Good afternoon, ladies and gentlemen. Thank you so much for joining myself and Conor here this afternoon. We welcome you on lots of different platforms, LinkedIn, and a variety of different Zooms and stuff, so we really appreciate you coming to listen to us. My name is Eavan Gannon, I'm from Powerscourt, and I'm joined this afternoon by the man of the hour, Conor Costigan.
Hi, Eavan. Delighted to be here.
Excellent. Looking forward to this. This is meant to be, obviously, a chat between myself and Conor, but we will welcome all opportunities from the floor. Please, you've got some details probably in front of you there, investorrelations@dcc.ie welcoming any questions throughout the course of the hour conversation that we're having here. For those of you who are social media savvy, please feel free, #DCCHealthcare and #DCCEvent, and we look forward to seeing your tags over the course of the afternoon. Without further ado, I would like to introduce, as I said, the man of the hour, Conor. Thank you very much for taking the time. You joined DCC in 1997. You've had considerable experience. You've worked in a variety of different areas, starting out in food and beverage.
I first got to know you at Investor Relations, we've worked alongside each other for many years. You joined DCC Healthcare in 2003, before taking the helm in 2006. You've had a few busy years, if I'm not mistaken, 2006 when you took the helm, revenue was approximately GBP 100 million.
That's right, yeah.
Would you like to take us through the transformation that you've led the way on?
Well, I suppose it's been a fantastic growth journey, and as you say, in 2006, we had revenues in Euros, obviously in those days, of about EUR 110 million, profits of about EUR 12 million. I think we had about 700 people in two countries, Britain and Ireland. I suppose in our latest fiscal year, we had revenues of GBP 655 million, profits of GBP 82 million. We've got 2,800 colleagues now, and operations obviously in Britain and Ireland, but also in continental Europe and in the U.S. It's been a very exciting journey, and we still feel like we're only getting going.
Absolutely.
We've got exciting growth platforms now in the DACH countries and in the U.S., so lots to go for still in DCC Healthcare.
Fantastic. Well, an impressive journey so far. Thank you for taking us through that. You might give us a little bit of a deeper dive into the two divisions. We all know DCC Healthcare, but it's made up of the DCC Vital and the DCC Health & Beauty Solutions. You might give the audience and myself a little bit of a further dive into those.
Yeah, sure. The larger of the two businesses last year, but just slightly, was DCC Health and Beauty Solutions. That's a contract manufacturing business, a CMO business, serving the health and beauty industry, focused on nutritional products and beauty products. We provide a range of outsourced services from product development, formulation, regulatory services, through to obviously manufacturing and packing.
Yeah.
Our customer base is leading brand owners in the health and beauty space, big consumer healthcare businesses.
Any we know?
We have lots that you know, lots that you would know all right. A lot of household names, international and local champions as well, in the U.S., Europe, across and Britain. Direct sales organizations are important, specialist retailers. We've eight manufacturing facilities, high quality facilities, five in Britain, and three now in the U.S. I suppose one of the key features of the business is we really build long-term relationships with our customers.
Yeah.
We try to lead out on product development and product innovation, and through that create very sticky long-term relationships. On the other side of the house, DCC Vital, is focused on medical products. It's involved in the manufacturing, marketing, sales, distribution of medical products in the British, Irish, and now the DACH market. We're also selling through international distributors. We're selling into the acute care, the hospital sector, which would've been the origins of the business. Today we have a very broad reach, very strong presence in primary care, both in Britain and now in Germany, leadership positions, and into other fragmented healthcare settings as well, and that's obviously a big growth area for us as well.
Excellent. Thank you very much for that. Talking of healthcare and the last 18 months, maybe you could give us some further information as to how the divisions have coped, both your staff and products, and those relationships, and how you've had to deal with everything that was thrown at you over the course of the last 18 months.
Yeah. Look, obviously for the whole world-
Yeah.
A challenging 18 months, and it's been a very successful period for DCC Healthcare, but a very challenging period and we're hugely proud and grateful to all of our colleagues around the business for their commitment. I suppose we learned a new kind of phrase through the pandemic, which when people talked about essential products and services, and what we do in DCC Healthcare, and indeed in DCC generally, is we provide essential products and services. Whether that's the medical products to keep hospitals and GPs running from PPE to ICU devices, or on the health and beauty side, the nutrition products that people really want, the consumption of which really shot up through COVID as people really proactively sought to keep themselves fit and well. I suppose it wasn't an option for us to ask people to work from home. We had to keep factories going.
We had to keep warehouses going.
Additional pressures, obviously, that you've had to-
Exactly.
Onboard.
I suppose our number one priority, our number one value in DCC is safety. I suppose our number one priority was keeping our people safe. I suppose we had to, first and foremost, implement new procedures to make sure we kept people safe in the workplace. Then to operate under those new regimes while coping with increased demand, supply chain challenges, and everything that is gone with the last kind of 18 months. As people will have seen in our results last year when we grew our profits by 35%.
Yeah.
We overcame all those challenges. All the 2,800 people around the business overcame those challenges and delivered a fantastic performance.
Excellent. Well, on behalf of all of us, thank you, because you are the ones who are helping to keep the healthcare systems going. Just a reminder to the audience, please do feel free to drop questions into investorrelations@dcc.ie at any stage. We will take them over the course of the discussion, or indeed at the end. Just coming back to you there, you mentioned the reporting structure, and as you said, you were locked down in Dublin, and your teams were all working. How is it that that relationship with you and the management teams in all of the different businesses, how does that work, particularly when you're sort of locked away from each other?
Yeah. I suppose the way we're set up in DCC Healthcare, it's the same really with the DCC group head office team, if you like. We have a very lean corporate and divisional teams across the group. DCC Healthcare is no different. Although we are expanding our small healthcare team from two to four over the next couple of months, really reflecting the scale of the business today and also our ambition for international growth. We're very fortunate in that we have very experienced leaders in both the Health & Beauty business and in Vital. Stephen O'Connor leads the Health & Beauty business. He's been with the group almost as long as me, we've worked side by side to really build that business over the last 20 odd years. Then Harry Keenan leads the Vital business. Harry is a hugely experienced medical device and healthcare professional.
He led the Baxter business in Britain and Ireland for many years and joined us about six years ago.
Excellent.
One of the features of DCC, as you'll know, Eavan, is we've very stable teams throughout our business. I suppose the transition to operating virtually with those teams was relatively straightforward. We know each other well. We have a rhythm in terms of how we communicate. It was a little more challenging with our more recent colleagues in the U.S.
Of course. Yeah.
In fact, it's interesting, Amerilab, our most recent acquisition in the U.S., we completed on the 25th of March-
Right.
2020, and then obviously headed into the pandemic, and unfortunately, we haven't been able to be physically in the business since, but we've really built the relationships virtually since then. We obviously had spent a lot of time in the business through the due diligence process and formed very strong relationships, and that really stood us in good stead through the virtual period.
I was just going to say, are you looking forward to getting back out there? Are you rushing to jump on a plane?
Yeah. No, absolutely. I'll be in the U.S. next month.
Meeting your new colleagues.
Offices and seeing. We've been spending money in all our facilities, so as well investing to develop capacity and capability. Looking forward to getting out and-
Excellent.
Seeing our colleagues and...
Very well. Travel safely. You mentioned the relationships with your clients and sticky and how it is that you develop products and innovation and things like that. Could you take us through that process and how that's opened opportunities as sort of the relationship has evolved over time?
Yeah, I suppose, maybe starting with DCC Health & Beauty Solutions, I suppose our focus really in this area is to build long-term relationships, partnership relationships with brand owners. As I said earlier, we lead out on product development. We have about 170 scientists around DCC Health & Beauty Solutions involved in our new product development and our quality teams, and that's very important to our customers and our prospective customers. We're constantly scanning the market for trends. We're constantly looking for new ingredients coming through, new uses of ingredients, and then we are coming back proactively to our customers, to potential customers with ideas for new products. That part of our operation is very important. Clearly, we're operating at the upper end of the quality spectrum, very well-invested facilities.
Being part of the DCC Group and having access to the balance sheet is important to keep that investment going in the facilities, and our customers really value that. Obviously you've got to provide very good service levels. You need flexibility to be able to respond to customers, because demand patterns aren't always uniform. We work very hard to try and keep that flexibility in our operations and be able to be responsive. I suppose the combination of those things really drives these long-term sticky partnership relationships.
Yeah. Has that been tested in any way in the last 18 months, or is that just a little bit more of the same, just having to be a little bit more front and center on a Teams or a Zoom call or something like that or?
Yeah, no, I think certainly it's been tested.
Yeah.
I think for all the manufacturers, it's been a challenging period. The demand for nutrition products was particularly strong.
Probably everybody on the call here has boxes of tablets that they all take every morning now that we might never have been looking at before. It's definitely an increasing space.
It is. Well, I suppose, historically, the market over the last kind of 10 years or so has grown maybe 7%, 8% per annum. It grew in the U.S. last year by 14%.
Wow, okay.
So and-
It's not just me.
Consumer penetration has increased, so more people are taking it, and that bodes very well for the long-term prospects for the market. I think going back to your question, I think we coped with those that demand, that pressure, better than others. I think we had capacity. We were able to turn on capacity.
Fantastic.
The stability and the commitment of our labor forces and the robustness of our supply chain really helped us to maintain service levels at a very good level through that difficult period.
Excellent. Well done. We might take a little bit of time to talk about the platform from here. You've spoken about lots of opportunities, your relationships, and talking about the process of what seems to be a good platform for organic growth. As you have the relationships, you're able to build things out. Could you take us through how you see that, how you see the opportunities there?
Yeah. I suppose the great thing, the starting point, I suppose really, and the great thing for DCC Health is we're operating in growth markets. Whether it's nutrition market, the beauty market, the medical products market, demand is growing for our products, and that's driven by really long-term macro factors. There's obviously demographic factors aging populations, higher incidence of illness, which is driving people to look for more cost-effective health solutions. It's driving them to look for more kind of preventative self-care. I suppose through COVID, some of those things have really been accelerated or underpinned as well. There's some fairly nice kind of underlying trends that benefit us right across our nutrition and medical products. We're also seeing increasing regulation-
Yeah.
Increasing regulatory oversight.
That's good news for well set up, well invested, well-resourced businesses like ours and that again, we're benefiting from that. In the nutrition space, there's some interesting trends that are beneficial as well. There's increasing scientific support for the use of nutritional supplements, and I suppose that's probably been a key factor in some of the large consumer healthcare and consumer product businesses getting involved in the nutrition space. There's been some significant investment by the likes of Nestlé, P&G, Procter & Gamble in this space. I think Nestlé alone has deployed about $10 billion over the last five years in buying nutritional brands. That's shifting standards in the sector. It's shifting consumer penetration as well. I think, all of those trends will also feed into more opportunity for better resource, bigger players like DCC Health & Beauty Solutions.
Fantastic. Excellent. Again, just reminding you, if anybody wants to drop some questions in as we go along, otherwise we can take them at the end of the session. You mentioned their CapEx and taking it. Are there any examples of monies being put to work within the business and how it has been fruitful as it done to date?
Yeah. I mean, the biggest project we've done, from a capital investment point of view over the last couple of years is an almost doubling of our softgel capacity in our British softgel plant that came on stream last year. That's been fantastic in terms of we've had some very interesting technological developments in that business.
Okay.
We've really developed our expertise in vegetarian softgel capsules, which is quite a growth trend, the whole vegan piece.
Yeah.
We've also produced the world's first, we believe, organic vegetarian capsule.
Okay.
We've a number of other technological developments. Having that additional capacity allows us now to really go and exploit those opportunities.
That innovation and that technology, is there opportunities to roll it out elsewhere? Obviously.
Yeah.
Organic and vegan.
We've parallel projects now going in gummies.
Okay.
We're about to commission a new gummy line actually in our softgel plant in Britain, which will allow us enter the gummy market in Europe. I suppose gummies has been one of the fastest growing sectors-
Yeah.
In the U.S. over the last 10 years, and really started off as a kids product.
Okay.
I suppose those kids became adults and continued to take gummy supplements. That's obviously grown the market substantially, all the forecasts would suggest that's going to continue. It's less developed in Europe, we're putting in the investment now and getting going as that market begins to evolve. We already have customers lined up for that. We're producing gummies in a modest way in the U.S. today, but we're developing out a much more substantial investment project to increase our gummy capacity, and that should come online over the next 12 months.
Fantastic.
There's a range. We're constantly investing. It's one of the features of the business in health and beauty, is we're constantly investing in capacity, capability, and then obviously the key thing is really cross-selling that capability across our customer base.
Great. Excellent. Well, you obviously have lots going on to scale the platform. That's great. Maybe you might give us a bit of color and flavor to some of the acquisitions that you've done in the past, and how they've bedded in and given you opportunities to move forward. How you see that space at the moment, and what's out there and where are you looking, and where's the next steps?
I suppose we created, by acquisition over the last five years, two really interesting growth platforms. Obviously we've made three acquisitions in the nutritional contract manufacturing space in the U.S. That's really put us on the map and given us a strong position. The U.S. nutritional supplements market at retail is about $56 billion.
Wow.
We estimate the addressable contract manufacturing sector for us is about GBP 8 billion. Even though we've made good progress.
There is so much to do.
We're really still scratching the surface. We've still got, in terms of mirroring the capability that we have in Europe, we've still got plenty to go for there. It's a very fragmented market, so we feel very optimistic about what we can do there. We also, obviously within health and beauty, have a beauty products business. We've a lot of expertise in that business. When we look at the U.S. beauty products sector, the contract manufacturing sector, it's a growing sector. It's a fragmented sector. A lot of the same dynamics as that we've seen over the last five years in nutrition. That's another opportunity that we'll be tackling over the next little while. Obviously on the Vital side, we made a very important acquisition earlier this year of Wörner.
Yes.
Which is one of the leaders in the supply of products into the primary care sector in Germany.
Germany, yeah.
That's a sector we know well because we're the market leader in supplying products into primary care in the British market through our Williams Medical business that we've owned for the last seven years. That's a business we've invested in to really develop our technology capabilities. We operate an omni-channel sales and marketing approach. We're selling across digital platforms. We're selling across contact centers, e-commerce platforms. The market in Britain has obviously been adopting those digital ways of interacting.
Okay. Yeah.
Over recent years. When we look at the German market, it's less developed actually from a digital-
Okay.
Point of view. I think there's a big opportunity for us to enhance what we bought, taking the learnings from Britain, and then really push on. It's very fragmented in Germany. Lots and lots of privately owned businesses, some of whom face succession challenges with the aging population.
Of course.
We think there's a lot of bolt-on acquisition activity in Germany that we can leverage. I think, as we've seen also in the U.S., putting the flag down, getting senior executives on the ground in these businesses leads to other opportunities. We've got broader ambitions beyond just the primary care sector, and we think Wörner and developing that business can be a good stepping stone to a much broader development for DCC Vital in the German and continental European market generally.
Great. Well, you've given us a very upbeat picture of organic growth and scaling the platform. Talk to me a little bit about being part of the DCC group, and being able to access the cash in the business. How is the process when you're looking to get some money to be able to put investment into the healthcare business?
Yeah. Look, I feel very confident that we've got the absolute full support of-
Excellent.
Of the group.
Yes.
The board to go and deploy significant capital in the healthcare market. It's a very attractive market.
Absolutely, yeah.
It's growing at higher rates than other sectors. We've got a very strong track record of growth over the last 10 years. DCC Healthcare has grown its profits by 16%, compound. Half of that has been organic. As I say, we've invested in our management infrastructure. One of the things actually we've done over recent months is we've put in place a divisional team in the U.S.
Okay.
To support the businesses that we own today in the U.S. in a better way. Obviously also to be in the market more consistently, driving the acquisition activity. I think we've got the management infrastructure and capacity. We've got the balance sheet, obviously, in DCC. We've got the board support. We've got a nice opportunity set in fragmented markets. I think we're very well set up to accelerate the deployment of capital in DCC Healthcare.
Excellent. Well, I see a question has just come in, so you're not going to have to listen to me for too long, so there's too many questions. Question coming in from Rowan Smith in Setanta. Demand robust, outlook good, risk of new competitors entering the business or existing competitors increasing capacity. Is this a concern?
I think, I suppose all of those things are correct, Rowan. The demand growth has been very good consistently in our markets. We do see competitors increasing capacity, but if you take the contract manufacturing business, it's difficult to come in-
Okay.
Enter the business in a really credible way, and particularly to be credible with the serious players.
Yeah.
You can't replicate decades of investment like we have, or the depth of technical resources, the product development resources. It's difficult to replicate that very quickly. Certainly, competitors are investing to increase capacity, but the market is growing and that isn't a particular concern for us.
Good. Glad to hear it. I have one or two more questions. I am very conscious we're going to open it up to the floor. It would be remiss from where I sit in a financial media space not to bring up supply chain. Can you talk to us about where you sit with the supply chain issues? Are you seeing any? Is it a growing concern, something that you worry about? Obviously, I don't doubt that you're constantly keeping a check on this and this is your day job. But is there additional pressures that you're seeing out there at the moment?
Yeah. Look, I think all through the COVID period, I think supply chain has been more challenging than.
Yeah.
Heretofore. I suppose, part of the reason why we were able to deliver the performance we did last year and continue to expect very good growth this year is because we have those long-term-
Yeah.
Supplier relationships, very robust supplier relationships. That's been very helpful to us. We're not immune to the challenges that people are facing generally at the minute, but it's not holding our business back. There are pockets of challenges here and there, but it's certainly not having a material impact on our business. We're managing our way through it in a good way.
Excellent. We talked a little bit about the regulatory environment. Another area of particular interest close to my own heart, sustainability. What can you tell us? What have you been doing?
Yeah. No, look, sustainability is obviously in DCC is very close to our heart as well. As a group, we've set out our objective of being net zero by 2050, by reducing our footprint by 20% by 2025. I'm pleased to say in DCC Healthcare, we absolutely embrace that wholeheartedly and we've made a lot of progress even before we came out with those kind of published targets. We were well on track.
Excellent.
Against those measures. I think approximately 65% of our electricity today is coming from renewable sources. Again, we're on a path to 100% over the next little while. Maybe just to give one example of EuroCaps, our softgel facility in Wales, we have two wind turbines at that site. We've almost 2,000 solar panels, or we will when we finish the latest round of installations. We're producing, self-generating a significant proportion of the electricity that we require for that business, that manufacturing business. There's a lot of initiatives going on around the group on that.
Right. Keep up the hard work. I'm going to open the floor to Annelise of Morgan Stanley, who's going to join us on camera. Good morning or good afternoon, Annelise.
Hi, good afternoon. Hi, Conor. Nice to see you. Thank you for taking my question. I have a couple if that's okay, but I'll do them one by one. Firstly, you talked a little about supply chain issues and shortages, but you seem to be managing that quite well. I'm just wondering on input cost inflation, particularly for things like ingredients or certain products that you distribute, to what extent that you're seeing that in your geographies, and also perhaps you could comment on your ability to pass that on to customers, how those discussions are going, and whether you're seeing any issues with that.
Excellent. Thank you. Just to recap there, input cost inflation and if you're able to pass it on to your customers.
Yeah. Look, that is a feature, both in terms in terms of labor costs and raw material costs. Yes, we have to and have been passing that on as was we're passing it on in a good environment in terms of the demand for the products. We haven't had material pushback in terms of implementing those price increases.
Yeah. I think it's safe to say that costs are increasing across the board.
That's right.
Next question. We have Allan Smylie from Davy. Allan. There you are.
Hi, Allan.
Yeah. Hi, Conor. Hi, Eavan Gannon. Thanks for taking my question. I've just a growth question, I guess, to kick off on my side. Conor, you said that growth in the U.S. market really accelerated last year. I think you mentioned 14%. How should we think about the ability of the business to grow organically off this higher base, both this year and over the medium term?
Yeah. The market in the U.S., as I say, was growing at 7% or 8% consistently over the last 10 years or so. Had this spike last year, if you like, to 14%. The projections are for continued growth, albeit more in the kind of mid-single digit level over the coming years. Certainly the market projections are for continued growth. Our own expectations is to continue to outperform the market. We have particular strengths in some of the higher growth segments. We're very strong in effervescence both in the U.K. and in the U.S. We're actually the leading contract manufacturer of effervescent products. We've got strength in premium skincare products.
Which again, is a growth area. We're developing nicely in probiotics. We've got strength in nutritional liquids, which has been a growth area. Complex formulations. We mentioned organic already, organic and natural materials.
Yes.
Those kinds of materials aren't the easiest to work with. We've got a lot of expertise in those areas. I suppose we've always tried to position the business where we have the best margin opportunity, the best long-term sustainable profit growth opportunity, more than kind of chasing top line. We still feel very positive about the growth prospects for the business and of this higher base.
Brilliant. Excellent. We've got a few more questions here. Kate Somerville.
Hi.
The screen now. Hi, Kate.
Hi, Kate.
How are you doing?
Hi there. How are you doing? I have a question on the Vital business. I just want to understand about, sort of last year, how COVID really impacted it. I imagine there were some COVID-related orders. Just want to understand what offset that, and how we should think about the recovery into 2021, in those other parts of the business, and how we should think about growth within that business going forward. Thanks.
Excellent. Thank you.
Sure. I suppose it was an unusual year in Vital.
All of us.
All of us. I suppose our product mix changed.
Yeah.
A lot in that business, and I suppose it just shows the agility of the business commercially and again, the robustness of the supply chain. Clearly normal activity in hospitals and GP surgeries and the healthcare systems generally, was down.
Yeah.
Normal procedures weren't happening. People weren't going to their GP in person. On the other hand, obviously the demand for things like PPE-
Yeah.
Products that are used in intensive care, which intensive care units were under a huge stress.
Pressure, yeah.
All of those demand was up. We had to react to that and adjust. Obviously we did that very successfully and I think our goodwill with our customers, with the healthcare systems-
Of course, yeah.
Has increased on the back of that, because we didn't let people down.
Yeah.
I suppose, as we move into this year and beyond, the systems obviously are trying to ramp back up to normal activity. I wouldn't say they're at those levels yet, and we've been supporting them in every way we can to do that. It's critical obviously for society that they do. There's a huge backlog now. People have probably read some of the statistics about the waiting lists and the backlog-
Of course, yeah.
Of treatment in Britain in particular. People have been talking about it. We're working hard with the system to obviously give them all the support they can as they ramp back up. What we're seeing obviously is somewhat reduced demand for-
Okay, yeah.
Some of those COVID-type products, although we don't believe that's going to go-
Go away, yeah.
Away. It's going to be at an elevated level because we're going to be living with something for forever. Obviously ramping back up on normal activity. Yeah, it's been an unusual period. Again, I suppose just the agility and the robustness of our businesses has really come through.
Excellent. We have another question from Zane George. Good afternoon.
Hi, George.
George?
Sorry, I just had to unmute my mic. Thank you. Afternoon, Conor Costigan. Yeah, I guess just sort of following up on both Allan Smylie and Kate Somerville's questions there. I just wanted to understand how you see the margin trajectory of your business, and perhaps if you could maybe segregate the Health & Beauty, and Vital business. I'm guessing you saw a decent lift in both segments last year. Is that a sort of path that could continue into the future?
Yeah. I suppose maybe just to comment kind of a little bit generally on that. I suppose one of the things we constantly work at, in fact, is to optimize our sales mix. As I say, we don't chase top line anywhere. We're focused on trying to focus on sustainable business that gives us the best kind of margin and return on capital characteristics. Whether that's in the beauty area where we've really invested and focused in on premium skincare or in the nutritional products area where I've talked about the kind of more specialist areas that we've focused on. Again, in Vital, people will know we exited the generic pharma business.
Yeah.
Which was a lower margin business. We've also kind of downsized some of our logistics activities. It's a constant feature of how we've been managing the business over recent years. You'll have seen our margins nudging up over those years, and that's something we stay focused on. I don't think we can promise that trajectory continues forever, but it's certainly something we put a lot of effort into.
Excellent. We have another question come in from the audience. Thank you very much. Maria Gillespie from Davy. Much U.K. production. Any Brexit impact? The Brexit question.
There had to be a Brexit question.
Had to be. Yeah.
Yeah. I think the biggest impact of Brexit for us has been additional admin associated with-
Okay.
Exporting product to Europe from our British manufacturing base. We haven't lost any business. No customers have kind of said, "Well, you're in Britain. Our market is Europe.
Yeah.
We're going to find a new manufacturer." In fact, we've just won quite a significant piece of business in one of our facilities where an international brand was producing the product for Britain in a continental European site, and wants it produced in Britain. Perversely actually, that's probably the only kind of piece of business moving in or out that I can attribute to Brexit. Otherwise, it's really been a little bit of additional admin burden, and most of that has been learning curve, actually. Teething issues.
Okay.
Lack of clarity maybe from the government, from the system on procedures.
Don't think you're on your own on that. Yeah.
A lot of that's kind of flushed through and people have got used to the new protocol. We've managed our way through it, and it's been okay.
Excellent. Well, it's not going away.
No.
We've got another question in from Maxine in TD Securities. Looking to add capabilities in the U.S., gaps and acquisitions. I think we covered a little bit about the U.S., but if there's anything else you want to add there?
I suppose, if you line up our capabilities for the European market, in health and beauty against what we have today in the U.S., I suppose probably the biggest gap is softgels.
Yeah.
That was actually our first contract manufacturing acquisition in the U.K. way back when. That's certainly something we'd like to have in the U.S., and we're active on that front in terms of developing relationships with potential acquisitions. The beauty area is the other one that I touched on. Again, we focused on nutrition to really get going on that, and make sure we're laser focused on building our position. With the additional resources we have in the States and having established a good position in nutrition, albeit with lots to go for still, I think we can afford now to start looking at the beauty market. As I say, it's fragmented, it's dynamic, it's higher growth.
It’s huge.
It's huge. Lots of opportunities for us there as well.
Excellent. Very conscious of time, but if people have any more questions, please do feel free to send them on in. We've got another question in here from Rajesh in HSBC. Average duration of products that you manufacture?
Jeepers. I presume.
That put you under pressure.
I'm going to have to interpret that, but I presume you're thinking maybe about the consumer products, how quickly the brands cycle them.
Probably.
Probably, it varies from format to format, but I'm guessing about probably 20%, maybe a little bit more of everything we produce each year in our facilities is new.
The natural turnover.
Yeah. To be able to cope with that.
Yeah.
To develop those products, go through formulation, go through testing and quality, and that speaks to the kind of resources and capabilities that we have. You know, there are c ertain products, markets-
Yeah.
That products have a much longer lifespan. Typically, it's a very dynamic market. It's a market that likes innovation.
Yep.
We see a lot of the development of the e-commerce channel, the development of digital brands who are virtual companies who are coming to contract manufacturers looking for everything. Probably that pace of innovation and dynamism is only going one direction.
One. Yeah.
We're very well equipped to manage that.
Fantastic. Well, I don't believe we have any more questions, I'm very conscious of time. I found that hugely informative. Is there any passing comments or anything you'd like to leave the audience with? I personally took away that there is great confidence and ability and capability within the division. You have lots to play for and lots of ambition, hopefully, you'll be around for the next 14 or 15 years. Is there anything you'd like to leave the audience with as a general closing?
Look, I think DCC Healthcare is probably in the best shape it's ever been in. As I said, it feels like we're only getting going. Among the team, I know there's huge excitement and enthusiasm for the opportunities we have. Lots of organic opportunities, lots of organic investment opportunities. Obviously, we've the balance sheet to support that. A very interesting opportunity set from an acquisition point of view, operating in fragmented markets. We've got additional management capacity now to be able to absorb those acquisitions. We've got very nice growth platforms set up in the U.S. and in Germany that we can build on. We think we can be a much bigger part of the DCC Healthcare Group over the coming years. That certainly speaks for all the healthcare team.
Excellent.
That's our target and our expectation.
Fantastic. Well, thank you very much. It's been an absolute pleasure from my perspective. I hope you all found that informative. I know that the IR team, Rossa and Holly, are available to take any further questions if anybody has them, and please feel free to direct them into the group, and we look forward to seeing you in November at Results. Thanks all very much.
Thank you.