Good morning, and welcome to our Capital Markets Day 2022. We are here in our recycling headquarters in Mülheim-Kärlich, Germany, and I would also like to say a big welcome to our digital audience following us via the web. Thank you for being with us today. My name is Georgiana Radulescu. I'm heading Investor Relations here at TOMRA. We have prepared an exciting day for all of you. The first part of the day will be a presentation session. I will talk more about that. We will have a strategy update, and we will present to you our future ambitions. For the second part of the day, we will go on a test center tour where you will see a demonstration of four different material types.
After that, we will go on a field trip to our demo plant for advanced mechanical recycling that we have set up in cooperation with Borealis early last year. The agenda for the first part of the day is split into two blocks. For the first block, you will hear from Tove, after which, each division will present their strategies and path going forward. Unfortunately, Michel Picandet, the Head of Food, was no longer able to be with us today due to unforeseen personal reasons. Tove will take you through the strategy update for food. We will have the first Q&A session at 9:45 A.M., and we have intended it for division questions. We will take questions both from the hall here.
For the audience here, please raise your hand, and my colleagues will be with you with the microphone. We will also take questions from the web. We kindly ask you to ask your questions in advance because there is always a small lag between the live presentation here and the webcast sending. We will take a break at 10:30, and we will be back at 11:00. After the break, we will discuss our corporate strategy with Tove Andersen and Eva Sagemo, and that will be followed by a Q&A, which starts at 11:00 and ends at 11:30. Some housekeeping rules for everyone here. The event is live-streamed, so please let our team know if you do not wish to be filmed or photographed. The restrooms are on the right side by the entrance.
No photos here or during the full trip in Lahnstein. There are designated smoking areas. Please ask my colleagues. Do not touch the machinery. There are many moving parts there. Also, please do not wander around in the TOMRA campus because there might be heavy machinery in motion, and we want you to be safe. The emergency exits are located behind you by the entrance. Please do not hesitate to get in touch with my colleagues if you have any questions. That being said, we will start by watching a short movie before welcoming on stage Tove Andersen, President and CEO.
Imagine a world without waste. At TOMRA, we believe it's possible. It all starts with transformation. Transforming the way we obtain, use, and reuse the planet's waste and precious resources. Transforming the way people think and act. Making it easier to get involved. It's not just about collecting plastic bottles or recycling waste. It's about making sure that every resource counts. It's about transforming resources so they can be used over and over again, and sourcing raw materials as sustainably as possible. At TOMRA, our purpose goes beyond what we do and has a profound impact on everything we love. TOMRA, leading the resource revolution.
Every minute.
1 million plastic bottles are being bought every minute, and less than half of those gets collected for recycling. 32% of plastic packaging waste gets into nature every year. If we continue the way that we are operating today, by 2050, there will be more plastic than fish in the oceans. If you look at agriculture and food production, that represents 20% of the global CO2 footprint, and still we waste a third of the food that we are producing. The way that we are operating today, businesses that are operating and how we are acting as people today is not sustainable. It needs to change. In TOMRA, we want to play a proactive role in changing that. Our vision is to lead the resource revolution.
We believe that businesses have the power and responsibility and the obligation to help manage our planet's resources today and tomorrow. In a world that is changing, our question is how fast can we at TOMRA go, and what will it take? That is what we're going to talk about here today at this Capital Markets Day. My name is Tove Andersen, and I'm the CEO and President of TOMRA, and I'm really excited to welcome you here at MK to the Capital Markets Day, and for you that are joining online. I'm really looking forward, together with my leadership team, to give you an update on our business and our strategy. I joined TOMRA almost a year ago, August last year.
I spent a lot of my time these first 10 months to get to know the business, to travel around, to meet our people, to meet our customers and other key stakeholders. That has, of course, been important for me to establish a view on what are the challenges and the opportunities that we are facing, and how we should address them, and how should we have an operating model to be able to execute on the strategies. What has met me when I've been traveling around? I have met really passionate, competent employees that really wants to make a difference for our customers, and a difference for the society that we operate in.
I also have met customers that truly see TOMRA as a partner, a partner that they work closely with to increase profitability of their businesses and minimize their environmental impact. Of course, these 10 months has not been easy either. We are still, you know, at the end of the pandemic, but that has, of course, impacted us throughout this period and still impacts us in China. It's also been a period with rising inflation, the sad invasion of Ukraine by Russia, supply chain disruptions, and so forth. These short-term challenges, which I must say I've been really impressed by the organization, how they tackled them, these short-term challenges doesn't take away from the strong fundamentals that our business are within. I often get the question, "Has there been any surprises since you joined TOMRA?
Has anything surprised you here?" In general, entering the company has just reconfirmed the positive impression I had before I joined. Actually, I have been positively surprised around the opportunity space. I guess I thought we had come further than we have when we talk about circularity and resource management. Looking into this, you just see that the opportunity space is even bigger than what I envisaged. Of course, we have a long history to build upon, also as illustrated on the graph you see here. We are actually 50 years today, and we have grown from being focused on collection to now have three legs that we stand on. We still have collection, where we sell reverse vending machines to ensure that bottles doesn't get into nature. Still, a half of our business.
We have the recycling division, where we sell sorters that can more or less sort anything to enable it to be recycled. We now have the food division, which is a third of our business, where we make sure for fruit and vegetables that every resource counts. Building on this 50 years history, we have created a broad business platform, but at the same time, we have been able to keep the entrepreneurial spirit. That leads us to where we are today. We believe that we are uniquely positioned to leverage the global megatrends that are happening around us. You know all of these megatrends very well, so I don't need to explain them to you. Of course, there's never been more focus on climate change, never been more ambitions around reducing carbon footprint, and circularity is a part of the solution.
Similarly with resource scarcity, to continue the way and consume the way we're doing today without, you know, utilizing resources over and over again will not be feasible. You also have the demographic and social change driving, you know, increased demand for fruit, vegetables, and high-quality food. Technological breakthroughs create new opportunities and automation, and of course, rapid urbanization drives that we need to have a holistic resource management system. We are then in a unique position. In all the key segments that we operate in, we are the leading player, and that is across all the divisions. We have the best-in-class technology, and that is of course one of the reasons why we are a leading player.
We also have, you know, 50 years of knowhow, that we can advise the customers, that we can have a good service for the customers to ensure that they can operate continuously. We have purpose-driven employees. Now we are 4,600 purpose-driven employees with a strong culture, and that, I guess, is what has impressed me the most since I joined the company, with can-do people. There is no problem that we can't solve when we work together, and that we do. This has then created this position, where we believe that we are really perfectly positioned to then leverage the global megatrends that are accelerating around us. Today, we are presenting to you an ambitious strategy where we will accelerate growth in our core businesses, and we will develop adjacent opportunities.
Let's then start on the first part and talk about how or what is going to be our roadmap to accelerate growth in the core. We will start with the collection business.
I want to teach my children to respect nature and to protect the environment, just as my father taught me. My name is Silje, and I work at TOMRA Collection in Asker, Norway. When I finished studying sustainability, I looked for a company that works with circular economy and has an environmental impact. At TOMRA , it's easy to connect the dots. Every time we install a reverse vending machine, it means that we're keeping cans and bottles out of nature and landfill. We work to enable clean loop recycling, giving bottles and cans the best chance of becoming new containers again and again. Together with our customers, we collect over 40 billion bottles and cans for recycling every year. That's not enough. Our goal is 500 billion.
I'm excited that every time a person uses a reverse vending machine, we're all contributing to a more beautiful and healthier planet. My children say that I'm returning bottles for a living, that I'm a professional bottle picker-upper, and I love that. I can't imagine anything more meaningful to do.
Hello, everyone. Good morning. I'm Harald Henriksen, heading up Collection. I have a few topics I want to cover today. First, some facts on the business. Then our growth drivers. I will talk about legislation. Also, our go-to-market strategy. I will also touch upon competitors, innovation. I see we're all nodding, so it's the right agenda. Also supply chain, due to the sort of issues we have globally now. I'll touch upon that, and then I will end with our big, hairy goal. I have less than 20 minutes, so please note your questions, and then we'll take it in the Q&A afterwards. I'll just start with some facts, and this is sort of the current situation that we are represented in around 60 markets.
We have around 70% market share, probably around 70% on number of machines, and maybe a bit more than 70% on the revenue, if you add revenue per machine. 81,000 machines globally in the markets, close to NOK 6 billion in revenue. We collect 43.6 billion containers through our machines every year. We have sort of real-time numbers on that because 80% of our machines are connected to the cloud, and then we have that information, and it, of course, increases every year. 43.6 billion is less than 3% of what is being sold of beverage containers every year. That shows the potential we have. That's actually the number we like to refer to instead of talking about the number of machines.
It's all about the number of bottles which is available. Growth drivers. The biggest growth driver for us is legislation and our ability also through our public affairs team to actually both influence and consult with governments all over to be able to put in place the best practice, best possible, most efficient type of deposit scheme. That's number one on the drivers. Number two is, as I said, you know, we have 81,000 machines out in the market. That's an asset to us. Those machines will be replaced, and they are being replaced after seven years, eight years, 10 years. Some of you don't have a machine in 20 years. What we see is that innovation coming with new innovative products is a trigger to generate demand in the market and trigger replacement.
That's definitely one of the big drivers as well. It's probably more important to come with new technology in existing markets instead of in new markets, because in new markets, we have a competitive portfolio anyway. That's sort of a, you know, part of the growth drivers. The third one, which is not mentioned here, is also when we enter new markets, we talk to a lot of stakeholders, customers. We see the opportunity to also generate business in a bigger part of the value chain. One example is in Australia, where we are running the whole IT backbone of the system, deposit system in New South Wales. We see all these opportunities also when we go into new markets. On legislation and new opportunities today, I said, we are in 60 markets.
There are actually 40 one-way deposit markets globally, and then around 20 which have voluntary refillable schemes, and we work in all of those. What we see now, as I said, the biggest driver is new markets, but it's also modernization and improvement of the existing markets, because there are actually several markets where the deposit scheme is not as efficient as it should be. California is an example. We have no business in California yet, but it's a deposit market, so a lot of improvements has to be done there. Examples here are Connecticut in the U.S., where they have decided to modernize the system. Handling fees are being increased. More beverage categories are included into the system, and in 2024, the deposit value will be doubled from $0.05 to $0.10, and that will seriously improve that deposit system and the performance of it.
Quebec and Canada have decided to modernize their system. All the sort of regulations and details are not ready, but we expect that it will be more beverage categories, increasing handling fee, much clearer collection targets, and also doubling of the deposit value in Quebec. We have new markets like Latin America. We expect Uruguay to be the first one-way deposit market in Latin America. We already have 2,000 machines in Latin America, but that's through a distributor on a more refillable type of schemes. We expect Singapore to be the first deposit market in Asia, and many countries look at Singapore, so that will be extremely important for us. We have moved our Asian headquarters, Collection headquarters from China to Singapore.
Just a few weeks ago, we have also managed to get the Minister of Environment in Singapore to travel together with us to New South Wales to have a look at our setup there. We have already a lot of good connections in Singapore. We know that Australia will actually be the first deposit continent. It's only two states left. It's Victoria and Tasmania. It's ongoing tender processes in both of those states now. Victoria will go live in July next year. Tasmania, something similar. That will be the first continent with deposit in all states. Things are also moving forward in New Zealand. Europe is probably the most important market right now, so I'll zoom into that.
In Europe, only 10 out of the 27 European Union states have deposit. Around 1/3 Of the population in European Union today can use a deposit scheme, and we expect that over the next 5 years, another one-third of the population will be able to use the scheme in addition to UK. We also expect, and we see there are movement in Serbia and in Turkey. A lot going on in Europe these days. This is all based on the Single-Use Plastics Directive and the target set by the European Union. Very exciting times in Europe. If we talk about our sort of go-to-market strategy in Europe, and actually in most countries when we talk about new markets, we always want to go into the market early.
Not too early, because that will be too costly, but not too late. It's sort of a timing issue. We want to be in a market with our own people as early as possible to be able to build relationships with stakeholders, customers, set up partnerships, really learn the market. I referenced Singapore now, and that's the kind of approach we want to have in all markets. What you see on this map with the TOMRA logo is actually where we have our own offices. We have distributors, but we always want to have our own office when a deposit is being introduced.
We have people, and we have set up probably worldwide close to 10 companies over the last 12 months -15 months in the markets which will implement deposit over the next few years. Competitor setup. We believe that we have a very strong position. This slide of what you see on the right-hand side, I think I probably used for many, many years. It's probably the same. I started in 2004. Wasn't that different at that time. Maybe some changes on the names of the competition, but it has looked like this, so it's not really a big change on the competitive setup. We have always also had a few startups, small family-owned companies starting up in different countries, some disruptive companies, and that's probably increasing now.
We see a lot more startups, but we are following that very closely. Our sort of, let's say, key elements of keeping this position is that we have long-term relationships with all the big retailers. And that's, of course, extremely important for us, a trust-based relationship with the customers. We have a service network. I said also that we like to have our own companies, and that means also that we like to have our own service technicians, and that's something that our customers really value. It's not third party. It's TOMRA hired people. As an industry leader, of course, we will always and should always be the innovation champion. We should always be the one innovating the technology, the way we also innovate the market with leading technology and leading solutions. That's important for us.
We have a solutions portfolio, meaning we have modularized products which we can adapt to the different market needs. That's important when you enter a lot of new markets because no market is similar. There are always differences between them where we need to adapt. If we look into our innovation strategy, you know, it's always based on customer centricity and ability to generate a good experience for our customers. Number one is, as I said, experience. It's a great recycling experience for the user of the machine or the consumer, so that's important for us to think about, and you will get a demo of this R1 product in the break later today at 10:00.
Also for the retailer or the customer buying the machine, it should be something which is very efficient, so that the customer can have the peace of mind of, you know, knowing that they bought the right product. It's accurate, it's secure, it's efficient, it has an efficient service network, it has digital products which the retail store owner or the retail chain owner can use to make sure that the whole fleet of machines are running perfectly. All of these things are really valued by the customers. Of course, we want it to be a smart investment. We want the customer to know that this is a smart investment for the future. It's a machine which is prepared for future changes in the market.
You know, with retailers, they are all digitizing their systems now. There's a journey going on. We have developed a lot of what we call APIs, making it possible for the customer to integrate their digital ecosystem into ours, loyalty cards and stuff like that. So, it's very adaptable for the future. This is a good example. You know, I think this machine, which we will see a demo of, also is answering on all of these three elements and definitely a great recycling experience. Customers are driving past many other stores to get to a store where they have this machine. We have this machine now in eight countries. We started in Nordic countries, where we have sold now a few hundred machines.
I've talked to some of the users, the consumers, and the feedback I get, the only problem with the machine is that it didn't come several years ago. They really love it. We see up to 300% increase in return volume. If a store buys this machine, and you see that increase in volume, of course, the store gets a lot of new customers, so their revenue increases as well. It's actually really answering on what we want to achieve. On the solution portfolio, which I talked about on one earlier slide, being able to adapt to the different needs in the different markets. This is some pictures from New South Wales in Australia, where we have a joint venture with the biggest waste management company, Cleanaway.
They have trucks. They do the processing. We own the material together. We sell aluminum, plastic, and glass. This is a market where retail does not participate, so we didn't really have a customer to sell the machines. We developed a solution, these kiosks you see, 20-foot sea containers, where we have modularized, you know, part of the RVM in the front and an especially designed back room. We rent the land where these are, golf courses. There was one at Bondi Beach as well, parking lots and so forth. We have reverse vending centers, where we rent the building, and we have machines. We have single RVMs, which we have managed to get into some retail stores.
We have our technology in automated depots, and we also have a counting center with our technology for the manual collection. The way the business model is that the actual bottle is the revenue-producing unit, so we get paid a fee per bottle. All the bottles in New South Wales are counted through our technology in some way. Then we have, as I said, the full digital backbone for running the system with a very popular app as well, which the users can use to get electronic receipts, to get the deposit to PayPal or your bank account, and you can play games, and it's quite a fun app. Global supply chain has been a bit challenging these days with the availability of semiconductors and also logistical issues.
We have managed to deliver on customer demand and what we have promised to the customers. Even though it has been challenging, we have managed to do that. We see going forward, this may continue, and at the same time, we see quite a big growth. Our target is to be able to produce 30,000 machines in a year. That's probably around 3x what we do now. We don't expect that will be sort of a running thing, but we have to be prepared for it because what we are running is an event-based business. You know, we will have peaks, and we need to be ready to deliver on those peaks.
One thing is production capacity, which is fairly straightforward, but we also need to focus more on dual sourcing, combining Europe and Asia in a good way to be able to achieve this going forward. This is my last slide, and you saw it on the movie as well. You know, today we collect 43.6 billion containers. Our big, hairy goal, which our whole organization is behind, is to be able to deliver 500 billion in the future, which is quite a big number. It's one-third of what is being sold. You know, this reflects the underlying market growth, it reflects our ambitions, and I think it also shows that we are fairly confident about the future. Thank you. We'll go to food.
When I cook, I like to get the most out of food. A lemon or an orange isn't just a fruit, it's part of a salad dressing, seasoning, dessert. It even goes into my drink. My name is Tom, and I work at TOMRA Food in Leuven, Belgium. At TOMRA, we transform the food industry. Our technology minimizes food waste by making sure every piece of food counts. We have the ability to look at hundreds of pieces of food a second and instantly sort it based on size, color, appearance, quality, and even sugar content. We have the responsibility to help growers, packers, food processors, and society to get the most out of food. It all matters because the planet has limited amounts of land and water, along with a growing population.
I love cooking for my friends and through my work, it also feels as if we are helping to feed the planet, ensuring every resource counts.
It's very unfortunate that Michel cannot be here presenting this today because I know he had been really looking forward to it and to meet you all. I will then give you an update on food. I will first talk a bit about the market and the drivers, our position there, and then our strategic priorities. I think the video showed you a bit what the food business is all about. It is an advanced sorting equipment to really optimize fruit, vegetable, processed food to ensure that we as a consumer get the quality that we want and the pack houses and the processing industry optimize their profitability while minimizing the environmental footprint. I talked in the introduction about global trends, and if we then circle in on food, what are the key global trends hitting the food segment or driving the food segment?
Of course, population growth and rise of the middle class. That increases the demand for cash crops like fruit and vegetables, which are, our focus crops, but also the demand for quality and consistency. Increased focus on sustainability is, also increasing, the focus on minimizing food loss. Again, I mentioned this in my introduction, a third of the food is wasted. This is not sustainable. All this, our customers in this space as well will have the roadmaps to net zero. We have the shift to automation and digital tools that are enabling us to do sorting, detection that were not possible in the before, but also, increasing automation, increased demand for automation due to high inflation and shortage of labor.
It's important in this segment to remember that this segment is cyclical by nature. The crops here are seasonal, and typical investments will be seasonal. There are regional differences, and that's why you also will see cyclical investments into the sector. If you look at the market and you look at the graph here. North America, Europe and Oceania are the mature market. The bubbles you see here represent the size of the market and the white bubble, the level of automation. You will see in North America, Europe and Oceania is the mature market with high penetration of automation. If you look at our sales, approximately 80% of our sales are in that region. Even if that region is mature, it doesn't mean that there isn't potential for further growth there.
There is still quite a bit of replacement happening, but also, you know, for new technologies, when there are new solutions being developed, it's a large market that is very ready and very fast can adopt those kind of new technologies and driving growth. Latin America and South Africa is the smallest region and also with a fairly fragmented customer picture. You will have some really large professional customers there with high automation, but also you have many small players. But it represent an opportunity for growing in the future. Asia, the biggest region, but with a very low penetration on automation and actually the automation there as well is at a very kind of lower level, simpler kind of sorting requirements and not really the segments that we are operating in.
Of course, when we look medium to long term, Asia represent a significant growth opportunities in our food segment. Why automate? I think that people often think about automation is all about cost and labor, but it's about much more than that. In this sector, food safety is extremely important. You know, these brand owners, the pack houses, the food processor, wants to ensure that what we get and what we buy in the store doesn't have any contaminants. To then have advanced sorting can be a guarantee to ensure that that is not happening. Quality improvement is another key driver. What is the alternative often? It is manual sorting. If you really want to have a consistent quality and the big brand owners, that is a big thing.
You know, they put the fruit in the grocery store with their brand on, they want to ensure consistent quality. If you try to do that with manual labor, it's very difficult. Of course, our sorters can also identify things that people would not be able to identify. For example, our sensors can, you know, read the sweetness or estimate the sweetness of an orange. Yield increase, important of course, for our customers. When you then get a fruit or vegetable into a packing house, you can then sort it into different qualities in a very accurate way to ensure that you optimize also based on market. You know, these packing houses will change this every day based on what they can sell things at to really optimize how they sort their fruit and vegetables so they can maximize the profit for the packing house.
Also at the same time, they will then reduce the food waste. You have the more known drivers as access to labor and cost. Cost savings is of course mainly driven by labor savings, but it could also be energy savings. Also, what we see now with the shortage of labor, automation is not only about cost reduction when you talk about labor, it's just to be able to get access to labor, which is a challenge. When you automate, you know that you will be able to run your pack house or processing unit every day, when you need it. We have this with minimizing food waste.
Today, that is probably not the key driver for decision, but over time, all of the customers also in this area do have their sustainability targets, will work on minimizing their environmental footprint, and automation will be a part of that journey. There are many reasons for why automate, but why should they then choose TOMRA? Why do they choose us? It is linked to our knowhow that we have a deep category knowledge that I will come back to. It is about the technology. We do have best-in-class technology in all the core categories that we focus on, and we are now also adding on digital insights into that technology. We have, and I think that's a bit unique with TOMRA as well, is that we have this local presence, local knowledge, but we are a global company.
In the food segment, we are selling into 80 countries, so we can combine this local presence and the local knowledge with a global knowhow. In food, we focus on categories because at the end of the day, all the categories have different needs. When Michel joined TOMRA beginning 2020, we had the geographical structure on our sales force. He then together with his leadership team reorganized that. Why did we think that is a better setup? It is because we want to be customer-centric. We want to ensure that we have salespeople that really understand the categories, they understand the business of our customers, and then they need to focus on certain categories.
To be, you know, a good supplier in this industry is not only about understanding our product, but it's really to understand the customer needs, which means that we need to know the whole value chain. For all these different categories, they will have different value chains, different requirements and so forth. Now we have category manager for all the key categories that we selected. The categories you see here, the six ones you see here are our core categories as we call them. They represent 70% our sales in the food segment. For all of these, we then have category managers, we have dedicated salespeople. They drive the product development, innovation and so forth, so that we have really utilizing our deep insight in the categories to really drive the whole customer experience.
Look at the competitive position and the market position. As you see on the graph or the picture on the right-hand side, we are the leading player within this industry when you look at the markets, when you look at the number of installations out in the market as well. Also when you look at we have the broadest portfolio and we are in the broadest or the highest number of different segments. If you look at the whole food sorting and grading market, it is a large market. It's between EUR 1.5 billion and EUR 2 billion. A lot of that is really low-tech detection that we are not operating in. We are operating in the high-tech, high-margin business.
If you then look at, we have been trying to estimate what is really the addressable market that we are operating in, and that is EUR 1.2 billion. If you then look at our market share, probably many of you know, and will see our sales, for example, into this segment last year, we sold approximately EUR 0.3 billion into segment. We estimate our market share to be 25%-30%. When you look at the growth of this market, the addressable market, we expect this market to grow with approximately 6% per year. Our ambition is to outgrow the market. Our ambition here is to grow more than the market and increase our market share. What is then our strategic priorities within the food segment?
It's to maximize growth and focus on operational excellence. That might seem simple, let's then dive into what does it actually mean in practice. Maximize growth. We are going to focus on three areas, or we are focusing on three areas to maximize our growth. It is the core categories, it's expanding in new growing categories, and it is to increase revenues from services and digital solutions. The white bubbles that you see here is our estimated market share. If you look at the six core categories that I talked about, just before, in those categories, we have between 25% and 60% market share. I can use citrus as an example. Citrus, we have 50% market share in North America, and we have 25% market share in Europe.
What we want to do in citrus is to utilize the knowledge and the competence we have on that category to increase our market share in Europe. This is how we work specifically category by category, and we believe there is a significant growth potential also in these core categories. Of course, these are large categories from before. You know, citrus is a large category from before, but with a significant potential for further growth. We have the expansion categories, illustrated here with cherries, avocados, and proteins. These are typical categories where we have a low market share, less than 20%. Also these are categories that are growing quickly. For example, avocado, due to, you know, healthy diet. What we do here is that we utilize the knowledge that we have.
We also utilize the knowledge from other categories, develop new solutions into these segments to drive the growth from them. We want to increase our revenue from services. Today, our revenue from services represent approximately 23% of our total revenue in the food division, and we have an ambition to grow that. We're also developing digital solutions as add-ons, but also as services that we want to sell to the customers to increase our growth. Our strategy in food has good organic growth opportunities, but also we believe there are benefits with consolidation of the industry. As I said on the previous page, we believe we are at 25%-30% of the market. It is still a fairly fragmented market. We believe there will be interesting M&A opportunities coming here, and we want to pursue them, and we see that being value-generating.
Operational excellence. In the food division, we have a very structured program on how to improve in many different areas. We call it the Cultivate program. What we focus there, we focus on productivity, supply chain optimization, technology management, and customer focus. Just to give you some examples. On productivity, it's a lot about taking out synergies. Many of you will know that our food division is the result of four major acquisitions. We have taken out a lot of the synergies from that, but there are still opportunities to still take out more. Supply chain optimization. Of course, global sourcing and resilience is high on the agenda in the food division, as in all our three divisions.
Here is a lot about leveraging the production capabilities we have in New Zealand, China, and Europe, and how do we balance that out to become more resilient, and of course, our sourcing strategy. Also what we are looking at here, it is our go-to market models country by country. We're also looking at changing and are changing in some markets to ensure that we are closer to the customer. Technology management, you heard Harald talk a lot about modularization and what we have done in collection to make our production modular to then both be flexible, agile, and have lower cost. Here in food, we have a quite large legacy portfolio because we have had all the acquisition, and there is a significant potential here by modularizing our product to increase efficiency and agility in production. Of course, customer focus.
I talked about this category focus, but also we want to ensure that we have a consistent customer experience from the initial talks, to we do the sales, to we do the survey, so we can ensure a consistent and a good experience for our customers. That was short on operational excellence. What goes through everything we do in food, it is about making sure every resource counts. We want to play a role together with the value chain, not only to drive the profitability of our customers, but also to reduce the environmental footprint and to contribute to reducing food losses in the world. That's why we have set a quite ambitious goal on that by 2030, we want to contribute with reducing post-harvest food losses with 50%.
It will not be something we'll do alone, so we are working with the value chain to support the whole value chain in achieving this important target. That ends the food presentation, and we will then move over to recycling.
If there's one thing I could teach my daughter, it's that everything in this world has value, even waste. We just need to change how people perceive it. My name is William, and I work in Xiamen, China, for TOMRA Recycling. At TOMRA, our global team specialize in unlocking value from different types of waste, such as plastics, metals, wood, and even textiles, so that these materials can be used and reused in many different industries. By improving the overall sorting process, we can achieve higher recovery rate and less material losses, optimizing the customer return on investment. Our technology creates the purest fractions that will be turned into high-quality product, giving materials a second, third, and many more lives.
At TOMRA, we see waste as a resource, and working together with our partners, we shift this perception of waste and come up with innovative solutions that will accelerate the transition to a circular economy. Maybe one day, my daughter can also be part of this transformation.
Good morning, everybody. My name is Volker Rehrmann. I'm heading up our Recycling business, and we are very happy to have you here in our Recycling headquarters. I would like to start with sharing a little bit of a story of the recycling industry because it's not so familiar to everybody. This world is very different today in many aspects, of course, but this in particular also with regards to the recycling industry. In the past 25 years, we all thought in the Western world that we are doing good. Probably all of you at home. You know, separating the plastics packaging into a separate bin, and we thought we are doing all great with recycling. It was not.
You know, material was mainly shipped to China, and we all hoped they would do some good recycling with that, which they didn't. They just picked the good material, the cherry-picking. At a certain point in time, you know, everybody realized that, and this whole system, you know, couldn't continue anymore as it was. China stopped the import, and then we suddenly realized in the Western world, oops, you know, what do we do with the material? Are we really recycling? I call it a little bit, you know, the feel-good phase of recycling. We all thought we were doing good, but we weren't. This is changing. We are now coming into a new phase of recycling. We are now coming into, you know, let's call it the professionalization phase of the recycling industry. Why is it changing?
First of all, we have realized that we cannot continue like that. All the pollution, all the plastics in the ocean, that was a big driver. China stopping was a big driver. The sustainability agenda on top of this creates suddenly a demand for recycled material. This is new. It was never there before. Every brand owner, every consumer goods company now has a target for using recycled material in their products because it saves a hell lot of energy. When you do recycling, you save so much energy and reducing CO2 emissions. There is a big demand for this recycling material, but it's not available on the market because what people need is high-quality recycled material, and the industry is not prepared for that. We have very big drivers for this change in the industry.
Legislation has also recognized that, and legislation is reacting to that, and it's another very big driver now, that legislation is putting pressure behind that this industry is now really changing and becoming a real recycling industry. On the right side, you know, just as a reference, you see targets of consumer goods companies for what they have publicly committed, how much recycled content they would like to use in their products. You can also see how far away they are from that. There is already now a big demand for high-quality recycled material. Unfortunately, it's not available. There is a higher demand than there is a supply of high-quality material into the market. This is an example of what legislation is doing. I mean, legislation is doing a lot of things.
It starts in the country typically with, you know, EPR system, Extended Producer Responsibility system. You know, deposit system is another measure. We see bans of material. We see taxes, plastics taxes, as you all have heard about in Europe. A lot of measures. In Europe is clearly a frontrunner on this legislative side. If you just look at what the latest Packaging and Packaging Waste Directive requires from countries to reach recycling targets. This is example of Norway. If you look at the green dotted line there, it shows you how much material is recycled in Norway using a new measurement method, a more realistic measurement method. The orange line is showing you what the target is.
What it fundamentally says, within the next few years, Norway has to double the amount of plastics packaging it needs to recycle. These examples you can do for all other countries as well. There is a big pressure to increase the amount of recycled material. Now there are also coming new players into the field, the chemical industry. If you look at the left side of this slide. The chemical industry, the producers of plastics, of virgin material, have for 35 years successfully ignored that there is something called recycling. They cannot anymore. They are also under significant pressure. Their brand owners, their customers, require more recycling material to be used in their products. Now they have finally woken up, and they have also seen they need to use more plastics waste in their feedstock.
Instead of using pure fossil fuels, you need to use more plastic waste material in your feedstock. They have also publicly committed, just a few examples that you find here, Shell, LyondellBasell, OMV, Dow Chemical. You know, we can make this long. Every major producer of virgin plastics has a public commitment to use significantly more recycled plastic waste in their feedstock material. Currently, they are, you know, they are close to zero, so it's a new player also coming into this field. If you add up, you know, what the public commitments are, you easily come to 10 million tons that would be needed by the end of this decade. Now, let's focus a little bit on the right side of it. We understand, you know, there is a high demand for this material out there.
On the right side is the shocking or, you know, as Al Gore would call it, the inconvenient truth on the right side of it. This is the latest report from Material Economics, looking at, you know, the situation for plastics in Europe. They started with more, you know, realistic figures looking into how much plastic is brought into the market in Europe. It is around 45 million tons of plastics brought into the market in Europe. Then they looked at, okay, where is this material ending up? You see still the majority ending up in incineration and landfill. 24 million tons in incineration, 14 million tons in landfill. 85% in Europe of all the plastics brought into the market is ending up in incineration and landfill after 30 years of trying hard to recycle.
Only 15% is really recycled, including the export of material into other countries. 15%. The problem with that is that those 15% are mostly down-cycled, so into more low-value application, but that's not what the market wants. The market wants to replace virgin material, needs higher quality material. This shows you that the recycling industry has only just begun. It's really a new phase in the recycling industry. We are just starting to make recycling real to professionalize this industry. From this right graph, you can also see what it takes in order to get there, to reach the demand and also to reach the legislative requirements. Number one, we need to recover more material. We need to collect more material, recover more material to bring it into the recycling process. That's number one priority.
Number two priority, when you have it in the recycling process, so when you have hold of it, we need to produce high quality material. Not downcycling, we need to produce material out of the plastic waste that has virgin-like qualities because that's what the market really needs. This is then also kind of describing what we at TOMRA are focusing on with our solutions. If you look into, you know, what do our sorting systems do for a circular economy? Sorting is one of the, you know, some might say the essential step within a circular economy. Our solutions do those two things I mentioned.
The first one is, you know, we recover materials out of mixed waste streams with our technology, and you will see a few examples within an hour or so that we show you how these machines work, what they can do, how they recover material. You can basically use any type of waste streams. You can even use your dirty household waste at home. You know, put it into your, you know, modern, sophisticated sorting plant, and the material will be sorted. This sorting step you can see as a first step, recovering the material. Think of it, if you would put a sorting plant in front of every incinerator, you could recover all plastics out of it so that it does not end up in incineration and create CO2 emissions by basically burning fossil fuel.
That is technically possible today with our solutions, and it's being done in a few examples. We have developed a segment. It was not easy, and many people believe it is not possible, but it is possible. We started a few years ago as a pioneer to develop this segment, and we have a few plants, incinerators, we have installed sorters in front of it. In the Nordic countries, in Norway, there are examples. In Sweden, there are examples. In the Netherlands, we have examples of that. This works. It's not a technical problem, it's just a problem, you know, do you want to do it, and is there kind of financial incentive behind it? The second part that
You know this first step, you know, basically sorting mixed waste stream makes up 65% of our business that we do. The next part is the recycling process. Once you have recovered, make this material available for a recycling process, you need to create high-quality material. This basically means, yeah, if I put it very simple, you need to wash and sort the material in the recycling process. You need to make it clean and sort it into the highest purities. This segment makes up approximately 25% of our business. As a third element of the business we are doing, we have the mining segment, where we use our sorters to recover and sort ores, basically to reduce the environmental impact.
Our solutions can save a hell of energy and water in the mining industry by using dry sorting compared to traditional waste, wet processes. This is just a picture showing you how this typically looks like, a sorting plant. On the right side, it is one in Norway, close to Oslo at IVAR. On the left side, one in Germany. Gives a little bit a flavor of how these sorting plants look today. They are developing into fully automated plants. It's not the dirty old stuff anymore like it used to be in the past. In the future, you will see highly automated, more like production sites. The latest one, the most modern sorting plant in Europe is in Munich, built by PreZero. It has around 50 of our sorters, fully automatic, clean, nice, great.
Now let's look at a little bit how we see the market growing, going forward. This is important for you. On the left corner at the bottom, you see how we currently estimate the market for us, and the market is the sensor-based sorting equipment market in the recycling industry. We currently estimate it to be around the EUR 400 million market. Still relatively small, has already grown nicely over the last years. We estimate our market share to be around 55%. The next step we will see, and all studies show it, there will be a capacity growth in the market. More material will be recycled going forward. There are various studies out there that you can look after. The general average estimate is that there will be an average annual growth of 8%.
Our markets will grow by an average growth rate of 8% just by additional capacity. On top of that, we see that there will be a higher degree of automation happening. I mentioned the fully automatic plants. In the past, there was still a lot of manual sorting together with the optical sorting. In the future, the trend will be fully automated plants. There will be a higher penetration of technology of our sorters in this, which will add to this growth rate of 8%. In total, we estimate our markets to grow in the next years with around 10%-12%. You can assume that we will defend our market share, that we will grow with the market of 12% per year going forward.
On top of that, we will, of course, do more innovation, as we have always been doing in TOMRA. TOMRA is the pioneer in developing new applications, new market solutions, developing new markets. We will also innovate in new segments for automated sorting in different material categories. It's not only about plastics, we are also sorting metals. Aluminum alloys is an example. I will show you on the next slide some examples of that. On the right side of this slide, you see what also Harald has shown, our competitive position. I mean, we are the market leader in this segment. We have been the pioneer. We have developed this market over the years. Of course, we clearly have plans to continue to do so. Just a few examples that I mentioned, why we will create additional growth to just the capacity growth.
On the left side, you see the plastics part. I mentioned that the quality needs to improve in the recycling process. The market needs high-quality recycled material, and that requires more technology coming into this segment. What we have been doing at TOMRA, we have also invested together with Borealis in a demonstration plant where we wanted to show the world that it is possible to produce very high quality of plastic waste no matter where the material comes from, whether it comes from nice, clean, source separated material, or whether it comes from dirty residual household waste. We've invested into very advanced process there, a very advanced washing line, very advanced sorting systems there to create a very high quality. That's what you will see this afternoon when we go there.
On the right side, you see some of the examples where we want to continue to innovate new solutions. Wood sorting. It's not only the plastics industry that would like to use more recycled content in their products, it's basically every industry. Every company has a sustainability agenda, and every company wants to use more recycled content in their products. It's also happening in wood, it's happening in textiles, and it's happening in metals. You will see a demonstration also today in our test center here about wood sorting, where the target is exactly the same. Use old wood, which is a bit contaminated, sort it into high qualities so that you can use it in new products again. Textile sorting is a very interesting segment that is currently developing.
We all know that the way we use and treat textiles is a mess. You know, very often this fast fashion industry cannot continue like that. They also need to do more recycling, closing the loop also on textiles. We have the first sorting plants out in the world, and TOMRA will also say a few words later about this, the opportunities we see there, where we sort with our systems textiles into nice qualities of material that then can further be recycled. Last example, aluminum alloy sorting. Aluminum recycling is not necessarily seen as a problem because the recycling rate of aluminum is extremely high. It's already today 90%. So you could ask, "So what? This is working well." Yeah, partly yes.
It has a high value, so it is the recovered and recycled, but it's always a mix of aluminum. It always goes into the lowest quality because it's just a mix. You can only use it for low-quality applications. The trend today for aluminum usage, think about all the cars that will have aluminum bodies, you need higher qualities. You cannot use a mix. You need pure alloys. That's the latest and you know, I have a technology background. For me, also the greatest development we have been doing in TOMRA. We have developed a laser-induced breakdown spectroscopy system, where you shoot with lasers on aluminum pieces, create a plasma, measure the elemental composition of it. It's a little bit like Star Wars.
While the objects are moving, you shoot a laser on them and measure the resulting emissions from plasma. It's just amazing. That will help you know, also creating nice qualities of different alloys, which then allows closing the loop on aluminum also in higher applications. Looking a little bit into our strategic priority areas. I mentioned the first one already. It's accelerating growth. I mean, we use this analogy of the iceberg here for obvious reasons. Currently, recycling is only looking at the tip of the iceberg. There's so much more material that needs to be recovered from areas where it's currently lost, mainly incineration and landfill. We have the technology. We just need to convince the world and demonstrate that it is possible and doable and that it makes sense.
That it makes sense is without doubt. Instead of burning plastics, you should recover it and use it to replace virgin material. You have a double effect. By not burning it, you save CO2 emissions, and by using it to replace virgin material, you again save CO2 emissions. It just makes perfect sense. We expect incinerators in the future will become part of the European emissions trading system in Europe, that they will have to pay for the emissions they produce. These developments will drive this business. We will increase the recovery of recyclables. It will just make our addressable market bigger. Secondly, we will focus then on developing processes and enabling a high quality for those recovered plastics waste. Without that, it doesn't work. It needs to be in balance.
What you recover, you need to be able to, you know, bring to a high quality so that it can really replace virgin material. That's where the demand of this world of the brand owners is. On the right side, you see the more obvious one. Of course, we would like to continue to provide leading solutions and innovations to this industry. We have always been using cutting-edge sensor technology. We will continue to do that. I mentioned this LIBS, laser-induced breakdown spectroscopy system. But also, you know, the latest trends in artificial intelligence, they help us. Object recognition using AI, using deep learning networks has made tremendous success. We will use this.
We are already using and we'll use more of that in sorting tasks where, for example, the material is the same for more granular sorting. Our classical material sensors see it's the same material, but there are special reasons why you want to further sort it. Example would be food-grade, food contact material versus non-food contact material. Those type of applications. And there is a long list of applications where artificial intelligence clearly helps going forward. We will, of course, do this all based on our really deep market expertise. We have been doing this now for 25 years. You know, we have not jumped on this green train. This is basically all we are doing, all we can do.
We have really deep market expertise and we cooperate with many players and stakeholders in this market. Of course, like in every presentation, you see digital solutions will play an important role in the future. The recycling industry is not a very mature industry. The recycling industry needs to professionalize, and digital solutions bringing more transparency into this industry, into the material flow, will be an important backbone on that. I encourage you to also, you know, we do some demonstration of our digital solutions on that side. I encourage you to take a look at it at the break. My final slide, you know, what is our mission here? We are here to enable closed loop recycling solutions, material stream by material stream. Biggest focus is still on plastics.
There is the biggest problem, but also for lots of other streams, material streams, as you will see in our product demonstrations in the test facility. We have committed that we want to help the world, you know, coming to 30% rate of closed loop recycling for plastics. Currently we are at 3%. We have committed by the end of this decade, we want to achieve that. Think about it, the world today is only 8.6% circular. There's every year this circularity gap report. In general, when it comes to the materials, the world is consuming 100 billion tons of material, and only 8.6% of that is circular. So there's a lot more to be done in the future. Thank you. I think we are ready for question and answers, Georgiana.
Thank you, Volker, and thank you to all the speakers so far, and invite you all on stage. This is our first Q&A session, dedicated primarily to the divisions. We will take questions both from here and from the web. If you have a question, just raise your hand and my colleagues with the microphone will be there with you. Yes. Okay. We have one question here. We'll take the one from Aurelio.
Thank you. It's Aurelio from Morgan Stanley. The first question is around, I think it's the first time you talk about, Latin America and APAC in collection being so prominent. I wonder, obviously the timeframe for that is going to be slightly different. I don't know if you can put some, not necessarily numbers, but give us some indication of the growth that we could see Latin America, because obviously Uruguay starting, then many other countries could possibly follow, Singapore as you talk about. What's the opportunity going forward in these markets? Because I think the European side is more well understood.
Yeah. Latin America, as I said, it's Uruguay will probably or most certainly be the first country in Latin America. It's a small one. Not that many inhabitants, but it's probably the most, let's say, relevant. You know, it's very hard to say when Chile, when Brazil, when other countries in Latin America will introduce deposit. I don't really have a number on that. I think in Asia, we have worked in China for 10 years. We believe that it's also hard to say anything about years. We have, as I said, tried for 10 years. It's a lot of work with politicians and so forth, but China will probably start with some big pilots.
A city in China could be a quite big pilot, but it's a few years into the future. Singapore has very concrete targets. It will happen in Singapore. The question is whether it's in 2023 or 2024. It could be later because it's political processes. I think it's a very good starting point. You know, as I said, everyone in Asia is looking to Singapore, so a very good deposit system in Singapore could also be a driver for other countries. I think that's the only thing I can say about these areas.
Okay. That's helpful. If I may, one more question. It's around the current exposure that you have in throughput models. I don't know if you can give us some numbers or some rough estimates of the percentage of your sales that go into throughput models. On that, of the big European countries that don't have a legislation right now, I'm thinking about France, Italy, Spain. Do you think that some of those big countries could go down the route of implementing throughput models?
Yeah. Today we have throughput models in all Baltic countries, Latvia, Lithuania, Estonia. All states in Australia will have a throughput set up. Of course, a lot of the business we're running on the East Coast of the U.S. is throughput based. In our plans going forward, we see that most Western European or most European countries will have regular sales and service. It will be fairly small on throughput, but it could be more in Eastern Europe. I think that's, you know. Also new states opening up in the U.S. could be a mix of sales and service and throughput.
Okay. That's great. Maybe if you can just squeeze one last question, sorry about that. On recycling, I think you talked about very interesting opportunities going forward. It feels like downstream is still the biggest bottleneck. Whether it's more mechanical recycling, chemical recycling, what do you think is going to be the trigger point for the world to see more recycling upstream? Is just downstream the biggest kind of bottleneck at the moment?
Yeah, it's always a combination. Those two things need to be in the balance. You're right, currently, you know, we are collecting more material than we use in high quality applications. What is really needed is a trend towards more quality recycling processes. That is happening today because for the first time there is a demand for it out there. It is happening mainly on the mechanical recycling side. The role of chemical recycling in the future is still a bit open, I would say. I mean, we are absolutely convinced it will play a role there for some difficult to recycle material. I don't necessarily see a trigger point. It's an evolution. It's happening already today year by year, and we see it also in our business.
The good thing for us is that every recycling process, whether it's mechanical or chemical, needs sorting as an essential step. Also chemical recycling. It's not like, you know, sometimes people believe you just throw, you know, a mix of waste into a chemical process and out comes gold. It's unfortunately not like that, or fortunately from our perspective. A chemical process needs a stable material input flow. It cannot just fluctuate too much, and that basically means it needs to be sorted, prepared into a certain recipe.
That's great.
Thank you. Thank you. Let's just take one question from the web first. This is for Volker. On the recycling business, how do regional municipal differences in recycling impact your ability to scale and the industry's ability to source recycled material of sufficient quality? Regional municipal differences in recycling.
We don't necessarily see that as a major problem because as I said, we can deal with you know all types of different compositions of waste, whether it's separately collected or whether it's a mixed waste. In the past, it was different. We relied on the more separately collected material stream. Today, we can work with all different types of waste streams and you know whether it's a single stream system in the U.S., whether it's a Green Dot system in Europe or whether it's completely residual household waste. That doesn't impact our ability so much there.
Thank you. Can take one more question from the hall. Yes, I think we will take one more from this side.
This is Jörg from Union Investment. I have also a question on recycling. I mean, the objectives to do more and the regulation, it's all, I think, in place and getting ready, but the question is a bit about the economics. If I talk to, let's say, waste management companies out of the States, they usually dump everything on the landfill. And they would say, "Well, we're not getting incentivized to recycle, and it would also cost too much to do it, so we're not doing it." What's your solution to persuade them to use your machines and your objectives?
First of all, I think it's a very valid observation. If we reflect a little bit why recycling has never taken off, you know, one of the main reason is it has never been a great business, so people don't invest into this. That's why also the legislative part is so important. We see two trends here. One is the demand. Brand owners want this material. They need this material for their sustainability agenda, and they are willing to pay premium prices for it. Number one. I mean, look at the, you know, the price development of PET, highest quality PET recycled material. For many years, there is a significant premium over virgin material. Who would have ever believed this? When I start in the recycling industry, especially the Americans, they would have laughed at you.
More expensive than virgin? You're kidding. No, it is. That is one driver. Think about the oil price. The main factor why plastics virgin material is so cheap compared to recycled material is the oil price. That has been, you know, in the past, how many years? 15 years, the oil price was on a very low base, so it was difficult for recyclers to compete. The cost for recycling material is depending, there is kind of fixed cost on collecting and sorting it. The prices of virgin material are mainly depending on the oil price. When, you know, when the oil price was so cheap, it was partly difficult to compete. Where is the oil price today? What are expectations for the future for the oil price? Clearly you are improving situation for it.
Last but not least, legislation. Look into the developments we see here. Emissions trading systems. Emissions will get a price. If, when you just dump or burn plastics, you will have to pay for it. This will make recycling more attractive. The plastics tax that Europe has introduced, I mean, it depends on how it will be implemented in the different countries, but basically it will make virgin plastics more expensive. It's already happening in the UK and in Italy. It makes virgin plastic compared to recycling plastics more expensive. Various elements contributing to that where I think, and you're absolutely right, that's a main driving factor, recycling will become a business.
Last but not least, when you think about that, when this industry professionalizes and builds plants at scale, it will also be possible to become more cost efficient on producing recycled material.
Thank you, Volker. Let's take one more quick question from the web. I think it is for all of you. Does your new growth ambitions include M&A or is it purely organic?
We'll talk a bit about that also later, but the strategy that we're presenting today is not dependent on M&A. We believe that we have significant opportunities to grow organically, and that will be our focus. However, in the food segment, as I mentioned, we have a fairly low market share, 25%-30%. It is a fragmented market. We think it will be beneficial to do some consolidation there, so we expect it to contribute into our ambition on growing in food. In the two other division, M&A will mainly be linked to potentially technology, digital capabilities, as Morten know, enabling technologies for driving the business. Thank you. Over. Can I have one more question? Yes.
Thank you. It's Michael Winkler from GLS Investments in Bochum. I have a question regarding the collection business. Could you maybe possibly tell us your expectation on annual growth rates in this business, because you gave it for the other businesses? Then also in the segment about service revenues, what's the share of service revenues? How do they grow, especially what you expect in service revenue in the future? Just for understanding, can other companies do the servicing of your machines as well? How is that share, or is it maybe possible in the future? Yeah, that would be one question.
Okay. Yeah. Service revenue, if you look at sales versus service is approximately 50/50. But if you look at the total revenue split for collection, you also have, if we keep throughput outside, the throughput part is growing due to, you know, that we have won Latvia and New South Wales, and we also expect a good development in other states in Australia. We also have the material recovery. It's mainly four different parts of the revenue, but sales and service are split 50/50. Other companies could do service as well, and earlier there was some third-party service providers. But it's not really happening.
You know, I think we really have developed our service organization, and we see customers also demanding actually that we do service ourselves because of the success we have with it. I wouldn't see that as a big sort of challenge going forward, but it is possible. On growth rate, I'm not sure what I'm going to say that, whether we want to sort of split it into the different.
No, you comment on it being event-driven.
It is event-driven.
Event-driven.
That's what I said also on the production of machines that, you know, let's say UK comes, and then we get a big share of that. Of course, that will be a really good year, and then maybe it's a few smaller countries a year, and then you get Poland and Spain, and then. It's very hard to sort of say exactly what that growth rate will be. It could maybe be 20%-30% one year, and it could be 8% another year. All depends on deposit legislation and when it comes.
Thank you, Harald. We take one more question from the web before going to Fabian. It's also for collection. Adoption of DRS, and for that matter, recycling infrastructure, has seen much higher take-up in developed markets like the EU. Studies show that some 90% of ocean plastics comes from river runoff in just 10 rivers, primarily in emerging markets. What efforts have you targeted in emerging markets, and is this not the biggest opportunity for you?
It is, it's probably the biggest opportunity, more long term. Now, of course, a lot is happening in Europe. At the same time, we continue to work in China and Singapore, as I said. We have also spent some time in India, and politicians are extremely eager to make something happen. It's back to the timelines again. When will it happen? We are definitely present. As I said, you know, we want to be early into the markets to be able to influence and make it into a sustainable system in the end. What we believe when we talk about emerging markets is that it will be a different kind of setup than what we're used to in Germany or Norway or Sweden and so forth. It's not the same retail structure.
That's why the experience we have in Australia, as an example, using our modularized systems with the kiosks and with the outdoor solutions and so forth, we think that will be a more adapted solution for the emerging markets together with the software solutions and so forth. We have already thought about, you know, what kind of technology, what kind of setups will be important in those markets.
Thank you. We can go ahead, Fabian.
Thank you. Fabian from Carnegie. You state 10%-12% growth rate for recycling mining.
Over the next years, and just having the, let's say, the growth rates for the past few quarters in mind, how should we think about that, given that you've had substantially higher growth rates now, the run rate, at least for 2022?
I was probably not good enough in my explanations. I said the market will grow with what we expect that the market will grow with around 12%. But we will do innovation on top of that. We want to grow higher than that.
Okay. Your increased sales CAGR guidance, is that primarily from recycling, mining, collection solutions, or how should we think about that?
Yeah. We will of course talk about that later today, you already looked at what we sent out this morning. We expect that recycling and collection will grow more than food. We said, you know, in food that the market is growing with 6%. We expect to outgrow the market. I would say we would expect kind of high single-digit growth in food, while we would then expect recycling and collection to grow higher. As Harald commented, in collection, it's difficult to give this growth rates because it's really about simulating when do you think the different markets will come. While then in recycling, you have the underlying segment that we are in, where we believe 12%, then we're going to work hard, as we have done always, to increase into new segment, which should give additional growth.
Thank you.
Thank you. Other questions from the room? Yes, we have one question here.
This is Moana from Alphinity. Yes, when you're thinking about recycling, it's really a systems approach. I mean, there's so many components in the value chain, and you're providing one service, which is extremely valuable at the end. I was wondering if you could provide any insights on any challenges or opportunities you see on supporting education and regulation. If you had any examples of where TOMRA, as a leader, has really pushed that, maybe on the upstream side a little.
Yeah. We've been, Volker has been working hard on that with his team.
Yeah. I mean, you're absolutely right. That's also why, TOMRA, you might remember three years ago we started our Circular Economy Division with exactly that target, to have a more holistic view, to work on more holistic solutions, because we are only. Our products are only, you know, a part of it, a very important part of it, but, you know, we need to think about a holistic system, always. We recognize that, and we, you know, we set up a dedicated team to work on that. Since then we have been working a lot with various stakeholders. Completely new stakeholders to TOMRA. We are in, let's say, daily meetings and discussions with the chemical industry, for example. The chemical industry will play an important future role, here, entering the recycling space.
We are, you know, regularly talking to brand owners who want their recycled content. We are talking to converters and of course we are talking to waste management industry as always. It's a new trend for us. We are discussing and cooperating with completely new stakeholders in the entire value chain. If you look a little bit at our publications, we have done quite some work, also white studies that we have published, on our view, what needs to happen, what the benefits of a circular economy can have to climate change, how many CO2 emissions could be saved if best practice recycling would be applied globally.
We are really doing a lot of work which is relatively new to us, where in the past we were only talking to our customers, now we are talking to the entire value chain. Not only talking, maybe talking is not enough. It's really cooperating. The example this afternoon you will see. It's a joint effort between Borealis and TOMRA, for example.
Thank you. Other questions from the room? Yes, we have one question there.
Hi, it's Kathy Sheng from BlackRock. I know the mining business is small, but I'm just curious, could you tell us about the demand and growth in that business in an environment where we have higher commodity prices, strong decarbonization plans from these big mining groups? Just wondering how much you think you can grow, over time.
Yeah, with mining, we maybe have become a little bit more humble over the years. The mining industry is a very conservative industry and applying and introducing new technologies in the industry is a cumbersome process. You're absolutely right, our sorters have high benefits for this industry and we are starting to see that. We are also starting to see that in projects, in mining projects that have a high importance for the decarbonization of the industry. Think about lithium projects. We have now many more lithium projects because this world needs more lithium. We also have many more mining projects in Europe because Europe is reopening mines.
There was a reason why they were closed, because the quality was not good enough. Again, our solutions help to improve the quality so that really mining these mines again makes sense again. Yes, we see a good growth development in our mining business and, you know, it's maybe a l-
On a good rate, a little bit lower than the one we currently see in recycling, but not far away.
Thank you, Volker. Let's go back to the web, take one question. On consolidation in food, it's from Daniel from ABG. On consolidation in food, how do you think about this and the margin picture in that segment? No impact, or do you expect it to increase margins?
I think, of course, scale is an important factor in food industry or our food business as in the other businesses. When you look at the margins in food, we work on many aspects. We work at the things I talked about around operational excellence, you know, really looking at our processes, how we produce, modernization, all of those things to increase margins in the existing business. Scale will give us operating leverage. When we look at acquisitions, we could do acquisitions for different reasons. It might be a category where we feel that we are weak, that this could be a way to enter a category.
It could be a technology that we are missing, or it could be that there will be, you know, really synergies and operating leverage from doing it. Yes, scale and margin expansion is, of course, one of those possibilities through acquisitions.
Thank you, Tove. Let's see in the room if there are other questions.
Also I remember I forgot when I was presenting food to sell the food station over here. We will have Ivan and some others of our food colleagues standing there in the break. If you want more details on food, please go and see them.
Thank you. If there are no other questions in the hall, I will take one from the web, from Sander, from Nordea for collection. Can you put any color on the current timeline for the DRS scheme in the UK? Any news or progress?
Well, as Scotland at least has decided, that's the go-live date August 16th, 2023. That's probably known by everyone. Ireland has no set date yet, but we expect that also to happen late next year. That could be wrong, but that's our expectations. UK or England, Wales, yeah. We assume that it will probably happen in 2025 with the rollout in 2024. That's not a set date. It's not official. It's just our current intelligence. You know with these processes, it could be later. It will probably not be earlier.
Thank you, Harald. I will take the last question, we have time for that, from the web. It's a two-part question. What would be the largest impact in growth and margins in case of a recession next year? I suggest we take the growth part of the question first, and then we address the margins part of the question in the second part of the presentation.
Yeah. Of course, it is something that we have been evaluating and constantly monitoring. I think TOMRA is in a quite fortunate situation that most of the segments and businesses that we are in are essential businesses. For example, if you look at previous recessions, the retailers will continue to operate. They need to ensure that their customers still are able to return their bottles. The food segment in general is very resilient toward recession. Waste management, essential industry that needs to continue running. You know, a lot of the underlying business will continue operating. But of course, if you get a recession and you get collapse of commodity prices, that will impact on future investment, and it might curb the growth for a certain period.
It will not take away from the underlying fundamentals that will then drive the growth in the more medium to longer term.
Thank you, Tove. The time is up. We will have a break. For the web audience, we will be back at 10:30. Big thank you to all the speakers so far. Hi again, everyone. I hope you enjoyed the break. It's time to sit down because we will start the second part of the presentations. Thank you. Welcome back, everyone. Welcome back to our digital audience as well. We will soon start the second part of the presentations with Tove and Eva here on stage. Before that, we will also watch a short movie.
In 2018, I read a book called Zero Waste Home, and it changed my life.
For the last several years, I've been striving to reduce plastic in my life. I don't buy vegetables in plastic. I only buy juice in reusable bottles. I pay a lot of attention to waste separation. It's not always easy and requires a certain mindset. My name is Yuwen, and I work at TOMRA Recycling in Koblenz, Germany. My work at TOMRA is focused on the use of advanced technology to collect, sort, and recycle various materials to accelerate the transition to a circular economy. It's all about making sure the materials can be reused or recycled again and again. To transition to a circular economy, we must all work together. Plastic is a valuable material, and we should treat it that way. We can do that by recycling and reusing it for as long as possible. It's truly an exciting time to be part of this transition.
I hope you all had a good break, and that you managed to engage with my colleagues and see some of the demonstration. We will now then dive into corporate strategy and sustainable growth. What we showed you before the break was how we were going to accelerate core growth in our core business. There are similarities and differences between the different divisions. When you look at the growth focus, which is a common focus for all the divisions, in Collection we will grow in as the new markets come on stream on deposit, but we will also grow in existing markets through innovation. In Recycling, we talked about growing with the segments that we're already in, but also how we're going to push boundaries and develop new segments with technology.
In Food, we talked about increasing market share and geographic presence, and focusing on the key categories. Supply chain resilience and digital with the commonalities in all the three divisions' strategic priorities. When we look at innovation, which also is a common focus, the actual areas that we're looking into is somewhat different. Harald talked about customer-centric innovation to really give a good recycling experience. Volker talked about, you know, how to unlock new segments through innovation. In Food, it's more about portfolio optimization due to our legacy. We also talked about Collection being legislative-driven, and also partly Recycling being supported by legislation. Engaging with policymakers are important in those two divisions, and somewhat in Food, but to a much lesser extent.
We talked about M&A, that yes, M&A might be an enabler more on the tech side for Collection and Recycling, but it could be a significant part, or it could be an interesting part of the growth agenda in Food. Our strategy is built on organic growth, and the really core growth engine as we see it for the next five years will be in our core businesses. However, we have a solid market position, and we have a good financial position as well, and we want to utilize this to develop adjacent businesses. Now we're going to talk about what does that mean. Volker mentioned this briefly earlier. A few years back, 2019, we established a unit for circular economy. We knew that we had significant knowledge about the whole value chain and what is needed to create circularity.
We then put aside a dedicated team to focus on that, to become a thought leader, but also to identify new opportunities to do business development. Now we have come to the point that we believe that, and see that there are significant opportunities here, opportunities that are based on our competitive edge, our market position, our knowledge, and our technology, and utilizing that in leveraging on the strong microtrends linked to circular economy and resource efficiency. What does this mean, then, more in practice? What are we looking for when we talk about adjacent businesses? We are not looking at something that would typically be in the core, and I want to stress that we will still have a lot of development activities in the core businesses, as you saw this morning.
What we are looking for here are business models that have the potential to become significant. We need to be careful on how we use our resources, and we only want to allocate resources into opportunities that can become significant. What means significant? That it could become a new leg of TOMRA. It should be right for scaling. This is not about R&D activities, long-term developments. This is about identifying business opportunities. It's about business building and identifying business opportunities that can be scaled over the next few years. It should be opportunities where we have a competitive edge, opportunities where we have the right to win due to our 50 years of know-how, due to our technology or through our value chain expertise.
Of course, it should not be needed to be said, but of course it needs to give strong capital returns. We will not enter in anything that we don't believe will give that. We will launch later today updated targets, and these targets are also applicable for the adjacent opportunities that we look into. How we will manage this is that we will manage this a bit separate than the divisions. We want to ensure that we don't disturb the divisions on really delivering on their strategies. As I said earlier, you know, the core divisions are still the kind of key part on delivering on our financial targets for next five years. We will ring-fence resources working on this to ensure that we don't disturb that.
Also we believe that the adjacent opportunities should represent up to 10% of revenue in five years. To then say a bit more on, the areas that we are looking at, textiles, digital, plastic and reusable. Starting with textiles. Textiles is probably the least circular material in the world today. If you look at textiles, less than 1% is being recycled in a closed loop, fiber to fiber, 1%. If you look at the global CO2 emissions from the textile and fabric industry, some different figures, but roughly 10% of the global emissions are linked to that. We all know, now you know how the fashion industry is under pressure due to this. This needs to be solved, and recycling will be part of the solution to solving the sustainability issue in textiles. Why doesn't it happen today?
It is about recycling technology, but a lot of things are happening there, both on the mechanical and chemical recycling side. It's also about enabling automation in textile sorting. If you're going to be able to do this in an efficient, scalable way, you need that. We're looking and investigating into that opportunity. Also of course, Volker had this on his strategic agenda again. What we are looking at here is not about selling sorters into this. That will of course be part of a future setup, but this is looking at what role can TOMRA play to unlock these opportunities that then would go beyond just selling sorters. Digital business model, we sit on a lot of data, a lot of insights. You know, when oranges going through our sorting machines, we get like 300-400 readings on each orange.
You know, the metal going through our sorters, we know the quality is coming. To enable transparency, enable circular loops, certification scheme and so forth will play a role. Digital marketplaces. We are investigating and exploring opportunities there as well. Reuse. We have talked a lot about recycling, but of course, reuse is also part of the solution. If you look now in big cities, litter takeaway is probably the biggest contributor to the litter that you will see away there, you know. McDonald's cups, you know, the different takeaway cartons and so forth. There will be pressure to be solved, and there will probably also be legislation here supporting this. What we are looking at, you know, how should the collection systems be for reusable packaging?
How can you set up an efficient scheme on this so that you can enable then a closed loop? Because it doesn't help to have reusable packaging if it doesn't get collected and reused again. That's another opportunity that we are working on. We have closing the gap in plastics recycling, and I'll dive a bit into that one. Volker has already set the stage for me on this one, so he has really explained the gap that exists today. You know, in Europe alone, 24 million tons of plastics lost to incineration, burned, emitting CO2, and you have to actually produce new plastic to replace it. 14 million tons to landfill.
The challenge is that, of course, you could sort this out of the incinerators, but they are not large enough to really have the high quality sorting you could recover extracted from the incinerators, but they are not large enough to really have the sophisticated sorting there. Then on the other hand, you have this demand for recycled plastic that we believe, you know, are really increasing now. There is already a demand there, but when you look at the commitments and Volker showed some of those as well, just looking at the major plastic producers and the targets they have, you know, they will need 10 million tons more of plastic. Then you can't only take what is separate resources, you need to also look at what is going into mixed waste. They need it in a way where it's already sorted.
Because typically, you know, the recyclers, they will only want to have certain fractions to be able to recycle it in their process. There is a gap here. How to close this, it is about advanced sorting. You need then to recover the mixed plastic, but you also need to get it sorted into a way that the recyclers can use it. Also as Volker said, you know, we have done this. We have worked on this for many, many years. We know it is feasible. Many doesn't believe this is feasible. They think, you know, this dirty plastic from mixed waste, you will never be able to get it in a way that the recyclers can use it. We know that it is feasible.
What we are working on here now is business models on how can we enable and work with the value chain to close this gap. We are now working on that, and we expect that we could commit more details and the first investment probably early next year. What we have done so far, we have talked about how we are going to accelerate growth in the core. We also talked about that in addition to that, we want to develop adjacent businesses. How does this actually come together? What are our ambitions going forward? I will invite Eva Sagemo on stage, who is our CFO.
Hi, everyone. It's really nice to be here today and present our future ambitions for the next five years. First, I would like to recap a bit on what we said back in 2018 at our last capital markets day in Oslo. Back then, we had five targets. It was related to growth, profitability, capital allocation, dividend, and return on investments. Our ambition on growth was to grow our business more than 10% for those five years. We have been able to grow our business 10%. On the profitability target, we aim for moving towards the 18% EBITDA margin.
During this period, we have been able to add two percentage points to our EBITDA margin, and also taking into consideration that we have invested in new markets for TOMRA Collection during this period, but also position ourselves in circular economy space. I think also we all know what it has meant for TOMRA with the pandemic, but also with the supply chain disruption that we have seen over the last months. We also have a policy on the dividend. We have that we want to pay out 40%-60% of our EPS as dividend yearly. During this period, we have been able to pay out 40%-60%. On top of that, with a cash flow growing at 15% during those years, we have also been able to deliver or to pay out extraordinary dividend twice.
TOMRA has also, during these years, had a low leverage ratio. Only one time, one year we have had a leverage ratio that has been above one times net interest bearing debt over EBITDA. With that low leverage ratio, we have also been able to maintain being a investment-grade company. The last target that we had back in 2018 was related to return on investments for new projects. During this period, we have also had solid results on new investments, and also been able to increase the ROCE during this time. Even taking into account that we have the IFRS 16, the leasing standard that was implemented in 2019. To just give an example, we had throughput markets in Australia that has given good results for TOMRA.
Looking into the future, we have also now defined five targets for the next five years. It's related to revenue growth, where we aim to grow the company 15%. That really means that we want to double TOMRA's revenue within the next five years. On the EBITDA margin, we want to expand our margins to 18%. Our dividend policy stands firm, and also we want to maintain being an investment-grade company. On top of that, we have also now a target on sustainability, and we will give more details on that at the end of the presentation. If we look at the first target, where we want to grow the company 15% on revenue for the next five years, this is quite ambitious.
What we have heard today is that the main growth will come from core business, because this is where we really see we have most of our value pools. It's mentioned in collection, it mentioned in recycling, but also in food. TOMRA Collection and TOMRA Recycling, they will aim for growing double-digit figures, as we have heard earlier. Food want to place their target at a high single digit for the next five years. I think also we need to remember that it is challenging times that we are standing in currently. We have high inflation, we have geopolitical instability, but also a fear of coming recession, which also Tove has commented on. We believe that our market drivers are really, really strong and also maybe more relevant than ever.
On our profitability target, we are aiming at 18%. How are we going to get there? Of course, we need to recoup from the cost inflations that we have seen over the last months, and we are quite confident that we will be able to do so. The next step is related to growth. With growth comes efficiencies and scale effects, but also taking into consideration that TOMRA Collection and TOMRA Recycling will grow at a higher rate, having also higher margins than food. That will also have a good impact on our margins. We have a margin expansion expectations in the food business.
Third, we expect that not only a revenue growth coming from adjacent opportunities that Tove just mentioned, but also giving healthy profits going forward. In TOMRA, we are in a quite fortunate position. We have good cash flow from operations, and also being a quite CapEx light company. Going forward, we have now currently a CapEx need of approximately NOK 500 million -600 million as a yearly run rate. This will probably increase going forward, because as Harald mentioned, we probably need to expand in production. Also, some markets will also materialize as throughput markets. Still, what we see is that the main growth will come from core business.
Taking that into consideration, also being a fairly capitalized company, we believe that we will be able to maintain our dividend policy also going forward with 40%-60% of earnings per share. Today it's been released that we have received an official rating from Scope Ratings that gives TOMRA an official rating at A-. Our financial risk profile is assessed at A, and our business risk profile is assessed at BBB+. For TOMRA, this is an important target also going forward, because it kind of like indicates if we have both hands on our steering wheel. Of course, we have had a fairly low leverage ratio historically, but also looking into Q1 2022, we ended at 0.5 times net interest-bearing debt over EBITDA.
We believe that even if with all the activities that we have planned, that we will be able to maintain a good rating for its company. Taking into consideration that the growth will mainly come from core business. Today we have a good headroom, and we are kind of like very confident that we will stay firm to being, to continue to being an investment grade company also in the future. If we look at financing, our debt levels in TOMRA is quite low. Our current financing consists of mainly bond issues, and one of them is maturing now in November this year. It's four hundred million Norwegian kroners. Looking into refinancing but also financing of new activities, we are targeting a green bond framework.
With the preliminary taxonomy alignment of 60%, and also what you will see that we have set ambitious targets for our sustainability going forward, we truly believe that TOMRA will be good position to get access to financing and capital pools also going forward. In TOMRA, it's important not only to aim for a profitable growth, but also sustainable growth. We recognize that it's important factor, so that sustainability is an important factor in a competitive market, but also to attract talents and to retain employees. Our sustainability target is a threefold. We want to lead the resource revolution by becoming a fully circular business and being safe, fair, and inclusive. What does this mean? With our handprint, we want to maximize the positive impact from our solutions.
With our footprint, we mean that we want to minimize the negative impact from our operations. With people, we want to create social value for our people, so our employees, but also business partners going forward. What we have done within the sustainability area, we have set a holistic set of targets, and we have focused on the areas that are really where we can make the most impact going forward. Today it's been launched on the new TOMRA.com, a full list of details related to the sustainable targets going forward, with also supporting information. I just want to highlight three items for you here today. First is that we are committing to a net-zero emission by 2050. We are also targeting Science-Based Targets going forward.
One other example is that going forward, we are aiming for that to use at least 90% sustainable materials in all new products by 2030, and that our products are 50% circular at their end of life time. We also have an important target related to people. We want to be inclusive, add diversity, but also take health and safety into consideration. What we think with this target, this is really important for TOMRA, because our people is really the most valuable asset that we have enable to be in order to be able to deliver on those targets going forward. With that, this is a summary of all the targets that we have set for the next five years. It's the revenue growth at 15%.
We have the EBITDA margin at 18%. Our dividend payout, 40%-60% of EPS as before, and we want to maintain an investment grade company. In addition, an important factor going forward is to have sustainable growth for the company, because this will be a key element for the future growth of TOMRA.
With that, Tove, I think, I give it over to you.
Thank you, Eva. To sum up. What we have told you today is that TOMRA is uniquely positioned through our 50 years of experience, through the know-how, the competence we have, the people we have, the technology we are selling in all our areas, that we are uniquely positioned to leverage the global mega trends that are currently being accelerated. We are going to leverage those by accelerating growth in our core and developing adjacent opportunities. As Eva just shown, we have set bold ambitions linked to doubling our business in five years. This is not going to be straightforward. This is not going to be easy. After what I've seen since I entered TOMRA, I'm confident that we have what it takes. I'm confident that the market opportunities are there.
It's not going to be straightforward. It's going to be challenges. I'm sure we're going to get some setbacks, but we are very committed to deliver on this. Because for a sustainable planet, for generations to come, we have the obligation to grow. Thank you.
Thank you, Tove. I would like to invite all speakers on stage. Thank you. We are opening up for our second Q&A session, which we will run in the same way as before, taking questions from the hall and taking questions from the web at the same time. Just raise your hand when you want to ask a question, and my colleagues will help you with the microphone. Yes, we have a first question. Aurelio?
Thank you. I actually have three, if I may, so I'll be brief. The first one is around the margin potential that you see by division, especially in the food business. Second question is around the ROIC target. Why don't you have one right now? The third question is if you could touch on a little bit on the framework agreements that you've discussed in the conference calls, i.e., the size of those and where we stand right now in terms of trying to push price increases to customers. Thank you.
Thank you. Yeah, I can start on the margin. I think it was margin expansion in food. Yeah. We are working on expanding the margins in food. We are not giving specific targets per divisions, as you've seen. The targets that we are launching today, they are the averages. A part of the uplift in the margins, as we communicated, is linked to food. This is linked to the things I talked about on operational excellence, where we are working on many different parameters. There is no one quick fix. It is actually working through different opportunities there. I'll be sitting together with the team on the plans that we have. We have very concrete initiatives that will drive this over time, but it will take a few years.
The next question was.
On the ROCE target.
ROIC target.
Yes. This target is now no longer part of our official targets going forward. I want to emphasize that it doesn't mean that we don't have internal targets on new projects within TOMRA. I think also, a new project can have a variation if it's a good target or not. It can vary between the different percentages, right? I think, we, of course, would not go in and invest in new projects where we don't believe we'll be able to deliver on the overall targets for TOMRA. I think, since we don't give out in the market details about projects as such isolated, I think it's important. That is maybe the main factor because you can't measure it from a market perspective.
I think I just want to confirm or just to emphasize that we have good internal targets on new projects, but we don't put them as an official external targets going forward.
Okay. Thank you. The last question was around the framework agreements that you have in the collection business.
Yeah. Most markets we have, let's say, control over the price increases, but in some markets, we have more long-term frame agreements without CPI adjustment. Of course, we try to work on that, but there are contractual limitations. Not all will happen this year, some next year, and some also early 2024.
Thank you, Harald. The next question, I will take it from the web. Your new target and overall strategy set out a clear ambition to be a growth company, yet you've maintained a dividend policy that's more consistent with much lower growth businesses. Please, can you talk about the rationale here, and why haven't you taken the chance to reduce the payout ratio and take a greater focus on M&A and organic investment?
I think it must be a great story, isn't it? That we're going to grow and still be able to have a good dividend. No, I think it's back to what Eva said. You know, our core business is a fairly capital light business. As we have shown, you know, we are generating very good cash flow from that business, and we expect that to continue. We believe that we will be able to finance the growth with the balance sheet we have, with the cash flow that we are generating, and develop the adjacent businesses while maintaining dividend. Also, I think the way that the financial market is today, if there are good growth opportunities, I believe that we will be able to get the financing, so we don't really see that as a limitation.
Thank you, Tove. Any questions from the room? No. Okay. One question: how are you dealing with the current inflationary and supply chain challenges? And in the context of the EBITDA target of 18%, how is that impacting the trajectory towards achieving that? That was one question, and we have another question, which is, fairly similar, but is a bit more detailed. On the margin expansion towards 18%, three questions. One, can you explain how much of this will come from mix, i.e. collection and recycling going faster than food? Two, how much will come from underlying margin expansion, in which segments? Three, what will be the phasing of this over the periods 2027? Will it be back-end loaded?
I suggest Eva start on the margin mix and phasing, and then I think it's best to hear from the divisional head on the concrete actions they are doing related to supply chain challenges.
On the margin that we aim for 18%, so of course we need to recoup, and that will account for 0.5%. We have the business mix, which will account for more than one percentage point. The scale effects and efficiency, but also the business mix coming from recycling and collection.
Yeah. On the cost side and supply chain, we have. Number one on the collection side has been to be able to deliver according to customer demand and our promises. That means also that we have had to buy a lot of components on the spot market, which has been fairly expensive. That we estimate will go down going forward, but we will still have some price increases. I talked about the dual sourcing strategy also for collection, that it will probably have a positive effect on cost because of also moving things back to Europe and reducing the freight costs. We believe that's also a good approach going forward. We estimate.
I cannot say anything on the timing, but we estimate to have control over the costs going forward, and that will, combined with increasing prices, be good for the gross margin.
Yeah, it's a very similar situation on the recycling side. We have short-term challenges on the cost side. On the material margin, it's a combination of what Harald also said, supply chain disruption and inflationary effects. I think the good news is that we have been able to deliver. We did not have to stop selling our products because of those shortages. In some cases this meant, as Harald explained, to buy on the spot market that we all hope and are expecting to decrease. The inflationary effects, we think we have the pricing power to increase the prices to compensate for that. In effect, we have increased prices 2x this year.
The effect will take a little bit of time because of offers being out, you know, until it fully is visible. We also have higher cost increases on our OpEx side, but that is mainly to the higher than expected growth, so we need to be able to deliver on the expectations of our customers. That goes in line with the higher growth. Overall, also being long term for the five-year period, on top of that, we have always had, you know, COGS reduction programs for our main products, and we have one significant project also there that will deliver significant savings in the five-year period.
Thank you.
There was also one question around the timing of the EBITDA improvement. The way that we see it is, of course, difficult to say exactly how it will be, but it will be a gradual improvement of the EBITDA. It's not that everything is going to come at the end of the five-year period. However, also because collection is an event-driven business, there might also be some fluctuations in the year due to, for example, large new countries being launched in, collection. In general, you could expect to see a gradual improvement of the EBITDA throughout the period.
Thank you. Thank you all. We have one question in the room and then one more question there.
Hi. Can you explain what has changed in your margin guidance from 2018, where the guidance was above 18% in terms of margins? What has limited you in achieving that? And is this new target of 18% a floor, or is it a target in terms of that improvement?
Yeah. If we look at 2018, that was before we entered into the pandemic situation. Of course, that has been challenging, but we have been able to manage the operations quite good during this period as well. That has limited maybe the synergies in food. We didn't have quite the speed that we was hoping for, especially in this food business on the margins throughout that period, starting in 2018 when we did the last acquisition in food. And also with Michel Picandet entering in the start of 2020, where we have initiated a lot of programs. COVID has been a bump in the road on the speed for that, for that sake. I think when we look at what we are doing now, aiming for 18%, it's a target.
I think that we need to remember that these are ambitious for TOMRA. The future ambitions for what is going to happen in the next five years, and we don't know, right? This is what we see today. I think what we see is that, of course, the cost inflation and what we have been struggling with for the last month is something that we are quite confident that we will be able to recoup from. That is because we have taken a lot of initiatives in all business divisions on both price increases, but also cost reduction programs, or really to have a look at where we have our costs. That is a twofold thing.
Going forward with the growth that we are estimating in core, we will have synergies effects and scale effects coming from that. Also taking into consideration what I said, that collection and recycling, having higher margins than food, will grow at a faster speed than food during these five years.
Thank you, Eva. I think we had one more question there.
Hi there, Marcus from Ruber. Have you considered a change in inflationary environment when you have set your new growth targets? I mean, top line may be easier to get when inflation is higher.
Yeah, that is, it's a purely relevant question these days. Of course, as Harald mentioned, they are working on price increases in collection. It will take longer time, but they are trying also to recoup some of that now in 2022. It will take longer time, taking into 2023 and 2024. The targets that we are set are for 2027. The yearly average growth rate is 50% on the five years. For example, for food and for recycling, they have done a lot of price increases already. I would say that most of the growth is coming from core, and of course we have a small impact on inflation, but it's not material.
Thank you. I will take one question from the web. Can you give us an update about the macroeconomic situation? Where does TOMRA feel the most impact?
I think that's a good question. Because I spent the whole afternoon talking about the macroeconomic situation. I think all of you probably have a lot of insights into that. I think for TOMRA, so I think I'll focus on the second part, where does this really have an impact on TOMRA? As I said, if you look at our collection business, it's the existing business with you know, recurring service, replacement of equipment and so forth, is very recession-proof. You know, these retailers, people will purchase food, and these retailers need this to be up and running. Could it stop kind of driving legislation in Europe, which is the main driver for, the five-year growth targets in collection? It doesn't seem like it. The commitment seems to be very strong by politicians. The targets are there for EU.
We believe that business is very robust. If you then look at recycling, and Volker Rehrmann can add here as well, there are parts of the business that would be impacted if you get a sudden drop in commodity prices that would reduce the business case for investing in recycling and so forth. It could in a limited period reduce a bit the growth coming. But it doesn't take away from the underlying drivers, which is linked to sustainability, and it will come back. It could perhaps curb then the growth for a certain period. Food, as I also said, is one of the most recession resilient industries in general, because people will continue eating, but there are changing patterns when you have recessions.
People will look at their food budget. They will look at what they're doing. Of course, for our customers who are the pack houses and the processing units, it's a bit similar picture as for collection, that the underlying business replacement recurring services need to continue because they are essential to keep the business running. Of course, investing in a new pack house or investing in a new processing unit might be delayed if you have a recession. That would be some of my reflections. Not sure. Do you want to add something?
No.
Thanks.
Thank you. Any questions from the room? If not, I will take the next question from the web. Will the competitive landscape become more intensive for reverse vending machines?
Yes. As I said, until now, we haven't seen a big change, but I would assume that it becomes more intensive. You know, with all the new markets opening up, I expect that, and that's why we follow all these developments very closely on all the startups, potential disruptive technologies coming up and so forth.
Yeah, I believe it. In big countries, U.K., Spain, Italy, Poland, I would expect fierce competition. Maybe also price competition. We, as TOMRA, are confident about what we can deliver, and we also believe we will have quite a good price premium going forward as well.
Thank you. We have no more questions from the web. One question here. Yes.
In terms of your net zero commitment, just wondering what the low-hanging fruits, I mean, are, and what are the challenges looking at going forward, as well as when you expect to publish more data on the Scope 1, 2, 3 emissions?
Yeah. First of all, I want to highlight that, of course, our footprint is fairly small. We believe in walking the talk, so you know, we don't only focus on our handprint. Being, you know, in the fortunate situation that all our solutions have a positive environmental impact, we are now setting targets on our footprint. We are now committing to Science-Based Targets. That will take a couple of years because it's a process to get them established. Also what we have done now is to look at our Scope 1 and Scope 2, and where do we think we should start already. That's why we have launched on Scope 1, that we will then commit to 100% renewable electricity by 2030.
On Scope 2, we have said on transport that we will have reduction over 90%. Now I have to remember if it's correct. 90%? Yes. So many figures, you know, for a Capital Markets Day. 90% on our transport emission by 2030. These are actually the two things that we have highlighted where we think we can act now and have an impact. I would say renewable energy and transportation are the ones that we're highlighting. In parallel, we are initiating the work to really create circular product design, looking at how do we design our own products and also set targets on that. On actually then launching and improving, I mean, we are of course reporting data today on our environmental footprint, but we are.
This is work in progress to improve our reporting. We are doing life cycle assessment on; we have selected in each division one product in each division where we're now doing the life cycle analysis. As the reporting our data improve, we will improve our reporting consistently. It will be a bit step-by-step, and we'll take it kind of focusing on the key things first.
Thank you. Yes, we have one more question there.
You mentioned textiles as one of the adjacent areas that you want to like to expand. I mean, usually the textiles are a mix of materials between plastics and cotton, and also. I mean, how could that look like as a from a TOMRA perspective in terms of your offering? Because it's a bit different than just sorting the material because you probably have to cut it, separate it, and do certain things with it. What are your thoughts there?
Actually last week, I visited this CETIA sorting plant, which is the first automated sorting plant of textiles. Here we are taking AUTOSORT, sort of our flagship sorter, and installed it to sort textiles based on different material. The technology we have, we can of course sort wool from cotton from polyester from cellulose, and so forth. Also, as you say, there is a lot of mixed material that also needs to be sorted. I think first, you know, these pure materials, you need to sort that out, and then you need to sort out the different mixed material. Also, probably product design will be part of the solution. That, the brand owners needs to think about circularity when they design the products.
We are exploring this now, and when we talk about adjacent opportunities, we then don't talk about selling just the machines. We are exploring now how to unlock this market. You will need to be able to have efficient collection systems. You need to have automated sorting, you need to have an off-taker, you need to have recycling technology. We are exploring this space with many different value chain players to see if we can find then profitable business models that can really unlock this circularity. Yeah, it will require, at some stage you sort, you have to shred, you have to take out zippers, et cetera. From a technology perspective, we actually believe this is feasible now. The scalability is still a bit of a challenge, and that's why you need to have the automation.
Also on the actual recycling technology, there is a lot of development happening now, but also that seems to be becoming ripe for scaling.
Yes. Any other questions from the audience? No? Okay, then we will be ready for the lunch break. There will be a second R1 demonstration at 11:45 A.M. The buffet is there, and after the lunch break, we will move into the second part of the day, where we will go for a test center tour, where you will see the sorting of four different materials. After that, we will take a bus and go to the field trip plant, which is 15 minutes away from here. A big thank you to our digital audience as well that has been following us, and a big thank you to all the speakers here. I'll pass it on to Volker.
I just wanted to say, you know, we are a little bit early, so buffet is not yet there, but it's standing right in front of the door. Relax a few minutes, it will come in, you know, as we speak. That's the only thing I wanted to say.
Perfect. Thank you.