Good afternoon, everyone, and welcome to Imperial Brands Capital Markets Day. I'm Peter Durman, Head of Investor Relations. Thank you for taking the time to join us today. We really appreciate it. Before I hand over to Thérèse and the team in a moment, I'd just like to point out we aren't expecting any fire drills today. If the fire alarm sounds, then you'll need to leave the building. You'll have to leave through the emergency exits that are over that side of the room. I'd also like to take the opportunity to draw your attention to these cautionary statements that you see on the screen here. These apply to all of the content for today, just so you're aware of that. We have a full agenda for this afternoon, but like our strategy, it is focused.
It is focused on the areas that will generate the greatest value. The presentation content will be split into two sessions. The first will run until about 2:35 P.M., after which we'll have an initial Q&A session for about 20 minutes. We'll then take a break for about 45 minutes, and you can join us downstairs in the breakout area and meet management. There are various product displays and so on available for you there. The webcast will be paused at that point, but there will be videos showcasing the content in the breakout area for those of you who are joining online. We'll then resume back in here at about 3:40 P.M. for the remaining presentations and then a final Q&A session. You're also very welcome to join us for some drinks afterwards downstairs in the breakout area.
I should stress that all of the executive leadership team are here today, along with other members of our senior management team. Really, do please take the opportunity to ask questions during the course of the day. Thank you.
Good afternoon. I'm Thérèse Esperdy, Chair of Imperial Brands, and on behalf of Imperial Brands, welcome to today's event. We are very excited to be unveiling the next phase of our strategy. Today, we'll be outlining the focus choices which we believe will deliver further sustainable growth over the next five years. Before handing it over to Stefan and the team, I'd like to briefly reflect on our recent progress, the creation of the strong foundations on which we are now building. I will outline how the board has overseen the development of our 2030 plans. The current strategy set out four years ago was a detailed plan which directly addressed specific opportunities to drive performance. That strategy was about being more focused in our choices, for example, by focusing investment on a smaller number of priority markets for both tobacco and next-generation products.
Our starting point was that we needed to get closer to our consumers and become more data-led in how we made decisions. It was about creating a performance culture that was accountable and collaborative and seizing self-help initiatives to improve ways of working and unlock efficiencies. Stefan and the team will describe our progress in more detail. What you will see is clear evidence that the strategy is working and that this is now a stronger, more sustainable business. We have a growing track record of consistent results and enhanced capital returns for shareholders. This performance is even more remarkable given the varied headwinds we have faced over the past four years: the impact of the global pandemic, the invasion of Ukraine, which forced our exit from Russia, the highest inflation for a generation, and, of course, disruptive new entrants into the market.
I want to recognize the resilience, agility, and resourcefulness of Stefan and the entire management team and say thank you for the significant change that they've brought to Imperial Brands in a relatively short period of time. During the same period, we've also strengthened the board through new appointments, and we now have a more global experience board, which better reflects the needs of the business. In particular, we have greater depth in consumer-facing industries. This has allowed us to contribute to the company's ongoing transformation and, I hope, add substantial value. Throughout the period, the board has gotten closer to the business through visits to our key global operations and major markets. We've spent high-quality time with management, colleagues, and, importantly, consumers. This deep business knowledge has enabled us to be closely involved in the development of the next phase of the strategy.
Over the past 18 months, the board has cast a critical and constructive eye over every aspect of our plans. We have examined all avenues to unlock value. You'll notice that we have retained our longer-term vision to be a strong challenger and our purpose, which aspires to a healthier future. These resonated strongly with both our internal and external stakeholders and really underpinned the success of the first phase of our strategy. They have continued to serve as guiding principles throughout what has been a comprehensive and rigorous strategic review process. Building on the progress of the last four years, what the team will present today is a consumer-centric, focused, and agile playbook for creating shareholder value. While so much has been achieved, I hope you will share our confidence and enthusiasm that there are still significant opportunities ahead.
The opportunities which the team will be describing are based on careful analysis of the facts—facts about our consumers, our market characteristics, our capabilities, and our points of difference. This gives us confidence that we can continue to grow the key financial measures of success: revenue, profit, earnings per share, and capital returns in a measured and sustainable way. I'll be around throughout today's events and look forward to speaking to you at the breaks. With that, I'd like to turn it over to Stefan and the management team to take you through the details. Stefan?
Thérèse, thank you. Welcome also from my side to all of you here in the room, but also to the people who are watching our webcast online. I will talk about the 2030 strategy. I think our 2030 strategy is both an evolution of the current plan, and at the same time, it is a significant step up in our appetite to transform the business. Because we will get even closer to our consumers and build differentiated brands, which will drive revenue growth and stronger performance for the company. We as a company see attractive opportunities to invest in our people, technology, data to transform us to an even more agile organization. This means this will be an important change in our ways of working to unlock further efficiencies and growth for the company.
I think for shareholders, this will generate additional value from our combustion business through an even sharper focus on the levers of growth. In new generation products, we will build scale, and through greater scale, we will drive profitability. We will also generate even more cash and stronger returns for shareholders, including an evergreen share buyback each and every year until 2030. This performance will be delivered with the same disciplined capital allocation framework that we have today. I will expand on these themes in a minute. First, I do want to reflect on the journey we have been on over the past four years. A key difference versus the 2024 Capital Markets Day is that this next phase of the strategy is built, as Thérèse referred to it already, on much stronger foundations.
Back then, we were describing new concepts, which at that point in time were a long way away from being proven. Today, you have the evidence that our approach is working. It is transforming Imperial Brands to deliver a more consistent performance with stronger returns for our shareholders. This underpins our confidence in the next five years. If you really step back, our 2021 strategy was built on one idea. This was the idea that there was a need in our industry for a challenger business and that we, as Imperial Brands, could meet that need. Now, becoming a strong challenger required us to get a few things right. First, it will not surprise you, we needed to start with our consumers. That meant a strategy based on the facts, who they are, and what they need. Then the capabilities to serve these consumers with great brands.
Second, it meant that we had to be highly focused. We couldn't be an everything-everywhere business. Now, therefore, in combustibles, we zeroed in on the five markets that account for 70% of our operating profit. And within those five markets, we narrowed down further on a small number of key levers: key brands, subcategories, sales channels. In next-generation products, or NGPs, there was an equally focused approach. We targeted markets only where the new categories had already been established and where we had a right to win. Third, we needed a culture based on accountability and collaboration, as well as the tech and the right ways of working to enable our people to work with agility. How have we done? Now, to be clear, we take nothing for granted, and we still have six months to go in our current strategy to deliver.
If you step back, we now have the data to show this challenger approach is working for us. Over the next five years, you will see us continue to follow the same principles: start with the consumer, staying focused, and investing with agility. Now, let's briefly look at our progress against the individual elements of our current strategy. Starting with consumer capabilities, we've now built a 1,000-strong team, which combines external hires from leading FMCG businesses and the upskilling of our existing colleagues. Paola, our Chief Consumer Officer, will talk to you in detail about how this team has brought more rigor and more innovation, both to our combustible business but also to our NGP business. This has translated directly into more powerful brands, which have helped us maintain market share, drive pricing, and build revenue and profits.
Now, this renewed focus on the consumer is personified by our fresh leadership team, which brings diverse experiences from internationally consumer-facing businesses. Furthermore, and a very important fact, three-quarters of our top 500 colleagues are new to Imperial Brands or new to their roles in the past five years. Our full Executive Leadership Team and other senior leaders, as Thérèse has talked before, are here today to answer your questions and chat with you in the break. Please take the opportunity. Another major focus over the past four years has been the development of a performance culture. Now, this is about creating a working environment which prioritizes accountability, collaboration, and forward planning. It's also been about enabling our people to confidently deliver both on our short-term plans but also on our long-term transformation programs.
Alison, our Chief People Officer, will explain to you in more detail how our structured approach is driving performance. Now, in parallel, we have begun major programs to equip our people with better data and more integrated processes. Lukas, our CFO, will update you on these activities and how further investments will support our goal over the next strategic period. Our improving consumer capabilities and performance culture have helped deliver strong operational progress. In combustibles, we are no longer the number one share donor in our industry. We have stabilized the aggregate share in our priority markets. This has been a very important benchmark, which I know you all monitor very closely. At the same time, we have driven strong pricing in these five markets.
This has led to the single most important outcome of the current strategy: our core business, which delivers a more consistent, more sustainable financial performance. Our regional presidents, Kim, Aleš, Priyali, will illustrate how our challenger approach has strengthened the performance of our largest markets while also creating strong performance from our broader portfolio of countries. Now, turning to NGP, we have now built a platform for sustainable growth. While this segment is still a modest percentage of our overall revenue, we are now present in more than 20 countries. We have built credible offerings in all three categories. This is a result of the transformed capabilities and innovation, which enabled us to significantly shorten the development cycles. From a low base, our revenue has grown by 75% since 2021. As we have increased our scale, it has been encouraging to see that gross margin have also increased significantly.
Now, this more consistent operational performance in combustibles and NGP has driven a stronger financial performance. Our growth in net revenue and operating profit has accelerated in line with the targets we set to you back in 2021. These outcomes, along with the benefit of our ongoing share buyback program, have fed through into growing earnings per share. This brings me on to another important feature of our strategy: our disciplined capital allocation. Thanks to our consistent financial performance, we have been able both to invest in the business and to consistently increase shareholder returns, both in dividends and buybacks. Over five years, we are on course to making capital returns totaling GBP 10 billion. This has supported strong total shareholder returns. Now, while delivering on our operational and financial goals, we have also been progressing on the ESG agenda.
Those of you who joined us in our recent webinar on this subject will know that our ESG commitments are aligned with our commercial objectives. As we grow a sustainable NGP business, we reduce consumer harm. As we build a more efficient, higher-quality supply chain, we cut CO2 emissions and waste. Similarly, as we develop a high-performance culture, we create a safer working environment. These ESG commitments continue to be important to us. Two are our long-term purpose: striving for a healthier future. Of course, as Thérèse referred to, our challenger vision. Also unchanged are our five behaviors because they have played a key role in galvanizing our cultural changes and organization. Now, returning back to the strategy, as I said to you, the 2030 plan is both an evolution and a step up in our ambitions.
Throughout today's presentation, you will hear us all talk specifically how we build on our existing progress. You will also hear how we've identified important new areas of upside potential for the company. Take Germany, our second-largest market worldwide. Here, we have now achieved our key objective of stabilizing our market share in combustibles. This has been a result largely of successful investments in the sales force, which we will continue to nurture. We have also identified additional opportunities to strengthen performance, in particular through new, more focused approaches to improve the equities of our biggest brands in that market. In NGP globally, we intend to step up performance by targeting very specific consumer types where we have an opportunity to build our brands. If I look more broadly at consumer capabilities, we have assembled great individuals.
As an integrated team, there's more that we can do. We can get even closer to our consumers, create even more differentiated brands, and innovate faster with greater precision, which makes me turn to our culture. We know we can be even more accountable, more collaborative, and more strategic to drive even stronger performance. In tech and data, we are still some way from the full benefits of the investments that we've already made. We've always told you that this would take time. As you will hear later, the major programs that we've already begun are all well on track, and we see attractive opportunities for further investments. These operational improvements will enable us to build on the consistently strong financial performance we've reported over the past few years.
We will deliver net revenue growth from both tobacco and NGP, high single-digit growth in earnings per share, and strong cash generation. Later, Lukas will give you more detail on our refreshed medium-term guidance. Let's stand back and consider what the business will look like in 2030. As I said earlier, we always start with the consumer. Our consumer insights suggest that in five years' time, many people in our key markets will still choose cigarettes for moments of relaxation and pleasure. As Murray, our Chief Strategy Officer, will explain to you in a minute, in the majority of our priority markets, tobacco will continue to be affordable, with taxation rising at predictable rates. This supports our view that our combustible brands will remain the most important driver of value and cash.
In NGP, we'll have a much larger and more meaningful business, which will be contributing to profitable growth for the company. We will have built more strongly differentiated brands and loyalty among those consumers that we choose to target. Now, the market landscape in NGP will remain highly varied, thanks to the local cultural preferences and differing regulatory regimes. Therefore, we will continue to offer multiple NGP categories. Even in five years' time, we'll still be focused on a success in a defined number of markets where we can create sustainable value. Now, turning to capabilities, the current strategic period has been a period of playing catch-up. During the next five years, in selected areas, we believe we can pull into the lead. For example, we can know the consumers in our priority markets in our target segments better than anyone.
I want us to have a culture where all our people can do their best work every day, thanks to the investments that we're making in the right culture, the right tech, and data. To be clear, we will always remain totally focused on creating shareholder value. The capital allocation framework that we have used so far and which you tell us you value will remain unchanged. This will continue to be our guide to how we prioritize the use of your money to invest in the most attractive opportunities that we see. Over the next five years, we'll continue to deliver progressive dividends, and we will provide an ongoing evergreen share buyback program. I will return at the end to sum things up. Of course, we'll all be available throughout the day to answer your questions.
Now, I would like to hand it over to the team. First up is Murray, who will explain the sustainable growth opportunities that we see in the business. Murray, over to you.
Thank you, Stefan. I first joined Imperial a little over five years ago. My career began in McKinsey, focusing on consumer and retail sectors, before moving on to financial and operational roles at Cadbury, Yum Brands, and Costa Coffee. As you just heard from Stefan, our approach to strategy has been about making conscious choices: choices about markets, choices about categories, choices about target consumer segments, and choices about where to focus investment and capabilities. I was part of the team who developed our existing strategy way back in 2021. Looking back, the evidence suggests that on the whole, we made the right choices.
Back then, there were some suggestions that perhaps we'd gone too narrow by focusing on just five markets in combustibles and by exiting markets where we couldn't compete in NGP. This focus was necessary. By doing fewer things better and by focusing on areas where we have a right to win, we have built stronger foundations. These foundations mean that we've been better able to respond to changes in consumer trend, such as the emergence of the disposable vape category. Now, as Stefan said, our 2030 plans are an evolution of our current strategy. They've been built on the same principles as before: a rigorous assessment of opportunities informed by consumer insight and data, a clear playbook that acknowledges our strengths, and a comprehensive review that considers all options to create value. Ultimately, it's about leveraging our role as the industry challenger.
We will remain focused on the small number of markets and categories that will have an outsized impact on our commercial success. We will go even deeper with detailed plans for the most attractive regions and subcategories within these priority markets. We will not seek to be all things to all people. Now, let's look at the revised strategy wheel. Starting with combustibles, this segment will continue to be our main driver of revenue, profit, and cash. As I'll explain in a moment, our portfolio is a highly sustainable source of value. Investments remain prioritized behind our five largest markets: the U.S., Germany, the U.K., Spain, and Australia. We will manage our broader portfolio with the same level of rigor so that they can contribute and make a greater contribution to overall performance. In NGP, we will maintain our highly targeted approach.
We will build on our firm base to develop a profitable business operating at scale in the markets and segments where we choose to compete. Supporting these two priorities are our three enablers. We will be sharper in how we target consumers, thanks to stronger insight capabilities, which will support more differentiated brands in combustibles and in NGP. We're stepping up our ambitions around people. We've established strong, good foundations and intend to build towards a high-performance culture. We're equally ambitious in how we invest in technology and processes to become a more data-enabled and efficient organization. Here, we have made good progress, but our work to date has only highlighted there are even more opportunities for us to pursue. Our confidence in delivering growth is underpinned by our industry revenue projections.
Across our footprint, nicotine net revenue is expected to grow at an annual compound rate of just over 3% from 2020 to 2030. While NGP categories will become a larger proportion of the total revenue pool, the value growth from combustibles remains resilient. This is a view shared by many of our peers in their recent statements. In 2030, the combustible segment will still represent around 75% of total industry net revenue. We are confident in the sustainability of the combustible pricing model. Across the portfolio, we can continue to take pricing to offset volume declines and sustain net revenue growth. Our combustible markets will therefore continue to be the main driver of value for the group up to 2030 and beyond. This chart helps explain our confidence. As you'll see here, the number of packs earned per hour of work are the average salary in different countries.
The more affordable markets are to the left of the chart, and the less affordable markets are to the right of the chart. Three of our top five markets, the United States, Germany, and Spain, sit well to the left. These three markets account for over half of our total operating profit. Affordability is the best leading indicator we have of future value creation. In affordable markets, you tend to have conditions where tobacco remains normalized, governments have predictable excise approaches, illicit trade is low, and pricing outpaces volume declines. In the U.K. and Australia, tobacco is less affordable. Here, excise duty accounts for 80%-90% of the cost to the consumer. As a result, we've kept our assumptions prudent, and these assumptions influence how and where we invest. What does this mean for the future performance of our combustible markets?
Our top five markets, which currently account for around 70% of operating profit, will still be important contributors in five years' time. Our wider portfolio of markets has the potential to make a larger contribution over the next five years. For example, our Africa business or Africa businesses have grown faster than the group average over the past four years and are expected to continue to perform strongly. Let's now look at the outlook for our five priority markets. Our forecast suggests that the total combustible market size of the more affordable three markets, the U.S., Germany, and Spain, will continue to grow. In these markets, if we execute well, we'll be able to generate growing value. We do expect revenue pools in the U.K. and Australia will decline. However, even in 2030, these will still be large, profitable markets.
Furthermore, our teams are highly skilled at maximizing cash returns in shrinking markets. In the U.K., we have the opportunity to offset some of that combustible decline through growth in NGP. This brings me on to NGP. This chart shows the broad diversity of consumer behavior as it relates to combustible and NGP choices across global markets. Whilst it is clear that combustible tobacco continues to play an important role in our consumers' lives, when we look at NGP demand, the key takeaway is that no single category dominates globally. The market-by-market variation in category is driven by a mix of culture, public policy, regulation, and taxation. For example, the popularity of oral nicotine in Sweden and Norway dates back to deep traditions back in the 1800s. The U.K. preference for vaping is supported by government policy, which endorses the category as a method of smoking cessation.
The dominance of heated tobacco in Italy and Eastern Europe is a result of the category being launched early and then securing preferential regulation. It is worth highlighting that the data on this chart only represents the legal market accessible to businesses like Imperial. In Australia, restrictive regulation means that the vast majority of vapes are illicit products. With consumers expected to continue opting for a range of NGP categories, we are clear that we have to remain competitive across vape, heated tobacco, and oral nicotine. This slide reinforces the view that we need to have strong propositions in all three NGP categories. Across our footprint, industry growth in NGP is expected to remain strong. However, in the future, that growth will be at a slower rate than the last five years. This is because the industry is growing from a larger base.
Across our footprint, NGP penetration in the nicotine market is expected to increase from around 19% in 2025 to around 25% in 2030. As you can see, all three categories will contribute to growth. Agility and speed, speed to market, will be the essential differentiators for success. Paola will shortly demonstrate how we're strengthening these capabilities. All NGP categories are expected to grow over the next five years, but the rates of growth will vary. Growth is expected to be led by heated tobacco and modern oral nicotine, which is expanding from a lower base. All three NGP categories offer attractive gross margins. In NGP, we will continue to focus where we have the capabilities to win. Our market entry framework remains unchanged. We will focus on markets where the category is established and where we have a strong route to market.
Over the next five years, we'll invest to build scale in four areas. One of our biggest opportunities is in U.S. modern oral nicotine. Our own proposition Zone launched last year and is performing well. Across Europe, we see opportunities in all three categories. As I explained, consumer preferences vary by individual market. Western European consumers continue to prefer vapor. The Nordics' long-established preference for modern oral nicotine remains. In southern and eastern Europe, heated products dominate. We will continue to have our highly targeted approach. Over the last four years, we've defined a clear plan of how to deliver our financial and operational targets in each market. We will continue to use these principles to deliver our commitments over the next five years. This is our playbook of operational levers or must-win battles.
It provides a clear focus for our choices and investment in each market, with each of the top five markets having a clear set of priorities to pursue. This playbook also creates a common language across the group with clear measures against which we can work with local teams to monitor progress at regular performance reviews. As Stefan said, the performance culture we've created has been a key driver of our success. After the break, Kim, Aleš, and Priyali will give more details on this disciplined approach. Now, I'd like to hand over to Paola, our Chief Consumer Officer, to talk about how we're creating shareholder value by enhancing our consumer capabilities and building brands. Paola, over to you.
Thank you. Thank you, Murray. Good afternoon, everyone. I joined Imperial Brands in August 2021. Before that, I worked at Procter & Gamble for 22 years in various leadership positions across Europe, the Middle East, the U.S., and China. You have heard from Stefan already, who gave an overview of where we come from, where we are going, and our challenger approach. Murray described the opportunities that we see in our markets and categories. He outlined also the strategic choices that we are making to capture those opportunities. In my presentation, I am going to build on what you have heard already by looking at our strategy through the lens of our consumers and brands. I will explain more about how our challenger approach works in practice. As Murray explained, we have created value in combustibles by focusing on our priority markets.
Since 2021, these five markets have delivered an aggregate market share gain of 48 basis points and an average annual net revenue growth of almost 2%. Underpinning this growth has been also the increasing strength of our brands, which has supported both share and pricing. In fact, we have a broad portfolio of distinctive mix of international and local brands. For each of them, we carefully measure performance in terms of share, pricing, revenue, and profit. Here, for example, we show our six largest brands. You can see how each of them has contributed to revenue growth. In NGP, also, the story has been of a strong growth in revenue from a low base, but also improving gross margins, underpinned by market share growth in all the three categories.
Obviously, as a challenger, our goal is not market leadership, but instead, what we want to do is to carve out a strong niche, meeting the needs of selected consumer types, as I will explain in more detail in a moment. These successes in both combustible and NGP have been supported by a new way of working, which puts the consumer first. Having previously lacked the center of expertise, our first step was to establish the Global Consumer Organization. Over the past four years, we have hired really talented people, and you will be able to meet some of them in the booth during the break. We have combined their skills with the deep tobacco and market knowledge of our existing people. Together, they have brought a step change in how we approach insights, brand building, and innovation.
We have the opportunity to unlock further value, embedding our consumer-driven approach to build our brands. This is how. Our challenger approach is to build differentiated brands that our target consumers want to buy. The approach can be broken down in three steps. The first is about knowing our consumers best. Now, this little word, our, is very important because there is something distinctive about how we think about our consumers. As a challenger, our approach is not to spread our resources thinly across all of our consumers, markets, and categories. Instead, we focus closely on deeply understanding very specific types of consumers, those consumers where our brands have most appeal. This brings me to the second step, which is about using those insights to build brands which are very focused, differentiated, and address consumers' particular needs.
To deliver for you, our investors, we don't need to build brands that appeal to all the consumers. We pursue specific types of target consumers. We innovate by focusing on the specific innovation that our consumers most value and by building winning propositions. In this way, by being clear on the areas we focus on, we maximize return on investment across our portfolio. Let's look at more detail at our consumer insights. Since we established the Global Consumer Team, we have now rolled out the full set of insight tools. At our New York event two years ago, we highlighted our work on the demand spaces. This research framework looked at our consumer behaviors by moment: times during the day, outside or at home, alone or with other people. It gave us important insights into the increasingly eclectic behavior of nicotine consumers.
Of course, from a health point of view, it is better for smokers to transition exclusively to NGP, we know that many remain dual users for a considerable period. Since the New York event, we have invested into a further major piece of ongoing research, looking at the typology of consumers with closest affinity to our brands. We have also invested in new ethnographic studies where our researchers conduct qualitative research with consumers in their natural environments. This has enabled us to more closely follow how our consumers use our products and the challenges they face. For example, it was this kind of research which revealed that blu consumers were seeking simpler, more authentic flavors and wanted a vape which valued understated style over fashionable gimmicks. We will look at this case in a little bit more detail later.
I want to drill down into our new typology framework because I believe it will help illustrate our challenger thinking. Typology research gives us a nuanced understanding of consumer different mindsets, habits, and lifestyles. We divide our world into seven distinct consumer types, as you can see from the slide. Those on the left tend to be more value-focused and conservative. They are also more likely to be combustible smokers. As we move towards the right, the typologies become more image-conscious, more open to experimentation, and more likely to use next-generation products. Although our markets, of course, each have important cultural and regulation-driven differences, we have found out that this framework is relevant across national boundaries.
The important thing to note on this slide is the way that the appeal of our major combustible and NGP brands clusters around just four of the seven consumer types. This means that we can prioritize research into the most relevant types for us, focusing only on the consumers that matter the most. Again, focus. Once we have defined our consumers and we have understood their needs, we now can build differentiated brands. It is our view that brands in both combustible and NGP are becoming more important than ever. In combustibles, as markets become more restrictive, attributes like trust, quality, and taste are becoming increasingly relevant. In NGP, vaping, heated tobacco, and modern oral are all relatively nascent categories. This means that we need to act now to keep building our brands and patiently develop them as assets over time.
This is why we have created our new brand-building framework. For the first time, all our brands, combustibles and NGP, international and local, are developed using the same rigorous approach. First, we identify who our target consumer is. Next, we define what the brand stands for. Then we identify how we will communicate the brand's values consistently. Being consistent and specific is crucial. It is how we build consumer loyalty and measurable brand equity over the long term. In turn, we create shareholder value. I will talk about some specific examples later in my presentation. You will also hear from our regional presidents, Kim, Aleš, and Priyali, how this approach in their markets has already started paying dividends. Now, having forensically understood our consumers and defined the territory for our brands, we then focus innovation in the most relevant areas.
Now, in the last years, we have made already huge strides in innovation in both combustible and NGP. We've recruited a great team with diverse experience. We designed a way of working where the consumer is really at the center, giving, for example, immediate feedback on blends and flavors or to our prototype design. This enables us to iterate at a faster pace and to win with more accuracy. Feedback to our third-party partners is provided immediately. This helps them contribute more actively to product development. Our activities are focused through three innovation centers: Liverpool, which focuses on vape and modern oral; Hamburg, focusing on heated products and combustible; and Shenzhen in China, which gives us a closer relationship with our Chinese partners.
We also embed our science team in the innovation process because this ensures we innovate safely, responsibly, and with a clear eye to our contribution to tobacco harm reduction. Now, this video helps bring to life our innovation approach. The team here were acting on the ethnographic insight that I mentioned earlier to develop improvements to our blu proposition. Let's have a look at the video.
Here at the Sense Hub, we bring our brands to life. We have a very clear view of who our consumers are. We create with our consumers. They give us in-the-moment feedback, and we act on that feedback at pace. We also link with our partners and our supply chain so we can be ready to move at scale. It's just convenient with the round edges. It's comfortable to hold in your hand, even though it is quite a small device.
Our consumers have a very clear idea about what they want from their perfect vape. Right now, we're working on the new Blu Box kit, our new rechargeable pod-based system. We're focused on trying to get as close as possible to our consumers' perfect vape. Blu consumers aren't chasing every passing trend. They're looking for a device that's comfortable and tasteful. It's not masculine. It's not feminine, which is a good thing. I think the matte one just flows better, feels better with the overall design. Blu is a long-established name in vaping. Consumers turn to us as a brand they can trust. Our Blu consumers are looking for authentic taste and a consistent experience. A pineapple has to taste like pineapple. We put all our formulations through rigorous tests to ensure they're stable, of a high quality, and consistent. It tastes like actual pineapple.
It's not too kind of synthetic or too sickly, like with some other flavors. I guess I just tend to go for more well-established brands, for instance, that have built up a reputation they're trusted. We have the tools here to innovate, to create new prototype designs. We have the labs here to innovate, to create new flavor formulations. We have the science to make sure that everything is done safely and responsibly.
The video you just saw focused on just an area, a specific area of NGP innovation. We follow the same process with our cigarette, cigar, or fine-cut tobacco consumers. Again, first, we identify our target consumers. Second, we sharply define our brands. Third, we innovate to support those brands consistently. By doing that, thanks to this focus, we are able to drive the best return on our investments.
Let's see now how this applies to combustible. I would like to start with, first of all, a helicopter view of our brand portfolio. Thanks to our history of acquisitions, we have a very deep range of brands to leverage. This means that in our major markets, we can compete effectively across all the price points. In the U.S., for example, all our brands are distinctive to that market. While in other markets, we offer a combination of international brands and local jewels. In Spain, instead, for example, West, a global brand, plays an important role in the value segment, supporting more premium local favorites like Fortuna, Nobel, and Ducados. This approach, which enables us to hold share while improving price mix, is creating strong commercial value. Winning in combustible is much more than only a game of pricing.
As I mentioned earlier, quality, flavor, and features are becoming more important than ever. For smokers, the subtle differences in aroma between, say, Virginia tobacco or an American blend matter a great deal. As markets move towards plain packaging, flavor assumes even greater relevance. In this area, our innovation team is employing the sort of methods you might find in the tea or coffee businesses. They are combining the traditional art of tobacco blending with modern data analysis techniques. The chart in the center of the slide is an illustration of how we map the flavor preferences in our major markets. The green shaded area highlights the more popular flavor profiles, while the orange areas show where the least amount of consumers congregate. This kind of analysis helps us find the so-called white spaces, where consumer preferences are being currently underserved by the market.
We really believe that these insights into flavor will increasingly help us create differentiated brands and improve our quality. We also continue to innovate in terms of formats, like, for example, sizes, filter types, and packaging, with recent launches, as you can see on the slide. It is also very important to note that our approach is all about making fewer, better innovation choices built around consumer insights. It's all about choices and focus. This slide provides a good example where we have brought together all the elements that I've been describing: deep consumer insights on our consumers, consistent brand building, and focused innovation. Davidoff, for example, is a great brand that has been growing strongly and steadily in its focus markets. Here, we saw an opportunity to further differentiate the brand and set it up for future growth. First, we identified, we started with the consumer.
We identified the target consumer that, according to our typology, is an ambitious type that is called the recognition seeker. We sat down with this consumer. We conducted in-depth ethnographic research, which helped us identify a differentiated opportunity. We found out that Davidoff's consumers are seeking premium products with strong heritage alongside an individual tailored personality. Now, let's hear from a couple of Taiwanese consumers about what they are looking for in the brand. Video.
[Foreign language]. Davidoff gives off a sense of sophistication and holds a certain status in society. In our social circles, the acceptance level is very high. The feeling with Davidoff is, it feels like a sense of superiority. Can I say that? It just feels like there's some more social benefits. I'm currently smoking the Davidoff Absolute 4. I started smoking it about three years ago.
After smoking it that time, I thought, hey, it's actually quite smooth. The packaging design has been revised recently. It feels like this is an attempt to create a more lively design.
These two videos are just an example. We really spend time with our consumers. By incorporating the insights from this kind of investigation, we have been able to innovate, creating a product that better met their needs. We are now trialing a new addition to the Davidoff family, which is called DFX. This combines a distinctive filter packaging and a blend created by leveraging the taste segmentation work that we have seen before. It also has a special scent strip to address consumer concerns about the lingering smell of tobacco on their fingers. It's early days, but initial consumer feedback has been very positive.
Through innovative products like this, of course, we are not only serving our consumers, but we are also serving our business by driving the growth of our brands and their net revenue. Now, let's turn into NGP. As Stefan and Murray made clear in their presentation, our disciplined approach to market entry continues. We will only launch products in markets where the category is already established and where we have pre-existing route to market. Within those chosen markets, we are focused on the consumers that we are looking for. Now, we know that most NGP consumers have similar foundational needs: products which are potentially less harmful than smoking, greater social acceptance, and moments of relaxation and pleasure. Beyond those foundational needs, we know that consumer preferences are varied.
Our goal, as we said so far, is to create differentiated brands and to innovate to meet the needs of our very own specific consumers. This focus enables us to be agile in responding to their needs. A great example of this is the launch of the 1,000-path Blu Bar, where we have been the first global tobacco player to launch a product with such a high path count, the first. We have also been fast to market with the launch of our rechargeable Blu Bar kits. Now, let's look more closely at the different NGP categories, starting with vape. With Blu, we have an important baked-in advantage. In a category which is characterized by novelty and noise, Blu stands out as one of the longest established and therefore more recognized and trusted brands. In the past few years, we have got better at flavors.
Here, I mean authentic adult fruit, mint, and tobacco flavors. We have got better at nicotine delivery and better at quality. We knew we could do better at targeting our proposition and building a more differentiated brand. Thanks to the process that I have described earlier, we now have a much clearer view. We have identified our type of consumer in our typology, which is called the progressive achiever. They are looking for trusted brands and a long-lasting style. You saw earlier how we are acting on their feedback to create new products and flavors at pace. These innovations are now translating directly into growing share and net revenue, as you can see from the slide. The latest extensions to the range are the rechargeable Blu Bar kit and Blu Box kit.
Consumer feedback so far has been very strong, as you can see from the stats on the right of this slide. Authentic taste and flavor are, as we expected, emerging as an important differentiator, and consumers are recognizing the real quality. With the heated tobacco, our focused consumers are close to many of those who enjoy our combustible products. They are value-conscious. They enjoy our established ritual. They tend to be people still on a journey away from cigarettes. For our heated consumers, a simple-to-operate device and a stick with a flavor close to a smoking experience are the two things they value the most. Today, I'm pleased to introduce our brand-new Pulze 3.0 device, which is being rolled out this year. You will see it downstairs.
Importantly, for our busy consumers who are on the move, this is the smallest all-in-one device which offers at least 25 sessions on a single charge. The consumer research shows that this is a clear improvement in experience compared to our previous model. In modern oral, we have two strong brands serving distinct consumer types. First, there is Skruf, with its two decades of Nordic heritage. It boasts a loyal consumer base in core Scandinavian markets. We also see opportunities to further internationalize the brand. Our research shows it has strong appeal among consumers seeking for potentially healthier options, a clean taste, and consistent performance. There is Zone, our brand in the U.S., and for more adventurous European consumers looking for exciting flavor experiences. The American launch has been received positively, and you will hear more on this later from Kim.
Overall, in NGP, net revenue and gross margins are growing as we continue to build scale. In some of our medium-sized markets, NGP is now a very material percentage of overall net revenue. In Greece, for example, Blu is the number one vaping brand. We have also grown share in heated products. In Norway and Sweden, we are enjoying good growth of our modern oral brands. Over the next five years, our ambition is to replicate successes like this in our larger markets like the U.S., the U.K., and Spain. A key proof point of our route to profitability is shown here. On the left, it is the current industry margins across the different categories. You can see that in the vapor and modern oral, where we already have scale, we are delivering margins in line with industry peers.
In heated tobacco, we are naturally at an earlier stage because we only launched in this category in Europe three years ago. However, we are building scale to enhance gross margins. In particular, margins on the heated consumables are expected to improve over time as we grow the business. After the break, Kim, Aleš, and Priyali will give you more color on our NGP ambition in the individual markets. Now, let me try and pull all these strengths together. It has been a period of rapid change since I joined this company in September 2021. Back then, the GCO was new. We were still hiring people in. Our ways of working had still to be defined. In NGP, we were moving in the right direction, but we were still in a tentative test and learn phase. Where we are now is that I'm blessed with a great team.
Month by month, we are working in a more integrated way. We now have a sharper view on our consumers. We have stronger brands and the product features to support them. Over the next five years, I look forward to create even more value in combustible. We have an opportunity to emerge as an important, distinctive, and profitable force in NGP. I will now ask Stefan, Murray, and Peter to join me on stage to take any of your questions. Thank you.
Great. Thanks, Paola. We have about 20 minutes now. We have allowed for an initial Q&A session just on the content that you heard in the first part. We will have a longer Q&A session at the end of the second half. As usual, we will take questions from the room first.
We will take questions from those who wish to ask a question on the telephone who joined remotely. If you wish to ask a question remotely, you will need to register to receive the dial-in details. That is all in the press release that we issued today. The link is there. You just need to go on, and then you will get your telephone numbers and the PIN to dial in with. If you wish to ask a question, if you are already dialed in and you wish to ask a question on your phone, you just need to press star and one on your keypad. That is star and one on your keypad. Okay. We will take the first question from the room. Please wait for the microphone and state your name and organization before posing a question.
We will go to the question down here with Simon in the front row, if we may. Thank you.
Thank you. Simon Hales from Citi. I wanted to just ask a little bit more about Australia. Murray, you mentioned in your presentation that clearly you have taken some pretty prudent assumptions going forward over the next five years. Could you expand a little bit more on that? How do we think about Australia in the context of the wider business, perhaps five years from now? Is it close to falling out of the top five markets? If that was to be the case, what are the couple of markets that are perhaps coming up that could replace it? If I could just have a follow-on second, maybe around the U.S. market, how are you thinking about the main drivers there of that market over the next five years?
Thanks for the question. I think you'll have the opportunity to ask Priyali and Kim questions after the break. You may want to comment also. If you think about Australia, it's still a big profit pool for us as we look out over the next five years, as we did with all the big markets. We spent quite some time looking at trends in consumer understanding, outlook, and regulation, understanding the impact of illicit and the impact of NGP. Clearly, NGP there is largely illicit. We know there's a large demand in the marketplace. We've tried to take a balanced view across those measures to how we see the market evolving. I would emphasize this is, to some extent, an art, not a science. As we look across the group as a whole, clearly, the numbers may vary for individual markets.
Directionally, we feel pretty confident in the outlook that we've got for it. In terms of the outlook relative to the top five, it still remains up as one of our big markets. As we look out, really, some of the African markets are the ones that will be challenging for that top position. It still remains a very important contributor in the out years. With regards to the U.S., we're looking at quite some detail around the different elements of what drives market size in the market. Both the underlying secular trends, the impact of the economy on the consumer, the impact of illicit NGP, particularly in the U.S., are quite important, and the impact of regulation.
I think as we look out now across the horizon for the strategic plan, I think there is more of a normalized outlook in terms of that demand versus what we've seen some acceleration recently. From a regulatory perspective, it's a relatively stable market as we look over the regulation outlook, which could have a significant impact. We feel pretty good about the forecast that we've got that gives us confidence in numbers that we've shared today and the results that we think we can deliver.
Okay. Go for a question in the middle there. Rashad. Yeah, that one. Thanks.
Thank you. Hey, Rashad Kawan from Morgan Stanley. Thank you for taking my questions. A couple from me, maybe the first one for Paola. You talked about innovation in combustibles in particular.
How do you think about in markets, in plain packaging, or kind of moving towards that direction? How do you maintain that level of differentiation? The second question, maybe Stefan, in terms of the buybacks, I think you were pretty clear in your wording that you want to return surplus capital and not surplus cash. How do you kind of think about that maybe from year to year as you kind of balance investment needs versus setting that target on an annual basis? Thank you.
Thank you for your question on the differentiation. It's a very important one. Actually, our belief is that the more the markets become dark, the more you need to become specific and choice-full in the areas where you focus on.
First, of course, from a product standpoint, because that's the thing that really the consumer experiences in terms of flavor, in terms of feature, and et cetera. That's the real experience that consumers have. Also from key messaging standpoint. On this one, I would add a couple of important parts. First of all, in the markets that are becoming dark, most of the brands have anyway a legacy of positioning or image, which is still in the mind of consumers. The most important thing is to keep leveraging on this legacy. That's why specificity and consistency is important. The other part is that there are some tools that enable us to communicate to the consumer. One example is, for example, through the retailers, through the advocacy assets.
Even more, the more you become focused in the areas and choice-full on the few assets that you can use, the more you really need to become clear on the areas where you can communicate. I want to give an example that already worked quite well. For example, a few years ago, just in Australia, we launched a brand which is called Lambert & Butler. Australia is really one of the darkest markets we have. It was a little bit of a bet. We were all thinking, will it work? Will it succeed? Et cetera. Eventually, now it's a brand that has like 5% market share. Again, it has strong product, very consistent communication through the retailers, and it landed very well with the consumers. It's all about being clear and choice-full and consistent.
Rashad, let me answer your question on share buyback. I think what is exciting, if we look forward, what I think you should take away is it's the same capital allocation framework that has guided us well in the last couple of years. What's different is with our net debt-to-EBITDA level being at the right place. With the visibility that we have on the market outlooks, with the deeper knowledge we have clearly about the five top markets and the cash generation that gives, we clearly feel very confident today. Clearly, we're talking about up to 2030. That's five years away from now to actually say we will be an always-on share buyback in the next five years. I recognize there's an underlying question about how much. I recognize that.
Look, I think you hopefully understand that this is a decision that we'll have to take on a year-by-year basis, as we've done in the last three years. I think what's fair to say, also when you see the back half of this presentation, we are talking about every year a meaningful share buyback that can really make a difference to the total shareholder return of this company. Yeah.
Great. Thanks. I mean, just to cover, obviously, Lukas will be coming back to talk about medium-term guidance and the financial framework in the second half. We'll take a question in the front row here from Gaurav, if we may. Thank you.
Hi. Good afternoon, Gaurav Jain from Barclays. Paola, a question for me. If I look at slide 45, different countries, cigarette brands, you have probably five cigarette brands in every country.
I look at the next-generation product slide, slide 33, there is just one brand in every country. Do you think there is an opportunity to launch more brands targeting different customer segments, different price points to actually accelerate your NGP growth?
Thank you for the question. I will give you my perspective on this. I mean, in my opinion, from an NGP standpoint, there will be an opportunity at some point. I think not yet at this point for us. I will give you an example. For example, in modern oral, where the category is really developed in the Nordics, we have a portfolio of brands. For example, we have Skruf and we have Zone.
Where the category is sizable and our brand has already occupied the consumer need, it makes sense to play portfolio, which is more like the case of combustible, where the categories are very developed already, right? I believe in the stage where the categories are right now, there is an opportunity to really be more focused and sharp on the consumer needs and establish our proposition. That is the bet that we are having at this point in time, really establish our proposition with a very laser-focused consumer need. We will keep observing maybe in the future, but I think for now it's going to be more about choices.
I think, Gaurav, if I build on Paola's observation, I think hopefully what you can see, if there is a company in this industry who knows how to play combustible portfolios, it is us, despite our smaller scale, which goes back to the point that Paola covered. We have a legacy history of different brands. Now, you can see is this positive or negatively? We choose to see it positively. We know how to play with a portfolio of different brands. It is a skill set that clearly we have now fine-tuned in the last couple of years. I think it's a skill set that will serve us well also on the NGP side. As Paola said, let us start with one brand or two brands and then build it in a portfolio.
It's a skill set that we have honed as a company now for a while.
Great. Any further questions? Gaurav, you can go again.
Also on just the nicotine pouch growth, your peers clearly are doing more CapEx as their capacity is growing. When do we see CapEx from you on nicotine pouches, assuming some level of growth over the next three to five years?
If I can take this one, I think, Gaurav, our approach to NGP has been very much working with partners, a capital-light approach. In modern oral, in the U.S., we're working with a manufacturing partner, which allows us to be more nimble, allows us to have to make significant investment upfront to access these categories.
I think across all the categories, as we get to scale over longer periods, we'll review as a business as to what the right choice is. Especially in such a dynamic category today where the consumer demands are changing, you've also got the added complexity of tariffs and how you're going to deal with the impact of those and different product types, I think we're comfortable with the current approach, which is asset-light, working with partners. We'll continue to look at that strategy over time and make the right call at that point in time for our shareholders.
Okay. One right at the back, if I may. Damian, I think.
Yeah, thank you. It's Damian McNeela from Deutsche. Just one for me.
Just on heated tobacco profit margins, I think in the slide 55, your margins are below sort of industry standards, and you sort of indicate that you're building scale. Can you sort of just give a bit more information about where that scale is going to come from? Is it the three countries highlighted in the slide, or is there more to do in other markets there?
The scale will come. We have identified the key markets where, as Murray said before in the presentation, we know where the category is primarily established, right, and where there's the biggest demand, which is the Southern Europe and Eastern Europe. This is pretty much the focus areas and the focus markets where we are focusing right now. The scale will come primarily by building our market share in those markets.
According to our glide path, we believe that this will drive the path to profitability.
Okay. Anyone? Any other questions? I think that's it for now. That's great. Okay. We will draw a close to this part of the Q&A. We are now going to have a breakout session, which was going to be downstairs. There will be another Q&A session at the end. Obviously, any of those of you who are online, you are welcome to obviously dial in for that and ask any questions for that session as well. If I could ask everyone to be back here, let's say we will keep it to the timetable we were on before. Basically 3:40 P.M., so 20 to 4:00 P.M.. If you could come back and be seated in good time for us to start again at 3:40 P.M..
Downstairs, you'll find a series of booths and product displays and other members of the senior management team there to talk to you about what we've been up to. Obviously, the executive leadership team will also be downstairs as well. I look forward to seeing you down there. We'll come back at 3:40 P.M. Thank you very much.
Hello and welcome to the Consumer Insights breakout at the Imperial Brands Capital Markets Day. My name is Zoë Ruffels, and I am the Global Consumer Insights Director. At Imperial Brands, our challenger approach is to build differentiated brands that our consumers want to buy. In Consumer Insights, we aim to know our consumers best, to deeply understand specific types of consumers where our brands have the most appeal. We use our brand-building framework and consider the who, the what, and the how.
Who our target consumers are, what our brands stand for, and how we communicate the brand's values consistently. We segment consumers into groups or typologies with the closest affinity to our brands. This is to give us a nuanced understanding of consumers' differing mindsets, habits, and lifestyles. We've done this work across multiple countries and for the first time across both combustibles and next-generation products, or NGP. We have defined seven distinct consumer types or typologies that sit across a spectrum. From the trust seeker on the left, who is more value-conscious and conservative and seeks a sense of belonging both with family and friends, to the recognition seeker on the right, who is looking for brands that help portray an image, is progressive in their choices, optimistic in their outlook, and who likes to stand out from the crowd.
Once we know who our consumers are, we use our knowledge of demand spaces, those times of day when our consumers choose to consume nicotine, be it outside or at home, alone or with other people, to understand how, when, and where to reach them. Our insight aims to gain a deep understanding of these consumers, to know their aspirations, their motivations, and their pain points across the different nicotine categories. For each typology, this guides us on what we want our brands to stand for and how we want our brands to show up in their lives. In our breakout, we bring our who, what, and how brand-building framework to life with examples across our combustible and NGP brands. Let's take, for example, our international brand, Gauloises. Gauloises targets the conservative connoisseur. This is a consumer who likes to project discernment in their often unconventional choices.
These consumers have a high level of confidence and are very individualistic. They are looking for something unique in tobacco, an exceptional and taste experience of high quality. This links very much to the brand positioning of Liberté Toujours, Freedom Always, and the characterful taste of the smoking experience. Today, in our breakout session, we are also showcasing the trust seeker for Heated Technology Brand Pulze, the progressive achiever for our vapor brand, Blu, and the conservative connoisseur for our oral nicotine pouch brand, Skruf. We speak more about these brands in our other breakout sessions. Thank you so much for your time.
Hello. My name is Rebecca Zhang, Head of Innovation Excellence. I'm here with Joe Thompson, Group Science and Regulatory Affairs Director. We are excited to demonstrate the role that consumer-centric science and innovation play in helping to provide consumer choice across all our categories.
Our approach can be broken down into four integrated phases.
First, we co-create with our consumers to address their needs. We have developed a series of sense hubs and design labs in different locations. This is where we bring together consumers, our insight capabilities, and collect data for every aspect of our innovation approach. This includes device prototypes, flavor formulations, nicotine satisfaction, sensorial elements, and consumer psychology. Our ideal way of working and approach to technology is designed to create a range of differentiated products and brands.
Second, we build consumer and regulatory trust through transparent, rigorous, and peer-reviewed science and engagement. We are committed to making a meaningful contribution to the public health concept of tobacco harm reduction through our next-generation products. We are also proud to be a responsible manufacturer who safeguards our consumers with a wide range of processes that ensure our products are high quality and trusted.
We continue to demonstrate the harm reduction potential of our next-generation products relative to cigarettes through our multidiscipline, scientific assessment framework. Our data shows that reductions in harmful and potentially harmful constituents found in cigarette smoke translate into a reduction in toxicity in the laboratory. These reductions are confirmed in clinical trials. We use this data to engage with the scientific community, public health bodies, and regulators to promote tobacco harm reduction.
Third, we partner at pace to meet fast-evolving consumer demands. We've adopted a buy, borrow, build approach to problem-solving. This approach has dramatically improved the speed of our product development cycles and enabled us to offer our consumers better products and greater choices.
As a challenger, we're leveraging our partners' cutting-edge scientific research techniques while avoiding the need to test on animals.
Finally, all the above helps us to deliver potentially harm-reduced products that our consumers love.
Our in-market real-world behavioral studies demonstrate that consumers use our next-generation products either to significantly reduce their smoking or to switch away from cigarettes completely. Consumer preferences continue to evolve at speed. We are confident that our differentiated approach means our NGP brands will continue to meet the needs of our target consumers and help us forge a path to a healthier future together.
You will see examples of how science and innovation support brands across all our categories in the other breakout videos. Thank you so much for your time.
Hello, and welcome to the Combustibles Breakout at the Imperial Brands Capital Markets Day. My name is José Antonio Cabrera, Director of Global Marketing and Portfolio. I am here today with my colleague, Karolina Wiechmann, Head of Global Sensory and Consumer Science and Innovation.
Our combustible brands strategies are anchored on the brand-building framework you heard about in the main presentations. We start by identifying our target consumer, the who. For example, as you've seen in the Consumer Insights breakout, for our global combustibles brand, Gauloises, this is the conservative connoisseur. Identification is only the start. To gain a greater insight, we use ethnographic research, a combination of social and behavioral science-based studies. Understanding our target, consumers' pain points, and unmet needs helps us to define what our brand stands for and align this with the consumers' brand choice drivers. For Gauloises, conservative connoisseurs celebrate the freedom and the power to be true to themselves. This positioning informs our brand campaign, the how of our brand-building framework, how our target consumer, the conservative connoisseur, will experience in-market touch points. We ensure a consistency of messages globally.
Innovation remains highly relevant in the combustible category. At Imperial Brands, our challenger approach means we focus on specific initiatives to support brand equity. Our innovation is driven by a passion to address our target consumers' pain points to create products that truly resonate with them. We concentrate on three key innovation areas. First, taste innovation. Taste is the most significant purchase driver in the category. Through a taste segmentation program, we identify underserved taste segments to develop tailored propositions to meet these unique consumer preferences. Recent launches, such as Gauloises Rich Gold in Morocco and Fortuna Go Gold in Spain, are prime examples of new line extensions that cater to previously untapped taste segments.
Second, marketing and design. By innovating our product's appearance and how it's marketed, we can change our target consumers' perception of product quality and modernity without them even touching the product.
Examples of this type of innovation here are Fortuna, Davidoff, and Lambert & Butler.
Third, to the innovation of product features. As we aim to meet the evolving needs of consumers, we are tapping into key demand shifts, such as thinner formats, innovative filter designs, and enhanced packaging attributes that preserve tobacco freshness. These feature improvements are directly linked with consumer preferences, ensuring that our products continue to meet their needs and exceed expectations. You will see how our brand-building framework works across our categories in other breakout videos. Thank you for your time.
Hello. My name is Tony Dunnage, and I am the Global ESG Director for Imperial Brands. At Imperial, we believe that ESG represents good business practice that drives long-term success. As you've already heard, Imperial has a clear purpose and vision defining why we're here and what we're trying to achieve.
Our approach to ESG is a core element of our business strategy and aligned with our purpose and vision. It remains so in the next phase of our five-year plan. We are committed to conducting our operations responsibly and respecting our people, our communities, and our planet. We defined our ESG priorities by first conducting a comprehensive ESG materiality assessment. This involved listening to the views of consumers, customers, employees, regulators, and investors. This assessment identified eight focus areas, as shown here. These focus areas are closely aligned to our strategic priorities and to our key commercial objectives. For example, by starting with the consumer, as we grow scale in our NGP business, we offer more consumers potentially reduced-risk alternatives to traditional tobacco products, which makes a more meaningful contribution to harm reduction.
In addition, we're also committed to causing minimal harm to the environment and using the planet's finite resources wisely. By implementing energy-efficient technologies and practices, we have lowered our carbon footprint, reinforcing our commitment to environmental sustainability and achieving cost savings. We also promote integrity among our suppliers, expecting them to uphold the same standards as us. This ensures ethical practices and a secure, reliable supply chain. We work with suppliers to support farming communities in choosing to grow tobacco sustainably for today, tomorrow, and the future. The safety and well-being of our workforce is paramount. We will continue to ensure higher safety standards and foster a culture of inclusivity. Imperial Brands remains committed to our eight ESG priorities, and we continuously review our progress and adjust our strategies and plans to ensure we stay on course.
This commitment builds trust, enhances reputation, and creates long-term value for our stakeholders, while at the same time positively impacting society and the environment. We are proud of the achievements we've made so far, but we are not complacent. We will continue to drive for improvement, enhancing our policies and procedures in line with evolving standards and best practices. If you have any questions or would like to learn more, please feel free to reach out. Thank you very much for your time.
Welcome to the Modern Oral Nicotine Breakout. I'm Per Danielson, Senior Brand Manager for Oral Nicotine. I'm joined today by Jill Jones, who is Head of Processing and Formulation in R&D. At Imperial Brands, we follow a multi-brand strategy in modern oral nicotine to address our diverse consumers' needs.
By leveraging consumer typologies and our brand-building framework, we've crafted distinctive brands tailored to meet specific consumer needs, starting with Skruf. Skruf is our Swedish challenger brand with over 20 years of Nordic heritage. The brand resonates with conservative connoisseurs, a consumer typology that we find is also important for some brands in other categories. Conservative connoisseurs are financially secure, health-conscious individuals with a refined taste to influence those around them. They value quality, authenticity, sophistication, and style. They seek out brands that reflect their self-perception. Skruf's essence is rooted in celebrating its Nordic heritage and embracing fresh thinking. This is reflected in the brand's design, communication, and product development while staying committed to consumer-driven innovation.
Skruf products are developed to meet the functional needs of Skruf's target audience. This means they offer a fresh and clean taste with a smooth, consistent nicotine delivery.
Consumer co-creation has given us a deeper understanding of our target consumer needs, which has inspired unique innovations and flavor compositions that deliver on the needs of the conservative connoisseur.
Moving on to Zone, our modern oral nicotine brand launched successfully in the United States last year. Zone is tailored for the recognition seekers. These consumers are individuals who value being recognized for their achievements. They're ambitious, competitive, early adopters, and socially active. They demand an immediate and intense nicotine satisfaction paired with an exciting range of long-lasting flavors. Zone's target audience gravitates towards brands that are trendy, premium, and have a strong social presence. It's about making an impression and showing off in social settings. The Zone brand looks to empower consumers to own their Zone, to make the most out of life's opportunities with confidence and control.
We support this by offering a premium product, seamless nicotine and flavor experience designed to meet their high expectations.
Zone delivers a superior nicotine and flavor experience our target audience demands. It has a moist base blend that offers instant release and an intense experience along with long-lasting flavor release and a comfortable mouthfeel. Our Zone product provides a solution to the consumer demand shift we observe both in the United States and in other European markets. We continue to review our footprint, and as the category becomes more established in a new market, we will look for launch opportunities in line with our NGP strategy. You will see how we use our brand-building framework across the other categories in the breakout sessions. Thank you very much for your time.
Hello, and welcome to the Heated Tobacco Breakout at the Imperial Brands Capital Markets Day.
My name is Neil Gledhill, Director of Heated Tobacco, and I'm here with my colleague, Andrew Austin, Head of Industrial Design. Heated Tobacco is one of the three next-generation product categories in which Imperial Brands aims to build scale. As with all our categories, we use the brand-building framework to identify our heated tobacco consumers and their pain points. The consumer typology we target are the trust seekers. Trust seekers want to provide a better, more stable future for loved ones. They can become overwhelmed by complicated technology and new fads, and they are still on a journey away from cigarettes. They want simple, no-nonsense brands that are reliable, offer good value for money, and facilitate authentic moments. They want to change how they smoke because they need something better, but often find the alternatives feel too complicated. Life is stressful enough, and smoking puts them in their comfort zone.
It's their familiar, simple go-to ritual that helps them relax and cope with life. Our new heated tobacco offering, the Pulze 3.0 device, was co-created with consumers with these pain points in mind.
Thanks, Neil. Our Pulze 3.0 design is a simple-to-operate device with an intuitive rollerball opening mechanism, ergonomic cleaning, and an all-aluminum body. The combination of an improved heating system and airflow design delivers greater satisfaction with more nicotine, improved taste intensity, and greater vapor density. We focused on designing a product that delivers simplicity of the overall experience and the satisfaction of an authentic taste. Pulze 3.0 is the smallest all-in-one device, which offers at least 25 sessions on a single charge.
Thanks, Andrew. With Pulze, consumers have the choice of both iD tobacco and iSenzia zero tobacco sticks. iSenzia is the newest brand to our heated portfolio.
It's a range of nicotine tea sticks with flavor crush balls and has helped to drive our market share growth in consumables over the last year. iD and iSenzia combined now command a 3.3% market share in Italy, our number one market in Europe. With the launch of Pulze 3.0 and a sharp focus on the needs of our trust seekers, we are confident we can build positive momentum in the heated tobacco category. Thank you very much for your time.
Hello, and welcome to the Vapor Breakout session at the Imperial Brands Capital Markets Day. My name is Jamie Johns, Head of Marketing for Vapor. I'm joined by my colleague, Amanda Godbehere, Senior Research Manager in Consumer Science. As you will have seen, the Vapor category is one of the three next-generation product categories in which Imperial Brands is building scale.
Like our colleagues in other categories, we use our brand-building framework to unlock further value. The framework gives us a sharper view of our target consumer, of how to differentiate our brand, and of which product features to develop. Starting with a who, we identify the Blu consumer as the progressive achiever. The progressive achiever isn't interested in mainstream fads and trends. They have a clear focus on functional needs, a desire for style over fashionable gimmicks, the need for reliable, trusted brands with proven quality, a love for authentic flavor and intensity that lasts from start to finish, and an expectation for immediate nicotine satisfaction. In terms of what, our Blu brand meets progressive achievers' needs by delivering a sensory richness that's uncompromising.
In a category characterized by novelty and noise, Blu stands out as one of the longest established, most recognized, and trusted brands with over 15 years' heritage. Blu delivers high-quality, authentic adult flavors. It is available in convenient, premium-looking devices, and it has strong nicotine delivery. How we bring this alive is through a powerful campaign, one that emphasizes the superior taste profile of our new rechargeable range.
Thank you, Jamie. We keep our consumers close when we develop our products. Our latest innovations, the Blu Bar and the Blu Box kits, combine rechargeable formats with a range of delicious flavors, with each kit delivering up to 1,000 puffs. With optimized mesh heating and draw resistance technology, the Blu Bar and the Blu Box kits deliver consumers the nicotine and flavor experience they love and expect.
The product also addresses other key consumer needs, such as low liquid detection and a child security lock. These innovations underpin our brand performance. The Blu Bar kit achieves superiority on key metrics, including taste intensity, liking, and preference in comparison to our competition. Our Blu Box kit performs equally well with the addition of superiority on mouthpiece comfort. Knowing our consumers and understanding their needs and expectations allows us to focus on a strong innovation pipeline that supports our brand equity. Thank you very much for your time.
Hello, and welcome to the Consumer Insights Breakout at the Imperial Brands Capital Markets Day. My name is Zoë Ruffels, and I am the Global Consumer Insights Director. At Imperial Brands, our challenger approach is to build differentiated brands that our consumers want to buy.
In Consumer Insights, we aim to know our consumers best, to deeply understand specific types of consumers where our brands have the most appeal. We use our brand-building framework and consider the who, the what, and the how. Who our target consumers are, what our brands stand for, and how we communicate the brand's values consistently. We segment consumers into groups or typologies with the closest affinity to our brands. This is to give us a nuanced understanding of consumers' differing mindsets, habits, and lifestyles. We have done this work across multiple countries and for the first time across both combustibles and next-generation products, or NGP, and we have defined seven distinct consumer types or typologies that sit across a spectrum.
From the trust seeker on the left, who is more value-conscious and conservative and seeks a sense of belonging both with family and friends, to the recognition seeker on the right, who is looking for brands that help portray an image, is progressive in their choices, optimistic in their outlook, and who likes to stand out from the crowd. Once we know who our consumers are, we use our knowledge of demand spaces, those times of day when our consumers choose to consume nicotine, be it outside or at home, alone or with other people, to understand how, when, and where to reach them. Our insight aims to gain a deep understanding of these consumers, to know their aspirations, their motivations, and their pain points across the different nicotine categories.
For each typology, this guides us on what we want our brands to stand for and how we want our brands to show up in their lives. In our breakout, we bring our who, what, and how brand-building framework to life with examples across our combustible and NGP brands. Let's take, for example, our international brand, Gauloises. Gauloises targets the conservative connoisseur, and this is a consumer who likes to project discernment in their often unconventional choices. These consumers have a high level of confidence and are very individualistic. They are looking for something unique in tobacco, an exceptional and taste experience of high quality. This links very much to the brand positioning of Liberté Toujours, Freedom Always, and the characterful taste of the smoking experience.
Today, in our breakout session, we are also showcasing the trust seeker for heated technology brand, Pulze, the progressive achiever for our vapor brand, Blu, and the conservative connoisseur for our oral nicotine pouch brand, Skruf. We speak more about these brands in our other breakout sessions. Thank you so much for your time.
Hello, my name is Rebecca Zhang, Head of Innovation Excellence. I'm here with Joe Thompson, Group Science and Regulatory Affairs Director. We are excited to demonstrate the role that consumer-centric science and innovation play in helping to provide consumer choice across all our categories.
Our approach can be broken down into four integrated phases.
First, we co-create with our consumers to address their needs. We've developed a series of sense hubs and design labs in different locations.
This is where we bring together consumers, our insight capabilities, and collect data for every aspect of our innovation approach. This includes device prototypes, flavor formulations, nicotine satisfaction, sensorial elements, and consumer psychology. Our ideal way of working and approach to technology is designed to create a range of differentiated products and brands.
Second, we build consumer and regulatory trust through transparent, rigorous, and peer-reviewed science and engagement. We're committed to making a meaningful contribution to the public health concept of tobacco harm reduction through our next-generation products. We're also proud to be a responsible manufacturer who safeguards our consumers with a wide range of processes that ensure our products are high quality and trusted. We continue to demonstrate the harm reduction potential of our next-generation products relative to cigarettes through our multidisciplined scientific assessment framework.
Our data shows that reductions in harmful and potentially harmful constituents found in cigarette smoke translate into a reduction in toxicity in the laboratory. These reductions are confirmed in clinical trials, and we use this data to engage with the scientific community, public health bodies, and regulators to promote tobacco harm reduction.
Third, we partner at pace to meet fast-evolving consumer demands. We've adopted a buy, borrow, build approach to problem-solving. This approach has dramatically improved the speed of our product development cycles and enabled us to offer our consumers better products and greater choices.
As a challenger, we're leveraging our partners' cutting-edge scientific research techniques while avoiding the need to test on animals.
Finally, all the above helps us to deliver potentially harm-reduced products that our consumers love.
Our in-market real-world behavioral studies demonstrate that consumers use our next-generation products either to significantly reduce their smoking or to switch away from cigarettes completely. Consumer preferences continue to evolve at speed, and we're confident that our differentiated approach means our NGP brands will continue to meet the needs of our target consumers and help us forge a path to a healthier future together.
You will see examples of how science and innovation support brands across all our categories in the other breakout videos. Thank you so much for your time.
Hello, and welcome to the Combustibles Breakout at the Imperial Brands Capital Markets Day. My name is José Antonio Cabrera, Director of Global Marketing and Portfolio. I am here today with my colleague, Karolina Wiechmann, Head of Global Sensory and Consumer Science and Innovation.
Our combustible brands strategies are anchored on the brand-building framework you heard about in the main presentations. We start by identifying our target consumer, the who. For example, as you've seen in the Consumer Insights Breakout, for our global combustibles brand, Gauloises, this is the conservative connoisseur. Identification is only the start. To gain a greater insight, we use ethnographic research, a combination of social and behavioral science-based studies. Understanding our target, consumers' pain points, and unmet needs helps us to define what our brand stands for and align this with the consumers' brand choice drivers. For Gauloises, conservative connoisseurs celebrate the freedom and the power to be true to themselves. This positioning informs our brand campaign, the how of our brand-building framework. How our target consumer, the conservative connoisseur, will experience in-market touchpoints. We ensure a consistency of messages globally.
Innovation remains highly relevant in the combustible category.
At Imperial Brands, our challenger approach means we focus on specific initiatives to support brand equity. Our innovation is driven by a passion to address our target consumers' pain points to create products that truly resonate with them. We concentrate on three key innovation areas. First, taste innovation. Taste is the most significant purchase driver in the category. Through our taste segmentation program, we identify underserved taste segments to develop tailored propositions to meet these unique consumer preferences. Recent launches, such as Gauloises Rich Gold in Morocco and Fortuna Go Gold in Spain, are prime examples of new line extensions that cater to previously untapped taste segments.
Second, marketing and design. By innovating our product's appearance and how it's marketed, we can change our target consumers' perception of product quality and modernity without them even touching the product.
Examples of this type of innovation here are Fortuna, Davidoff, and Lambert & Butler.
Third, to the innovation of product features. As we aim to meet the evolving needs of consumers, we are tapping into key demand shifts such as thinner formats, innovative filter designs, and enhanced packaging attributes that preserve tobacco freshness. These feature improvements are directly linked with consumer preferences, ensuring that our products continue to meet their needs and exceed expectations. You will see how our brand-building framework works across our categories in other breakout videos. Thank you for your time.
Hello, my name is Tony Dunnage, and I am the Global ESG Director for Imperial Brands. At Imperial, we believe that ESG represents good business practice that drives long-term success. As you've already heard, Imperial has a clear purpose and vision defining why we're here and what we're trying to achieve.
Our approach to ESG is a core element of our business strategy and aligned with our purpose and vision, and it remains so in the next phase of our five-year plan. We are committed to conducting our operations responsibly and respecting our people, our communities, and our planet. We defined our ESG priorities by first conducting a comprehensive ESG materiality assessment. This involved listening to the views of consumers, customers, employees, regulators, and investors. This assessment identified eight focus areas as shown here. These focus areas are closely aligned to our strategic priorities and to our key commercial objectives. For example, by starting with the consumer, as we grow scale in our NGP business, we offer more consumers potentially reduced risk alternatives to traditional tobacco products, which makes a more meaningful contribution to harm reduction.
In addition, we're also committed to causing minimal harm to the environment and using the planet's finite resources wisely. By implementing energy-efficient technologies and practices, we have lowered our carbon footprint, reinforcing our commitment to environmental sustainability and achieving cost savings. We also promote integrity among our suppliers, expecting them to uphold the same standards as us. This ensures ethical practices and a secure, reliable supply chain. We work with suppliers to support farming communities in choosing to grow tobacco sustainably for today, tomorrow, and the future. The safety and well-being of our workforce is paramount. We will continue to ensure higher safety standards and foster a culture of inclusivity. Imperial Brands remains committed to our eight ESG priorities, and we continuously review our progress and adjust our strategies and plans to ensure we stay on course.
This commitment builds trust, enhances reputation, and creates long-term value for our stakeholders, while at the same time positively impacting society and the environment. We are proud of the achievements we've made so far, but we are not complacent. We will continue to drive for improvement, enhancing our policies and procedures in line with evolving standards and best practices. If you have any questions or would like to learn more, please feel free to reach out. Thank you very much for your time.
Welcome to the Modern Oral Nicotine Breakout. I'm Per Danielson, Senior Brand Manager for Oral Nicotine. I'm joined today by Jill Jones, who is Head of Processing and Formulation in R&D. At Imperial Brands, we follow a multi-brand strategy in modern oral nicotine to address our diverse consumers' needs. By leveraging consumer typologies and our brand-building framework, we've crafted distinctive brands tailored to meet specific consumer needs.
Starting with Skruf. Skruf is our Swedish challenger brand with over 20 years of Nordic heritage. The brand resonates with conservative connoisseurs, a consumer typology that we find is also important for some brands in other categories. Conservative connoisseurs are financially secure, health-conscious individuals with a refined taste to influence those around them. They value quality, authenticity, sophistication, and style, and they seek out brands that reflect their self-perception. Skruf's essence is rooted in celebrating its Nordic heritage and embracing fresh thinking. This is reflected in the brand's design, communication, and product development while staying committed to consumer-driven innovation.
Skruf products are developed to meet the functional needs of Skruf's target audience. This means they offer a fresh and clean taste with a smooth, consistent nicotine delivery.
Consumer co-creation has given us a deeper understanding of our target consumer needs, which has inspired unique innovations and flavor compositions that deliver on the needs of the conservative connoisseur.
Moving on to Zone. Our modern oral nicotine brand launched successfully in the US last year. Zone is tailored for the recognition seekers. These consumers are individuals who value being recognized for their achievements. They're ambitious, competitive, early adopters, and socially active. They demand an immediate and intense nicotine satisfaction paired with an exciting range of long-lasting flavors. Zone's target audience gravitates towards brands that are trendy, premium, and have a strong social presence. It's about making an impression and showing off in social settings. The Zone brand looks to empower consumers to own their Zone, to make the most out of life's opportunities with confidence and control.
We support this by offering a premium product, seamless nicotine and flavor experience designed to meet their high expectations.
Zone delivers a superior nicotine and flavor experience our target audience demands. It has a moist base blend that offers instant release and an intense experience along with long-lasting flavor release and a comfortable mouthfeel. Our Zone product provides a solution to the consumer demand shift we observe both in the U.S. and in other European markets. We continue to review our footprint, and as the category becomes more established in a new market, we will look for launch opportunities in line with our NGP strategy. You will see how we use our brand-building framework across the other categories in the breakout sessions. Thank you very much for your time.
Hello and welcome to the Heated Tobacco Breakout at the Imperial Brands Capital Markets Day.
My name is Neil Gledhill, Director of Heated Tobacco, and I'm here with my colleague, Andrew Austin, Head of Industrial Design. Heated Tobacco is one of the three next-generation product categories in which Imperial Brands aims to build scale. As with all our categories, we use the brand-building framework to identify our heated tobacco consumers and their pain points. The consumer typology we target are the trust seekers. Trust seekers want to provide a better, more stable future for loved ones. They can become overwhelmed by complicated technology and new fads, and they are still on a journey away from cigarettes. They want simple, no-nonsense brands that are reliable, offer good value for money, and facilitate authentic moments. They want to change how they smoke because they need something better, but often find the alternatives feel too complicated. Life is stressful enough, and smoking puts them in their comfort zone.
It's their familiar, simple go-to ritual that helps them relax and cope with life. Our new heated tobacco offering, the Pulze 3.0 device, was co-created with consumers with these pain points in mind.
Thanks, Neil. Our Pulze 3.0 design is a simple-to-operate device with an intuitive rollerball opening mechanism, ergonomic cleaning, and an all-aluminum body. The combination of an improved heating system and airflow design delivers greater satisfaction with more nicotine, improved taste intensity, and greater vapor density. We focused on designing a product that delivers simplicity of the overall experience and the satisfaction of an authentic taste. Pulze 3.0 is the smallest all-in-one device, which offers at least 25 sessions on a single charge.
Thanks, Andrew. With Pulze, consumers have the choice of both iD tobacco and iSenzia zero tobacco sticks. iSenzia is the newest brand to our heated portfolio.
It's a range of nicotine tea sticks with flavor crush balls and has helped to drive our market share growth in consumables over the last year. iD and iSenzia combined now command a 3.3% market share in Italy, our number one market in Europe. With the launch of Pulze 3.0 and a sharp focus on the needs of our trust seekers, we are confident we can build positive momentum in the heated tobacco category. Thank you very much for your time.
Hello and welcome to the Vapor Breakout session at the Imperial Brands Capital Markets Day. My name is Jamie Johns, Head of Marketing for Vapor, and I'm joined by my colleague, Amanda Godbehere, Senior Research Manager in Consumer Science. As you will have seen, the Vapor category is one of the three next-generation product categories in which Imperial Brands is building scale.
Like our colleagues in other categories, we use our brand-building framework to unlock further value. The framework gives us a sharper view of our target consumer, of how to differentiate our brand, and of which product features to develop. Starting with a who, we identify the Blu consumer as the progressive achiever. The progressive achiever isn't interested in mainstream fads and trends. They have a clear focus on functional needs, a desire for style over fashionable gimmicks, the need for reliable, trusted brands with proven quality, a love for authentic flavor and intensity that lasts from start to finish, and an expectation for immediate nicotine satisfaction. In terms of what, our Blu brand meets progressive achievers' needs by delivering a sensory richness that's uncompromising.
In a category characterized by novelty and noise, Blu stands out as one of the longest established, most recognized, and trusted brands with over 15 years' heritage. Blu delivers high-quality, authentic adult flavors. It is available in convenient, premium-looking devices, and it has strong nicotine delivery. How we bring this alive is through a powerful campaign, one that emphasizes the superior taste profile of our new rechargeable range.
Thank you, Jamie. We keep our consumers close when we develop our products. Our latest innovations, the Blu Bar and the Blu Box kits, combine rechargeable formats with a range of delicious flavors, with each kit delivering up to 1,000 puffs. With optimized mesh heating and draw resistance technology, the Blu Bar and the Blu Box kits deliver consumers the nicotine and flavor experience they love and expect.
The product also addresses other key consumer needs, such as low liquid detection and a child security lock. These innovations underpin our brand performance. The Blu Bar kit achieves superiority on key metrics, including taste intensity, liking, and preference in comparison to our competition. Our Blu Box kit performs equally well with the addition of superiority on mouthpiece comfort. Knowing our consumers and understanding their needs and expectations allows us to focus on a strong innovation pipeline that supports our brand equity. Thank you very much for your time.
Welcome back to the second part of our Capital Markets Day session. I am Kim Reed. I am the President for Americas Region. I've been in this role since June of 2021, so essentially the last four years.
Prior to that, I was with Pepsi as well as Kellogg's in many senior positions prior to joining Imperial in 2019. Thrilled to be with you all today. Before the break, Murray outlined our market opportunities, and Paola explained our approach to leveraging consumer insights to build our brands. Now you'll hear from the regional presidents on how we apply these capabilities and deploy specific levers from a common playbook to drive performance in our markets. I want to start by revisiting our playbook. As Murray shared earlier, we bring this toolkit to each market, then prioritize the initiatives that will deliver the strongest performance. Internally, we refer to these as our must-win battles. As the challenger, we must stay agile and make clear choices on where we focus. These must-win battles support this disciplined focus.
This structured, data-led approach over the past four years has delivered strong results. It's not about a single silver bullet. There are multiple clearly defined levers for each market, all grouped under these five themes. We have more than 25 growth initiatives across the five priority markets. As Priyali will explain later, these same levers apply across our broader market portfolio. It's a highly detailed plan, and my colleagues and I will highlight just a few examples from each market. Let's turn to the U.S., Imperial's largest market. Over the last five years, we have built a high-caliber team. 80% of the leadership team was recruited from FMCG companies. 30% have brought regulatory experience inclusive of tobacco. The team now also better reflects our U.S. consumer landscape, with 60% people of color, 30% gender diverse, and seven different nationalities.
I must say, I'm very proud of this team. This is a highly attractive market, second only in size to China. As Murray illustrated earlier, it remains affordable. This means there is headroom for continued pricing to offset volume declines in both cigarettes and mass-market cigars. The U.S. also has a transparent regulatory environment where decisions are typically driven by evidence and science. Our strong U.S. portfolio spans all price points in both cigarettes and mass-market cigars. As the number three player in cigarettes, we ensure each brand has a distinct role in each price segment. This means we are well-placed to be precise about our target consumers and capture trends in the market, such as downtrading. We invest strategically to enhance the brand and meet adult consumers where they are. In NGP, we have a Zone in modern oral nicotine, and Blu is our vapor brand.
The NGP market in the U.S., specifically vapor, faces challenges due to a lack of enforcement against the illicit trade. While there are actions to curb the sale of illicit products, these are not yet proving effective. The clear key priorities we set in 2021 have consistently delivered operational and financial performance over four years. Our disciplined portfolio management has driven four consecutive years of cigarette market share growth, with a cumulative gain of 180 basis points. At the same time, targeted investment in brands and sales force has enhanced our ability to take price while maintaining share gains, driving strong revenue and profit growth. We have achieved this against a U.S. market that has become more competitive in recent years. Looking ahead, the foundations we have built mean we are better placed to face these challenges.
I'd now like to demonstrate how our focused investment behind this playbook of operational levers is driving performance and highlight further opportunities over the next five years. I'm going to give four examples of how we use our must-win battles in the U.S.. I will start with how we have reinvigorated Winston, one of our local jewel brands. This is a great example of how deep consumer insights have guided a clear investment plan to strengthen brand equity and appeal. Winston sits in the premium price segment and has been an iconic brand since 1954. It has always enjoyed strong recognition among American adult smokers but was neglected under previous ownership, leading to market share declines. Our work on consumer insights and typologies identified our target consumer as conservative connoisseur. It also highlighted three key areas to address for our target Winston consumer, as shown in these charts.
First, reinforce the brand's high-quality tobacco, good flavor, and satisfying taste. Second, leverage the strong brand awareness while improving consumer trial. Third, emphasizing Winston's premium quality at an affordable price. You heard from Paola earlier how we are using deep insights and intelligence to understand our consumers better. Our recent campaigns have focused on quality and our unique only tobacco and water story. We've introduced consumers to our cigarette ambassadors, such as our master blender, Aaron Hayes, or the farmers who contribute to Winston's high-quality tobacco, rich flavor, and satisfying taste. Our messaging also reinforces the timeless American values that matter to Winston consumers: the spirit of fun, freedom, loving the outdoors, and motorsports. For example, using our challenger mindset, we identified an innovative opportunity for retailers to brand a NASCAR vehicle in return for allowing us to communicate with their adult smoker database.
These retail partners were able to offer Winston smokers the chance to win a ride in a NASCAR, an experience that resonated deeply with our target audience. This strengthened our retailer relationships and expanded our direct-to-consumer engagement. By leveraging retailer databases, we launched Winston's loyalty program, something previously we were not able to do. Working with key retailers, we engage with our consumers, both in store and online, seamlessly integrating our loyalty program with our partners' apps. As consumers' needs evolve, we've refined Winston's brand personality and expanded the range with the recent launch of Winston Select. Winston has grown its share within the challenging premium segment by 20 basis points over the last four years and the overall market by six basis points. Looking ahead, we've identified further investment opportunities to leverage our consumer insights, build on Winston's brand equity, and reinforce the quality messaging.
There's also scope to further evolve the Winston portfolio to meet consumer needs. For example, we see opportunities to drive recruitment through further brand innovation. In mass-market cigars, we have invested in our iconic heritage brand, Backwoods, a leader in the premium natural leaf segment. Our deep consumer insights work is also relevant to the mass-market cigar category and enables us to build differentiated consumer-centric brands. Backwoods is all about authenticity with deep ties to music, particularly hip hop. We've kept Backwoods relevant for our consumer through investment in leaf consistency, quality, as well as product innovation such as flavors. This underpins our ability to continue to take price and more recently regain share of the natural leaf segment.
Looking ahead, we see further opportunities to leverage this iconic brand through further investment in quality to reinforce Backwoods' premium positioning, further innovation in different formats and flavors, and connecting with adult consumers via the live music events that we sponsor each year, as well as initiatives such as the Backwoods Studio to support artists. We also see scope to leverage our wider cigar portfolio through brands like Dutch and Dutch Masters. Turning to another operational lever, building scale in NGP. Our decision to enter the fast-growing modern oral nicotine market last year through a targeted acquisition is a great example of our disciplined challenger approach in NGP. Modern oral was becoming a larger part of the nicotine pool where we could leverage our existing sales force. We started with consumer insights to identify an untapped opportunity for a differentiated, more moist product.
This guided our acquisition strategy, leading us to acquire the products behind Zone. Consumer testing reinforced our choice, and we launched Zone in February of last year, initially in 12 metropolitan areas. Our consumer insights and intelligence identified Zone consumers as recognition seekers, helping better inform how we target our consumer base. Let's briefly hear from one of our Zone consumers in the U.S..
Yes, so with the Zones, I definitely think the flavors are better than other brands that I've tried. I think they last a lot longer. The flavor and the nicotine, I think, last longer when you're keeping it in. It feels better. It doesn't dry out as fast. It doesn't get flat. It doesn't move around as much. I think in all aspects, it's just an upgrade compared to the other brands that I've tried. It's easier. It's more discreet.
You don't have to go outside and take a smoke break. You don't have to do anything like that. You can just pop it in, go back to work, do whatever you got to do.
We have now built distribution to 70,000 stores and achieved continued share gains. Looking ahead, we see further opportunities to expand distribution, build awareness, and innovate. This category is becoming more competitive, but we are confident we have a differentiated offer that resonates well with our target consumers and is a strong platform for future growth. In vapor, Blu remains a strong brand. However, as I mentioned, the illicit vapor market continues to pose challenges due to weak enforcement. Therefore, for now, our investment focus is primarily behind Zone. Finally, another key lever has been our investment in our sales force, and this will continue to be a key lever for the next five years.
There have been four areas of focus. First, to grow our sales force by 43% to close the gaps in coverage versus our peers. This has increased store visits, which is important in tobacco where the majority of our sales occur through small independent stores and where the frequency of store visits matter. Second, we have used our improved data to optimize the deployment of our Salesforce by geography and channel. This analysis is becoming ever more detailed, helping us prioritize specific cities and counties to maximize coverage in the areas with the best returns. We have to scope leverage this data even further in the future. Third, we have invested in our key account management team to drive engagement with our largest customers. We have significantly expanded this team and used external benchmarking to optimize their coverage ratio and focus on our best opportunities.
Looking forward, our aim is to deepen our key account partnerships through integrated joint business planning and category management capabilities. Finally, we have also introduced new capabilities such as the Perfect Store, a tool that guides our sales reps through each store visit and best-to-use store shelves to bring value to the consumer. Looking ahead, we will build on these capabilities with a new sales platform and further leveraging our data. All of these initiatives have taken time to embed, and we are only just beginning to unlock the strength of our larger sales force. In summary, we have made good progress, but we still see significant opportunity. By applying our consumer insights to brand building and innovation, and by ensuring our sales force optimizes our consumers' path to purchase, we can drive even greater results.
I'm proud of what we've been able to accomplish over the last four years and excited for our continued success. I'll now hand it over to Aleš.
Thank you, Kim. Hello, everyone. It is great to be here. I have been with Imperial Brands for more than 20 years, starting in sales in my native Czech Republic. I have worked in several European markets, and now I'm responsible for the Europe region. This has always been a dynamic and challenging industry. I want to say this: there has never been a more exciting time to work at Imperial. I hope our presentations today are giving you a sense of this excitement. The region I cover is diverse, with more than 25 markets in total, and it is our largest region. However, we are also very focused.
Just three markets, Germany, the U.K., and Spain, account for about 60% of the revenues of the region and around a quarter of group's revenues. That means I spend most of my time focused on these markets, and I will talk about these today. Each of these markets has their own characteristics. That is why we believe a really detailed understanding of our consumers, our brands, and our customers, the retail trades, is vital to success. I will start with Germany, our largest European market and second largest for the group. It is the largest profit pool in Europe. Germany is important to us, not just because of its absolute size, but also because of its long-term sustainability. The average price of 20 JPS cigarettes retails in Germany for around EUR 8, and therefore it remains an affordable market, which provides an attractive runway for our future pricing.
There's a predictable excise environment, which is expected to continue through the next period of our strategy. There's a broad consensus around the need to balance public health with tax revenue and the prevention of illicit trade. Germany, compared to some other markets in Europe, is still relatively open to our industry. This gives us opportunities to continue developing our brands through point-of-sale advertising and direct consumer communications. Turning now to our own business in Germany, the first thing I would like to say is thank you for your patience. We always said that turning around this market would take time. Now we have stabilized our market share after years of decline and have created a base from which we can move forward. Our German business faced three challenges: an underpowered sales force, underinvestment in our key brands, and an excessive pricing strategy ahead of peers.
Over the past four years, we have been systematically addressing each of these issues. One of the key drivers for this turnaround is our sales force. What we have been doing in Germany is similar to what Kim has just described in the US. We have become more focused in our approach with clear best practice guidelines for our sales teams, driven by performance and data. We have also hired 70 new reps, enabling our coverage to move from 60% to 80%. That's an additional 10,000 stores covered. The number of store visits has increased by 80% to more than 400,000 a year. Like elsewhere, our turnaround has been supported by more rigorous performance management and a closer alignment of incentives. We have really only just begun leveraging our expanded Salesforce and their improved capabilities. There are further opportunities to use our data to refine performance. Turning now to brands.
The turnaround in our flagship brands is still a work in progress, and it's an area where we see further opportunities for upside over the next five years. We have been using the rigorous approach developed by Paola's global consumer team. This is more about sharply defining our target consumers, differentiating our proposition, and being more consistent in our communication. We have been leaning into these strengths and are starting to see improvements, particularly with Davidoff. We have also strengthened our presence in Fine Cut with the launch of Paramount. We just taken a 5% share of the Fine Cut category in three years. As a result of these brand investments, we are able to price more effectively alongside our share delivery. NGP in Germany is relatively underpenetrated compared to some other European markets, so it presents future opportunities for us.
We are present with Blu and have delivered share growth driven by product innovations. This will be supported in the second half of this year by the launch of Blu Bar Kit. Overall, I think we now have a high-performing salesforce and an improved, more diverse portfolio to drive value creation over the next strategic period. Let's turn now to the U.K. Here, over recent years, our sector has become the subject of political debate and media attention. It is important to stay focused on the long-term commercial fundamentals. There are two key points. First, high excise levels mean that the combustible profit pool will continue to decline over the next five years. This means our focus is on optimizing our value creation in a shrinking market. We manage our investment differently here, constantly evaluating the right balance between market share and value.
The generational ban will have a minimal effect during the next strategic period. Second, we see the U.K. continuing to lead the way in the transition towards next-generation products, and specifically vape. While we do not want to overpromise, we now have products that resonate well with consumers in this category. In the U.K., we enjoy a strong number two position in combustibles with a well-balanced portfolio across cigarettes and rolling tobacco. We will continue to carefully balance share with value creation. This approach has enabled us to deliver a stable share over the last four years. First, this has been driven by an active approach to managing our portfolio of international and local dual brands to meet the needs of different consumers. Looking ahead, a key value lever is to use our improved data and revenue growth management tools to support pricing.
A second key lever is our successful launch of brands to meet the needs of down traders. For example, the launch of Paramount has been well received. Here, our Salesforce and the relationship with customers are a source of a competitive advantage. These partnerships have been critical in supporting the launch of new brands in a dark market where the normal marketing tools are restricted. Vapor remains the largest NGP category in the U.K. with a growing share of the nicotine pool. We have delivered an encouraging uptick in Blu share, driven by the drumbeat of innovation that Paola talked about. This has allowed us to rapidly meet the changing needs of consumers for new formats and authentic flavors. Let's hear from some of those consumers now.
The flavors are really like the fruits.
If it's pineapple or passion fruit, if it's like strawberry or something like that, it actually tastes like it, and you don't get the really bad aftertaste as well, which you get with some of the disposable vapes. I think it looks nice. I think with the Blu products, they look a little bit more premium than just like your average vapes that you'd see on the shelves. I think that the Blu products are more targeted for, I'd probably say, the older demographic. I guess Blu just stood out for me as it looked more official, more trusted, that kind of thing. Some of them looked a little bit cheaper. I did try some of the others. Didn't really like the flavors as much, but they were very synthetic. It's far too sweet. Tried the Blu ones, and I've pretty much liked every single one.
I've always gone back to Blu. I think the designs are always good. They're very easy to use. The strengths are good. For me personally, they tend to last a little bit longer than some of the other devices. I guess with Blu, it's just that reputation that stood out more for me than anything else. A more trusted brand, well-known brand.
Looking ahead, we will launch the Blu Box kit next month to continue this momentum. Moving on to Spain. This is an attractive market, which will play a growing role in creating value for the group. Tobacco remains affordable with a pocket of 20 king-size Fortuna, currently priced at EUR 5.70. Encouragingly, after a period of static pricing, we have now achieved pricing over the last three years, which supports the market outlook.
While there may be new regulations over the next five years, we are still able to communicate with consumers through branding and points of sale. NGP has a relatively low penetration, and our forecasts suggest that Spain will continue to be a combustible-dominated market over the next strategic period. However, NGP is growing, and with Blu, we are the number two, so we are well placed to capture any growth. One of the big opportunities for us in Spain was to leverage our strong portfolio of largely neglected local dual brands: Nobel, Fortuna, and Ducados. This was a key shift under our current strategy. These are managed alongside international brands like West. This strong and broad portfolio means we can appeal across consumer typologies, price tiers, and geographical areas. Our Salesforce has been building its coverage, particularly in the vending channel, where historically we had been underweight.
The team has consistently grown market share, while year-on-year profit growth has been the highest of our top five markets. There is an opportunity for further outperformance through innovation and reinforcing the challenger positioning of our dual brands. This targeted investment in our brands and customer relationships creates a solid platform for future growth. Thank you, and I will now hand over to Priyali.
Thank you, Aleš. Good afternoon, everyone. Unlike Aleš, I am relatively new to Imperial Brands, having joined just last August from Procter & Gamble. I have joined as the President of the AAACE region, which covers Africa, Asia, Australasia, Central, and Eastern Europe. At P&G, I worked across several different FMCG categories, and therefore, coming new to tobacco, one of the first things that I noticed was this very high level of involvement consumers have with our products.
On average, consumers interact with our brands 10-15 times a day. This is very high. Because of this, they notice the smallest details, from point-of-sale communication to subtle changes in tobacco blends. The importance of getting close to our consumers and building differentiated offerings is even greater than I had assumed from the outside. The other really interesting thing about the category that struck me was that the nature of it is such that consumers cannot buy a product without interacting with a human being, the retailer. That is why it is especially important that we value and build strong retail partnerships. The region I cover is perhaps even more diverse than Aleš's, with upwards of 50 markets, the largest of which is Australia, which accounts for 12% of regional revenue and 3% of the group.
To manage this complexity, we apply the same challenger principles that you've been hearing about throughout today's presentations. These are a deep understanding of the consumer and focused prioritization of resources. Let's start with Australia, one of the group's five priority markets. In combustibles, this is a challenging environment with restrictive regulation and high levels of excise. Therefore, high consumer prices. In Australia, a pack of cigarettes retails between AUD 30-AUD 50, the equivalent of GBP 17-GBP 27, making this one of the most expensive cigarette markets in the world. Over the years, this has led to consumers down trading to lower-tier brands and, unfortunately, a large and growing illicit trade. However, despite these challenges, we are well placed as the number two player in Australia with strong brands across all relevant price tiers.
We are also strong in fine-cut tobacco, an important consumer segment where we have our iconic Champion brand. In Australia, even more than other markets, there are limited opportunities to communicate directly with consumers. Here, retail partnerships are key. Despite these pressures, I do want to reiterate that Australia remains a highly profitable and cash-generative market. While the combustible profit pool is forecast to shrink, we can continue to generate a strong return through careful choices, balancing share and value. Additionally, in NGP, the government has recently opened the door to allow vapor products to be sold through the pharmacy channel without a prescription. We launched Blu 2.0 just last month to test this opportunity. Our approach of carefully balancing market share and value creation has supported consistent financial delivery over the years.
Success has been underpinned by a focus on understanding consumer preferences and deepening retailer relationships. These capabilities have helped us develop a portfolio to ensure we have attractive propositions across all major price points. Paola referred to this in the questions and answers session earlier, but two years ago, we launched a new brand in Australia, Lambert & Butler. This was in response to the challenge that Parker & Simpson, an existing brand in our portfolio, was stretched too far across price tiers. It is not easy to launch a new cigarette brand in a market where you cannot communicate directly with consumers. Here, our strong retailer relationships came into play, and we have successfully grown Lambert & Butler into a meaningful share in the last two years itself.
In the next strategic period, we will continue to make focused investments in our consumer capabilities, portfolio, and retailer relationships. In this way, we will create maximum value from the opportunity available. Now let's look at the broader portfolio of markets. As Stefan said, we are not an everything-everywhere company. We focus on prioritizing the best investment opportunities based on consumer insight and data. The markets where we have chosen to play are profitable and cash-generative and have attractive long-term growth prospects. However, year to year, on an individual basis, some of these markets can be volatile, which is inevitable when operating in emerging markets. To deliver sustainable growth, we group them into market clusters, with cluster management teams leveraging global consumer capability while building strong local route-to-market expertise.
As in larger markets, we operate with a combination of international and local dual brands, the latter with strong heritage. In AAACE too, we use the same rigorous approach to brand building, which Paola described earlier in her presentation. This approach supports stronger, more consistent performance across clusters. Some of these clusters have the potential to become future growth engines, which can help to compensate for markets where there are headwinds to the profit pool. Today, I'll illustrate this approach in two of our clusters, Africa and Central and Eastern Europe. The Africa cluster now generates around 10% of group operating profit and has grown faster than our average. The market environment is supportive, with affordability increasing as incomes improve. We have leadership positions across four of our top five markets in this cluster, with strong local brands and strong route-to-market capability. Take Ivory Coast, for example.
Our local brand, Fine, continues to build market share over time through brand activation, format innovation, and strengthened distribution. Like several others in the region, Fine is a powerful, deeply resonant brand, with Ivorian consumers having built an equity over years. Across the Africa cluster, we focus on consistent investment to strengthen our dual brands and the selective addition of international brands to our portfolio. Of course, like both Kim and Aleš said, we continue to expand our sales capability using data and insights. Although we already enjoy high levels of market share in our African markets, we're confident we can drive further value in the next strategic period. Let's go now to Central and Eastern Europe. In this cluster, we have delivered growth from both our combustible and NGP brands. In fact, this cluster has been at the center of the development of our heated tobacco proposition.
We started out with consumer trials in the Czech Republic and have since expanded our footprint to three markets. Working closely with Paola's team, we have been steadily refining and focusing our offering. As you heard, in the heated category, we're targeting a specific consumer type, the trust seekers. They tend to be value-conscious and still on a journey away from cigarettes. In these markets, this segment is sizable and under-penetrated. It correlates very closely to our combustible consumer profile. The good news is these are people we already know well. Let's hear from one of our consumers.
[Foreign language]. I've tried a lot of tobacco products, starting with cigarettes and e-cigarettes and heated products. I prefer heated products. And why Pulze? Compared to other brands, I found this one the best.
Heating tobacco suits me because I feel it's not as strong as cigarettes, but stronger than vapes. It reminds me of smoking. Maybe that's why. The benefits of Isenzia are the flavor options. They are more delicate than tobacco. I like these flavors. I wouldn't change anything about the Pulze devices. They are light, just good to hold in the hand and not too big.
Heated tobacco is competitive, but we now have a clear view of our consumers, and our brands are becoming more sharply defined with the right product features to delight these consumers. I am confident we have the foundation to build on the next five years. I want to leave you with this final reflection before I hand over to Alison. Our growing success in heated products is a great example of Imperial Brands' distinctive, diverse culture, which has impressed me ever since I joined.
Delivering growth in this category requires a lot of collaboration between our market teams in Prague, Warsaw, and Budapest, and our innovation and supply chain colleagues in cities across the world like Hamburg, Liverpool, and even Shenzhen. We also link up with Aleš's team in Rome and Athens to ensure we are sharing and reapplying some of the best practices across our portfolio. It is a really interesting blend of different cultures, deep industry knowledge, and FMCG know-how. This diversity of experience and thought will, I believe, be an important competitive advantage for years to come. Alison, over to you.
Thank you, Priyali. Hello, everyone. I joined Imperial in September 2020, and I was involved in the development of our current strategy that we launched back in 2021. My background is in leading people and culture functions for several large-listed companies.
As Stefan highlighted, Imperial Brands is a challenger business. Being a successful challenger is about being close to our consumers. It's about being focused, and it's about having the right ways of working, the right skills, tools, and a performance-based culture. We've invested significantly in developing our performance culture in its broadest sense. This is an important reason why we are now delivering such a strong, consistent operational and financial performance. We have clear plans to evolve further. To understand where we're going next, we must reflect on where we've come from. Throughout its modern history, Imperial Brands has always been best when it acts as a challenger. When we emerged as a separate-listed company in the late 1990s, in global terms, we were an insignificant player. We went on to successfully challenge businesses many times our size to build the broad portfolio we have today.
However, when we were developing our current strategy, it was apparent that rapid growth had created cultural challenges. Our people felt this acutely, and they told us so. The organization had not invested in consumer capabilities. Silos had emerged, and collaboration was sporadic. Accountabilities were unclear, and the organization no longer mirrored the growing diversity of the consumers we served, making it harder to attract talent. The business prioritized short-term delivery at the expense of long-term planning. We listened to our people. Alongside our purpose and vision, we developed five core behaviors. These behaviors were created by our people to address the cultural gaps that they had identified. Always start with the consumer. Collaborate with purpose. Take accountability with confidence. Be authentic and inclusive. Together, we build our future. These behaviors defined the performance culture that was required to deliver our strategy.
We ensured these behaviors provided clear direction and were not merely words on a wall. We implemented a structured program to help people understand the core elements of a performance culture. We equipped people with the necessary ways of working, skills, and tools. How did we ensure we started with the consumer? First, we set up a global consumer organization. This was consciously designed to mirror FMCG best practice, particularly in consumer insights, brand building, and innovation. We recruited expertise from outside the organization to introduce fresh consumer thinking that we could blend with our really deep tobacco knowledge. During the past five years, we have refreshed 75% of our top 500 leaders. Our GCO team now is fully staffed with 1,000 professionals distributed amongst our major markets.
We also thought deeply about how we could foster more purposeful collaboration to share best practices and ideas. This meant setting collective objectives, altering the bonus structure for our senior leaders to introduce a greater element of group performance. We reformed our structure to ensure our enabling functions were focused on commercial goals and were better integrated into the markets. Turning to accountability, this starts at the top. As executive leaders, we're very conscious of the commitments we make to shareholders. Throughout the organization, we put in place regular, structured performance conversations, all designed to meet our commitments. We equipped our leaders to become performance coaches through a program we called Connected Leadership. Over 1,000 of our leaders have now been through this intensive seven-day residential program, which equips them to maximize the full potential of their teams.
Being inclusive to all is essential to attracting and retaining talent and an important enabler of our strategy. The changes we made in our leadership and to our culture have now helped us to attract top talent from leading consumer businesses. I have been positively surprised by how this has become a competitive advantage, reinforcing our challenger mindset and now better reflecting our consumer base. Improving how we plan for the long term to build our future has perhaps been the biggest challenge. Our people told us one of their biggest barriers was fast, accurate data to provide them with actionable insights. One of the ways we responded to this was to launch a program to combine 60 legacy systems into a single platform for enterprise resource planning. Now, Lukas is going to talk more about improvements in tech and data in a moment.
We have invested in new tools to create an end-to-end view of our supply chain from leaf to shelf. We have carefully studied the best practices of FMCG peers to introduce a more integrated approach to business planning, which accurately balances consumer demand and supply. A helpful indicator of the health of our culture is what our people tell us through our global employee experience surveys. For the third year in a row, we have maintained engagement scores above the global benchmark. A consistent 74% is a strong result for a business of our size undergoing such change. As our regional presidents affirmed, we have a highly motivated, highly engaged workforce across all of our markets. You can see on this slide some of the data from our most recent survey, which indicates strong levels of accountability and collaboration, as well as a deep understanding of the strategy.
These are all key indicators of a performance culture in action. The current strategy has been focused on resetting, fixing, and catching up. During the next five years, in the areas which really matter to our commercial success, we see an opportunity to move into the lead. As a challenger, we need to be a leader in knowing our own consumers. You heard Paola outline this ambition earlier. Organizationally, being a consumer leader is about taking our talented individuals and leveraging their potential by integrating them into a high-performing team and ultimately a high-performing organization. Our customer relationship has long been a strength. We see an opportunity to go further, building excellence into the DNA of our sales teams through investment in skills building, better technology and data to drive sharper insights, and a global sales academy for knowledge sharing.
Manufacturing is another area where we will build excellence, strengthening our focus on efficiency, quality, and health and safety. These efforts are a great example of how our sustainability objectives and commercial goals reinforce each other. Looking ahead, we remain committed to our triple zero goals: zero waste, zero carbon, and zero injuries. The final point I want to leave you with is this: a key learning from the past four years is that our people can't do their best work without the right systems. Equally, the best tech in the world is worthless without a culture that can make good use of it. People, process, technology, and data—they are inextricably linked. That is why Lukas and I collaborate very closely to ensure that we integrate our people strategies and our tech and data strategies.
The transformation of our culture and the transformation of our organization and capabilities has been essential to the delivery of our strategy. The big opportunity for the next five years is to bring all of these interconnected elements together to become an even more agile challenger. With that, I'll hand to Lukas.
Thank you, Alison. Hello, everyone. You just heard from Alison explain our opportunities to better equip our teams through better processes, technology, and data. I'm going to develop this theme a bit further. I will describe how, through integrating our processes, people, data, and technology, we will create a more agile and data-led organization. Four years ago, what attracted me to Imperial Brands was that it was unusual to find a business of such scale and where there were so many self-help transformation opportunities.
What's exciting for me now is that while we have made good progress over the next strategic period, we can unlock even greater value. Let me remind you of the organizational context. Our current global footprint was assembled through multiple acquisitions over the last 20 years. However, the scale and pace of these acquisitions meant there was limited focus on integrating back offices, processes, and systems. As Alison said before, this resulted in multiple legacy platforms and a siloed organization. We had operated as a confederation of independent businesses where it was hard to leverage our scale or share best practices. There was very limited use of shared service models. The group center was primarily focused on controlling costs rather than enabling our markets to grow revenue. As Stefan said, this is now a stronger business than it was four years ago.
Our transformation has enabled a more consistent and sustainable performance. The ambition over the next strategic period is this: the completion of our journey from the loose collection of businesses we inherited to a fully integrated organization with common processes and data. It will be an organization where finally we are making the most of our global scale to create significant efficiencies and empower local teams to make fast, agile decisions. This future organization we build on the foundations we have put in place under the current strategy. These are the key milestones for the implementation of our shared service models and Unify, which is what we call our ERP project internally. Four years ago, we had a very limited shared service platform covering a small number of finance processes. We set out a plan to expand this across other functions.
We established two global business hubs in Poland, which now cover a broad range of processes across supply chain, finance, procurement, data, and IT. This has allowed us to start standardizing our processes and create efficiencies. The next phase of our plan is to leverage what we have built by including more end-to-end processes across a broader range of functions. This will be supported by further standardization and connectivity through improved systems. This brings me to our Unify project: the implementation of a single ERP system replacing our 60 legacy systems. This is more than just a technology solution. It will simplify our operations through harmonized data and by unifying the systems that connect us globally. We have gone live in the U.K., and we are rolling out to all markets and factories over the next four years.
This slide sets out how we will build and harmonize our organizational capabilities. Over the last four years, we assembled world-class talent. As you're hearing today, we have now precisely defined where they need to focus to deliver our 2030 strategy. To ensure our people succeed, we need to connect them to each other and empower them through standardized ways of working, technology, and data. This means better connecting diverse teams working at different ends of the value chain through improved end-to-end processes. We will also help our people by leveraging data analytics on an enterprise-wide basis. This data-led approach will allow us to apply artificial intelligence more effectively and empower our people to make investment decisions better informed by consumer insights and data. This will make us better able to capture our growth opportunities to drive top line.
For a business that already generates gross margin of more than 65%, this is the best return and the greatest opportunity beyond efficiency benefits. These changes represent an attractive investment case to support sustainable top-line growth and create efficiency to drive bottom line. We plan to invest around GBP 600 million in cash costs, as you can see here on the slides. This will be in two main areas. First, creating an agile, data-led enterprise integrating people, technology, data, and processes. Second, driving manufacturing excellence. This includes a standardized operating model to improve safety, quality, and performance, unlocking efficiencies. We expect the majority of the spend will be in 2027 and 2028, with some spend in the years either side. We will provide more specific guidance year by year. In addition, we also expect to incur associated non-cash charges of around GBP 140 million.
This program is highly specific and will be time-limited to deliver step-changing organizational capabilities and support our strategic delivery. As a result, we intend to treat these costs as an adjusting item to aid comparison of our performance over time. We expect to deliver annualized savings of around GBP 320 million, which will be delivered in the latter half of our plan. We will reinvest the majority of these savings to capture more top-line growth opportunities. This will be through investing in the must-win battles you have heard about today. These are the big levers which will drive performance in both our combustible and NGP brands. We will further enhance our consumer brand and innovation capabilities. It will also improve our resilience to offset headwinds such as cost inflation. This will underpin the long-term sustainability of profit and cash growth through 2030 and beyond.
I would now like to take a moment to explain how what you have heard today translates into a clear financial formula for the next five years. The good news is that the components of our future financial model are very consistent with what we have delivered under the current strategy. It starts by having a clear strategy to win with the consumer, which you have heard about today. This will drive financial delivery, particularly sustainable growth in cash flows, and support our medium-term guidance. This, in turn, will deliver growing capital returns for shareholders in line with our capital allocation framework. Turning now to our medium-term guidance, you will see it is similar to what we have delivered in recent years. We expect to deliver low single-digit net revenue growth from our combustible tobacco business.
As Murray explained earlier, our tobacco brands will continue to be the major driver of profit and cash. Our NGP brands are expected to deliver double-digit net revenue growth. This will mean that over time, NGP will become a more meaningful part of our overall group in line with our purpose of forging a path to a healthier future. This revenue growth in both combustible and NGP, as well as our contribution from Logista, will support annual growth in group-adjusted operating profit of around 3%-5%. This is consistent with the growth rate we have delivered over the course of the last three years and reflects continued investment in both our combustible and NGP brands. We are adding EPS to our guidance to recognize the contribution from the ongoing evergreen share buyback over the next five years.
This will help to drive adjusted EPS growth of at least high single digit. To support this, cash generation will remain a key focus. We expect to deliver growing free cash flow over time with an annual range of GBP 2.2 billion-GBP 3 billion. This range takes into account the phasing in the cash spend on our restructuring investment and the potential variation in foreign exchange translation. Like the last four years, we have set this medium-term guidance at the level which we believe we can consistently and sustainably deliver. I should stress at this point that our guidance for the current half and full year is unchanged, as shown on this slide. I will not go through the details. However, I would like to remind you that, like previous years, performance will be weighted to the second half because of phasing of pricing and investment.
As a result, first-half group-adjusted operating profit is expected to grow at the low single digits, so at around 1%-2%. We remain confident of delivering our full-year guidance as set out in today's statement. The cash characteristics of our business remain highly attractive, with low CapEx needs supporting strong free cash flow delivery. This will be further underpinned by ongoing growth in our adjusted operating profit. I'd also highlight that as we have shrunk our capital base through share buyback, our free cash flow per share is becoming increasingly attractive. Looking ahead, we will continue to optimize our cash delivery and be highly disciplined in our use of capital. One of the contributors to both our profit and cash is our stake in Logista. This is a Spanish-listed European logistics business in which we have a 50.01% stake.
As a leading distributor of tobacco products in Spain, France, and Italy, Logista plays an important role in collecting excise duty payments. Therefore, depending on time, Logista can often have a significant duty creditor and positive cash balance, from which we benefit through our daily cash pooling. For example, in this past year, the daily average cash balance from Logista was GBP 1.8 billion. We are also supporting Logista's strategy to develop in sectors outside tobacco, which has helped drive a strong share price performance over the last four years. Its attractive markets, competitive position, and strong execution create a potential for further re-rating and value creation for our shareholders. Our disciplined and consistent approach to capital allocation has served the business and all investors well over the last four years. This is a differentiating factor in Imperial's investment case.
You'll be glad to hear that our approach to capital allocation will be unchanged, with the same four priorities. Our first priority is organic investment to support our strategic delivery. This will include investments in becoming more agile, simplified business to support long-term sustainable growth, as I mentioned before. We will continue to consider small bolt-ons to develop our NGP capabilities. Our strategy does not require any large M&A or any of its associated risks. Our second priority is to have a strong, efficient balance sheet by maintaining investment-grade credit rating. This aligns with our existing net debt to EBITDA leverage target at around the lower end of our two-2.5 times range. Our progress was recognized last year with the upgrade from Moody's, which provides greater security for our investment-grade rating. Our third priority is to reward shareholders through a progressive dividend policy.
This means we are committed to growing our dividend per share every year in line with our underlying performance. Fourth, we are committed to returning surplus capital to shareholders via share buyback. This is about rewarding our shareholders by meaningfully reducing the capital base over time. As Stefan announced, we are today committing to an evergreen share buyback during the next strategic period. Like our current plan, we will advise on the buyback quantum each year based on the levels of surplus cash available. The key message I want to leave you with is this: we have a clear, sustainable financial plan which supports both continued investment in business transformation and a sizable buyback each and every year over the next five years. By 2030, we will have delivered eight consecutive years of share repurchases. There are few companies which can commit to such a consistent long-term program.
Thank you very much, and I'll hand back to Stefan for the conclusions.
T hank you, Lukas. Before we move to the Q&A, let me offer you a few final thoughts. Now, throughout today's presentation, I think you've heard about three things quite consistently. When first, we start with the consumer. That is the mindset that we believe will drive real commercial value for this company. Secondly, we are being highly focused in the choices that we're making as a company here. Third, we have the team and the culture in place to successfully deliver on our strategy in the next five years. It is these three things: consumer centricity, tight focus, and performance culture, which together make up our distinctive challenger approach. It is this clear approach which we believe will enable us to successfully deliver on our 2030 ambition.
Now, on this slide, you can see the priorities this team will be focused upon between now and 2030. These are the key things we will update you on a regular basis in our results presentations. They are how you should judge our success in the next five years. We'll get even closer to our consumers to build powerful differentiated brands which drive revenue across combustibles and NGP. We will unlock value investing purposefully into our organization and our people. We will generate sustainable value in combustibles by staying on the growth levers which we know really matter. In NGP, we will build scale in a targeted way which will generate profitable growth. All of this will underpin our ambition to continue to improve outcomes for our shareholders that is you.
Our goal is to maintain the consistently strong revenue and profit growth you have seen over the past few years from us. We will continue to drive cash flow, and that will enable us to increase our ordinary dividend and maintain an evergreen, always-on share buyback program. This all adds up to at least high single-digit EPS growth each year, which is one of the highest in our sector. We continue to trade on an attractive valuation by any measure. This creates a strong investment case both for existing investors and for new investors, with compounding returns underpinned by a very clear plan. Hopefully, as you have seen today, we have a capable leadership team that will deliver that plan.
Now, I would like to invite the colleagues who presented after the break back onto the stage, and then we will be more than delighted to answer any questions that you might have. Okay?
Great. Thanks very much, everyone. As before, we are going to take this as our final Q&A session, so please take advantage of it. We are going to take questions from the room first, but then we will take questions from those who have joined on the telephone as well. As a reminder, if you are joining on the telephone and you want to ask a question remotely, you will need to dial in using either the dial-in details we sent out in an email earlier today, or you can register using the information that is on the press release, which we issued today.
If you wish to ask a question on the telephone, please press star and one on your keypad. We will now just take the question from the room. Please state your name and organization before posing your question, and we are happy to take your first question. Who is going to go first? We will take the question at the back of the room, Faham. Thank you.
Thanks, Faham Baig, UBS. A couple of questions from me, please, starting with the U.S. first. The U.S. has seen significant downtrading over the past five years. That seems to be continuing. We now see increasing competition in the segment from an international player and a premium player. What do you see as the segment's potential in the U.S., and how does Imperial think about value share in the U.S. going forward?
Very good. Thank you for both of those.
First of all, I think everybody knows that the U.S. is a very affordable market. You heard Murray talk about that earlier. As you just indicated, it's also a very competitive market. We're the number three challenger in this marketplace, but we've had, as you saw in the presentation earlier, we've had some success, quite frankly, in leveraging our entire portfolio across all price segments, inclusive of the deep discount segment. As we go forward, we've taken an outlook. We've looked at where we believe the volume decline will continue, whether that volume decline will continue or not, and we've done some deconstructing on that. First of all, before I go into that piece, I think what's most important is we still believe that our value creation model stays intact.
What I mean by that is there is still room for us to continue to take pricing to offset any volume declines as we move forward. Within those four levers, we have continued to deconstruct how we think the market will continue to perform. There are two that we believe are secular in price that we do not see much change. Those have been fairly consistent over the time frame. The two factors that we are seeing change are the macroeconomic pressures on our consumers, as well as the cross-category impact driven by illicit. Those two factors represent almost half of the size decline that we have seen in the U.S.. That, quite frankly, especially the macroeconomic piece, has driven some downtrading. We have had downtrading in the U.S. for many, many years, though, so that is not new.
The fact that those two factors represent half of our decline, that is new. As we think about the outlook, listen, it's very hard to predict the outlook. Our assumptions, which have been quite cautious, have assumed that we will see some easing of headwinds from a macroeconomic standpoint. The pressures on our consumers that may be doing some downtrading, we do believe that that will start to ease over time. The real big change that needs to happen is greater enforcement around illicit. We believe that once that happens, because 50% of the sales right now in vapor are driven by illicit right now, if we can see a meaningful change there, we believe that overall we'll see a meaningful change in size.
All of that said, we have performed well in this environment with our portfolio because we have a portfolio that goes across all price segments, including deep discount, but also in premium. You heard me demonstrate that within our Winston brand today. I think overall we are comfortable with where we'll go, our plan for the next five years, and believe that our portfolio puts us in a position to continue to be able to deliver.
Faham, if I build on Kim's point, I think hopefully what you took away from today, our capabilities from a marketing perspective, brand building capability is different where it was four years ago. I think what's exciting, we definitely have a very nice portfolio of different brands at every single price point. We had that portfolio for quite a while.
I think our capabilities about doing the right things with each individual brand at the right price point is better today than it would have been four years ago. As the market could become more competitive, I think we're well prepared.
Great. A couple of questions for Lukas, please. Imperial's absolute debt has been declining for the last five years, but as you look to maintain net debt to EBITDA, is it reasonable to assume for the next five years issuances should outweigh redemptions? The second question is on the operating profit growth outlook. The previous guidance assumed an acceleration in operating profit growth. Should we expect any phasing in the new 3%-5% CAGR guidance over the next five years, please?
Let me start with thanks, Faham. Let me start with the debt and redemption.
It is true that once we've reached our strong balance sheet and we have committed to maintain that leverage, you will see us coming to the market more frequently. I think that's probably and you've seen that in the last 12-18 months already. We've just launched a Euro bond, which was very successful. Indeed, you're right. You'll see Imperial coming more regular to the market. On the AOP phasing, this is a five-year guidance. It's a midterm guidance, and we'll come back every year with the update of that guidance. There is no specific phasing necessarily in that three to five. That is a range that you will see us going through every year here.
Okay, we'll take a question from Gaurav in the front, and then we'll come to you.
Hi, so I think the investment case for Imperial is quite compelling.
I think the biggest sort of question that I get from investors is there is a perception that there is a key man risk, and Peter has decided to retire. Now everyone is also the question people ask is that what if you and Lukas, what are your plans? When could you decide to retire? People also ask the reason that maybe your term is also ending next year. How should people think about changes that could be happening at the board level or in the CXO suite?
Sure. First, I appreciate that. Thank you for making a compliment that you appreciate Lukas and me on this one. It's always a good starting point because it's not always the case. Yeah. On a serious note, let's be very clear.
I think one of the things what hopefully today demonstrates for you is the quality of the management team that has arrived at Imperial Brands in the last four years. Yeah? And you've seen the quality of the management team. I also want to be very clear that it is this management team, not Lukas and me, who drives this performance. Yeah? I think what you also hopefully took away in the talk with some of you in the breaks, this next five-year plan with some very clear programs and some very clear commitments has been developed collaboratively by this team. This should give you all the confidence. Yeah? You logically see Lukas and me really excited about it. I want to make this point. I'm not a believer in business as a team sport, and I think it's not about one or two people.
It is about the business overall. Hopefully, this afternoon has demonstrated that to you. I do not even talk about the 500 other people who sit below this management team.
Thanks, Stefan. Come to Simon in the front.
Yes, Simon Hales from Citi again. Can I just come back, Lukas, to the three to five midterm EBIT guidance? Obviously, that is a little bit lower than the previous program, maybe 50 bps lower. I know this is a nuance, but I am just trying to get my head around what has driven that. You have reiterated the top line. I think from what we have seen today across the organization, it feels much more confidence in the go-forward five-year strategic plan than perhaps there would have been four years ago when there was a lot of change that needed to be made in the organization to deliver it. What is different?
What am I missing that's led to that slight nuance in the guidance?
I think that's probably a question many of you have. For one, we have set achievable targets. We have done that in the past, and we'll continue to do that in the future to set achievable targets. Probably more importantly is that we want to balance the opportunity to create cash and profit with investment that underpins future growth of cash and profit. There are tons of opportunities to invest. Be that scaling up NGP, be that investing further in our differentiating combustible brands, be that further investing in our tools and salesforce, investing in technology, in people, in processes, as we said before. There are lots of opportunities where we can balance off the shorter cash flow and profit with the longer sustainable bid. We are here for the long term.
We are here to build that future sustainable growth in profiting cash. What is also very important, we have added the EPS as a metric which we guide the market. We believe that investment we are doing will support future cash flow and profit, but also the high single-digit EPS. That is really what we are looking at, that 3%-5%. It is a reasonable, achievable target that supports the high single-digit EPS.
Okay. Great. I take a question in the back of the room.
Hi, Damian McNeela from Deutsche. Just perhaps for Lukas, just whether you could provide a bit more information on the cash costs.
What sort of areas is the money going to be spent on, and what are the risks that that GBP 500 million of cash, given the fact that most of it is not being spent for a couple of years, is actually higher than GBP 500 million when we get there?
First of all, I think we have been quite prudent in our plans. I think over the last four years, you have seen that we have been very transparent and very diligent in doing what we said we would do. I would assume that you will not see us spend more than GBP 600 million. That is point number one. As I mentioned before, you can see some excitement in us in building our differentiated capabilities, in developing our culture, our organizational capabilities.
Hence, to your point, the opportunities where those GBP 600 million costs will be spent is multiple across the whole organization. That is investing in our technology, using better our technology. Data is a good opportunity. Supply chain efficiency has a lot of opportunities. Manufacturing excellence is another one, scaling up NGP. There are lots of things that we could do and where that money will go. We are not splitting today the details of that plan because today is about the bigger pictures, how we will invest in the future to generate that high single-digit EPS. We will, as we usually do, provide further details as and when we progress on those plans.
Any more questions in the middle here on the right, my right? Great. Thanks.
Hi, Divya Balakrishnan from Marshall Wace. Thanks for the presentation. Just one question from my side, following up on Simon's.
This is a business model with a fair bit of flex in terms of operating leverage that you can deliver. How much of conservatism do you think is being baked in the 3%-5% operating profit? Is it just something you want to keep expectations low?
No, I think let me answer this one. I think what's important, as we sit here, we're forecasting, we're giving you as investors a commitment for the next five years. I think we shouldn't keep it. I think that should give you some good level of confidence for us, the business, to sit here forecasting what happens in 2029 and 2030 with quite a level of precision. I think that should give you the confidence. It goes back to the point that Lukas touched upon before.
With our visibility we have today, with our level of investment, we believe this is the right corridor to target this business for. I think what is important to keep in mind here, this is a business that only a few years ago started to rebuild its security and confidence in being able to deliver this number. Rest assured this is not lost on this management team, that it's important to have a set of numbers committed to today here in March 2025, all the way up to 2030, that we have the confidence to deliver.
Great. Thanks. I think Rashad had his hand up.
T hanks. Hi, Rashad Kawan from Morgan Stanley. Just a follow-up, Lukas, on the cost savings plan. I get the compelling nature of it.
It sounds like, particularly within the kind of the ERP program and transitioning all the different countries to the same systems, it's a big lift. Are there any risks in terms of any kind of near-term disruption that could cause as you get those and migrate those programs across different countries?
Yeah, I mean, the nature of any larger ERP implementation is not risk-free. Many of you have seen this in the market. Where I take my reassurance from is that we are catching up with the industry. We are developing a system which is well-known and for which there are lots of people in the market that know how to do this. What we've done really is we have hired a lot of people who are very specialized in that program.
We have been very prudent in the sequencing of that rollout, where you can see that we take five years to rollout the whole enterprise. I feel very confident with the team, the plan we have in place. Also, we work with renowned service providers that we can manage that risk really well. We have got live in the U.K., which is one of our top five markets, without any interruption. You have heard, Stefan, we are not a team that is very complacent with what we have done. We are very acutely aware that every rollout will have inherent risks, but we are confident that we can repeat what we have done in the U.K. going forward.
Okay. The question over there.
Hi, Philip Spain from JP Morgan. Thanks for taking my questions.
Just on NGP, do you have a view of what level of scale you'd be able to achieve break-even in that business and over a potential timeline for when you could achieve that scale in NGP?
Sure. I was waiting for that question because I'm sure it's also one that goes to mind of some other people. As you would expect, with the level of volatility that the NGP market has between the different forms of NGP, the taxation, the regulation, we haven't purposefully stayed away from saying exactly this is the year where we will break even. I think what you hopefully see as well, when I have really good plans across all three categories, we clearly in this five-year plan, we do make a commitment that this will make a meaningful contribution to the top and the bottom line and the cash generation of the business.
I think what's important here as well, look at the progress we've made the last four years. Look where the business is today. The propositions we have are market share positions in some highly competitive marketplace that should give you as investors the confidence that Imperial really has a role to play in here. I think the brand capabilities, the innovation capabilities, some of them that hopefully you saw downstairs as well, should give you that confidence that we absolutely have a plan to build a business that is profitable and driving forward. It's a key piece of our strategy going forward.
Okay. We'll take the one going up in the front here.
Lukas, a question on the free cash flow guidance. GBP 2.2 billion-GBP 3 billion is a pretty wide range.
Is it that in the years when you have the cash restructuring cost, free cash flow is GBP 2.2 billion and FY 2030 is GBP 3 billion is what you are trying to communicate?
First of all, I think to that question, this is the first time we actually give a guidance on free cash flow. We do that because we want to underpin the importance of our capital returns policy. That is really the driver for this free cash flow commitment to just underpin that capital return. Now, you're right. In the lower end of that range, you could consider that there will be probably the initial phase of our restructuring cost will have a bigger impact, but also FX translation risks are embedded in there.
We are committed to build our cash flow over time to that $3 billion, which you've never seen in Imperial, to the end of that program or the five-year plan, sorry.
Okay. Any more questions? Checking. All good? Very good. If there's no more questions, thank you very much. I'm now going to hand over to Stefan first, including remarks. Thanks.
I'll be very brief. First, look, I wanted to close by thanking a couple of people. First, the executive team that I think brought hopefully the story of the next five years alive. I think it's always important to thank all the colleagues who've worked downstairs diligently to bring some of our key things that we've done differently the last couple of years ahead. I also want to thank Peter. Peter isn't going yet.
Peter is with us, but I think Peter and the IR team have done a great job. Most of all, I want to personally thank you. Yeah, first, for all of you, especially here in the room, who kind of invested your afternoon with us. I also want to especially thank the investors who've invested in Imperial in the last couple of years, who invested with us in when we had in 2021 our strategy when our plans were unproven, because that was a real vote of confidence in Imperial. Hopefully today, you've seen that as we set out another clear plan for another five years of value creation. I hope we have given potential new investors, but also our long-serving investors, a great opportunity to look again at the investment case.
I think we offer a journey of very compelling returns as we continue to forge our paths to a healthier future. Thank you very much from my side and the whole team for attending today. You are more than welcome, please, to join us downstairs for a drink where you will have every opportunity to spend time with the entire leadership team of the company. Thank you very much. Thank you.