markets, we have built Italy and France. Revenue have more than tripled in the period, and for the past couple of quarters, revenue have increased by more than 50%.
Russia, we believe we have built the market with our distributor in Russia, now having 187 concept stores in Russia. However, over the last year, business have been somewhat slower due to the general economic situation in Russia. We also said that we would prepare Japan and China, and I believe that we have actually done more than just preparing. We have actually acquired the distributors and taking control of those two markets, both in Japan and China. And Kenneth, he will present more details on the accomplishments and also on the plans for the years to come. Fix Germany, you say, well, not entirely yet, but we do have a great footprint now in Germany with 154 concept stores, and we have closed a lot of unbranded point of sales.
So we are on track in Germany. We have the footprint to build the growth in Germany, but fixed, we have not done yet. On building the global brand, we are focusing initially on awareness, and we have increased our awareness from 60%-73%. And Anders will get into more details today on how we are building the brand and thinking around that. So overall, when looking back at the accomplishments since the last capital markets day in 2013, I'm proud to look at the results, and I can certainly say that the, that we have delivered on the horizons that the, that we outlined. And with that, I'll hand the word back to Anders.
Thank you very much, Peter. So the first point on our agenda today is talking about the brand and becoming a global jewelry brand. And there are two important words in this. The one is global, and the other is jewelry, which is actually broadening our product offering. We thought it would be a good idea to start this presentation by sharing with you a video we have made on our brand. It has, across Facebook and YouTube, generated more than 35 million views, and we do believe that it represents very well the direction that we want to take with our brand in the future. So this is what we're going to show you.
Twisting bonds of time, you're in their grasp. A staircase to climb, breathing in gasps. The wind only knows what happened to me. I know your rose, trapped beneath the sea. This I know, I'll never let you down. This I know, I'll never let you down. Bruises on all the trees, echoing sound. If you're down on your knees for the final count. This I know, I'll never let you down.
So we believe this illustrates very much the journey that we have taken to become the most loved jewelry brand in the world, compared to the most recognized jewelry brand. Some of you might already have seen it and be among the 35+ million views that has been there. We believe that one of the things that we should celebrate is the uniqueness of women, and that is what we can help women express through our product. Well, when we look at branding, we can't get away from product. Sometimes we talk about branding as it's something you build in cyberspace without having a product to substantiate it. But I think we all know, as we are also consumers, that when we look at a brand, we also evaluate the product.
Especially in our segment and with the development of Pandora, we have been built on a very, very strong product offering. And it is the closest link we have to our consumers. So product and brand goes hand in hand, and I think it's very important to realize and recognize that when we talk about our brand. So but having the product as a starting point, let's talk about the brand. As I said, we are on a quest to move from the most recognized to the most loved, and if we evaluate where we are in relationship to most recognized, we can see that we have a brand awareness, an aided brand awareness, of 73% in Pandora.
It is slightly above companies like Tiffany and Cartier, and a little bit below a company like Swarovski, who has got a lot broader product offering than only jewelry. I think that the closest competitor that you can see in this chart is Thomas Sabo, and Thomas Sabo is on a lower and different level than we are. We have a very high brand recognition across all these markets, and the survey is based on our 25 biggest markets, most important markets. We are on a journey to become a full jewelry brand. Peter talked about the development that we've had in our rings, and it is important for us that we continue this journey, as we can see that it supports the development of the brand.
So both the uniqueness in women, but also the collective trait of women, are things that we are going to build upon. But next, I'll share with you a few thoughts on the industry or the market where we build the brand. We are in a very unique position in Pandora, and I think this is very clearly illustrated in this chart. If you look at the right-hand side and the first graph, you can see the size of the branded share of jewelry. And it is between 2009 and 2015, according to the McKinsey study, which was done only moved slightly forward, and I think that we can say that we enjoy our share in moving that forward, and will continue doing so.
If we compare to other product groups and other products, you can see that jewelry is actually to a very limited level branded. So we are building a branded position in a relatively unbranded world. One of the advantages we have, having size in a market where we have few direct competitors at this time, and I'll tell you, we are looking over our shoulders at all times, because the only thing that you don't wanna do is to forget about your competition. But one of the things that we enjoy is the fact that we can have a high share of voice, and share of voice is actually that we can have an overspend of media compared to our competition, and that in itself is a competitive advantage for us.
Apart from the media cost that is building the brand, we also have our concept stores, and our concept stores is, in my opinion, the most important brand-building vehicle we have in Pandora, and a big part of the total branding. Then next question that we're going to look at is: how do we actually build the brand? As I mentioned, two important components of building the brand is the product we offer and the development of the product that we offer, and our concept stores, where we can both show our consumers our full product offering. But one of the things that I enjoy very much is also when you travel around the world, it actually is so that the Pandora stores are standing out.
We have a visibility on all different media platforms, and one thing that I'd like to point out in the graph on the right-hand side is how you can see that we are utilizing more TV. And TV you can only use if you have a full geographic distribution in the market, because most of the TV channels are national. And again, back to the competitive advantage you have by being able to use the national medias, and we can also see, and we'll get back to that later, that in some of the markets where we've been able to do that for a number of years, we've had a pretty good success with it.
We also have around 1,800 concept stores to support this development, and as you know, we have an aim of spending 10% of our revenue on marketing to continue being a strong brand in the market. Let's have a look at the awareness of Pandora. And we actually have a strong brand awareness, as I mentioned before, and if you look at the graph here, you can see how much it has developed over the past years, from 36% of aided awareness back in 2010, and to 73%, with a good leap in this year forward. More than every fourth woman consider buying Pandora, and you can see that in the, in the bottom graph, where 27% is actually considering buying.
It's, of course, important that we have women in our who are aware of the brand and interested in the brand. But as gifting is around 2/3 of our total revenue, it is equally important that men are. About 1/3 of the gifting, in rough numbers, is women buying for other women, and about 1/3 are men buying for women. Clearly, we men, we get a lot of guidance before we buy, so it is most important that women are aware of our brand. Let's have a look at the concept stores and our shop-in-shops, which is a crucial part of developing our brand and our business.
More than 75% of our revenue is generated in concept stores, and you can see on the right-hand side how that has developed over the years, but also the number of concept stores and shop-in-shops, which now stands at more than 3,000 units across the world. The reason why we enjoy the concept stores is that it gives the consumers an opportunity to see our full jewelry product offering, but also get the right consumer experience when they meet our staff. If we look at the lower part of the chart here, we have tried to make a comparison between our Pandora stores and the multi-brand stores. Maybe we have over- ex-...
It's elaborated a little bit heavy on the multi-brand stores' dullness, but we do have a very light environment, and most importantly, we have trained staff who knows how to address the consumers in all the different geographies, and that is very different. If you say, "Have a good day," to a German, they get upset. If you do not say, "Have a good day," to an American, they also get upset. So retail is a local thing, and we need to do it the right way across the world.
It also means that we have a full control of our brand, and I think that's one of the things which sets Pandora out or aside from other companies in a lot of different industries, that we actually control our full value chain from the time when we design, and here in Gemopolis, manufacture our products, and until we meet the consumers in the stores. We'll continue the development on our concept stores, and what we are seeing here is that we see a good potential also in the future to continue opening concept stores around the world. I know a lot of you have continuously asked for a number or a guidance, and we've been very courageous today in actually giving you a number.
So we say what we can see is between 200 and 300 new concept stores every year from 2016 to 2018 is what we can foresee. Now, you can say, "Well, your guidance for 2015 is still more than 375," but what you have to remember is that in 2015, we built a lot of new stores in Germany, which was a special case, and if you take that out, we get to the number between 200 and 300. We still have a focus on building the right distribution and not just building distribution. If you look at where we are, anticipate that these stores will open, we've given you a rough number on that. It is a rough number. I can assure you of one thing, it is not going to look like this when we hit 2018.
But we believe that Europe, where you have to add also, Middle East and Africa, because that's part of the region, will be 60%, and then 20% in Americas and 20% in Asia Pacific. One of the things which we experienced by the end of 2015 was that we got a good interest from Jared, which is a very big customer of ours in the American... in the U.S. market, where they wanted to change from being a multi-brand customer with Pandora to building shop-in-shops. So during 2016, they're going to build more than 200 shop-in-shops in their stores, and that is going to add nicely to our branded environment in the U.S. At the same time, we will continue closing unbranded stores across the world.
We've seen that being necessary, and the last, but very good example, is Germany, where we've substituted a lot of unbranded stores with our own concept stores. And then to an update on our product. Product is our key component of our relationship to our consumers, and we want to offer a full jewelry assortment. We have all different categories of jewelry available in our stores, and we've had, as you know, a strong focus on developing our rings for the past years. We've arrived at a level where we have close to 13% after the first three quarters of 2015 in rings. And what is really important is that as we have developed the rings, we've also had a focus on developing our charms and bracelets, so both categories have developed in this period of time.
So when we move into new categories, we still want to develop our already existing categories further. If you look at the bottom slide, bottom part of the slide, it shows that even though we have been rather successful in all the markets that we've entered over time, the markets are very different, and we have to treat every market as a separate market. If you look at the spend on jewelry across these, selected market, there are some very big differences. Let me just point out two. One is that earrings is the biggest segment in the U.S., and when we get to China, that Kenneth will talk more about later, it's actually, neckwear that is the biggest category. So we see these differences between the markets.
When we look at the ring category, it is rather big across all markets, but we have to remember that a very big part of the ring category is actually engagement and bridal. Let's talk about new categories that we will look at. So when we activate new categories, it's not only important for us that that we can see there is a consumer demand. We also have to be able to fulfill that demand, both from a design perspective, but also from a manufacturing perspective. And later today, you'll see some of the complexity we have in our manufacturing.
But we need to do it in the right quality so that we still live up to the, to the framework that Per Enevoldsen made for us, because the reason why he set up manufacturing in Thailand was that he was not really satisfied with the quality that he could buy in Denmark. So we need to make sure that we can make the products. We also need to make sure that we have the right idea of how we are going to present the products in the store to the consumers, educate our staff, our frontline personnel, our most important employees, apart from the ones who are actually manufacturing the products in the stores.
Then we need to make sure that we, through advertising and promotions, make sure that the consumers know that we have more products. Charm bracelets and ring are in focus for the market today, and from January this year, we will also start focusing on earrings as the next category. It doesn't mean that we will take away focus, as I mentioned before, from the other categories. We'll continue developing those. Today, earrings account for about 3% of our revenue in Pandora. Next, a summary of what I've been talking about on the brand. We have a strong brand, which is built highly on high-quality product. We have a high share of voice in an unbranded industry, which we believe is a strong competitive advantage for us.
We have a focus on developing and strengthening our branded environment, both with concept stores and shop-in-shops, but we are focused on concept stores, where we will open 200-300 concept stores each year through to 2018. Charms, bracelet, and rings are established categories, so we'll include earrings from 2016, and we believe that we are well on track to become a full jewelry brand. The Pandora brand. So before we go to Australia, any questions, comments? Yes, you need to have a microphone. You'll get that right now. And maybe it works? Maybe it doesn't.
Hello? Yeah, okay, it works. I was wondering, in terms of your concept store openings, 200-300, is there anything you can say in terms of the development over the years? Is there reason to think it'll be more in the first year, and then perhaps towards the lower end of the range in the latter year? How do you look at it?
No, I think that what we feel comfortable about saying is, we will still have the same focus as we have today, which is we need to identify the right locations, and then we will open. There are some of the more developed markets where, of course, we are building less stores today than we did previously, but we still see good opportunities, even in markets like the UK, which is well developed. So, as the brand gets more and more traction, as we expand our product offering into a full jewelry offering, there's also an opportunity to build a stronger network. So, 200-300 is as much as we can say at this time, and clearly, the transparency for the first year is bigger than it is for the last year.
We feel comfortable that we can see that there is this opportunity over the years, but we cannot get into further comments. And the reason being, as I think I've also said before, if we come up with strict numbers in this, we might be tempted to open the wrong stores in one year, and we don't want to do that. So 200-300 is how you should think of it over this period of time.
Just to follow up, I mean, I know it's difficult, but is there anything in your market view that would suggest that 2018 would be less than 2016? Are there anything in the horizon in terms of being worried about the penetration level or anything?
Well, I think that if we were worried, we have now, for the first time, given you a number. So if we were worried, we would not have given you a number. So, I guess that answers the question.
Thank you.
Hi, thank you. I think you started by saying that, brand building starts with the product. A lot of global consumer companies use a terrible word, which is globalization, this idea of developing global product assortment, but also finding ways to cater to local tastes. And so I'm just wondering, how do you address that? How do you address the specifics of the Australian consumer, of the Chinese consumer, of the Japanese consumer? How far are you willing to go to basically develop specific products to cater for the different tastes around the world? Because I suspect in terms of usage of raw material, in terms of how bulky or how discreet the products will be, you need to cater to a lot of differences. How do you deal with that?
I'm sure there are differences around the world. I would say if you look at our core assortment, say, 80% of what we manufacture, that has actually got very good traction around the world. I'm sure that Kenneth is going... Or you, I know you will talk a little bit about this, but there are also differences, and I will not take your presentation and talk about the differences now, because I think we should leave that to Kenneth. But there are differences around the world. I wouldn't say it was local difference. It's more in cultural clusters, like you have an Anglo-Saxon cluster, which is actually Europe, U.S., and Australia, so it's all over the world. You might have a Central European cluster, Ce ntral Europe, being Western Europe and Central Eastern Europe.
You definitely have an Asian cluster, where there are specific taste dimensions that we can cater to. It is part of what we look at, and we already do a bit of it. We think we can do a bit more, but we still want to make sure that we have a product offering, which is 80% the same around the world, with some specialties on top of it. But I wouldn't call it a localization. If we would ask our markets, of course, they would, each market would like to have their own assortment. They would even probably like to have their own brand. They are not going to have either, because we want to have a global brand, and we also want to have a base global offering.
One of the things which has been interesting is that, when we made the cooperation with Disney in the U.S., we saw a lot of interest on Disney, especially from Asia. Actually, we also saw a lot of Asian consumers entering our stores in the U.S. because they found out that we had it. So there is definitely more similarities between the consumers than differences. So, it has been good to be able to launch in Asia.
Just to follow up on that, some of your competitors will include Australia in Asia. You don't, and that's, I guess, linked to that cluster of Anglo-Saxon taste?
Yeah, I think it is also a historic reason. Now, David Allen, who is responsible for EMEA, came from Australia.
From my perspective, I wanted him to make sure that he had a good eye on Australia, handing it over to the new guy, Brien, who's now responsible for Australia, so it's more a practical purpose. I think that because you can say the U.S. and the U.K. is not under the same management, even though there's a cultural similarity.
A question about the development of the assortment. You mentioned how you can widen into finger rings and earrings and so on. In terms of price points and perhaps moving up to higher price points and perhaps developing gold more in the assortment, what are your thoughts on that? And also, on as you widen the offering, you mentioned that you can build a stronger presence in a market. And could you try and give us an idea of if you have a market where you're well-established, how much more, how many more stores or selling space would you be able to add once you have a wider product offering?
Let me start with the price points. We are affordable luxury. We will stay affordable luxury, and we will not change that position. I think that sometimes you learn from your mistakes. We made a big mistake back in 2011, where we tried to be aspirational, to move into something we were not. We will not do that again. So we'll stay where we are now. We can say that in some areas we have more sales of gold products than in other areas. Like in Russia, they're more interested in gold. Now, their interest has kind of diminished a little bit over the past years. But there are definitely differences, but we are not going into jewelry in different levels. We'll continue making fantastic products affordable.
When you look at the product offering, and actually, we'll get back to that when we talk about Australia, but I can take the example now instead. In Australia, as an example, we had a very, very strong business of charms and bracelets, but it was one of the first countries where we chose to focus on rings. And as we focused on rings, we could see that consumers who entered the stores having actually an interest in rings, got interested in our charms and bracelets. So actually, the two categories work together, and what we want to do is to make sure that the first thing that consumers in the future think of when they think of jewelry in the affordable luxury space is Pandora. And that, of course, gives us a broader base for our business.
We'll continue focusing on developing already existing categories, and then on top of that, put the new categories, as we've done with the rings and as we are going to do and start doing with the earrings from 2016.
Just a couple of questions from me. First, on, on your... You're talking more and more about becoming a jewelry company rather than a charm bracelet company. What kind of split do you see as sustainable over, say, the next three years, by 2018? Do you think you can take earrings to the same sort of levels as, as rings? And, as a follow-up question to that, do you think your concept store network, as of now, is the right one, especially in terms of the old stores, to showcase as a full jewelry brand rather than a-
Good questions.
- charm store?
First question, the answer is, we will take this one year at a time. We've had the focus on rings and seeing how we could develop that. I think it's been very encouraging. As Peter mentioned, it's become a really substantial business in itself, and we will do the same on the earrings. We don't have a number saying this is where we should go, but that we share. Clearly, we have ambitions to grow it. Our concept stores, clearly, when we change our product offering, we also have to change the way that we present our products in the stores.
What we can see is that some of our really small stores has a little bit of a challenge with the full assortment, but the majority of our stores actually have the size to support the broad product offering that we have now.
So for relocations as well?
Yeah, but it's few stores. Most of the stores is in the sweet spot. And then we'll see as we progress how this is going to look. But one of the great things about Pandora is actually we, in a relatively small retail footprint, can generate quite a good, reasonable revenue.
... Could you tell us some more about how you're positioning your earrings? The reason I'm asking is, both within charms bracelet and within finger rings, you've been able to do the building block approach, but I guess that would be hard within the earrings.
Absolutely correct. We have tried having a building block earring offering in Pandora. It was a disaster, and I think sometimes when you have got, when you've got a great, great idea, like the, the charms and the, and the bracelets, where you say: Well, great, here we can collect, and we can continue developing, the, the bracelet, and, and thereby consumers will come back to us. We can see that consumers come back to us anyhow when they are looking for, for jewelry. You try to do the same, and we actually did that with the earrings, but it meant that, you combined all the things, and whenever you wore them, you lost half of the things which were on the earrings. Not a very strong concept.
So with the rings, we both have individual rings, but we also have stacking rings, so we actually offer both, and we can see both has good traction. When it comes to the earrings, we are entering into a world where create and combine is not as clear. If you look at create and combine, I think there's another dimension which is interesting, and that is that we actually have the opportunity of offering sets. And if you look at our stores today, we try to showcase more and more sets where we have earrings matching necklaces, matching bracelet and charms, and also matching rings. So from that perspective, you can combine and create.
I'm coming back to the guidance on concept store expansion. How do you think about the split between owned and operated and franchisee-run stores? I think you have previously said that 10%-15% is a good number over time for owned and operated, and I think for various reasons, we're now seeing around 25%. So in what direction do you, do you believe that this proportion will go in the coming years? Thanks.
Well, I think that the most important way to talk about this is actually to talk about the criteria for owned and operated stores, and how do we look at this? We're still committed to franchise, but we're also taking a larger proportion of the stores as owned and operated. And especially in 2015, we had a lot of owned and operated stores because of Germany, so that was a special case. But we can see cases like that in other markets, if we can't find the right franchisees or when we have to, you can say, reposition ourselves in the market, we would take an approach, and we would not be afraid of it, as we still have a very good earning on our owned and operated concept stores.
The other thing is when we open new markets, and let's take the example that Kenneth is going to talk about later, China, we want to establish a good base of owned and operated stores. So we are expanding owned and operated in China at this time only. Just to know it, and then later we will evaluate whether franchise is a good opportunity in China. It might be, and it might not be, depends on whether we can find the right partners to do that. We also have... When we take over distribution, distributors which has represented us, we actually take over a lot of owned and operated stores if they had run it with owned and operated stores.
And then the fourth category, where we've seen some traction over the past year, is that when we see really good A locations in the world, we want to take those ourselves. It's very profitable, and it is really supporting the brand. So those are the criteria. We don't have a number for the percentage of owned and operated, but within those criteria, we'll see where we end.
Thanks. Could you just remind about which markets, that you have third-party distributors on right now?
We have a number of markets. We have in Europe, and maybe I need a little bit of help here. We have Belgium, we have Portugal, Spain, Ireland, Greece, and then we have a few Asian markets still, where we have third-party distributors.
Yeah, so that would be South Korea, it would be China, and in Southeast Asia, most of the Southeast Asian markets, excluding Singapore, are still run by external distributors.
And then we have in Africa also, external distributors who are running it for us. And I think maybe this should be the last question, because otherwise I'll get in trouble with Morten.
Hi there. Yeah, you just talked about share of voice and kind of your marketing strategy. I just wondered, as you're thinking about kind of the new categories, whether we should expect, you know, your marketing to move away from charms because you've got, you know, large enough awareness on a global basis?
Yeah. We will not move away from charms and bracelets in total, but of course we'll include the new categories, and what is really important is that we show the consumers what we have available. That's how we can drive the understanding of the fact that we have a full jewelry offering. So, include, but still, of course, have focus on charms and bracelets. And the way you have to think of it is, as we enjoy the new categories, we still want to develop the existing categories, but clearly, we have to spend some of our investments or marketing cost on the new categories to make sure that they know we're there.
Cool. And thank you. And just as one follow-up, I was quite surprised to see such a dramatic increase in terms of TV marketing spend over the past year. Could you... You know, you talked about social media presence as well. Could you just help us explain how we should think about that going forward in terms of your split between traditional versus digital marketing spend?
I think digital marketing is has been relatively constant. In some markets, we've peaked it. What we are looking at is how do we get the best deals? And historically, we've spent a lot of print media, but we can see that's less efficient, and actually, when you look at the cost of hitting the consumers, it becomes a little bit too high. So therefore, with the presence we have, we can be more efficient using television, but also social media. I think that's probably the most important areas of advertising when we look at it in general in Pandora.
Then there's specific case, and I'm sure Kenneth is going to talk a little bit more about that, because when we are building new distribution, clearly, when we do not have a national distribution, we can't use national television. That's then not efficient either. So, so it's something that we actually plan and execute market by market, depending on how we see it more efficient. We want to get value for money, with, with, with our media spend. Okay, and I'm very sorry that you have to bear with me for another presentation, which is, about Australia. We are sorry that David couldn't be here, but as I said, he has a. You shouldn't put an Australian on skis. That's just the way it is. But we are going to talk about Australia and, and how we grow in a developed market.
I'm also going to talk a little bit, and I know that some of us have had discussions on this historically, about what has happened in Australia, how did we get in trouble, and how did we get out of trouble in Australia? First, even though David is not here, a few words on him. David, he joined Pandora back in 2011. He actually started his career in a store working retail, and he's extremely passionate about retail, as at the same time, he also has a good business mind across the different function. But one of the things which has been important for us and is important for us in the future, is to think more about the execution in retail. So there, David is a great example of someone who can support that.
Next, we'll look at the agenda, what we're going to talk about in regards to Australia. The jewelry market in Australia, a few words on that, the brand representation, and actually the need for change, how we got in trouble, how we got out of trouble, where the brand stands today, the focus we have today, and then a summary. But first, a few words on the jewelry market in Australia. These are figures that we have from Euromonitor, and with the precision that Euromonitor can do, what we can see is that over the past five years, the market in total have increased by 13%. Euromonitor expected to decline slightly over the next period of five years. Actually, you can say it's a flat minus that we would have.
The online channel in Australia has actually taken gotten a lot of traction. It's now representing 7% of the jewelry retail sales in 2015. We've put a chart in here where we have the Australian and the world market, and what you can see is that rings is really a big category in Australia. More than 50% of those rings are engagement and bridal products. After this, we'll look at competition and how the competitive landscape looks in Australia. Here we have the different brands. You can see our position in the market. But if you look at Prouds and Angus & Coote and Michael Hill, they are jewelry brands, which are actually retail brands. So they have their own products. They do not have their own manufacturing facilities.
I would consider them being a private label retailer in the market. They have a broad assortment, which ranges from AUD 50 to up to AUD 300-400, and they are very promotional. Actually, the Australian market have turned very promotional over the past few years. The only one who's really kept out of that strong promotional trend is Pandora. If you look at the right-hand side, you can see that has paid off nicely with a 42% increase in our market share. Now, these are the branded companies, and you can see there's also some of the international competitors like Tiffany, Thomas Sabo, and Cartier, and Swarovski here. Totally, the branded part of this has increased, clearly driven largely by Pandora.
But if you put together all of these competitors, which would represent the branded part of the Australian market, it will leave us with 70% unbranded, where it is retailers which have four stores or less, and they are selling multi-brand or unbranded product in the market. So there's even in a well-developed market like Australia, still a lot of opportunities for driving the brands in the future. Next, let's have a look at Pandora in Australia. Pandora entered Australia some 12 years ago in 2004, and after that, we introduced in New Zealand. So it's one of our most developed markets. We started and had 40 multi-brand customers the first year, and we saw a tremendous development over the years following.
The first owned and operated concept store was opened in 2008, and the store is actually still operational, and is in the Queen Victoria Building, and is today our third biggest owned and operated store in the world. So the store is doing well. It has not been doing well all along. We have also developed our franchise business, and we opened the first one in 2009. So after only 5 years in Australia, the revenue peaked at AUD 184 million, and it was the peak. We have not been back to that level since then, until, I can say that, 2015, where we, for the first time, beat the number. But it shows the rollercoaster we've had in Australia.
We had 800 stores at that time, a combination, of course, of multi-brand and concept stores, but with a strong focus on multi-brand. The charms and bracelet represented at that time, 85% of our total revenue, as you can also see on the lower chart. On the upper chart, you can see the composition of branded versus unbranded. I think that in Pandora, we've changed our definition and perception of what is branded and unbranded over the years. In those days, we called it branded. Today, we would probably call it unbranded, because it was retailers who had a small Pandora sign on the shelf where they sold the Pandora product. So next, Pandora getting into trouble. What happened in Australia was that our distribution was, as in a number of other market, overcrowded.
There's been a strong, strong focus on driving sales into the stores, and no focus at all on driving sales out of the stores. So the stores were overstocked, and the distribution was overcrowded. What happened was that we began to see that the retailers were not competing against other brands, but competing against each other to be the one selling Pandora. And that, of course, gave a lot of unintended promotional activity, which was really hurting our brand. We were also too expensive at that time. What had happened was that over a period of two years, we'd increased our prices with 30%, and the consumers were turning their back to us. That was one of the learning points of we need to stay competitive.
So what we did was we decreased our prices with between 5% and 20%, and until then, the only way we set our prices was that Per, or it was Thomas's predecessor in at least the manufacturing, he would say, "This is the manufacturing price, and then we'll do only a markup on that." So we would not look at what is the commercial price of the product, we'll just add the contribution margin that we needed. So when we redid our prices, we decreased the prices with between 5% and 20% to get more commercial prices in the market, so there was a closer relation between what the consumers thought the product should cost and what the price actually was.
So what happened was that the consolidated revenue declined from AUD 184 million in 2009 to AUD 110 million, a decline of 40%. And if you look at the right-hand graphs, you can see the like-for-like development in the market. So a good number of quarters with negative like-for-like development, even in the concept stores. So next question is what to do based on that? And here are the core focus areas to reignite the business. The distribution was overcrowded, and we had to reduce our multi-brand network, 800 stores. We were actually getting to the point where we were starting selling Pandora in gift shops, and that is not really supportive of the jewelry brand that we are. We had a strong focus on getting concept stores.
We were actually the driver of where the concept stores should be situated, so we took the locations, and over time, we also made sure that our franchisees, they got the locations that we wanted to have. We needed to strengthen our branding presence. Then we integrated our commercial functions, and integrating commercial functions is actually a little bit of an exaggeration, because before this time, before 2012, we did not have a merchandising function in Pandora in Australia. And the merchandising function is key because those are the ones who decides and finds the right assortment for the Australian market, and they actually take responsibility for the products all the way through the retail stores and to the consumers.
We introduced that function, but also integrated it to the other functions, the marketing and the sales, and until then, the marketing was thought of just being the driver of the business. So the more marketing, predominantly print in those days, that was used, the more we thought that we built the brand. We put these things together in a focus of selling out of stores. We had pushed in products into the stores, actually also made demands on our customers and how much they should buy. So we pushed products into the stores, and now we changed our focus and said, "Now we need to focus on how we drive the sales out of the stores, the retail." We wanted to improve the consumer experience, and that meant that we had to support our stores and make sure that they got the right training.
So we took it upon ourselves to train, of course, our own personnel in our own and operated stores, but we also did a lot of training for our customers' personnel. We took what we call a tactical approach to marketing. The tactical approach was we need to do two things marketing-wise. We needed to tell the consumers that we changed the prices, and we were, again, affordable luxury, but we also needed to show the consumers what we had done with the products. Over this period of time, we had developed a very strong product offering, and we needed to show the consumers those products. So those were the two things we did, and we did that in connection with structured promotional activity, so to make sure that the consumers understood that we were affordable.
Maximizing return on inventory is actually talking about the fact that we had overstocked the stores. We'd pushed product in, and it was not all commercial, so we needed to talk to our customers about how they could get a good return on their inventory and the right inventory in the stores. And then we refocused the business on the core categories of charms and bracelets, and this is probably one of the areas where, and I know, at least in some areas of the world, there's been the question of, is Pandora a fad? And I can tell you, in those days, in Australia, there was a big belief that Pandora was a fad, but it was not a belief which was shared by our people in Pandora Australia.
So they had the focus on the charms and bracelets and said, "We just need to re-ignite this. It is not a problem-related product, product-related problem we have, it is us getting a bit lost in the business." I think the history talks for itself. I will, of course, talk a little bit more about that. So far, strong focus on the charms and bracelets, but again, also adding one more category. The Australians were the first ones to embrace the rings and the category of the rings. Next, let's have a look at the commercial focus here. Focus on sell-out, and focus on sell-out was really the thing. Retail execution and how do we set up our stores so we sell-out?
I can say this has been a really strong focus in Pandora, and actually, when I joined the company, there was a lot of talk about we need to have retail mindset, and I got scared because we are a branded goods company, but actually the meaning is a retail mindset as the opposite of a wholesale mindset. We have to take responsibility to our products until the consumers buy it, not just until the stores buy it. And that's a big change, and probably the biggest change in Australia and the reason behind the success in Australia, that we had this strong focus on the retail mindset. But there was, of course, other things which was also supportive of this. What we can see here is we had the merchandising, marketing, and the sales department.
As I talked about before, these three functions had to work together. We introduced also the seven drops, which was an important part of reigniting the brand, so we were refreshed at all times. Again, this was a small thing maybe, but it was again, understanding and focusing on retail, not just sending products in, but focusing on having the right commercial product across the year to actually sell-out, and a focus on our end consumers. Let's look at some of the different parts of it, and we will start by looking at the maximizing the return on an inventory. As I said, we had pushed products in, but at the same time, we didn't have any system to support the retailers. We introduced a lot of technical system or technology to support the retailers.
One of the things we did was we helped them with replenishment of their stores, so they and took away as much as you can say the difficult parts of running the stores so that they could concentrate on the consumers in the Australian stores. Take responsibility for the sell-out and then focus on the products and the categories across the full life cycle. I think we mentioned...
No, that was a different point, but actually, what the Australians did was they said, "Well, sometimes we take our products, which are still commercial, from our assortment too early." So they started mixing new and existing products in their collections. What that did was that some of the existing products that we'd had in the assortment for several years, when we mixed it in with a novelty, actually sold better the second time that it was part of the collection than it did the first time. I think that's been a learning point for all of us across Pandora, to see we need to focus both on novelty and also on our existing products.
Lastly, if you look at this chart on the right-hand side, you can see that with a revenue increase of 35% across the concept stores, both our own, but also our—the franchise stores, we could reduce the inventory. I think it speaks volumes of how lost we were in the inventories in the stores, and how much we had actually pushed into the stores. Next, there was a focus on building the brand. If you look at the right-hand side and the aided brand awareness of females over 18 years, we have a really strong position in Australia.
It has been done or driven by the carefully planned promotional activities that I talked about before, but also very much on the in-store activities, driving sales, and making sure that the consumers had a good experience when they visited us. It's not only important to have a good development and understanding in the female community, also the male community, as I talked before about, is important, and there we can see we also had a very nice increase. Let's have a look at the marketing focus.
As you can see, we really bumped up media advertisement in that period of time to more than 50%, but also spent more on, on digital media, Facebook, blogging, streaming TV, and so forth, which has been also an instrumental part of it, and we took out a lot of the print advertisement that we had previously done. Just in 2015, we increased the number of visitors to our website, pandora.net, by 57%, which is a pretty, pretty amazing number. But at the same time, the activities were maximized around the gifting seasons of the year, so around the periods like Valentine's, Mother's Day, and Christmas. Because Pandora is very much gifting, but in Australia, even more so. In Pandora in general, I've mentioned roughly two-thirds is gifting. In Australia, it's closer to three-quarters, which is gifting.
So we need to get all the gifters, both the males and the females, on board. Next, let's have a look at the focus on our consumer and consumer experience. Now, the way that we had put our sales force together in Australia previously was channel-wise, and that's actually also true for Pandora in general. So what did that do? That meant that we had the multi-brand retailers that we were focusing on, on one sales force, another sales force took care of the franchisees, and a third sales force took care of our owned and operated stores. We merged that to make sure that we had a regional view, and we wanted to make sure that we expanded the right stores in the right areas.
If we had the old type of sales force, clearly the ones who were responsible for the multi-brand retailers, they wanted to drive that category forward, even though it was hurting Pandora. So we put it together to have this regional view and drive the right development on our concept stores. We also, as I mentioned before, had a clear focus on where do we want the locations, so it was not something which was left to franchisees to find the location and come to us. We knew where we wanted the locations, and then we gave it to different franchisees.
The brand representation in retail, the way we present our stores, the customer experience, the Pandora, the way the consumers see and then feel Pandora, and then the last thing, which is the operational improvement, which has driven incremental revenue. When we got engaged retail personnel, which is the most important people of this company, we can also drive the units per transaction, and this is a big development. You have to remember, at the same time, we have a mix change towards more rings, so the average price increased, but also the number of items per transaction increased. So both things develop in the right development. So with all of this, next, we'll look at the results of this.
The consolidated revenue, which kind of bottomed out at AUD 110 million, grew to AUD 173 million in 2014. And as I said, 2015 is our best year ever in Australia, and we've had 11 straight quarters with more than 15%, like-for-like growth. So where's the brand in Australia today? We have a very, very high level of branded share revenue in Australia. Seventy percent concept stores and 92% branded, and much stronger branded than it was back in the days where we got in trouble. We have 109 concept stores. Of those, 94 are franchise-operated, and we have 15 owned and operated. AUD 250 million is our total sales out of our concept stores in Australia.
And, as you can see, the 92% of the revenue is branded. Average turnover in a Pandora concept stores is AUD 2.6 million, a very strong number. And if we look at the Pitt Street, which is the best owned and operated store we have in Pandora, and the Queen Victoria Building, which I mentioned before, which was our first concept store in Australia, those are the first and third store within the Pandora owned and operated network. So let's look at a summary of what has happened. Maybe it didn't, yeah. So next level of growth, next step, having developed a good network, is that we can actually move a little bit more into the regions.
We can see with the product offering we have today, we think that we can attack some of the smaller cities in Australia with the concept stores. That's one of the things as we develop the brand traction, we can do that. We, of course, do it carefully, so we don't over-distribute, but we can see some good opportunities in this. We opened our eSTORE in September of this year, which we believe is another concept store, but a virtual one for the consumers to enjoy. We've improved the consumer experience, the operational performance of our concept stores. We will continue focusing on the integration of the commercial function with the aim of looking at how to make sure that we sell-out of stores, not sell into stores.
Marketing focus unchanged, and continue to maximize the return on inventory, so we can become the full jewelry brand and with a focus, including in earrings from 2016. If we look at the Pandora Australia principles of doing business, the reason why I want to share this, clearly, this should have been with David's words, because it is David's words. But one of the things I love with this is that it is really simple. If it has to work in an environment like retail environment, it has to be simple. So beware of the highs of success, which is we have to be curious at all times. If we lose our curiosity, we are lost. What can we improve? That's why we go to work every single day.
It's all about people, so we have to get the right people on the bus, but we also need to have engaged people. I think we've all tried to go into a retail store whereas the staff is unengaged, and often you leave without buying anything. We do not want to overcomplicate things. You need to keep it simple. So looking ahead, what does Pandora Australia look like? We believe that we can increase our revenue in Australia and New Zealand more than 30% in the next three years. The like-for-like sales growth, which has been on a very high level, is expected to be higher than 10% in 2016, before it goes to the level that we have mentioned so many times, to about 3%-5%.
We believe that we can add another 5-10 concept stores per year in Australia in the next three years. We believe that our concept store revenue will be more than 80%-85% of revenue over the next three years. And then David has been courageous and given one of the numbers that you asked for, but only for Australia, which is that the earrings is expected to be around 8% of revenues in 2018. So this was Australia, and, I hope that it was okay to listen to me once more, but then you will not have to listen to me anymore. And just maybe one thing to mention in that connection, and I should maybe have done that before I started talking. On the table in front of you, you also have a nice jewelry guide.
So anytime that you would get a little bit bored today, and it might stop now when Kenneth takes over, but there's a lot of good info in that, and it shows a lot of what we do and the different materials that we use in Pandora. So any questions for Australia, we will try to engage with David.
Yeah, first, a short housekeeping question. So you said, Australian average revenue in a concept store was AUD 2.6 million. Is that sell in or sell-out? And then the real question, so if you look at the issues you've had and solved in Australia and compare that to the issues you're having in northeastern U.S., can you talk a little bit about where you see the similarities and where you see the differences, and to what extent the things you did in Australia are similar to what you have to do in the U.S.? Thank you.
It is sell-out. So it's the average sell-out of a concept store, not either an owned and operated or a franchise. Well, there are similarities between markets, but I think it's also important to realize, as I also showed earlier, every market is its own. Can we learn across the company from each other? Absolutely. That's one of the reasons why we actually established the management board in Pandora, because we needed to have a forum where we could share our experiences. One of the things that the Australians did earlier than anybody else was actually to focus on a broader product offering. So they were the first ones to bring the rings in, which actually happened later in the U.S. That's something which has been learned.
If you look at the operational principle and the focus on the sell-out of the stores, I think that Australia is more progressed than most other markets, but we are still moving in the same direction across the company. So I think that already now we are seeing alignment around the principles. Now, there are, of course, also differences, and, and, when you hear Kenneth talk about Asia, clearly it's a totally different story, especially when you talk about some of the newer markets. But there's a lot of things to be learned between the different parts of it. And northeastern part of the U.S., as we've talked so many times about, where we can say that we are getting in better shape. We are now in small negative like-for-like numbers in, after the third quarter of this year.
We don't have any numbers for the fourth quarter yet, but third quarter was still improving. We can see that we've done some of the same things we've done in Australia. We've added more products into it, we've looked at sell-out from our retail stores, and it seems like we're getting some traction on it.
And in connection with that, do you feel you have found a formula? So if you're going to see headwinds in other markets, do you feel more comfortable that you'll be able to address that early on after having made turns around in Australia and you could say the UK as well?
Yeah, the U.K. is a good example of the same. But I think that if we get headwinds in the future, and we will get headwinds, because all company does, otherwise you are crazy if you don't think you will, we will get it from a different source, because we've learned from what we did wrong in 2011, and we've actually implemented that across a lot of different countries. Take Germany as an example, which I think is actually a good example, where we've reset the retail footprint in Germany. And so far, even though we have talked about you expecting negative like-for-like numbers in Germany during the year, this year, we have not really delivered on that, and that is, of course, positive. So I think that we know what to do. We will see things...
Also, our collections, some of our collections we get out there are fantastic, and some are a little bit less than fantastic. So there are always things which is happening in our daily life, which is changing things, but the overall development is good. We will see challenges in the future, but I don't think we'll see them from the same side, because we try to learn from our mistakes.
Thanks.
Yeah, you need a microphone.
Maybe, maybe-
Yeah.
Try the microphone. Let me be very explicit on the 30% that Anders mentioned. The 30% growth from 2015 to 2018 is from 2015 to 2018, it's not per year in that period.
Thank you, Peter.
That's good to know.
Yeah.
Just a follow-up on the promotional environment in Australia. Do you see that ever changing, or is that just embedded in the way things work there? Second question, your growth on a market that's not growing, even probably slightly declining, if you can believe Euromonitor, where are you taking that from? Who are you taking that from? Sorry.
Well, you know, when there's a strong competition and nobody really has any point of difference, clearly it becomes promotional competition. So I can see it changing with the change towards more branded jewelry, but I think the branded jewelry has to be branded like we do in Pandora, where we actually start from scratch, design it ourself, manufacture it, and not just off the shelf, put our brand on it, and then put it into stores, because then there's no difference. And clearly, no different commodities, a lot more competition. We are building a brand in a relatively unbranded world. Now, you can say that 30% of the Australian market is branded, but it's not really branded in the way we brand things.
It's retail branded, which means private labels, which has a brand on the door, but not really a brand on the product the same way we do it. So I think that we can continue developing our brand also in Australia, and that's the reason why we believe we can continue growing in a market which is flattish.
Can I just ask, what's the average age of your consumer in Australia, and how does that compare to the rest of the world? Because you've been saying, I think, that with the introduction of rings, you've been attracting a younger consumer. So how has that changed over the last few years?
Well, let me give you an anecdotal answer rather than... I don't know the exact number, but, but it is a bit younger. Because what we can see is that the higher the share we have of rings, the more it drives a younger audience into the stores. So for that reason, we, we are actually building a good presence with the younger audience. I think... And it's a good question from the perspective that one of the focus points, and I think I've mentioned this before, is that what could scare me is, and I've seen that in other businesses, is if you have a good grip on a, on a, on a segment of consumers, say, between 20 and 40 years old, and they 20 years old are between 40 and 60 years old, you're lost.
Actually, with the new categories, we can drive other age categories, but also consumer categories into our store. We have a broad spectrum of consumers who actually see us as attractive, but a bit younger because of the product, but an exact age, I can't give you.
But not that big?
No, we don't have that big difference, but there are some differences, Claire.
... Yeah, could you talk about your expansion into smaller cities in Australia? What size of cities are we talking about, and how has that sort of changed from where you thought it would be, let's say, a year ago because of your product expansion?
Well, you can say I, I don't know the exact number, because it also depends on where the city is. Australia is a big country. We need multi-brand retailers also in the future, because in some of the outskirts, if we want to be available, we need to be there, but we would never be able to set up a, a concept stores. But clearly, with, with the penetration in the Australian market, there is an opportunity for us to move into areas where we haven't been before. And, we've seen the same thing in the UK, where we can see some of the, newer additional, concept stores have been in cities where we, five years ago, maybe not one year ago, but five years ago, wouldn't, expect to be.
I think it comes with the development of the brand, that we can take a slightly bigger position in retail.
To follow up, I mean, if we look at the U.S., you're now willing to go into cities in Australia that you're not willing to go into sort of size-wise in the U.S. Can you talk about the difference in sort of approach and size?
I think that what is important and that we have to realize is every market is its own, so there are differences. Clearly, the stronger brand following you have, the more opportunity you have for retail. That's a general comment. At the same time, we should also be, and we are cautious, not over-distributing ourselves, because you can be on fire so much that you will actually hurt yourself. So we are taking a cautious expansion, or taking the expansion cautiously, and therefore, we also have a relative low number of expansion in the future. But we believe that there are still opportunities. We can see in the UK, some of the smaller cities we have entered are actually providing very, very nice business and have become very good stores.
Thank you.
Okay. I think it's probably—oh, one last question.
Yeah, it's actually two questions. Do you share the view of the Euromonitor that the Australian market should decrease the next five years? And also a clarifying question, is it a compounded annual growth rate of minus 3.4% or is it-
No, it's, it's over the years, so that's why I say largely flat. So I think that, clearly, we don't have better numbers, and, and who can predict the future of this? I think that the more branded goods that we get into the jewelry sector, the more you can actually develop the product group, because it also depends on what are, what are the options in the market. So I think a flat market over the next few years, probably a good estimate, but we'll see. We'll do our best to change that, especially in Pandora, and we do have ambitions to grow. Thank you very much. I think we should have a break now, and have some coffee and be back in 15 minutes. So 10:45 A.M., we'll start again.
All right. Good morning, ladies and gentlemen. I hope you are loaded up on coffee and cookies. For those of you coming in from Europe, it's about 4 or 5 in the morning now, so you're all fresh. Double espresso? Very good. For the next 45-60 minutes, we'll be talking a little bit about Asia. We'll be talking a lot about Asia. We'll be talking about a bit about our history and how we've spent the last couple of years building our platform for growth. As introduced earlier, my name is Kenneth Madsen. I've been with Pandora for seven years, so in a Pandora context, I'm one of the dinosaurs. I was employed sometime before the IPO, so I've been through the entire journey. Before Pandora, I've been engaged in sales, marketing, and retail for the last 22 years.
My career started with Carlsberg Breweries, and I moved on to music, so label management, product management, and launch, and marketing of music in Denmark and Scandinavia. From there, I moved on to shoes, ECCO Shoes, which some of you might know, where I got the commercial responsibility for Central Eastern Europe and the Middle East. And that became then the springboard for me, joining Pandora in 2008, where I got the responsibility to build up the business in Eastern Europe and the Middle East, which included Russia at that time. So a relatively long time with Pandora. The last three years, I've been based out of Hong Kong and been running the Asia region. Quick view on the agenda, what we're gonna be talking about today.
We'll give you a brief introduction and history, about where we started out and how we have come to where we are today. We'll give you a macro view on the jewelry market in Asia, how we see it, look a little bit at the competitors and the peers. We'll then dive into a distribution and business update, talk a little bit about how distribution has developed and how that has affected our business. And from there, we'll go into priority markets. We're gonna talk in detail about Hong Kong, taking us into a good discussion on China and finalizing on Japan as well. And as usual, we'll end up with a Q&A if any of you have questions about Asia. So quick executive summary on our history. We were established in Hong Kong in 2009.
We're currently 110 employees sitting in Hong Kong, dedicated to supporting the growth throughout Asia. Hong Kong is our regional head office. We have, in the last 1.5 year, opened a new office in Tokyo, Japan, in Shanghai, China, and recently, a couple of days ago, we've opened up our representation in Singapore as well. So in the last 2-3 years, we have added a lot of headcount. We came from a relatively small team, so one of the things that we did, and we quickly acknowledged, was that if we were serious about Asia, which we were, we wanted to make sure that we had the right people on the bus.
So, we've been recruiting and building a very, very strong team in Hong Kong, and now recently in Tokyo, Shanghai, and Singapore as well. The team that we've brought on board is coming from international retail branded goods, so it's not 180 people from the jewelry sector. We actually believe that we needed people from fashion, from accessories, electronics, Apple, et cetera, et cetera. So first, I think the first important message is that we've spent some time building up an organization and getting ready for growth in Asia. If we look a little bit at the industry, the jewelry industry in Asia, China is expected, if we believe the Euromonitor numbers, to hit roughly around $100 billion in jewelry sales this year.
So the Chinese market is now 50% bigger than the US market, still heavily driven by gold, I should say, but it is a massive and a significant market as well. Other markets of note in Asia Pacific is Japan at $8.4 billion, Hong Kong, $7.7 billion. We'll come back to talk a little bit about the Hong Kong jewelry market. Those of you following the industry have seen what has happened in this year as well. Comparatively, you can see here some of our biggest markets, the US coming in at $63 billion, and the UK market, roughly $5 billion. Now, market size is one thing. I think it's more interesting to look a little bit about the expectations for the future. Where's the future growth gonna come from?
Well, the researchers, they believe that China will continue to grow at a very, very healthy, roughly 7% compound annual growth rate over the next 5 years. They also believe that Japan and Hong Kong will continue the growth that they have been through the last few years, Hong Kong being a special case. U.S. is also expected to continue the growth, whereas the U.K., perhaps a bit like Australia, is expected to be flattish. So if we, if we kind of summarize on, on that, and we look on the pie chart up here, and we take China, India, and the rest of Asia, the expectation is that 80% of the total industry value growth in the jewelry market will be coming from Asia. So obviously, that is a very, very interesting region for Pandora being in the jewelry business.
If we take a quick look at the regional competitive landscape, we have a very, very big player called Chow Tai Fook. We don't look at Chow Tai Fook as a competitor. They are a private label brand, but they have an incredible presence, especially in Hong Kong and China. They're right now operating in excess of 2,100 concept stores in Hong Kong and China. Most of it is owned and operated, but they are also running a bit of a franchise model in China. Swarovski, they have more than 20 years of history in Asia. We don't look at Swarovski as a direct competitor, but certainly as an international jewelry brand in the price point that they are, we are looking towards them to see what they have achieved in Asia over the last 20 years.
They're distributed through a mix of franchise, owned and operated, and they have, in the last, 5-10 years, been acquiring, as we've done recently, more markets and taking more ownership over stores in Asia. Cartier, one of the oldest brands in Asia, they have more than 40 years of history, operating again through a mix of owned and operated. They have quite a bit of shop-in-shops, and also, a franchise or wholesale business. The last one we wanna highlight is Tiffany & Co. They have more than 40 years of history, in Japan, 25 in China. Relatively limited distribution footprint, but they have a much, much bigger retail space, that they are targeting, with about 114 stores as of today. So what have we done in the last, 6 years? We entered Hong Kong in 2009.
Hong Kong was the first market for us to open. We are today operating in 12 markets across Asia, so I would say every significant market, excluding Myanmar and Cambodia, we have distribution there today. What has happened in the last 1.5 year is that we have moved from being a completely wholesale or distributor-orientated business, where we were owning the distribution in Hong Kong, we would be doing distributor or wholesale to the rest of the region. In the last 1.5 year, we have, as you all know, we have been acquiring a majority stake, starting out with Japan, 1st of January of this year, of 2015. Then moving on to China, 1st of July in 2015, and most recently, Singapore, so now... and Macau.
So now we have a direct, owned and operated, presence in five out of those 12 markets that we distribute to. If we take a quick look back at our financial performance, our reported revenue, 2012 was a very, very modest HKD 180 million, and a year of startup, so we reported a negative EBITDA for that year. 2013, we came in just shy of HKD 500 million and managed to get the business under control, delivering, at that time, rather solid 35% EBITDA. 2014, the business again more than doubled. We came in at, 1.1 billion Hong Kong dollars, consolidated and delivered 54% EBITDA. Now, that is a very high EBITDA margin, even for Pandora.
So at that time, we were running still a very, very lean organization, fully focused on wholesale. So that is, by all standards, a very, very high EBITDA margin we came in with. If we look at the first nine months of 2015, we reported a revenue of nearly DKK 1.2 billion and an EBITDA of 44%. So significant growth over the last few years in Asia. Our EBITDA margin in 2015, as you can see, has been impacted by the acquisitions in Japan, China, and Singapore. The start up, us establishing the new offices, getting the team in place, and all the transactional costs.
We do expect that our EBITDA margin is gonna be under pressure for the short, medium term as we go into Japan and China and continue to invest in people, in marketing, and in opening new stores. If we take a broader look, and if we look at sales out, because right now, when you look at reported revenue, it's, it's a mix of owned and operated, and it's a mix of wholesale. To give you a really good view of how does the business look like, I think it's interesting to look at retail sales out. What is the real business that's happening in Asia? Hong Kong is the biggest, both revenue driver, but also the biggest market for sales out for Pandora still as of nine months, 2015.
Followed closely by China, which is growing very, very fast for us, so they represent an 18% share of the regional sellout. And then you have markets like, which is interesting, Taiwan, Malaysia, and South Korea, which are very, very significant wholesale markets. So from a revenue perspective, reported revenue perspective, of course, they represent less, but from a sellout perspective, they are quite significant markets for Pandora. So I think the conclusion here is that we have a very good balanced portfolio in Asia today. It's not that our growth over the last few years has been driven by one, two, or three major markets.
We've managed to actually establish the brand from Northeast Asia, South Korea, it's a great performing market, to Greater China, Taiwan, magnificent market, Hong Kong, and, and a solid growth in China, down to Southeast Asia, where you have Singapore and Malaysia, and you have some of the more new developing markets like the Philippines, really starting to pick up. So good, balanced portfolio, good balanced sales out in Asia today. What is also worth to note about Asia is that, as a difference to the West, so Western Europe and also the Americas, we operate a 100% branded distribution in Asia.
As Anders was speaking a little bit earlier, we have learned from our mistakes in the past, so once we went in and looked at Asia, we didn't want to pursue the opportunity of going in and opening a lot of wholesale accounts quickly. Now, Asia is not a very good market for wholesale in, in, in the beginning when you're in the jewelry business, but we took a conscious decision to go in and say, "Asia, for us, is gonna be 100% branded. We're gonna operate through shop-in-shops and concept stores exclusively." We've increased our footprint significantly over the last two years. I've highlighted a few markets over the last three years, sorry. I've highlighted a few markets here. So Hong Kong has grown from 2 to 22 concept stores, a significant increase in footprint.
China has grown from 39 to 57 concept stores and shop-in-shops as of Q3 2015. What you don't see in this slide is that we've actually closed quite a few non-performing stores, which were opened historically, a long time ago, in the wrong locations. So you don't see also the effect of us discontinuing some stores here. So all these are net numbers. Japan, relatively modest growth from seven to 15 stores in the last three years. South Korea, 26 to 40 stores. Taiwan, 11 to 15. Singapore, from 14 to 21. And finally, Malaysia, from 15 to 26.
So all in all, we have more or less doubled our distribution footprint in Asia over the last three years, while at the same time, we've cleaned up a lot in the distribution in Japan and South Korea, where we've closed non-performing stores that should have never opened. The last thing I wanna say here is that when we look at Asia, and we look towards the future, there's still a lot of potential for opening stores in Asia. Of these markets that we've highlighted up here, it's perhaps only Hong Kong and Singapore, where we now would say we have a relatively full distribution footprint. That's not to say that we won't open one or two more stores in either market....
but 22 stores in two markets or cities like Hong Kong, Singapore with 5-7 million inhabitants is probably a good place to be. But if we look at China, obviously, there's a big, big potential, and we'll come back to talking about China later. But also Japan, obviously, a big potential for new store openings, but even South Korea, Taiwan, and also Malaysia still has significant potential to build the distribution and the business. There we go. So that was a little bit about our history. It was a little bit about our financial performance, where we're coming from, and it was a little bit about where the distribution has developed into. Now, let's talk a little bit about the brand. The question I get a lot is, "So how is the brand perception in Asia?
Is it very different, and how does that work?" Well, I mean, we are a younger brand in Asia. We do not have 12 years of history as, as you do in Australia. We have six, where of it's actually only the last three that counts, and we were not very active in the first three years of our venture into Asia. So really, when we talk about Asia, it's the last three years that counts. So we're considered as a very young and a very feminine brand in, in Asia. It's very trendy as we bring in a lot of new styles, and the Asian consumers, they appreciate the mix and match and the styling opportunity that you have with, Pandora, that you can mix and match the colors and the stones to your outfit. The Asian consumer is very style and fashion conscious.
So, one of the things that I wanted to highlight was the difference between the Asian and the Western consumer is that at least historically, and it's shifting a little bit in the West as well, Pandora has been bought because of unforgettable moments and memories, so the emotional connection. The Asian consumers, first and foremost, look at fashion and style. How does it look? Do I like the product? Does it fit with what I wear? And secondary, they're picking up on the moments and memories that's associated with it. So that's one of the differences that we have in the brand. It's a relatively young brand. It's considered very stylish and fashionable, and they buy it more so than towards the West because of the mix and match and styling opportunities.
We talked a little bit earlier, there were some good questions about the assortment. So, a global assortment with a local relevance, I also don't like globalization, but we can talk a bit about it anyway. Since 2014, we have shall we say, tested the waters a little bit by introducing a number of region-specific or even country-specific products. So I've only brought in three here, but we have, we've actually introduced more than 10 so far. So we've brought in the Chinese Money Bag. We've brought in the Double Happiness, if you're familiar with what that brings. We've brought in a Korean and a Japanese doll, we've brought in a Chinese Love Heart, et cetera, et cetera. So...
All of these products, 75%, the vast majority of these products, I should clarify, have made it into the top 10 of our sell-out. So the indication is that local products that fits to a certain theme, holiday, vacation, or speaks to a special culture in Asia, works very, very well. They've also been supported by local campaigns, so we are supporting with, for instance, a Chinese New Year campaign. We also focused on Valentine's in China, which is different from Valentine's in the West. We have White Day. We have a lot of celebrations and holidays in Asia, which we don't have in the West, and we all cater to those in our communication and somewhat in our product offering.
So a bit to your question, we're not going towards a regional Pandora collection, which is specifically designed to Asia. What Anders said was, we are still working on a global core, and on that core, we are building on the sides for that to increase the relevancy. How much of that relevancy on the regional side, can't give you a number for that, but it's certainly something that we're looking into because the numbers are very, very encouraging. The second thing I want to highlight when we talk about products in Asia, and we talk a little bit about what sells. What sells in Asia, and what sells in Europe, and what sells in America. What's interesting is that if you take the top 200 from those three regions, they are almost identical.
If you take the top 20, they're very different. So what that means is that the consumers are buying a lot of the same stuff in the top 200, so the same products that work in the U.S., they also work in Asia, but how successful they become then is different. So we have strong colors in China, like red, lots of stone, lots of sparkle. That works really, really well in China. That might not work very well in Western Europe. So interestingly enough, you know, the idea of a global assortment is correct. It works. We can see that from our top 200, but we can also see when we look at the top 20, that there's quite a bit of difference. So I hope that gave a little bit more flavor to the question that was asked earlier.
We've also spent a lot of time on enhancing retail operations, and there's a lot to this, and I don't want to spend the next hour talking retail operations. There's all the training part of it, there's the service, there's all the in-store navigation as well. But one of the things that we've spent a lot of time on is to make sure that we have the right stock. When you come from a distributor wholesale model, you have some partners out there that are perhaps not always looking at both stock on hand and sell-out. So we come from at least the past, where stock holdings, if we look at the top 200 products, represented 35% of stock holdings, but it represented 67% of sales out of stores.
So clearly not a very healthy stock mix at the time. So we've been working a lot with that, and as we go in and take direct ownership of markets, it makes it a lot easier to fix that stock. So now we have 50% of our stock on hand out in the stores, in the top 200 segment, representing 66%. There's still some work to be done here. Distributors, they sit on stock, and for them to get rid of non-performing products is a bit of a challenge. But we're working towards it, and I'm confident that over the next few years, we're gonna have a very, very good picture and balance on stock versus sales out.
I wanted to finish off this little speech about our brand, about our product, and about our consumers with a small video. Some of you may have not been to one of our stores in Asia, haven't seen the branded environment that we are represented in, haven't met a Pandora consumer. So for the next 1.5 minutes, I'll introduce you. So that video was... We have a few people from Hong Kong. We have at least one. Where was this video shot? Ah, okay. It was shot in iSQUARE. So this is our best performing store in Hong Kong. It's actually our best performing store in Asia, and it's actually on the top 3 globally best performing stores. So it's a very solid store.
It represents well what it is that we want to achieve with our distribution in Asia. Yeah, and very, very successful. So that was the first part, I would say, an overall regional introduction. Now I'm gonna spend a little bit of time talking about Hong Kong, and what we have achieved, what we have learned, and where we are headed. So as I mentioned earlier, it was the first market to open up in 2009. It's a fully owned and operated market with only distribution through concept stores. It's also the most developed distribution and brand positioning that we have in Asia. And very, very successful stores there, with an average revenue of HKD 29 million per store, and that's sales out, retail value.
We very much look at, at Hong Kong as a model market for the rest of, of Asia in terms of the distribution and the brand that we have, that we have established here. We also see Hong Kong as a spearhead going into China, and that's not to say that, that Hong Kong equals China, because that would be naive, but there is certain similarities that we can use when we look at our footprint, when we look at our marketing strategy, when we look at our digital strategies, which I will talk a little bit more about later. What's interesting for those of you that follows the jewelry market, and especially the jewelry market in Hong Kong, it has been under a lot of pressure the last couple of years. These numbers up here, those are Euromonitor's numbers.
South China Morning Post and also the Hong Kong Statistical Office disagrees with these numbers. The latest number from end year until and including November is that the jewelry and watch business is down 14% year-on-year in Hong Kong. So, last year we had Occupy Central. This year we've had a significant drop in inbound tourists from China. Hong Kong has historically been the number one tourist destination for the Chinese, and especially the wealthy Chinese, to come in and do a lot of shopping. They are now going more to Japan, to South Korea, to Australia, and to Europe to do that shopping. So right now, retail, not only jewelry, but especially jewelry and watches, and especially on the high-end side, are really, really suffering.
Despite that, we have actually grown with 50% year-on-year from 2014 to 2015 in Hong Kong, which many find hard to believe, and everybody says: How is that possible? How can you grow in a market which is under so much pressure? Well, first, remember that we're an affordable luxury. Much of the pressure on the industry in Hong Kong is coming on the higher end segment. The second one is that we're operating in the branded silver segment, which is a very, very new category in Hong Kong and throughout Asia. We have, in fact, very, very little competition. So this pressure that we have seen coming from the wealthy Chinese coming in, not buying high-end luxury products, hasn't hit our category.
The last thing I want to mention is that Pandora in Hong Kong, and that's actually one thing we do for all our markets, is that we focus a lot on the locals. So our marketing, our distribution, everything is focused on the Cantonese that lives and works in Hong Kong. We've never really devised a distribution and marketing strategy aimed at servicing tourists coming in from China, because that's a fickle bunch, and that can change over time. So we are less dependent on tourists in Hong Kong. Our revenue split between locals and the Chinese are roughly 80/20. So 80% of our revenue in Hong Kong is coming from Cantonese, 20% is coming from mainland Chinese and other tourists. So when the tourism drops, we are, shall we say, less susceptible to that impact.
So despite all, a very, very healthy growth in Hong Kong, and we remain positive for the years to come. If you read the press about Hong Kong, it's like no end in sight, a worse crisis since SARS, and it's tough. It's really, really tough for some retailers in Hong Kong today, but we have managed to keep our nose atop the water and still growing at a healthy pace. If we look at awareness in Hong Kong, as I mentioned, we are a much younger brand in Asia than we are in Australia, than we are in the West. So Hong Kong comes from an aided awareness of 28% in 2011, and the latest numbers we have is 86%.
So also, over a relatively short amount of time, our awareness has grown tremendously in Hong Kong. 21% of women in the age group 18+, they now own a Pandora bracelet, and what happens in new markets is that you have all the early adopters, and in the beginning, the women, they buy mostly for themselves. Once they've started, and they've started on the Pandora bracelet, then they start making a wish to their husband or better halves, that I really enjoy this product, I would love to have that for my anniversary or birthday, but they also start gifting it to their girlfriends. So in the beginning, we see that that's mostly driven the growth, mostly driven by self-purchase.
But now also we see that gifting is giving us a bit of a second wind as the brand gets more and more recognized in Hong Kong. If we look at our awareness in a competitive, and I don't like the word competitive, because Tiffany and Cartier, they're not our competitors, and I would even question if Swarovski is our competitor. But at least on a peer benchmark, we are now ahead of both Cartier and Swarovski in aided awareness, only surpassed by Tiffany, which has a very, very long history in Hong Kong and outside. So we've just bought this, right? We've just thrown a lot of money into Hong Kong, and that's why we've achieved this fantastic awareness and these results. Well, not really. We've spent the money, I believe, a little bit smarter, as well as the competition.
Here you have the gray one, the 14 numbers and the nine months of 2015. So our ad spend is more or less on par with what Tiffany & Co., they're putting into Hong Kong. If you look at Swarovski, they are overspending us nearly 3 times, and I think what's interesting to note here is that they're ramping up in 2015. Chow Tai Fook, on the other hand, which has always been a big player in Hong Kong, also from a marketing spend and a share of voice, they seem to be rolling back a little bit on their investments or marketing spend, as we like to call it.
If we look at the real competition, such as Thomas Sabo, Chamilia, Links of London, all of them have a very limited presence in Hong Kong from a distribution footprint, and they have very, very limited share of voice and very limited investments in marketing in Hong Kong. There was a question earlier about social media and digital. We have very early on adopted a very aggressive or very focused, I should say, strategy when it comes to digital marketing and social media. The excitement around Pandora and Pandora in Hong Kong becomes very evident when you look at what has been achieved on Facebook, just as an example. We've listed up here, there's a lot of numbers here. I'll not take you through all of it. I'm sure you've read it already.
But if we just take a look at the fan count up here. So the first number represents Hong Kong fans, dedicated fans, and the second number represents global fan count. So in less than two years, Pandora is now the number one jewelry brand on Facebook in terms of fans and followers. We are also the... continue to be the fastest growing brand on Facebook, and we are also the most engaged brand. So what we see from our consumers is that they are very interested in our brand. They are very socially engaged. When we post news on Facebook, there's a lot of communication and engagement with the consumers because the interest is just there.
So we are committing a large part of our marketing budget in Hong Kong to social media, to digital media, because we believe that that is a very, very strong medium for us to get across. What we're doing in Hong Kong and what we've been doing for the last two years is, again, I wouldn't say replicated may not be the right word, but we're using all the learnings that we have from Hong Kong now that we go into China, and we start investing into marketing in China, and the same goes for Singapore. So all the learnings that we've done in Hong Kong has become the basis or the benchmark as we go into the newly acquired markets.
So that was Hong Kong. And so let's talk a little bit about the small, tiny market called China. We are six months into China in terms of direct ownership. As you know, we acquired a majority stake from our distributor, Oracle, that had been running the distribution for nearly five years. And the reason why we did that was to get one, direct ownership of what we believe to be one of the absolute priority markets for Pandora going forward, but also being able to go in and directly, shall we say, take charge of the brand and the brand building, and also how we build the distribution. Distributors and franchise is a fantastic model in some cases, assuming that you find the right partners. That can be a challenge in China.
I won't say they don't exist, but the market is so sizable, so big, that we decided that we needed to go in and take charge of this market by ourselves. Since July, we have a dedicated organization of 45 people sitting in Shanghai. Again, this is mostly a mainland Chinese organization. We believe that for us to bring this brand to where we want it to be, we needed some of the best locals coming from significant retail brands in the business. So we have put together a very, very strong team in Shanghai right now, which is working on our plans for the future years. It's still early days for us, but we have significantly increased our marketing investments and also investments into new store openings.
And I think what is very encouraging to see, is that we have what we'd like to call kind of a proof of concept. Because we have retail stores north of Beijing, going down through Beijing to Shanghai, all the way down to Guangzhou and Shenzhen, and all of them, they are performing very, very well. So again, we're not a brand where you can say we have a few good stores in the capital of Shanghai, because that's not really representative for Asia. We have stores and a store network that is working really, really well throughout the East Coast. A bit on the financials. If we look at the sales out, we've seen an encouraging growth in 2014 and 2015.
Again, under the old distributor model, we had in 2012 and 2013, a relatively modest revenue of HKD 112 million in 2013. In 2014, we doubled that, and the nine months of 2015 has taken that to HKD 330 million. What's more interesting maybe than just the revenue number is that historically, our stores in China have not been performing on par with the rest of Asia. So back in 2013, if we say that an average store in Asia was performing at index 100, then a store in China would be performing at index 44. So it would be delivering less than half the sales out of an average store in Asia. So that was, of course, concerning.
That continued more or less flat into 2014, when we started the negotiations for the takeover. Now, here in 2015, as we start to invest into marketing, retail operations, and also relocating the non-performing stores, that has already, for the nine months of 2015, increased significantly. So China, and it's growing fast, is quickly coming on par with the rest of Asia when we look at average store sell- out. China also becomes increasingly important for us, in terms of a sell-out perspective. As we transition from the wholesale to the distributor model, if we just look back for the last four quarters, you can see that China represented, at the end of 2014, only 12% of our sales out, and less than one year later, it represents 21% of our sales out.
China right now is growing faster than any other market we have in the region. The like-for-like sales that we are seeing in China is very, very encouraging as well. We, of course, expect that China, in terms of share of business, will continue to grow in 2016 and beyond. A bit of a future outlook on China, and I'm sure I'm gonna get questions on this one. We are, as I said, six months into China, and we want to do China right. We have a, what I'd like to call, a careful, ambitious approach to China because we know what the potential is, but we also don't want to go into China and heedlessly open stores left, right, and center. We've tried that before. It didn't work. 2016 for us is still a ramp-up year.
We're still getting and finalizing the organization. We're also getting the entire back-end structure in place to, to open and operate a, a larger store network in China. So all the infrastructure is still being worked upon. So when we look at the future, we are expecting roughly 30 new concept store openings in 2016, and the guidance is that we, in the coming years, will open between 25 and 30 stores per year. So we maintain that guidance, and we get a lot of questions around that, whether that's ambitious enough. I want to say that our priority in China is quality over quantity. We don't want to open the wrong stores, I think I mentioned that, and we want to make sure we get China right.
As we go into Japan, I can share a little bit about what happens when you open the wrong stores and how you go in and have to reactivate a market like that. That is something that we do not want to do in China. The good news is that we are being very well received in China. We have many, many landlords and major shopping malls interested in Pandora. We're being offered, where in the past, they would put us on the third floor, down in the corner. Now we are on the first and second floor, next to all the big international brands, being offered the positions that we want. So there's a lot of excitement around Pandora in, in China, and we get the right locations offered as well.
If we look at marketing under the distributor model, and one of the problems with a distributor model, there's many good things to it, is that you have a distributor that you expect to invest in the brand. He will typically put his money behind short-term revenue drivers inside the shopping malls, but not look too much on the overall branding activities. So if we look at where we're coming from, from a marketing standpoint, you can see that we are historically nearly nonexistent. We haven't been spending any money in China historically. So if you look at the development that we've been through, and you keep in mind that we haven't spent any marketing money on it, I think that also speaks to very good opportunity for us to go in and get the word out, about the Pandora brand and what we represent.
Again, interesting to see that a brand like Swarovski seems to be heavily increasing their spend in China. In 2016, so this is a 2015 slide, we of course expect to increase our marketing investments in China significantly. So this slide, when we meet next time, will look very, very different, I suspect. Right, so that was China. Japan, one of our other priority markets, we are seeing a more moderate growth in Japan, and here we need to be honest about where we're coming from. We have actually 5-6 years of history in Japan, and we initially went with the wrong distributor. We opened stores in the wrong location, and the marketing behind the brand was not what we wanted at the time. We didn't control that good enough.
So we had to go in and do a cleanup in Japan. We had to close the majority of the stores that were opened back in 3, 4, 5 years ago, and now we have to spend time rebuilding the confidence in the brand, both towards landlords, the Japanese, they have a very, very long memory. So the landlords, and also rebuilt the confidence in the brand towards the end consumers. So if we look today, the progress for Japan is slower than the rest of Asia. We remain confident that Japan will be a sizable part of our business in the long-term future, but we will need to spend the next 2, 3 years getting the distribution, getting the right stores in place, and also rebuilding the confidence in the brand.
We have, again, historically, very, very minimal marketing spend in Japan under the distributor model. But what we see now, and for those of you familiar with Japan, this is the high street of Ginza. 1 million people pass by here every single day. We've opened a major flagship store on Ginza, and that has been opened now for six months. The results are better than expected, and we see a lot of positive feedback coming from the landlords because they're now starting to take us serious. They see that the brand principle has come to Japan. They see that we've opened a flagship or a large brand representation on Ginza, so we see a lot of positive development. Our awareness, comparatively to Hong Kong and some of the other markets, is very, very low.
So again, to perhaps repeat myself, Japan is a focus market. Japan, we expect in the long term, will be a significant part of our business, but in the short, medium term, we need to spend time to rebuild the confidence in the brand and the distribution. The last thing I want to touch upon is Disney. There's a lot of interest around, Disney. As you know, we, we extended the North American license agreement with Disney to include Asia Pacific, so that includes Australia. We are now, about two months into, the launch, and it has been very, very positively received, in Asia. It's more or less mirroring the U.S. launch, which is interesting because Disney is a much, much stronger brand in the U.S. than it is in Asia.
And that's important to remember that Disney, while a massive, massive brand, is also, in many ways, a developing brand in, in Asia. But the numbers that we see looks very similar to what we've seen in the U.S., so a very, very positive has been received very, very positively. And just to give you a little bit of an indication on the numbers, I don't think we report specifically on Asia, on, on Disney, but we did 100,000 pieces sold out of stores in the first four weeks we went into the stores. From Disney side, it's the Mickey, Minnie, and of course, perhaps not surprisingly, the Disney Princesses that are the strongest performers.
Now, with Disney, as we saw in the U.S., which we also saw in Asia and also saw in Australia, you have a huge interest coming in, and then after that, shall we say, sales and interest normalize to a point after that. So we do expect that, you know, we do not expect to keep selling 100,000 pieces of Disney the next four weeks in the many, many years to come. That business is gonna normalize probably, and we expect to a level of where it is in the U.S. today. On the park side, we have a Disney park in Hong Kong that's part of the license agreement. We have opened the first store in Hong Kong Disneyland, and we'll be opening another two stores inside the park in Q1, Q2.
And as Shanghai, the new Shanghai Disney Resort opens up sometime in the late spring, I think is the guidance right now, we will also be operating 3 stores within that resort as well. So, Asia. All in all, a very, very strong revenue development in Asia over the last few years. I believe we've established the foundation for future growth. We have the organization in place. We have acquired the priority markets that we set out to get. Brand awareness has developed very, very nicely, and Hong Kong is the model market for what we'd like to achieve in the rest of Asia. Disney, which was launched earlier this year or earlier in 2015, is performing very, very well, and we do foresee a big potential across Asia in the future, of course, focused on China. Thank you. Any questions on Pandora in Asia?
Thank you. Two quick questions, please. You didn't say much about Korea. Korea seems to be quite an influential market for many consumer brands, and I know you have no direct competitors, but in terms of sort of affordable luxury, you've had people like Montblanc or people like Coach taking back distribution in the previous years. So you know, what are your plans for Korea longer term? And then second question around China. So you showed that the average sales per store is bumping up significantly and probably will be on par. Can you tell us about profitability in China? Because I suspect rents and staff costs are still significantly lower than in other places. So is China already you know, a sort of positive contributor to margins? Thank you.
Yeah. Let's start by South Korea. South Korea is a very, very strong market for us. It's also an important market for the region. For those of you who live in the region, you would know how much the, the K-pop culture has of influence on the entire region. We do not have any plans to take over South Korea presently. As I think I started out by saying, we spent 1.5 years doing three major mergers and acquisitions, and that's—that were the plan. That was the strategy for Asia, to secure those markets. So right now, we do not have any plans to take over South Korea, but we recognize the importance and will continue to support the brand.
South Korea is one of the markets where we have actually a strong distributor, which is working very closely with us on both the distribution and the brand building. And the second question on the average revenue in China. It's correct that comparatively to Hong Kong, but Hong Kong is not a good benchmark, the leases are cheaper. The staff is also cheaper, but the operating cost is higher as well when we operate the stores. So, you know, we don't speak to profitability in our stores in detail, but what I wanna say is that the stores that we're opening right now are profitable. They are profitable from day one. So we are content with the stores that we are opening right now.
Hi, two questions, please. You touched upon the market in China and the significant growth going forward. Can you do you see any changes in consumer taste in China that are bigger or people are moving away from gold to sterling silver jewelry? That is the first question. The second question, a market which we didn't talk about and where you're not present today is India. When do you believe that market is gonna be ready for Pandora?
Yeah. So to take the first question first on China, can you repeat that one?
It's, it's regarding consumer taste.
Consumer taste.
Do you see any trend in the market that-
Yeah, yeah
... that people are buying more-
Yeah
Sterling silver jewelries compared to gold jewelries?
Yeah, yeah. So what we see is definitely a shift from the traditional gold jewelry into branded jewelry. If you're familiar with the Chinese market, it's very brand driven. So I think we have a good opportunity in the branded silver segment as people, they perhaps leave the high-end and the gold segment and go into a more affordable segment. I personally think, and I don't have any research to back that up, but the good old days of the Chinese spending incredibly amounts of money on very, very high-end luxury is forgone, and they now start to look into more about quality and the price that they pay for it.
So we expect that the category, which is silver and the branded silver that we operate in, will grow, and we're very confident with that category. To your second question about India, we don't have any immediate plans for going into India. It's certainly on the radar. It's a sizable market. We saw the forecasted growth going forward. But at the same time, we don't want to jeopardize anything that we're doing in China right now. We have quite a lot on our plate. So, India is on the radar. No, no, no plans right now.
Thanks. On the store forecast for China and Japan, is it concept stores, or is it also including shop-in-shops? That's one question. The other one was if you just could remind about the ownership structure of this joint venture in China, and if there's any mechanisms for full control later on? Thanks.
Mm. Yeah. So, let's start, let's start with the last question. So, our... The ownership structure in China is 75-25, so we own 75%. We have established a completely new company called Pandora Jewelry China in Shanghai, that we are in control of. We also control the board there. So our partner is really, he's really there to open doors for us. So they have a very, very strong network, Oracle. They've previously been distributing Montblanc. They've been engaged with Cartier and a number of other brands, so they have an incredible network when we go out and we meet the landlords. So they are- they're more supporting us on the front end rather than the back end. We have full control of the company. It's our organization sitting there.
They are opening doors for us on the relationship side. Yeah.
Any mechanism for full control later on?
No. There is. I mean, it's a relatively short joint venture. It runs only until the end of 2018. There is no mechanism, unless there is a major default, there is no mechanism to take over the last 25 percent before then. Yeah. And sorry, the other question was?
The other one was the split between the concept stores and shop-in-shops.
Yeah. Yeah, that's a good question. So, China has, historically been very strong on department stores and shop-in-shops. So right now, we have a number of shop-in-shops in China, but we see that, the business and the market is moving from department stores into concept stores. So the majority of our stores, I don't want to say 100%, but let's say 90% plus, will be, concept stores in China. Japan is a bit of a different story, because there are still some very, very strong department stores operating in Japan. You cannot... You have to have a distribution in those, department stores, so it's a mix of, shop-in-shops and concept stores, in Japan going forward.
Thank you.
And maybe, let me just be very explicit around China. So we are in full control of the company, owning, or we have 75% of it. It's being consolidated fully into our, our accounts, and we do have an, an earn-out mechanism so that we'll also take full financial control of the remaining 25% in 2018. But as Kenneth said, until then, no, no plans of, of anything else. So 2018, full financial control.
Thank you, Peter.
Yes. Hi, could you comment a little bit more on what exactly went wrong in Japan? You talk about some landlord issues and some distributor issue. What exactly, if you could be a little bit more specific, went wrong? And why are you having problems even now within the JV? You seem a little bit less cautious on Japan than other regions. Why is that? Thank you.
Yeah. I prefer not to talk about history, especially when it's painful, but since you ask, you know, our initial distributor partner in Japan, we signed with him 5 or 6 years ago. As was the priority in many places around the world, the priority was to open a lot of stores and sell in a lot of product. We heard that story from Australia, and the same was also on the agenda for Japan at that time. So the distributor opened a lot of stores in a short amount of time. We put in a lot of products into the stores, but as they were not located in the right locations and were not supported by the right brand marketing, the sell-out didn't happen. So, we had to close down those stores.
In Japan and many other markets, when you go out to landlords, you open a store, and it's not successful, and it closes down again, they remember. That's why we are so, I wouldn't say cautious, but we're so focused on getting it right in China, because Japan was an example of how we shouldn't approach a big priority market. So this confidence in the brand is being restored now. They see the numbers that we're generating in the shop-in-shops and concept stores we have now. We're sharing the numbers that we see coming out of our flagship in Ginza, and they are very, very positive now in opening up to getting us back in.
But once you leave a retail location, a department store, once you tell a landlord that it isn't working out and we have to terminate, they remember that for a long time. So that's the confidence that we have to rebuild. Yes, we've tried a few times up here. Let's...
Could you just talk a little bit about your pricing policy in China and Japan in terms of what's the premium applied versus the U.S. and Europe, and whether you think that your pricing position right now in both China and Japan is appropriate, or you still have to make some changes?
So our pricing, our retail pricing, right? So, right now, China is priced about 30-30% higher than it is in the U.S. And Japan is about 30-35% above as well in retail price. Now, that follows more or less the benchmark that you have from other fashion and accessory companies as well. What we do see is that a lot of brands are starting to bring down their retail prices across Asia, because as we become more global, as information becomes more global, as shipping becomes more and more easy, it is difficult to maintain a 30 or 40% price premium. We have no intentions of changing our prices right now.
The interesting part is when we do focus groups, and we talk individually about Pandora products, and we ask our end consumers, so the Chinese, the Japanese, the Cantonese in Hong Kong, and the Singaporeans, and we ask them: "What do you think is a reasonable price for this product?" We are very competitively priced. So we don't have a pricing problem in Asia, but as any global brand, there is, of course, the challenge of having different price points, points around the world.
Sorry, just to follow up on that, the 30%-35% that you spoke about used to be the sort of the industry norm.
Mm.
But over the last year or so, with currency movements, that shot up to 40-45.
Yes.
How did you manage the FX volatility? And, you know, is there a change to that policy now going forward as FX volatility seems to be increasing?
Mm. Yeah. We're following the volatilities. We, we have adjusted our prices slightly over time to adjust for major FX effects, so that has happened also in Japan. It's happening a bit in Malaysia as well. We haven't changed our policy on how we price our products, and as I said earlier, we have no intentions of changing the prices right now. But it's something that we are looking, of course, carefully into and following.
A question on the profitability. You showed us how it had come under pressure as you loaded up the overhead costs in the past several quarters. Where do you see that going in the next three years?
Yeah, it's gonna be difficult to give you a precise number in three years' time from now. You know, we came off a very, very strong year in 2014, and I think I mentioned that I don't believe that 54% EBITDA margin for Asia consolidated is gonna be sustainable. We're looking at about 44% EBITDA margin this week. We're gonna take probably a bit of a dip next year. So we see the next two years, we're gonna be investing in China and Japan, and after that, we should start to see the leverage. I can't give you a prediction.
Yes.
Hi there. You talked about, you know, in Asia and China, you've got a younger consumer. Could you perhaps give us some stats in terms of the average age of your consumer within Asia and across the different markets, and how that translates into demand by categories?
Mm.
Then, secondly, you touched upon a number of times some of your kind of competitors increasing their marketing spend quite aggressively. Does that worry you in terms of acting as a hurdle to being able to take share within the market going forward?
Yeah. So if we start out with the consumer, and that's a big question because we are representing 12 different markets, and we have different history in those markets. So what I can say is that, you know, in the past, when we looked at the Pandora consumer, we were talking 29+. In Asia, we have, for the past years now, been looking at the age group 18+. So I think as a new brand coming in with not a lot of history and where fashion and style is the key driver, you automatically draw in a younger crowd.
The second example I can use is that we launched the Essence bracelet, which is perhaps a more thinner, more delicate, more fashionable bracelet, and that has done extremely well in Hong Kong, so that speaks to a younger audience. I can't give you an average age for Hong Kong, but what I can say is that on average, we have a younger audience than we do in the rest of the world. The second question on the competitor spend, no, it doesn't worry me. It looks like it's Swarovski, who are ramping up their investment cost. We are, of course, following what they're doing, but as I said, we don't consider Swarovski a direct competitor. We follow what they do.
We follow the categories that they operate in, but we're not worried that they are going in and overspending in terms of us. They have been overspending for many years, comparatively to us, but we've done quite well in those years. So that should be an indication that there is no real correlation between how much money Swarovski and other competitors spend and how Pandora is doing. One last question, perhaps? Otherwise, we're gonna run out of time.
A follow-up on the marketing. You mentioned that marketing in China should be expanded dramatically, but should we expect figures like the ones you showed for Tiffany and the likes?
... I think the numbers that you should expect is the numbers that we usually enter a priority market with. So Anders was earlier mentioning 10% of our revenue. So that's probably a good guideline for the money that we're gonna be spending. If we look at markets like Italy, we've gone in and front-loaded the marketing spending a little bit, but I think 10% is probably a good guide. Okay? I think that's it for questions. What happens now?
Leave to Thomas.
Leave it to Thomas. Thank you very much.
As Anders mentioned, my name is Thomas Touborg, and I'm heading the end-to-end supply chain in Pandora. We are, and I am excited to have you all here in Bangkok today, and have the opportunity to show you our crafting facilities. Before heading out to the factory, let me give you a very high level, brief introduction to the processes that you will see there during our tour of approximately two hours. Two hours is a very, very tight schedule to understand the operation. So a few words of introduction here that might help you on that tour. First of all, the factory is kind of divided into three main process areas. We have the front end, we have the finishing, and then we have the final quality inspection.
So if you kind of keep that in mind, that is the three main processes of the facility. Within the front end of the business or of the factory, we have the design development. The designs are done in Denmark, but all the design development, meaning the 3D drawings of our products and the 3D printing and the creating of the master product, is done here in Thailand, and you will see some of that during the tour. Further, in the front end of the factory, we have the mold making, we have the waxing, and we have the actual cast granulation of metal, and the casting and the burnout of that process.
You will see it when you come there, but it's the part of the factory where we have the creation of the product, first in a wax model, and then later into the actual metal product. Keep in mind that when you're in that part of the factory, we do work with liquid metals. Some of the areas, we do have pretty hot products around, so before touching them, kind of sense if they are very hot, because you will burn yourself if you touch them. The front end, the final process in the front end is that we have some cutting, and we have some cleaning of the raw metal products. Then that's the front end. Then the products will move into the finishing end, where we have grinding.
Let me see if I can point here. Grinding is done like this or with machinery, where it's called auto-polishing. And after the grinding, we have a goldsmith area, where some of the products go into the goldsmith area if they are, if we have spare or semi-finished parts soldered onto the product, for instance, with two-tone, or if we are setting stones into the product, then it also goes into this goldsmith area, where you... And you will see some of that when we go through the facility again today.
Also, within what we call the finishing area, we have the glass creating or the manufacturing of our Murano beads, where you will see the craftsmen building Murano beads from glass rods, and creating that glass part of the Murano bead. And then, after finishing, the products will go into a final quality inspection, where they will be reviewed, and the quality will be assured before it goes to our consumers. So front end, finishing, quality, and then the different processes underneath. Yeah? A few words, practical, before we leave.
As I said, the time schedule is very, very tight, so it is important that you stick to your group, and I guess you have all been assigned to a group and remember which number you have, that you follow the guidance of the on-site Pandora people there, guiding you through the system. And they will try to push you if you, like, kind of hold up at one position, and it is important that we keep the pace. It's not allowed to take any photographs, and I would suggest that you leave your laptops, your jackets, eventually your ties here before we go. It is warm in most of the areas, so no need for bringing jackets. We will lock this room, so everything will be safe.
The buses will leave in 6 minutes in front of the lobby. Please be there. We do leave people behind. We are a little bit ahead of schedule, and that is due to the schedule has been made from a few simulation runs over the last few Thursdays at 12:15 every Thursday, checking the time, and it fitted perfectly until this morning, where the local council decided to make some major road construction in the area. So we need to go 10 minutes before plan to be sure to be there. Also, the lunch, as Anders mentioned, is in our employee canteen. You will enjoy that, I'm sure. The first teams, I believe that's 1, 2, and 3, actually only have 30 minutes to finalize the lunch, so be quick. With those words, do enjoy.
The bus is leaving in 4.5 minutes. The toilets are on the way downstairs, and the buses are in front of the lobby. Enjoy the tour. Okay. Welcome back. I hope that you all enjoyed the visit to our crafting facilities here in Gemopolis, and that you felt some of the pride and passion that our craftsmen here share with all employees in Pandora. For the next 45 minutes, I'll share some further insights on the Pandora manufacturing and supply chain with you. As mentioned before, my name is Thomas Touborg. I've been with the company for 5 years. It is a privilege for me to be heading the end-to-end supply chain in Pandora, including procurement, manufacturing, warehousing, planning, and quality.
Prior to Pandora, I have been working 20 years in different industries, heading supply chains and manufacturing. Now, I guess that's enough about me. Let's look into the agenda for today. First, I'll give you a high-level overview of the different supply chains in Pandora and then focusing on the jewelry supply chain. We'll look a little bit into what we have done in the past, which changes we have made, and then we will look at the key focus areas that we believe that we'll need to succeed on to be able to supply the demand that we expect to need for the future.
There will be focus on the new crafting facilities that we are planning to build in northern Thailand and here in Gemopolis, and then, finally, some question and answers at the end of this presentation. Boiled down to one word, I guess that Pandora's supply chain is first and foremost about scalability. Pandora's manufacturing has been built on the foundation, on the visions, and the great entrepreneurial ideas of our founding father, Per Enevoldsen, or Khun Per, as the craftsmen here in Pandora still call him. Per Enevoldsen did not just invent great products. He also managed to establish a manufacturing system, a supply chain, with a scalability second to none in the jewelry industry.
With this proud and binding history, I'll cover some of the changes that we've done in the last five years, and then give you an introduction to the changes or the plans we have put together to meet the demands of the future, to create the scalability of the future. And these will be, and I will cover that a bit later in the presentation, but we will focus on three areas where we need to succeed to meet the demand of the future. That being, one, expansion of the current production capacity. Two, being reducing the lead time in the supply chain, and today, mainly with focus on the manufacturing facilities. And three, increasing the data transparency throughout the value chain, and again, today, mainly with focus on the manufacturing facilities.
However, and as mentioned, before we dive into the plans for the future, let's have a look at what Pandora's supply chain look like and what we have made of changes and improvements over the last years. Our most important task is to ensure timely and accurate delivery of jewelry to our more than 90 markets, and approximately 9,500 points of sales, including 1,800 concept stores. In 2015, we delivered more than 100 million pieces of jewelry, anchored in 7 seasonal drops, and on top of that, 7 special product drops, being Pandora Rose, Disney, Essence. Group Operations that I'm heading is representing more than 11,000 employees here in Thailand, and on top of that approximately 500 employees across the world.
In reality, Pandora has got three supply chains. Of course, there's the main supply chain being the jewelry supply chain that we have seen the front end of today. But beside that, we also have got a fixtures and furniture supply chain, delivering products and goods for the retail points, being fixtures, furniture, flooring, lighting, et cetera. And then a point of sales material supply chain, delivering gift boxes, ribbon, bags, visual merchandise, goods, and so on. Today, it is about the jewelry supply chain. However, allow me just to mention a few accomplishments in 2015 from the two other supply chains. On the fixtures and furniture supply chain, this supply chain delivered fixtures for more than 375 new concept store openings.
On top of this, 200 concept stores was refitted with new fixtures, and on top of that, approximately 200 shop-in-shops. In total, the fixtures delivered to our retail points equal more than 1,200 full-size containers of fixtures. 1,200 containers of fixtures. That's quite a lot of furnitures for the retail points. On the POS material side, we delivered more than 30 million gift boxes. If you put them on top of each other, stack them up, the pile would be 1,500 kilometers tall. Some significant supply chains in our business. However, today we are focusing on the jewelry supply chain. Now, let's look into the global footprint. As you have seen today, our manufacturing is located in Thailand, here in Gemopolis. Manufacturing is supplying 4 main distribution centers we have around the world.
Distribution centers, I'll eventually call them DCs during this presentation, so bear with me if I'm not saying distribution center every time. But four main distribution centers around the world, located in the U.S., Baltimore, in Hamburg, in Germany, in Bangkok, here in Thailand, and then in Sydney, Australia. Besides the main distribution centers, we have some local DCs located in major markets, where the business requirements is that we need to have a local DC due to mainly triggered by lead time through local customs or e-commerce requirements on lead time. And as you see, we have a few of those, that's the blue dots we on the map. So that is the coverage of the Group Operations.
Let's dive into the details on the jewelry supply chain, and let's start with the customer and retail level, where the value of our efforts is evaluated every day by the customer and the consumer. The 9,500 points of sale are, as you know, segmented into concept stores, shop-in-shop, outlets, e-commerce, and multi-branded. All these points of sale are customers to the main DCs or the distribution centers. So the 9,500 points of sale are placing approximately 2,000 orders against the, the jewelry DCs or distribution centers every day. More than 80% of these orders are placed through a global online service, where the retailers can place the order. And orders, 95% of all our orders are delivered to the retailers within 48 hours.
Before shipping, prior to shipping, samples are taken for inspection of the shipping, of the picking accuracy, and the accuracy from all DCs are on a line level above 99.5% accuracy. Distribution centers or retailers are also offered return logistics process. As an example of that is the stock, the permanent stock balancing program in the US and the global, and the global claims handling programs that covers all of the world. Also, some value-adding services, such as delivery of trays with pre-arranged jewelry, ready for use in sale area, has been introduced, to reduce the total value chain cost of opening a new sales point. Next step in the supply chain, that's the distribution centers, the four DCs and the local. Take a look at the chart here on the top right side.
That is the footprint of our distribution centers in 2010. More than 20 local warehouses to cover roughly half the number of markets that we have today. The high number of warehouses was not supporting scalability, but driving up cost of increasing, driving up cost and the risk of being out of stock due to difficult sharing and planning between the DCs. During the last 4 years, we have consolidated the DCs, as mentioned, the distribution centers, into 4 main DCs that cover shipments of jewelry to all markets. The footprint is reflecting, and the footprint is here on the bottom half of the chart, is reflecting the business requirements on lead time, service levels, and cost throughout the world.
Finally, let me mention that this footprint has been designed in a way that it allows us to grow the e-commerce business and to do further expansion of the markets that we cover. The consolidation of the footprint, of the distribution center footprint, has paid off on a number of areas. Most important is that the product availability for retailers has gone up by a more simplified network, with more transparency, with stronger business processes, and with an easier way of sharing excess inventory or when inventory is constrained. Also, logistic cost has been reduced due to scale, warehouse excellence program, and sharing benchmarking between the DCs. And as you see here, the logistic cost has been reduced with 57% during the last 3-4 years.
One of the examples of how we have improved our logistics cost has been on the improved performance on the picking productivity, where the improvement has been above 100% across the DCs, and the more softer, the DCs with more soft performance back four years ago, has improved even significant more. Today, the DCs are combined, able to deliver more than 5 million pieces of jewelry within one week. Example, an example that's needed during peak season in the autumn every year. Next step, or the main attraction of the day, is manufacturing. Let me spend some time on that. You have all seen it with your own eyes today.
I think it's, it's fair to say that it's a true mass manufacturing setup and built on highly skilled craftsmen located in one of the crafting, jewelry crafting pockets in Thailand, Gemopolis. And honestly, we are very proud of our crafting facilities and our craftsmen, and we do see them as the heart of our value chain and a key driver for Pandora's success in the past and in the future. During, as mentioned, during the last year, we have delivered an amazing volume of jewelry above 100 million pieces. That's an increase, shown on the chart, of around 100% within the last four years. As mentioned again, we are today more than 11,000 employees here in Thailand, up with 7,000 people during the last four years.
Now, on the next 2 slides, I will try to share some further insights with you for the background on understanding the gap between the increase in employees, craftsmen, versus the increase in output, where the increase in employees has been sharper than output. One of the main drivers behind the growth of Pandora is the rapid introduction of new products, anchored in product launches or drops, lifted from 2 yearly product drops in 2011 to 7 seasonal product drops, plus 7 special product drops in 2015. The special product drops, again, Disney, Pandora Rose, Essence. From a manufacturing point of view, this is, in reality, 14 drops, even though that Disney and Pandora Rose isn't globally launched market-wise. From a manufacturing point of view, it still requires the same attention to development, planning, capacity allocation, shipping, as accurate shipping, and in time.
So from a manufacturing point of view, this is actually 14 drops. Last year, as shown on the right side of the chart, almost 50% of our revenue came from products launched within the last 12 months, up from approximately 20% in 2011. This significant increase in the ratio of new products will challenge any production system. As an example, there's a learning curve for the craftsmen on new products. Before the craftsman is ready for stable and high productivity, it takes some learning. Also, within the first few weeks or even a month or two, new products can have a higher internal reject rate than products that has been replenishment for a longer time.
However, as the chart in the center also shows, by streamlining the number of active products or SKUs, as we call them, reducing that by utilizing our size and by utilizing the trained and skilled craftsmen, Pandora has been able to manage and absorb this challenge of new products, minimizing the employee output gap. Another important driver behind the Pandora growth is the introduction of more sophisticated and detailed products. As an example, the products that we have in our collection today is containing much more stones than what they contained some years ago. Seen from manufacturing, more sophisticated products, more stones, more details, that equals more complexity. And more complexity is more time spent with the craftsmen, and it's more cost on machinery and other factors in manufacturing.
In other words, a piece of jewelry five years ago and a piece of jewelry last year can't be compared one-to-one when it comes to the need for craftsman hour, machining hours, and so on. I brought two examples of this to make it a little bit more concrete. On the left side, this is the bangle that we launched in 2013. To produce 1,000 units of this bangle, it requires eight casting flask. Do you remember from the tour where we went into the crafting casting area, where it was pretty hot? We saw these steel tubes where we put in the wax and the gypsum, and then cast it into... That's a casting flask. So to produce 1,000 pieces, we need eight of these casting flask.
However, to produce 1,000 pieces of the bangle launched in 2015, 72 casting flasks is required because there's less product per casting flask. Now, since the cycle time, the machine cycling time of casting, is the same for the two products, there is a need for 9 times more machines, 9 times more space for machines, and 9 times more operators taking care of the machines, obviously driving up the manufacturing cost. A second example of what the added complexity means to manufacturing is the launch of the ring on the right from 2014 versus a ring from 2007. The ring from 2014 carries 283 cubic zirconias handset in the wax. Whereas,...
This ring will require 158 craftsmen for one day to produce 1,000 pieces if you pool the hours together. 158. Whereas the ring on the left requires 40 craftsmen to produce 1,000 pieces in one day. Again, more hours to produce the same numbers of units. What I've tried to do on the last couple of slides is to illustrate the reason behind the fact that number of employees grows faster than the number of jewelry pieces in output. The products that we offer our consumers today are more advanced and sophisticated, contains more details, and renewed much faster today than they, they were 5 years ago. Our consumers love this, and it fuels our growth. It brings us closer to the vision of becoming the most loved jewelry brand in the world.
However, at the same time, and as a consequence of having more sophisticated products, manufacturing output in units per craftsman hour is decreasing, even though the crafting facility becomes more effective every year and gains and finds productivity gains. Going forward, the crafting facilities will continue to realize productivity gains. However, output per craftsman hour is, as mentioned here, strongly correlated with the details of the products that we're producing or the complexity. Meaning that also in the future, the need for machinery, square meters, and craftsmen is not a one-to-one ratio to the output. So that was a bit on output and number of employees. Let's look a bit at the competitive advantage that our manufacturing system offers us.
We do believe that the organizational knowledge we have, and the manufacturing model offers competitive advantage towards our competitors. That being current or potential new newcomers. The advantage comes from a number of sources. Let me mention some of them. First of all, we operate an integrated value chain, where we have built our knowledge over the last 15 years on how to operate a huge and cost-efficient manufacturing. The sheer size of the Pandora manufacturing is a difficult animal to copy, and the product that we produce today are more advanced and more complicated than what we did a few years ago. As an example, some of the product pass through 75 pairs of hands before they are completed, and that's not something that you just establish.
That takes lots of experience and knowledge. Then, talking to the integrated value chain, the product development is an integrated part of our value chain, allowing us to react faster and to have double loop learning on the new products that we introduce, and doing it even better next time we have new products. The most important thing, in my mind, is that we are able to attract and retain a huge pool of skilled craftsmen. Speaking to the part with attracting craftsmen, the picture here shows how it looked last time we had a recruitment weekend. 8,000 people showed up on a Saturday morning to hand in their application for approximately 800 open positions. I am honestly proud and honored by this ability. The official unemployment rate in Thailand is under 1%.
Every single one of the 8,000 employees had an interview when handing over their application. Not a long one, but we spoke to every single one, getting the first impression of that was an employee that was suitable or fitting into the Pandora culture. And I guess that tells the true story on how we look at our craftsmen and our potential craftsmen, not just as resources or workers, but as key employees who creates a critical part of the competitive advantage that Pandora has got. And we are committed, and we are behaving accordingly. This mindset on the craftsmen goes right back to the founding father, Per Enevoldsen, and his view on the respect for the employees and for the teams, that they were creating the value of the company, and today, that is part of our DNA.
So beside the mindset, let's have a look on why potential employees line up from 3:00 A.M. on a Saturday morning, making the traffic collapse in the Gemopolis area. I said our craftsmen are the supporting base for the whole manufacturing model. Given what I talked to before, that a lot of new products are introduced, and the products are becoming more complex. So keeping people in the company after having trained them to avoid having a lot of learning curves, also being both a new employee and having new products, that's important for us to retain them. So beside the mindset on our craftsmen, a number of concrete systems and actions are supporting the success of retaining our craftsmen and attracting our craftsmen. Let me mention a few.
First of all, we do believe in safety first, and we have an extensive safety, health, and environmental focus. As an example, we have got health check for all employees, we have a nurse in each building, and we have an ambulance standing by at the facility just in case of a rare accident. And as some of you saw during the visit, the boards are speaking a clear language on how rare accidents are at our facility, even though that we're working with liquid metal and sometimes heavy equipment. We try very hard to create job stability. We're trying to handle demand spikes by adjusting overtime, by utilizing sub-suppliers, by utilizing the inventory we have on our distribution center, instead of hire and fire.
This proven stability, and that's seen from the craftsman point of view, that we have proven that we have stability and, and, we have stability on, on the craftsman job, that is, helping to keep the employee turn rate low. Then we have lots of training, training programs for the craftsmen, both professionally and personally. It starts with a five days introduction program within the first three months for all craftsmen joining Pandora. Speaking to culture, values, product, technical techniques on how to do our jewelry, safety, and so on. During the three months, each employee, craftsman, has also a coach or supervisor attached, following that craftsman, ensuring a fast learning curve, and that any mistake is taken care of very early.
After three months, there's a test on each of the craftsmen, whether they have met the development criteria we have for them. Then what I also think is very important for us, attracting a lot of potential craftsmen, is that we use succession planning right down to shop floor. Talented craftsmen will be promoted to supervisors or managers, receiving even further internal and external training, and that's also some extensive external training we're doing on some of these supervisors, or getting promoted into product development or some of the supporting areas like planning, HR, or quality. Then on top of that, further employee benefits, free meals, free transport to and from the facilities, and as you saw today, there's no dormitories on our factory here in Thailand.
And then finally, also very important, the past year, we've got our own radio station. I can't remember whether it's Pandora Radio or Radio Pandora, because there's a company in the U.S. that has one of the... Anyhow, we have our own radio station where we broadcast news and general programs for our employees, and we have different social activities. For instance, we have an internal Pandora Got Talent show. It's like an X Factor show. It's just on inside Pandora with our own employees, and I can guarantee you, it is a joy every time we do that, and some of them are actually very skilled. And let me share a personal experience with you on this one, because three weeks ago, I attended the Christmas party here in Thailand. 9,000 employees showed up for the party.
Everybody sitting outside at round tables, dining, and that's a lot of people sitting and having dinner. And then a huge stage with big video screens, and on that stage, the winner of the Pandora Got Talent was performing, I think, like 3 or 4 numbers of different music, and people just went crazy. That was really an experience and a proud moment, I think, for all of us joining that party and bringing us closer together. Yeah. All in all, the results of this effort is that we have very effective and happy craftsmen, with a high engagement score and with an extreme low employee turn rate. In 2015, we had an employee turn rate within Thailand of 3.7%.
That is really supporting the business we have, the growth we have, and the ability to deal with the many new products that we are launching. I think it's fair to say that results have shown that we have been very successful in attracting and retaining our craftsmen. Now, from people to systems and processes, let's look into the next step of the supply chain being planning. To ensure high product availability at our distribution centers, it is critical to be able to predict, or at least to predict the majority of the demand that we have at retail level in the coming weeks and months. Predicting the future is an even bigger challenge when you are facing high growth rates and many new products.
Pandora has established a proactive and strong forecasting functions that builds the bridge, or that bridge the products that are needed at retail level with the supply from the supplies, from the supply side. Central to this ability to forecast is the Sales and Operations Planning function, which facilitates the balancing of the demand needed for seeing that, and the available capacity from our distribution centers, the inventory there, and the capacity at manufacturing, ensuring that we have the right products available. Input to the forecast system is fed from our advanced IT system, which combines statistical information with true and real-time intelligence from the markets, related to sell-out data, related to promotional activities, and store openings.
We have been able to improve the forecast accuracy towards the DCs in the region, measured on a weekly basis and per product, meaning for instance, a specific ring in a specific size or a specific color, from being at the level of 43%, two years, three years ago, to 60% last year. 60% is a strong performance given the context we operate, many new products and a strong growth. 80% would probably be world-class in that environment, and we expect further improvement on this figure in the years to come. As you probably already know, there's strong benefits from an accurate demand forecast, and let me just mention a few. First of all, again, product availability at the DCs for the retailers, avoiding loss of revenue on retail level.
Second, is to ensure a sound and fresh inventory, not too high to at a cost of the inventory, meaning too high cost, and not too high to avoid obsolete stock. Number three, and also very important, that to keep the upstream supply chain, meaning manufacturing, producing at a relatively stable level to avoid huge fluctuation, meaning hiring, firing of people, and eventually building facilities that's not needed, adding CapEx. The final step in the Pandora supply chain is raw materials. As you can see from the table on the right, the raw material ratio has been reduced during the last four years, and the part called others has increased. Others is mainly wage. Today, still more than 50% of the COGS, or the cost of goods sold, is raw materials.
Now, some of this development is driven by what we've talked on earlier, that more complexity, more richness in our products is requiring more craftsman hours. But some of this development is also driven by gold and silver prices coming down. It's driven by the fact that we have utilized or leveraged on our scale to get better prices, changing this, the ratio between the different parts. However, the 50% on raw materials, meaning that to be efficient, Pandora needs a strong and robust network of sub-suppliers. We do have close cooperation with our sub-suppliers on a number of areas, on improving products, creating innovation on the raw materials, reducing cost, working on CSR areas, and sharing long-term demand estimates to ensure that we have raw materials available.
Let me also mention that our focus on reducing environmental impact from our materials. Waste from the production process is, to a high degree, reused for different purposes, internal or external. The vast majority of our gold and silver is originating from recycled sources and not from mining, or not directly from mining. And we mainly use man-made stones. They are less costly, the supply of these stones is more certain and more robust, and the environmental impact of man-made stone versus gemstones is significant. An example of a man-made stone is a cubic zirconia, that is a crystal. When it's cut, it looks a little. And it's a clear crystal, it looks a little bit like a diamond, but at a completely different price. It is possible also to have these stones in different colors.
The supply of the stones is very robust.... So Pandora is using a huge volume of raw material. Let me just mention a few here. The first one is the cubic zirconias. Last year, we purchased and used more than 2.5 billion cubic zirconias within the year. That is approximately 7 million stones every single day of the year, 365 days. We do not work 365 days, anyhow. A skilled craftsman will be able to set approximately 4,000 of these cubic zirconias into the wax in 1 day. On the material, 225 tons of pure silver and more than 1 ton of pure gold within 1 year.
Then the last section on the enamel, four tons of enamel, and a tiny, tiny bit is used per product, and we are using four tons of enamel. Some crazy numbers when you start to think about it. Now, we've been through the Pandora supply chain now, and let me just spend one word on recapping on this by sharing the lead times on the different steps of the supply chain. Retail stores are replenished with new products within 48 hours, the products are shipped from... After placing the order towards Pandora, the products are shipped to the retailers within 48 hours. The distribution centers orders product at the facilities here in Thailand for replenishment.
The replenishment time from the manufacturing to the distribution center is three to seven weeks, depending on the product complexity and how many process steps that includes into that product. And then on the raw materials, the lead time on raw materials varies a lot depending on what we're talking about of raw materials. Gold, silver, and cubic zirconias has lead time of only a few days, whereas some of the natural stones that we're using have got lead times of up to several months, given the volumes that Pandora is using. Now, this concludes the part, the part of the presentation where I'm walking through the Pandora supply chain and the changes we have done to it, how we have gotten as far as we are today. Now, let's move into how we'll provide for an increasing demand of the future.
As mentioned earlier, in the beginning of the presentation, we have chosen to share specific insights on three key focus areas, which, in our mind, are all cornerstones in creating the scalability of the future. As I mentioned before, number one being capacity expansion, potentially double the current crafting capacity. Number two being reducing our lead time, targeting 50% reduction on the production lead time, and then increasing our data transparency in the entire supply chain, but here focusing on a new ERP system in manufacturing. Let us start with the expansion of the production capacity and why we have chosen to place all our crafting capacity in Thailand. Why Thailand? Well, from a skill set and a culture perspective, Thailand is a strong country and have a strong history on producing fine jewelry.
Thailand is exporting fine jewelry with a value of more than $100 million worth every year, more than $10 billion a year, making Thailand an important exporter of fine jewelry. Within Thailand, there is a huge pool of skilled craftsmen. There's raw material suppliers for all kind of stones and materials, there's machine suppliers, and in general, there's easy access to knowledge for fine jewelry. Furthermore, Pandora see that placing our second crafting site also in Thailand, allows us to transfer a significant number of volunteer employees who wants to move to the second site that we are placing in north of Thailand, most of them moving back to the area where they came from. This will allow us to do a faster ramp-up and a more efficient implementation of the new facility.
This is some of the reasons for why Pandora has chosen Thailand as the location for our crafting facilities. Let's look into the investments that we have done and will do into new facilities. Pandora will invest DKK 1.8 billion worth of new capacity during 2015 to 2019. We have already invested, spent DKK 300 million in 2015 on this program. In 2016 and 2017, we will invest approximately DKK 500 million a year, and then fading out during 2018 and 2019 to a total of DKK 1.8 billion. The future backbone of the crafting facilities will be two new and larger facilities than the ones you have seen today, each of approximately 20,000 square meters.
One facility will be located in Lamphun in the Chiang Mai area, and one new facility will be located in the Gemopolis area, and then we will transform some of our existing 30,000 sq m of production areas in Gemopolis into a new and more streamlined setup. The Chiang Mai factory is located, or Chiang Mai is located 700 km north of Bangkok. If you look to the picture here on the right, I can share with you that we are truly excited about this next level of crafting facilities in Pandora. The picture is a computer-animated picture of the new facilities, the new facility that we are placing in Lamphun, 30 km outside Chiang Mai, and 30 km away from the international airport.
It will begin commercial operation in Q1 2017. The construction of the building, of the facility has started. We inspected the site just two days ago, and we are progressing according to plans right now, casting the floor in the main production area. The facility is located in an industrial park, and it is a park, as the picture might show, but there's other industries in that area as well. It's operating under tax privilege, as we are doing in Gemopolis, and the facility will have supporting buildings of approximately 5,000 square meters, and then the main production building of 20,000. The facility has been optimized for shorter lead times using flow principles and establishing a bigger shop floor area in one floor.
The flow principles, combined with some optimization, primarily within the casting areas, and with the new ERP system, will be the pillars of the new Pandora production template. The production template will be the future standard for how we implement new crafting facilities in Pandora. In total, we expect to employ more than 5,000 people in Chiang Mai or in Lamphun, operating in two shifts. The main product groups for this facility will be rings and earrings, where we expect growth in the future. The facility has been designed for this purpose; however, it is flexible and can easily be used for other purposes as well. Finally, the building has been established or designed based on green principles. For instance, reuse of water, relatively low energy consumption, and as an example, solar panels.
Let's have a closer look at the facility with this short animation. Working title for the facility is PPT2, and the construction has started in Lamphun, as mentioned. When you see the picture here, you can see the round circle in the middle. That's what we call a halo roof, providing shadow from the sun and cover from the rain when people are walking between the buildings or staying outside. There will be recreation areas for people having their lunch and sitting outside. When we look through the production building, it has been established, as said, with the mindset of flow principles and with a lean architecture on the organization, where 10 people reports to one supervisor, and 10 supervisors report to one manager, and 10 managers report to a production manager. Yeah.
The principles and the learnings from Lamphun and the production template there will be transferred to Gemopolis when building the new and larger facility here in Gemopolis. This facility is still on the drawing board; however, it is expected to meet the 20,000 square meters template size also. It will not be in one level, but in three or four levels, but placed in Gemopolis. It is expected to start commercial operation in Q1 2018. It will be based, as said, on the same production template as Lamphun, including the flow principles and the new ERP system. After the commercial operation has started on this facility, we will start to streamline and update some of the existing buildings in Gemopolis, and to be used for crafting facilities going forward. Now, let me recap on the three focus areas that will create our scalability for the future.
Going forward, Pandora will operate, as it says on the left, three main facilities: Lamphun, the new facility in Bangkok, and the existing but updated facilities in Gemopolis. Potentially, this will double our current crafting capacity. However, we do expect to use some of the current buildings for other purposes than production or crafting. For instance, product development, technical purposes, and some administration or office purposes. Today, we do have some leases in the Gemopolis areas, and we will then move that into our own buildings. We will shorten the lead time with a target of 50% as a result of implementing the flow principles. This will make us faster and more agile in meeting the market demand from our customers and the expectation from our customers.
We will implement a new ERP system in the manufacturing that will increase the transparency in our value chain towards manufacturing. Finally, let me summarize on the Pandora supply chain. In reality, three supply chains. The jewelry supply chain, shipping more than 100 million pieces last year from the crafting facilities. The crafting facilities employing 11,000 employees, many of them highly skilled and trained craftsmen. And that Pandora's got a robust and global distribution center footprint, offering short lead times and high service levels to our customers around the world. The footprint has been prepared for future growth in the e-commerce business or further markets on top of the 90 we have already.
We have a strong forecasting capability, where we're able to link the demand from the commercial side of the business and our retailers to the ability to supply from our manufacturing. Finally, new crafting facilities will be added in Q1 2017 and Q1 2018, potentially doubling the crafting facility and ensure our scalability of the future. This concludes my presentation. Thank you. Questions?
Thank you. I have a clarification question. When you talk about the drops, which are 7 regular drops and then 7 for the special lines, and then you talk about orders, please explain to me how that works. If I'm a normal Pandora store, what part of my volume do I get through the drops, and what part do I get through orders? And hence, you know, is two days very important or significant?
Yeah. So we could say that the product drops or the launches of new products are planned in advance, and the markets handle this in different ways. But generally, the customers are introduced to these new launches, and then they order this up front, and it has a lead time that's longer than the 48 hours, and it's shipped to them on a specific date where the product are launched globally. So that's one side of the business. The other side of the business is the replenishment on the running business, where a retailer is carrying, for instance, bracelets in 19 centimeters and want to replenish his stock due to the sales that he have had, the sales out that he has had, and then he has got a replenishment...
The lead time from the distribution center is 48 hours, plus the shipping time from the distribution center to the retailer.
And what's roughly the split for a normal store? Would I get 80% of my volume from scheduled drops and 20 from-
Actually, I will need some help on that. What I included here was the 50% of our revenue is from product launch within the last 12 months. But I actually don't have the figure on what is...
Fifty-fifty.
Okay.
Roughly fifty-fifty.
Yeah.
Hi there. Maybe a naive question, but I understand all the benefits of producing here in Thailand, and all the positives. How do you think about country risk? How do you think about political risk? How do you think about, you know, beyond 2018, or maybe historically, have you thought about alternative locations in Vietnam, Indonesia, or other markets to hedge that risk?
When we decided to place the second facility here in Thailand, obviously, we evaluated pros and cons on having it in Thailand and came out that we see the risk as being low. We're able to manage it when we have two sites located each at an international airport and far away from each other. The risk of natural catastrophe is then much lower. There is a risk on political instability, but we hear a lot about that, I think in the western part of the world, but when you are here, it is something that is not very present, and we see it as a low risk.
When we're moving into placing our building yet another new site, and that will take a couple of years, but when we eventually are going to do that, we will evaluate again and see on the pros and cons of having more, even more capacity in Thailand or placing it somewhere else.
A question on the reduced lead times and the opportunities that gives you in terms of speeding up the rotation of product at the retail level, even more than you have already done. Is that part of the planning or the intentions?
The lead time that I've been talking to today is the replenishment lead time, meaning that when the DC or the distribution center orders new products from the manufacturing, what is the time from the distribution place the orders until manufacturing ship the orders? That lead time is mainly. The reason why that's important is mainly due to that. Shortening that will make us more agile and make it easier for to meet demand spikes and changes in the demand pattern. That's the main reason for reducing that. The lead time on new products, when we're doing new product launches, is not impacted by this. That follows a different cycle, where it's about developing, testing, building up the sell-in volume, and then meeting that launch date.
Sounds like it's not the idea to, to accelerate the rotation then?
No, it's not.
Thomas, could you comment on the silver? What's your view on the silver market? There's some speculation prices may go up for silver, so how does that impact your inventory? And I guess last time when that happened, right, your margins were impacted as well. So what's kind of your take on that market?
I think I'll leave that to Peter.
Yeah, absolutely, and on the gold and silver prices, Thomas is just buying whatever he needs for production, and then we have a hedging policy that we are sticking to, so we are not speculating in any way on the development in commodity prices.
I think why were you then in the last cycle adversely impacted, right? So your margins, you peaked, and then you dropped for a while, and then you recovered. If you're hedged, and if it's not, it's not that material of an event, you know, why? Or was that a factor last time? Maybe I'm wrong.
Yeah, obviously, we have a hedging policy where we hedged one year ahead. So depending on whether prices go up and down, there's a time lag effect of approximately 12 months. And you say prices are very low today compared to what they were in 2012, 2013.
Thank you.
Maybe it is time now to open for kind of any questions that have arisen over the day. Of course, you're welcome to ask questions to Thomas still, but anything else which would also relate to Kenneth or Peter or me, please go ahead.
That's to Kenneth, actually, on your presentation of China, I didn't hear much about online retail strategy, so could you maybe comment on how you see that, how fast you see yourself doing something there? Does it involve being able to pay via WeChat? Some words on that, please.
Yeah, I think, sorry, I don't have a mic, so I'll just speak up. You can all hear me? We'll do it through the mic then. So, e-commerce again, we're relatively young in Asia, and e-commerce is even more young than that. We launched our first e-com store in Hong Kong two months ago. So, e-commerce in Asia for Pandora is very, very new, and it's very, very young. When we look at China, e-commerce is certainly a big, big, big part of our strategy and what we're looking into in terms of developing our footprint, not just in brick and mortar, but also online. To stand here today and tell you exactly when we go live and whether we can pay through WeChat, that's way, way, way too early.
I can only say that, obviously, online and e-commerce in China, given the size of the market, is a very high priority for us to get right.
...
Well, everything is being evaluated. So, there's many opportunities with e-commerce in China. There's your own brand stores, there's Tmall, there's, you know, selling through WeChat. There's tons of opportunities, and they almost change weekly. So we, you know, as opposed to other markets, we really need to do our homework on this one, and that is what we will do before we'll decide on our approach to this.
... Yeah, go ahead.
Just two questions, please. The first is: how important were the tax incentives that you get for Gemopolis in determining whether you have your second facility here in Thailand or someplace like India, for example, that has an equally long tradition of jewelry making, and so on and so forth? And then the second question is, to the complexity that you spoke about and the number of craft hours per product, has that been fully recovered in the margin by the sales price that you're able to achieve on those products? Or has some of that been, you know, covered by the fact that the raw materials have gone down in the meantime?
Yeah, I can comment on the taxes. So we have a tax exemption in Gemopolis until 2020, and we have also obtained tax privileges at the new facility in Lamphun, and they're running until 2024. That has been part of the decision, but not the only criteria for continuing in Thailand. The main reason for being in Thailand is that we have found a formula that works in Thailand, building a culture and a production system that works. In terms of the gross margin impact, we're very focused on our price points, so we have not changed the price points that we know is selling out. So the increased complexity in our production processes have had some impact on the margins.
Going forward, we of course expect that Thomas and the whole production team will have some efficiencies in the production, but we expect that these efficiencies will be absorbed by increased complexity in the products.
But you can say that right now, of course, the complexity increase is reflected in the margins that we have over the year. Any other yeah?
Yes. Thank you. I'm just curious as to your priorities in the U.S. I mean, obviously, the rings category is not as big there as it is elsewhere, but at the same time, you're saying you want to push earrings. So, just curious as to some comments as to how you're going to go about this in the U.S., specifically.
Well, the U.S. has actually caught on very well on rings and are pushing the 20% level of rings. So I would say it's relatively progressed in the U.S. market. So we feel that we are ready for adding the extra category in America. The reason why it is ramped up a little bit late in the U.S. is that they were kind of late adopters of the rings into the focus areas of the company. So I think that we are pretty ready also in the American market. And clearly, as I pointed out previously, in the U.S., earrings is a relatively good category, so I think that we'll be able to sell a few pairs of earrings there.
In the U.S., specifically, are you also going to spend around 10% of sales on marketing in that country?
That's a general level that we have across the world, yes.
Okay, thanks.
If there are no more questions, and
There's one more question.
There is one more question. Yes?
You haven't touched on your M&A strategy, your dividend, share buybacks, you know, that, and cash flow, I assume, would be strong. Anything that you can share? Maybe what's your vision of top line growth, longer term top line growth and EBITDA growth? So anything, you know, from a strategic perspective, if, if you can share anything, that would be helpful.
I think that we will be able to share that, and we normally do that when we publish our numbers for 2015. In connection to that, we will have an updated guidance for 2016. When we talk about M&A, in general, we do not have any plans for M&A in general. So we think that we should continue driving the Pandora business under the Pandora trademark. So that is what we're going to continue doing.
Obviously, the production expansion indicate that we will continue to drive the growth of the company, and our capital structure policy remains the same, so we strive to have an increasing nominal dividend and then pay out any excess cash in the form of a share buyback, and still having net interest-bearing debt to EBITDA of between 0-1, meaning not holding on to cash. So no changes to that.
Hi there. Yeah, we've talked quite a lot about kind of growth going forward, but you've also today announced, you know, some significant investments that are going to be made, both in terms of stores and production. Just wondered if you could help us understand, the margin trajectory going forward of the business, given that, you know, you're at such high levels as well.
In terms of the margin, we have an EBITDA margin we've guided of around 37% this year, and also that that's a good midterm target, plus minus any changes in commodity prices. So any effect of increasing complexity, that will be offset by increased productivity or efficiency in the production. So we believe 37%, that is a healthy level of margins.
Actually nice. Okay. Well, I think it's time to thank you all very much for joining us here in Gemopolis. We have been looking very much forward to showing our crafting facilities and share with you what is very close to our heart. So thanks for taking the long journey here, and I hope that you've all felt that it has been worthwhile. Next point on the agenda is drinks that we're going to have at 6:30 P.M., followed by a dinner at 7:00 P.M. It's correct? Yes. I'm getting thumbs up, so I got that right. And the drinks will be served in the courtyard, and there should be signs if you are afraid of getting lost, so that we can all find our ways to the courtyard.
So, see you in a little bit more than an hour. Thank you very much.