Ladies and gentlemen, thank you for standing by. Welcome to the 2019 Full Year Results Conference Call. At this time I must advise you that this conference is being recorded today. Wednesday 26th February, 2020. I would now like to hand the conference over to your first speaker today.
Nadia Vensalen Nicola. Thank you. Please go ahead.
Thank you very much. Good morning, everyone. Nadia Ben Salem Nicolas speaking. Thanks for being with us this morning for Danone's full year results. I'm here with Chairman and CEO Emmanuel Faber and CFO, Cecile Cabanis.
We'll begin with an overview of 2019 results, and we'll follow with the outlook and the announcements we made this morning. Regarding our strategic plans for the future. The presentation is available on the London website as you may have seen. It's longer than usual and contains a lot of new information. And before we may be asking for about 2 hours of your time this morning, including Q And A.
Before we start, I draw your attention to the disclaimer on Page 2. Related to forward looking statements and financial indicators definition. And with that, let me hand it over to Emmanuel.
Thank you, Nadia. Good morning, everyone. Thank you for being with us this morning for an important announcement on both, as Nadia said, our 2019 strong progress, and the way we want to continue to build our profitable growth model in the future. I will turn immediately to Page 3, where we sum up, basically, in less than 2 hours, what you will hear from us today. First of all, I'm very pleased about the progress that we made in 2019.
With the execution of both our strategic priorities and delivery despite the headwinds. 2nd, we are actually closing a cycle of 5 years with a strong strategic and financial track record And we are anticipating already at the start of this year. The entry into a new cycle towards our 2030 goals. So this year, in many ways, is going to be pivotal. Pivotal because we will massively accelerate and invest in the next couple of years to shape a fully climate powered business model.
I'll put it in my own words maybe, We believe that we have reached a tipping point where, our brands will be incredibly stronger if climate is an ally and not an enemy. And we believe that we have the right business model to achieve that. Consequently, we will update and we are updating our 2020 objective. As I said, recognizing this year is pivotal towards this shift. And let me add that, I'm very pleased about a number of the metrics in which Cecile will deep dive later in this call, in particular, on our capital allocation and cash flow generation that creates and share long term sustainable value for us.
So in all, as we start this call, let me say that I'm truly confident we are fully confident that we're taking the right steps at the right moment, at the right pace to create a virtuous circle that will fuel a superior growth model and unlock sustainable value in an accelerated manner and a bigger manner. Let me go, for this in a couple of highlights, and I will start with Page 5, which, mirrors on the left our 2030 goals and the performance that we achieved in 2019 on the 3 pillars that, you know, our business model, and I chose to highlight our EPS growth of 8%. Our brand model, we've just been recognized, AAA at the CDP ranking among the top 6 worldwide out of 8000 companies. And it speaks a lot about what we want to do for our brands. And finally, as usual, as you know, everything starts with people at Danone.
And we are very happy and proud that the level of engagement of our people, is hitting a record high in 2019. Page 6 is a quick overview, and I won't detail it of the key metrics, financial metrics for our performance that led to the 8 point 3% recurring EPS growth that I mentioned before. Broad based like for like sales growth in acceleration as we will see, again, later, a step change in our margin, 15.2%, a 76 bps improvement, all cash, high conversion, with close to 10% free cash flow to net sales, And finally, and, I think in the current context, very importantly, a stronger balance sheet, where we are 1 year ahead of our plan of deleverage, with a multiple of 2.8 of our net debt to EBITDA. Speaking about the 5 year period on Page 7, I will simply say that, we end this period of 5 years of transformation and delivery with a 50% EPS uplift on a recurring basis, which again highlights the choices, the relevance of the choices and the discipline with which we've made them over the last several years. Next page is, on climate.
As I just said, we are very happy and proud to be a AAA List company, which means that we are building a climate safe, a water secure, a deforestation free future, not only for the planet, but really for our business. So let me turn on Page 9 a little bit on this as an introduction to our discussion about the future. We've been really pioneering and making pretty bold commitments to transition to low carbon economy for a long time, actually. Since 2009, we started commitments for 2020, a number of years ago with the agreement in Paris 2015 under COP, we signed further agreements and we committed by then to carbon neutrality for the total company by 2050. A peak of our full scope emissions of carbon by 25.
Then we signed the 2 degrees signed based targets in 2017, the 1.5 degree pledge even more ambitious by 2019, which we're calling for the fact that we would peak our emissions, at the latest by 2020. And we are, very proud to share on the next page that we've actually anticipated that and, brought out full scope carbon emissions to their peak last year already at the end of last year. So that's 5 years ahead of a plan that we designed only 5 years ago. And that's ahead of the 1.5 degree SBT target and commitment that as a number of other companies that have signed this pledge we've made for 2020. A few highlights on these pages that are on this page that are describing the fact that we are now scoping 95% of our activities in scope 2 and 3, which is indirect activities And that's mostly agriculture, as you can see here, 60% coming from agriculture.
So when we speak about regenerative agriculture, we're really talking about the core of what is at stake for the future of our business in terms of both financial business environmental value. A few more numbers, 27,000,000 tons is going to be our peak. That was last year. Of carbon externalities. And comfortable on our decreased trajectory now, a 9% carbon emission intensity, versus the previous year on a like for like basis in in 2019.
As a result of that on Page 11, we have decided to start the conversation with you and the financial community that is supporting us, about the link between carbon and climate and our business. And the best and simplest way we've found is basically to report here on this page, what our carbon adjusted EPS would be in 2018, in 2019, if they were in our accounts. And what you can see here is with the value of per tonne, which is the value that we use for our CDP disclosures and have been doing that on a consistent basis. You can see the impact on our EPS, which basically means that it's a significant off balance sheet charge that we see here. And it's interesting because already last year, the carbon adjusted EPS has actually grown double digit, 12% because of only a 2% cost of carbon per share increase last year.
Of course, when you turn to the next page, now that we have peaked, it means that the cost of carbon per share is actually going to be a negative trend, as we continue to or starting this year, compress the absolute amount of our carbon footprint, which means that the carbon adjusted EPS is going to grow significantly faster than our recurring EPS. And you will see later in the presentation that, it means a lot, not only because we want our, brands to join the fight against climate change with their consumers, but really because it's about the resilience of our all business model, because we depend on climate because it's high time that, as I said before, we make climate an ally and not an NMA for our business model. My last point about the last year's achievement is back on people. Last year was a very special moment, where we started our one person, 1 voice, 1 share program, which allowed us to welcome, during the AGM last year, our 100,000 employees as shareholders and granted them the dividend sharing scheme that has started a very interesting conversation about the whole cycle of money and profits and how we create value together with them in an entirely new way.
And this is exemplified by the cycle on the right, which is the 1 voice cycle where, as you know, they are now voicing out their priorities, opinions, advice inputs, on what makes a difference for their business locally wherever they are among our big objectives. We're listening to this voice. This is inputs for our strategic planning, but this is also inputs for our boards because they now need twice a year, with the non executive board members of Danone, which brings a completely new way of setting, the tone for the company's priorities in the future and makes them very, very especially engaged with the company that they are building together with us. With that, I will turn to Cecile for the financial review.
Thank you, Emmanuel. Thank you, everyone. And before I deep dive into bridges and number, I would like you to go on page 15 and give you some comments of the 2019 performance versus our strategic priorities, starting with sales growth acceleration. So you've seen that in 2019, all businesses are growing, that we've been able to accelerate the growth throughout the years and despite some headwinds that we faced in H2. And as I mentioned at the big of last year.
We've been able to exit the year at 4.1% rate, which is what we aligned to say in order to make the progress on our businesses, and I will come back on the performance of each of our entity for Q4. But it's a very good quarter where we continue to deliver behind our brands and categories. On efficiency, a record year on productivity, EUR 900,000,000, a year where we've been able to grow the gross margin which you remember is what is absolutely key in measuring sustainable, profitable equation. We are very happy with that, and I will comment on the levers. And we have continued to sustain the investments behind our brands.
Last one, Emmanuel mentioned, we had record high cash flow, 1,000,000,000 which is enabling us to be 1 year in advance in our deleverage plan. We also continue to be very disciplined in the way we manage our Folio. And last year was the year where we sold the Healthburn Farm in the U. S. And we've been able with that to improve our ROIC by 70 basis points.
So let me now deep dive into the figures, pay 17 with the Q4 sales bridge. So as you see, Q4, we had the reported growth of 3.9%. This is made of a like for like sales growth of 4.1%, including improvement in volume. Q3 was -1.6 percent. Q4 is stabilized, minus 0.1%.
And a strong value contribution, 4.2%. Then as you know, we are now removing the Argentina organic contribution, but it would have added another 0.5% to the like for like growth. Scope effect is a negative minus 1.4% and it's linked to the divestiture of Elsman Farm. And finally, we have been having a slightly positive effect in currencies in Q4, 0.7%, which is mainly linked the appreciation of the US dollar. Let's now go into our different entities.
I will start on Page 19 with, specialized nutrition, commenting both on full year and Q4 for each of the entity. Full year 2019, Specialized Nutrition grew again by more than 5%, 5.8%, with a balanced contribution of both medical and annualized nutrition, margin exceeded 25% for the first time and was led by a positive product and country mix as well as the first synergies that we started to have from successful early life and medical nutrition integration. Moving on Q4. In Q4, Specialized Nutrition delivered double digit growth, you see that on the bottom left of the chart, 10.2% Medical Nutrition posted a steady mid single digit growth and annualized nutrition sales were up double digit in Q4. China posted another exceptional quarter with a goal that exceeded 20%, this credit it from the excellent performance of our brands, especially during the 11:11, which in which at Amil has been the number one selling brand in IMF.
And there was also some loading effect because we had this year and earlier, Chinese New Year compared to 2019. At the end of the day, we compare that to a mid single digit growth for IMF category in China for the full year. We've been growing high single digit and it's entirely driven by the positive mix and premiumization. Danone over performance is linked to what we've been discussing throughout the year. It's both the very strong equity of the brands, including a very successful expansion in Lower Tier Cities.
We have tripled our presence in a local MBS, We've been posting some very strong innovation and premium propositions through the cross border e commerce of in particular, a good milk range that has already accounted at the end of 'nineteen, four hundred million sales. And moving out to China, Early Life Nutrition in the rest of the world grew mid single digit in Q4. It was driven by the rest of Asia, especially on the back of, reinforcing market leadership and game changing innovation, like the C section adapted formula. It's also growing very nicely with happy family in the U. S.
When we, look at the years to come, we continue to have a very strong plans behind the brand and a very strong innovation pipeline that is focused, especially on HMO, where milk organic offerings and pediatric specialties. In 2020, the growth of specialized nutrition will remain solid, but we expect it to be below 5% in order to take into account for China reduced baby pool, but in particular, the potential effect of the coronavirus outbreak, because as you imagine, this is currently affecting some of our challenge. Remember, the friends and family challenge now that there is a travel ban and also some sales coming from Hong Kong. The other important news on that came 2 days ago where the government said that will be freezing the registration process for innovation. We've been saying that our innovations were ready to go for the direct channel, they will pause on the registration process.
So it will delay some our ability to put on the market some of our premium innovation, and we will surely push on a broader e commerce to expand a dull crop premium range, but have an impact. EDP on Page, sorry, on Page 21, Essential dairy and plant based delivered a growth for the year of 1.1%, accelerating from last year with Europe pushing now a consistent positive growth, which is a great news. And our recurring operating margin, which has improved by 13 basis points. Including portfolio of alloysation actions, efficiencies that have offset double digit milk price inflation. Plant based sales stood for the full year 'nineteen 1,000,000,000, up single digit versus 2018 with outgoing double digit very strongly.
Moving to Q4. GDP posted a 1.5% growth, accelerating from Q3, on the back of a general improvement in dairy and continued very strong growth in plant based. From a regional perspective, there has been some progress also made in North And LatAm America. Europe delivered another positive quarter of growth with an outstanding performance, a double digit of Alpro, which is now as big as bacteria in Europe. The result was supported by new brands development, such as light and free and new pro and some portfolio innovations.
North America, as I said, improved to a slight positive growth in Q4, On the back of a different element, a better quarter for U. S. Yogurt, supported notably by the success of too good. I mentioned it last quarter. It's closing, its 1st year with $50,000,000 sales.
The top 3 brands that we have in the U. S, international delight in coffee creamer, silk in plant based and horizon in organic milk. Representing altogether almost half of Norand sales are growing strongly in the quarter. And on the other hand, VEGAP posted steep double digit decline, including inventory management actions, given the transition toward renewed Vega 1 formula. In the rest of the world, CIS registered low single digit decline, which is people, we are increasing now investments behind the path of a traditional range and a milk.
LatAm accelerated to more than 5% growth in Q4 led by strong growth in dairy and the continuing increasing penetration of loan based portfolio. Morocco finally delivered another double digit growth quarter still on a low base, but closing a year of strong zinc coverings and brought the business back to a market leader position and to positive margin. So we are fully confident, on the further acceleration of EDP in sales growth in 2020, and notably in plant based despite, still challenging conditions in Russia, especially for the few quarters of the year. Moving to Waters. So for the full year, 29 18, Waters delivered moderate growth, 1.5% as a result of a difficult summer season that we had the opportunity to comment in Q3 and some demand softness in Europe, while all the other markets remain solid.
The recurring operating margin reached 13%, thanks especially to portfolio valorization, highest effects, but also a strong over delivery on efficiency. If I move to Q4, so in Q4, we've been able to grow sales again in Europe, which is mostly driven by a good performance on our local brands, both in Spain and Poland. There was a soft performance in France, Germany and UK. And it's worth to mention that in order prevent any out of stock during the winter strikes in France, we have made some advanced shipments in December. Moving to the other markets.
Outside China, growth was solid in Q4, led mostly by Indonesia and Turkey. As well as clean water in Mexico. Acquisitions have been a bit under challenge in Latin America in the quarter. In general, we are very pleased by the performance of our Planwater portfolio that is in large reusable format. As you know, and makes around 50% of our plain water volume in the world.
They were up 10% in 2019, And in France, the VelveIC ECLita format that we launched last year in 100% FPT already represent close to 10% of evolving brand revenue in the country. Finally, moving to China and Mizone brand, we've experienced as expected, the steep double digit decline in Q4, when we post the investment in the quarter ahead of brand repositioning initially planned for March 2020. As we speak, and I will come back on that, the current coronavirus are break is having significant effects on our first quarter sales. As you know, Mizone is an on the go product, mostly distributed in convenience and traditional channels, and those channels have been heavily impacted by the outbreak. This will force us to delay the promising brand re launch that was an important step to reignite Mizone Brand Growth.
And And I will get back on the full picture of the coronavirus impact, as you have seen in the press release. So all in all, for Waters, for 2020, it will be a highly dependent on Mizone's performance. But we have to expect a good that will be a very moderate. Recurring operating margin. So as I was mentioning, we have 1,000,000 in 19 of accumulated savings.
Part of it is a continued, a very strong delivery of protein program 2nd year, EUR 400,000,000, they will go now for the last year. Comulated, we have EUR 700,000,000 savings and, we committed 1,000,000,000 for 2020. So we are well on track. On the rest of productivity. Today, there was a lot of focus on procurement, supply chain optimization, spare parts, 3 d printing as an example, crack filling head, another example, and also some efficiencies in logistics for water.
And the successful integration of Early Life and medical nutrition, delivering the first synergies. Moving to Page 24, you have the bridge of margin. So as I said, a very strong delivery in improving the gross margin despite important inflation of 6%. And this is the sum of portfolio valorization, mix and price. And very strong productivities and efficiencies.
We've been stabilizing the overall investment behind the brand. And then on overhead, you see a slight negative impact, which is linked to on one hand, the first positive impact of synergies and reduction in term of fixed cost. And some other negative effect. Outside of this like for like margin improvement, we've been having positive scope effect, which comes from the fact that you remember, we said portfolio optimization, we impact of improving the margin. So this is a 20 basis point effect from the sale of Urban Farm.
Then currencies and other is having a slightly positive effect of 6 basis points. And Argentina margin is weighing on the overall performance by 21 negative bps. Moving to the EPS bridge, and as already shared, so recurring EPS closed at 3.85, increasing by 8.3%. This is driven by the overall operational strong performance, which is contributing 6.4%. And all the other items contributed all positively, with slight positive effects on financial cost on tax with a full year underlying tax rate at 27.5 percent and associated currency also contributed positively.
On Page 29, IFS it was worth to spend a few minutes to go through the nonrecurring net income. Because there is a swing between last year and this year and a swing between recurring and nonrecurring. We have a recurring net income plus 9.2 percent reported net income minus 17.9 percent. It's both link from the high base of 2018, where we recorded an exceptional capital gain from the partial sale of our stake in Yakult and negative impact this year based on the loss incurred at the sale of Hans Bonsam, as well as an impairment of the goodwill of Yoshili for 1,000,000. Moving to Page 31, very nice chart about our progress on cash flow delivery with a record year, up 12.5%.
This is improving the cash conversion as well. And it was mainly driven through the improvement of our NOPAT. CapEx remaining stable around 1,000,000,000. So this is having, of course, an impact on deleverage, page 33, 1 year in advance, 2.8 times. We said we would reach less than 3 times in 2020, 2019, we are at 2.8 times.
You see in the bridge, Page 33, and we had, we had said that our net debt would increase by 700,000,000 linked to IFRS 16. So we started with a net debt at 1,000,000,000 you have a debt free cash flow of 1,000,000,000, the payment of the dividend, 1.3 and M and A and others of 0.6, leading to a full debt at the end of 2019 of 1,000,000,000. And finally, for 2019, on Page 34, the proposed dividend that will be proposed in the AGM on April 28 2020. In cash, which is an 8% increase in line with the progression of our recurring earnings. The payout remains stable.
And, I think it's a sign that we are in our ability to continue to strengthen the model. Emmanuel reminded that over the last 5 years, We increased EPS by 50 percent, which is, 5 years of delivery on profitable growth. As we said, we would do, and I think it's another year that is showing that we are delivering behind our model, a profitable growth model and acceleration, as you've seen in Q4. This is closing 2019, and I will hand over to a reminder to and forward.
Thank you, Cecile. So the chapter of this part of the presentation is called investment to accelerate climate action of our brands and strengthen our growth model. And that's really what, the plan is about. Let me turn to Page 36 which basically summarized it over time. As a number of you know, we've started to design our 2020 horizon back in 2013 2014.
And it was my responsibility and the teams here responsibility to put this and executed this over the last 5 years. The idea was really to anticipate and adapt to the food revolution, embracing it, as we've said many times. And I'll come back to that. We see 2020 as a moment where we need to interrupt in a way, the 5th year and final year of our 2020 plan because The industry is undermined. Our categories are undermined by either visible or invisible challenges opportunities that are really related to, perception of climate in social norms and behaviors that we feel we need to really anticipate now in order to fully meet these opportunities.
And as said on the right part of this chart, stay ahead of the curve, in 20, in 25. Let me turn to Page 37. And this page should be read vertically. So On the left, you have the very important themes of the food revolution that we've been working on and that we identified. The first column of 2015 to 2019, is describing the level of priorities that we have had in these ones.
During this period. The next one is about where we feel we are now versus the new normal. Not the one that we had anticipated, but the updated 2020 new normal of our categories. And therefore, is there a need or not to, slow down, maintain or accelerate our pace of investment to stay ahead of the curve in the next 3 to 5 years. So let me start by the first block, which is trust inside and outside.
I think it was fully embedded in the plan I think we are where we need to be, which is ahead of the plan already, and we will continue. And that's about employee programs. It's about the B Corp certification, the transparency of our brands, and a number of other topics The second one is very important that this age of where Danone is in its corporate history, and that's about efficiency and discipline. You know, that was a very important part of the agenda. We still believe that despite the huge progress we've made with things like protein and others, there is more to be done here, including an organization.
So this is working progress, but we feel we are at the right pace and we will continue to progress on that. The 3rd and 4th are actually the 2 sides of the same coin. Planetary diets and natural and local. It's really about the 1 Thanet 1 Health vision for our brands and our products, fully embedded in the plan, absolutely core to the decision of moving for Alpro Silk Horizon Organic and a number of others in our strategic move, but also a number of smaller acquisition that we've done, the Danone Manifesto Ventures initiative that we've taken, where we continue to believe that we are ahead of the curve. And therefore, we will need to continue to invest, but no need to accelerate this.
Here. As you know, we have a already very solid plan, 1,000,000,000 in plan based by 2020 5. So it's really about delivering on this right now, with all the CapEx needed, the that and opening the countries, which is currently happening. We've shared that a number of times with you, and I'm certainly very encouraged by the news that you'll see that shared about the brands, growing very fast in the U. S.
And Noram, actually Mexico LatAm as well, except for vigar. And certainly ARPro with a stellar performance mid double midteens in the Q4 of last year. One element that was, less of a priority, but definitely in the plan for 2020 was packaging. And clearly, here, we are caught off guard. As I think, frankly, everybody else, you've seen the plastic compensation rising, tremendously in 2018.
19. We really believe that it's time to take this fully on the agenda of the company. In a pretty radical manner, and we'll come back to that. That's clearly one of the elements of acceleration for us in the plan. And then there are three topics that are linked together: omnichannel, our ability to compete everywhere and when our consumers are able, willing to use our products and get them in the hands, We are not there yet, and it's a matter of execution processes and systems and to end value chain, which we have started to create with cycles organization, but we are not there yet either.
So there's clearly a need for acceleration. And finally, There was no digital and data other than e commerce, as you know, with our target of doubling by 2020. Which frankly means that we need to go much more radical on this. And this is why it's an orange here. And we will therefore, double down on this, and I'll come back to that in the next couple of minutes.
So with that in mind, it basically means that you will have us busy on accelerating the formulas that you see here, our brand model, and making sure that by investing rightly on climate related topics and planet boundaries topics, We actually joined the fight of many of our consumers, but also civil society, NGOs, governments, that are putting pressure today on all the large food and consumer goods companies to, again, make climate not an enemy, but an ally for our brands' growth development. Fundamentals to that is the suited of our sourcing model in a climate efficient sourcing for planetary diets and regenerative agriculture. And as I said, on the right, two boxes, which is really about our execution capabilities, we need to be much better in terms of our climate resilience and overall execution in the business model and to end value chain and omni channel. And this will be enabled by the fact that we're starting a big project on putting data at the core of what we do, and that's the 4th pillar that you have here. The Page 39 is giving you a bit more color, but I'll go into more details.
We're talking about in the next 3 years, 20 to 22 to spend about 1,000,000,000, about half of that being on packaging. To serve the list of important enablers that you see here, innovation, brand sourcing, packaging, and value chain to deliver superior competitiveness for us in our categories, where our value proposition, our ability to to reach, the people using our brands and engaging with them everywhere they are and basically leverage even further the data on people engagement behind what we do, which, as you know, is for me the magic about this company. I'm giving you a bit more granularity of what we mean here concretely on Page 41 directly. Let's go for diets and agriculture. Page 42.
As I said, we do not mean today that there will be meaning full acceleration of investments in the field of regenerative agriculture. There's a lot that we've launched over the last several years, 5, 10, 5, 2, 1 year. Let me, on this stage, 42 just tell you how much carbon in agriculture is not an externality for us. It's not about the planet It's not about the next generation. It's really about our business.
So here are a few facts, eroding soils from carbon extraction. The already in a number of countries, the U. S. And many others, our solids are eroded to the tune of 50% to 70%. Which means no farming in the future.
Agricultural cycles are pretty long. So there is an urgency to put carbon back into the soil. Because carbon is essentially 60 percent of organic matter. So you cannot have healthy soils, which will support the agriculture of tomorrow, if we do not put carbon back into the soil through regenerative practices, the current agriculture model is way to, relying on pesticides and carbon intensive, expensive entrants. We know the solution to that, and we know how to reduce both again, immediate costs and longer term costs in terms of soil health by moving to regenerative practices that prevents the use of such interns.
3rd and very important one, water availability and erosion. Erosion is directly related to water erosion, directly related to the soil carbon structure and how much carbon you have in the soil, which actually retains water. And that water retention is all the more important that there are a number of agricultural areas that in not 30 years, but in 5 to 10 years, warm be able to be formed the same way as today because there won't be water anymore. And this is related to the final topic here, which is there is a need to adapt agricultural practices to remedy the current temperatures elevation. Let me give you two examples on that.
We know that in France, there will not be a possibility to continue to farm corn in the south part of France where it is today because there won't be water enough anymore, which calls, relies a lot on and temperatures will be too high. So that's a challenge. So it means that that part of agriculture has got to change. But on the contrary, the temperature elevation is also creating opportunities. For instance, we've been able to start programs with our cattle razors in Normandy for our dairy products and brands here, where they are growing soy locally.
So we are producing they are producing soy in Normandy instead of important soy from Brazil. So you can see how this is sinking carbon, back to farm autonomy, partake autonomy, an overall decrease of both the costs and the carbon, and the erosion of this agricultural part. So it means that moving for regenerative agriculture is critical for the resilience the efficiency and the cost of farming for us in the future. That's why on Page 43, we're basically saying if you look at this picture in the middle, we're talking about a shift towards the fact that we do not compete with nature. We want to partner with nature, and we've been doing that.
And we have many examples now that show how it works, not disturbing soil, but protecting it, going from monoculture to diversity and a reductionist agriculture to a holistic one. Which means we will continue on the right to accelerate on regenerative agriculture, local problems, biodiversity, traceability, which will save both cost, emissions of carbon and water. A few examples on Page 44, In France, we've already invested 1,000,000 in 2 years. That is allowing brands like Danone or Bladina to regain consumer preference. It's very interesting to see in Bladina, for instance, that in only 2 years and a half, we are now a close number 2, nearly number 1, let's wait a little bit in, the organic baby food segment, which is growing 35% in France, And this is thanks to the program of regenerative agriculture, transparency.
The 5% of sales that are, in on this product range are being invested every year in regenerative Agriculture, driving consumer preference. On the right part of this chart, page 44. You have examples in the U. S. You know already about the non GMO pledge in 2016 that was really the peak start of major transformations for us.
It was a $17,000,000 investment. But that allowed a brand like Danimals to take nearly 10 points of market share, our kids' brands, because moms and parents had a preference for non GMO products being, feeding their, that keys, basically. So a couple more examples here. Happy families going to ease launching this month, a regenerative and organic line, with a very, very tight organic farming certification that is driving consumer preference in the middle, international delight, one of our fastest growing brands in the U. S.
For the first time ever, there is now a segregated palm oil, logistics for us. And this is a competitive advantage because no one can trace back to the mills, how much deforestation or actually forced labor there is, even in the RSPO roundtable solution now. What we have done is that we convinced Cargill to build separate infrastructure in the port, importing our pie model. And this is a joint CapEx for Cargill and for our brand because we believe as a leading brand, we will be challenged if we don't do that and we're rebuilding a consumer preference for a growing fraction of consumers in the U. S.
With that. And another example on polynezation programs that we run with many brands around the world, and that's one about silk in the U. S. Here. On Page 44.
So enough about agriculture and the link to consumer preference and the resilience, let me go now packaging Circularity with a few examples. But let me start, where we think that the packaging topic is probably the highest topic And that's about France, Germany and the UK on Page 46. We're talking here about water. And you can see, on this page, the level of consumer preference and purchase intent for regular PET, for silo, origin PT and recycled PET. So we are talking at home where you're basically no one is actually seeing you, you have a consumer preference, which is meaningful of about 0.5 point of preference.
When it's out of home, it's a plain 100 basis point of preference because people don't want to be seen with a plastic bottle anymore and recycled plastics is a much more acceptable in terms of social normal solution. So what we've decided to do on packaging is On Page 47, moving entirely out of, virgin slash fossil oil PET 4 water by 25. So we are going to be 100 percent our pets in Europe in all our water brands. And we start in April already in France on most of the formats in the UK, the full rent, sorry, in Germany, the full rent. And in the UK, formats for Avion.
And adding to that, climate neutrality, not only to Avion, which is a long term commitment, as you know, for 2020, but adding Volvick immediately becoming climate neutral this year as well. A few examples of adding digitality and new models on Page 48, you can see a direct return schemes on the left. On a glass of bottle of Avion, a glass bottle of Avion, sorry, a metal bottle for Avion, a plain water It can for Sparkling Avion to be launched in the U. S. Functional and, flavored in a can, at the back end of this year or early next year, Bonafont and many others going for cans as well.
Metal cans and the Tetra on the Baltic Kids Ranch. But also on the right, as you know, we've we are also flooring, home and new on the go models, which are completely changing the paradigm in terms of water packaging. Let me take you to the next chapter on Page 49, which is about, our plastics in yogurt. So here is probably the boldest commitment that we're making right now as a company. When I say a commitment, it's actually not a commitment in, say, it's an ambition that we have and a target that we will reach for our brands where you see, going entirely 0 PS by 25 globally and in Europe by 24.
So it means we are going to shift to PET and ARPET as soon as possible on the left to PLA and other bio sourced materials starting in 2020, Leda Vash, the leading organic yogurt brand in the in France, which is ours, has already, a bio sourced a starch based polymer packaging and paper on the right, which is for the U. S. Market, but you will see more paper in the next couple of pages. For instance, in the UK, we are already starting by 2020, There won't be any PS material anymore in our UK range. It's all going to be clear labeling on PET and our pets.
Recycled cardboard, a tericycle partnership for, the kids poaches. And the first ever reusable glass spot for Danone, which is going to be launched this year in the UK, together with the loop program. Another example of fast forwarding the transformation on PAX is Alpro. We believe this brand being, as Cecile said, bigger than Activia now, in Europe. Also the clear thought and market leader in terms of plant based solutions, we believe that brand requires, deserves, packaging that serves its consumers' purpose and engagement with it.
And so as soon as 2021, we will move entirely out of PS, which is mostly the case today, to pick up paper cups, as you can see on the left, plan based drinks cartons, with and without aluminum, but, the films will be bio sourced inside. And ARPED bottles, on the right for some of the drinkable versions. The 2 sort of pages I can share as a summary of this nearly $1,000,000,000 packaging acceleration plan for our brand superiority in the next couple of years is on Page 52 53. It means for our 25,000,000,000 cups a year, produced for EDP, we will be 0 PS worldwide by 25, 0 PS in Europe by 24. In water, in Europe, 100% ARPED in Europe by 25,000,000,000 for 5,000,000,000 bottles and outside of Europe, as you know, already 60% of our volumes are sold in a reused Zebo packaging already today, which will be accelerated.
There is also a plan, but not an accelerated plan. So I'm not about it today. But as you know, in Indonesia, on the go formats, we have already moved to some 100% recycled PET formats, the same in Mexico and other countries. So this is going to go on, but that's not part of the acceleration. The some of the bigger, picture numbers here on Page 53 to finish.
It means that if you look on the left at our plastic packaging, From today to 25, we will go on recyclable content from 60% to 95%. On recycled to less than 10% to more than 50% and reducing our footprint on production of packaging by 30% globally and by 50% in Europe on plastic. In total packaging, it will mean that, again, 95% of it will be recyclable, more than 50% will be recycled and fossil origin will be cut by 2% to less than 25%. So With that, we believe that we will reaccelerate our brand competitiveness on packaging which becomes a clear, factor of choice for consumers. To accelerate that even further on Page 54, we will both invest in packaging innovative companies and business models, through the Danone Manifest Venture that you know of, but we are also announcing today the creation of a packaging transformation accelerator with the intent of investing up to 1,000,000 by on new business models, new materials, and recycling solutions, which needs to be co designed with a lot of parties outside of Danone.
Let me finish that presentation about our strategic priorities as we start 2020. With a digital end to end. On Page 56, you have, topics here on which I won't go into any detail, but it's basically about saying that on the left, we are going to drive a transformation of our end to end value chain in a way that will allow us to be much more flexible and precise in the way we plan for demand and we meet that demand, which is a matter of, of course, top line growth opportunities but also cost reduction, waste reduction and climate reduction as well. It's about on the right part of it, increasing the flexibility in particular for our EVP operations. One of the example is We know now that we have a significant opportunity to leverage our factory footprints for dairy by creating hybrid production capabilities for plant based in the same factories.
That's one example of flexibility, but there are many others. Late differentiation in the manufacturing process and omni channels, as I mentioned. And finally, point that Cecile has highlighted already last year. We are moving the 1 Danone Services organization, which is in many countries today in place serving all businesses on a cross category standpoint to the next level of integrated business services also powered by data and analytics that we think is going to help us over a 3, 4 years period to serve our business at a lower and more efficient cost. An example on Page or 2 examples on Page 57 of what we concretely mean and what we've done and what we want to do at a much bigger scale now.
If you're on factory, I think on the right, you know it, already. We've discussed that with you. The digitization of Avion Factory And Automation Robotics, putting AGVs in place, nearly more than 60 AGVs, for instance, instead of forklifts, has allowed us to, first of all, go entirely to train, direct load instead of trucks So moving to a more efficient overall logistics for our Avion platform allowed us to reduce the loss of materials because there is no accidents anymore, no incidents, no stops anymore. And safety at work, of course, is improved as well. Just talking about these AGVs investment that we've made, for instance.
Many more of our investments in the automation of Evian were done. To the point that we've been able to increase the capacity by 12% of the of the factory, reduce the overall carbon footprint and cost of the supply chain and brought Avion to being the 1st site in France ever in this industry to be recognized as a fully carbon and certified as a fully carbon neutral production facility. On the left, there is an example you probably know less well, which is Opole. It's one of our best factories in terms of performance on baby food. It's based in Poland.
We have entirely digitized Opelay with, as you see, pretty interesting returns on these investments, 10% cost efficiency, 12% reduction in CO2 emissions, 6% batch size flexibility added, which again talks about, the ability to be more agile on the way we work. And 0 paper factory, which is also a matter of being much more precise and efficient in the way information are flowing, including in terms of the speed at which our operators are able to work on their, on their lines. That leads me maybe to a final comment, which is about organizations and ways of working, on Page 58. In my first set of introduction on that strategic priorities topic, for 2020. I highlighted that on efficiency and discipline, we had made huge progress already over the last 5 years.
But there was a yellow, not green. We are not ahead of the curve. I think we are in progress, but we need to go beyond where we are today. And this page is exemplifying a number of topics on which we are currently working to continue to make sure that our organization is more efficient in the way we are making and making decisions in the localizations of these decisions We continue to believe we are too heavy at the top of the pyramid in terms of pyramid, and then we need to put decisions back even closer than what they are today to the consumers, the markets, the countries, and therefore, there is a work in progress there. As I said earlier, this is not an acceleration that we need there, but the continued work that we continue to transform the way we work as we are moving into the next phase of our development.
Thank you for your attention on this part. And I move the back to Cecile on our book and guidance.
Maybe on page 60, this is, the journey we are in unchanged goals for 2.3. Emmanuel went through the investment that we want to to put this is really in order to make sure that we preempt the trends and the issues that people have. And we make our brands, even more relevant and our business more resilient. So let me go into the next page, to give you some granularity around the EUR 2,000,000,000 investment. If we look at the EUR 2,000,000,000 investment, there are some categories in which they will be classified and then there are some natures of space.
If I go to the different buckets, the 1,000,000,000 will include a 1,000,000 C and L investment in recurring costs, meaning extra EUR 200,000,000 per year. This will really be about supporting innovation, everything that Emmanuel explained about packaging and climate. So seeing, but also to make sure that we continue to support the brand in our journey. The second, and it will be for 2020 in term of cost investment acceleration. CapEx 1,000,000,000, around 1,000,000,000.
And this is really linked to, the setup of a connected end to end value chain, include everything we have to do in our factories in order to enable the packing, catching transformation and flexible plant. As well as a digital and around EUR 500,000,000 of one offs that will serve here as well some high type of lines that we will have to change and different elements. So this is, overall, how we see, the granularity of the cost. And, I remind you of this EUR 2,000,000,000 around EUR 900,000,000 will be about packaging. On all this plan, we will come back to you with a more detailed plan, school and market debt that will take place probably in June as And then we can, we can easily go into the details of the plan.
If I go to the next slide, 62, And, back to what I did for 2019, our priorities for 20 20 in term of, equation have not changed. It's all about accelerating growth. Maximizing efficiency and continue our allocation of capital and resources with discipline. When it comes to accelerate growth, it's around making sure that we preempt and we have the right responses for people's trends and concern, as I just said, it's about making sure that we have the high execution of our competitive plant in the country. It's about a plant based acceleration towards the billion ambition that we set for 2025.
In terms of efficiencies, as I said, 2019 was another year, record EBITD 900,000,000. We will continue to make sure that we carry our efficiency agenda in the right way. That we reduce our fixed costs to enable to put more investments behind the brands and that we build a very efficient and effect end to end supply chain. Last allocate capital with discipline, it's really around both making sure that we add agility and empowerment globally, but also that we have a great to make sure that we are able to shift resources from one place to another when there is a sense of value that is shifting. And it's a strong balance between executing and deliver in the short term, And as you've seen with this extra investment, making sure that we are also building something that is sustainable for the long term.
And not tactical. So it's really the balance between short term delivery, increasing the efficiency of the model and making sure it's sustainable for the future. So if I move to, or before I move to the guidance, and the debt on the coronavirus impact, because I think it's necessary. We are now end of February. So for the one, we start to have a pretty good assessment of what it will mean.
If I, so you know that obviously China is our number 2 market, 10% of the company sales into 2019. It's 1 third of the sales, which are my zone and 2 thirds, which are on, specialized nutrition. Of course, the number one priority for us is to provide the best and safest possible framework for our 8200 employees in the country. We have upgraded, especially locally, our bank which is our global program, that provides all demand employees with quality health care coverage. And covering 100% of care expenses for our employees and their children And we provide also a specific, financial allowance to protect the extended family members, such as parents and grandparents.
If I move now to the business impact, my zone is today, by far, the most impacted business for us. It has a 1 factory in Huham, a province that is still close today. Maison Bottles, as you know, they arrived to the consumer who are very complex and much layered distribution channels, and they are mostly sold on the go in convenience store. So the demand for the entire category is heavily affected given what is happening now with the Navios. We had a plan to relaunch the brand, initially for March, making sure that we would hit before the high season.
And this is now delayed to Q2 and putting, risk to the loading for the summer session. At par, specialized nutrition is concerned. There there's no disruption in the supply and manufacturing of our ELM and medical nutrition products. Still travel limitation are impacting sales through the so called channels, friends and family, as I mentioned earlier, and some from Hong Kong. And the impact that will affect us is course, the frozen registration process that has been announced by the government on our premium innovation that were ready to go for the direct channel.
So when we put all that together and as a preliminary assessment, we expect that Coronavirus will generate a sales loss of Q1 of approximately 1,000,000 in net sales. And as a consequence, it will have a negative impact on margin for H1. Again, this is the estimation to debt, and we are of monitoring, very carefully the situation. If I move to our guidance on Page 64, Given everything we said, first, if I go to margin, because of the bold investment choice that we are making, The guidance that we had that was more than 16 will now be to sustain margin more than 15%. The gap between both is entirely due to the fact that we want to accelerate investments even if the macro uncertainty and there are some specific contexts, we think it's still the right time, and it is the right time to continue to be fully focused on our journey and make sure that we continue to take strategic decision and not tactical.
And that's why we have decided that we will not up the margin to 16% but really use this year to accelerate strong investment behind the brand and the business. On the rest, it means that we continue, what I said, around making sure that we deliver more efficiencies that we finish the protein program according to what we said and continue to foster efficiencies. On the top line, as I said earlier, we closed, 2019 with the growth at 4% rate. Which is, confirming the potential of our portfolios categories and brands. And as we enter 2020, we have factor in both the already visible impact and uncertainty related to the coronavirus outbreak that I just discussed.
And it means that we will have a guidance that will range between 2% to 4% And that includes the 100,000,000 sales loss in Q1, meaning that we do expect a Q1 that will be broadly flat. And for the effect of clarity, remember that this exclude the contribution of Argentina, which is if we take 2019, 0.5 points, additional growth. So overall, here again, it's continued acceleration on the businesses, and especially EDP and factoring the impact of the coronaviance. So as a result of Boes, this short term context and this accelerated, started investment we want to do to make sure that we continue to deliver both on the model short term, but also make sure it's sustainable. We will guide in the mid single digit recurring EPS growth for the full year.
If I move to the next page and to give you a bit of more metrics for the midterm. And to reassure you that we are behind a growth acceleration and strengthening the business model. If we look at the midterm, we expect acceleration of growth to be 3 5%. We expect our recurring EPS growth to be mid to high single digit. And, we will continue to support our accelerated investment agenda with very disciplined capital allocation, which will continue to ensure a strong balance sheet And we expect the net debt to EBITDA ratio to be between 2.5x and 3x mid term.
It's really important that we all understand that we are making, both structural change and accelerating investment in order to make sure that our business model this effective and efficient and that we are in the past of creating sustainable value, even if in the short term, There are some uncertainties on the overall context. And I will stop there to make sure you can ask some question or Emmanuel, you want to conclude.
Good.
Okay. Thank you very much. And now we are ready to open the Q and A session. Thank
you.
I think first question from Richard Taylor, that's Morgan Stanley. Good morning, Richard.
Good morning, everyone. Thanks for the question. I've got 2 or 3 actually. Firstly, I'm interested in your comments about the innovation registration freeze in China. How long will that last for, what impact do you think that will have on your business?
Secondly, I suppose reflecting on the last 4 years, like for like at the group level, has grown pretty consistently between 2.5% and 2.9%. You've had, I think, 24 quarters of negative volume growth in EDP. So I'm really interested in what gives you confidence you can grow above that level in the medium term. And then finally, that net debt to EBITDA guidance. Obviously, you're already at 2.8x.
So how should we think about that? Are you going into 2.5x to 3x because of further investments or should we be thinking about buybacks or M and A? Thank you.
Thank you, Richard. So I'll take the first one. The simple answer is that we don't know. We are in situation where, as you've seen, The Chinese government has decided to postpone without even giving effect there are, there are meeting of the party with 5000 members of parliament So it's a symbolic, very important decision that they made. If they did not put any date on this one.
I think we should reasonably assume that, they will not treat this as a priority. This is why Cecile's comment about our ability to, double down on the strong positions we have on e commerce and direct international is the right way for us to mitigate the situation with this great slate and lineup of new Ultra Premium innovations that are going to go in China through other channels, but unfortunately, not immediately through the GNB compliant system. So it's a long answer to say that we don't know. And it's very clear that it will be probably a couple of quarters, but it's very hard to predict anything at that point in time.
On your question around the historical growth rate and why we are confident that we can accelerate, especially on EDP. So first, it's very clear to us that we have the right portfolio of categories and brands in order to accelerate the growth. When you refer to the past, you refer also to some years where, EDP Europe was very challenged. I mean, there were some years was very negative. It's now back to growth for the consecutive, 3 last quarters, which is one of the battles that we had to win, and we did it.
The other thing is we shifted double you when we acquire WhiteWave to our plant base. And as you've seen, plant base has been growing high single digits. So there are progresses that are made on all businesses, both in terms of fundamentals and BI brands. We have specialized nutrition that has been growing now for 3 years above 5%. Together with that and the investment that we want to preempt and not wait in order to do them later.
I think we have the what it takes, in order to make sure that can accelerate the growth. And your last question on the debt and the net debt lever, today, we are we are fostering in this kind of guidance to the fact that we are accelerating in that we want to remain very disciplined in the way we use capital I've always said that we wanted to remain a strong grade investment and this is part of the guidance. And to your question, it doesn't include today's share buyback plans. And in terms of M And A, we continue to have the investment that we will do with the Danone Manifest venture, bolt on M and As, and the new packaging accelerator fund. Noting
a special.
Thank you very much.
Next question is from James Edward Jones at RBC.
Three questions from me as well, please. So in recent years, you've been pretty convincing, and it's really a follow on from question, but you were pretty convincing about the 2020 targets and consistently confident you'd achieve them right up to last October. Why should we have any more faith that you'll deliver on these new targets than the previous targets? Secondly, Emmanuel, in the past, you've made a really good case, that good environmental practices are also beneficial for financial performance and shareholders. Could one argue that the non stakeholder model is now moving too far away from the interests of shareholders?
And thirdly, I was just wondering if you can give us any sort of numerical capital expenditure guidance, please.
I didn't catch the last one.
CapEx guidance. Okay. So,
I'll probably let Cecile answer the last one on, and maybe add on my to the first ones. I think that, the environment is is clearly a volatile one. We don't see, in the, guidance of this year, any change versus on the top line. Any change versus everything that we've said, until the end of last year, The acceleration of the fourth quarter for us is, a sign that we are in the right direction, as we it's been sequential. There has been ups and downs and challenges, but I think the fundamentals are really there.
The, the we will see how much China is bringing more uncertainty than or China or the virus, by the way. But that's not the topic for this discussion. We have set the target this year only on the basis of what is certain when it comes to the China situation on our businesses. We remain absolutely hopeful and that may be good news that the it's a matter of a couple of quarters and not more than this. Absent that we are on track with our acceleration plans.
We are recycling in China in particular a very strong year already. And so we were counting on a further growth related to the pack of innovation that we that we've mentioned, yet I think we will deliver a very good performance overall this year in, in specialized nutrition with a continued acceleration of EDP as Cecile has mentioned. So I don't think there is an change there. I think the direction is the right one. We are taking a stock of the change perception or importance of, the nature of packaging in the in consumer's preferences that we've seen And I think every of you guys are seeing as much as we do in the way people shop around us and we shop ourselves.
Which means that we've made the choice of not letting our brands fall back gradually in terms of preferences because the case is that when you look at what I highlighted on PET versus ARPA preference on the go, 100 basis points of It's a huge difference. And this is basically where, if we do not invest and most brands have not, most big brands have not yet, invested strategically on water and packaging, we think that we have a risk of of a slowdown. And we don't want to have that, and that's why, we are doubling down on that part. So we are making the right investments, we believe, to maintain this, the vision that we've or sorry, that makes me confident that we have the right categories. The our brands are pretty powerful.
The innovation rate 30% now is a big achievement of the last couple of years, which we have not highlighted much in this conversation because We don't think we need to accelerate. We need to maintain that, but we also need now to innovate on the back. And that's, and that's what we are, what we're doing.
Can I just push you there, Emmanuel, clearly, and you've reduced the sales guidance from 2021 and beyond? And you could explained 2020 very clearly. What's changed after 2021? What
has changed?
You've lowered sales guidance from 4 to 5 to 3 to 5. So from 2021 on What's the reason for that? I understand about 2020, but beyond after 2020, you have lowered the guidance.
Because fundamentally, because fundamentally, we continue to believe that we can deliver with our brands and our categories, superior growth. What is superior in the current environment versus what was superior when we set up all these, targets a few years ago around the acquisition of WhiteWave I think the environment has changed. We do not see the 3 to 5 as a change in the objective that we have, we believe that we have, again, the right categories for the future, and that we are building the strength of our brands and competitiveness is that they would be able to recapture the market share that a number of large brands over the last decades have lost or certainly decade have lost. And we know we had our fair share of issues and topics to resolve. We continue to have some, as highlighted in this call as well.
So we are not complacent about this. So I think you need to interpret to look at this as not a change in the ambition, but clearly in the variable of tile, situation in which we are. We believe that the link to your third question is basically our absolute commitments on the mid to high single digit EPS line, which is the line that we created a couple of years ago when we decided to decouple growth acceleration and efficiency, I think we are back to willing to have flexibility in the way we navigate our model in the next few years. And that's all I think we should you should see through that. There's no more read through and read across.
When it comes to your last question, I don't think so. I'm very clear on why and again, I won't repeat in order to make sure We are not overusing your time here, but I'm very clear and we are very clear on why the climate actions we are taking are actions that are building competitive advantage. Not about going outside of the shareholders' interests. And this is the reason why we want, to drag the conversation of carbon, not as a corporate social responsibility or whatever kind of topic, but as a strategic one. And that's why we are putting together a chart where you can see our EPS related to that, global climate topic because it's a it's a it's a proxy.
It's the biggest proxy you can find about how we are, using these externalities to build competitive advantage and therefore, to drive our EPS up further, in the future.
Yes, there was a question on the CapEx, but I would like to complement what what Emmanuel commented because I think the best way to get faith in, what we say is to look at what we did for the best 5 years. We've been able to, increase and strengthen the model. You remember, 2015, we said, it's about gross, not gross at any price. It profitable growth. And we've been delivering behind that.
We've been restoring the growth in Europe. We've been, transforming the portfolio to make sure that we were in a position to have the best category for the future. Efficiency agenda, we said we would deliver 1,000,000,000 protein. We are delivering 1,000,000,000 protein. And in terms of free cash flow delivery, we are 1 year in advance to our agenda.
So I think these are also important milestone. And we decide today to increase investment and it's the right decision that we think we're making. And this is why even if we continue to be fully committed on a profitable growth, the margin, we want to to stabilize it around 15 for this year, 2020. CapEx, sorry, it was your last question. CapEx, we always said we would be in a trend between 4% 5%.
We've been in the tours in the lower part of the range, you have to take this range and then, of course, we need to add the billion investment that we will make over 3 years.
Thank you. Next question is from Martin Dugua at Jefferies. And before you go ahead, Martin, I would like to kindly ask a next participant to really limit yourself to a maximum of two questions. To ensure everyone has a chance to ask a question during this session.
I'm going to be very brief actually. Just two quick ones. Emmanuel, on the commitment to Circular Economy and RPET, there's a footnote on sort of Slide 53 that sort of suggested it is subject to availability. And what interests me is First of all, are you quantifying the on costs of the commitment to our pets in terms of a cost impact or a margin impact? And is that reflected in medium term guidance?
And secondly, do you see a need to fund a market in arpek rather as Nestle have recently announced they're putting in CHF 1,500,000,000 to sort of basically make a market in ARPET. Is that an issue for you? And the second question is just on China. I mean, your guidance implies you to be down in China about mid teens in Q1, which seems like a sort of sensible starting point. But what are you assuming on in formula realized how difficult it is to forecast, but you should have had a pretty strong quarter in infants in China in my view COVID, do you expect infant in China to be sort of up flat or down in Q1?
Okay. Hope those are fairly quick.
Yes. Thank you, Martin. So I'll try to make it a quick picture of color as well. The, we have put this, our pet availability point because, it's related to the PS, move to, ARPA in EDP. When it comes to, water, we have secured what we need on the market a huge work being done over the last 6 months really for our teams to be able to deliver the 100% ARPETs ambition that we have for our 5,000,000,000 bottles a year in Europe.
So that's done. Indeed, there is a price to this because ARPET is currently 30% more expensive than Virgin PT. We recognize that. As you know, we have in the past already, in a number of countries invested since 10 years in our own recycling related facilities with the Danone ecosystem fund. So in, in Indonesia, in Mexico, in Argentina, in Brazil, in China, We already operate, or we are contracting with, denim related investments in, formalized and structured recycling systems that allow us to get PET water grade and diamond grade, on a recycled stream basis.
So we had anticipated that, which allows us to lower the cost of our PET, our pets overall worldwide. But in Europe, that's not the case. And therefore, yes, we have factored in the margin, the fact that ARPET is more expensive, and we think it's going to stay expensive for some time. We are also working on, as I said, with a lot of stakeholders of the recycling systems, the connection of direct returning schemes as existing a number of and growing number of, of countries, other beverage companies like Nestle and others to make sure that we secure the growing amount of PET as an industry. But again, for us, when it comes to water, we have what we need for the next 3 years, in Europe.
So the comment is about the migration from PS to PET to ARPA. On the yogurts part of it because we are not entirely sure. We are sure that we can move and we will move to PET. Once you've moved to PET, it's very easy to convert to ARPET. And this is where we will decide case by case, how much it makes sense from a cost versus, preference from a consumer standpoint country by country, range by range, It's not like it's not a blank check that we're letting our people to go just to draw on.
It's really about a case by case, range, right range observation, on what the writers will be. And on this one, there is, yet for the back end of the program, the question of how much ARPET will be available for our EUR 25,000,000,000 cups globally. On China, maybe I will let Cecile comment.
So on China, there are 2 elements. The first one is that, Mizone is obviously the most impacted brand are in February. We expect Maison to be down 50% So this is the current trend. And, as it comes to early life attrition, as I said, there will be some impact, but on very specific channels, And to your comment that we should expect high performance ex Coronavirus don't forget that last year was a low base from the year before, so you need to be careful because in terms of absolute, it was not, such a favorable base of corn. So don't expect.
I think you have a view on the base of comp, which is
Okay, thanks for that. Very clear. Thank you.
Thank you, Martin. Next question is from Celine Panutti at JP Morgan.
Good morning, everyone. Good morning. My first question is on Waters. Would like to understand the growth rate has clearly decelerated. Now you have committed to meet expectation of consumer with recyclable packaging.
But overall, what is your take on the growth rate of this category. And I think as well that you have lost market share, how do you plan to offset that? And I was wondering whether the margin improvement that we've seen this year is sustainable or should we factor that the reinvestment and the PET cost that you mentioned about are going to hit this category more than the others? And my second question is trying to understand the Q1 guidance because you said that China will impact Q1 and it's 100,000,000 and that's 1.6% of your Q1 sales. And then you're getting yet you're guiding for the group to be flat.
So I don't reconfiliate why the one points like what's the difference between what's the rest of the equation bring you flat basically for Q1? Thank you.
Thank you, Celine. So I'll take the question on water. To make it simple, we see no change in the potential for this category. It is challenged, in a couple of countries, not a couple few countries and big countries in Europe, and that's true for, France, the UK and Germany, we there is a there is a a number of reasons why this is the case, a number of reasons, including how much money is actually being put on the category in the past couple of years. And this packaging topic, which is really important in these 3 countries.
Having said that, overall, we don't see any change. We continue to see strong growth in the water category worldwide. We have our own portfolio is having pluses and downs. As you know, Maizen has been reformulating and we've found it's challenging over a couple of years to re found the right formula for Mizone in the in the future for China. We believe that we are now having a relaunch, that is very powerful And we expect Maison to grow again, but it's a big part of our equation, as you know.
Indonesia is stellar performance, frankly, and the category continues to grow in Indonesia, the same in Mexico, in Latin America, in Poland, in Turkey, in a number of European countries as well. So to put it simply, no change in our view that it's a great a healthy category. But there is a bit of what Cecile said about aqua drinks. We won't do it we won't do this today. I suggest, but Probably, we can go back to you with more granularity on what the magic was about Aquadirinks and there's a little bit of less magic today.
But we continue to believe that functional and flavored, sourced spring water brands are a great category for the future where we can deliver more than what we actually deliver these days, with great innovations that we've, that we've launched infusions, organics, etcetera, it's a down. Yes, on the margin, you're right to say that the great improvement of last year will not be sustained this year. We are doubling down in many accounts on the water category, starting in the back end of this quarter. So this category will feel a bigger impact on the reinvestment plan that, that we have for the next couple of years. And then I let Cecile answer the quarters.
Yes. I will recap the effects. So the 1, the first one, obviously, the one you mentioned, Celine, Q1 impacted EUR 100,000,000, as we estimate today on the common average. Then, and I should probably have that. But I mentioned on, on Q4 comments that there has been some phasing effect, especially for early life nutrition given the earlier timing of Chinese New Year.
And some on waters in order to make sure that we wouldn't fall out of stock during the strikes in France. This is a bit less than 1,000,000 in total, but it's also impact, January as it is phasing. So overall, with that, we expect moderate grade moderated growth story for a specialized nutrition decline in sales, in waters given the size of my zone. And EDP will confirm its acceleration, a trajectory and be in line with performance of Q4. And of course, we expect growth to accelerate, as the year progresses with today assumption that we've put on, on China.
Thank you, Cecile. Thank you, Celine. Next question is from, Alain Oberber at MainFirst. Good morning, Ella.
Good morning, Nadia. Good morning Emmanuel. This is Alon from MainFirst. Couple of questions regarding the guidance. Now obviously you skipped the EBIT margin guidance.
Could you elaborate on that? Is it particularly because of the investments, I guess. The second is regarding return on invested capital guidance. Has that also changed on the timing 2022. And the last question is regarding the bridge.
Obviously, free for the guide in 2020. I mean, you highlighted the coronavirus, but in the release, this morning, you also said that, obviously, Russia was an issue in Argentina, which is steepest a little bit of granularity, ID numbers why you lowered the guidance on margins for 2020 based on these 2 issues?
Thank you, Alain. So on the on 2020, what we are giving a 5% margin is concerned is we said, we will remain above 15% of margin. And this is factoring the fact that we continue to have our agenda to improve margin and profitable rules. And at the same time, as we present is, we will advance 1,000,000 of cost investments in And for the midterm, I think you can refer to what we say in our 2030 goals. Which is about a superior, a profitable growth, which derive on the fact that we will, we will continue to make sure that the model is delivering profitable growth.
So that's for margin. And then your question on ROIC, we continue to be very disciplined in capital allocation. We have, improved, I would say, in 19, 70 bps. Obviously, acceleration of investment in CapEx And OpEx will have some short term impact on ROIC Remember that we have been working hard on Portfolio Management as well. For 2020, we didn't want to bet on portfolio management given the current market condition.
We don't want to be in a position to to be forced to do some portfolio management. If the conditions are not met, But surely, we are continuing to look at ROIC as an important metric And when we come in June with a more granular plan, we will also share more about ROIC. In your comment around what we put in the press release around Russia is actually, it's, when I commented that the Q4 of EDP Indeed, I said that probably for the following few quarters, we will continue to have a CIS, which will have a performance that will affect the acceleration of EDP So yes, this is factor in indeed.
Thank you. Thank you. Next question is from, Alan Eversky at Credit Suisse.
Good morning, good morning, guys. Yeah, just one question for me, actually. Just when I look at EDP's margin, for last year, it looks essentially unchanged from the the margin of 2017, I know you've realized $220,000,000 of cost savings at WhiteWave and there was a targeted for revenue synergies above that. Mean, it would appear that the retention rate on those savings has been pretty poor and that you're not going to hit some of the financial targets you had for WhiteWave. I just would appreciate just some comment on what were the headwinds that you didn't expect?
Thank you for the question. We are clear on the WhiteWave trajectory. We know, and I think we've been transparent of, about some of the executions, topics, that actually prevailed even before we were able to manage the company, on brand's execution in particular, on brands like silk, the fact that there has been an abnormal market situation on the premium dairy and the milk price in, in the U. S. That led us to, need to go for a very significant efficiency program on sourcing of milk to make sure that we were creating value on that market, continued challenge of the yogurt degree, which is overpromoted with the, you know, the 5 that the Greek segment has come to a plateau and the loss of velocity on the shelves, So promoting a lot from some competitors.
So we are clear that there were challenges. We are absolutely clear also of why this is a changer, both for our North American presence, but for the company in total. The integration is still in progress. Although we will reach our $300,000,000 of synergies that we expected, but yet there is more to come actually than that will that we had seen. So in total, it's more a matter of the execution of the first copper of month years, of aligning these two companies together to create this big leader on the flexitarian diets in the chilled cabinet in the U.
S. Than anything else. So we are very confident on what we are building, including actually on the margin expansion of wet wave over time. And then on North America over time, there have been a few big offenders. And there is absolutely no excuse in what I'm saying here, but consistently over the last 18 months or so, there have been there has been bigger founders, while you have a bunch of very large and successful brands that are all operating at a much higher than average margin for our portfolio in the U.
S, which again, as Cecile mentioned earlier, is now, for those brands, growing, very much in line with what we expected them to grow when we acquired WhiteWave 2 years ago. When it comes to the rest of the portfolio, we had a significant inflation in milk last year, higher than what we had initially anticipated, as well as inflation on some plastic raw materials. In the during the year. So a lot of the efficiencies, and were actually, as you said, flowed back into the cost of doing business for us. And I will let, maybe Cecile comment any further if you want to add anything on the margin for DairyDP?
No, I think for, it's what you said, for 2020, really about increasing efficiencies, but facing 10 percent, milk inflation, which, which was an extra cost that we had not anticipated still a much valorization of the portfolio, a high part of the value growth and an ability we'll withdraw gross margin improvement.
We have time for our last question, from James Targett at. Good morning, James.
Yes, good morning. I'm full of your work with James. So I'll ask on his behalf. He had to hop off. I was just wondering if you can give some color on U.
S. In formula. Just on the ground, what is happening there? I just wonder if you have a potentially an advantage versus some of the local manufacturers that might have been impacted about from the coronavirus. Are you prepared for potentially shortages across shelves of products?
And could that offer you an opportunity to to perhaps grow share in that market in the weeks to come? Thank you.
Thank you, Pedro. I assume you're talking about China more than the U. S.
Yes. Sorry, China, yes.
That's fine. No worries. Well, the answer is yes and no. As Cecile said, there was some loading pre Chinese New Year in the process of the back end of last year. So we were pretty loaded already.
The the baby food has been or the infant milk formula has been elected as emergency goods status in China. Which allows, products in this category to move easier than regular food and beverage products, although not, freely. So that, but that's not a competitive advantage per se. It's, it's just protecting the ability for Chinese babies to get the nutrition they absolutely need. This is critical.
And by the way, the same goes for our medical nutrition products there. Having said that, the ability to, build stocks is very difficult in particular because the we started also having logistics, and shipments being slowed down by the procedures of ports, coronavirus measures that have been taken actually both in Europe now, very recently, but, of course, in China already. So I guess my, too long answer is to say that I don't think that we have much, advantage here you could even argue that domestic players who do not need to import will have less administrative difficulties in the future, although I don't see that as, in any case, a midterm concern for us.
Okay, great. Thank you very much.
Thank you very much. This will conclude today's call. Thanks for your time, your attendance. I am available with the rest of the team here to follow-up with any other question you may have. Along the rest of the day and thanks again for your attention today.