...Welcome to Orkla's Investor Day. My name is Thomas Ljungqvist, and I'm Head of Investor Relations. I will also be your moderator during the day. We're very, very happy to see so many familiar faces here in London, and I also know that we have many old and new friends following us on the webcast. We're happy to have you on board as well. So what can you expect from us today? Most of you will already have turned to the third page in Peter's presentation, showing the financial targets going forward, and actually, most of today is gonna be about how we're gonna deliver on those targets, essentially how we are gonna continue creating value for you as shareholders.
We're confident in our business model, and we're confident in our ability to continue winning in local markets over time, and we're also confident in our ability to operate more efficiently as we continue to strengthen as One Orkla, and over the next three hours, our team will share their enthusiasm for the business with you, and today is for you, so if you have questions, please ask them, and this goes for you following us on the web as well. Please post your questions, and I will make sure that they're being asked during the day. I think I'll go and take one of these instead. As you can see here on the screen, we're gonna have five sessions, and, approximately halfway through, we're gonna have a twenty-minute break, and you will have an opportunity to ask questions after each and every one of those sessions.
But now, let's get started with an update on our strategy, priorities, and new financial targets. Please welcome our President and CEO, Peter Ruzicka.
Thank you, Thomas. Good afternoon, everybody, and welcome to this Investor Day. We were here in London three years ago, and we presented at that time our financial targets for the period 2016 to 2018. We are about to come to the end of that period, so it's natural for us now to update you on our new financial targets and, probably more importantly, to tell you how we are going to reach those financial targets, which will be the main thing of today's presentations. During the last three-year strategic period, we have changed the company from a conglomerate to a pure Nordic-based brand consumer goods company through sale of non-core assets. We have grown our top line with approximately 9% annually in this period, and we have also grown bottom line with approximately 9% in that period.
That has been done through working more as One Orkla. We have changed the company from being a multi-local company, very fragmented structure, into working much more as one company, sharing knowledge, experience, technology, and resources across business areas and business units. And to be honest, I'm quite proud of what we have achieved so far, but there is a lot more to be done going forward. There's a lot more potential in the One Orkla model, utilizing the strengths, the capabilities that lies within working together as One Orkla. Before I go on to the financial targets, let's just remind you shortly of our, who we are and our strengths. Well, as I said, we are the leading brand consumer goods company in, with a base in the Nordics.
We have built our brands on local consumer insight during many, many years, and we have, in general, in almost all the categories we are present in, we have either number one position or a strong number two position. And we are also a preferred partner for the retail customers, creating value and growth both for them and for us. We also have strong market positions in the categories where we are present. Typically, we have market shares in the range of 30%-80%, and we have had that for many years, so those market positions are resilient. We are, in general, we are operating in smaller markets. The Nordics are small markets and the Baltics.
Since we are operating in smaller markets, and in order to get economies of scale, we need to have a broader category scope than most of our international peers in order to have economies of scale in back office, in go-to-market organization, in innovation, in production, and so on. So we are somewhat different from the big multinational peers. Looking back at what we have achieved, we have delivered back to the shareholders approximately NOK 20 billion since 2014 in ordinary dividend, special dividend, and share buyback. And also, during the same period, the total shareholder return has been 94%. And, of course, this is also visible in the share price development. We have had a good share price development, as you see, delivered total shareholder return of 94%.
We have beaten both Oslo Stock Exchange, and we have beaten peer group in this period. We have done that by utilizing our scale, working as one Orkla. We have done a lot of value-adding acquisitions, companies that we have bought, integrated, and extracted synergies or created top line growth. We have allocated capital from sale of non-core assets. The last asset we sold was the 50% share of Sapa, and we have successfully invested those proceeds into brand consumer goods companies that we have successfully integrated and extracted synergies. So that's how we have created value. In addition, of course, that we have managed to turn around a negative organic growth back in two thousand thirteen and twelve into the positive territory during this period.
But I guess you are not happy with the share price development so far this year, and I can promise you that I am not happy either. We need to do something about that. But then let's move on to our financial targets. This model describes how we see value creation. Long-term organic growth is the most important KPI in order to create long-term shareholder value, and our target is to grow at least in line with the growth we see in the markets where we operate. We will also have higher focus on improving underlying margin, EBIT margin. And the target towards the end of this, the coming period, 2020- 2021, is to improve margin by a hundred and fifty basis points. And short term, we will have higher focus on margin improvement than on organic growth.
M&A has been and will be an important value driver for Orkla. We will continue to find companies that fits into our, our strategy, where we can realize cost synergies or we can create higher top-line growth. But we also will take a, look into our total portfolio and look into our portfolio management to see are there categories, are there companies, are there areas that we believe where we are not the right owner, that we could exit over time? And then there's working capital, and I know that a lot of you are not happy with our working capital development or the total level of working capital, and I am not happy with that either.
So we have a target toward, or during this period, to reduce working capital by three percentage points, meaning it will go down from today, approximately 13% of NSV, down to 10% of NSV. I would just have to admit that when it comes to working capital, I think our performance has been. I would say, lousy. Reaching those targets, that will create underlying growth in EBIT. It will generate a strong cash flow, also from freeing up working capital, and it will improve our asset efficiency. We will, of course, also continue to pay our dividend at minimum NOK 2.60, but we will change our dividend policy during this period somewhat, so that we will. We aim to pay out in the range of 50%-70% of reported earnings.
But also remind you that our first priority when it comes to employing excess capital is to find attractive companies to buy that fits with our strategy, where we can extract synergies or create growth. That's number one priority. But of course, we will continue to pay out dividend as well. And we want to remain an investment-grade company, meaning that our total debt to EBITDA should be over time at maximum two and a half times. So going forward, we have a little bit different priorities when it comes to short term versus medium long term. Short term, we will focusing on reducing our complexity. I will come back to this later. We will also improve our price management capabilities. We need to grow in new channels, because we see much higher growth in channels outside traditional food retail than we do in food retail.
But at the same time, we also need to invest in future growth. And Ann-Beth and Stig will share some of their thoughts on how we're going to grow going forward later today. And of course, we will continue to reduce cost and reduce complexity in all parts of the value chain. Of course, in supply chain, and Atle Vidar and Johan will come back to that later, but also in SG&A and all other parts of the business. So that's more the short term. Looking at the more long-term priorities or mid to long term, what we are doing short term, we lay the foundation for accelerating growth going forward. It will help us to focus resources in areas with higher growth, more value creation potential.
And of course, when we have one common ERP system in place, that will be an extremely important enabler for us to extract more synergies, but also to share best practices, share innovations across Orkla, and also to grow the top line going forward. So how are we going to improve our underlying margin? Well, some quite simple steps, at least simple to talk about, not that simple to do in reality... But we will work on SKU complexity reduction. We have, as most companies, we have a long tail of SKUs, and we will look into the tail and see are there areas that we can exit, or are the areas that are just too small, it's not worth continuing? The last years, we have had headwind from price inflation on raw materials.
We have had headwind from currency effects, and we have to improve our ability on price management. We have to improve our ability to pass on price increases to our customers, but we have also need to see how we are pricing our complexity. It's okay to have a long tail with slow-moving products, as long as the customer is willing to pay for that and the margin is accordingly. So we will focus on that much more going forward. We will also prioritize our resources more going forward. So we are dividing our categories, I would say, in general, in two parts. One, invest to grow, and two, run for cash.
And that will have an implication on how we allocate our human resources, financial resources, technology resources, innovation resources, so that we are sure that the resources will be used where they give highest possible return on those investments. And as I mentioned, we will also look into areas where we believe Orkla is not the right owner long term, to see the areas we can exit. We had one example last year. We sold our mayonnaise-based salads in Denmark and Norway because we thought that another owner could create more value. We could rather use our resources on other categories with high growth potential and higher value potential going forward. We will also continue to strengthen our unique business model.
What is really, really the big main asset in Orkla, in addition, of course, to all our fantastic employees, is our portfolio of strong local brands. We have actually more than three hundred strong local brands. They're old, many of them are old, some of them are actually, one of them are back to 1806. These are brands that have been built during years based on our unique consumer insight in the local markets. But not only consumer insight or, or that the brands are local, but it's also about our ability to fill relevant content into the brands, into the products, that really meets the local consumer demand. So that is really the strength of Orkla, the proximity to the local market. However, that model has, of course, created a lot of complexity.
So we introduced a couple of years ago, the term One Orkla, meaning that we have to share resources, share best practices, share innovations, share consumer insights across business areas, business units, and geographies. We started this process some years ago, and we are definitely on the right track. There is a lot more to be done in this area, and we will talk more about this later today. But this is a fine balance. We need to differentiate products or offerings to the consumers, where differentiation really makes a difference and where it really matters, and where the consumer is willing to pay. And then we have to reduce complexity and standardize where differentiation doesn't mean very much to the consumer. We are also facing markets that are changing, and we, of course, need to adapt to those changes.
I mentioned a little bit earlier that we see that the lower growth in traditional food retail. That means that we need to follow the consumer into the channels, wherever, whatever channel that is, where they want to buy our products. We need to be present in all channels, all situation where the consumer expect to find our products. So we'll continue to accelerate growth in other channels, both structurally and organically. And when I talk about other channels, we are talking about, of course, online, specialty stores like pharmacies, DIY stores, but also, of course, out-of-home, which is a channel with high growth. We've also seen lately that smaller players, really local players, but also private label, is taking a big part of the growth in our industry.
And we will meet that challenge by making our local products even more tailor-made to the local consumer and position our local brands even more locally than we have done. And this is one area where we really have a competitive advantage compared to our big multinational peers, that they have more one-size-fits-all approach. The digital transformation is influencing all parts of the world, and of course, all parts of our industry and all parts of our value chain. And we also have to make sure that we have the right competencies, the right people, to utilize the possibilities that lies within digitalization in all parts of the value chain, and to create that as a competitive advantage... and we also see quite big changes in consumer preferences. Health and wellbeing, it's nothing new, actually, but we see that that trend is strengthening. Also, demand for convenience is increasing.
People have more money, less time, and they want to have convenient solutions, fast consumption, but it should be healthy, it should improve your wellbeing, and so on. Taste indulgence is also important, and when you're talking about food or whatever you eat, the three most important criteria when you're launching a new product or innovating an existing product is taste, taste, taste. We will never compromise on taste when you talk about food. Sustainability also becoming more and more important, and especially for young consumers. We have very tough targets, very demanding targets, to reach the sustainability goals that we have put up. For me, I usually say that for us, there are three main reasons why we should take sustainability seriously. Number one is that we have responsibility.
We have an obligation to make sure that our products that are sold to tens of millions of people every day, make sure that those products are good for you, they are healthy, and of course, that they don't harm environment, people, or planet. That's our responsibility, and we will take that seriously. Secondly, it's good for business. If we can reduce waste, if we can reduce packaging, energy consumption, transportation, and so on, that means saved cost, and that ends on the bottom line. And thirdly, we see that consumers are more and more concerned about sustainability, and actually not only about the product they buy, but also the company behind the product. And the CEO, for instance, what's his attitude towards this? Is this just greenwashing, or do they really are they really serious about this? So that's the three reasons why this is important.
We have a lot of good examples of what we are doing. We just launched a toothbrush based on recycled plastic. It's not in plastic wrapping, of course, it's in pulp paper. You saw the ad for that just before we started. Also, to meet the trend for health and wellbeing, we have several brands under the vegetarian or vegan or better-for-you brands, and we see strong growth in those categories, and that will continue going forward. Actually, based also on consumer insight, in this case, in Norway, but actually also based on input from our big retail customers, we last year we developed and we launched the series Klar.
I hope you saw that outside in the hall, or otherwise you can go there in the break and have a chat with Anna, who is behind this product. That's a detergent series of environmentally friendly detergents. It's almost 100% plant-based. It's made in recycled plastic containers, and the formula is very concentrated in order to reduce logistics cost and logistics impact. I mentioned several times that M&A is important for Orkla, and it will be an important value driver also going forward. When we look at M&A, we see that in three dimensions. One is the category dimension.
We will continue to strengthen our current business areas, looking in where we can buy categories with higher growth that meets consumer trends, whether it is health, wellbeing, or sustainability, or convenience. But also, we will do acquisitions in areas where we have a position, but where we can strengthen our position and get economies of scale. And also in certain areas, we see that we can build niche positions in smaller niches, but in a bigger geographical area, for instance, in the whole of Europe, like we have done in ice cream ingredients and in wound Care. Secondly, we see a possibility within the channel shift. Still, approximately 60%-62% of our sales is done through traditional food retail, but as I mentioned, sales growth is lower there, and we see higher growth in other channels.
We will continue to aim for M&As within other channels, it being online, more towards specialty stores, or also in out-of-home area, and lastly, on the geographical dimension, we still have approximately 70% of our sales in the Nordics and the Baltics, and the good things about the Nordics is that it's high purchasing power, stable markets, but the negative thing is that the growth is quite limited. However, we see higher growth in central European countries, in some eastern European countries, in the Baltics, and of course, in India, so going forward, we will also continue to seek acquisitions in markets that can give us higher growth going forward, so to sum this up, before we go to the Q&A, we will continue to find the right balance between economies of scale-...
standardization, simplification, with tailoring to the local consumer and the local market need, and that is a fine balance. We will continue to manage the shift in channels and capture our fair share of the growth we see in other channels growing much more than food retail, and we will continue to develop our portfolio to become even more sustainable and future-proof, and of course, to meet the consumer trends that we see very clearly, whether it is health, sustainability, convenience or whatever it is, and then maybe most important of it all is our people. I am not doing this job myself. The management team that you will meet later today, they are not doing them themselves. We are dependent on all our good people, talented people, that brings this into action and execute on our strategy, and I'm very happy.
Last year, we won actually a kind of rating in Forbes. They rated 2,000 companies worldwide, and Orkla was rated number one preferred employer in Norway. I'm very, very happy about that. But going forward, of course, we need to, and we will, attract the best people, we have to retain the best people, and we have to incentivize the best people to keep them also going forward and to develop. In a couple of years' time, I'm sure we will also win the Forbes rating also in our in the other main markets we are present in. Thank you.
Thank you, Peter. We will now open up for a Q&A here from the audience and also from you following us on the webcast. You can post your questions, and if you have a question, please raise your hand, wait for the microphone, and state your name and institution, please. Thank you.
Thanks. John Ennis from Goldman Sachs. I've got two questions. The first is on the definition you use for underlying EBIT margin. I'm guessing you're going to exclude FX and maybe the impact from M&A, so I just want to see if that's the case, and then to what extent you're confident that reported EBIT margins can expand by, I guess, a similar magnitude to that 1.5%? And then my second question, I guess, builds on your talent point at the end. You said that EBIT margin will be a bigger focus than growth, I believe, and then I wondered how you're reflecting that in your management incentives going forward.
Okay. Thank you. The target we have of improving EBIT margin, underlying EBIT margin of hundred and fifty basis points in three years' time, is excluding any currency exchange effects and M&A that might have a dilutive or create incremental effect on EBIT. Jens Staff, our CFO, will come back to those targets more in detail later today. When it comes to our incentive system, that will somewhat be changed in order to facilitate our margin focus in the short term. I will not, cannot go into details on the incentive structure now, but that will also be described in our annual report.
Thank you. Any more questions? See if I have any questions from the web. Yes, Peter, we have a question here from a U.S. investor that wants to know. Well, the question is: You've had a bit of a weaker organic growth development in or throughout 2018. What are the most important things you think you have to do to improve that trend?
During 2018, we have been faced with headwind in some specific areas that will not continue into the next years or next year. One is the sugar tax in Norway. I think we have talked a lot about that, so I'll not go into details. We have been faced with we have experienced an extremely warm summer in the Nordics, which is not positive in general for retail and especially for most of our categories. Of course, some categories, like ice cream, is very good, obviously with that weather.
But the most important thing, and both Stig and Ann-Beth will come back to this later today, actually, in their presentation, but that's to be able to use our unique consumer insight, transfer that into relevant products, relevant brands for the consumers, and to grow that way. That's the most important thing.
Thank you, Peter. Any more questions? Yes, please.
Aaron Iocarelli, Lazard Asset Management. I would like to ask you, you talk about change in price management. So how should we be thinking about the mix between pricing and volume going forward as you want to accelerate organic growth?
I cannot go into details to tell you what how we are balancing that, but what I said is that we need to improve our capability in price management, and number one is that we are able to pass on the cost inflation that we are facing or currency effects we are facing. That's number one, but also to have a better pricing policy when it comes to slow-moving products, for instance. As I said, it's okay to have a long tail as long as you have customers willing to pay a value for that, and that's the margins are accordingly. But I cannot give you a figure on how much we'll focus on volume versus price.
But what I said is that short term, our focus, main focus will be on underlying margin improvement, and that will be higher priority than organic growth short term. But of course, as I said, long term, it's important for us to grow organically, at least in line with the market we operate in, and that's also the target for this period.
Thank you, Peter. And I think we have to wrap up the Q&A session here, unfortunately, and move on.
Thank you.
Now we're moving on to our commercial strategy and priorities, and essentially how we win in local markets over time. Please welcome Ann-Beth Freuchen and Stig Ebert Nilssen.
Thank you. We will now focus more on Orkla's commercial strategy. In the first section, I will talk about our point of departure. Orkla is a local champion with strong brands and key positions in our main markets. We will give more insights into our categories and markets, and in the second section, we will describe how we will grow the platform going forward. Orkla's business model is unique, and in our presentation, we will try to explain how this model will enable us to win in our local markets. Orkla has a heritage of building strong local brands. We have been building brands for more than two hundred years. Our history start back in 1806, with Kalev as our first brand. You can see, we have many brands with a long and proud history.
I think it's fair to say that we have been good at continuously upgrading and improving our brands, keeping them relevant to our consumer and customer. We are still launching new brands, like, Paulúns, Klar, and Vill, and Ann-Beth will come back with some great examples later on. As a result of this, we have today a great portfolio of market leading number one brands and strong number two brands. We are market leader in more than 50% of our categories in our main markets. For example, you can look at the snacks business, where we are number one in Sweden, Finland, Latvia, and number two in Norway and Denmark. In the health supplement, we are market leader in the Nordics and in the Baltics markets. We have a broad category exposure. A broad category exposure gives us local scale.
These slides show the three largest categories we have in each business area. We try to prioritize categories where we can use our ability to build brands. We try to avoid categories where there is low brand awareness and high private label share. As an example, we have limited presence in the fresh category, such as vegetables and fresh meat. We also focus on categories where there is a potential for local differentiation. This can typically be taste preferences, which vary from market to market, and ketchup is a great example of that, where we are a major player in almost ten European markets with more or less the same formulation. No, no, with unique formulation in every market. Sorry. Peter talk about our business model, and our business model is based on two main parts.
First, you have the proximity to the local consumer and customer. Our strong local presence creates unique consumer insights, and we use these consumer insights to tailor products, brands, concepts to local needs. We have a setup and the flexibility in our value chain to make the local tailoring happen. And furthermore, we also use this flexibility to tailor products to our customer, and a broader channel strategy will require more unique products going forward. The second part of our business model is realizing scale as One Orkla. We have strong local sales organization to cover different channels. We have synergies in media buying, and we believe that scale in the data will be an asset going forward. And as a big local player, we also attain synergies when it comes to logistics and warehousing.
Most of our categories are present across markets, and we are now increasing our effort to attain category synergies. We are increasingly sharing research and development resources, insights, and innovation across markets. We use also scale in our supply chain to optimize procurement and production across markets, and Atle and Johan will come back to that later. As Peter also mentioned, our market growth rates are modest at the moment. As you know, Orkla is a major player in the Nordic and the Baltic markets, but we have also significant sales in some Central and Eastern European markets. Market growth varies significantly among categories and markets. In the grocery channel, we see that growth rates are modest, however, higher growth rates in other channels, like specialty trade and e-commerce, and this is especially evident in the home and Personal Care category.
We estimate that the market growth for Orkla's categories in the Nordics will be around 2% for 2019. But we are strengthening our growth platform by increasing our presence in markets outside the Nordics. From 2014- 2017, we increased our sales with 8% of the revenues in the Baltic countries and the rest of Europe, going from 20%- 28%, the blue part of the graph. We have done value-creating acquisition in that region, and key drivers for that is Hamé in Czech Republic and Slovakia and Laima in Latvia. Growth has also come from higher underlying growth in this region, as well as higher focus on international sales. We have now covered Orkla's point of departure.
To summarize, Orkla has a unique position with strong local brands and relevant local scale advantages. In the next section, we will focus on how Orkla will grow the platform going forward. Peter presented how the market conditions that Orkla operates in are changing, and briefly touched on how we will adapt. In this section, we will deep dive into how we are adapting and how we are using our unique model to win in our markets. On that, we'll go through some great examples in the five following categories. We are accelerating growth in faster-growing channels, such as out-of-home, e-commerce, and specialty trade. We are utilizing Orkla's large portfolio of products better, for example, by stretching products into new categories, and we use real local consumer insights to respond to consumer trends. We are also exploiting scale in marketing in new ways.
Scale in data and consumer insights enable us to build competitive advantages. And finally, we will accelerate the value we can get out of Orkla's business model, combined local preferences with scale. So as an introduction to the next session, let us look at the TV commercial from Möller's, a strong local brand from Norway, now with international success. Thank you.
... Thank you, Stig, and I will now take a closer look at those five areas of growth for Orkla going forward. The first route to growth is to adapt and grow in channels seeing faster growth rates than what we call traditional grocery retail, and there are three areas of focus for Orkla, and first and foremost, international markets. We will bring our selected brands into markets outside our home markets, and the focus markets we have outside our home markets is Asia and Europe. A great example is that recently, or this summer, we got listed three SKUs of the Naturli' brand, our vegan brand. I'll come back to that later on, in five hundred Sainsbury's stores here in the U.K., not being our home market in foods.
We have created a one international sales department in Orkla to increase our impact when we go internationally, across categories and across brands, taking out synergies, working as one. The second focus area of ours is e-commerce, and we do still see penetration rates in many categories in this channel growing at a very fast pace. Orkla's main focus would be to create our own online shops, where this is relevant to the consumer. A good example is our textile business, Pierre Robert Group, that has created a very healthy business platform with their own online store. We target in Orkla to have a market share online, at least in line with our offline shares. The third channel that is important for us going forward and increasing our organic sales is the out-of-home channel.
We do see in many regions, many geographies, and even in some countries, that the home consumption is now below the out-of-home consumption in the foods area. And Orkla will capture our fair share of that food consumption going into other channels. And as Peter said, we want to be relevant and apparent in those categories and in those markets where consumers are moving to. We are delivering already a lot to the food service, sector, going to the out-of-home channels. A huge part of our business in Orkla. Anyhow, we need also to capture our share of recent direct consumer presence in that, channel.
We acquired Gorm's, and I know there have been some question about Orkla going into the restaurant business, but we did acquire Gorm's, a premium pizza chain in Denmark, earlier this year, holding around 10 outlets at the time of acquisition, having a business plan for the next 12 months to triple that. We saw that a natural fit with Orkla, acquiring a pizza chain. We know a lot about pizzas. It's a core category competence of ours, and going into the out-of-home sector, exploiting that kind of category competence is what we'll do more going forward. I'll now share with you a fantastic example, like Stig talked about, Möller's cod liver oil, a huge success in the international market.
Möller's cod liver oil, one of Orkla's oldest brands, coming out of the fresh waters outside the western coast of Norway of Lofoten and hitting spot on the health trend that we see globally. Möller's cod liver oil is now sold in 20 different countries, and we have seen extremely healthy growth rates internationally of 84% over the past couple of years. We're quite proud also of seeing health trends in the home markets of 7%, still very healthy growth. The production facility in Oslo, producing Möller's, has more than doubled their volume over the past two years. So taking selected local brands internationally is what we'll do more of. The second example I brought to be in the digital arena.
We have interviewed many kindergarten teachers in Norway, and we came to get the insight that they have a quite complicated life running a kindergarten, so we have developed, and was just launched two weeks ago, so it's a bit early to say anything about the results yet, but we did develop an online service to kindergarten teachers, specifically target on their needs. It's an informative channel where they can get nutritional effects or information. They can share this with the even more demanding parents, and they can also teach the children about nutrition. Secondly, it's an online service that can give them inspiration, making a week plan and getting menus and recipes, and then thirdly, even more important, it's very convenient. It's a one-stop shop where they can get all the groceries needed for the kindergarten delivered on their doorstep.
A good proof of example where Orkla actually enters the digital arena through e-commerce and this is a service that is easily applicable to many other institutions, such as schools and hospitals, and so on. Our second important route to growth going forward is Orkla's brands, and I think both Peter and Stig has been touching upon that. Orkla has more than 300 local brands, and that's our true competitive advantage. This is our asset, and we can promise you, going forward, that we will extract more value from those brands that we are holding. Brands holding positions being a strong number one or two in their categories. An example, and you can taste it, I hope, I'll bring some samples afterwards, is the Smash. One of the most successful indulgence brands in the Norwegian market.
Launched back in the 1980s, being fantastic, quite unique, and we brought that to the Swedish market around 12 months ago. But what we did, we did apply the OLW, the local brand, hero brand in the Swedish market, and a really strong endorser of quality for Sweden. Applying OLW, but at the same time, launching the same kind of product we've been having in Norway for decades. That's good. We have increased the number of Smash bags sold out of the Trondheim factory by 60% over the last 12 months. Impressive. And my personal reflection, we should have done this much earlier. A second example, as Stig briefly touched upon, is that we have a lot of brands with strong brand essence. And to understand where this brand essence is relevant in other categories is important for us going forward.
Earlier this year, we launched a gum in Norway, chewing gum, after losing the Wrigley distribution agreement, as you all are aware of, and we found in the portfolio brands in Orkla, Solidox. Carrying the brand essence and deliver on consumer needs, basically aligning what is needed in gum. Consumers wanting healthy teeth, fresh breath, and seeing that we can translate and expand the Solidox brands from toothpaste, being there for decades, and actually entering a new category. Solidox, a big success in the Norwegian market, holding a 15% market share in those chains listed, sold more than five million consumer packs since February, and we will do more of this, and we are doing it already. Our third route to growth is consumer trends. We do see global trends in our retail business across all countries, and I'm sure you're quite familiar with these four trends already.
This is something all our competitors are seeing as well. Our true competitive advantage in Orkla is that we will adapt to these trends locally. We will renew our current portfolio, and we do that a lot, and we will also introduce new brands and new products where this is needed to respond to these trends. A lot of our competition are seeing the same trends, but Orkla has a unique model to adapt locally, because these trends means different things in local markets, and I'll share some examples of how Orkla has responded over the last year. Sustainability, meaning very many things in many different markets. Being a branded consumer goods company, I think Peter stressed this quite much earlier on. Sustainability really being the core of what a branded consumer goods company is doing.
An example from the Norwegian marketplace: we launched in close cooperation with the retailer, a big retailer in Norway, a palm oil-free Easter egg. Palm oil has become an ingredient not seen as very sustainable in many, many markets. The Norwegian retailer announced there will be no listing of new products containing palm oil. They took a quite clear statement. And then in a very quickly way, Orkla Confectionery Snacks Norway responded and developed together with this retailer, a palm oil-free Easter egg variant within six months, and that's a quite short time to market. We got this listed instead of the competitor, responding quickly on a local sustainable trend. The second trend is convenient. Convenient being the essence is all we do. We want to make our consumer's life be easier. Convenience example, and there could be many, but I brought one from India.
India, having a breakfast tradition requiring cooking for quite some time. But we do see that Indian moms are still working more and more out of home. So adapting and getting that insight and delivering great taste in a convenient way, and actually able to cook their traditional breakfast in three minutes, meeting spot on the Indian breakfast trend, and MTR did a great job here. The third big trend is the health and wellbeing trend, and what does health mean? Health does mean different things in different categories and in different markets. I brought an example from the cereal category. In the Nordics, your cereals are not supposed to obtain added sugar. That's a no-go. You want a healthy breakfast, and we do see a lot of our global competition having sugar in the cereals.
Adapting to this, we did launch Paulúns cereals, granolas, for the breakfast consumption back in 2014, adding no sugar, and we transferred this to all the Nordic and Baltic markets. The same product responding to the local need in the Nordics for having a healthy breakfast, and this, compared to global competition, is giving us a competitive advantage. The second—no, the fourth big trend, and you can say in many ways, the paradox to what I've just been talking about, health. Health is getting a lot of space when we talk about trends, but never to be forgotten, indulgence and taste is in the corner of every foods company. Taste, taste, and we'll never compromise on taste. And taste is local, and this is where Orkla can adapt. I brought an example.
I hope really you have the chance to taste it in the break, otherwise, bring a sample here later on when you leave the room. It's the Panda licorice brand, a fantastic licorice known worldwide. It's one of our global brands, delivering on fantastic taste with some health benefits. We have decided to add chocolate and make chocolate licorice juices, delivering even a greater taste and a bigger indulgent experience. This is now being launched in three Nordic markets at the same time, and so far, having a very positive market reception. So taste it. Delivering really on the taste, trend going forward. Naturli', I touched very quickly upon it when it was international sales. But Naturli' is a brand that we launched in Denmark. It's delivering on multiple trends at the same time, ...
It's 100% plant-based, it's vegan, it's convenient, and has a great taste. Naturli' has entered multiple categories as well, leveraging on Orkla's category competence, and it's been showing fantastic growth rate, and we're talking about year on year of 46%. A fantastic example delivering on trends. Our fourth area of growth is the way we interact and engage with our consumers. We are a branded goods consumer company, and we need to create loyalty to our brands. Being present in social media is not probably the biggest news of today, because this is important in everything we do. But to interact in a proper way, to bring in consumers giving us feedback and being present in a relevant way, is important being a Branded Consumer Goods company.
I'll come shortly. I'll come back to an example where we've been working closely together with consumers using social media. The second area where digitalization is important to us is where we can actually use our scale to capture data, get more insight, and have a competitive advantage in this area. We have Plusstid, and we call it a family magazine. It's a content hub, where we can actually share information, inspire, give ideas, and get a lot of good feedback from our consumers. Plusstid has 2.4 million unique users, and that's a Norwegian magazine. So remember, that's equivalent to the number of households in Norway, 2.4 million, so it's a high number. The second example where we're using our scale in capturing the data we need going forward to make a competitive advantage for us is optimized.
News that we brought to the market just before summer, we have created in collaboration with the biggest bank in Norway, a company called Optimize. What is Optimize about? Optimize is actually two strong local players combining their consumer insight, being able to capture even more data together and create a strong base for giving us insight. But even more importantly, Optimize is enabling us to buy our own online digital ads based on our data and our consumer insight, being able to target specifically what we need. What do we get? We get a much higher return on investment on our marketing spend, and we increase our media effectiveness, and we do not need to use a third-party media broker. Very forward-thinking and an extremely important way of capturing big data going forward.
I'll now show how we have launched Klar, and then you got familiar with it in the hall before entering this room. Launching Klar in close cooperation with consumers, using social media, not being the big news of today, as I said, but still you can see what value you can create closely cooperating with consumers. We knew there was a big health trend in sustainability, delivering detergents in a more sustainable way, and we got a lot of input, and we opened up for questions and ideas, and we created test products for Klar, and we tested it and got test persons online through social media, and they're giving us feedback in a quite open way. For Orkla, being that transparent to competition and the external world is something we do not normally do.
What we saw, being an honest and transparent brand, leaving those comments in the media was important part of actually interacting with the consumers. And we have been launching now, twelve months later, three new variants. This one of them, it's a glass cleaner, and that's on the request for consumers through social media. They said, "Why didn't you launch the glass cleaner to begin with?" So we have developed this. Working in an agile way, involving consumers in making, creating bigger value for, for Orkla is what we'll do more of. I can promise you, you will see more of this going forward. So I'll now share with you the commercial of Klar that was from the launch campaign, where we actually have showed a commercial where we went into a local community and tested the products.
This has been done in true life, not only for commercial purposes, so enjoy a piece also of advertising for beautiful Norway.
It is perhaps not entirely common to ask an entire municipality to say exactly what they think about a new product. So Klar is not an entirely ordinary brand. Klar is a series of products that make it easy for everyone to choose more environmentally friendly options. We let the residents of Træna in Nordland test them for one month. The result was a range of honest feedback, completely unfiltered. This is something we need so we can develop even better products, because that's the way to think if the green shift is going to be more than just talk.
You get almost religious looking at this commercial, at least I do. The fifth route to growth for Orkla is our business model. We do truly believe that it's our competitive advantage, that we can tailor locally more than our global competition, and we do truly believe that we can take out synergies through our scale compared to our local competitors with the business model that we have. We will tailor our products where tailoring is relevant to the consumer. But even more important, we should not tailor our products if it's not important to the consumer. As an example here, having a different shape of detergent bottles. We need to manage our complexity in a diligent way, and Johan and Atle will come back to that in the next session.
So to sum it all up, Orkla has a unique business model to create growth in our local markets going forward. We have a competitive advantage in our ability to tailor local to local consumer needs, whether it's in channels, into trends, through our brands, or in the digital arena. And I think our focus for the time to come is those five areas that I've now been deep diving in, and I'm sure that will make us grow in our local markets also in the years to come. Thank you.
Thank you, Ann-Beth. And Stig, if you want to come up as well. We'll now open up for a brief Q&A with Ann-Beth and Stig. So if you have any questions, please raise your hand and wait for the microphone. See if I have any questions here as well. Any questions in the room? Yep, please go ahead.
Yes, good afternoon. I have quite a few questions. It's Adrian from Intrinsic Value Investors. One is on the brand portfolio. How many of your brands are licensed brands, i.e., not local brands? Because if I look at Omo, Jif, Jordan, they are global brands, but I think they are also owned by other companies. Two, your on- have you consolidated the advertising agencies with your sort of more online and optimized, that you don't need to use maybe instead of four advertising agencies, you use one? and I also would like to know, the out of home, do you still use brands there, or do you use unbranded products in the channel? and then the last one, Klar, what market share has it achieved over the since launch? Thank you.
I can maybe start to take the question regarding licensed brand. The brands you refer to, Unilever brands, we own these brands in Norway, so we have the ownership to them. So, in general, I think at the moment, we don't have that many licensed brands anymore. Most of the brands we have, we have access to them.
But, sorry to say, but the year, for example-
Yeah.
It's a very similar. So how does it work? I'm not familiar to this. So the-
We have the rights to use the brand in Norway. We don't have the rights to use the brands outside Norway. Regarding Klar, it's if you look at the Personal Care business in the Nordics and in Norway, it's not growing. I think Klar is one of the few brands really growing, and it's taking market shares. And also, we are using the Klar concept in Sweden, in an old brand called Grumme, and also there, we are taking a lot of market shares. We are growing with almost 15% and taking shares from the big global players. I don't have the exact figures at the moment on Klar, but we are going in the right directions.
Okay, and then you had a question about out of home and branded and not branded products. I think we have a fairly good combination. Obviously, there are some generic positions that we do deliver unbranded, but we do also use our brands where this is relevant in the out-of-home sector, where we are through food service deliveries, so there's a good combination. And then you had a question about media and the media agencies. I think if I understood you right, the number of agencies that we're using? Was that-
The consolidation.
The consolidation. In Norway, we will more and more transfer to using Optimize as our media agency, and particularly in the digital area. We do not have that opportunity in the other markets that we operate in yet, so this is specific for the Norwegian market. So there, we are still dependent on third-party media brokers.
Thank you, Ann-Beth. Any more questions here in the room? Yes, please go ahead.
Yeah, I had one on the e-com comments you made. I think you mentioned having online shops for a number of your brands. I wondered what proportion of your business you think that's feasible for, versus needing, say, an aggregator to sell your products. If you could give a rough percentage or some category color, that'd be useful. And then a second question, Peter mentioned that you're prioritizing some businesses for cash and some for growth. Could you give us a bit more color on which products or categories are fitting into both of those buckets?
Maybe I will take the first regarding e-commerce. I think we have few brands in our portfolio where we will have own brand stores, but I think the most important thing for our brands is to sell our products through other e-commerce retailers and platforms. I think that is the key issue, and it's really where we are building capabilities at the moment. As you maybe remember, we bought this Health and Sports Nutrition Group, which gave us a quite big scale. It was one of the biggest e-commerce player in the Nordic region. And today, in Care, we will have approximately 10% of our total sales are on e-commerce, so we are building scale and competence. But to have own stores, it's not a key strategy for us.
I think the key thing is to build competence to play with the other e-commerce retailers.
Can you please repeat your first question or your second question about the categories and growth?
Yeah, it was just on the back of the comments made in the first presentation. You mentioned having some brands focused on being run for cash and prioritizing growth for other categories or brands. I wondered if you could try and give us some color on which of your brands or categories are falling into each of those buckets? You know, which ones are you really prioritizing for growth?
I think you need to see that in relation with the consumer trends that we see. We still have several categories being part of our base, our core business, as you can call it, seeing a healthy, sustainable financial contribution to Orkla, but not seeing extremely high growth rates. That's more or less like the base of some of our business. Secondly, we are investing and putting a lot of resources into areas and categories where we're matching consumer trends, as I had a few examples of on the screen. It's a mixed picture.
Okay, thanks.
Any more questions here from the room? Yeah, let's take a last question there. Mike?
Preben Rasch-Olsen, Carnegie. Turning a bit back to the international sales and e-commerce, I think it's about a year ago, you launched your cooperations with Alibaba.
... selling products in China, how has that developed, in connection with what you're saying today?
I think it's fair to say that the total level is still quite modest, but the growth rates are very high. We and the ambition is still high. We see at the moment a lot of activities now before Black Friday. It's especially on the Möller's brand and on the Jordan brand. But we believe that e-commerce can be an interesting route to market in international sales. In Korea, for example, we are selling Jordan toothbrushes, and there, roughly 50% of our sales are in that channel. So e-commerce is an opportunity for us for some selected brands in international sales. But so far we are still on single-digit level when it comes to in dollars, when it comes to sales in Alibaba and Tmall.
But let's see when this quarter is over, because then we are finished with the big sales days. But the team are still very optimistic when it comes to that.
Thank you, Stig. Thank you, Ann-Beth, and thanks for all your questions. We're now gonna move on to our operational strategy and priorities, and this session is essentially about how our supply chain can best support our commercial strategy, and of course, also how we're gonna continue operating more efficiently. So please welcome Atle Vidar and Johan Clarin.
Good afternoon. You just heard Ann-Beth and Stig talk about winning in the local markets, and before that, you heard Peter presenting our financial targets for the coming three years. To support that, Orkla's supply chain needs to be both flexible and more cost and capital efficient. These are the six focus areas for Orkla's supply chain as we move into the new strategic period. These six focus areas also represent the structure of this presentation, and Johan and I will come back to each one of them later. But you will see a strong continuation of our factory improvement program and the factory consolidation program. Then you will see a sharper focus on, harmonization and simplification, a step up on net working capital, and also a step change in indirect procurement of indirect materials.
So to know where you're heading, you need to know where you came from, and we came from a situation in Orkla's supply chain without a really clear strategic direction. We had scattered capabilities, varying performance, and rather limited collaboration. But we also had pockets of excellence, and what we have done is really to build on our strengths. Together with great team effort, propelled by Peter's decisive leadership, we made a step change in how we work with manufacturing and logistics consolidation, in how we procure as one Orkla, in how we drive supply chain performance, and not at least, how we build joint capabilities. There are a lot of things we are proud of, and we have a lot of achievements, but this is a long-term journey, and we have more to do than what we have done.
And you can look at this as we are at base camp level and moving up and forward. And exactly as Atle pointed out, we will focus on harmonization, simplification, leveraging One Orkla, optimizing our resources, and the one ERP landscape. That will significantly improve our ability to take out synergies and how we work.
But before we go into the six areas, let me briefly remind you of the key numbers of Orkla supply chain. We are 11,000 employees, working in 103 factories, and producing 8.5 million consumer units daily. 98% of that is delivered on time. We have an inventory turnover of four times per year. That indicates a room for improvement, and the total cost base in supply chain Orkla is 27 billion NOK. And here you see the structure, the cost structure of supply chain. You recognize the 27 billion NOK. That is 80% of Orkla's total cost. Of the supply chain cost, 19 billion NOK are in material cost, indirect and direct material. Six billion are conversion costs, and we have close to two billion in distribution costs and other supply chain costs.
We'd like to draw your attention to the distribution costs. We will take, as Atle said, each and every area, but first start out with distribution costs. We have been working with consolidating our logistics operations, and we have seen great savings coming out of this. First, we have consolidated the number of distribution centers. We're actually cutting down by almost 30% by 2021. We do this, of course, to streamline our network, to cut costs, but also prepare for a better infrastructure in terms of online business. The second part of this consolidation is around consolidating number of logistics service provider, and we cut those with half. This is important, of course, to leverage our logistics spend and also setting a better governance and a better competitive environment. In 2015, we talked about our consolidation in Denmark.
We went from five to two distribution centers. Last year, we talked about the three hubs we developed in Sweden and in Norway, and this year, we want to turn the focus to Finland, so in Finland, we started out with five different distribution centers. Each operated in rather isolation across the different business areas, and of course, again, taking the One Orkla approach, making the analysis, we saw that we can consolidate these five into two, and this will give a financial effect of EUR 2.4 million within a few years. And we have been working with consolidation in logistics, but we have also been doing so in manufacturing, and we have, throughout the last couple of years, been working with a one, one, one strategy. That means one factory per category or technology per geography.
We do this, of course, to simplify and harmonize, but we also do it to build really strong centers of excellence that could fit customer and consumer demands, and also pave the way for future growth. This journey, displayed on the graph, has led to revenues per site increasing by 40%. It's quite a big improvement. Just to put it into perspective, before 2014, we actually had a pace of closing factories at one factory per year. One factory per year. As indicated on the gray boxes, we have increased that. Now, some of you might challenge to say, "Well, you started out at 97, and to the right hand, you have 96. What happened?
It's one factory in four years." Well, you have to bear in mind that through acquisitions, we have added a net of 31 factories. We have closed down. We have communicated closing of 32, and 24 of those, 24 of those are already closed. And as indicated, we have communicated closing of two factories in two thousand and eighteen. And if you look into the total EBIT effect of those two communicated closing, they are actually at the same level as the complete number of factories we communicated closing of in two thousand and seventeen. What does this mean? Well, of course, we're going for larger sites. Throughout this journey, we have also been extremely successful in bringing in acquired companies' footprint into our total optimization.
We'd like to draw your attention to the acquisition of Hamé that we did in two thousand and fifteen. Of course, as part of the due diligence process, we looked at the different footprints, you know, combining Hamé footprint with our own, and we found that we had a good opportunity in Romania to close down a ready-to-eat meal factory in south of Romania, a Hamé factory in Caracal, and we moved that to our own factory in Covasna. That's Orkla Foods Romania. But before doing this, we took the grip of cutting down SKUs, taking out complexity, as Peter talked about before. We cut SKUs by 40%. We moved in the volumes. We, of course, see great effects on utilization rates and in sharing overhead and fixed cost, but also seeing good effects on utilizing common product development resources.
This particular case gave eight million NOK in the EBIT effect, with rather limited investments and one-offs, and also leading to fewer CapEx spent going forward. Atle, we're doing more of these cases, aren't we?
We are doing more. Let me take you to Scandinavia. This category is dilutable drinks, and we have strong market position in all Scandinavian markets on that. This initiative led to a closure of two factories, and we concentrated production to one center of excellence for dilutable drinks in Kumla in Sweden. The journey is that in 2016, we closed the Norwegian production that was predominantly delivering to the Norwegian market, moved the production to Kumla, saved 11 million NOK on that move, and as we speak, we are closing the factory in Denmark, that also, by the way, came out of an acquisition. We are now moving that production to this center of excellence in Kumla, and we are saving another 8 million NOK, so all together, just from moving, it's close to 20 million NOK.
To be able to do that, you need to clean up the assortment, cut the tail. We also needed to outsource some of the products, and then we can do the move. Having done the move, we will now do more of a harmonization, and we will do more working with OEE, so you will see more savings coming out of this. And from this autumn, we will have just one packaging format for dilutable drinks all over the Nordic countries. But let us have a look at a small video clip that shows more of this case.
Footprint means making fewer factories, producing more, creating economies of scale, and at the same time, we can build center of excellence within different categories.
...Right now, we are in the process of consolidating all dilutables into one factory in Sweden, meaning closing down two other sites. By doing this, we have created a good flexibility through transferring knowledge, formats, and products between different markets. Next step is to launch the same bottle in all countries. During this project, we've been able to save more than 20 million SEK yearly, but we haven't seen all the spin-off effects yet, so there will be more.
Yeah, Jens, you heard the one. There will be more coming out of this. Now we talked about the consolidation we have been doing in logistics and manufacturing, and we'd like now to draw your attention to the biggest portion of our supply chain cost, and that is in procurement. We have a procurement spend of roughly NOK 20 billion. That is NOK 9.5 billion in raw materials, NOK 2.5 billion in packaging, NOK 2 billion in traded goods, and NOK 6 billion in indirect material and services. Of course, we are evolving our strategies over time and getting closer to the supplier markets. Peter pointed out price management, and in particular, for raw materials, we need to work internally with the commercial side to strengthen price management internally.
We have previously also talked about indirect as being a somewhat immature area of our spend, and we see good progress, and we will continue to step up our efforts of increasing savings coming out of, of indirect side. To share with you some of our achievements throughout this time period, we have managed to increase the cost improvement rate with 24%. Now, this also includes some cost avoidance, so I think the best way to look at it is a productivity measurement for our procurement team, and we're actually doing much, much more. On top, we have been able to rationalize the number of people working, so we have cut that down with 15%. In effect, we're doing more with less. It's really a great way to run your supply chain and procurement.
We've also had a focus on payables, so we've increased the number of payment days, of course, during this period, but as Atle will come back to, we need to do more also in this area. Looking at the consolidation of our supplier base, we have actually been successful in achieving the target we outlined last year of 25% in the direct side. So in the direct materials, where we have the biggest spend, we have cut down suppliers with 25%. We're a bit behind on indirect, but then again, the average spend on the indirect side is lower, so we've really prioritized where it matters the most. But good progress there, and we are just now south of 24,000 suppliers.
So looking ahead a bit, we will, of course, continue our efforts in price management and working with our cost base. We will strengthen and focus on working capital contribution from procurement. We will also, going forward, increase the focus on securing deliveries, making sure that the products are coming into our factories in the right quality, in the right time, and so forth. This will actually, by the way, have a good impact also on working capital because we can take down the raw material inventory at our factories. At the heart of what we're doing is sustainability. We have outlined very ambitious targets for 2025 in terms of having 100% recyclable packaging, 100% sustainable raw material, working on UTZ certification, taking out palm oil, etc.
We have great attention to this going forward. And Stig and Ann-Beth, they showed some of the growth plans, and also, of course, from procurement side, we will use our supplier base to drive innovation going forward. And in addition, we will focus our efforts on setting and building strong capabilities also on the system side. The one ERP landscape will help that and also drive we believe stronger improvements on the indirect side, thanks to better compliance and better follow-up. But looking at this slide and just picking some and give you an example of what we are doing, we would like to draw your attention to one of the categories. So this is a category. We have a spend here of above NOK 300 million, so it's quite significant, and we were actually facing supplier consolidation.
So we sat down and outlined new strategies, finding new ways of working. So we went into a partnership with one of the suppliers. They were not the biggest at the time, but we have grown them to the biggest supplier in this category. So what did we do? Well, we worked with harmonization. So we managed to cut down specification from 50- 15. And not only that, we went from very specialized, own unique Orkla specification to standardized specification. And the best part of all, it was the supplier product development resources that helped us in this process, and on top, we launched a new pricing model. We added, mind you, added 45 days to the payment terms.
We reduced the volatility in pricing through much more transparent and open books in terms of the cost base, and we already now have more initiatives ongoing to further reduce the cost. We talked about sustainability, and also here we formed a joint program on sustainability with this supplier, down to actual farming level, and managed to launch new products with the sustainability value included, and going forward, we will use this partnership also to drive top line, and we're looking into other business opportunities.
Then we would like to take you from procurement to our factory improvement program. When we see a huge potential for lowering cost in a factory, our central team of experts team up with the local management at the factory to realize that potential. The approach is typically threefold when you go into that project. You look at the manning. Can we remove non-value-adding positions from the lines? You look at the yield improvements. Can we get more finished goods out of the same amount of raw materials? And you look at equipment efficiency. You go in and say, "What causes the stops on the lines, and how can we mitigate them?" When we do this kind of projects, we typically see that we can reduce the addressable cost base with 15%.
The graph on your left-hand side shows that since twenty fifteen, we have completed twenty-seven such projects, and by coincidence, we have twenty-seven ongoing and in plan for the now and for the coming year. I will take you into one of those projects. We go to Åland, the island between Sweden and Finland, belonging to Finland. We have a potato crisp factory there. We did exactly that. The local factory management team teamed up with our local experts, went in, did right sizing of the workforce, managed to have yield improvements, actually got more potato crisp out of the same amount of potatoes. But last, but maybe not least, is that it produced a huge change in the attitude of the factory management. The attitude went from, "We are producing and supplying," to, "We want to improve.
We want to improve, and we want to improve. So these are deliberately strong results. So far, approximately EUR 1 million, and there is more to come, in this factory. So let's have a short video clip, meeting the factory manager at our factory in Åland.
For more than a year, the Haraldsby factory has intensified its focus on the One Orkla principles. By applying a cross-functional way of working with high focus on lean, 5S, and waste management, et cetera, we have been able to increase our efficiency. So far, I'm proud to say, the project, as we call Project Happy, has resulted in over 1 million EUR in cost savings. However, I do not consider that the biggest change lies in the amount of euros, but rather in the change of mindset and behavior throughout our whole organization. Today, continuous improvement is a top priority in our daily business, and for us, this trip has just started.
Good. Thanks to Christer, and, I'll just remind you, we have 20 ongoing projects like this and 7 more in plan. Then, to working capital. Orkla acknowledges quite clearly that we have not put enough focus on the working capital efficiency over the last years. Now we set a clear target of reducing working capital by 3% in relation to sales over the next three years. The two main levers are within accounts payables and then within inventories. We have set a target of increasing payables by 18% over this period, and that sort of represents half of the target. That's simply improving Orkla's payments terms with suppliers, and also, in some cases, go into partnerships with suppliers to achieve this.
The other component is in inventory, where we have set a clear target of reducing inventory level by 6% over the next three years, and that represents the other half of the target. Many key levers to be able to improve inventories, but the two most important is probably improved planning processes and reduced complexity.
And to improve working capital, you need data and analytics, and we have outlined an ambitious digital roadmap that actually goes across the complete supply chain, and also vertically from factory level down to line level. And we are forming and building our new capabilities around this. And digitalization will provide a game changer in how we work with improvements in supply chain going forward. And we will have one last example just to show what we're doing.
The last years, we have made significant efforts to optimize our factory footprint. This has now enabled us to focus our resources further and to start building capabilities to make a leap in digitization.
...One example is our factory floor performance system. Machine performance is followed in real time, and the reasons for downtime is logged. This makes our daily management a lot more accurate and efficient, but it also helps us identify where our improvement opportunities lie. In our digital roadmap, we have identified the most important areas of where to focus our efforts on. That means both to deliver on current opportunities, but also how to start prepare for the future as One Orkla. Digital manufacturing will give us significant productivity gains and start prepare us for the future.
So thank you very much, Niklas. So now moving from digitalization back to sustainability. So we continue to see good progress on our strive to have a sustainable operation. Also included acquired companies' environmental footprint. And we see this across energy, greenhouse gases, water, and waste progressing well. And just to give you one example, in energy, we have a spend of roughly NOK 500 million. And of course, as Peter said before, reducing energy consumption is good for the bottom line, but also, of course, for environment. And we are fully committed and driving towards the Paris climate agreement. And to give you one very practical example of what we're doing, we'd like to turn your attention to waste.
So what we did was, you know, we have a huge number of production lines across Orkla. So we went in, in this specific case, to a ketchup factory and invited people working in other ketchup and dressing factories, and we also had our central expertise team joining, and they made analysis. And they found by optimizing both the startup time and the shutdown, the shutdown time of this process, that we can reduce process waste with 55%. And the great thing here is, of course, that not only do we see this improvement locally in this line, but this team also then developed a replicable methodology that we can roll out elsewhere, and also avoiding add-on investments, for example, in wastewater treatment.
So in this particular line, in this case, we had a saving of 0.7 million SEK, and we have 25 additional lines that we can implement this on in Orkla. It's a really great classic case around waste. Then it's time to sum up. We have introduced you to our six focus areas in supply chain going forward towards 2021, and you here see the most important KPIs for each of those six areas. We hope you have seen that we will continue the strong program we have for factory improvements and for factory consolidation. And we will see you will see a step change when it comes to net working capital, when it comes to procurement of indirect materials, and when it comes to focus on harmonization and simplification.
And then we will have a flexible and more cost and capital-efficient supply chain. Thank you.
Thank you, Atle, and thank you, Johan. We'll now open up for Q&A here from you here in the audience and also from the webcast. So please, if you have a question, raise your hand, state your name and institution. Any questions?
Thanks for taking the questions. I've got two. The first is on the One Orkla strategy that you mentioned for getting to the optimal number of factories. I guess you therefore have visibility on what you would say is the right number for the current categories you operate in. Could you give us that number or give us some sort of sense on how that compares to the 96 you're currently targeting? And then the second question is around rationalizing SKUs. You seem to be talking about that as flowing into the procurement and the working capital savings. I wonder if you could give more detail on the scale of that SKU reduction, you know, how many SKUs are you actually cutting across Orkla?
I can start with the first question around the manufacturing strategy, the One Orkla strategy. We are, of course, continuing looking into our manufacturing footprint, and we are, honestly speaking, not that focused on exact number of factories. What we are preoccupied is with having a competitive supply chain. There's no single goal in only having one factory, but we are balancing flexibility and cost, and on a continuous basis, making sure that we are competitive. No fixed number on that one. In terms of SKU rationalization, yeah, you will not get a number of SKUs we will cut. That's only part of the simplification process.
There will be cut SKUs, but we also need to reduce complexity when it comes to, as you have seen examples of, like packaging formats and similar things, so that the necessary complexity, when we want to, customize to local market, comes late in the supply chain and not early. That's very important, and of course, as Peter touched, there is also a complexity, reduction, topic that goes on a more strategic level, what categories to stay in and what not to stay in, so I guess hope that answers your question fairly okay.
...Thank you. Any further questions from the audience here? If not, I have one question here from the web. It's about the indicated factory closure pace, and whether. Well, the question is, you indicate a lower number of factory closures going forward per year. Does that also indicate a lower potential?
Yeah, as I saw, we indicate a level of four to six factory closures per year, which is lower than the number that Johan showed you. That is, of course, only part of the way we work with productivity improvements. And it does not indicate lower cost potential, because the ones that we are planning for is a bigger project, more complex project, but also with more cost potential coming out.
Thank you. Any further questions here from the audience? Okay, then thank you for your questions, and thank you, Atle and Johan.
Thank you.
We will now have a twenty-minute break, so that means we should be back at roughly 3:05 P.M., and for those of you here in the audience, don't miss the opportunity to try our fabulous Naturli' products out in the hallway during the break. Thank you.
Good afternoon, and welcome back from the break. I hope you enjoyed some of the Orkla products in the hall. I'm here to tell you a story about Jotun, a colorful story about Jotun. My name is Morten Fon. I'm the CEO of Jotun. I've been the CEO now for 13 years. I've been working in Jotun for 30 years, so I feel I have fairly good background to give you this story. I have worked in Norway. I have managed our business in Egypt. I have managed our business in Malaysia, and I've also been regional responsible for Southeast Asia. Now back in Norway on the 13th year. Jotun is a story of growth, and that's what I would like to share with you today.
But to understand that story of growth, I think we should go a little bit back in history first. Jotun was founded by Odd Gleditsch in 1926. In the beginning, it was a marine coatings company. Basically, what we did was to sell marine coatings to the whaling fleet and to the shipowners in Norway. In the 1930s, 1940s, and 1950s, Jotun developed also a decorative range of products, and we grew in Norway, but it was basically a Norwegian and relatively small company. Then after the war, World War II, Jotun started to develop. We started to develop new products, for example, in protective coatings, and in the early 1960s, we started to internationalize. Of all places, the first factory built outside Norway, we built in Libya.
If you would like to make it difficult for yourself, you go to Libya. But what happens then is that you learn a lot, and that learning is still in the company today. In the 1960s and 1970s, we started to establish ourselves in new markets like Thailand, Malaysia, Dubai, and so on. Then in 1972, we had a big merger in Norway, and that's when Orkla came into Jotun. At the time, it was called the Norsk Lilleborg. The Norsk Lilleborg merged with three family-owned companies in Norway, so basically, the four biggest paint companies in Norway was merged into one. Without that merger, we wouldn't have any paint business in Norway today. From there on, the company continued to grow.
In the 1980s, we grew into a lot of new markets and also in the 1990s, and basically in Southeast Asia and in the Middle East, so both those region has been very important for us. We have grown based on that business since then, and especially after year 2000, we have seen tremendous growth based on all the establishments done in the early days. So working in Jotun today, we cannot take credit for all this. It was done by a lot of good decisions in the past. Today, Orkla holds a bit more than 42% of Jotun, and the Gleditsch family holds a bit more than 54%. And in my opinion, Orkla and the Gleditsch family has a very good relationship.
Looking at what we have become, Jotun is today a company that has basically three strongholds, but we say we are a global company because we have operations basically all over the world. The strongholds are Scandinavia, with our home market, Norway, but also the Middle East, where we have a big business and a lot of market-leading positions. In addition to that, we have Asia, both with Northeast Asia and with the Southeast Asia part. When you look at our structure today, and most of you that follow Orkla, you read the Jotun size out of the consolidated accounts. So I will reveal a small secret, and that is that our total turnover of paint, the revenue, based on all our companies, regardless of ownership around the world, is $2.7 billion.
We are quite a lot bigger than most of the analysts thought. We are in 45 countries. We, we have 40 factories spread around. We are approaching 10,000 penguins or people, and we sell about 860 million liters of paint. And how much is that? Doesn't tell you a lot, but the Norwegian paint market times 40 is more or less what we do. And today, our portfolio of segments is powder coatings, approximately 10%, decorative paints, 40%, and the rest split between protective coatings for anticorrosive purposes and the marine coatings. When you look at our development, you can see here that from basically early 2000, we have had a tremendous growth up to the last couple of years, and I will explain what has happened to you on the next slide.
In addition to that, you will see that the yellow line indicating our EBIT has come down based on 2015. So we have had two difficult years, and I will try to explain that also. But on the other hand, 2015 was an exceptionally good year. And if you look at this graph and look at the yellow line compared to the blue stacks, you will see that our EBIT margin up to early 2000 was more or less every year below 10%. From then, it's been more or less about 10%. So we have managed to improve profitability by growing, growing the business. I, I will revert to that. If you look at the graph to the right, you will see that our growth over these years has come in selected regions. In Western Europe and in Scandinavia, we have seen limited opportunities for growth.
Nordic, those markets are mature, and it is difficult to grow in those markets. But at the other hand, Middle East, at the top here, has delivered fantastic opportunities for growth. Northeast Asia, the same, and also Southeast Asia has delivered huge opportunities for growth. We have also grown in the Americas. For us, that is Brazil and the U.S. and Mexico, but still small numbers. I said that I would like to explain what has happened in the last couple of years with our top-line growth and also with our result, and that we can do in this way. It's basically three things that has affected us. The two first ones affect the top line, and that is the downturn in the marine newbuilding.
Basically, the shipbuilding has collapsed, and we had 30% of the market in China and Korea, and when those markets go down, it is very difficult for us to absorb that. And we have lost approximately 1.3 billion NOK turnover in that segment over two years. And then it's the offshore, the oil and gas business, where we also have seen smaller investments, but also less maintenance in that business. So for us, that has given the effect that we have lost approximately 500 million NOK turnover. So all in all, we have lost 1.8 billion NOK turnover on these two subsegments, and we haven't managed to compensate that in the other segments. But we are still growing. And the good part of this story is that now, shipbuilding is probably at the bottom.
It will probably start to increase a year from now when it comes to paint consumption, and we know that because we have already signed three times the number of contracts this year compared to last year. So that market will come back. When it comes to the oil and gas, we have seen already improvements when it comes to maintenance, but also when it comes to new structures built. So we are. We believe that we are at the bottom of that cycle. So both of them will come back, and that's promising for our business. The last one is the raw material prices. Raw material prices has increased 30%, and now we are flattening out. We have been increasing prices now continuously for two years. That's tiring for the organization, but it's needed. So we have always been a little, a little bit behind.
Now, we feel that we can catch that gap, and that means that our margins will start to improve again. So all these three elements have had a large effect on the last couple of years, but we believe now that we will see better future when it comes to these three elements. If I look on Jotun development in a little bit wider perspective, over a number of years, and often when I'm asked, "What has created the growth that you have managed to create?" Then I normally answer by these three elements, and the first one is corporate culture. We have an extremely strong organization with a very solid foundation in our Penguin Spirit.
That is sort of the description of our corporate culture, and we define it by long-term thinking, loyalty, respect, Care, and boldness to do the right stuff, and this is very important. So when I received Harvard Business Review, you probably wonder, why is that page there? When I received that early this year, they took one magazine, and they focused on corporate culture. That is good. And when they then decided to illustrate it by penguins, then I was very happy. And I think it's good that they do that because corporate culture is very important. The second issue is long-term thinking and also having a strategy that stays firm over time. And for us, that means that we are focused on the four segments, and we are focused on doing everything organically. So we are not an M&A company.
We are a company that has been built organically, and the last element, you could call a little bit of luck, because we have had a fantastic footprint when it comes to geography, that has given us a lot of opportunities to grow, and when I say a little bit of luck, who would know that China has become what it is today in 1983, when we entered, and who knew that Saudi Arabia would become the market it is for us today, so I think the people at the time that took these decisions, excellent decisions, but probably also a little bit of luck, but the better prepared, they normally also have more luck, so looking at our positions in the global paint market, it is approximately $135 billion. We operate in four of four segments, sub-segments.
That market is approximately $85 billion. Conclusion number one is that it's big enough for us. We have approximately 3% of the global paint market. That means that we can compete for the next 97. That should be enough for a few years to come. And if you look at our position in the four segments we operate, in decorative, we are relatively small in the world. We are probably number 10 or something, but we are very strong in Scandinavia, very strong in Southeast Asia, and also very strong in the Middle East. So we have about 2% of that market. In powder coatings, we are among the biggest, among the 5 biggest, but we still have only 3% of the market, and that means that it's scattered on a number of competitors.
Protective coatings or, anticorrosive, products, to protect everything against corrosion, we have 8% of the global market. By that, we are probably number three. In marine coatings, we have a bit more than 20% of the market. That means that every fifth ship in the world is painted with our product, and we are the market leader. How do we look for new markets, and what is driving our industry? When we look for new markets, we look for two things. Either we go to markets where our customers would like to see us, so if the oil companies or the shipping companies say that you have to come to Nigeria or Tanzania, we will evaluate going there with them.
The other element, and more important, is that we look for markets, emerging markets, where there is a lot of people and where we see expected economic development. Because we know that the paint markets, they develop two to three percentage points faster than the economy. So if we find a country with a lot of people and expected GDP growth of five, we know that we, the paint market will grow with five to seven. And the reason for that is that these countries, they develop a middle class, and they also develop infrastructure. So it's very good for us, and it's easy to go there. And if you look at the markets on the right, or the countries on the right-hand side there, I've taken that out from a PwC report.
You can see here that the economies that we expect to grow in the world. The good thing is that in all these markets, we are already established. When you look at our growth the last fifteen years, here, we are comparing Jotun growth to all, basically all our peers and the bigger international companies. I have to admit that we have taken out one company here. That's an Indian company, because they wouldn't fit into the graph. They are up there somewhere. They have grown much faster than us, but we have outgrown all our international competitors over the last fifteen years. The impressive part, I believe, is that we have done everything organically, because all these other companies, they have bought top line. We haven't bought one liter of top line.
So how is this happening, and what is our strategy? And here it says, "What has been the strategy," but it will also be the strategy going forward. I can tell you that. The four segments, why is that on the strategy? We believe, as I already said, that the opportunities in those four segments are ample. We don't need to look outside of those, because that's what we know how to do. And then I am also, I believe it's very important that we have employees that feel secure, that Jotun is continuing to invest in the four segments. I don't want people to go to work that are afraid that Jotun is going to sell the segment. The same with suppliers. I believe that if we are long-term in the segment, they would like to develop stuff together with us.
I believe also that our customers, they are more interested in developing long-term relations with us, if they believe we are there also tomorrow. Four segments is important to us. Then the organic growth. Why is that so important? First of all, we don't know how to do M&A, but I think you saw on the last graph that we are actually quite good at doing organic growth. Let's stick to what we are good at. What does that do to Jotun? First of all, we have one strategy in all our operations. Number two, all our products are Jotun-endorsed, so we have one brand. Number three is that we have one corporate culture. When we move into a new market, we build corporate culture, Jotun culture, from day one.
So we get a company based on the same values, the same strategy, the same business models for the four segments and one brand, and I think there is a lot of strength in that. The differentiated approach for us is about being a multi-local company, because we have so many operations around the world, and we have to, we have to know that we have operations locally that can take opportunities and handle challenges, because we cannot do that from headquarters. So we are depending on building an organization with a differentiated approach, company by company, segment by segment. So you could call it a multi-local strategy. Then there is a picture to the right here, and that's an indication that we invest in R&D. We are building this thing as we speak.
We are investing close to 1.4 billion NOK in a new R&D center, and we do that to develop products and solutions and concepts for the future that we believe are important for Jotun to continue to develop. We actually do the majority of our R&D efforts in Norway in a controlled manner, in a R&D center that has extreme loyalty. We are building competence and experience every day. Huge investment for Jotun, but I believe also very important. When I talk about organic growth, I would like to share one example with you, and this is from our Vietnam operation. We did this exactly according to the Jotun model. We start to import product from another company, and in this case, it was from Malaysia. When we build sales, we build an organization. We do it with Jotun people from the beginning.
Then in 1997, we built the first factory, and in 2003, we launched decorative paints into Malaysia, into Vietnam. That was a fantastic story, because when we came in with our tinting system, where you can tint 16,000 colors, we call it the Multicolor system. When we came to Vietnam with that, they didn't have, they hadn't seen it before. So this was great news in Vietnam, and we actually had 2 minutes on the national news that evening, that colors are coming to Vietnam. As you can see here, we have created growth, and we have created even better bottom line. The model is like this, it's simple, but it's not always easy to execute on it, and most important, maybe, it takes time.
You don't move in and expect to make money day two. You have to have patience, and you have to invest, but the relative investment is relatively small. So how do we see the market? First of all, we believe that the paint and coatings market is an attractive industry to be in. The industry has outgrown GDP growth. That's good. We believe that Asia-Pacific will dominate also going forward. It has a lot of environmental focus for us, but also for everybody else in the market, and that will continue. And we also believe that M&A activity will continue. And our biggest competitors, they continue to buy companies. We will not do that. We are not part of that game, and we don't believe we have to either. But we are well-situated in the markets that will continue to grow.
If you look at this picture to the right here, you will see that Asia will become extremely important in this industry for the future, and that's where we have a majority of our footprint already. To do this, it is important that we bind the company together. We are a global company with a lot of smaller operations, so we have invested a lot in one ERP solution. In Jotun, we call it Matrix. That's the name of the ERP solution that we have rolled out globally, and we have upgraded the system a year ago, and that was also a successful upgrade. So we have a functioning ERP system that sort of binds Jotun together globally, that we believe it's important. Collaboration is important in Jotun, and we have built platforms for basically everything, communication, customer handling, and so on.
We believe that's important because running a global company, for example, in the marine business, customers are everywhere and the vessels are on all seas, so we have to have good systems to track and to keep track on this, but then we have also done other digital projects. For example, this tinting system I talked about earlier, Jotun was the first company that developed this in the seventies, and we are still among the leaders when it comes to further development of the tinting systems. Hull performance is about putting something on the vessel that makes it more efficient. In the old days, we sold antifoulings. Today, we sell efficient hulls, and to do that, we have put measurement equipment on board the vessel that helps us to monitor how efficient the hull is.
SeaStock management, it's about us having delivery capabilities in 1,600 ports in the world, and we have to help the customer to optimize where he picks product for onboard maintenance. And then Jotun Color Design is a good example. You can all try it, not now, but later today. You can find the app. You can take it home. You can take a picture of your wall in your living room, and you can change the color. Be Careful, because somebody might have to ask you to paint that wall afterwards. But it is doable, and go and check. It's a fantastic tool. And for us, all this is not gadgets. It's about improving efficiency, it being the Matrix ERP system or it being these tools that we use in the marketplace.
I will not talk a lot about figures, but this is our development since two thousand and three. Top left, you will see that we have, in average, added 8% volume throughout this period. We had some difficult times throughout the financial crisis, but apart from that, we have added volume continuously. Top right, you will see that our manageable cost came down nicely, and then it has stabilized. That we have to do something about. Of course, that will also help when shipbuilding and oil and gas are coming back. It will be easier for us also to make sure that we become more efficient. If you look at our EBITA, we have delivered in average 11% over this period by growing the volume and becoming a little bit more efficient.
And when you look at our return on capital employed, we have delivered on average 22% over this period. So I believe it's fair to say that we have a sort of proven track record. We will not start M&A activities, with one exception, and that is if we can find technology available that we can use in our existing segments, but we will not buy market access. Our footprint, I believe, is excellent for future growth. We are basically situated in all the markets that are expected to grow for the future. I think that helps. We have a strong corporate culture that I believe also binds Jotun together. It's very important for the job we do and how we behave in the market. And then to the right here, you can see the Eiffel Tower. You can guess what kind of coatings is on that.
It's Jotun, of course. But we have also painted a number of other iconic buildings around the world. So I would like to share some of those videos. You have to take a close look at this video, and at the same time, this video also tells you a little bit more about what we actually are doing.
Time passes. Time flows. Time never stops. But what if we could change that? Erase the traces of the past, heal the wounds, reverse the disruption. Let history, nature, and ideas live forever and leave them to the next generations, beautiful as they are. Or what if we could see the future? Travel thousands of miles in a few seconds. Explore the possibilities that life might come up with. We can do it all. Stop it, bend it, rewind it. We are the masters of time. We want some things to change and some to stay just the way they are. Jotun, for iconic buildings and beautiful homes.
So thank you for listening.
Thank you, Morten. We'll now open up for Q&A from the audience here, and also from the webcast, of course. Please post your questions if you have any. Please raise your hand and state your name and institution if you have any questions.
Yeah, it's Adrian again from Intrinsic Value Investors. I have two questions. One is, what does Orkla bring to the table to Jotun? I.e., does Orkla help you in any way running your business? And two, if that is not the case, and Orkla were to decide to list the shares they have in Jotun, would that be possible, or is there some kind of agreement between Jotun and Orkla that they are unable to list the shares? Thank you.
To the first question, we have a number of projects that we do together. We have learned a lot from Orkla when it comes to, for example, brand building, the Brand Academy. We have joint projects also, some on the purchasing side, but mostly on the competence side. And then, of course, there has been a good relationship, as I started to say, between Orkla and the Gleditsch family, and the Orkla contribution to the board over the years has also been very important.
Orkla has some thinking that is different from what we have in Jotun, and they have been able to challenge us when it comes to some of the things they are strong at. When it comes to listing Orkla shares, I will not comment on that, other than saying that it's probably difficult to do that without having an agreement with the family.
Thank you. Any other questions? Or should I look at the web, perhaps? Yes, Morten, we have a question here on the web from—it's a Norwegian investor. You mentioned in your presentation that Jotun's success today builds on some very good decisions that were made very far back, and maybe it was, you know, partly good decisions and partly luck. What is your pipeline of new market entries now, and is it sufficient?
I'm not sure it's sufficient, but we are continuously developing that pipeline. You know, I think it's important to see that the investments done and the market entries done in the '80s and the '90s is very important for us today. So we have the responsibility to make sure that we enter new markets today that will be important in the future. And to name some, we are into Bangladesh, we are into Cambodia, we are into Tanzania, Kenya, Morocco, Algeria, and so on. So we have a number of countries in the pipeline. In addition to that, we have made what we call roadmaps into three areas where we are not so strong today. That's Central Asia, for example, Kazakhstan.
That's Africa, where there are a number of markets we are not into yet, and we know that Africa will continue to develop, and faster than before, both when it comes to people and economic development, and the last area is South America, where we have built a factory in Brazil, that we hope we can utilize also entering other markets in that region in the future, but you are right, we have to get into new markets to be able to create the growth we have done in the past, so it has to be a combination of existing strong operations and new markets.
Thank you. Any further questions here from the audience? If not, thank you for the questions, and thank you, Morten. Okay, so where does all this take us, takes us? Our CFO, Jens Staff, will tie all this together and outline our ambitions for continued value creation. Please welcome our CFO, Jens Staff.
Thank you, Thomas. In my session, I will summarize the financial ambitions based on what you've heard on presentations earlier today. I'll also talk about how we are going to be more effective on SG&A, and also talk about our ongoing ERP program, which is building an important part of the future infrastructure in Orkla. You've heard that we are targeting a step change in working capital. I'll also reflect a little bit about the past performance and what we are going to do to deliver on the targets going forward. M&A is an important value creator for Orkla and will so also in the future. I'll explain how we think about portfolio prioritization and resource allocation going forward. Lastly, I'll give some guidance on CapEx and talk about what kind of returns we have created and generated the last recent years.
This slide illustrates how we are thinking about value creation in Orkla, and the ability to grow organically over time is, of course, very important. It's a very important KPI, and our target continues to be to grow organically, at least in line with market, in our underlying markets. We continue to take out synergies and improve efficiency across the value chain. Short term, we will prioritize actions to raise margins, to improve mix, better price management, and the reduction of complexity. Our target is to improve the underlying margin by at least a hundred and fifty basis points by 2021. And when I say underlying margin, I mean, margin adjusted for currency translation effects and M&A, and M&A is a core part of Orkla's growth and value creation, and we continue to see a very attractive universe of targets.
M&A is number one priority for excess capital. At the same time, we should address our current portfolio and pursue selective exits where that makes sense. As I've said, we are targeting a step change in working capital efficiency that will improve our cash conversion going forward. Our target is to reduce net working capital to net sales ratio by three percentage points by 2021. The current level is approximately 13%.... It's important to clarify that both for net working capital and underlying margins, these are targets that are to be delivered within or by 2021. That means that you can't evenly distribute this target throughout the period. For the organic growth guidance, this should be seen as an ambition over time. As Peter mentioned earlier today, we are initiating several actions to improve margins that may negatively impact growth in the short term.
I'll revert more to this later on in my presentation. By delivering on these targets that you see here, we believe that we will generate a healthy bottom line growth, we will create stronger cash conversion, and improve asset efficiency. As you have heard earlier today, we're also changing the dividend policy, and the new policy is to increase dividends above the current level of NOK 2.60 per share, normally within the range of 50%-70% of reported earnings per share, and our leverage, simplistically defined as net interest-bearing debt to EBITDA, shall not exceed 2.5 times over time, and this is in line with the ambition to stay a firm investment-grade credit quality company. Okay, let's look at what we have delivered since 2014.
We have achieved an underlying EBIT growth of 5% since 2014 through organic growth and improved operational efficiency. These graphs illustrates the performance in the branded consumer goods area, and including smaller bolt-on M&As of approximately 1% per year, this brings the performance historical performance to the lower end of the 6%-9% range. Underlying margins in the period are up 150 basis points, mainly driven through fixed cost efficiency and operating leverage. As you can see, we have had very strong headwind on variable margins, primarily due to raw material price inflation and currency. Reported margin, as you also see on the graph, is affected by M&A and are diluted by the M&A that we've done in this period.
As Peter mentioned, we are prioritizing actions to drive further margin improvements, not least turning this negative trend on the variable margins. Let's move on to the actions to deliver on the new target going forward. You've seen this slide earlier today, and heard presentations that Orkla synergies is an important contributor, and you should expect improvements at the same pace in the next period. There will be a pace change from portfolio mix and contribution priority, and short-term actions, just examples of short-term actions, is to reduce SKU complexity. We have a far too long tail. We have to improve on price management. You've heard this many times today. Run for cash, harvest, and invest for growth. Optimize strictly across the portfolio, and do selective exits, and look at the portfolio categories that we have today.
These short-term actions, as I've said, several times, may affect top-line growth, at least in the short term. In addition to supply chain, we have two big cost buckets, namely A&P and SG&A. When it comes to A&P spend, that's all about prioritizing and maximizing returns, and we don't foresee any cost out in that area going forward. Since twenty fourteen, we have simplified our go-to-market organization in several geographies. We have centralized accounting, as one example of how we leverage central competence in Orkla, but there is some obstacles here, and the previously decentralized structure, the active M&A agenda, has resulted in a multitude of ERP systems across the group, and, of course, this has created hurdles to standardization, and, of course, requires also some additional manpower to maintain.
That's why we last year decided to build a uniform ERP platform, and that will, of course, be a key enabler for further harmonization across the group. Ensuring a successful implementation of this program is, of course, one of my highest priorities in the coming years. Efficiency in SG&A is, of course, very important. It's a big cost bucket, and we'll continue on the journey towards a more simpler and more efficient go-to-market structure. Let's look at some recent examples of this. We announced the merger of our foods businesses in the Czech Republic and Slovakia earlier in this month or in October. These businesses was acquired in twenty thirteen when we acquired Rieber & Søn, and in twenty sixteen when we acquired Hamé.
After a period now of integration and turnaround, it's time to merge these two companies to create a stronger, bigger entity, a much more effective platform that we can scale going forward as we have ambitions to grow structurally in this area. There's many similarities with this merge and the merge that we did last year in Finland, when we merged the confectionery snacks and foods business in Finland, creating Orkla Suomi. It created a bigger, more robust company with one management team, and where we realized cost synergies in the area of 1-2% of net sales. Let me now take you through more details on the ERP program. As many of you know, we have a very fragmented ERP landscape, where we have approximately 30 different ERP systems. We have limited common standards, limited common metadata structure, and so on.
Of course, this is costly to maintain, and are, in many cases, an obstacle to take out synergies across the value chain. As expected, this is a complicated project with touch points across the entire value chain, and we are making every effort to do this with limited disruption. That's why we are sequencing this project. We are facing it in sequences and rolling out over several years. We've started this year building templates and so on, and we will be most likely finished with the majority of the companies within 2022. We go live with the first pilot Q1 next year. Of course, I'm very excited about the opportunities that the new ERP landscape will bring us.
With more integrated systems, standardized processes, harmonized master data, and so on, planning, procurement, logistics, and manufacturing can be much more easily optimized throughout the supply chain. Of course, this will also make it a little bit more easy to do M&A and divestments and so on to optimize the portfolio. Maybe not least, it will be a much more modern solution that better supports our digital agenda going forward. Let's look at structural growth. We have grown the core consumer goods business by approximately 40% since twenty fourteen. That's roughly 9% per year. Organic efforts increases the growth by 2%, and our structural initiatives have contributed approximately 6%. Of course, M&A is an important tool for us going forward to increase our presence in higher growing territory, in channels, and in categories.
I'll now go through some of the recent acquisitions, and then also some lessons learned. Let's start with the growth cases. Hamé and REMA have seen double-digit growth since acquisitions, but since they were acquired, but with limited synergies. When it comes to value creation, sales has close to tripled in Hamé. It's roughly a CAGR of 29%, since we acquired it, and the growth is increasing. When it comes to REMA, another good growth example, where value creation has been double-digit growth since we acquired it. This brings me to Harris. Many of you know that House Care UK has been the drag on results in Care, for some time.
Harris is not performing as planned, and I would say yet, and it's been more challenging than we anticipated. So what went wrong? You've heard some examples of what went wrong. First of all, we lost the distribution agreement with Kingfisher. That was a calculated risk when we acquired the company. Secondly, we saw then Brexit, and with Brexit, a weakening of the British pound come towards some important procurement currencies, and it's been both difficult for us to increase prices, but we haven't been good enough on price management. And we saw a weaker DIY market than expected. We have taken out a lot of costs in Harris, so we have started the turnaround. We have reduced significantly the amount of costs. We will do more.
We have changed management, both in UK and in the factory in China. And we are addressing, call it a new value creation model for this company. So we have a turnaround plan. Moving on to Cederroth and Laima, which are both good examples of platform investments where we strengthen local presence and extract a lot of synergies. Both of these have delivered good results compared to the business case, and Cederroth has been a very good acquisition from day one. Laima had a little bit more troubled start, but have really picked up performance. We have extracted a lot of cost synergies, and top line is growing. So these are examples of good platform cases with a lot of synergies. So let me try to sum up some of the lessons learned walking through these acquisitions.
First of all, we need to stay true to the model, acquire strong local brands where differentiation matters, and in categories that we, that we are familiar with. We need to ensure strong local management from day one that understands the One Orkla model. Accept that integration takes time, sometimes longer time than we think, and we need to calibrate accordingly. Be cautious about adding complexity, and address turnaround cases early on, and maybe be a little bit more impatient. I'll now go through some of the, of the thoughts when it comes to portfolio management. We have a very broad portfolio of brands, which is necessary to have sufficient scale in the markets that we operate in. We can't spread the resources too thin, across the portfolio. We have to prioritize, and prioritizing isn't rocket science. We prioritize based on some criteria.
I mentioned some of them now. It's category growth, of course, it's profitability prospects and brand positioning in combination with our ability to win, and of course, look at the supply chain complexity. Different categories have different brand dynamics, and it requires different response, and Peter mentioned initially that we need to improve how we optimize resources across the portfolio to ensure the best possible return, and we have to reduce portfolio complexity, optimize pricing, so that we ensure that we really can price in complexity, and we may have to say goodbye to some old friends to reduce complexity and improve our growth exposure, so where does this take us? I want to leave you with three expectations. Our short-term portfolio actions may have some short-term negative impact on growth.
M&A continues to be an important part of the growth agenda in Orkla, and we may do selective exits where we see less potential, in Orkla going forward, and where complexity is not adequately priced. Let's now turn to working capital. Since twenty-fourteen, working capital has increased as a percentage of net sales. Our broad portfolio, our increasing channel diversity, our fragmented supplier base, and M&A are all contributors to this increase. To address the potential, we have now introduced a quite tough target of high reduction of working capital going forward. And as you know, our decentralized structure, where there was no overarching procurement function, supply chain was decentralized. Our supplier base and ERP landscape are highly fragmented. You know, this structure isn't an ideal starting point. Working capital has been on the agenda for some time.
We have made the changes, which have started to deliver positive effects, and Johan Clarin talked about the effects earlier today. We have centralized procurement. We have worked much tougher on rationalizing the number of suppliers on payment terms, and we see positive effects from this work. But the positive effects have been offset by primarily higher inventory turnover, or lower inventory turnover. Looking at the business areas, Orkla Care is the area with the highest absolute level, and has also had the worst development since 2014. Care is also the area with the broadest portfolio in terms of SKUs, and where we see a potential to reduce complexity going forward. What will change going forward? Of course, we have to address the root causes.
Portfolio complexity is, of course, clearly a contributing factor, and to reduce complexity, cut the tail, is one of the absolutely important actions that both will improve margins, but also, capital tied in inventory. We are on the journey to simplifying our supplier base, and we see real improvements on the work that we have done, and we expect this work to deliver significantly going forward. With our ongoing supply chain program, we see a much more robust supply chain in Orkla going forward. And in combination with the ERP program that we are doing, this will allow for improved planning and the ability to differentiate service levels, optimize recipes, and so on. Let's look at CapEx. And the total CapEx, the recent years, has been around 3%-4% of net sales.
Going forward, we will see some increased investments related to the ERP projects and our supply chain restructuring program. Our ERP project will increase CapEx slightly above 1% of net sales for the next three or four years. Going forward, the restructuring agenda will require more investments than we've seen in the last years. The announced closure and relocation of the biscuit factory at Kungälv in Sweden is a recent example. This is a large investment for us that will be taking gradually until the factory is planned operational in 2022. At the same time, this frees up a very attractive property close to Gothenburg that will potentially reduce the net investment significantly. So overall, you should expect a CapEx level in the area of 4%-6% going forward for the next three or four years.
Of course, depreciation will increase slightly due to this increase in CapEx. I'll now give you a quick recap on the return that we have generated the last years on capital employed. I'm pleased to see that we have delivered incremental returns well above the cost of capital since twenty fourteen. Capital employed in the Branded Consumer Goods business has increased by approximately 40% over the period, whereas operating profit has increased by 56%. This reflects the progress that we are doing on the One Orkla agenda, but also it's a reflection of the track record that we see in M&A.
We don't have any guidance on return on capital employed going forward, and of course, this will depend on organic development and the efforts to improve margins, but also on the M&A activity and the type of targets that we acquire. An increased focus on targets, on growth targets, would, of course, imply higher margins, and multiples, which will weigh on the return, at least in the short period. So let's move to capital allocation leverage and look at the dividend policy on the next page. As mentioned previously, we are changing the dividend policy. The policy is to grow our dividends above the current level of NOK 2.60 per share, and normally within a range of 50%-70% of earnings per share. We continue our ambition to stay an investment-grade company with the capacity to seize attractive opportunities.
And in simple terms, this means a net debt to EBITDA not above 2.5 times over time. And it will come as no surprise that M&A is our number one priority when it comes to allocating excess capital. And of course, we will also prioritize investments in the One Orkla agenda and ERP. And Orkla has a history of distributing a lot back to shareholders, both by paying an attractive ordinary dividend, but also paying out special dividend and do share buybacks. And since 2014, we have returned approximately NOK 20 billion to shareholders through ordinary dividend, special dividend, and share buyback. And as a shareholder in Orkla, since 2014, you have received a total return of approximately 94%, which corresponds to an average annual return of 15%, which is pretty good.
To sum up, together with my colleagues here today, we have illustrated how we will continue to deliver an attractive shareholder return. Peter outlined the strategy and priorities to strengthen One Orkla for future growth. Beth and Stig illustrated our proven ability to win in the local markets, which is how we are going to grow, at least in line with the markets. Atle Vidar and Johan illustrated our proven ability to drive efficiency through the value chain.
...Morten Fon has illustrated Jotun's impressive organic growth story and attractive footprint, a company positioned for strong value creation going forward. I've taken you through how we manage our assets and optimize our portfolio for improved margins, how we continue to simplify our go-to-market structure, how we build tomorrow's infrastructure through the ERP system, how we will create even more value through M&A, and how we will achieve a step change in working capital efficiency, and we believe that all of these plans and actions will drive shareholder value going forward, so I'll now hand the floor back to Thomas to open up for joint Q&A with me and Peter.
Thank you, Jens. Peter, welcome back on stage.
Thank you.
We will now, as Jens says, open up for Q&A from you here in the audience, and obviously also from you following us on the web. I thought I'd actually start out with a web question from Ole Martin Westgaard in DNB. It's actually lots of questions, but I think I'll take them one at a time. A few of them are top line related. You aim to grow in line with market. Where do you see the underlying market growth at the moment?
There are big differences from market to market and categories to categories. If you look at our main or largest markets in the Nordics, we see underlying market growth in the area of 2%. And of course, we see higher market growth in Central Europe and Eastern Europe, and obviously in India, but there are huge differences from category to category. We have seen also that market growth has come down so far this year, especially in Norway. But we anticipate that market growth will pick up to in the area of 2% going into next year.
Thank you. A related question. I think I'll try and go through all of these. Can you please elaborate on what you mean by that your priorities could hamper growth near term? The question is essentially: should I expect Orkla to underperform market growth? And if so, by when do you expect to be done with this period?
As I said, short term, our main focus will be on margin improvement, and we will improve margin by reducing our SKU complexity. And that might lead to that we will cut some of the tail that might impact top line, but we will only do that if it improves our profitability. So it's difficult to say now how much that will impact top line shortly or short term, but I think the main message is that we will prioritize margin improvement, underlying margin improvement, before organic growth short term in order to also lay the foundation for future growth, so that we are able to focus our resources on higher growth categories, higher growth geographies, and higher growth brands. And also to meet, to be even better to meet the consumer preferences in the local markets where we operate.
Thank you, Peter, and then moving on to the margin side of this question. The first part of the question is about: how should I think about the 2021 margin improvement target? Will it come gradually, or should I expect it to be front-end or back-end loaded?
You should expect the target to improve by 150 basis points by 2021. That's what you should expect.
There are a few additional questions to this margin question. Can you say anything about where we should expect the margin improvement to come from in between the segments? Is there any particular segment you see a potential for more improvement than the other?
We don't elaborate on that, but you should see this as a joint... You know, it's a One Orkla delivery model, so everybody has to contribute.
The last part of the question is: Will HQ cost be a big contributor since you now include it in your target?
Everybody has to contribute. That's how we look at it, and you're thinking, you know, it's a One Orkla approach to this. So in sum, we'll deliver.
Thank you, Jens. Any further questions from anyone here in the audience? Several. Start at the back.
Thank you. Carnegie. Two questions, starting with the first one on M&As. Lots of talk about that. You've been successful. It's been a year since you sold or divested Sapa. You have a very strong balance sheet, and I believe you gave yourself one year to explore the world for opportunities. So now what? Are you handing it out to the shareholders?
As we've gone through, we have returned a lot back to shareholders. The way we see our, call it, financial strength now, the balance sheet, is that we are comfortable having this strength, looking at the universe of targets that we feel is interesting. This one year, I can't remember saying one year, but I believe that, you know, the way we are leveraged now, we are comfortable having this position.
Just one curious question. Naturli', and the ice cream, very nice, is sold exclusively at REMA in Norway. And I also believe when you launched Klar, which is another extremely impressive brand, was also exclusive at some of the retailers. Why that strategy? Why don't you go more broad with products like that?
... When it comes to Naturli', that is, originally is a Danish brand developed by our Danish organization for the Danish market, and then we will take it gradually into other markets, where we operate. And, of course, we would like to have to see full listing in all retailers, preferably in all over Europe. But we are in a situation where we are fighting with our suppliers, with our competitors for shelf space. And I think the retailers will, over time, see the value in our brands, and in our products, and they will be, whether they like it or not, they'll be forced to listen because the demand from consumers will be there. And that is quite often how we launch products.
We sometimes do that exclusively in one retail chain, and then over time, we broaden the distribution in the whole market or more markets.
Thank you. There were some other questions?
Thanks. John Ennis from Goldman Sachs. I've got two. The first is on portfolio management. I wondered how long you will monitor these sorts of businesses and try to improve them before you opt for the route of exiting them? And then I wondered if you could give us the proportion of your sales that are on that monitoring list. And then my second question is related to the synergy chart you showed. I think it said that you delivered 5%-10% of acquired sales in synergies from Cederroth. Which seem quite high to me because the Orkla Care margins haven't really expanded. So could you give us what the offset has been there?
Yeah, when it comes to the category, I cannot give you an exact number, but we will look carefully into all the different categories, but also into the brands and also different business units. And if we don't believe we are able to create shareholder value by turning around, or maybe we see that someone another owner will be a better owner for those categories or companies, we will do those kind of decisions quite fast. And I cannot give you an answer on what how big share of the portfolio that will be. And also important to mention is that this is not a one thing job we are doing one time.
This will be a constant process where we evaluate our positions, our categories, our brands, on a continuous basis to see whether we are the right owner or whether we should exit.
Yeah, just to comment on the margins in Care. We've done some acquisitions that's been dilutive to the margin. For instance, this HSNG, as an example. And then, as you know, the House Care business in UK has been a drag on the margins, as well as some areas in the health part, just to mention the most important drivers.
But I guess just to follow up on that, would the margins in Cederroth have actually been five to ten percentage points higher than when you acquired it, or has something else offset that?
The margins are higher, definitely higher in the Cederroth portfolio now than we acquired when we acquired it, of course. So, but we have integrated the businesses, you know, it's fully integrated in the Orkla House Care and the Orkla Home and Personal Care business unit. So, you know, we don't decompose that and disclose the details on the development.
Okay, that's helpful, though.
Espen Klette from Pareto. As you mentioned, your excess capital available is quite significant. How will you work to ensure a strong capital discipline? And my second part is, how do you evaluate your targets? In other words, on which basis do you measure your potential M&A targets? What requirements do they have to satisfy? Thank you.
The latter one, we don't disclose every detail in how we measure profitability and how we look at profitability in the M&A cases that we look at. But of course, we have a standardized approach. We look at, you know, net present value, discounted cash flows with the hurdle rate, or the capital cost that is. We start with our WACC, and then we build up hurdles. You know, a traditional approach, and of course, we have to be really, really, you know, tough on ourselves to challenge the cases.
I believe we have been pretty good at that, and you saw the incremental return on capital employed and looking at the multiples that we have acquired companies on. It's around. Look at the acquisitions that we've done last, you know, 3 years. It's been an EBIT multiple of around 14 pre-synergies. So it's then even accretive before synergies. So I believe that we have been quite good. But of course, this is really important for us going forward, to be really strict, make sure that this is strategically really relevant, that it will make us able to grow in the future, and that we don't pay too much. So. I agree, it's very important, but we have a fairly good track record, actually.
I don't know if you want to comment.
No, I agree.
Yes, it's Adrian again from Intrinsic Value Investors. Two questions. One is, what is your total ERP spend on the upgrade of SAP, and who within the management team is responsible for that? And my second question is, we haven't discussed the industrial bakeries, and I think everybody will understand your move into consumer goods brands and the like, but there is one part of the business which is completely sort of out of that strategy. And my question is, in five years' time, when we have a capital markets day, are we still seeing the bakeries business in the total sales number?
Yeah, I can answer the ERP program, because I'm the responsible. And we don't, you know, disclose the budget that we have, but when we guided the CapEx now, we said that CapEx going forward, at least for three, four upcoming years, will have, you know... It will drive a little bit under 1% of net sales, this ERP program. That's the way we look at it now.
And to your second question related to Orkla Food Ingredients, well, that has, of course, been part of our presentation today. It's not only of the three other business areas, it also includes food ingredients, and we will continue to expand in food ingredients. Even though margins are lower, it's mainly a business-to-business company, and margins are lower, but return of capital employed is at least on the same level as we see in the other companies, or in the other business areas. And there are substantial synergies between food ingredients and the other companies, especially Orkla Foods, in procurement, but also in supply chain production.
Actually, part of the lunch you had or the snack in the break was from Orkla Food Ingredients, was the Naturli' brand that is developed in Orkla Food Ingredients in Denmark. Then we use Orkla Foods' sales force in other markets to sell those products. I think it's a lot of synergies between the different business areas, also in food ingredients.
Thank you, Peter. We're running a little bit short on time, so I think we have to wrap up the Q&A here, and Jens and I will leave the floor over to you, Peter, for a final wrap-up.
Thank you, Thomas. I think also Jens did an excellent wrap-up in his final part of his presentation. We have presented to you today our financial targets going forward, our priorities. You have also seen what we think, how we think about growing our business, both organically, meeting local consumer, meeting consumer trends, but also through M&A, and I think Atle Vidar and Johan also gave a very good picture of what we have achieved in supply chain efficiency so far, and also what we're going to do forward in order to simplify, get economies of scale, and improve our efficiency. I also hope you are as impressed as I am by Morten's presentation of Jotun and the fantastic organic growth history, and the way they have created shareholder value, sticking to their strategy for many, many years.
As he also pointed out, he still only has 2%, no, 3%, market share worldwide, so it's a huge potential for future growth. Jens presented how all these actions and all our priorities, how that combined, impact our financial performance, going forward. I hope that we have been able today to infect you with the same enthusiasm as I have for this company and all the potential that lies ahead of us for future value creation. Thank you very much.
This brings the Investor Day to an end. This concludes, at least the Investor Day for those of you following us on the webcast. And for those of you here in London, please join us for some drinks out in the hallway. Thank you very much.