Good afternoon. I'm Jo Russell, Head of Investor Relations at Haleon. Thank you for joining us today for our Capital Markets Day. Members of the Haleon executive team and across the wider business are excited to share more details on the next phase of our journey. Before we commence, I'd like to cover a few housekeeping items. Our presenters will take around three hours, with two breaks scheduled at appropriate intervals. We'll also have breakout sessions in the middle of the afternoon. There will be videos available for those online to watch. We'll have a Q&A session at the end of all the presentations, and you'll be able to ask questions via the online platform. After today's event, all presentations and webcasts will be available on the investor section of haleon.com.
Before we commence, I'd just like to remind people in the room and listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, sales, and expectations. Please refer to this morning's announcement and the U.K.'s SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed in or implied by any such forward-looking statements. With that, I'll hand over to Brian McNamara, the CEO of Haleon.
Great. Hello, everybody, and thank you for joining us today. It's great to see so many people in the room, live in London. I want to welcome everyone, those everybody who's joining us online. You have seen that yesterday we published our Q1 results. It gave you a sense of the dynamics we're facing in 2025. We confirmed our 2025 guidance as we manage in a challenging and uncertain economic environment. Today is very much about the future and unlocking the full potential of Haleon. We successfully transitioned out of a pharma company, and we're now transitioning the business to become a world-class consumer company. We've made great progress, but it's very clear there's a lot more for us to go after. First, let's ground ourselves in where we are today, starting with what we've achieved over the last three years.
It starts with our fantastic portfolio of leading brands in resilient and growing categories like oral health, vitamins, minerals, and supplements, pain relief, respiratory health, and digestive health. That portfolio, combined with our capabilities in expert engagement, innovation, and route to market, has helped us deliver on the commitments we set out in 2022 and more. We have consistently delivered at or above our 4-6% organic revenue growth guidance and, importantly, generated positive volume mix every year, which was underpinned by strong market share gains. We have expanded our operating margin at constant currency and delivered strong cash flow, which has allowed us to reduce our leverage to 2.8 times by the end of 2024. We have also optimized our portfolio.
We've done that by divesting non-core brands and investing in high-growth markets like China, where we've entered into an agreement to take 100% control of our OTC business. Finally, we started life with a 45% overhang in our shares. Today, that's down to zero, enabling us to create a strong institutional investor base. In short, we've delivered on the commitments we made three years ago. We've established strong foundations for Haleon as a standalone company. I'm incredibly pleased with where we're at today. As we continue to transform Haleon into a world-class consumer company, it's clear there's so much more for us to unlock. Three separate areas where I see the greatest opportunity. First is growth and our continued confidence in delivering 4-6% annual organic revenue growth.
The second is productivity and unlocking a significant gross margin opportunity through optimizing our supply chain, allowing us to deliver operating leverage more consistently to the bottom line. Third is culture and continuing to evolve Haleon into a more agile, performance-focused consumer company. First, let's look at growth. I'll start with some context. We're a company 100% focused on consumer health, an attractive and extremely relevant sector that's worth about GBP 200 billion today. We're in growing and resilient categories, which are benefiting from favorable long-term macro trends, talking about things like continued focus on health and wellness, the long-term shift towards aging populations, and a growing middle class. With these trends, we're expecting the categories we operate in to grow at about 3-4% a year.
Today, we reach about a billion and a half people out of a global population of 8 billion, representing a significant opportunity for us. Over the past three years, we've strengthened our individual category strategies, and now we're much clearer on the headroom for growth across those categories, making us even more confident in delivering sustainable 4-6% annual organic revenue growth. We can see the potential to better leverage our global footprint, scale our innovations, and capitalize on the strength and breadth of our portfolio, going beyond our historic emphasis we've had on power brands. Here we see three opportunities to go after. The first, closing the incident-first treatment gap across our categories. Take oral health, for example. Where only a third of people who suffer from tooth sensitivity actually treat their symptoms.
Pain relief, where today around 4 out of 10 pain occasions are not addressed. Second is innovation-led premiumization through providing meaningful benefits and better health outcomes for consumers. Otrivin nasal mist is a good example here, and we'll touch on that later today, as is our new Sensodyne clinical range. Third, driving penetration among lower-income consumers. By that, I mean all consumer groups outside the highest income bracket. We believe that we're uniquely positioned to deliver on the needs of these lower-income consumers. Today, we're significantly underpenetrated with this population, with our market share less than half that of higher-income consumers. Now, the second opportunity is increased gross margin. We'll do that through developing a more efficient and agile supply chain. The reality is today, our supply chain is the combination of three separate pharma supply chains.
Now, that comes with a very strong heritage in quality, compliance, and scientific excellence, all things that are very important to us and will continue. With that heritage comes a lot of unnecessary complexity and inefficiency built into our supply chain. We see a real unlock in radically simplifying our current portfolio. We'll do this by reducing the number of packaging variations, the number of formulations, and ultimately significantly reducing our number of SKUs. That will allow us to drive more efficient and effective operations in our plants, which in turn gives us the ability to better leverage scale and procurement and drive significant savings. There's also a real opportunity to evolve our manufacturing footprint. First, we'll consolidate and simplify our third-party network.
We will evolve our internal network to support the future shape of the business, including strengthening our presence in key markets like India and China. These initiatives will realize GBP 800 million in gross supply chain savings over five years. In turn, these savings will significantly contribute to 50-80 basis points of adjusted gross margin improvement per annum. That gross margin improvement, along with operating leverage, provides us with the capacity to invest in the business and also gives us confidence to upgrade our guidance to high single-digit adjusted operating profit growth at constant currency. The final opportunity is to continue to transform Haleon into a more agile, performance-focused consumer company. When we separated, we cloned and copied the processes and systems across to Haleon. That was the right thing to do from a business continuity perspective.
Those systems and processes were right for a pharma company, but not for a consumer company. We have made good progress over the last couple of years. We have done a number of things, including evolving our processes and simplifying the way we do things, reshaping the company and upgrading the talent across the organization, including at the leadership team level. We still have a lot more to go after in terms of the shift here, and we have a clear plan in place to deliver it. That includes driving a culture shift within the organization, becoming a more agile, performance-focused company. We are doing this in a number of ways, not least through directly linking employee remuneration to key financial metrics as well as individual performance. We are also streamlining and simplifying our operating model and continuing to expand our business services footprint to support our growth and productivity agenda.
We're making good progress here. I've talked about what the opportunities ahead look like. Now, let's look at how we're going to go after that opportunity, which we'll do through our win-is-one strategy. Our win-is-one strategy is all about raising the ambition and realizing the full potential of the company. It's how we're mobilizing and driving the organization relentlessly and consistently forward to capture the opportunities we see ahead. There are four elements to the strategy, all designed to work together and reinforce each other, starting with our purpose to deliver better everyday health with humanity. It's the impact we want to create for our consumers around the world. To deliver our purpose, we define two ambitions: to provide everyone at Haleon with a North Star and guide us in everything we do.
They capture both the growth opportunity I've just talked about as well as our consistent commitment to maximizing shareholder value. The two ambitions are to reach 1 billion more consumers by 2030 and to generate industry-leading shareholder returns. We have aligned the entire organization around a set of strategic drivers to support these ambitions. I'll take each of these in turn. First, health in more hands. This is all about unlocking the significant headroom within our categories. It's about driving penetration and closing the incident-first treatment gap I talked about earlier. It's about driving innovation-led premiumization as well as penetration among lower-income consumers. Second, superior brands. This is about leveraging our category footprint, scaling our innovations, and capitalizing on the strength and breadth of our brand portfolio. Our new clinical platform for Sensodyne is a great example of what we're doing to attract new consumers and drive premium offerings.
Third, wired for excellence, driving efficiency and productivity across the entire value chain. A key part of that is the unlock within our supply chain, which I talked about earlier. Finally, full potential people, unlocking the potential of our people to deliver on our ambitions and cultivate a culture that gives us a genuine competitive advantage. We have defined a set of four behaviors that we have embedded in the organization. I will let some of our people explain what they are.
Consumer first, always. To me, it is about putting the consumer at the heart of every decision. When we see the world through their eyes, we unlock real value. When we answer to their needs, we unlock growth for everyone. Collaborate for impact is about building strong relationships that drive us towards our purpose and objective. It is about working together to create meaningful change.
Unlocking value at pace is making well-informed, fast decisions and then executing, learning, and keeping on improving. To me, grow myself and others means that we are consistently challenging each other to learn, to develop, and really to encourage each other to do the same so that we can be at our full potential.
Of course, in line with our purpose, our responsible business agenda is woven into every element of our strategy. Now, I'd like to spend a minute talking about how this translates into our value creation algorithm, which Dawn will talk through in more detail later. First, our algorithm starts with the confidence in our medium-term target of 4-6% annual organic revenue growth. Second, the substantial gross margin opportunity creates significant financial flexibility, which means that we're upgrading our guidance to high single-digit adjusted operating profit growth at constant currency.
That strong operating profit growth, along with improvements in working capital, will drive strong cash flow generation. Combined with disciplined capital allocation, this will drive strong EPS growth, enabling us to achieve our ambition of generating industry-leading shareholder returns. Over the course of the next couple of hours, Tamara and Franck will take you through the headroom we see for growth across our categories. They'll also talk you through a couple of examples to show you how we're driving health in more hands through our superior brands. Filippo will focus on our route-to-market capabilities and our strength in the pharmacy channel as we take our superior brands to consumers. You'll then go through a series of breakouts where we'll bring to life the execution of our category strategies in market.
After that, Namrata will take you through our supply chain opportunity, a key part of our Wired for Excellence strategic driver. She'll also update on our responsible business agenda. Then, before I come back and bring it all together, you'll hear from Dawn, who will take you in more detail through our value creation algorithm. Before I hand over to Tamara and Franck, I'll leave you with the key messages I want you to take away from today. We have a clear strategy to drive growth across our attractive and resilient categories. We're unlocking the opportunity in our supply chain to reinvest in the business and deliver strong gross margin. We're continuing to transform Haleon into a more agile, performance-focused consumer company. All that underpins my confidence in delivering our value creation algorithm. Thank you. Now I'll turn it over to Tamara and Franck.
Good afternoon, and what a beautiful afternoon it is as well. I mean, London in the sunshine, you cannot beat it. I'm Tamara Rogers, Chief Marketing Officer.
And I'm Franck Riot, Chief R&D Officer.
Between the two of us, we bring a wealth of experience in the development and the building of strong brands in consumer goods. Brian introduced our win-is-one strategy and our four strategic drivers, one of which was superior brands and health in more hands. We are going to take you through how we build superior brands and what we mean by superiority, which for us is about focusing on what really matters to the consumer, and then show you a series of examples of how our superior brands unlock those three growth opportunities you heard Brian outline earlier. We will give some insight into how we're evolving our capabilities to really maintain that competitiveness.
First, we're going to spend a few minutes just grounding you in our categories and our brands. Starting then with the categories. We operate in resilient and growing categories, reaching 1.5 billion consumers already with our portfolio of fantastic brands. We have the ambition, as Brian shared, to reach a billion more. Now, we've made a decision to change how we report our categories to strategically line them up better with the opportunity that we see ahead and to give you improved visibility on our performance. As you can see here, we've broken up digestive health and other into digestive health, therapeutic skin health, and other. We're moving our U.S. smoking cessation business into respiratory health, given the link between better breathing and respiratory health outcomes for consumers. We believe that you know the great brands we have in digestive health of Eno, Tums, and Benefiber.
We have talked less about the therapeutic skin health brands. Now, these tend to be pharmacy-based, strong local brands, such as Bactroban in China, which is all about supporting wound healing. Fenistil across Europe helping to stop that annoying itch from insect bites. Abreva and Zovirax, which are fantastic antiviral treatments, a really efficacious way to clear up cold sores fast. These great brands have a role to play, enabling us to achieve our ambitions as they have attractive margins and they sit in the faster-growing subcategories of skin health. Now, all the categories we play in are substantial, ranging from the largest, vitamins, minerals, and supplements at GBP 65 billion, to digestive health at GBP 18 billion. We are well-positioned, typically occupying the number one or number two positions. Overall, combined, these categories are set to grow at 3%-4% in the medium term.
We have got confidence in our ability to outperform that in line with the guidance that Brian gave earlier. Now let's turn to how we build superior brands to drive that sustainable growth, brands which are relevant to the audiences we engage with, brands that deliver superior and premium solutions. Let's start with what superiority does mean to us at Haleon. How do we define it, and how do we go about it? Of course, in line with our behaviors, we start consumer first, which simply means we focus on understanding really what matters most to consumers and experts. Once we've identified that, we put all our time into building superiority, excelling, and delivering where it matters most. Doing this consistently is key. Consistency builds trust. Trust means that we become the consumer's first choice when their need arises.
This ultimately results in creating brands that are leaders in the categories we compete in. We live this across Haleon. We are consistently looking to measure our superiority against both our ambition but also against our competitors. We can tell you how we build superior brands. As we said, the measure is what matters to consumers. Do not just hear it from us. Let's listen to what our consumers have literally said or written to our team at the Consumer Relations Center.
Thank you for the excellent product you have created. I am 63 and disabled and have difficulty walking. If it was not for the brilliant products, I would not be able to move around as I used to. It has been a blessing. Even when sitting down, I used to be in a lot of pain. After applying your brilliant product, I feel relief.
I'm only quite young, and I lost my teeth to no fault of my own, pure medical reasons only. Polident helped me along the way to keep my teeth in, keep them nice and white, and give me the added confidence that they won't fall out. I want to tell you how much Abreva really and truly means to me. I have suffered from cold sores since I was a young teen, and I'm now 65 years old. My life has been plagued with cold sores that spread and covered my entire upper and lower lips. It was a horrid time. I can't write a book here, so just let me say Abreva is a tiny little tube that has been huge in my life. Now my headaches start small and then explode into full-on migraines.
I had no idea how to treat a migraine, and then my friend recommended Advil. I never turned to Advil before, but after taking my first one, I've never turned back. Quick relief that actually happens? Absolutely nothing else works. Thank you for honestly getting me back to living, but also making me a better mom so I can just be there with my kiddo without being in pain.
As we develop the thinking behind superiority, we identify five key levers: science, experience, experts, communication, and execution. These levers form our superiority framework. All are important. For each brand growth initiative, we pick the levers that will make the most difference, and then we double down. That way, we build brand superiority. This is underpinned by our strong consumer and condition understanding and capabilities. Let's go deeper into each one.
Our world-leading science program is multidimensional, designed to deliver health benefits to consumers through innovation, renovation, cleanse, as well as cutting-edge ingredient and material research, and science visualization, to name a few. Experience. Winning on key experience attributes is critical. This includes excelling packaging design, product sensorial, and inclusivity. Experts, healthcare professionals such as dentists and pharmacies, confidently recommend products when they have a good depth of knowledge about how our products deliver, ultimately leading to trusted recommendations for their patients. Communications. It is all about lending our meaningful brand superiority through relevant, high-impact, and memorable campaigns to drive awareness. Lastly, execution, which is so critical. Supporting our brand with media and showing they are accessible, widely distributed, and easy to find on shelf and online to convert awareness to purchase.
You will hear more from Filippo on how we are doing that in pharmacy, a key channel for Haleon, which also demonstrates our capability with expert engagement. Enough theory, Tamara. Let's bring this to life now.
I agree, Franck. Let's get into how we're applying the levers of the framework to build the superiority that drives both brand and category growth for each of the three opportunities that Brian headlined earlier. First, by closing the instance versus treatment gap across all of our categories. Second, innovation-led premiumization to provide meaningful benefits and better health outcomes for consumers. Finally, driving penetration amongst lower-income consumers. By this, we mean all consumer groups outside of the higher-income bracket. The incidence versus treatment gap is one that we see across all of our categories. We see a huge opportunity here. Let's take, for example, oral health.
You've already heard Brian mention the opportunity in tooth sensitivity, where a third of people who suffer—sorry, a third of people who suffer with tooth sensitivity—treat. The rest of them don't. In gum health globally, we know that 53% of adults suffer and experience bleeding gums. Yet only 6% of them don't use a therapeutic product to treat those symptoms. If we extrapolate this for oral health, it means that billions of people are not treating those issues. Closing just 10% of that treatment gap would see us double our oral health business. Turning to parodontax, our oral health brand specifically designed to address gum problems, we looked to China. It is the largest gum health market in the world at GBP 860 million in value, where around 70% of adults suffer from gum problems or poor gum health.
This is almost double the incidence we see in European countries. Yet only 40% of sufferers are purchasing a specialist toothpaste for gum. With the majority of the Chinese offerings only relieving symptoms, not addressing the actual root cause, we saw a fantastic opportunity to bring our clinically proven treatment for gum problems to this market. We launched parodontax there very recently. We'll now walk through how we're unlocking this opportunity around the world using the three superiority levers most meaningful to build parodontax's competitive advantage. These three are science, experts, and communications with consumers.
First is science. Recognizing the high prevalence of gum issues, we knew that we had to continue our focus on efficacy and demonstrating our meaningful superiority.
We have run a number of studies, and the latest study demonstrates clear superiority of our unique sodium bicarbonate formula versus Ergato Space, with a two-and-a-half times greater reduction in gum bleeding. Clinical results like these don't just live in our labs. They support superior claims that persuade the consumer to purchase. Recent data show parodontax not only treats but reverses gum problems. We rapidly leverage its powerful claim, adding it to our pack, as you can see here, strengthening the overall proposition. As a result, we have created a powerful product range supported by a differentiated set of claims. This is already used by 44 million consumers to solve their gum issues. Now let's look at experts. Consumers tell us that the product recommendation from a healthcare professional is the biggest influence on their likelihood to try parodontax.
Knowing that new scientific data is extremely meaningful to dentists, we focus on demonstrating our superiority with this expert audience. We have recently conducted a new study, in fact the first of its kind in the world, on parodontax efficacy against plaque, a major cause of gum problems. I am going to share with you a visualization for experts that demonstrates the superior plaque removal. You will see plaque, which is described as a biofilm. Let's see what they see, the science in action. It is an extract of a film our dental reps use when discussing parodontax on their daily call.
Treatment with 67% sodium bicarbonate was shown to remove the soft upper layer of biofilm, resulting in a 40% reduction in biovolume. Repeated treatments softened the remnant biofilm matrix, resulting in an 80% total biofilm volume reduction. Contributes to the clinical results seen for parodontax 67% sodium bicarbonate toothpaste.
What this shows is we significantly improve gum health markers for patients with gingivitis from just three weeks of use. As a result, we are the number one recommending brand for gum problems in the key markets of France and Italy.
Now to communications. Knowing that so many consumers do not know how to treat their gum problems, we designed our communications to really clearly demonstrate the superiority of parodontax. Using a very distinctive character to build standout, difference, and memorability, parodontax challenges consumers to find a better way.
Sally! Great pair of lungs. Shame the same cannot be said about your gums. You need parodontax. It actively repairs gums for one week. High five! We are not there yet. parodontax. The gum experts. The idea also works brilliantly in social formats. You need the gum experts. parodontax. parodontax.
This communication program is running in all of our top markets and within the first year has seen us make big gains in awareness and increasing our brand strength. We have recorded record shares across the last three years. To summarize this one, the focus on meaningful superiority from the three levers of science, experts, and communications has delivered excellent results, unlocking that incidence versus treatment gap opportunity for consumers with gum problems. We have achieved over a decade of above-category growth. We have increased penetration with growth in 80% of our measured markets. In our EMEA heartland, 73% of the gum category growth over the last year was driven by parodontax, growing both our brand and the category. We are fostering premiumization, with 35% of new users to parodontax in the U.K. and in the U.S. having traded up from regular toothpaste.
Now on to innovation-led premiumization, the second of our growth opportunities. Now we're confident that our innovation-led premiumization across all of our categories will continue to be a valuable source of growth for us based on the macro trends that we see. Modern living, strained healthcare systems, the consumer's desire to more proactively manage their own health. All these things mean that many consumers are seeking more than just the basic solutions. The fact that we already do premium is another one for believing. In our six categories, we are weighted to the 120 price index market segments. And our capabilities in insight and trusted science ensure that we deliver the very best to consumers, resulting in our premium ranges being worth paying more for. Let's focus on respiratory and Otrivin and specifically nasal decongestants, where we know that there is an opportunity for innovation-led premiumization.
In our key markets, an incredible 65% of the population actually suffer from nasal congestion. Yet only half of them treat at the source of the issue with nasal sprays. Our nasal decongestant Otrivin is already the clear leader in the category. Insight revealed that some people were put off from trying this format due to discomfort, with 66% of consumers noting that traditional sprays felt like a jet to the back of their nose. We heard this, and we chose to unlock growth through premium innovation by doubling down on the meaningful superiority framework levers of science, experience, and communications.
Let's start with science. Otrivin's superior speed of treatment, compared to existing over-the-counter pills, is a great example of focusing on what matters most to consumers.
Building from the core product's efficacy, the team delivered a breakthrough fine mist applicator via a patented design to address key consumer pain points, achieving a gentle and comfortable mist experience whilst retaining superior efficacy. Let me bring it to life for you.
Otrivin new nasal mist. Nasal congestion is described by patients as a reduced ability to breathe, and it negatively affects quality of life. Nasal congestion is characterized by dilation of the blood vessels and swelling of the mucous membrane. Otrivin new nasal mist provides a comfortable, fast, and long-lasting relief from nasal congestion by reducing vasodilation. Otrivin new nasal mist is applied topically to the nose and comes out as a gentle fine mist, reaching wide to the inflamed or swollen areas in the nasal cavity, which are typically affected by common cold, allergic rhinitis, and rhinosinusitis.
We also ran a real-world evidence study capturing feedback from consumers, which demonstrated important quality-of-life improvement, and particularly in sleep and vitality from the first day of use. By doing this, we double our weekly average recommendation from pharmacists in our core markets. We are able to support meaningful claims to bring to life benefits for consumers. Now moving to experience. We built an innovative and consumer-preferred experience by leveraging a combination of internal experts across sensory product and packaging development to develop a world-first mist applicator. The new packaging releases a comfortable fine mist without any drip at the back of the throat. This brings a world-first one-squeeze button actuator, easier for everybody, and supports inclusivity for people with dexterity issues. A shorter nozzle, which is less invasive of the nose, is much more acceptable to convert non-users of sprays.
As a result, we have improved the consumer experience and are driving penetration. For example, achieving between 7% and 10% increases in Poland and the United Kingdom.
Those penetration increases are really significant. Now to communications. With such a great product and great scientific evidence, we were able to create superior quality-of-life claims and highly memorable communications that celebrate just how much better the usage experience really is.
Let's take a look.
Nasal sprays can feel like this. Say goodbye to spray struggles with brand new Otrivin nasal mist. It is more comfortable for your nose because it is not a blast, it is a mist, and unblocks in two minutes. You can feel like this. Breathe your best with new Otrivin nasal mist.
This has been really effective advertising that has built our difference.
At the same time, we gave the brand a powerful new ownable visual identity on pack and across all consumer touchpoints. We drove clear communication of strong claims supported by that real-world evidence and launched a new brand architecture, which really stands out and enables consumers to navigate. They can see the benefits of the different variants. In our researched markets, we have seen these increases in findability by 42%. Purchase intent is up by 8%, helping to support trial and the lifts in penetration that Franck just shared. In summary, we have lifted the superiority of Otrivin with a premium innovation, which has delivered outstanding results. Seven markets have launched our nasal mist in 2024, and we are rolling out to more markets. We are growing our market share where we have launched this superior experience, and we are holding share in those markets where we are yet to launch.
Our initial results show it's working. In the early launch markets of the U.K. and Sweden, we're bringing new users into Otrivin, with more than half of them being first-time spray users.
Finally, to the third growth opportunity driving penetration amongst lower-income consumers. Today, our penetration is weighted to the highest income band at around 30%. If we look at lower-income bands, and particularly in emerging markets, we see a significant penetration opportunity as our reach is about half of that. We also know lower-income consumers are looking for products they can trust to deliver real health benefits that are readily available and come at an affordable price point. We have delivered against this need historically, with brands including Grandpa, ENO, and see Haleon as well positioned to deliver even more widely across our superior brand portfolio.
In VMS, half of the world's population has micronutrient deficiency, and 2 billion of those suffer from deficiency-related conditions, and primarily in emerging markets. For our specific example, we are going to focus on Brazil. The category is already huge in Brazil and growing at 6%, with a category currently only reaching a quarter of households. Low-income consumers account for over 70% of the population. Incredibly, two out of three Brazilians have insufficient daily nutritional intake. Yet an incredible 81% are trying to improve their health. Sancham is a well-known and desired brand in Brazil, but 31% of consumers felt it lacked relevance for them. 40% said pricing was an issue. As a result, category penetration is low. An amazing opportunity to grow with the right proposition. We knew we needed a tailored consumer-led answer and focused on the key levers of science and execution.
Starting with science, we use our understanding of nutrition deficiency from a study of more than 30,000 Brazilians to create Centrum Essential, a product specifically formulated for the needs of the lower-income Brazilian consumer, with the aid of vitamins and minerals most relevant for this audience. First launched in 2023, swiftly followed in 2024 with single-dose effervescent powder that brings a different experience and delivers against Brazilian top two most wanted benefits of immunity and energy in a very convenient and portable format.
Moving to the all-important execution. This launch is a great example of delivering superiority to a specific audience. To ensure that we made the brand relevant, real care was taken with superior execution in two ways. First, an absolute focus on affordability, hitting a key accessible price point, significantly lower than the regular Centrum Adult price from the number one multivitamin brand in Brazil.
Secondly, we really focused distribution on the retailers that specifically target lower-income consumers so that we were offering what these consumers need, where they want to shop. Having a trusted brand such as Centrum creating tailored offerings at compelling price points has enabled relationships with new distributors. We have created brand new listings in 5,000 incremental stores. That is a meaningful increase to brand distribution. What are the results that we are seeing here? These products are already driving penetration, with 50% of volume growth coming from new users to the multivitamins and minerals category. The launch of those new effervescent powders continued this positive momentum, with 70% of users in the first six months also being new to the brand. This range is helping Centrum to build its market leadership position and achieve its highest global share in the last three years.
This is just one great example of how we're unlocking penetration growth in a new audience. We'll extend this as well as other successful launches designed for lower-income consumers across the categories to more markets. We have shown you three examples of how our capabilities of consumer understanding and trusted science ensure that we build superiority. They also demonstrate how we're unlocking that growth headroom through closing the instance versus treatment gap, through innovation-led premiumization, and lifting our penetration amongst lower-income consumers. We will continue to apply this approach, successfully building superior brands and driving our growth momentum going forward.
Talking about the future of Tamara, it's essential that we continue to leverage our strengths and raise the bar on our capabilities to sustain our position and deliver growth.
We are going to cover five key capabilities, which we are continuously strengthening to ensure we are sharp for tomorrow as well as today. We'll start with technical mastery. We are investing around GBP 200 million in new cutting-edge R&D facilities, many of which are unique to Haleon. Facilities including state-of-the-art prototyping suites and labs for mastering ingredients, formulation, or bioactive, as well as experiential spaces for direct interaction with consumers, which will ensure we continue to deliver pioneering innovation with even greater technical agility and speed to market. Moving to regulatory excellence, our regulatory excellence is world-class. We continue to advance this so we can shape the future of healthcare policy and regulation and innovate with new digital solutions, as well as continuing to actively support product licenses already in place for our portfolio in this complex and ever-changing regulatory environment.
For example, in China, we secured a direct approval of our Voltaren 2% gel as a non-TC classification rather than needing to be prescription status first. In my opinion, our regulatory excellence and data-first approach enables this, saving years of time versus a typical regulatory process. Superior evidence generation. Science is at the heart of our brands, and we are going to continue to invest here, but in new and digital ways. In addition to our high-quality clinical study, we will be expanding those we do with consumers in a real-life setting. Known as real-world evidence studies, they provide robust insight into both usage and quality-of-life benefits of our products. This allows us to unlock meaningful superior claims that ultimately drive recommendation and purchase.
Now looking at partnerships.
Partnerships are a key way of how we are building superior brands now and into the future, extending our knowledge and our authority across multiple stakeholders in the industry. Our launch of the Haleon Pain Management Institute is a good example here. It's a body of multidisciplinary experts working to deliver education and skills development for frontline healthcare professionals and really building scientific credentials through research and partnerships. These kinds of partnerships build trust in Haleon and positively influence his recommendations. Finally, future-fit marketing, because it's not only about continuing to do good work, it's also continuous improvement in how we do it too. Smarter work with tech and data adds value. We're doing this in lots of ways already, and I'm particularly excited about our growing use of data signals that informs our media activation for our seasonal businesses.
For example, adjusting spend real-time as the instance of cold and flu rises or falls. Our data capabilities are also growing in AI, of course, where we've trained our enterprise AI platform to speed up innovation. We're already seeing that accelerating ideation on new products and claims for brands like Voltaren, Centrum, and Panadol. As you'll hear from Dawn later, our marketing capabilities are underpinned by sustained strong levels of AMP, with ever more focus on making it work harder for us. Never a dull moment, is there, Franck? Do you want to wrap up this section?
Indeed, Tamara. That's just a research top tool of the evolution we are leading, taking our existing strengths and stretching them further. We are set for the future growth generation.
In summary, we have shared that we have a fantastic portfolio of brands and operate in six attractive categories, and we see promising headroom for growth in each. We have a clear track record in driving sustained performance in consumer healthcare and in these categories. We have our own approach to building superior brands that deliver growth. We serve 1.5 billion consumers today with the ambition to add 1 billion more. Lastly, we are committed and energized to continue advancing our capabilities. With that, let me hand over to Filippo.
Thank you, Franck, and hello, hello everyone. I am Filippo Lanzi. I am President of EMEA and LATAM region since 2021. You have heard from Tamara and Franck about how we are putting health in more hands through our superior brands. They talk about five levers.
What I'm going to do now is to focus on two of these levers, specifically expert and execution, and how they will combine and help us winning in pharmacy. I'm going to leave you with three key messages. Message number one, pharmacy is a critical growth channel for consumer health and also for Haleon. Second, pharmacy, it is a lot more than just a sales channel, as it is a expert-driven channel where recommendation of trusted health products matters. Third, Haleon has what it takes to keep outperforming in this critical channel. When I say that, I mean that we have a strong footprint and route to market. We have distinctive assets which are focused on shopper experience, category growth, and pharmacist education. Finally, we have a clear plan to further enhance these capabilities, leveraging AI and technology, and also to scale them globally.
Let me start by explaining why the pharmacy channel is so relevant for consumer health and for Haleon. I will start by giving you a sense of scale. Today, there are around 3.6 million pharmacies globally working across more than 2 million points of sales. Combined, they account for around 75% of global OTC and VMS spend outside of the U.S. It is a growing channel, but it is also very fragmented. In fact, around 70% of the pharmacies are independent stores. This clearly requires a very different approach to how we work with mass market, which we have successfully developed over time. As I said before, pharmacy is much more than just a sales channel. Pharmacies are considered a first point of care. Very often, they are compensating the gaps in the public healthcare systems, which is largely down to convenience.
As an example, about 80% of the European population lives within minutes from a pharmacy. Pharmacists very often act as healthcare providers, providing advice to consumers, which then translates into purchase through recommendation. In a study we have conducted in key markets, when a pharmacy recommends a product brand to a consumer, between 8-9 consumers out of 10 go on with the purchase of the recommended brand. This gives us a really great platform to capitalize on our superior brands that Tamara and Franck talked about before. Within this context, Haleon has a winning and also unique competitive advantage in the pharmacy channel, which is based on three components: size. Haleon is the number one consumer health company in pharmacy globally, and we are very much ahead of our competitors.
If we take LATAM, for instance, we are almost twice the size of the next competitor, and we are outperforming the market by 1.5% in percentage. Our geographic footprint and extensive sales force, with more than 4,500 reps and more than 90% distribution of our products, means that we have a strong reach, and we are able to establish a direct interaction with pharmacists, which I believe is the foundation for our success. In addition to this, we have developed a distinctive approach, which is built on leveraging technology and science to accelerate our performance and stay ahead. Let me explain a bit more about this. Our distinctive approach is anchored on three pillars, for which we have industry-leading technology and programs in place. First, we offer best-in-class shopper experience through a variety of tools and solutions. Second, we lead category growth via our execution programs.
Third, we educate pharmacists with the right knowledge to leverage their recommendation impact. I will talk you through each of these briefly now. Let's begin with how we offer best-in-class shopper experience. Our approach here relies on how we generate shopper insights globally and translate them into our execution, capitalizing on advanced data and analytics and industry-leading tools. Here, let me introduce you to our Shopper Science Lab, our world-leading insight facility across 15 major locations globally. Let me show in a second a video to bring our capabilities to life here. Many of these capabilities are bespoke to Haleon and unique in consumer health. You will also see that in some cases, we have tailored features from mass market applied to the pharmacy channel with additional tools and customization, which are specific to this environment. Let's see the video, please.
Haleon's Shopper Science Lab is a global network of facilities, capabilities, and cutting-edge technologies that drive category growth in all channels, with a particular focus on pharmacies. Our centers focus on three areas: category strategy, shopper insights, and customer collaboration to ensure we are at the forefront of transforming retail and pharmacy. They offer a suite of innovative advanced tools. These are recognized by our customers, empowering them with robust data to inspire confident, data-driven decisions that enhance the shopper experience in both physical and online stores. Let's see some of our best-in-class tools used in pharmacies. The Advanced Range Review Tool, ART, is a proprietary technology of Haleon. It optimizes placement on shelves and predicts the commercial impact of changing the fixture, making it a strong favorite of our customers. Dragonfly AI is an AI-powered eye-tracking analytics tool that provides real-time analytics of immediate attention metrics.
It is used in multiple platforms, from packaging to advertisements. SSL E-commerce Evaluation Tool, SEE, improves the presence of our brands in e-commerce platforms by enhancing online content and improving engagement quality. Augmented Reality allows us to test point-of-sale materials in virtual stores. This experience helps optimize and offer a better shopping experience, considering the real store environment. Haleon's Shopper Science Lab network stands at the intersection of leadership and innovation, enabling us to set new standards in retail and pharmacy.
Good. I think you got a good sense of these tools and programs. Let's now move to the in-store engagement, where we have not only best-in-class visibility, but what I believe really differentiates us is the combined approach of driving the right communication along with the key activations. Let me give you a couple of examples here.
We customize our in-store messages to help consumers navigating across the need states to coincide with the key moments in a year. For example, the winter period, Ramadan, or for a specific group of target shoppers, as we did for younger consumers during last year and this year's London Marathon. Now, to complement this, we also activate our brands through condition awareness initiatives in pharmacies, with a variety of diagnostic tools that are unique to us. These include in-store tests for vitamin deficiency and dental plaque, a real innovative tool that helps us engage with our consumers to help them understand their condition in a convenient way. This is particularly relevant for how we engage with lower-income consumers, where an in-store test is the most common engagement they can have with a healthcare professional. Take the UAE, for instance.
There, we have helped 85,000 consumers define their vitamin deficiency last year through a simple three-minute test using our diagnostic tool and leading them to significant conversion to purchase. We are scaling this kind of approach across the entire Middle East. This year, we are expecting to do more than 3 million tests in-store, triple the number we did last year. Our parodontax Plaque Test activation has also confirmed the positive conversion because 62% of the people converted their plaque issue understanding into purchase. Turning now to how we are driving category growth through our Haleon Perfect Store initiative. Perfect Store is our global in-store execution program that focuses on category growth through driving assortment decision, product placement, and visibility. It is a program that is best in class and unique to Haleon in the pharmacy context.
Currently, it is in place in around 30 markets in Europe, Middle East, Africa, Latin America, and APAC, and the number is growing. It involves us strategically investing our sales reps' time for value-added activities, which drive category growth. We are seeing actually great results in those markets where this has been implemented. For example, we had in Hungary 3% category growth ahead of what happens in other stores and 2% in Poland, with the direct correlation with our market share expansion in both markets. Now, we are evolving Haleon Perfect Store through leveraging Next Best Action, which is an industry-leading technology which we are the first to use in the pharmacy channel. It is built on AI, and it definitely takes execution to the next level through personalization.
This means that our rep can generate a personalized plan and recommendation for each store using critical store-level insights, such as consumer demographics, display area in the store, and pharmacy purchase trend, which we expect to help drive further the category growth. Today, we have already implemented Next Best Action in four markets in Europe. Very soon, it will happen in India. We are aiming at scaling this industry-leading solution globally by 2030. Finally, we are taking a distinctive approach to educating pharmacists to best engage with their customers. We have more recently enriched this with digital capabilities. Haleon Health Partner, which is what Franck has shown before, is our best-in-class platform for our healthcare professionals. It is providing training, webinars, product information, and patient engagement materials with great convenience. Haleon Health Partner leads the industry when it comes to scale and reach.
It is live in 56 markets. We have nearly 1 million healthcare professionals registered. We have now developed a customized version for pharmacists, where we have almost 106,000 pharmacists registered to the portal. We have doubled registration compared to the year before. To give you a sense of what it does mean, in countries like Saudi Arabia or Pakistan, we reach 80% of total pharmacies through this portal. To conclude, I will go back to my early messages. Pharmacy is a critical growth channel for consumer health and for Haleon. Pharmacy is a lot more than a sales channel, as it is driven by expert recommendation of trusted health products. Haleon has what it takes to keep outperforming in this critical channel. Thank you. Now I'm going to hand back to Brian.
Thanks, Filippo. Thanks, everyone.
Listen, we're going to take a break in a couple of minutes. After the break, we're going to rotate you through some small group breakouts, where we'll go a little bit deeper into our categories and markets. Before then, I want to show you a short video on India and how it all comes together in India. India is clearly a key growth market for us as we look into the future. Let's play the video.
Welcome to India, a key growth market for Haleon. I'm Navneet Saluja, and I've been the General Manager of our business in India since 2018. With a population of 1.4 billion people, India is set to become the world's third-largest economy by 2030. India's consumer healthcare industry has grown rapidly in high single digits over the last five years.
We have built a strong track record of growth, delivering a 14% CAGR over the last eight years, well above the market and with consistent share gains. Looking ahead, we see a significant opportunity in this important market, and Haleon is very well positioned to outperform the market. To give you a bit of context, the landscape is extremely fragmented, with the top 1 million stores in the country making up almost 55% of the FMCG market. Haleon has established a strong footprint across multiple channels in pharmacies, traditional trade, modern trade, and now e-commerce. In the GBP 3.8 billion consumer healthcare market in India, we are currently serving around 370 million consumers. Importantly, in 2023, we took distribution back in-house from Hindustan Unilever, and in less than 12 months, we saw strong accelerated sales growth. In 2024, our volume growth was approximately twice that of the FMCG industry.
We are continuing to expand our reach across India, as well as doubling the number of healthcare professionals we engage with through our expert sales team. Turning to categories, to bring to life the opportunity that you've heard about today, I will now share a few examples of what we are doing here in India. Let's first look at our oral healthcare category and Sensodyne specifically. We first launched Sensodyne in India in 2011. It has delivered strong and consistent growth over the last decade. India is now Sensodyne's second-largest market. Importantly, we see lots of opportunity to drive growth through condition awareness among consumers, shopper engagement, science-led innovation, and expert advocacy. We are the number one dentist-recommended brand for sensitivity in India. India is also the number one toothbrush market for Sensodyne globally, and we are leveraging Sensodyne equity to build a complete care regimen and toothbrush-by-toothpaste.
There is also a significant lower-income consumer opportunity for Haleon, where we are underrepresented today. For example, 40% of toothpaste volume sales in India are at INR 20 or lower. This price point also makes it affordable to a large lower-income consumer base of India. We wanted to help more consumers with access to sensitivity relief. We turned this concept into reality within 58 days, launching a Sensodyne INR 20 pack to address this opportunity. It has been really well received. We are already in well over 300,000 outlets. We expect to reach 800,000 outlets by the end of 2025 and over 3 million outlets in the next few years. Let's now look at Sentryl. This we launched in India in 2022.
We are following the well-established model, which we have used with Sensodyne, with driving brand penetration by building consumer condition awareness and, importantly, driving expert advocacy through science-backed superior claims. While it's early days, Centrum is already ranked the number one multivitamin on Amazon. We're also meeting the needs of the lower-income consumers through the launch of Centrum Recharge. It comes at a price point of INR 10 per sachet, providing an affordable solution and encouraging new consumers to enter the category. Finally, let's turn to our antacid brand, Eno. It's fast-acting, getting to work in six seconds, making it a very differentiated consumer proposition. Priced at INR 10 per sachet, more than 1 billion sachets are made and sold every year in India, making it the most distributed antacid brand here. Eno is a brand built on culturally relevant advertising and efficacy.
We will continue to expand this category by promoting our scientifically backed innovative formats and ingredients versus home remedies. To conclude, we have a very exciting opportunity ahead for India, built on a superior brand positioning and growth categories we operate in. Thank you.
Hi everyone, I'm Jayant, and I've been leading Haleon's largest category, Oral Health, since 2019. As Tamara and Franck mentioned, Haleon is the global leader within therapeutic oral health, with strong positions in sensitivity, gum, and denture care. You've already heard about the opportunity we see to continue to drive growth in this category as part of our win-as-one ambition. In our breakout session, we are focusing on two elements of this: firstly, closing the incidence versus treatment gap, and secondly, driving innovation-led premiumization. We are bringing these opportunities to life by focusing on the U.S., which is our largest oral health market.
I'm joined today by Jason, who leads our expert team in the U.S. and who also spent five years as the U.S. category lead for Oral Health. Jason, over to you.
Hey, thanks, Jayant. Let's begin with an overview of our U.S. oral health business. Our portfolio centers on the Sensodyne franchise, which has consistently increased household penetration for nearly a decade with attractive market share gains. It includes the world's number one sensitivity toothpaste, as well as Sensodyne Pronamel, which is specially formulated to protect teeth against the effects of acid wear, and Polident Poligrip, the number one brand for denture care. We also have a small but fast-growing business in gum health through parodontax, which Tamara and Franck talked to earlier. Let me take a moment to tell you about our first opportunity: how we are closing the incidence versus treatment gap through our expert engagement.
As a result of our expert engagement, more than 40% of new buyers in the U.S. cited expert recommendation as their number one motivator for trial. How are we leveraging and driving this? We have a strong reach with the U.S. dental community, and we supplement direct office visits with our Haleon Health Partner Expert Portal. The portal provides experts with condition education, as well as patient tools and samples. We have nearly one-fifth of U.S. dentists registered on our expert portal. Importantly, registrants typically provide a higher level of patient recommendations. By demonstrating our trusted science, we're able to gain dentists' endorsement and support for the superiority of our brands. To give just one example, in a recent U.S. survey, nine out of ten call-in experts report that Sensodyne is highly effective.
Through the efforts of our expert sales and marketing team, Sensodyne is the number one dentist-recommended brand for sensitivity relief, and Pronamel is the number one recommended brand for enamel erosion. We are now also using AI to enhance our go-to-market capabilities and strengthen our expert engagement. One example is our proprietary AI Salesforce tool used by our reps for both training and for responding to dentists' inquiries. When our reps are in the field, they have real-time access to the superior science and the clinical data behind our brands. We are also applying many of these same expert engagement learnings from Sensodyne to parodontax. A further benefit of our expert model is that we're leveraging our expert scale and our expertise with dentists to drive awareness for our other Haleon brands.
Just one example of this is we are now detailing dentists across the country on Advil Dual Action, which is first in its category to gain the American Dental Association's seal of approval for dental pain. Early results since we began this detailing indicate a near 30% increase in recommendations for Advil amongst our call-on dentists. Now let me hand it back over to Jayant to talk about our second opportunity.
Clinical White has been particularly successful as it delivers on a significant unmet need for whitening of sensitive teeth. We know that more than 80% of sensitivity sufferers also want whiter teeth. Our formulation, therefore, is designed and proven through clinical trials to deliver two shades whiter teeth without causing sensitivity. Hence, our superior proposition of clinically proven two shades whiter teeth, sensitivity protected. This launch has also introduced new consumers to Sensodyne.
We employed tailored marketing programs to improve the relevance with younger audiences, and we extended our dentist testimonial campaign to social channels like TikTok and Instagram. Lastly, the team utilized a novel claim around Clinical White being used prior, during, and after in-office whitening treatments to broader relevance with experts. Through these intense efforts, the launch of Clinical White has helped strengthen Sensodyne's number one expert recommendation position. As I speak, Clinical White has so far been launched in 13 countries globally, with more due to launch. We will apply many of these learnings to our latest innovation, which we launched in February, Pronamel Clinical Enamel Strength, which is clinically proven to provide three times stronger enamel protection for more enamel-conscious consumers. In summary, Sensodyne has consistently driven growth in the U.S. ahead of the toothpaste category over the last three years.
This is underpinned by our extensive reach and strong relationship with dental experts who are a key source of trial for our therapeutic portfolio, as well as our innovation-led premiumization to satisfy existing consumers and introduce new consumers to our portfolio. We are successfully deploying this repeatable, scalable model across our oral health portfolio globally, tailoring it to different market needs and reaching new audiences. This has resulted in our global therapeutic oral health category growing at an 8.6% CAGR over the last three years. Thank you.
Hello everyone. I am Filippo Lanzi, President of EMEA and LATAM since 2021. You have heard from Brian how we have strengthened our category strategies and how, under Winners One, we are leveraging our portfolio of superior brands.
Let's turn to Haleon's second largest category, Pain Relief, and bring to life how we are capitalizing on the strength and breadth of our portfolio through some key market examples which are scaling globally. Charles, over to you.
Thanks, Filippo. Hi, I'm Charles Leslie, the Global Category Lead for Pain Relief. As you've heard, Pain Relief is an attractive category that's highly relevant to most consumers, with nine out of ten adults experiencing up to ten types of pain a year. We clearly see the opportunity to grow our share of the category. We're going to do it in two ways. Firstly, driving real benefits and better health outcomes for consumers through innovating to broaden the range of consumer needs and formats we address. Secondly, driving penetration amongst lower-income consumers. We have three great examples to bring this to life, which we're scaling globally.
We have selected Italy for our first example, not only because I am Italian, but it is also one of the top ten pain relief markets globally, with OTC spend at GBP 85 per capita. It also illustrates how we have leveraged our Voltaren platform to address a wider range of consumer needs and preferences. Voltaren is strongly positioned in Italy with consumers and highly recommended by pharmacists. Voltaren is also Italy's number one topical pain relief brand, built on its reputation as the back and joint pain expert. The bedrock of Voltaren is the powerful anti-inflammatory pain relief gel format. Having such a strong platform with Voltaren has enabled us to unlock the opportunity of going beyond medicated topical gel into new needs and formats to meet a wider range of consumer preferences. As always, our starting point is the consumer need.
In this case, both neck pain, a significantly under-penetrated pain occasion, and speed of relief, which is the number one consumer priority when experiencing pain. In response, we launched Voltaren Liquid Gel Caps, a systemic solution which is fast-acting in treating inflammation. As a result, Voltaren Systemics has grown close to double the rate of the market. We have also expanded our Voltaren patch range using a patented technology which provides comfort and long-lasting relief for lower back pain, a frequent pain occasion. With its combination of superior science, proprietary technology, and 24-hour consumer benefit, this new proposition has solidified our market leadership in medicated patches, leading to Haleon growing almost three times the market. This approach to leveraging our pain relief brands is not unique to Italy or Voltaren, and we are successfully applying it to other markets across the world.
Let's now turn to another element of Winners One: increasing penetration with lower-income consumers.
Pakistan is a great example of how we've already demonstrated our ability to grow Panadol profitably at a lower price point. Pakistan is home to 250 million people who are on average younger, with a median age of 20, and have far lower OTC spend per capita compared to markets like Italy. They are hard to reach, with over 60% of the population living in rural areas and with over 49,000 pharmacies. The average retail price per Panadol tablet in Pakistan is equivalent to GBP 0.02. That's around a tenth of the U.K. price. To drive penetration, we've increased engagement with both experts and consumers to establish Panadol as the most trusted pain relief brand in the market.
To give you an idea of the scale, our reach with healthcare professionals results in over 90 million recommendations of Panadol per year. Given the limited access to doctors in rural areas, we have partnered with the government to support their outreach program to access millions of homes across rural Pakistan. We have also rolled out Haleon's Pain Management Institute in Pakistan, where we are working with pain experts and the health authority to enable more education of the next generation of healthcare professionals. Finally, through innovation, we have expanded our portfolio into a specialist range to further address unmet needs. All of this has accelerated Panadol's growth and strengthened our leadership in Pakistan, selling over 5 billion tablets annually, growing double-digit and ahead of the market.
Looking forward, we are adapting this approach to other key markets. For example, Brazil, the fourth largest pain relief market in the world.
70% of the volume of the pain relief category in Brazil is at below the average price point. Until recently, we did not address this segment at all, given our premium positioning here with Advil and Voltaren. Lower-income consumers in Brazil live fast-paced lives. To go through the hassle of daily life, they have no time for pain. To seize this opportunity, in March, we launched Panadol under the local brand Sonridor. Sonridor leverages Panadol's proprietary OptiSorb technology, which disintegrates up to five times faster than regular paracetamol. We have positioned Sonridor at a range of affordable prices. This approach will allow Haleon to expand Sonridor distribution to access a wider range of pharmacies that serve the lower-income groups, leveraging the strength of our route to market. It is early days, but the response from the trade has been positive, which gives us confidence for the future.
In summary, pain relief is an attractive category that is highly relevant to most consumers. Haleon is well-positioned as the clear global leader with a strong track record of growth, delivering a CAGR of 5.4% over the last three years, underpinned by an attractive portfolio of both global and locally relevant brands. We will continue to leverage this portfolio and these learnings across different markets to drive penetration by meeting more need states, expanding into more formats, as well as reaching lower-income consumers. Thank you.
Hello, I'm Keith Choi, APAC President, leading the Asia-Pacific region since 2019. Joining me is Susan Gu, General Manager of our Greater China Business Unit.
Hi everyone. We're in Suzhou at our Haleon China R&D Center, one of the six hubs within the Haleon Group, which supports China's unique consumer needs with deep market knowledge and superior science.
Our manufacturing facilities are also here for vitamins, minerals, and supplements brands, that is, our VMS brands like Centrum, Caltrate for China and other markets.
Today, we are here to talk about our VMS strategy in action across various Asia-Pacific markets. As Tamara and Franck mentioned, Haleon is the global leader in VMS with a strong position across multivitamins and calcium. We have a well-classed portfolio of VMS brands and a clear wheel of headroom for growth, which we are pursuing by closing the nutritional gap, serving lower-income consumers, and expanding into premium benefit spaces. Let's bring this to life for you with three examples. Over to you, Susan.
Thank you, Keith. In China, the population is aging, and over 90% of people have inadequate serum intake from their daily diet. This is a major risk factor for osteoporosis and a real opportunity to close the nutrition gap.
Over 50% of women aged 65 or older suffer from osteoporosis. Despite the high preference, awareness and understanding of the condition remain low, with calcium supplements only having 20% penetration in China. We have taken proactive measures to drive condition awareness. We provide free bone density tests, including for underserved populations in remote areas of China. We are helping to increase condition awareness through our BoneUp China program, working closely with government authorities and medical experts to establish a partnership ecosystem that focuses on driving the importance of bone health. BoneUp China has standardized osteoporosis prevention by introducing the first diagnosis and treatment guidelines, including the use of calcium supplements, and is in full support of the government program Healthy China 2030. We are further expanding and scaling mobility in China by leveraging technology to drive condition awareness.
With an AI-based mobility assessment tool, consumers can access this tool through WeChat, one of China's most popular social media platforms. We have built a category-leading business with Caltrate in China. We're number one in the calcium supplement segment, and our market share is over one and a half times that of our closest competitor.
We also see future growth opportunity by replicating this established model in other markets. For instance, Caltrate is the number one calcium supplement in the Philippines. However, there's still significant headroom to grow, as over 75% of consumers are deficient in calcium. We are building the category, and we are at the initial stages of applying elements of the BoneUp China model.
We are driving condition awareness of calcium deficiency during pregnancy, reaching out to 80% of gynecologists in the country, highlighting the need for calcium supplements and providing bone density tests in clinics and in stores. Now, let's move on to our second example, which highlights how we are addressing the nutrition gap for lower-income consumers by meeting their most relevant nutritional needs. In the Philippines, around 90% of consumers lack iron and folate, and over 75% are deficient in vitamin B, vitamin C, and calcium. This widespread nutritional deficiency is particularly concerning, given that 70% of Filipino families earn less than GBP 500 per month and primarily rely on daily or weekly wages. For these individuals, maintaining good everyday health is crucial, as they rely on their ability to work every day to provide for their families.
Addressing the needs of this audience is directly linked to our strategy to drive penetration. Centrum does this by consistently offering care that is never incomplete, really is messaging in the Philippines. There are multiple benefits across energy, heart, eye, and cognitive health, empowering daily wage earners to fulfill their many demanding roles and ensuring that they can continue to provide for their families. To provide this lower-income consumer group with affordable offerings, our packaging enables selling single units at a price point of approximately GBP 10, also allowing smaller neighborhood stores which are more accessible to lower-income consumers with lower working capital to carry Centrum. Efficacy and awareness are key parts of our approach.
We reach out to over 7,000 general practitioners in the Philippines each month, representing over 60% of the universe of GPs, and have reached out to over 20,000 healthcare practitioners, including pharmacists through convention, webinar, and presentations. This approach has been a success in the Philippines. Sales have grown four-fold over the past decade, and we have grown eight share points between 2022 and 2024. We see this as just the beginning, given the known awareness of nutritional needs and the significant opportunity to serve a population of over 110 million. We are also applying this model to India, where VMS penetration is low at just 12%. We have just launched Centrum Recharge with a price point of approximately GBP 10 per sachet to provide affordable solutions for lower-income consumers to enter the category. Now, Susan will share how we have premiumized Centrum in China through increased personalization.
In China, Centrum is the number one brand in the GBP 1 billion multivitamin category, with a leading share more than twice that of our closest competitor. There is a significant opportunity to drive growth in China through new premium benefit spaces. We identified an unmet need for more personalized nutrition solutions, specifically developing certain life stages and benefits unique to the Asian consumers. In response, we launched the first designed-for-Asians daily nutrition pack tailored by age, gender, and lifestyle. These products, known as Centrum Daily Kits or Centrum Daily Ones Packs, are priced at approximately six times the base Centrum range, allowing us to drive the premiumization of both the category and the Centrum. The launch was driven by strong activation of digital commerce, including rapidly growing Douyin platform, China's version of TikTok, precisely targeting a premium audience.
This enabled us to ship and drive the super premium segment, which is growing over two times faster than the overall multivitamin category. As a result, Daily Kits has been a highly successful launch, a key driver in Centrum growing nearly two share points in digital commerce in its first year of launch.
We are rolling this out to new geographies, recently launching in Korea at nearly five times premium versus our base range. These kits now account for approximately 40% of our career DCOM sales since launch. To conclude, we have a clear strategy to drive VMS growth, which we are applying consistently to pursue the growth headroom in the category. We are enhancing our end-to-end capabilities, including AI and digital, to drive awareness and availability amongst a wide set of consumers. That is our VMS strategy in action.
We are excited about the future, and thank you for your time.
[Foreign language] Goodbye.
Hi everyone, I'm Jayant, and I've been leading Haleon's largest category, Oral Health, since 2019. As Tamara and Franck mentioned, Haleon is the global leader within therapeutic oral health, with strong positions in sensitivity, gum, and denture care. You've already heard about the opportunity we see to continue to drive growth in this category as part of our win-as-one ambition. In our breakout session, we are focusing on two elements of this. Firstly, closing the incidence versus treatment gap, and secondly, driving innovation-led premiumization. We are bringing these opportunities to life by focusing on the U.S., which is our largest oral health market. I'm joined today by Jason, who leads our expert team in the U.S. and who also spent five years as the U.S. category lead for oral health. Jason, over to you.
Hey, thanks, Jayant. Let's begin with an overview of our U.S. oral health business. Our portfolio centers on the Sensodyne franchise, which has consistently increased household penetration for nearly a decade with attractive market share gains. It includes the world's number one sensitivity toothpaste, as well as Sensodyne Pronamel, which is specially formulated to protect teeth against the effects of acid wear, and Polident Poligrip, the number one brand for denture care. We also have a small but fast-growing business in gum health through parodontax, which Tamara and Franck talked to earlier. Let me take a moment to tell you about our first opportunity, how we are closing the incidence versus treatment gap through our expert engagement. As a result of our expert engagement, more than 40% of new buyers in the U.S. cited expert recommendation as their number one motivator for trial.
How are we leveraging and driving this? We have a strong reach with the U.S. dental community, and we supplement direct office visits with our Haleon Health Partner Expert Portal. The portal provides experts with condition education as well as patient tools and samples. We have nearly one-fifth of U.S. dentists registered on our expert portal. Importantly, registrants typically provide a higher level of patient recommendations. By demonstrating our trusted science, we're able to gain dentists' endorsement and support for the superiority of our brands. To give just one example, in a recent U.S. survey, nine out of ten call-in experts report that Sensodyne is highly effective. Through the efforts of our expert sales and marketing team, Sensodyne is the number one dentist-recommended brand for sensitivity relief, and Pronamel is the number one recommended brand for enamel erosion.
We are now also using AI to enhance our go-to-market capabilities and strengthen our expert engagement. One example is our proprietary AI Salesforce tool used by our reps for both training and for responding to dentists' inquiries. When our reps are in the field, they have real-time access to the superior science and the clinical data behind our brands. We are also applying many of these same expert engagement learnings from Sensodyne to parodontax. A further benefit of our expert model is that we're leveraging our expert scale and our expertise with dentists to drive awareness for our other Haleon brands. Just one example of this is we are now detailing dentists across the country on Advil Dual Action, which is first in its category to gain the American Dental Association seal of approval for dental pain.
Early results since we began this detailing indicate a near 30% increase in recommendations for Advil amongst our call-on dentists. Now let me hand it back over to Jayant to talk about our second opportunity.
Clinical White has been particularly successful as it delivers on a significant unmet need for whitening of sensitive teeth. We know that more than 80% of sensitivity sufferers also want whiter teeth. Our formulation, therefore, is designed and proven through clinical trials to deliver two shades whiter teeth without causing sensitivity. Hence, our superior proposition of clinically proven two shades whiter teeth sensitivity protected. This launch has also introduced new consumers to Sensodyne. We employed tailored marketing programs to improve the relevance with younger audiences, and we extended our dentist testimonial campaign to social channels like TikTok and Instagram.
Lastly, the team utilized a novel claim around Clinical White being used prior, during, and after in-office whitening treatments to broader relevance with experts. Through these intense efforts, the launch of Clinical White has helped strengthen Sensodyne's number one expert recommendation position. As I speak, Clinical White has so far been launched in 13 countries globally, with more due to launch. We will apply many of these learnings to our latest innovation, which we launched in February, Pronamel Clinical Enamel Strength, which is clinically proven to provide three times stronger enamel protection for more enamel-conscious consumers. In summary, Sensodyne has consistently driven growth in the U.S. ahead of the toothpaste category over the last three years.
This is underpinned by our extensive reach and strong relationship with dental experts who are a key source of trial for our therapeutic portfolio, as well as our innovation-led premiumization to satisfy existing consumers and introduce new consumers to our portfolio. We are successfully deploying this repeatable, scalable model across our oral health portfolio globally, tailoring it to different market needs and reaching new audiences. This has resulted in our global therapeutic oral health category growing at an 8.6% CAGR over the last three years. Thank you.
Hello everyone. I am Filippo Lanzi, President of EMEA and LATAM since 2021. You have heard from Brian how we have strengthened our category strategies and how, under winners one, we are leveraging our portfolio of superior brands.
Let's turn to Haleon's second largest category, Pain Relief, and bring to life how we are capitalizing on the strength and breadth of our portfolio through some key market examples which are scaling globally. Charles, over to you.
Thanks, Filippo. Hi, I'm Charles Leslie, the Global Category Lead for Pain Relief. As you've heard, Pain Relief is an attractive category that's highly relevant to most consumers, with nine out of ten adults experiencing up to ten types of pain a year. We clearly see the opportunity to grow our share of the category. We're going to do it in two ways. Firstly, driving real benefits and better health outcomes for consumers through innovating to broaden the range of consumer needs and formats we address. Secondly, driving penetration amongst lower-income consumers. We have three great examples to bring this to life, which we're scaling globally.
We have selected Italy for our first example, not only because I am Italian, but it's also one of the top 10 pain relief markets globally, with OTC spend at GBP 85 per capita. It also illustrates how we have leveraged our Voltaren platform to address a wider range of consumer needs and preferences. Voltaren is strongly positioned in Italy with consumers and highly recommended by pharmacists. Voltaren is also Italy's number one topical pain relief brand, built on its reputation as the back and joint pain expert. The bedrock of Voltaren is the powerful anti-inflammatory pain relief gel format. Having such a strong platform with Voltaren has enabled us to unlock the opportunity of going beyond medicated topical gel into new needs and formats to meet a wider range of consumer preferences. As always, our starting point is the consumer need.
In this case, both neck pain, a significantly under-penetrated pain occasion, and speed of relief, which is the number one consumer priority when experiencing pain. In response, we launched Voltaren liquid gel caps, a systemic solution which is fast-acting in treating inflammation. As a result, Voltaren Systemics has grown close to double the rate of the market. We have also expanded our Voltaren patch range using a patented technology which provides comfort and long-lasting relief for lower back pain, a frequent pain occasion. With its combination of superior science, proprietary technology, and 24-hour consumer benefit, this new proposition has solidified our market leadership in medicated patches, leading to Haleon growing almost three times the market. This approach to leveraging our pain relief brands is not unique to Italy or Voltaren, and we are successfully applying it to other markets across the world.
Let's now turn to another element of winners one, increasing penetration with lower-income consumers.
Pakistan is a great example of how we've already demonstrated our ability to grow Panadol profitably at a lower price point. Pakistan is home to 250 million people who are on average younger, with a median age of 20, and have far lower OTC spend per capita compared to markets like Italy. They are hard to reach, with over 60% of the population living in rural areas and with over 49,000 pharmacies. The average retail price per Panadol tablet in Pakistan is equivalent to two pence. That is around a tenth of the U.K. price. To drive penetration, we've increased engagement with both experts and consumers to establish Panadol as the most trusted pain relief brand in the market.
To give you an idea of the scale, our reach with healthcare professionals results in over 90 million recommendations of Panadol per year. Given the limited access to doctors in rural areas, we have partnered with the government to support their outreach program to access millions of homes across rural Pakistan. We have also rolled out Haleon's Pain Management Institute in Pakistan, where we are working with pain experts and the health authority to enable more education of the next generation of healthcare professionals. Finally, through innovation, we have expanded our portfolio into a specialist range to further address unmet needs. All of this has accelerated Panadol's growth and strengthened our leadership in Pakistan, selling over 5 billion tablets annually, growing double-digit and ahead of the market.
Looking forward, we are adapting this approach to other key markets. For example, Brazil, the fourth largest pain relief market in the world.
70% of the volume of the pain relief category in Brazil is at below the average price point. Until recently, we did not address this segment at all, given our premium positioning here with Advil and Voltaren. Lower-income consumers in Brazil live fast-paced lives. To go through the hustle of daily life, they have no time for pain. To seize this opportunity, in March, we launched Panadol under the local brand Sonridor. Sonridor leverages Panadol's proprietary OptiSorb technology, which disintegrates up to five times faster than regular paracetamol. We have positioned Sonridor at a range of affordable prices. This approach will allow Haleon to expand Sonridor distribution to access a wider range of pharmacies that serve the lower-income groups, leveraging the strength of our route to market. It is early days, but the response from the trade has been positive, which gives us confidence for the future.
In summary, pain relief is an attractive category that is highly relevant to most consumers. Haleon is well-positioned as the clear global leader with a strong track record of growth, delivering a CAGR of 5.4% over the last three years, underpinned by an attractive portfolio of both global and locally relevant brands. We will continue to leverage this portfolio and these learnings across different markets to drive penetration by meeting more need states, expanding into more formats, as well as reaching lower-income consumers. Thank you.
Hello, I'm Keith Choi, APAC President, leading the Asia-Pacific region since 2019. Joining me is Susan Gu, General Manager of our Greater China Business Unit.
Hi everyone. We're in Suzhou at our Haleon China R&D Center, one of the six hubs within the Haleon Group, which supports China's unique consumer needs with deep market knowledge and superior science.
Our manufacturing facilities are also here for vitamins, minerals, and supplements brands, that is, our VMS brands like Centrum, Caltrate for China and other markets.
Today, we are here to talk about our VMS strategy in action across various Asia-Pacific markets. As Tamara and Franck mentioned, Haleon is the global leader in VMS with a strong position across multivitamins and calcium. We have a well-classed portfolio of VMS brands and a clear will of headroom for growth, which we are pursuing by closing the nutritional gap, serving lower-income consumers, and expanding into premium benefit spaces. Let's bring this to life for you with three examples. Over to you, Susan.
Thank you, Keith. In China, the population is aging, and over 90% of people have inadequate serum intake from their daily diet. This is a major risk factor for osteoporosis and a real opportunity to close the nutrition gap.
Over 50% of women aged 65 or older suffer from osteoporosis. Despite the high preference, awareness and understanding of the condition remain low, with calcium supplements only having 20% penetration in China. We have taken proactive measures to drive condition awareness. We provide free bone density tests, including for underserved populations in remote areas of China. We are helping to increase condition awareness through our BoneUp China program, working closely with government authorities and medical experts to establish a partnership ecosystem that focuses on driving the importance of bone health. BoneUp China has standardized osteoporosis prevention by introducing the first diagnosis and treatment guidelines, including the use of calcium supplements, and it is in full support of the government program Healthy China 2030. We are further expanding and scaling in mobility in China by leveraging technology to drive condition awareness.
With an AI-based mobility assessment tool, consumers can access this tool through WeChat, one of China's most popular social media platforms. We have built a category-leading business with Caltrate in China. We're number one in the calcium supplement segment, and our market share is over one and a half times that of our closest competitor.
We also see future growth opportunity by replicating this established model in other markets. For instance, Caltrate is the number one calcium supplement in the Philippines. However, there's still significant headroom to grow, as over 75% of consumers are deficient in calcium. We are building the category, and we are at the initial stages of applying elements of the BoneUp China model.
We are driving condition awareness of calcium deficiency during pregnancy, reaching out to 80% of gynecologists in the country, highlighting the need for calcium supplements and providing bone density tests in clinics and in stores. Now, let's move on to our second example, which highlights how we're addressing the nutrition gap for lower-income consumers by meeting their most relevant nutritional needs. In the Philippines, around 90% of consumers lack iron and folate, and over 75% are deficient in vitamin B, vitamin C, and calcium. This widespread nutritional deficiency is particularly concerning, given that 70% of Filipino families earn less than GBP 500 per month and primarily rely on daily or weekly wages. For these individuals, maintaining good everyday health is crucial, as they rely on their ability to work every day to provide for their families. Addressing the needs of this audience is directly linked to our strategy to drive penetration.
Centrum does this by consistently offering care that is never incomplete, where its messaging in the Philippines. There are multiple benefits across energy, heart, eye, and cognitive health, empowering daily wage earners to fulfill their many demanding roles and ensuring that they can continue to provide for their families. To provide this lower-income consumer group with affordable offerings, our packaging enables selling single units at a price point of approximately GBP 0.10, also allowing smaller neighborhood stores, which are more accessible to lower-income consumers with lower working capital, to carry Centrum. Efficacy and awareness are key parts of our approach. We reach out to over 7,000 general practitioners in the Philippines each month, representing over 60% of the universe of GPs, and have reached out to over 20,000 healthcare practitioners, including pharmacists through convention, webinar, and presentations. This approach has been a success in the Philippines.
Sales have grown four-fold over the past decade, and we have grown eight share points between 2022 and 2024. We see this as just the beginning, given the known awareness of nutritional needs and the significant opportunity to serve a population of over 110 million. We are also applying this model to India, where VMS penetration is low at just 12%. We have just launched Centrum Recharge with a price point of approximately GBP 0.10 per sachet to provide affordable solutions for lower-income consumers to enter the category. Now, Susan will share how we have premiumized Centrum in China through increased personalization.
In China, Centrum is the number one brand in the GBP 1 billion multivitamin category, with a leading share more than twice that of our closest competitor. There is a significant opportunity to drive growth in China through new premium benefit spaces.
We identified an unmet need for more personalized nutrition solutions, specifically developing certain life stages and benefits unique to the Asian consumers. In response, we launched the first designed-for-Asians daily nutrition pack tailored by age, gender, and lifestyle. These products, known as Centrum Daily Kits or Centrum Daily Wellness Packs, are priced at approximately six times the base Centrum range, allowing us to drive the premiumization of both the category and the Centrum. The launch was driven by strong activation of digital commerce, including rapidly growing Douyin platform, China's version of TikTok, precisely targeting a premium audience. This enabled us to ship and drive the super premium segment, which is growing over two times faster than the overall multivitamin category. As a result, Daily Kits has been a highly successful launch, a key driver in Centrum growing nearly two share points in digital commerce in its first year of launch.
We are rolling this out to new geographies, recently launching in Korea at nearly five times premium versus our base range. These kits now account for approximately 40% of our career DCOM sales since launch. To conclude, we have a clear strategy to drive VMS growth, which we are applying consistently to pursue the growth headroom in the category. We are enhancing our end-to-end capabilities, including AI and digital, to drive awareness and availability amongst a wide set of consumers. That is our VMS strategy in action. We are excited about the future, and thank you for your time. [Foreign language] Goodbye.
Hi everyone, I'm Jayant , and I've been leading Haleon's largest category, Oral Health, since 2019. As Tamara and Franck mentioned, Haleon is the global leader within therapeutic oral health, with strong positions in sensitivity, gum, and denture care.
You've already heard about the opportunity we see to continue to drive growth in this category as part of our win-as-one ambition. In our breakout session, we are focusing on two elements of this: firstly, closing the incidence versus treatment gap, and secondly, driving innovation-led premiumization. We are bringing these opportunities to life by focusing on the U.S., which is our largest oral health market. I'm joined today by Jason, who leads our expert team in the U.S. and who also spent five years as the U.S. category lead for oral health. Jason, over to you.
Hey, thanks, Jayant. Let's begin with an overview of our U.S. oral health business. Our portfolio centers on the Sensodyne franchise, which has consistently increased household penetration for nearly a decade with attractive market share gains.
It includes the world's number one sensitivity toothpaste, as well as Sensodyne Pronamel, which is specially formulated to protect teeth against the effects of acid wear, and Polident Poligrip, the number one brand for denture care. We also have a small but fast-growing business in gum health through parodontax, which Tamara and Franck talked to earlier. Let me take a moment to tell you about our first opportunity, how we are closing the incidence versus treatment gap through our expert engagement. As a result of our expert engagement, more than 40% of new buyers in the U.S. cited expert recommendation as their number one motivator for trial. How are we leveraging and driving this? We have a strong reach with the U.S. dental community, and we supplement direct office visits with our Haleon Health Partner Expert Portal.
The portal provides experts with condition education, as well as patient tools and samples. We have nearly one-fifth of U.S. dentists registered on our expert portal. Importantly, registrants typically provide a higher level of patient recommendations. By demonstrating our trusted science, we are able to gain dentists' endorsement and support for the superiority of our brands. To give just one example, in a recent U.S. survey, nine out of 10 call-in experts report that Sensodyne is highly effective. Through the efforts of our expert sales and marketing team, Sensodyne is the number one dentist-recommended brand for sensitivity relief, and Pronamel is the number one recommended brand for enamel erosion. We are now also using AI to enhance our go-to-market capabilities and strengthen our expert engagement. One example is our proprietary AI Salesforce tool used by our reps for both training and for responding to dentists' inquiries.
When our reps are in the field, they have real-time access to the superior science and the clinical data behind our brands. We are also applying many of these same expert engagement learnings from Sensodyne to parodontax. A further benefit of our expert model is that we're leveraging our expert scale and our expertise with dentists to drive awareness for our other Haleon brands. Just one example of this is we are now detailing dentists across the country on Advil Dual Action, which is first in its category to gain the American Dental Association's seal of approval for dental pain. Early results since we began this detailing indicate a near 30% increase in recommendations for Advil amongst our call-on dentists. Now let me hand it back over to Jo to talk about our second opportunity.
Clinical White has been particularly successful as it delivers on a significant unmet need for whitening of sensitive teeth. We know that more than 80% of sensitivity sufferers also want whiter teeth. Our formulation, therefore, is designed and proven through clinical trials to deliver two shades whiter teeth without causing sensitivity. Hence, our superior proposition of clinically proven two shades whiter teeth, sensitivity protected. This launch has also introduced new consumers to Sensodyne. We employed tailored marketing programs to improve the relevance with younger audiences, and we extended our dentist testimonial campaign to social channels like TikTok and Instagram. Lastly, the team utilized a novel claim around Clinical White being used prior, during, and after in-office whitening treatments to broader relevance with experts. Through these intense efforts, the launch of Clinical White has helped strengthen Sensodyne's number one expert recommendation position.
As I speak, Clinical White has so far been launched in 13 countries globally, with more due to launch. We will apply many of these learnings to our latest innovation, which we launched in February, Pronamel Clinical Enamel Strength, which is clinically proven to provide three times stronger enamel protection for more enamel-conscious consumers. In summary, Sensodyne has consistently driven growth in the U.S. ahead of the toothpaste category over the last three years. This is underpinned by our extensive reach and strong relationship with dental experts who are a key source of trial for our therapeutic portfolio, as well as our innovation-led premiumization to satisfy existing consumers and introduce new consumers to our portfolio. We are successfully deploying this repeatable, scalable model across our oral health portfolio globally, tailoring it to different market needs and reaching new audiences.
This has resulted in our global therapeutic oral health category growing at an 8.6% CAGR over the last three years. Thank you.
Hello everyone. I am Filippo Lanzi, President of EMEA and LATAM since 2021. You have heard from Brian how we have strengthened our category strategies and how, under Winners One, we are leveraging our portfolio of superior brands. Let's turn to Haleon's second largest category, Pain Relief, and bring to life how we are capitalizing on the strength and breadth of our portfolio through some key market examples which are scaling globally.
Charles, over to you. Thanks, Filippo. Hi, I'm Charles Leslie, the Global Category Lead for Pain Relief. As you've heard, Pain Relief is an attractive category that's highly relevant to most consumers, with nine out of 10 adults experiencing up to 10 types of pain a year.
We clearly see the opportunity to grow our share of the category. We are going to do it in two ways. Firstly, driving real benefits and better health outcomes for consumers through innovating to broaden the range of consumer needs and formats we address. Secondly, driving penetration amongst lower-income consumers. We have three great examples to bring this to life, which we are scaling globally.
We have selected Italy for our first example, not only because I am Italian, but it is also one of the top 10 pain relief markets globally, with autistic spend at GBP 85 per capita. It also illustrates how we have leveraged our Voltaren platform to address a wider range of consumer needs and preferences. Voltaren is strongly positioned in Italy with consumers and highly recommended by pharmacists.
Voltaren is also Italy's number one topical pain relief brand, built on its reputation as the back and joint pain expert. The bedrock of Voltaren is the powerful anti-inflammatory pain relief gel format. Having such a strong platform with Voltaren has enabled us to unlock the opportunity of going beyond medicated topical gel into new needs and formats to meet a wider range of consumer preferences. As always, our starting point is the consumer need. In this case, both neck pain, a significantly under-penetrated pain occasion, and speed of relief, which is the number one consumer priority when experiencing pain. In response, we launched Voltaren Liquid Gel Caps, a systemic solution which is fast-acting in treating inflammation. As a result, Voltaren Systemics has grown close to double the rate of the market.
We have also expanded our Voltaren patch range using a patented technology which provides comfort and long-lasting relief for lower back pain, a frequent pain occasion. With its combination of superior science, proprietary technology, and 24-hour consumer benefit, this new proposition has solidified our market leadership in medicated patches, leading to Haleon growing almost three times the market. This approach to leveraging our pain relief brands is not unique to Italy or Voltaren, and we are successfully applying it to other markets across the world. Let's now turn to another element of Winners One: increasing penetration with lower-income consumers.
Pakistan is a great example of how we've already demonstrated our ability to grow Panadol profitably at a lower price point.
Pakistan is home to 250 million people who are on average younger, with a median age of 20, and have far lower OTC spend per capita compared to markets like Italy. They are hard to reach, with over 60% of the population living in rural areas and with over 49,000 pharmacies. The average retail price per Panadol tablet in Pakistan is equivalent to GBP 0.02. That is around a tenth of the U.K. price. To drive penetration, we have increased engagement with both experts and consumers to establish Panadol as the most trusted pain relief brand in the market. To give you an idea of the scale, our reach with healthcare professionals results in over 90 million recommendations of Panadol per year. Given the limited access to doctors in rural areas, we have partnered with the government to support their outreach program to access millions of homes across rural Pakistan.
We've also rolled out Haleon's Pain Management Institute in Pakistan, where we are working with pain experts and the health authority to enable more education of the next generation of healthcare professionals. Finally, through innovation, we have expanded our portfolio into a specialist range to further address unmet needs. All of this has accelerated Panadol's growth and strengthened our leadership in Pakistan, selling over 5 billion tablets annually, growing double-digit and ahead of the market.
Looking forward, we are adapting this approach to other key markets. For example, Brazil, the fourth largest pain relief market in the world. 70% of the volume of the pain relief category in Brazil is at below the average price point. Until recently, we did not address this segment at all, given our premium positioning here with Advil and Voltaren. Lower-income consumers in Brazil live fast-paced lives.
To go through the hustle of daily life, they have no time for pain. To seize this opportunity, in March, we launched Panadol under the local brand, Sonridor. Sonridor leverages Panadol's proprietary OptiSorb technology, which disintegrates up to five times faster than regular paracetamol. We have positioned Sonridor at a range of affordable prices. This approach will allow Haleon to expand Sonridor distribution to access a wider range of pharmacies that serve the lower-income groups, leveraging the strength of our route to market. It is early days, but the response from the trade has been positive, which gives us confidence for the future. In summary, pain relief is an attractive category that is highly relevant to most consumers.
Haleon is well-positioned as the clear global leader with a strong track record of growth, delivering a CAGR of 5.4% over the last three years, underpinned by an attractive portfolio of both global and locally relevant brands. We will continue to leverage this portfolio and these learnings across different markets to drive penetration by meeting more need states, expanding into more formats, as well as reaching lower-income consumers.
Thank you. Hello, I'm Keith Choi, APAC President, leading the Asia-Pacific region since 2019. Joining me is Susan Gu, General Manager of our Greater China Business Unit.
Hi everyone. We're in Suzhou at our Haleon China R&D Center, one of the six hubs within the Haleon Group, which supports China's unique consumer needs with deep market knowledge and superior science.
Our manufacturing facilities are also here for vitamins, minerals, and supplements brands, that is, our VMS brands like Centrum, Caltrate for China and other markets.
Today, we are here to talk about our VMS strategy in action across various Asia-Pacific markets. As Tamara and Franck mentioned, Haleon is the global leader in VMS with a strong position across multivitamins and calcium. We have a well-classed portfolio of VMS brands and a clear will of headroom for growth, which we are pursuing by closing the nutritional gap, serving lower-income consumers, and expanding.
Thank you so much for your time, everyone. If you could make your way back to the main seated area, please, for the next plenary session.
Hi everybody, welcome back. I am Namrata Patel. I lead our supply chain and procurement for Haleon.
I'd like to extend a really warm welcome to all of you for the supply chain session. Just a little bit of background on me. I've worked in supply chain for 30+ years and across four continents. I joined Haleon in November 2023. Before that, I worked for 27 years with Gillette and P&G. Today, I'm really excited to share with you the strides that we're making on Haleon's supply chain, which is a key part of our Wired for Excellence strategy under the Winners One umbrella. We have ambitious goals, and we are confident that we will deliver these over the next five years. First of all, to deliver consistent customer service, 98% and plus, which is in line with best in class in the industry, delivering GBP 800 million of gross productivity savings.
This will increase our adjusted gross margin on average by 50-80 basis points per year in constant currency. Brian already shared this. Finally, 25%-30% reduction in our inventory days compared to the 2004 base. We are going to do all this by driving simplification and enhancing our processes and stepping up our operational excellence, as well as modernizing and investing in our end-to-end supply chain. Dawn will share later how this is reflected in our overall value creation framework. Before diving in and saying how we deliver the ambition, I did want to take a moment to recognize our heritage. Haleon is a young company, which is about three years old, but it has a very steeped heritage and a long legacy of coming from world-class organizations of GSK, Novartis, and Pfizer.
We are proud of this heritage, which brings high standards of quality, rigorous compliance, and scientific excellence. These are not just skills. They're a culture, and that's been shaped over generations, which also gives us a bit of a competitive edge. Today, we operate across 24 manufacturing sites with 16 unique manufacturing technologies like tablet making, which support our six categories. We also maintain an extensive contract manufacturing network, which you can see on the map with the black dots, which helps with our resiliency levels. The merger of three distinct supply chains has created and given us a little bit of complexity. For an example, we have many, many shipping lanes going to the same destination. We believe that there are big opportunities to drive efficiencies in our network, in our products, in our processes, and in our systems.
Just to give you a little bit of flavor of what I mean, we have manufacturing sites that basically make the same products, but in different ways. We have the capability and the capacity within our own network, i.e., in-house, but we have overly relied on suppliers to make our products on our behalf. Finally, we have SKU and material proliferation. For an example, we have many pack formats for the same product, which are only a few millimeters different. There is a lot of opportunity. We have also taken the time to benchmark ourselves to say, you know, what is best in class in the industry? On this chart, it is clear that we do very well in safety and quality. We have a little bit of opportunity to improve our service levels, but the big opportunity is in our cost and inventory, as you can see.
We've got a clear plan addressing the gap and leaping forward at pace. We have four key pillars as part of our supply chain strategy: immediate accelerators, which will have more of a near-term impact, i.e., in the next coming three years. We have operational excellence, which will drive improvement in doing our daily work. Build for tomorrow, this is focused on the more mid to longer-term horizon, with impact starting to be felt from 2027. Full potential people is focused on building the right capabilities to drive performance, as well as providing meaningful careers for our organization. All of this is underpinned by our fundamentals of safety, quality, and stewardship, which we will continue to preserve and build upon.
Let me bring this to life by talking about our goals and give you some specific examples of the progress that we're making already and we will make. Turning to our first strategy of immediate accelerators, with the integration of the three companies, as I've said already, there's a need that we have to harmonize and to simplify the way in which we operate and the way in which we work. We are strengthening our foundations across systems, processes, and capabilities. Among the several programs that you see listed here, I will deep dive into portfolio simplification, and then I'll briefly touch on planning and scale. This will hopefully give you a sense of opportunities that we're unlocking. Let's start with portfolio simplification. Our approach is very clear. It's to simplify to amplify. We have a significant opportunity, as Brian already mentioned.
We have an overly complex portfolio. We have 13,000 plus SKUs. We have 2,000 plus formulations and an extensive variety of packaging specifications. Last year, we spent some time analyzing the sources of this complexity, and we developed a dynamic data cube, which is helping us to pinpoint the opportunities to go after. We are working hand in hand with our commercial teams, and we are putting the consumer at the center of every decision we make. Our goal is to reduce the SKUs, the formulas, and the packs by 20-30% over the next two to three years. We are confident that this is possible. We already reduced last year 13% of the SKUs, and we have identified opportunities in reducing our formulations by 20%. Our objective is to make this simplification optimization an ongoing foundation for our company. I will share with you a few examples.
On this slide, on the left hand, on the right hand side, you can see a small sample of our toothpaste portfolio. We're working to harmonize the packaging of this portfolio. These changes will be invisible to the consumer, and the opportunities are significant. They range from around 20-40% reduction in packaging specifications. This is unlocking a huge amount of capacity and efficiency in our manufacturing sites, as of course, it's giving us scale in our purchasing power. Similarly, in the pain category, our cartons are marginally different, as I mentioned, just by a few millimeters. We're working to harmonize all of our cartons. This will have a significant impact in reducing the changeover times within our production lines. Let me bring this further to life for you.
Our oral health factory in Levice, Slovakia, is already benefiting from some of the simplification efforts the European business is driving. You are going to now watch a small video from Levice, and that will showcase how simplification is helping productivity. You will hear the phrase OEE, and this stands for overall equipment effectiveness, which is a measure of our asset utilization, the production lines, and the production throughput. I am going to play the video.
We have been focusing on complexity reduction over the past year with the ambition to reduce our formulations by 30%, and we are now seeing the real benefits. Complexity reduction projects are important enablers that allowed us to improve OEE by 10 percentage points in 2024. Specifically, on line D5, we reduced microstops by 64%. After transitioning from curved to straight cream, the line is running with OEE 75%.
This is a nice example of how complexity reduction gives us the ability to produce more and accommodate growth coming our way. [Foreign language] .
I'm really proud of what Levice has achieved. Not only are they achieving productivity, but they're also improving the organization's well-being through this simplification. We are off to a good start. We know that simplification will require focus from the entire organization, but we are confident that we will deliver. Simplification isn't just a goal; it's a powerful opportunity for growth. Next, I want to touch on planning and our scale initiatives.
We are rolling out an end-to-end new planning system and together with a unified sales and operation planning process. This will align our financial commitments with our demand and supply volumes, as well as promotions and innovations. This is the cornerstone of our efforts to reduce our inventory levels by 20-30%. We're also centralizing some of our transactional activities within our shared service centers. This is about leveraging the scale that we have, as well as it will enable driving depth of mastery in that space. For instance, artwork was managed across 27 countries across the world. It's now being consolidated into three shared service centers, and it will be completed in the middle of this year. I'm going to now move to operational excellence. This is the second pillar of our strategy, and this is all about reinforcing a culture where both quality and performance matter.
With this, we're raising the bar on our daily execution of performance. We now have quite an in-depth scorecard, which measures literally everything across the supply chain. Here, I'm just sharing with you some of the key metrics that we have, along with the goals that we've set ourselves over the five years in the green, and also what we've already achieved in the gray. We measure performance of our production through OEE, as I had just explained. Last year, we improved the OEE globally by 12 points. This is a 26% uplift. The progress will continue to happen, and it's a key enabler for freeing up capacity, which allows for growth, and it allows us to insource expensive volume that we're getting made outside.
Our core output measures of service, cost savings, and inventory, which obviously helps deliver cash, all of these are enablers for total shareholder returns. We're making great progress in these areas, and we have ambitious goals that we've set ourselves in order to be best in class. Let me share how this focus on driving performance and compliance is making a difference in one of our biggest operation sites. This is Dungarven in Ireland, and it makes Panadol and our denture care fixtures. During the last year, 2024, Dungarven increased their OEE by 12 points as well, coincidental. This, together with loss elimination programs, has led to a 50% increase in cost savings, also a 20% reduction in inventory days whilst delivering 98% plus in service levels, and finally, delivering our products with the best quality.
This is a great start, and we have these kinds of efforts across our entire network. Operational excellence is end-to-end. It's not just about the factories, and we're also working this with our suppliers to achieve similar successes. We've worked to reduce our proportion of single-source materials and our raw impact materials. Today, we source about 87% as multi-sourced, and this is obviously a great enabler for resiliency. Our goal is to get to 90% plus in the coming years. Also, we're building stronger and strategic partnerships with our suppliers. This is to co-develop innovations and technical solutions, which not only enhance product superiority, but it also helps to deliver savings. Last year, 17% of our savings that were generated were through these collaborations. Finally, we're changing our operating model, and this is again to leverage scale of our shared service centers.
What we are doing is we're moving smaller spend pools out to the shared service centers, and we will invest in AI and digital solutions to make this happen. This transition also helps to materially increase the amount of spend each one of our buyers manages. As part of operational excellence, running a responsible business is our daily job. Our core values of upholding our environmental promises towards sustainability and the commitments that we declared three years ago are on track. We've achieved a 50% reduction in our scope one and two carbon emissions compared to the baseline of 2020. We're also using 100% renewable electricity across all of our manufacturing sites, and half of our sites have the Alliance for Water Stewardship certification.
We're making solid progress in sourcing our ingredients responsibly and making our packaging recycle-ready by the end of this year, which is part of the overall goal of making our packaging recyclable and reusable by 2030. We are really committed to track our goals and deliver them. As I said, this is part of our daily work. It's not a separate program. Now I'm going to move to Build for Tomorrow. This is the third pillar of our supply chain strategy. Here, we are transforming our global supply chain to address the mid- to long-term needs of our business, including investments to serve key markets such as India and China. We're building a future-proof supply chain network, which ensures that we have resiliency and scale and builds technical mastery as well as innovation.
This map illustrates the intended presence in our growth markets such as China and India, as well as it showcases our future network, which is leveraging scale by implementing multi-category sites, multi-category manufacturing sites that are represented in the round circles with the nice colors. With this revamped network, our plan is to increase the amount of production we make in-house to 70-80%, and this is a significant cost saving. We're also, in parallel, working to establish strategic partnerships with our contract manufacturers, which will enable us to have access to technology platforms that require specialized expertise. Resiliency is clearly key in the supply chain. Having come out of a pandemic and now facing significant tariff challenges, we want to make sure that our network will be set up to take account of these eventualities.
Today, over 80% of what we produce is localized within the regions that we serve. This is a great advantage, and it further helps to mitigate from the forex volatility. Our goal with Build for Tomorrow is to leapfrog our supply chain to be more competitive and resilient and customer-focused. This transformation will redefine the look, the feel, the performance of our supply chain while enabling future readiness. I'm going to share a few areas we're working on to achieve this reality, and the visual will show the different concepts. We are assessing opportunities to simplify and unlock scale in our network by establishing multi-category sites, leveraging standard manufacturing platforms. To manage our cost base, what we're doing is we're moving at pace by adopting local solutions and global solutions for standardization and building technology platforms. We're also establishing on-site or near-site supplier villages.
This is where some of our suppliers for materials and packaging will be co-located with us. This obviously helps to save costs, it drives down inventory, and it helps build more resiliency. Innovation is at the heart of everything we do. To enable this, we're establishing what we call lighthouses in a few of our sites. Lighthouses are aimed at building in-depth mastery for material and production across our categories. We'll house technology experts there, as well as equipment for testing and development. Complementing that, we're also building supply chain innovation centers, and they will be co-located with some of our facilities as well. This is about building the future supply chain technologies partnering with external experts, things such as next generation of robotics or new sustainability requirements.
To drive the supply chain customer value creation part, we have partnered with Gartner to develop a blueprint to drive common scorecarding with our customers, building the joint loss elimination methodologies. We've already started the work to drive mutual benefits in areas such as transportation. A major part of these changes that I've just mentioned will leverage automation and robotics. To give you a flavor of the progress that we're already making in automation and robotics and what we have planned in store, I'm going to share with you a short video to bring this to life. Today, we have a need to heavily digitize and automate, and I've shared some of the work that we've already started to do. Overall, the Build for Tomorrow program is an investment in our future, and we're shaping our supply chain that's far more competitive, resilient, and customer-centric.
This program, which is more capital-intensive than what I've shared already, will ramp up more heavily in the middle part of our five-year horizon. This is intentional. This is taking a phased approach, and it ensures that we maximize our asset utilization, as well as we finish our simplification efforts to focus on the right portfolio. Overall, the CapEx as a percentage of our revenue is expected to increase from 3% to 4% over the next three to five years, and Dawn will share more of this on our capital spending profile. The fourth and final pillar of our strategy is, of course, our people. They are at the heart of everything we do, and we are very committed to building capabilities and creating meaningful long-term career paths, which will position Haleon as an employer of choice.
It's important to me to build a strong organization which is energized and has a depth of mastery to deliver and sustain great results. Equally important to me is the well-being of our organization. Let me share some of the exciting things that we're putting into place as part of developing our people. Firstly, we are strengthening the technical expertise and leadership skills that we have, and we have a large organization across the supply chain. We have developed training calendars and modules to make sure that we drive the depth of mastery across our seven disciplines in supply chain. A discipline is an area like purchasing or manufacturing or quality. We've designed a qualification process, and we are providing hands-on training as well as workshops to make sure that each employee develops. Each employee will undergo a minimum of 10 learning sessions annually, dependent upon their level and need.
Secondly, we're broadening our recruitment strategy. This is aimed at attracting talent with deeper digital and analytical skills. It's my goal to have 20-30% of our junior to middle managers with this skill set in the coming three years. Thirdly, we're establishing engaging learning centers on our sites. This is to bring the consumer in and build a knowledge bank for our people on our products and how they help. Our goal is to drive positive engagement levels as well as well-being, which will bring to life our purpose to deliver better everyday health with humanity. Finally, by streamlining all these things and driving automation and driving digitization, we're freeing up quite a lot of time that our people spend on manual tasks and so on, repetitive tasks. This is allowing us and will allow us to train our people to do more meaningful and impactful work.
We've got a short video from some of our people from around the world to share how they're feeling with the new strategies.
I'm Yang Amapang. I'm from the Cape Town site. Over the past year, we introduced the Operator Training Manual, which focuses on upskilling the operator and reducing our changeover times. I'm proud of this innovation and its impact in improving the operator skills. Together, we are delivering stronger results. Hi, I am Lacey Webble from Lincoln, Nebraska. I am an operator on the Theraflu Pouch Lines. In the past six months, I have been a part of an autonomous maintenance event where we identified key processes on our lines to help decrease stops. Since then, we have increased our overall equipment effectiveness by 10 percentage points. I am proud of the team that I work with, and we are excited to deliver stronger results.
[Foreign language] Hi, my name is Alfredo Serrano, and I work in the emergency packaging area. As part of our company's new strategy, my colleagues and I received training to improve equipment maintenance and enhance overall efficiency. This effort has transformed the way we work; our processes are smoother, downtime has been reduced, and we're seeing real results. I'm proud to share that we are running at the highest productivity the line has ever had. Operators feel more confident, empowered, and motivated to keep improving and give their best every day.
To close, we have over the next five years, I'm going to be really busy, and I will be highly fulfilled. We will improve our customer service levels to be 98% plus in line with best in class.
We will deliver the GBP 800 million worth of gross productivity savings that will help increase our adjusted gross margin by 50-80 basis points per year at constant currency. Finally, we will reduce our inventory days by 25-30% versus our 2004 baseline. I'm really proud to be a part of Haleon, and I'm really proud of my organization. It's an exciting and meaningful time, and I look forward to engaging with you later to hear your thoughts. With that, we're going to go to a short break for 15 minutes, and then Dawn will take the stage. Thank you.
Hi, everyone. It's left to me to bring the session home. A few of you have said to me, "Are we leaving the best till last, Dawn?" Let's see. Let's see how this goes. It's great to see you all today.
Yesterday, we talked about the near term, where we shared our solid Q1 performance. Today, our focus is looking ahead and focused on the medium term. We have set ourselves an exciting ambition to unlock our full potential. Over the course of the afternoon, you have heard from my colleagues about the exciting opportunities for Haleon. What I'm going to do is to pull everything together to show how this translates into our new value creation framework. You heard from Brian about the opportunity ahead. Our ambition is to reach 1 billion more consumers by 2030 and deliver industry-leading returns by driving continued top-line growth, by growing our operating profit through leveraging gross margin expansion, and through continued evolution to be a more agile and performance-focused organization. We start from a very strong position.
We have delivered industry-leading organic sales growth, at least in line with our 4%-6% target. We have generated strong free cash flow. We delivered faster than expected, from 4 times to 2.8 times. We returned around GBP 1.5 billion to shareholders through a combination of dividend and share buybacks. This strong financial performance demonstrates our ability to deliver on our commitments while building a platform for sustainable future growth. We believe we can and should do better, especially in the area of operating leverage. Over the last three years, we have delivered an increase in adjusted operating margin of 80 basis points at constant currency. This performance has been adversely impacted by the drag from foreign exchange. The net result is that our adjusted operating margin has declined 50 basis points, and our adjusted operating profit has been broadly flat in absolute terms at GB 2.5 billion.
Despite this drag, and excluding the standalone impact from demerger, our EPS CAGR has been 5% due to reductions in annual net interest costs, non-controlling interest, and reduced share count through share buybacks. Moving forward, delivery of consistent operating leverage through the P&L is a key priority for me. Stepping back, why is Haleon an attractive investment case? We are the leader in a global market of about GBP 200 billion. We operate in attractive, resilient categories underpinned by long-term consumer tailwinds growing at around 3%-4%. We have a diverse geographic footprint. We have an exceptional portfolio of superior brands and leading capabilities in expert pharmacy channel and science. We have consistently grown volumes and taken market share. Our updated value creation framework has three components: operating leverage from top-line growth, strong free cash flow generation, and disciplined capital allocation.
We have plans in place to deliver against each of these components. We are disciplined and consistent in our assessment of performance KPIs. To help drive performance, remuneration is linked to all key levers of value creation: revenue growth, operating profit, EPS, and cash metrics. You will see many elements are unchanged from our current framework. The key shifts are a step up in our profit guidance to high single-digit adjusted operating profit growth at constant currency, underpinned by gross margin expansion. This reflects our ambition to leverage strong revenue growth to drive operating leverage more consistently to the bottom line. Stronger free cash flow generation underpinned by laser focus on working capital improvement and a disciplined approach to capital allocation that balances shareholder returns with value-enhancing bolt-on acquisitions. Let me start with organic revenue growth.
As Tamara and Franck outlined, there is substantial headroom for future growth across our categories. We will unlock this by driving health in more hands through our superior brands and leveraging our strong geographic footprint. Currently, around two-thirds of our sales come from developed markets, where we will continue to drive core penetration and premiumization through innovation, as well as leverage our route-to-market strength in pharmacy. In emerging markets, we've achieved double-digit growth over the past three years. We will unlock category growth and drive penetration by closing the incidence versus treatment gap and broadening our reach to lower-income consumers. We will continue to focus on key markets such as India and China, as well as accelerate performance in the U.S. These strategies will lead to a balance of growth between price and volume mix. Turning now to gross profit. Haleon already has an attractive adjusted gross margin of 63%.
This is driven by several factors. The quality and resilience of the consumer health segment itself are leading category positions that enable us to leverage the benefits of scale and pricing power and our product superiority, which drives premiumization. To expand margins further, we will deliver GBP 800 million of gross supply chain productivity savings. This GBP 800 million will be equally spread over the next five years. In the near term, productivity savings will come from complexity reduction and operational excellence, with network optimization and robotic savings kicking in over the medium term. We've made good progress in laying the groundwork for these initiatives and are already up and running.
The costs to deliver these savings over the next five years are threefold: an increase in our average CapEx spend from 3% to 4% of revenue, GBP 300 million one-time restructuring and asset write-off costs, of which two-thirds are non-cash, and an increase in supply chain OpEx spend as we invest in leading capabilities. The GBP 800 million of gross benefits will enable a more agile and efficient operating model, which will unlock significant value for our stakeholders. Let me walk through how these savings will translate into gross margin expansion. We will continue to drive balanced growth through pricing and volume mix. Gross productivity savings will be offset by COGS inflation, as well as the incremental costs I just mentioned incurred to build the future supply chain capabilities. A good example of this is our investment to enhance our supply and demand planning that Namrata talked about.
I would like to emphasize that our gross margin guidance takes into consideration the mixed effects, which we will look to manage as we drive our growth across faster-growing geographies and new consumer cohorts. Moving forward, gross margin expansion will provide optionality, flexibility, and agility in the P&L. To drive top-line growth, maintaining the flexibility to invest in advertising and promotion is a key area. At 19.2% of revenue, our A&P is already at a very healthy level today. We have also shown that we will retain the flexibility to dial up or down depending upon competitive dynamics and to accelerate our strategic choices. For example, you have seen us devote spend in high-growth markets such as India and to support successful innovation such as Sensodyne Clinical White.
It is also important to ensure that we allocate our spend effectively to ensure our brands continue to be top of mind with existing consumers and to reach new consumers. We are focused on strengthening further the ROI of our spend in the following areas: more efficient media buying to beat inflation by 50%, allowing our investment to go further despite market pressures, and increasing the proportion of our spend on expert digital and social channels to connect with over 80% of dentists and pharmacists across our key markets. Moving now to look at R&D. Investment in R&D underpins our strong science capability and innovation platforms. We have a strong track record of delivering growth through innovation, which, combined with superior evidence generation, drives product superiority and underpins expert recommendation of our products. You have seen many examples of this today across Sensodyne, Otrivin, and Centrum.
In addition, growing our technical capabilities is a key focus for us. We'll continue to invest to grow our R&D infrastructure and capabilities that deliver the science and experience of our solutions. For example, as Franck mentioned, we have our new state-of-the-art R&D facility coming online in Slovakia at the end of 2026. We are also investing in our R&D digital tech infrastructure, including regulatory and clinical systems, which will enable us to be future-ready to dial up innovation. We are on a journey to make Haleon more agile and performance-focused. To support this, we're driving process simplification and leveraging technology. We are on track to complete our GBP 300 million productivity program in 2025, aimed at achieving an efficient organization. Haleon Business Services will drive multifunctional end-to-end process simplification and digital enablement while building capabilities for the future.
In digital and technology, we're embedding AI, enhancing analytics, and improving our e-commerce capabilities through a clear digital strategy. We recently piloted self-service customer ordering and e-commerce portals in Europe with great feedback and are planning global deployment over the next two years. These technology-enabled improvements are helping us to optimize our end-to-end value chain, increasing speed, agility, and improving efficiency. Recapping what we're targeting, we will deliver adjusted gross margin expansion on average 50-80 basis points a year at constant currency, providing flexibility in the P&L to ensure healthy investment in A&P and R&D to drive growth. We will continue to optimize our other SG&A costs to drive operating leverage while investing in future capabilities.
Together, this leads to a step up in our profit guidance starting in 2026 to deliver high single-digit adjusted operating profit growth at constant currency, an important step to ensure we deliver consistent leverage through the entire P&L. I want to turn now to foreign exchange. Our translational foreign exchange P&L impacts have been driven by two main factors: a mismatch in currency between revenue and costs, resulting in a higher currency impact at operating profit versus revenue, and strong growth in emerging markets, where higher inflation typically results in higher currency deflation. Over the last 10 years, despite a tailwind in G10 currencies, we have seen an average annual drag from currency of 0.5%-1% on organic revenue and 2%-2.5% on organic operating profit. What can we do to address this? Clearly, we cannot control currency markets.
It would be great if we could, especially at the moment. There is no quick fix. Our focus will be on the areas that we can influence, driving harder our constant currency operating leverage, which is more within our control to provide more buffer to currency moves, taking proactive steps to try and minimize the impact of currency over time and reduce volatility, including looking to minimize the mismatch between costs and revenues, reviewing our manufacturing strategy, as outlined by Namrata, and further embedding currency into investment and pricing decisions. As you saw in February, we have also changed our forecasting approach from using spot rates to Bloomberg Consensus Forward Rates to try and better reflect forward projections in emerging markets. Whilst this in itself is not a mitigation lever, it should provide more visibility on annual foreign exchange impacts.
Let's now turn to the second part of our value creation framework: strong free cash flow generation. Haleon is a highly cash-generative business. Last year, we generated free cash flow of GBP 1.9 billion. Benchmarking shows significant opportunity in working capital, especially in inventory. Many of the supply chain initiatives Namrata shared earlier will unlock the inventory opportunity. We have set a target to reduce working capital cycle time by 30% over the next five years. Working capital efficiencies will cover additional CapEx investment required to drive productivity. Our aim will be to deliver working capital improvements in a sustainable way to generate a more balanced cash flow throughout the year. By combining this with operating leverage, continued optimization of tax and interest, we will look to drive strong overall cash flow moving forward. In terms of CapEx investments, there are two key messages I want to share.
First, we expect to increase average CapEx spend to around 4% of revenue over the next three to five years. This reflects an increase to drive our growth and productivity agenda, as well as investments in data, AI, and sustainability. Second, CapEx spend is currently balanced between 50% of spend on productivity and growth and 50% on maintenance. Moving forward, this will shift towards a 65-35 split, with 65% being spent on growth and productivity and 35% being spent on maintenance CapEx. We are also embedding currency into our supply strategy and investment decisions, and we will maintain our discipline in achieving internal rate of return, hurdle rates, and attractive payback periods on investments. This overall strategic shift in CapEx will strengthen our capabilities while supporting our long-term growth ambitions.
As we exit our five-year plan, I would expect to see CapEx as a percentage of revenue to start trending back towards the 3% level. Let's move to look at our disciplined capital allocation. Based on our strong and improving free cash flow, we are well positioned to deliver on our capital allocation framework. Our priorities are unchanged and focus on balancing investment for growth and delivering attractive shareholder returns. As outlined earlier, we're investing for growth and investing in productivity. Our M&A approach will shift from divestment focus to bolt-on acquisitions in strategic growth areas where we see attractive returns, and I'll come back to this shortly. For shareholder returns, we will continue to grow dividends, at least in line with adjusted earnings, and we will return surplus cash to shareholders in the form of buybacks or special dividends.
All of this is underpinned by our strong investment-grade balance sheet and our target leverage of around 2.5 times net debt to EBITDA. Let's briefly look at M&A. We have been proactive in managing our portfolio. To date, our divestment strategy of non-core brands has delivered over GBP 1 billion in share proceeds. Whilst these divestments were the right thing to do strategically, we recognize that they have had a dilutive impact to margins in the prior years and in 2025. On average, over the next five years, we will look to manage the dilution of any potential future divestments through a better balance with growth-accretive acquisitions. We have defined a clear set of criteria and priorities for targeting bolt-on acquisitions. Our aim is to strengthen depth and breadth in our existing categories by addressing either a geographic or portfolio gap.
Any acquisition must have, first, a strong strategic fit in the areas of our current strengths: brand superiority, expert, and science. Second, a strong market position, brand equity, and opportunity for clear differentiation and competitive advantage. Third, any acquisition must deliver strong financial returns through EPS and return on invested capital. Fourth, the potential to deliver at least 4%-6% growth on a consistent basis when on the Haleon platform, and to be either margin accretive from the start or have a clear near-term pathway to get there. To sum up, our value creation framework underpins the next chapter for Haleon. By leveraging our superior brands to deliver healthy more hands, we are confident that we will continue to deliver against our medium-term target of 4%-6% annual organic revenue growth.
This growth, alongside our wired for excellence initiatives in supply chain, will support on average 50-80 basis points per annum of adjusted gross margin expansion, which in turn enables financial flexibility and agility through the P&L and our strengthened commitment to drive operating leverage more consistently to the bottom line. As a result, we have updated our medium-term profit guidance to high single-digit adjusted operating profit in constant currency. This includes a recognition that M&A should deliver a better balance of accretive bolt-on acquisitions to offset any dilutive divestments going forward. In turn, we expect to deliver strong EPS growth and free cash flow generation. Overall, this will enable us to deliver on our ambition of reaching GBP 1 billion more consumers by 2030 and deliver industry-leading returns. With that, I'll hand back to Brian.
You're all going to be hearing that in your sleep tonight, by the way.
It's just how you remember Haleon. We're embedding it in there. Thanks, Dawn. Fantastic. Before we move to Q&A, let's recap what we've heard today. I started by talking about the successful transition we've made as a standalone listed company, the strong foundations we built, and the transformation we're now making to become a world-class consumer company. I talked about the areas where I see the greatest potential ahead. I talked about how we're going to go after these opportunities through our one-is-one strategy, starting with our purpose, our ambitions, our four strategic drivers, and our four behaviors. After that, the team took you through the detail of how we're bringing to life our one-is-one strategy. Before Dawn just brought it together in our updated value creation framework and gave you more context on our financial commitments.
I hope you sense the excitement that we all feel and the passion in the team of the potential we see in this business ahead. I hope you've also seen that we have a strong alignment behind our clear ambitions and strategies with the right team in place to deliver. To close, I'll leave you with the key messages I'd like you to take away from today. We have a clear strategy to drive growth across our attractive categories. We're unlocking the opportunity in our supply chain to reinvest in the business and deliver gross margin expansion. We're continuing to transform into a more agile, performance-focused consumer company. All of this underpins my confidence in delivering our value creation algorithm. Now, we're just going to take a few minutes, so please don't go anywhere, to just set up for Q&A, and then we'll move right into Q&A.
Thank you.
Keep? Keep?
No, no. He's there.
Oh, he's there. Yeah.
Safe to seat.
Welcome to the Haleon Q&A session. If you are online, remember you can ask questions via the online platform. If you are in the room, please just raise your hand. With that, shall we start to take questions from the room?
Yes. Guillaume, by the way, I'm going to select who does Q&A. Very hard. So many of my favorite people in the room. I'll do my best.
I'm flattered. Good afternoon, everyone. Guillaume Delmas from UBS. A couple of questions for me. The first one on your 4%-6% organic sales growth guidance, which was reiterated today. Because we've heard about driving penetration among low-income consumers, that sounds incremental. We heard about reducing the gap between incidents and treatment, doubling down on premiumization.
I mean, all this is pointing to an acceleration in volume mix. Would that be a fair assessment? And keeping the 4%-6% organic sales growth guidance unchanged, does it mean you'll be relying maybe a bit less on pricing going forward, or you're simply thinking more the top half of the 4%-6% rather than the bottom half? And then the second question on EPS growth. Why no guidance on EPS? You're targeting high single-digit operating profit growth unless you're assuming significant changes in tax rates or interest rates. I mean, should that lead to a low double-digit 10%-12% EPS growth in constant currency over the next five years? Thank you.
Great. Thanks, Guillaume. Listen, I'll take the first question, then I'll pass to Dawn on the EPS question.
Listen, I think if you look at what we laid out and what underpins my confidence in continuing to look at 4%-6% growth over the medium term, I think on the incident versus treatment gap, we do see significant opportunities. It's also the place that has driven growth on the business in the past. You have seen that in the Sensodyne and as you heard about Sensodyne in the U.S.. Premium-led innovation is something else I think we have been very good at in the past. We continue to see opportunities and more opportunities we are going to go after. You're right that the new kind of incremental opportunity to what we have done in the past is the low-income consumer. That's not an area we really have strategically focused on in the past. We really see it as a great opportunity.
Also, as you think about that consumer in emerging markets and the fact that they are going to become middle-class consumers one day, it's really building the brand equity now and brand loyalty and then taking it into the future. All of that in the world that we live in and the uncertain environment gives us the confidence to continue to commit to the 4%-6% growth because we see those growth opportunities. We have plans behind this on what we're going to do and what we're going to roll out and what we're going to roll it out. I think the 4%-6% we're confident in, I wouldn't give you high-end, low-end, middle-end. I mean, but it just underpins our confidence overall. Dawn?
Yeah.
I think, look, in terms of the EPS, I mean, the reason why we're focusing on high single-digit operating profit is in terms of the quality of delivery of the EPS. We really want to make sure that that's coming through the P&L. Yes, if you look at the other elements, given that we have strong free cash flow over time, you might expect that interest cost to come down, everything else being equal. Tax rate, maybe let's see if it stays at the 24% it is today. Obviously, what you've seen over the last two years and what you'll see the impact of this year is also the impact of the reduced share count as well. That would be how I would think about EPS. Yes, driven by really strong high single-digit OP at constant currency.
And then you've got those other pieces on top.
Great. Thank you.
Right here. Yeah, that's you. I'm pointing over here. Yeah, absolutely.
Just a couple of questions. Going back to the top-line guidance, first of all, could you give us perhaps a bit of an update on the RX to OTC opportunity over the coming years? And then just going back to the guidance on the gross margin, what's your underlying assumption for input cost inflation?
Okay. I'll go to Dawn on the inflation question, and I'll go to Franck on our OTC switch. Just a reminder of what we've said in the past.
Three years ago at our Capital Markets Day, we had two RX to OTC switches in the pipeline, potential launches in 2025 and 2026, not in our guidance from an organic sales growth perspective, but in our guidance on profit because we'd be investing in those things. There's been a delay in both of those. Maybe I go to Franck, and you can talk a little bit about what's happening.
Yeah, exactly. We're still working on the one we have already mentioned a few years ago. As you probably heard, the environment in terms of regulatory is moving, changing, and we need probably to understand a bit more what the new administration will also unlock or bring as a new regulation. As an example, end of this month, we will have a new rule, which is what they call additional condition of use for non-prescription.
We need to understand a bit more how that could unlock further the access to self-care. Clearly, the new administration says they want to promote more self-care access. We will have to observe a bit more how the regulatory environment will move. Obviously, we have still our two assets that we have already shared in our pipeline, and we will check again if there are more to come regarding the evolution of the regulatory environment. As Brian said, it is on top of the guidance in terms of growth.
Thank you, Franck. Dawn?
Yeah. I think if you think about the gross margin and the gross productivity savings, our assumption is around about 2% inflation. If you think about that chart that I showed, that would be covered by price. The other way to think about it in terms of the GBP 800 million, today our COGS are GBP 4.4 billion.
That's roughly split around 30% raw materials and packs and kind of 70% kind of the rest of manufacturing costs and other. The inflation will hit the material and packs piece and obviously some other elements in terms of labor. As Namrata talked about, we would look also to cover that through all of the procurement initiatives that she mentioned. Within the manufacturing piece and the remaining 70%, that's where all the other initiatives would come through in terms of the operational excellence, the complexity reduction, etc. That's the way I would think about it.
David? Hayes?
Hi, Luke. Two from me if I can. One on organizational structure and then one on manufacturing. On organizational structure, you hear some of your peers talk about changing that. What is the best optimal structure? Just to understand, is it a matrix structure here?
Do the markets have a P&L, or is all these initiatives driven by the divisions? That is kind of where the initiatives are controlled as you bring in the new products innovation. On the manufacturing, it feels like you're saying there's too much contract manufacturing. You want to bring more of that in-house. Is that a function of the business and how it was created with all the three units? You are now going back to address that. What are the benefits of contract manufacturing that you worry about losing? With all the changes going on, to your point, you're busy.
Should we expect we're going to get a few quarters where it's like, "Oh, we've got to turn off this plant and turn this system off, and we're going to pre-ship?" And then would there be volatility along the way, or do you think that's something you can manage and we'll never even see the join, basically? Thank you.
Great. I'll take the org structure question, then I'll go to Namrata. By the way, I started my career in supply chain, so I could answer that one too. On org structure, I think about it as an operating model in a way. It starts with what you've seen, which is the win-is-one strategy, which lines up the entire organization of what we're doing. Strategically, we think about the business from a category perspective. We have a category structure.
As a leadership team, we look across the business and across the categories, and we make the decisions on big resource allocation that happens. That gets deployed down, and we have 14 business units, which are regionally lined up P&Ls. We run the P&Ls in the business units. Why that's important is our go-to-market is consistent across all our categories. Our categories aren't of a similar scale of, let's say, some of our consumer staple peers who run their business literally P&L top to bottom from a category perspective. We think it gives us actually the right ownership at the local level with the right strategic direction coming from the categories on down with resource allocation decisions made as an executive team on how we're going to drive the growth and productivity. Namrata on manufacturing. Thank you.
Thanks for the question.
I think in terms of the contract manufacturing network that we have, we have a lot of contract manufacturers around the world that do small amounts. On the one hand, that's good because we have some resiliency built in. We also have capacity in our factories, which we want to maximize on. One of our goals is that how do we have the balance between what goes to contract manufacturing and what do we do in-house? We want to use the contract manufacturing network to do specialized kind of products. If there's a new trend, for an example, we just can't overnight invest in it, and we may not want to either. That's our overall goal. Contract manufacturing will be very much part of our network.
Thank you, Namrata. Celine?
Thank you, Celine Pannuti, JPMorgan.
First question on the GBP 800 million savings, I would like to understand the drop-through. You said that there were some upper supply chain costs. Where are those? Are they included in the gross margin, or are they in the SG&A? On the 50-80 basis point annual gross margin expansion, I mean, quick math, I think you would need at least 40-50 basis points of EBIT expansion to deliver high single-digit EBIT growth. That would suggest not much reinvestment in A&P as a percentage of sales. Did I get this right? My second question is on gross margin. Over the period, you expect 250-400 basis points higher gross margin. Is there a drag from the 1 billion new consumer at low income? What is that drag?
If I look at different categories, where is the gross margin coming from? You already have, you said, I think, the best gross margin in the industry. What will get you even higher there? Thank you.
Fantastic. I am going to actually pass those over to Dawn. The first thing I just want to say about your question on the billion consumers, the billion consumers are not all low-income consumers. It is the part of the strategy which is new, and we are going to go after that aggressively. The penetration in our core categories on brands like Sensodyne, even in premiumization, will also add to that number. Dawn?
Yeah, I think what I would say on the gross margin, I mean, you are right. We have a really strong gross margin today, 63.2% last year.
Actually delivering 50-80 basis points on average over the next five years, that's going to put us right at the top end of the pack. I think that's really exciting. In terms of that gross productivity savings, I mean, that equals about 550 basis points over the next five years. If you then take off that higher cost to deliver and investment in new capabilities, if inflation is offset by price, then actually you're left with the 250-400 basis points over five years, which is the 50-80 basis points. Actually, when I think about that, I go that gives us huge flexibility. Actually, flexibility in terms of investment in A&P, investment in R&D when we need it.
If I think about SG&A, if we're growing at 4-6%, we should get some operating leverage from that, which again gives more choice and flexibility about what we would invest in terms of whether it's digital or new capabilities. I think, as I say, I think that's our goal. We obviously want to deliver the high single digit, but actually the gross margin opportunity, which is significant, that gives us that optionality to dial up investment when we need it or invest in new capabilities as well. That's really important to ensure that we can sustain that growth for the long term.
Thank you. Let me try to go in the back. Maybe you can bring the mic over there because I'm not going to be able to. Thank you.
Hi there, Jeremy Fialko, HSBC. A couple from me.
First one, when you're guiding from next year, will you be giving sort of annual guidance, or would you expect to be delivering this high single digit operating profit growth every single year, or is this simply an average over the period? The second one is on the SKU reduction. Do you think that that's going to have any impact on your revenues at all, or do you think you can get rid of this sort of 30% of SKUs with basically zero impact on your revenues? Thanks.
Great. Thank you. First of all, on the guidance, we would think about this high single digit operating profit at constant currency as an annual thing. Every year, of course, we'll give any updated guidance we would give like we would at the beginning of every year.
On SKU reduction, in our guidance going forward, any SKU reduction is incorporated into that. Maybe Namrata can talk to a few places that we're doing that because in many cases, that reduction is invisible to consumers. Actually, we don't think we will have a drag. We also did reduce 13% last year in our growth that we already delivered. Namrata, maybe a few examples.
Sure. Our goal is to focus on SKUs that are dilutive and that are declining in revenue quite significantly, so tiny, tiny amounts. One of the key things that we have, if I give you an example, on our toothpaste packaging, we have single languages. If we go to multilingual, that doesn't necessarily mean that we will reduce in terms of our revenues, right? We will keep those revenues going but have an immense amount of simplification.
We're confident that this isn't going to lead to any kinds of major revenue declines.
Listen, the reality is that, of course, some of that will be some risk in the top line. Well incorporated into our 4-6% guidance and eyes wide open. Next question. Let's go back there. Emma, maybe you can bring the mic there.
Supply chain. Sorry, it's James Edwardes Jones from RBC. Supply chain again. Can you expand a bit on how the supply chain retooling is going to reduce the currency mismatch, given that about, I think you said, 80% of production is already local? And a more sort of fundamental question, I guess. You spend about seven times as much on A&P as on R&D. As a science-based organization, have you given any thought to whether that ratio needs to fundamentally change?
Great. You know what?
I'll take the first one, and I'll pass the currency question on supply chain over to Dawn. Listen, I think if you look at our R&D as a percentage of sales, which again, 2.8%, 2.6% now, we do see the opportunity to invest more. Very competitive from a consumer company perspective and a consumer health company perspective. Within that, all the science that Franck has shared and all those capabilities and clinicals are all incorporated in that number. We feel like we have a good level of investment in R&D. Absolutely. We believe and we will invest more in R&D when we see and we have the opportunities to even do more in that space. Dawn, on the question on FX. Yeah.
I think, look, from a supply chain perspective, if you're thinking about a future network strategy, and Namrata talked about some of the changes and the supply chain of the future, what you obviously need to incorporate when you're thinking about that is what could be the impact of currency. There are still countries today that are sourced outside the country or from very different currency pairs. I think the considerations to think about is, one, your future supply chain network optimization that you're thinking about currency in that. The other piece is currency pairs or currencies that move together and the currency that you're invoicing in as well are all the different factors to think about in terms of how we balance that mix.
Great. Right here. Emma.
Thank you very much. It's Callum Elliott at Bernstein. My first question is actually for Tamara.
We heard a lot about how you're using marketing to drive category growth in your presentation. Dawn, I think in her presentation, touched upon how marketing is also an area where you're going to need to focus on efficiency. Maybe I'm just hoping that you can flesh out from kind of inside the marketing organization some details or give us some examples of how you're going to get a better return on ad spend at a time when I think Google announced ad pricing up 10% in Q1 this week. I think Meta ad pricing was up 10% in Q1 last night. It doesn't really feel like an environment that's particularly conducive to driving efficiency in marketing spend. I have a second question maybe for Keith. We saw the video about India earlier, the great success that you've had since taking back control from Unilever.
My question is, I guess there must have been a decent chunk of upfront investment building out infrastructure ahead of that change. I assume that infrastructure probably skewed to fixed cost investment. Would it be right to expect that we can now expect accelerated profit growth from India as well as the strong revenue growth that we've seen over the past year or two?
Listen, we'll go to Tamara first, and then we'll go to Keith. Just one comment on India. One of the reasons that we took distribution back from Unilever was two reasons, actually. One was a strategic reason. We compete with them, and we felt like we have a business that we needed to drive on our own. It was quite a fixed cost percentage payment we paid them, and it was quite high by any benchmark.
Actually, quite efficient for us to bring that in and also strategically made a lot of sense. There is a lot we are doing in India to drive growth, and Keith can mention on that. Tamara, do you want to go?
Yeah, sure. We feel very confident in the amount of A&P we have and the way that we spend it. We have a great partner in one of our media buying agencies where we have worked to make sure that we have a contract that helps us somewhat offset some of that inflation. We are focused on both efficiency, the buying, the cost, the spend, but also on effectiveness. One of the things we have been doing is we are continuously using data and analytics, doing market mix modeling. We do that across 70% of our media spend with an ambition to keep on increasing that.
As we're doing those MMMs, we're seeing big jumps in our ROI. We've gone from 1.2 up to 1.4. We're really clear around the role of the different channels, getting really good ROIs on those channels. We've reduced the number of campaigns that we run. We used to run quite a lot of small campaigns. We've reduced by 23%. What that means is we're able to really focus on doubling down that investment, expanding the number of channels. That gives us both fantastic reach but also the depth so that we're building both short-term sales and long-term healthy, strong brands. We're looking at all of that. We look at programmatic.
We look at making sure that we're not getting a value drop between demand side and sales side in programmatic so that we're really getting transparency into those media supply chains and we're really confident that we are investing money that is getting into the consumer and driving that conversion to purchase.
Keith.
On the India question, as Brian just now mentioned, right, in fact, we are more cost-efficient under our own hands. Apart from cost-efficient, I would say also the effectiveness. Post this model, when we take back our distribution, our sales for basically, in fact, our coverage doubled because of this. This will give us also more attention in terms of effectively even going to lower tier cities. Now basically with this change of the model, we are able to even unlock the growth opportunities.
For example, you heard about regarding the Sensodyne, right? We still have a lot of headroom for growth in the lower tier cities. Now we have really had just a INR 20 or GBP 0.20, okay, assessed pack. Now through our distribution, we really can be able to penetrate to those lower tier cities. Similarly, for the central recharge I shared in the regional breakout section, that is really, again, how we can really now leveraging our distribution sales force to really penetrate into the lower income group to unlock also the growth potential. This is really, I say, a great kind of distribution, strong root to markets. We build a muscle, but in particularly the existing brands as well as the new innovation we bring in. Second piece is also the expert marketing.
The expert detailing is very important drivers or also our building a superior brand. Now with this, basically, we also really have a lot unlocked of the growth potential. That is why in Q1, we continue to grow above market, and also we continue to have double-digit growth for India business.
Thank you, Keith. I understand we have a couple of questions online. Maybe we go to one of those.
Yeah, I'll take them individually. First of all is, could we talk about tariffs for Haleon?
Okay. We can talk about tariffs. Listen, I'll pass it to Dawn on the tariffs.
Yeah. I think, look, in the U.S., I think for us, tariffs, based on what we know today, are in the tens of millions, and that is obviously fully built into our guidance. 80% of what we sell in the U.S., we make in the U.S..
Yes, the tariffs have shifted from kind of finished goods impact for Canada and Mexico more to a global impact. We also incorporate raw materials impact, but actually, the impact's the same. I think I said on the call yesterday, when we think about tariffs, we think about it through two lenses. Yes, there's the mitigation lens in terms of how do you mitigate any on cost. The other lens is actually an opportunity. How do you leverage it to get an even stronger relationship with your retail partners? Does it unlock competitive differences or shifts which actually you can then unlock? I think for us, yes, we obviously monitor the situation. We mitigate it, but we also think about, is there an opportunity here as well?
Great. Okay. Back in the room. Right there. Am I here?
Thank you. Good afternoon.
Tom Sykes from Deutsche Bank. Firstly, just on the—well, they are all on the gross margin, sorry. Do you have what the history has been on the current sales perimeter for constant currency gross margin improvement to compare against the 50-80 basis points? And then does the 50-80 basis points include volume leverage? Because presumably your incremental gross margin, if COGS is a part, raw materials is a pass-through, is up sort of 70-80% or so. I do not think you answered the question on mix, just whether you thought mix was a positive or negative to gross margin into that 50-80 basis points, please. Thank you.
Okay. All right. There are several questions in there. What I would say in terms of moving forward versus the history, I think Namrata talked about it.
What's important for us moving forward is actually our starting point is different versus many others. We are not necessarily coming from a low base in gross margin. Actually, we have been pretty good in terms of gross margin. On top of that, we see significant opportunity moving forward as we have outlined. I think in terms of the volume leverage piece, if you think about what I talked about in terms of total COGS costs, GBP 4.4 billion, 30% coming from raw materials and packs, 70% from manufacturing costs. If I then think about the savings against that, if I think about the GBP 800 million against that, think about that in proportion. As I said, procurement savings on raw material costs. If I then think about the 70% for manufacturing costs, think about that may be broadly equal across three buckets. One bucket, complexity reduction.
Namrata talked about more languages on pack, harmonizing packaging, reducing the number of SKUs. Complexity reduction is not linked to volume leverage. It's just removing bad complexity and simplifying our supply chain, our manufacturing processes, and actually our end-to-end value chain. That will be the first bucket. The second bucket is around operating efficiency. Getting more out of our plants. This might be a tweak to a piece of equipment. It's de-bottlenecking it. It might be separating heating and cooling in a process. It's improving the performance. It's getting more out of the assets that we have and really driving them. What does that do? That unlocks more volume. In theory, not only are those assets being more efficient, you should be able to get more volume through it. That's where you get operating leverage benefit.
If you were not getting operating leverage benefit from volume, you would need to look at the cost. Think about that. The third area is around the network optimization. This is around the contract manufacturers. This is in how do we optimize that in-house versus out-of-house. I think the volume benefit is built into some of those elements in terms of the cost-saving piece. I think the last question in terms of mix. Obviously, we are managing a complex portfolio across different geographies, across different categories, across different packs. Optimizing that mix, whether it is coming from premiumization, whether it is coming from price pack architecture, whether it is coming from net revenue management, that is something that we do. We are managing that all the time.
If we have some things that are margin dilutive in the short term, we will look to balance that with something else, either in country or in a different country. The mix piece, that is built into the 50-80 basis points of gross margin improvement.
Thank you. Right there, Emma.
Yes, thanks very much. Edward Lewis from Redburn Atlantic. I just wanted to ask about the opportunities you talked about tomorrow, particularly in the emerging markets. I think I was struck by how you're taking the price premium that you've got, I think it's 120 index, and you're taking those brands into those markets, which I think we can often overlook how, I guess, aspirational the consumer can be. What does that mean to the competition you face? How much competition is there?
How much opportunity do you have to grow the category so it'll probably faster and take share with that regard? Brian, just on, I think, three years in, I guess, since there's been in terms of the culture. I mean, I think many of you on the stage have come from different companies. You've talked about being three companies put together over three supply chains. Just talk about, I guess, how you feel the culture of the company is developing over the last three years and the opportunity you see there.
Great. I will answer that question first. I'll go to Tamara a bit, but then maybe to Filippo to talk about what's happening on the ground and some of the emerging markets that he manages. Listen, I think we've made great progress as a company around culture.
Let me just tell you how I think about culture and define culture because I think about it pretty broadly. I think it does start with having an organization that's completely aligned and lined up to the strategic intent of the company. You saw our one-is-one framework. That is embedded throughout the organization. I can tell you that there was most of the organization online today for this Capital Markets Day, and they see that that is consistently something we're sending out into the world. I think second, you have operating model and how you run the business. The truth is it's evolved for us. When I talked earlier on the question on how does it kind of work, we've evolved to be much more strategically driven by categories versus being a P&L run by markets.
Probably started this journey more bottom-up, and now we're getting much clearer on those headroom for growth and making much bigger strategic choices across the business. I think there's talent and capability. On talent and capability, we've changed the talent quite a bit in the top three levels of the organization. I feel really good about how we've kind of increased that talent level. We see it in our engagement results. We just had an engagement survey just a few weeks back, 82% or 83% engagement. We're in kind of top quartile engagements. Within that, we still see opportunities. One of the opportunities is, let's say, quote-unquote, paraphrase, it's easy to get work done around here. It's not as high as it needs to be. That's my last piece, which is processes and systems.
I think it's the place where, again, we've made progress. We have Haleon Business Service that we're going to go further. We're not where we need to be. There's more to go after there. I would say on the entire culture journey, think about how you transition into a world-class consumer company that's agile, that's consumer-centric and performance-focused. We're 6 or 7 out of 10. We're on the journey. We feel good about it. We're very clear on what we need to do, but there's definitely more to go after. Great.
Yeah. Starting with our penetration. Our penetration with high-income consumers is around 30%. It's around 17% with low-income. When you go to some of the emerging markets, that gap actually widens even further. It's really clear that there's an opportunity here. We did loads of big studies.
Half of the world feel like they're able to control their health. The other half of the world don't feel like they're able to control their health. Doesn't always mean that that's the emerging markets, actually. We see quite a lot of that in other parts of the world too. What is clear is that 45% of low-income consumers would describe their health and wellness as good or quite good. That's 65% in the higher income. There is a real opportunity. In terms of competition that we face, often it'll be traditional home remedies. Sometimes you see some of the usual players in these markets as well. The majority of the time, it is things like home remedies. If you think about pain, 9 out of 10 people on the planet will suffer pain up to 10 times, 10 different types of pain.
That is also true for the lower-income consumer. One of the things that people are incredibly focused on is the ability to continue to get to work, to be able to do their jobs. They do not want to be held back by their health, and they want to provide for their family. Making sure that we are driving that health literacy, the understanding of what is the condition I have and what is the best way of treating it, is important. That behavior change is something that we are very expert at at Haleon. The Sensei models are a very good example of condition awareness. This is your issue. This is your solution.
Making sure we then do health literacy in the right way, icons on pack rather than written language all the time so you can understand what this pack is and what I buy it for. We see a lot of opportunity to take all of our categories into this lower-income consumer and have a lot of confidence in the plans that we've got there.
Thanks, Tamara. Filippo, anything to add?
Yeah, maybe I can add a couple of comments to what Tamara said. On the brand piece, clearly we discussed a lot about superior brand. What I see in all of the emerging markets is that the concept of brands first is really important because the appeal and the aspirational element you alluded to is absolutely key.
I think we have two interesting examples in that space because we saw this morning the example of Centrum Essential in Brazil, which, because the vast majority of the buyer of the product are new to the category itself, is a powerful signal that the brand equity is stronger, there is a significant attractiveness, and these people are new to the category. It is an opportunity to really expand the category penetration. I think another example about the lower-income consumer, not in emerging market, is a fantastic brand that we have in Italy, which is called Bettotal, which is a quite expensive VMS brand and is over-penetrated among lower-income consumers. It is not that the correlation is always as linear as we could imagine. I think from a competition standpoint, we have a very diverse competition.
In the breakout session, I explained very well that the launch of Sonridor and the entry point SKU, which is a position at an affordable price, I mean, we are targeting a local competitor, which is a local player, which is the number one at that price point. I mean, we believe there is an opportunity to really bring the benefit of the brand plus the scientific element of differentiation at a price point which will make it competitive. On the other side, without naming any other competitor, in the oral care space, we have a lot of examples of price steering, which are covered quite in-depth from our competitors. We see that also what we have been doing, especially with Sensodyne, has been giving us quite a meaningful payback.
Great. Thanks, Filippo. Why don't we go, Emma? Why don't we go there? And then we'll go next. Yeah.
Thank you. Hey, Rashad Kawan from Morgan Stanley. A couple from me, please. You talked a lot about consumer insights today driving investment decisions, particularly in categories like VMS, oral care, etc. I guess comparing where you are today versus three years ago, pre-Spin, how evolved are your consumer insight capabilities and how much more room is there to go? Second question, as part of your EBIT guide, you talked about managing dilution from divestments better going forward. You've obviously done a few divestments over the last couple of years. How do you think about the portfolio as constructed today? In terms of M&A, you've spoken in the past about VMS in particular being an attractive category. From an M&A perspective, is that still the case, or have your thoughts kind of evolved around categories in which to expand in?
We'll start with the second question first. Let me provide some perspective. I'll pass it to Dawn, and then we'll go to Tamara on the other. I think, listen, in the early life of Haleon, as we started life four times levered, we made the decision to divest. By the way, strategically, the right businesses to divest, and it helped strengthen our portfolio. It also helped us pay down the debt. We weren't in a position at that point to do bolt-on M&A. Those divestments, and you saw it in the bridge that Dawn showed on operating leverage, actually, we lost operating leverage, obviously, because those were diluted. That showed through 2024, and we have some more dilution this year. I think it's an acknowledgment that going forward, we're going to manage that dilution going forward.
If we see opportunities to divest, marry it up with bolt-on M&A. We feel good about the portfolio where we're at. Any portfolio can be strengthened on both sides, bolt-on M&A and potentially divest. There's nothing where we're sitting down feeling like we have an urgent portfolio change needs to happen, but we're going to be in a different position to be able to manage it going forward as we think about strengthening the portfolio.
No, I don't know.
Did I do it all?
Yeah. Sometimes I do that. I say, "I'm going to pass it to you," and I answer the question.
No, I love that.
By the way, I also have an MBA in finance. I do remind Dawn.
I believe one day you were a brand manager as well, Brian.
I was. I was tied brand manager at one point.
Never been as good as it was back then. Tamara, how about you?
It certainly was fun back then. Big shift, I would say, from where we were three years ago. Consumer first always is one of our—at least you do deep chatting—because consumer first always is one of our kind of key behaviors. I would say three years ago, we were really proficiently deep in things like condition awareness. Really understanding the medical, the health issue, how that left somebody feeling. We had great kind of market share, data, and coverage. I think where we have evolved is to really understand the consumer really around that condition and what's happening in their world and in their lives. Even things like crossover of studies, real-world evidence that Franck and I talked about earlier, that is not in a lab. That's not a clinical trial.
That's actually collecting data, often digitally, in terms of how are you using these products, what are the benefits you're getting. That's where we learned all about Otrivin. Actually, people were so thankful to be able to sleep through the night without being woken up because they just couldn't breathe. You get a whole load of richness there. That enabled us to go back and mine our kind of claims database around what is the most powerful and compelling claim for that new premium innovation that we launched. I think we're deeper around the consumer. I believe we are the first to do this, which is we've done some demand space work where we're looking across. Not just what's happening in oral health, what's happening in pain and respiratory.
We're actually looking at what are the real wellness issues that the consumer is facing and what are they really worried about? How does that differ from developed markets, emerging markets? A first in the U.S., and we've had feedback here from the retailers in the U.S. because they've taken the demand space work down to the next level to really understand cross-purchasing and are now working in partnership with retailers to really think about how do we bring the portfolio to life in the most relevant and meaningful ways. I think it has quite considerably changed, and it gives us even greater confidence that we're understanding what the consumer needs are and then how best to meet them with our products and innovation.
Great. Thanks, Tamara. I hear you. Thank you.
Yep. Hi. Warren Ackerman here at Barclays. A couple as well.
The first one, I guess for Brian, it's more on the global brands versus local brands. I was quite struck. It was the beginning of the day that your new divisional disclosure to give us sort of skin health. You talked about brands like Zovirax. At the same time, in the breakouts, we heard a lot about local brands like Grandpa in South Africa. I was just wondering, are these kind of linked? As you're getting bigger in emerging markets, do you need to have a portfolio of more local brands? I heard you also saying at the beginning of the day that your power brand strategy has been evolving over the years. Can you maybe sort of join the dots and all of that for us in terms of the skin health and then what it means between local and global brands?
Then just secondly, I was quite struck by the pharmacy sort of presentation. It seems like you do have a big moat. Can you talk a little bit more about how you can really maximize that channel? It'd be great if you're able to kind of give us an idea of which geographies is pharmacy more attractive than others. I guess it's not the same everywhere. And whether actually it will be accretive to your gross margin ambitions as you kind of dilute the drug channel, which is obviously under pressure. Thank you.
Great. Listen, I'll go to Filippo on the pharmacy, but let me take your first question first.
The way I think about that is if you look across our six categories, and I'll talk about skin health in a minute, and I think about power brands, the nine power brands, we traditionally have been very focused on the power brands. We're still going to be focused and drive those power brands. What I don't think we've done as good a job enough is leveraging the full portfolio, honestly. You heard a little bit about it today. If you think about leveraging the scale of innovation, technologies, assets we have, Sonridor in Brazil is a great example. That's a brand that was less than GBP 1 million probably in sales, wasn't a priority for anybody. We have brands around the world like that that already exist.
It's not like we need to bring in more brands, but I think we are now seeing with the opportunities and headroom growth we have in categories, we now can leverage the breadth of our portfolio. A lot of times, honestly, you can look at those kind of assets and think about it as a tail or a drag or something. I think our aperture has been opened up to say, "Wait a minute, we have incredible assets in a number of places, and obviously, we haven't been leveraging them as much." Now, the evolution of our category strategies getting sharpened, our operating model shifting a bit more to the top, all that has kind of come together to drive that. Specifically on digestive health and skin health shift, one, we wanted to provide more visibility and transparency across the categories we compete in.
We think digestive health is a really good category. Skin health, this is therapeutic skin health, and that's what we're calling it. They are OTC brands that line up with our go-to-market model and our strategy. They're really good profit brands for us, honestly, very good gross margins. We want to generate value through that too. It hasn't been a focus for us as much in the past, but we see the opportunity to drive value through therapeutic skin health. Filippo?
Yeah. I mean, what I did is, if you remember, I started the presentation by saying that pharmacy channel is relevant for consumer health and for Haleon. Now, this is true today, but for sure, it has all the potential and the elements to be true in the future. There are a few reasons for that.
First of all, if you think about this whole gap between incidence and treatment, the pharmacy institution itself could play a massive role in order to really keep engaging with consumers and understanding which solutions could be available for them to fix this problem. Second, if you think about the concept of self-care, it is relatively underdeveloped yet, even in Europe, for instance. There is a massive opportunity to really find the right equation to reduce the burden on the healthcare system at the national level and increase the role and the relevance of self-care. Third, I think there is a clear opportunity for improving effectiveness of the pharmacy channel. I think you saw the statistics on Perfect Store. I mean, at the end of the day, thinking of being able to allow the category to grow two to three points ahead of the average is massive.
This is a lot about improving the effectiveness of the operations in the store, thanks to the support that we could provide to the pharmacist. There is another element which is also about the harmonization. Again, think about Europe. There is no one Europe because if you look at the pharmacy setup in the Nordics or in the U.K. compared to what we have in Spain, in Italy, or even in Germany, it's totally different. We believe there are massive opportunities to potentially harmonize some of these elements to make the product become more accessible and more interactive for the consumers. In all of that, I think the key effort that Haleon has been making is really to play on this dimension because we really invest a lot in expert education. We invest a lot in commercial capabilities, effectivenes s to the customers.
This is recognized by them. This is why I do believe the opportunities for the future are still relevant, even in a channel which has been transforming for a while now.
Mark Howden.
Thank you. Mark Howden from Jefferies. Obviously, I'm not clever enough to ask my own questions, so I'm going to steal Del Boy's. When he talked about top-line growth, and when you answered about top-line growth, you did not go so much into the volume mix part of his question. It occurs to me that we have heard so much today about the opportunity with low-income consumers, penetration in various parts of the world in various categories. It feels like there is a tremendous volume mix opportunity ahead of you. I think on the call yesterday, we talked about balance and no more.
Is there any more you can say about the volume mix opportunity and whether it can accelerate from here and be a bigger part of that four to six?
Yeah. Listen, we probably won't guide on volume mix. And we have always said 60-40, 40-60, but clearly, if you look at that low-income opportunity, and listen, that will build over time, right? As you can see, Sonridor launched in Brazil this year, low-cost Centrum in India this year, 20-rupee pack in India was in June of 2024. These things will take a bit of time to build, but I do see the volume kind of mix opportunity as you look out the next number of years as a really good opportunity for us. Because again, these are incremental consumers into the franchise.
A lot of this, by the way, we talk a lot about gross margin from a percentage basis, dilutive or not dilutive. Let me tell you, incremental gross pounds, gross margin pounds, these are incredibly incremental to our business in the 70-80% versus, let's say, you do a great innovation and maybe it's 30%. We do see an opportunity as we look forward. I would say over the next few years, we're really striving for the balance that Dawn talked about, 40-60, 60-40. We see more opportunity as we look further out.
Maybe just give a data point on that because actually, if you look at our Asia-Pac region over the last three years, the CAGR in Asia-Pac has been 8.5%, 8.5%. 6% is volume.
Actually, we have got there are parts of our portfolio in particular, if you think about the Asia-Pac region, maybe there's about 65% that's faster-growing markets, the remaining 35% lower-growth markets. The fact that more than 70% of that growth is coming from volume actually exactly speaks to the opportunity that we're talking about.
Great. Yep.
Hi there. I was curious to hear a bit more about the capital allocation strategy on maybe a year three, year four, year five from now. I think in the near term, it's pretty straightforward if I'm not just shooting with you directly. Could you just talk a bit more about the dividend policy, share buybacks, capital investment, M&A? I imagine Bolton may not be there forever. Yeah, maybe can you take me in the lens of year three, four, five? Thanks.
Yeah.
As I said in the presentation, capital allocation policy is unchanged. Invest for growth, Bolton acquisition, return surplus cash to shareholders. We have returned GBP 1.5 billion of surplus cash to shareholders over the last few years or since the merger. I think what we have demonstrated actually and what we do is look at each year, what is the most optimal use of those funds? What is going to generate the highest shareholder value? We did that at the beginning of this year. We are obviously in a privileged position given our strong free cash flow generation. Obviously, what we decided at the beginning of this year is that we would return GBP 500 million in share buyback. We will look at that each year in terms of what is the most optimal use of that cash based on those three priorities. Okay.
I actually think we're at the point for the last question. It's going to be the last thing I remember from this day, so no pressure. Did we literally run out of questions exactly on time? Do we have a question from online that we want to take?
We've got one, and then we can. Can you discuss the ability to reach more lower-income consumers in the U.S. given the higher share of private labels in this market?
Okay. Great. First of all, people may be aware, we have a new Head of North America, Nathalie Gerschtein, who joined us from L'Oréal. Today's her first day. What you're not really aware of is this was all about Natalie's onboarding, to be honest with you. We planned this whole thing for her.
Listen, there is an opportunity there because the dollar channel is a very important channel for us. What you see happening in the U.S. a bit, certainly as people are under economic pressures, is growth in that dollar channel and growth in the club channel because they kind of attack it from two sides. One is a cost-per-use kind of thing if you're more affluent. The other is absolute price outlay. We see the low-income consumer in the U.S. too. We obviously are doing that today, but there's probably more opportunity for us to go after there too. That is the end. First, just want to say a big thank you for everyone who's here in the room in London for joining us in person, and a big thank you for everyone who joined us online.
I really look forward to keeping you all updated on the progress of everything we talked about today as we unlock the potential of this business. For those who are here in London, we'll have a reception now behind that wall, and I look forward to interacting some more over the next hour or so. Thank you very much.