Good morning, everyone. I am Karen Chan, Strategy and Investor Relations Director at DFI Retail Group. It is my privilege to welcome everyone here and on the live stream to DFI Retail Group Investor Day 2025. Before we begin, I would like to remind everyone to please switch your mobile devices to silent mode. Please also be advised that there may be some filming and photography taking place to capture a few highlights from the event today. Today, we have a full agenda. Over the next few hours, our management committee team will be presenting detailed strategy updates highlighting growth opportunities across our businesses, followed by a Q&A session. in the afternoon, we will begin our 7-Eleven and Guardian store visit for those participants who have signed up. More details on the logistics will follow shortly before the lunch break.
Now, before we start, may I remind you of the following regarding forward-looking statements. The information about to be presented is for information purposes only and is not intended to be investment advice for any person. There is no intention to invite for any dealings in any securities. There may be forward-looking statements mentioned in the presentation materials, which include statements regarding our intent, belief or current expectations with respect to DFI Retail Group's business and operations, market conditions, et cetera. Please refer to the full slide for our disclaimer. Now, may I introduce you to the DFI Retail Group Management Committee team who are with us today. Mr. Scott Price, Group Chief Executive. Mr. Tom van der Lee, Group Chief Financial Officer. Mr. Andrew Wong, Chief Executive Officer of Health & Beauty. Mr. Yoep Man, Chief Executive Officer of 7-Eleven. Mr. Curtis Liu, Chief Executive Officer of Food.
Mr. Martin Lindström, Chief Executive Officer of DFI IKEA. Mr. Wee Lee Loh, Group Chief Digital and yuu Rewards Officer. Ms. Crystal Chan, Group Chief Technology and Information Officer. Ms. Ella Chan, Group Chief Strategy Officer. Ms. Erica Chan, Group Chief Legal, Sustainability, and Corporate Affairs Officer. And Ms. Joy Xu, Group Chief People and Culture Officer. May I now invite our Group Chief Executive, Mr. Scott Price, to come on the stage and deliver his opening remarks. Scott, please.
Good morning, everyone. Welcome to the Inaugural Investor Day for DFI Retail Group. It is a pleasure to be here with you this morning and appreciate what a great turnout. We have been operating in a pretty dynamic environment over the last few years. There has been quite a disrupted customer out there. And we have seen it substantially through many of the products that we sell. We believe, though, that we are seeing green shoots of recovery.
We have had, for example, in our home market of Hong Kong, six months of positive revenue after 14 months of decline. We take that as a great news. We believe we have the right proposition. We believe that we have the right team. We think that we have got the right strategy moving forward. We are a pretty competitive group of people. We think the last few years have shown that out.
We are determined to win. We are determined to win for our customers, for our fellow team members, and for shareholders. For those who may not be familiar, DFI Retail Group started as a dairy store in Hong Kong in 1886, which means we will celebrate our 140th year next year as an outstanding retailer in Asia. We operate across health and beauty, convenience, food, home furnishings, restaurant group, Maxim's, all buttressed by an outstanding, what I believe, digital proposition with a very powerful loyalty program called yuu. In Hong Kong, and as well for those who are based here in Singapore, you are familiar with it here as well. A little bit more detail. We are 7,400 outlets across multiple markets, 12 in specifics, five formats, as I mentioned, with 22 million transactions. It is a lot of very valuable data.
We have five million plus members in the yuu program in Hong Kong. That is two million in Singapore. You will see the split across our formats here. The Maxim's group, although not noted, is $3 billion in revenue, which is included in our overall business moving forward. We have had a very eventful couple of years. We have been focused upon a reset of our portfolio to ensure that as we gravitate towards more of a federation of retail businesses, including a number of minority shareholders, we are moving ourselves to much more of a focused operating company. As a result, over the last two years, we have divested two minority positions in Yonghui and Robinsons, where through only influence, we did not believe that we saw a path to win. We also just closed a few days ago, the divestment of our Singapore food business.
We believe that as a single entity in Singapore, there is not a right to win. We believe that the Malaysia food purchasers will be able to create the synergy of value that we were not going to be able to provide on our own. We have reset our strategy and the focus of the business very much around organic growth as well expansion of margin. We reset our digital strategy to one that you will see in a few presenters from now, we believe is highly modern and accretive, as well our own brand strategy. You will have an opportunity during the breaks, if you have not done so already, to have a chance to look at some of the great work that has been done by the own brand team led by Fann Yuen. We strengthened our balance sheet, which has been very important.
We started with a very high level of debt. We have now successfully de-leveraged the balance sheet. We ended with a positive net cash by year-end 2025 and maintained, we believe, the right financial flexibility for strategically TSR accretive acquisitions. I want to go back. I forgot. I am going to hear from Tom later if I do not call out the cost optimization. Our CFO is relentlessly focused on cost reduction. You see that in our continuing improvement in reducing our overhead.
Finally, we delivered on our TSR commitments. First, we have aligned management for the first time in DFI's history, and I will talk about that in my closing in a little bit more detail. An 80% + annualized TSR as of November 2025. 40% since the beginning of 2024, and we recently, in October, paid a special dividend of $600 million to shareholders. That is where we have been.
Where do we want to be? First, driving organic revenue growth. As I mentioned, it has been a tough reset across the region as customers pivoted to value universally. We are now starting to see, yes, balance with value, but also some areas of opportunity for continued growth, and I will talk about some of those megatrends in a few slides. We are absolutely focused upon very disciplined use of our capital. We have a ROCE target of 15%, and as we leverage our capital, we are ensuring that we focus our investments in the areas where we see that we will get that high level of investment. Building out a creative digital ecosystem. Retail has quite interestingly emerged with a high margin area of digital through data optimization, data monetization, as well, retail media. That will be covered in a few speakers.
Finally, continuing to drive that very strong balance sheet with a focus upon return on capital employed and only M&A that we are convinced will become TSR accretive to the overall business. So what are the megatrends that we are seeing in our customers? As we develop the strategy that we are sharing with you that was approved by our board recently, four megatrends that we think are emerging. So the first is mindful of wellness. Although there is a focus on value, what we are finding is that our customers will pay a premium for the sense that they are taking care of themselves better. For those who have not had a chance, please visit our Health & Beauty booth at the very back. Two areas where we are seeing great outcomes from our customers is to offer the services around this concept of Wellness.
As we then do this rollout across all of our markets, how do we help drive Mannings and Guardian, this part of Asia, with that focus upon Wellness? Convenience. I tell you, I always thought I was an incredibly impatient person. Our customers are becoming just as impatient as me. You have to be able to ensure customers don't want to wait, Click and Collect , the ability to check out quickly, get in and get out with the products they want. This Con venience focus is an area that we think 7-Eleven is doing an outstanding job of delivering upon. We believe there is an opportunity to continue to drive not only our growth, but also a better ROCE through franchise, which Yoep will speak to in a bit. As well, the ready-to-eat. More and more, we are becoming a quick-service restaurant.
We believe a bit different than the Maxim's portfolio and a synergistic, but a QSR indeed. Finally, around value. We are seeing in our food business and as well our IKEA business, enormous opportunity for us to continue to reset our supply chain, reset our assortment to ensure that customers see DFI formats and banners as the place to go for great value. Both Curtis and Martin will talk about some of the progress. Finally, we are leveraging AI. We are in the early days, but we see the ability to personalize assortment, leveraging not only our data and the loyalty program for the knowledge that we have of our customers, but the ability for them to, one, get a quicker, faster shop with us that is a little bit more personalized, but also capturing that market share and that eyeball through our retail media.
DFIQ was launched last year. Or was it earlier this year? Last month. Aplenty. Hell, okay. I shouldn't have said that, but yes. It seems to go so quickly, but we've been talking about it for a year. We've only launched it just last month, and the vendor portal is now going to be reviewed in a few presentations by Wee Lee. With those insights, we then focus very much around how we're delivering it. Our purpose, which we launched, it's some of the reels, sustainably serve Asia for generations with everyday moments. That everyday essentials, the role that we play, is a very critical part of what we see as the reason for the DFI Retail Group's existence. Those everyday moments that we provide, not only products but also services to our customers.
That strategic pillar, customer first, people-led, shareholder-driven, and then our strategic deliverables, how we'll go about doing this. The first is retail excellence. For me, retail excellence is how every year you continue to build incremental revenue per square foot in every one of your stores. It's a relentless focus. It's a huge part of how we will increase our margins moving forward. The second is Access to Customers through growth. We're doing that again in a capital efficient way. We're leveraging franchise across multiple formats, in particular, Con venience and as well, our Health & Beauty . Omnichannel and Digital Ecosystem, that'll be talked about in a lot more detail by Wee Lee. Then again, this lean and agile operating model. You cannot deliver low price, without having low cost, to be able to deliver.
We have very much pivoted our business towards a focus upon cost that I think had been lost a bit. Very pleased with the progress that we're making. Finally, reshaping ourselves from a portfolio to an operating company, which means that we will operate the businesses that are part of our overall economic model. We will do so looking for synergies across those businesses so that the sum of the parts is not worth as much as what we believe to be the opportunity for the whole. Somebody once told me that retail is a simple business. You buy, you move, you sell. We are the most complicated simple business in the world, retail. To excel at best-in-class mass retailing, there are a lot of things that you have to do. First, you have to become number one or number two.
We're very pleased by the fact that we're number one in our markets in Hong Kong. We have to continue to grow presence in growth markets. We see Southeast Asia as a great opportunity to build upon the primacy that we have in North Asia. Strength in Omnichannel and retail is a non-negotiable. You absolutely must be able to deliver upon a digital proposition, meet customers where they want to be. It's no longer brick and mortar versus digital. Omni means that customers at any given time will have different missions. They want access to both. We have to be data empowered. We have been investing quite heavily in our AI capability and transformation, ensuring that our data is a valuable asset, not only to help us operate better, but also to be very attractive to how we personalize to our customers. Scale benefits and global standards.
As I mentioned, synergies across our businesses. As we think about property and our ability to negotiate with landlords, the size and scale of our business helps. Our ability to procure services, the scale and the size of our business helps. We have a lot of focus around how across all five of our businesses that we look for those synergies, and we only create overhead when it is accretive to the five P&Ls that we operate. Very disciplined capital allocation. Pleased again, paying down debt. We will be net cash positive by the end of this year. We have a very strong balance sheet. We will be very focused on ensuring that we continue to maintain that. Then growing TSR and dividends. As I mentioned, we are very pleased with the progress that we made through paying that special dividend.
Importantly, focused upon, again, that very competitive proposition that we have delivered with an 83%, 61% if you exclude the special dividend. We do focus upon how we are performing versus our peers. You see here a number of benchmarks that we are looking at. Our peer average is 6%, 20% Singapore, 29% Hong Kong, even 16% with the S&P. A lot of that has come from the core operating improvements that we put in the business and as well, the proceeds from divestments. Moving forward, how do we continue to maintain that world-class TSR? We believe there is an opportunity to continue to grow our business through strategic inorganic activity. But it is strategic. Strategic means that it falls within a number of important principles. Number one, the markets. We are only going to enter into markets where we think that we can win.
Those markets will only be in Asia. We have no interest in expanding outside Asia. Second, synergy. We are not interested in moving into new formats. We will not go into apparel or beyond what we are doing today. It has to be synergistic to the five operating units that we have today. Ownership. We will not take minority positions. You cannot build the synergy when you are only influencing. You have to have operating control. Finally, it needs to match not only the 15% ROCE, but has to be very clearly a part of an overall TSR model. We are quite active now looking around the market in which we operate. We think that there are some opportunities.
We are not in a position to give any indication as to what they are, other than just to say that we have a strong balance sheet and we are very focused upon continuing that TSR growth and see the opportunity to do so inorganically. Talked a lot about customers. I have talked a lot about team members. I have talked a lot about shareholders. To me, that represents community, and we take very seriously the opportunity, but as well the obligation that we have to give back to the community. We had launched earlier in the year our people, planet, and product commitment around how we ensure that DFI Retail Group is a valued member of the community. It has become a little bit debated, this whole commitment to sustainability. We have found time after time, research after research, customers will choose a sustainable product.
They want a sustainable product, but they won't pay a penny more. That's a huge challenge, but it's also an enormous opportunity. We have focused and invested to, one, bring down our Scope 1 and Scope 2, which is, in essence, the power and how it flows through our business. We've had a 22% reduction by the end of 2025 in terms of Scope 1 and 2. I think well on our way to that 50% commitment that we've made by 2030. Much more complex is the Scope 3, which are the products that we sell. We operate across sourcing in multiple markets, almost 25 markets that we source from, that are varying levels of sophistication when it comes to the topic of sustainability and reducing the carbon footprint. We have made some great progress, though.
There's a little bit of a video in the back there on our low-carbon rice. 380 tons has been sold. 205 tons now of deforestation-free coffee. We've also focused upon reduction on plastic and waste. So an 83% reduction in plastic packaging. Well on our way, we think, to removing it pretty much from our supply chain. 65% of our waste has been diverted away from landfills. You're going to hear from a number of leaders. We will follow up with Q&A at the end of the day before lunch. You're going to find, as you speak to them, we're passionate, we're committed, but we're competitive. We truly do want to win. We want to win for our customers, for our fellow team members, and importantly for this group, for our shareholders. Thank you very much.
Again, pleased to have you here, and we'll now turn it over to Andrew. Thank you.
Thank you very much, Scott. Good morning, everyone. Very glad to be here this morning with you all to share about our Health & Beauty strategy together with our financial ambition. Let's first take a look at our business overview. We're one of Asia's largest Health & Beauty retailer with more than 1,500 stores across eight different markets. In the past year, we've delivered strong top-line and bottom-line results, achieving $2.5 billion revenue and $211 million operating profit. This is actually built on a solid 4% like-for-like growth, and we actually serve 160, have served our customer on 160 million transaction in the last year. It is also important that we continue to keep our top one and two position in core markets like Hong Kong, Singapore, and Malaysia. Sorry, the slides are not moving. Why don't I start talking about the mixed life first?
Oh, it works now. Sorry.
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Yeah, I did push that button. Sorry.
Thank you, Scott. Where are we going to continue that growth trajectory? The answer is, like what Scott shared, is in Wellness. We are very focused to be the trusted advisor in Wellness. What Wellness means is it is a space where Health & Beauty converge, and it is an area of significant growth opportunity. First, Wellness is bringing higher functional value. It helps our customer beyond their basic needs. It is about products that differentiate versus mass and conventional commodities products. Let me give you an example. Instead of just selling shampoo that you could get from every single channel, we are going to focus the shampoo being sold at Guardian and Mannings with a much more functional value, like anti-hair loss product that actually helps you improve your scalp and hair health. Another example is derma skincare. It is no longer just solely about hydration.
It is actually helping our customer to understand what a healthier skin means. How are we going to help our skin building better natural barrier? In also even linking to what stress does to our skin and extending to wider range of supplement that help us nourish our skin from within. Secondly, we are going to build our Wellness assortment based on trust and prevention so that it drives tangible value for our customers. It has to be the product that we source, has to be clinically proven, scientifically proven. Wellness also represent a higher segmental growth. The key thing is with Wellness and our customers focusing on a healthier lifestyle, this represent, in our estimation, an 8.5% CAGR growth in this Wellness segment from 2025 - 2028. Wellness is actually multidimensional. It is not limited just to health.
It is a cross-category growth opportunity spanning across health, beauty, and even personal care. While Health & Beauty market remains to be a strong and steady growth market at a projected 3.7% CAGR throughout 2025 - 2028, Wellness is actually outpacing Health & Beauty general market, as I have mentioned before, at an 8.5% CAGR during the same period, which is more than double the Health & Beauty market category. Our strategy position us well to capture this significant growth opportunity by leading in Wellness, leveraging through the trust we have built over the past decades, and also through differentiating offering to drive future growth. As Scott shared, we have our operational strategies and pillars for us to deliver and bring that strategy to life. Today I am going to cover three, between Retail Excellence, Access to C ustomers, together with Omnichannel and Data Ecosystem.
Let us get started with win in Wellness under the retail excellence pillar. As I mentioned earlier, we are very focused to become the trusted advisor in Wellness. These are the three top priorities for us to focus on to continue our leadership in Wellness. First, it is assortment, that we are going to bring in new functional focus products that helps us customer to support their journey towards a multistep routine, Wellness target objective achieving journey for our customers. Second, we need to invest in technology in order to drive data-driven customer insights. Finally is about personalization. With those insight, how are we going to use our multiple platform and touch point with the support from our team members to leverage this data to bring recommendation to our customer? I will take you through one of each of them shortly.
First, to enhance our Wellness assortment, we build our assortment based on trust and our expertise in our team members. These are some of the examples of products that we are going to bring. Derma skincare with active ingredient to support our skin health, supplements with active ingredient that boosts our long-term wellness, and haircare with functional solution to improve the quality and the health of our hair and our scalp. Our Wellness product sourcing strategy is going to be guided by these following principle. They need to have clinically proven efficacy. They are going to be recommended by health professionals. These products are aimed to minimize irritation and reducing long-term side effect for our customers. This is important for us to help them reducing exposure to synthetic chemicals. Nowadays, customers coming into Mannings and Guardian do not only looking at getting just the product.
They are looking forward to have the expertise that our team members offer. For example, they want to understand more about ingredients. What is B5 going to help me? When it even comes to sleeping quality, which is something that actually bothers as a top three concern of our customers across Asia, they want to understand what choices do they have. Something closer to medication, melatonin, how are they going to do it, how are they going to take it, or some natural ingredients that is going to help them with a longer run improvement in terms of their sleeping quality.
With the right Wellness assortment and the right service that our team members provide, these translate into tangible financial benefit for DFI. For example, larger basket size, because when they understand more about their wellness need, understand more about different products and active ingredient, they are going to buy more.
Higher profit margin. When the education is there and they understand and they lean more towards premium product, which is clinically proven, and the fact that when we focus more into Wellness product, supported by our team members' expertise, we do not have to compete as much into the commodities discounting game. Finally, it will bring to increase visit frequency as they no longer just come back for replenishment of the products, but they continue engaging with our team members for the expert advice. If I have to share with you a little updates, because Hong Kong was a little bit early on this Wellness journey as compared to our Southeast Asia business, the basket of Wellness in Hong Kong actually delivers two times the basket size of our average basket.
The profit margin of the Wellness-included basket is 280 basis point above the average basket when customers come in without a Wellness purchase in the basket. The second thing is about technology. How are we going to utilize technology to deepen our relationship with our customer? While we were very focused to deliver our growth in the past year, we have not forgotten about innovation. At Guardian and Mannings, we have actually brought in various types, a range of assessment tools. The first example is the Health Pod, which is a Wellness assessment for preventative care. We conduct a proof of concept in Hong Kong, delivering more than 4,300 assessments for free for our customers. Our customers love this innovation.
They actually gave us a 6.8 out of seven points of satisfaction score, and very importantly, 6.7 out of seven score on intent to repeat and revisit. It also comes with a pleasantly surprise conversion rate of 50% after utilizing this assessment, and that they are spending 3.3 x bigger basket as compared to a normal customer walking through to our stores without doing the assessment. These tests, we have a light version there without the pod. It gives you more than 20 vitals with five minutes assessment. Another example is the skin and scalp assessment. Within five minutes, again, it delivers more than 10 metrics about your skin condition and 10 metrics about your scalp condition. We have this service across our Hong Kong, Singapore, Malaysia business. With Hong Kong starting around mid-year, we have some really exciting results.
I think 17% conversion rate with customers, again, spending three times more in their basket as compared to people, our customers, without using the service. We have also launched this service in Singapore and Malaysia just in October, and they are delivering similarly optimistic results with the basket uplift ranging from doubling to 4 x the average basket. Our customers also love this service. They are actually giving us a six out of seven satisfaction rate for this machine. We are planning to increase our tech-enabled store coverage from 3% - 25% by 2028, and it is a reflection of our focus on business case, return on investment. We are going to put these technology in the stores within our portfolio where there is business case, there is business return, so that it helps us achieving our TSR target.
Apart from having the technology providing us with customer-driven data, we also have our personal services. Our team members from Guardian and Mannings, not only our pharmacists, but our dietician, our beauty advisor, our derma advisor, our health advisor, and even in some sort of market, we have mental health practitioner offering various type of advice to our customers. Again, to help us becoming the trusted advisor for Wellness. By utilizing these customer data-driven insight, we understand our customer more, we help them understand their wellness requirement more, and it also help our commercial team to refine the assortment in our store and online to provide the right solution for our customer.
The third priority is, after having these insight, helping our team member, helping our customers, the key thing is also to recommend a very personalized recommendation of products to them so that our customer could improve their well-being. Taking this scalp and skin analytic machine as an example, the key thing is trust. This is a technology owned by Samsung, and DFI Health & Beauty have exclusivity. As I have mentioned before, it provides a very detailed analysis for our customer so that they are confident that our team members, apart from the experience, they also base on scientific method to help coming up with recommendation of products for them. I sincerely invite you to try the products, try the assessment. Our colleague also prepare some right product to fit with your problem area and help you improving your skin.
We welcome you to visit our Guardian stores in Singapore and Mannings stores in Hong Kong and Malaysia and Guardian to continue purchasing after you have seen an improvement in your skin and scalp condition. The other important area under our Retail Excellence pillar is our own brand reset. When we reposition our own brand strategy, the first thing that comes to mind is we got to listen to our customers. We have conducted more than 80,000 customer surveys, understanding what are the right own brand category and the feedback about our products. They tell us loud and clear. It is about quality, but giving our customers these products through great affordability. We have also, through this exercise, understanding from our customers, rationalized our SKU, taken away 40% of the low-performing SKU that might not fit their needs.
These exercise also include a redesign of way more professional packaging, again, taking the feedback from our customers. They result in measurable, tangible results. Our own brand gross profit on a productivity per SKU level has improved by 30%. Our end-to-end gross margin uplift by 13% versus 2023. We are on track to deliver a 500-basis point advantage in margin as compared to national brand by 2028. It is worthy to mention as well, now we are in Singapore, our future growth strategy of own brand is going to be very optimistic, and we are going to work with different partners. We have actually recently just announced our collaboration partnership with the National Healthcare Group in Singapore, one of a very renowned institution, to develop a new line of products that fits into the Wellness category. Please stay tuned.
Another pillar under our strategy is the Access to Customers. Indonesia is one of our fastest-growing markets, and we have recently done a survey asking our customers on the impression towards Guardian Indonesia. While we score well in a lot of the categories, the apparent gap or opportunity for us to improve is in terms of Con venience, location, and accessibility to our customers, which is why we are going to focus on accelerating our store growth in Indonesia through franchise, which is capital light, and at the same time, we could harness the local knowledge, especially when it comes to site availability. We are going to extend our presence to 32 provinces and also reaching total number of 750 stores by year 2028, which basically double our size in Indonesia. The third pillar is Omnichannel and Data Ecosystem.
As we have mentioned before, it is extremely important nowadays that customers do not only focus on offline but also on online, and we need to make sure that we bring seamless journey for our customers on both different channels. It is so much important for us to have unified data point. Wherever they shop, they will be given a good customer seamless experience. What we are going to do is going to, number one, we are going to continue investing in our Omnichannel capabilities, faster delivery time, Click and Collect solution in our store, and also enhancing continuously on our UI/UX in the Mannings and Guardian channel with an ambition for us to grow our online sales penetration to 7%-9% by 2028. Secondly is to drive loyalty.
We've actually started in all markets now having our Guardian and Mannings loyalty program, especially in Hong Kong, as part of the yuu Loyalty Program. We're going to leverage the personalized data, so as to continue giving our customers better education in terms of certain new trend coming out from Wellness, making recommendation of the right product that we understand, that we anticipate that they will care about. This is extremely important for us to continue growing our business. Third is also to leverage our extensive network, both online and offline, to drive retail media monetization. As you can see from the picture, these are some of the examples of how we will be placing screens in different touch point at our store.
It helps a customer to be exposed to more targeted advertising and recommendation in the areas of the stores that they want to shop at. It helps our supplier partner to bring more targeted advertising to our customers. At the same time, it also represent new growth and monetization opportunity for us. My colleague, Wee Lee, will share with you more in this area in this session. With the strategy that has been shared, it has to come with our financial ambition. First about sales. We're going to deliver 4%-6% CAGR growth between 2025 - 2028 in sales through increased productivity per square foot and also expansion of network. Secondly, we're going to deliver 9%-11% operating margin by 2028, which is through pivot margin improvement initiatives, and also continue growing our own brand penetration. The third area is ROCE.
We're going to deliver 55%-60% ROCE through capital-light expansion model, CapEx-light model, and continue with our very healthy store payback of less than a year in our offline stores. At the same time, investing to accelerate our digital capability. If there's one slide I would love to have everyone remembering in my presentation this morning, these are the key takeaways. Number one, we are fully focused to become the trusted advisor of Wellness, whereas Wellness is the space where Health & Beauty converge. That's going to deliver strong growth opportunity. Number two, Wellness is a segment to grow very strongly, and our target is to have Wellness to actually cover 35% of our sales with that sort of penetration and participation.
Number three, we're going to continue to accelerate our access to customer, and one of the key focus is to accelerate in Indonesia, doubling our network through a franchise model that will be requiring less capital from DFI. Finally, we're going to enhance our digital capabilities by investing into omnichannel capabilities. Thank you very much for your time today. Thanks. I'll pass the mic to Yoep.
Thanks, Andrew. Good morning, everyone. I am very pleased to stand in front of you and share with you the Con venience business of the DFI Retail Group. In the next 25 minutes, I basically have two objectives. Number one, share with you the strategy that we deploy in the Con venience business. Number two, how we are executing against our strategy. I am very pleased to have the opportunity to do this with you, but more importantly, being able to support a great brand like 7-Eleven. Before I share with you the future state of the 7-Eleven business, I want to take a step back and really share with you where we stand as of now. We operate the master franchise agreement for four regions, Hong Kong, Macau, Singapore, as well as in South China.
With this agreement, we are able to grow the 7-Eleven brand by means of operating company-owned stores, and at the same time, we are able to work with franchise stores who are able to get a sub-license agreement to operate their individual stores. This model we have been working on for the last four decades. As a result, we operate 3,400 stores in the licensed geographies of Hong Kong, Macau, South China, and Singapore. Our financials are robust. Last year, we posted a top line of $2.4 billion, and our operating profit is in excess of $100 million. We are the number one player in Hong Kong, Singapore, and Macau. We are the number one international convenience player in South China. If you look at China, there are 12 franchise partners. DFI is one of them. We are by far the largest and the most profitable franchisee in China.
Moving on, how we are looking at the trends that we are observing and that are reshaping the Con venience business. There are three that I want to highlight. Number one, if you look at urban areas like Hong Kong as well as Singapore, there is a lot of population living in concentrated area, and that drives the need for Con venience . Imagine yourself working in marina area, and it is always hard to find your morning breakfast.
It is hard to find your coffee. During lunchtime, it becomes worse when you are not able to get into a quick-serve restaurant. That is why when you look at big cities across the world, including Singapore, as well as Singapore and Hong Kong, that drives the need for Con venience . Mature market like Hong Kong, there are two Con venience stores serving 10,000 population.
In growth market like mainland China, that number is significantly lower, and hence we see a big upside when we focus our efforts on growth markets. Secondly, when you look at the economic climate, customers are prioritizing value, but they are not willing to trade off on quality nor service. We, as a Con venience retailer, we need to do multiple things all at the same time. The third trend that we see, we cannot just rely on offline to serve our customers. The channels are getting very blurry. We believe we need to serve customers across multiple channels so that we are able to build a strong relationship with our customers so that they visit us more often and hence spending more money. These trends are giving us great confidence and encouragements.
Our teams have been working on the business model as well as the format propositions for over four decades, and the testimony stands. We are the number one player in all markets that we operate in. If we want to continue this growth and really accelerate, we need to double down on our assortment and specifically on ready-to-eat, because that drives traffic, drives frequency, and it also drives loyalty to the brand. The addressable market for ready-to-eat will continue to grow with 4%, and we will grow faster than the market with 7%-8%. It is not just around sales growth, but it is around winning market share. Secondly, we are able to lean into categories that are more accretive to the overall business model. Ready-to-eat, as an example, are posting margins four times higher than a traditional category like cigarettes.
How we are able to unlock further growth is to double down on key shopping occasions. As said, breakfast is very important. Lunchtime occasion is very important, especially for customers who are living in urban areas. When we dial down on our strategy and how we are executing against it, there are a few pillars that I want to address. Let us start with retail excellence and how we are driving sales per square feet growth, how we are driving profit growth in our specific convenience format. Let us start with assortment. We have been looking into our assortment, not recently, but we do it in a very robust way. All our categories will go through a category review cycle minimally once a year, on average two times a year.
We are able to accelerate that cycle with data, with technology, and we are able to speed things up so that we are able to address our customers' needs. At the same time, we are looking at margin productivity for every categories in that review cycle. Hence, we are able to grow gross margins faster than the top line. It is very easy said, but let me also tell you the how. There are a few things that we are using to drive our category performance.
First of all, RTE, as said, we are tapping into more shopping occasions by means of dialing down our assortment and our new product launches in breakfast, as well as in lunch. Secondly, it is not just the RTE that we are focusing on, because customers who are coming in for a breakfast item, they also want to buy a coffee. They also want to buy a snack.
It is really the shift towards healthier options in drinks and snacks, where we are able to build that holistic basket. Thirdly, we cannot compete just on price. We need to be different, and hence, we have been driving a lot of innovation in a lot of categories. You are able to visit our booth. We are able to show you some products during the coffee break. Also in the stores, we are able to show you innovation so that every shopping trip becomes exciting and customers are able to put one more item in their basket. We, as DFI, we have been recognized by 7-Eleven International for product innovation, and that is really a testimonial to what the teams have been doing across all the markets that we operate in.
We are using this process as a way to offset the decline in low-margin categories like cigarettes, which is subject to tax increases by the government. More importantly, the customers are getting more health-conscious. It will not help when we are not dialing up on all the categories. Moving into innovation, there are a few things that are on our mind, but let me play a video first. Yes, we want to be convenient. We want to offer value. We want to offer quality. The assortment that we are driving needs to have its own personality, and hence, we are Japan-inspired. Secondly, our customers are requesting us to offer them healthier options, more affordable products, and that is what we have been doing. When we create newness in our categories, we need to put our new assortment, innovative assortment, on a pedestal in the modern store experience.
That is exactly the journey that we are on. Let me also share with you some fun facts. Only a third of our customers, 35% to be precise, are putting a ready-to-eat product in their basket. We believe we are able to bring that percent up to 50%. By means of doing it, we were able to deliver a CAGR for RTE between 7%-8%. Store execution. Let me share with you two examples on how we are bringing this execution to life in the store. This is Hong Kong. This is a store in Causeway Bay, which is two blocks away from Times Square, one block away from Sogo department store. This store has been trading there for over 20 years. It is on Lockhart Road. If you look at the catchment, it has evolved over the last couple of years.
It used to be very close to Wan Chai, where people are spending their past midnight entertainment on that particular road. There are a few mahjong parlors down the road a few years back. This catchment has evolved. There are much more trendier F&B options. There are more offices popping up in that catchment. Hence, when we look at the challenge the store was facing, the store was a bit outdated. The assortment was a bit outdated. We are focusing a lot on cigarettes. We are focusing a lot on beer. Hence, the team has taken this as a challenge and really did a big revamp on this store. The RTE did not stand out because it was on the wrong side of the store.
What the team did, flip the store around, putting our RTE on the right side, so that when the customers are going to the offices, they are able to see it during the morning. Secondly, we have looked at space productivity and assortment productivity by using our customer insights, we are using our data, we are using our tech in order to give us the right answers. At the same time, we have been focusing a lot on digital elements and creating that omnichannel experience with our customers. The results are very good for a 20-year-old store. We were expecting low single-digit growth, but we are able to post a 29% sales growth for a very old store. RTE penetration went up with 420 basis points, and more importantly, store profitability has grown with 170 basis points.
It's not just the efforts that the teams have been put in, but it's really that journey of listening to the customers and really reacting upon what they need and bring it to life in our assortment in our stores. In Hong Kong, we have a pipeline of 70 top stores where we go through this journey, and in the next three years' time , we'll take all those stores through a full refit program. The second example that I want to share is in China. As you know, China is a very competitive market. Global brands have been failing in China. We, as DFI, we will not fail our customers. We have been the number one international convenience player in the market that we operate in, and we know the competition is coming from e-commerce, from F&B operators, and on top of Con venience peers.
But we are not sitting still. We need to continuously evolve and challenge our model and really offer something that the customers want. Four quarters ago, the team started with a very small trial, 10 stores, where they're able to put in a food bar. We are selling cold RTE products like sandwiches, onigiri, packed meals, yogurts. But the team came up with the idea and say, "Hey, this is Asia. Our customers need to have a hot breakfast. They need to have a hot lunch." And hence, we have been expanding our range and really brought hot RTE to the customers. We're able to sell noodles. We're able to sell oden. We're able to sell curry rice in this store. By end of this year, 20% of our store fleet will have a food bar.
And within three years' time, we will be having 1,250 food bars, which translate into 50% of our store fleet will be operating a food bar. If you look at a store with the food bar versus one without the food bar, we're able to stand out from the crowd. The competition is fighting on price, but we are fighting on meeting the customer's need by means of being different. RTE penetration is 200 basis points up versus an average store. Digital penetration is 600 basis points up, and profitability is 120 basis points up. And hence, we've been accelerating this growth. Shifting gears into opening new stores and accessing more customers so that we're able to use the 7-Eleven brand to touch more customers. We operate the province of Guangdong. Guangdong is the largest province when it comes to population.
We have been operating in this province for over 30 years. We have the right to win. We have the right brands, we have the right products, and we have quality that our customers trust. Our franchise proposition, it is working, not just against our peers in the industry who operate also Con venience brands, but also coffee brands, as well as tea shops. We've optimized our CapEx investments, and it has a very strong competitive edge versus other franchise brands. And we're able to bring a payback between 12 - 18 months to our franchisees partners. As an end result, we are the leading international CVS player in Guangdong by far. If you look at this province, Shenzhen is the city closest to Hong Kong. We operate close, by end of this year, over 1,900 stores.
There are 21 cities within the province. Two-thirds of our stores are concentrated in two cities, Guangzhou as well as Shenzhen. We have deployed a very focused approach to go from first-tier cities, where we want to penetrate deeply and create density of stores, so that we are able to leverage the management costs, supply chain costs, and create economies of scale, so that we are able to reinvest in value. We are focusing on high second-tier cities like Foshan, Zhongshan, Zhuhai, as well as Dongguan. We are moving into other second-tier cities as well as third-tier cities. 21 cities, we only have a presence in 13 cities. There is massive upside if we continue to focus on a big market like Guangdong.
By 2028, we will be operating 2,400 stores. We are projecting a sales CAGR of 8% - 10%, and our profit margin will increase with 70 - 80 basis points, driven by operational efficiency, scale, as well as leveraging of our overall cost base due to increase of store numbers. Let me talk to you about Omnichannel, as well as Data Ecosystem. As said earlier, customers who are omnichannel are more loyal to the brand, and they are able to spend more money with us. We have multiple channels to address their need. Except for offline stores, we are focusing on the e-commerce ecosystem. Third-party platforms, we have a massive MAU as well as DAU. We are partnering with them strategically so that we are able to acquire new users.
We bring them into our own web as well as app, by means of offering a proposition that they cannot get by the third-party platform, subscription vouchers, pre-order, click and collect. At the same time, if you look at the downtime that the customer, how do they spend their downtime? They are scrolling on social media. We are able to leverage this channel to build a stronger loyalty with our customers. Hence, we are able to foresee our sales penetration for e-commerce channels will grow from 3% - 7% - 10%, obviously, with China leading the pack.
Additionally, we will be leveraging retail media to create deeper engagement with our customers. We are able to share with them the latest product launch, what is new, what is on promotion, during the whole shopper journey, at the front of the store, when they shop within the category, and even when they are checking out.
We started a few pilots with Swire, which is the bottler for Coca-Cola, and we are seeing great results. We want to deploy this collaboration with more suppliers, because it is working for us as a retailer, it is working for the supplier, and more importantly, it is working for the customer. Hence, we are on track to add 1% of incremental value to our overall top line. My colleague, Wee Lee, will share more about it later today. Our financials. Yes, we are the number one in Hong Kong, Macau, Singapore. As well, we are the number one as an international convenience player, in South China. We are ambitious, and we will continue to grow our sales between 6% - 8% CAGR in the next few years.
It is a combination of new stores, but more importantly, is around same-store growth, driven by acceleration of ready-to-eat, as well as driving our omnichannel growth. Our operating margin, we are aiming at between 5%-6%, because we are shifting away from low-margin categories into high-margin categories. Those categories are exactly the ones that our customers want, because we have been listening to them. We are able to create new revenue streams, by means of focusing on retail media. At the same time, once we grow our top line, we are able to leveraging our scale and bring down the cost of doing business by means of keeping our operational costs very lean. Our ROCE, we are aiming between 25%-27%. Because we have multiple models to grow our top line, not just corporate-owned stores, but more importantly, CapEx-light expansion through franchising.
We are able to leverage that scale, enhance confidence in delivering these numbers. Wrapping things up, we are aiming at 6%-8% top line CAGR by means of continuously refining our assortment, driving innovation, as well as driving omnichannel. Our total store network will exceed the 4,000 mark by 2028. Online penetration will reach between 7%-10%, and our margin will expand to 5%-6%, driven by a favorable sales mix, enhanced operational efficiency, as well as scale benefits. Thank you very much, and this is how we drive our strategy and execution in 7-Eleven. Let me hand over to Curtis.
Thank you, Yoep, and good morning, everyone. It is my pleasure to share the DFI's first strategy and our key direction and the plan that how we will deliver in coming few years, even in a more tougher, challenging markets. I think for the DFI, the Health & Beauty , we have a two-banner name. Convenience store, one banner name. IKEA, one banner name. Are you talking about food? Different country, we have a different banner. Up to today, we are operating in three markets. Significantly, Hong Kong is still the most important market for us. In Hong Kong, we are solid number one supermarket channel. We operate the Everyday Value supermarket channel called Wellcome. We also serve the premium customer with three banner names, the Market Place, ThreeSixty, and Oliver's. In Macau, we are top two retailers over there with 21 store. The banner name called San Miu.
In Cambodia, we are the only nationwide modern chain. Operate 15 of the total country's 25 provinces in the country. Up to end of the Q3, we have 85 store. Forecast end of this year, we are close to 100 stores. We are talking about some of the market trend. We will start from the Hong Kong. I think here we would like to share three major market trends. The first one is that we see local customer outbound travel still continues. Year-to-date, with a double-digit continued growth, even already with a high base in 2024. Second, more China e-commerce player competition coming through. As we understand, JD, Pinduoduo, Alibaba, and the quick commerce with Meituan, when they are coming, they are called Keeta. They are coming very aggressively.
The third trend, actually, if you see from the PPT, you can see, before COVID until now, in past five years, actually Hong Kong is falling into a deflationary cycle. Customer tend to buy something lower price. Despite looks like less all bad news, but in reality, we are performed very solid. We are very promising to be in the Hong Kong market. We are continue gaining market share in past five years. Even we are in a solid, like a supermarket, we are more than 50% of market share. But we don't see it that way because we see all the addressable market, actually our market share is below 20%. Still have a huge room for us to capture. That's why we are very confident we want to continue go to the journey. Let me share what will be our strategic pillar.
Start with the strengthen our price competitiveness. Let me share where we are today. Actually, based on the customer survey, we do that at a monthly basis. Our low price perception is the number one. Not only number one, we are actually six times better than the next competitor. Even we have this one, we are very price competitive in Hong Kong. But we think to conquer the China competition, start from end of the last year, we start to take the core basket item to compete with China. So we start to do the GBA price checking. From end of last year, we are more than double digit more expensive, but we are making progress. Until the end of the September, our price index already close to 105. I can tell actually the latest number, we are at 103.
That's where we are on the journey to continue to make sure our item are competitive. There's no reason for local customer shop in the GBA. Once we're doing this, what is the result? Very significantly, year-to-date, our unit sale actually grow by 3%. So the customer actually prefer, knows we're putting effort, and they are staying with us. Let's turn to Cambodia. I think Cambodia for us, actually, as I mentioned, we already opened the store outside of the Phnom Penh. Actually, in the capital city of the Phnom Penh, there's more than 12 Retail chain, including Retail and Con venience store. They all stay there. Why? Because there's a high population, relatively high income, but they don't have the supply chain capability to get outside of the Phnom Penh.
But we are the only one actually able to expand because we have a global leverage supply with a great item, and also, we have a supply chain capability. In that, we are open to expand another 50 stores. Once we open the store in the outside of the Phnom Penh, we call provinces, they are really much faster ROI, and you can expect that in coming three years, our PBIT will be triple. Let me further talking about how can we further drive our low price perception. As you understand, in Hong Kong, if you've ever been there, I think there's a highly promotion market. All the promotion are one day, three day, or seven days. But we want to go to the journey, really go to the everyday low price. We start one program called Everyday Value.
In Cantonese, say the "hai gingaa," that means the deal is for real. What does that mean? We choose phase one, 150 item across all the major category. We drop the price average about 40%. We lock the price for two months. When we first doing this, for in the market, actually, it is very incredible because no one able to doing this. The initial result encouraging. The sales growth very significantly came from more customer buying and the sales quantity growing. Our dry grocery, the sales growth more than 100%. How about the margin? Actually, we are not doing this for loss making. We doing this one even more profit-making. Why? Because we are go changing our buying model, go directly sourcing, and also, we using the AI help on the negotiation with the supplier.
With this one, we expected to open up to 600 item, basically cover all the core category and subcategory in coming six months. Own brand, as we mentioned, always important for us. We plan now, overall, our own brand penetration about 10%. We expect it to grow to 15%. Own brand not only for selling in our three market. I think own brand for us, called the Meadows. Next time, please go have a try. We would say it is a brand of Asia. Because today, we have more than 20% of our sales is outside our Dairy Farm business. We sell into the different market. A lot of retailers actually ordering Meadows from us. We will see this one is a really unique, best quality, good value offer. Please have a try.
If we mention about Everyday Value, 600 item in the future, plus own brand, these are truly the Everyday Value that can save customer basket. We expected the customer basket penetration with these two initiative can hit 80%. That means the customer, they can enjoy Everyday Value, 80% of their item put into the basket, they are enjoy the really value. How can we do this? Definitely, the most important is through our global sourcing capability. We are go upstreaming not only for own brand, for fresh. We go directly to the farm. Also, we are partner with a strategic supplier and strategic platform. For example, maybe you heard about one news. We are partner with one of the Chinese e-commerce platform called DDL. We partner with them, and our overall cost saving is a significant 20%-30% cheaper.
With that, we are able to fund our price investment, but overall, our margin even continue growing. Let us go to another pillar, is about store fleet upgrade. As you understand, the best way and the lowest cost to drive the top line actually is through like-for-like growth. We want to put into our store into the remodel. We plan to do 5%-10% of the store in coming three years with the remodel plan. We want to put more localized assortment tailored to the local customer, so customer they shop better. Of course, upgrade the overall shopping environment. We call this one called Project X. Every store after remodel, we expect it to grow 10% on top line and also better return on the bottom line.
Of course, and also most important, all the store after remodel, we want to equip them with a digital capability, which is a clear and collect. We will also continue open the store, even in Hong Kong, already very crowded. But we find room to open smaller store, which they have a best sales per square fit, low investment, quick ROI, and most important, they have an important role, become a clear and collect hub. They will play a very important role for our future omni strategy. In Cambodia, as I mentioned, we will open a small express format, quick payback. In supermarket, the payback can be less than one year. It is quite incredible, right? We were able to doing that with our supply chain capability. In coming up to 2028, we will open up to 140 store above. The third pillar is Omnichannel.
I think Omnichannel, online Click and Collect actually is a fast-growing engine for us. Today, we are about 4% of the online penetration. We forecast to grow to 7% - 9%. The growing engine mostly came from quick commerce. We believe there will be three times of the Quick Commerce sales growth and also store Click and Collect . Particularly in Hong Kong, everything is so expensive. We can, using our store network, we believe that Click and Collect can grow by 20 times. We invest in the in-store pickup capability, so we are able to using store as a service hub. So we are able to deliver to our customer from before three days to same day or next day. So it is happening for end of this year.
From next year, we will see customer will enjoy the wider assortment, faster delivery, and most important of all, once we using the store fulfillment model, actually on P&L wise, it is much, much more profitable in Hong Kong. The last pillar, actually, cost is very important. Overall, with what I just mentioned, our margin will be continue growing up due to our upstream resourcing. Our cost will continue down because we invest on AI and automation. The cost for us, mostly we focus on three part. One is the in-store labor cost, the second one will be DC cost, and the third one, definitely the head office overhead. Once we invest all this, initially, put into the pipeline, we will found we operate will be much, much efficient. We have a new profit engine for us, which is retail media and data monetization.
Just for everybody to know, actually, for food, we have the biggest customer data. We also has a most comprehensive transaction data. We were able to using them, now able to drive the top line with the getting more share of wallet because we know them better and with all this data, we are able to generate another retail media from our core supplier. Particularly in Hong Kong, we are such in a dominant position. We believe this will be a very, very important profit generation generator for the food business, particularly in Hong Kong. Overall, I think our margin will be continue even going up and don't forget, we have a very aggressive price investment target. We drop our price 5% - 10% lower. In that situation, we are still able to continue improve our bottom line. This is our financial ambition.
In the market we operate, except for Cambodia, most of them actually market are down, but we still believe we can drive top line 1%-3%. On the operation margin, compared to last year is at 1.7%, but we still have ambition we can up to 2.5%-4% through the sourcing, cost control, and also the new profit engine from retail media and data monetization. On the ROCE wise, I think this number will be quite nice. We will more than double in a food environment. We can be hit 12%-14%. Wellcome Hong Kong originally already a very, very good standard with the size of the itself and with the ROCE. But even in Cambodia, it is just starting, but we see the ROCE in up to 2028 can be hit 15%-17%. Actually, it is a world-class on the top tier market.
We are very seeing that be a TSR creative market for us. For me, very quick, to sum this up. To drive the fresh and value, this is very important. Start from Hong Kong, we will continue drive our GBA price to maybe 103. With all the initiative, we put 2/3 of them into the price, 1/3 into the profit. With that leverage, we are able to help the Macau on their buying cost, reduced by 10%-15%. Today, Macau, 30% of the product already leveraged the Hong Kong cost. We will continue doing that in coming two years, 50% will be leveraged. They can get a lot of benefit. With Hong Kong's cost, we are able to leverage to Cambodia with the item they are imported from Hong Kong can get 20%-30% cheaper. That is where the power of the food.
Even we have a three market, but we will leverage as much as possible. Store remodel and repositioning our upscale . I think at that one, 5%-10% of our store we touch every year. Once we touch, we expect a 10% like-for-like sales growth. Number three, Omnichannel will be continue our growing engine, particularly in Hong Kong. We will hitting to 7%-9% of the sales penetration. Retail media and data monetization, definitely for the food business, we will leverage it and become our major profit growing engine. Last but not least, everyday low cost is very important and we are not using a traditional way. We will definitely invest on AI and automation, particularly helping our store operation. We can help them to do their job easier and also for us that everywhere we can recruit the people willing to working in the retail environment.
Those are the quick sharing with you. Looking forward you enjoy— hoping you enjoy it and we do have the confidence on the all the plan we build up and actually at the past one year, we already see some very positive sign and we think in coming three years the result will be great and follow our plan. Thank you so much. Hoping you enjoy this morning.
Thank you, Curtis. We will now take a 20-minute break. Our format experience booths have now reopened, so please go and take a look at the innovation transformation that has been happening across our business format. Also, please help yourself to some light refreshments specially curated by our 7-Eleven Singapore team, available just outside the forum, and of course, our own brand products available at the booth. Vegetarian options are also available for those with dietary restrictions. Please reach out to our working team, Katie there, if you would like some. We will reconvene here in 20 minutes at 10:50 A.M. Meanwhile, please enjoy your break and I will see you shortly. Welcome back everyone and our online participants. We do hope you had a good break, get to enjoy some of our products, and also try some of our assessment tools at the booth.
Now, we will continue with the next section of our program. May I invite Mr. Martin Lindström, Chief Executive Officer of DFI IKEA, to the stage.
Hello. Hope you had a good break. I am really happy to be here with you today to share on how we at IKEA are driving growth by doing two simple things, focusing on value and accessibility. I will tell you what they have been doing, what we are up to, and why it matters for customers who want to have great home furnishing to the right price. So who are we? Well, we are operating a platform of IKEA stores across four markets with Taiwan, Hong Kong, Macau, and Indonesia. We operate in now some 26 locations, and that is a mix between full-scale standard IKEA stores, as well as some smaller shops. In 2024, we had a turnover of just over $700 million and an operating profit of $16 million.
We are the number one player on three out of our four markets with Taiwan, Hong Kong, and Macau, and Taiwan is 50% of our turnover. Yoep was mentioning on 7-Eleven being a franchise business, and IKEA is also operating under a franchise model. From that perspective, DFI is one of just a handful of companies having the right to operate the IKEA concept in the world here. In that, DFI is actually one of the longest-serving franchises. In Hong Kong, we have been operating since 50 years. In Taiwan, just over 30 years. In Indonesia, 11 years. That heritage brings us really deep market knowledge and understanding, strong local teams, and a mature operating rhythm. Let me share a few key opportunities that I see with the IKEA business, and I mention three, and I start up with Taiwan.
Taiwan, as I mentioned, is 50% of our turnover. Taiwan actually is seen as one of the strongest IKEA markets globally, and we are seeing a resilient consumer demand and a home furnishing category that is growing. The key to unlock now is on accessibility, turning this from a destination brand into an everyday brand, easy to use. The second opportunity is on Omnichannel, and that is how do we unlock the headroom across all our markets. Today, online penetration is 13% in Taiwan, 21% in Hong Kong, and 18% in Indonesia. As you can see from the slide, we are actually under index, both in Taiwan and in Indonesia, and we see room that we could scale further in Hong Kong. We see this as a meaningful opportunity to drive growth looking into 2028 with our economic model that is profitable today.
Thirdly, it is about affordability and how we win price credibility here and now. IKEA is trusted for our design and for our quality, but when it comes to affordability, we are trailing, particularly so in Hong Kong and Indonesia. To narrow that perception gap is, again, a truly meaningful opportunity to win more of the market, and I will come back on that. I will go through five levers that we will work on to drive growth up till 2028. It is about having strategic price investment where it will matter the most. It is about bringing relevance and more reasons to visit us. It will be about how do we reinvest where the returns are the best, how do we win on Omnichannel, and unlocking that headroom, underpinned by a cost transformation that is funding price and protecting margins. You can see it is actually a flywheel.
It is how do we lower the cost so that we can have better prices, getting more traffic, better productivity, and a higher return. Let me start from one of our strengths, and the IKEA brand and the IKEA brand equity is definitely one of our strengths. We are the category-defining brand within the region, where customers are appreciating us and trusting us for design, for our quality, and for our unique store experiences that customers are loving us for many years, indeed decades. I mentioned on both in Taiwan and Hong Kong, we can lead from a leadership position. In Indonesia, we are seen as an aspirational brand that is growing. With that as a base, we have two drivers. In Taiwan, it is about accessibility.
To make IKEA more convenient, to get closer to the customers with our stores, as well as to have an online offer that is really becoming an everyday choice. In Hong Kong and Indonesia, it is about affordability, and that is to make the value, the price signals where customers are comparing us the most. How do we do that then in terms of changing the price perception? We do two things. First of all, we offer more entry price products in every category, making value front and center of our range so that customers really see IKEA as the affordable choice. Secondly, we will do targeted price investments. I would even call it surgical price moves on those high volume, high awareness SKUs where customers are comparing us the most. We have two rules to keep us disciplined. First of all, it has to be seen.
We only invest in those prices which is highly visible and customers are actually noticing it. Secondly, it has to be paid for, and we are paying it from structural cost improvements to protect our price architecture and to protect the quality. We are not talking about blanket discounting. Across our portfolio, we are pivoting to Everyday Value. Scott was mentioning about Everyday Value, and IKEA is really about creating an Everyday Value. That is true across our markets. The application of that is a little bit different between different markets, and I use two examples here. In Indonesia, what the illustration is describing on the screen is that we have had too much of our price in the premium category, and we have acted on that.
We have removed some 700 products from that premium category, and instead built up our entry price category and boosting that with 17 percentage points. These are really volume articles that drives traffic and baskets quickly. In Hong Kong, we are responding or reacting to the new competitor reality that we are facing over the last two years, where we are then calibrating the price gap with the Chinese mainland competitors. That has been at around 20 - 25 percentage points. We want to narrow that to 5- 10 percentage points. We have already acted on the top 100 SKUs, where we have invested some 20 up to 25% on average, and we are seeing a great response on that.
To clarify, we are not talking about price war here, and we are talking about face value, which is including price for the delivery and assembly, which actually is one of our core competitive strength in Hong Kong, and the customers are appreciating. If you then have what we are selling at what price clear, what are then the more reasons to visit IKEA, and how do we bring relevance? One of the clear areas to bring relevance is on food. Food builds habits, and food matters here in Asia, and food matters for IKEA. Actually, 14% of our sales is coming from food. This is one of the highest in the IKEA world, actually, and it brings conversion. 40% of the customers are telling us that they come to IKEA because of food.
Of that category, 70% of them are coming out of the IKEA store with a home furnishing product. To put it simply, food is our most profitable marketing tool. It pays its own ways, it builds frequency, and it is add to the basket. With our Swedish unique menus, our localized menus that build relevance, and more than 100 launches across our markets every year, really build that neighborhood relevance and strengthen the brand recognition. A simple meal at IKEA turn into a home furnishing purchase. I would point out that this is actually one of our stronger competitive advantage as well. Outside of IKEA, there is no other home furnishing retailer that is having this as part of their proposition in their portfolio.
I talked about relevance within food, but of course, it needs to be relevance in our product range for home furnishing as well. One way of addressing that is that we are cutting the tail, to become more relevant. We are doing that for two reasons in mind. Both to put value front and center and more visible, and secondly, to calibrate our range to be more fitting to the consumer needs here and now, and to fit relevance. Practically, that means that we are removing some 2,000 products from our product range. On average per market, we are dropping our SKUs with some 20 percentage points. Concentrating the range like this will bring up the productivity and the sales per product some 30%, which adds on to availability as well as free shop capital.
On product relevance, we are then fine-tuning the range, and that is also to address some of the needs here and now, and addressing to what people are looking for right now. There are some examples on the screen there, but just example in Hong Kong, for example. We are removing some of the more bulkier sofas that that's challenge to fit into the Hong Kong apartments, and having more of slim fit and things that are fitting in. In Indonesia, I just mentioned about those premium prime range that customers not really looking for right now. We are replacing it with more relevant range. Or humidity-challenged product that doesn't work out, and replacing that with more relevant products. If you then have the demand engine right, and we have the price rights, where do we then invest, and where do we get the best return?
We think that one of the best return we can get is in Taiwan. I mentioned it's 50% of our sales. We have a long track record in Taiwan, since 30 years. Our sales CAGR over the last 50 years is 60%. We have an operating margin of 10%. Our online CAGR over the last six years is more than 30%. We have a strong platform of stores that are doing an excellent job and are loved by the customers. What we are addressing now is the access gap. We will do that with small-scale profitable openings into those white spaces where customers are telling us that it's too far to an IKEA store to become more convenient. At the same time, we are densifying our e-commerce offer so that we can be relevant on a daily basis throughout whole Taiwan.
We think that this is a meaningful opportunity to build for growth for 2028 in what is one of IKEA's strongest markets in the world. Moving into Omnichannel where customers are shopping today, and we strongly believe in online sales and omnichannel sales for IKEA, and we will do it IKEA way, which is profitable and with a scale growth. I talked before about the share or the per market performance of online. We are aiming to scale by 2028. We hope to have around 18%-20% of the IKEA business coming from online. We will achieve it by having each channel assigned a different role. Our own channels with our web and app, we will use for loyalty, we will use for service desk, we will use for the end-to-end IKEA experience.
At the same time, we will carefully pilot curated on third-party marketplaces to reach those demand pools that we are not capturing today. Here, Indonesia plays an important role. Indonesia is piloting third-party marketplaces not only for our group, but actually on behalf of whole IKEA. Indonesia is one of only two markets in the IKEA world that has the approval to operate on third-party marketplace. We have been on Tokopedia for the last few years, and we have recently, over the last few months, also opened up on Shopee. We have turned it into a learning loop on what range and assortment to use, how do we protect the brand and the unit economics, what is the service proposition, and our experience has been really promising, and we are really encouraged by what we are seeing.
As you can see from the expectation looking into 2028, we see that third-party marketplaces will play a significant role in driving growth also for Indonesia. Also here, Indonesia plays an important role for our other businesses, how this can inform us to scale up quicker once IKEA will give a general approval to work on third-party marketplace. Moving into the final lever, which is a lean and agile operating model. All of what I have described is funded. It is not wishful. We are looking at the cost transformation program that is in progress and delivering value month by month. It is either delivered or in motion. What is delivered is already on labor optimization, where we see significant savings coming through already this year. What is also to a big degree delivered is on rental negotiations, particularly so in Hong Kong.
We are also in Taiwan testing with some of our biggest stores where they have some additional extra space, which we have rented out to third-party supermarkets, and giving us a good return and experience. What is in motion is on the regional supply optimization. I mentioned about making the more efficient range and the cutting of the tail, but also the infrastructure optimization, where one example is on how we in Hong Kong can benefit from the more open borders by moving some of our fulfillment activities into Mainland China. What is clear is that labor optimization, rental, overheads, will all decline as a percentage of sales in 2026 and further in 2028. That will fuel our price signals, and also protecting our margin. This is really how we are able to pay for the customer promise.
Our outlook into 2028, I would say it is measured and realistic. We are looking at the sales CAGR of 1%-3%, versus our 2024 base. An operating margin between 4%-6%, versus 2.3% in 2024. The ROCE are between 5%-7%, versus 2% in 2024. That will come from mix and productivity. As you can see, it is not coming really from heroic top-line expectations. It is about what I described here on growth coming from our online scaling up, our more efficient range, cost savings that is translating into PBIT savings, and a better use of capital. What you should expect from IKEA over these years is that the profit growth should outpace the revenue growth. Bringing it all together, I would say we are seeing a like-for-like improving trend because I would say we are doing the simple things well.
We are getting the price right and the products that fits people's home. We are growing in those areas that we are confident we will win in. In food, which is our most profitable marketing tool, and in our profitable online business, which we see headroom that we can scale across all our markets. We will expand in Taiwan, where the returns are the best, and we see that we can close an access gap in what is one of IKEA's strongest markets. We are funding it through a cost optimization that is either delivered or in motion. Our hope is that we shall be easier to reach and clearly worth the price, done in a way that compounds returns. Thank you very much. Over to Wee Lee.
Thank you, Martin, and good morning, everyone. It's a privilege to be here to share with you after having my name called out eight times and having omnichannel online digital retail media mentioned around 48 times. I will spend the next 20 minutes with all of you to perhaps take you through why we are doing this, what we are doing, and perhaps give you a glimpse of how we are going to do it. The DFI Digital Ecosystem has four parts. Let me try to explain them to you. Number one, e-commerce, digital commerce, digital channel. Number two, loyalty and membership. Number three, retail media, or perhaps in your industry or what is more commonly known as advertising. Number four, retail insights, or what in the industry, perhaps people call it data monetization, insights monetization, or even data packages. All of these are somewhat synonyms.
First, let me start to explain about yuu and membership. in Scott's presentation, if you pay attention, it was five million plus members. Here, I want to expand to you that actually we have 33 million members across all of our loyalty programs across the entire group. Yuu Hong Kong has about five million plus, but we also have banner-specific loyalty programs. 7-Eleven Guangdong. We've got in Malaysia as well as Vietnam, and also IKEA Family in Taiwan and Indonesia. Also, actually, we have Lucky Cambodia as well. All of these is 33 million. I am very pleased that these 33 million members have accepted our membership proposition and have signed up and enjoyed it for value, convenience, and access. Number two, on e-commerce, I want to give you a bit of the story as you heard Scott talk about the digital reset.
Before 2024, actually, there was an ambition to build a super app in Hong Kong, and that was when we concentrated a lot of resources. Quite quickly, we identified two issues. That model was not customer centric. Number two, it was not economically sustainable. If you heard Scott mention, we need to meet our customers where they want to be. If they want to meet us on Shopee, we will meet them on Shopee. Over the last two years, we've gone from 60 customer shopping touch points to 80. We built up a lot of our own assets, our own apps, our own webs, mini programs, and also launched many of our stores on Keeta, Foodpanda, Lazada, Shopee, many of these other third-party platforms. Why this is important, because that has allowed us to scale our business profitably.
In 2025, up to September, we doubled our orders. We grown 100% year-on-year, while at the same time improving positive unit economics. More importantly, even in 2024 itself, we turned the whole e-commerce business around and delivered positive unit economics. That is an important milestone as we think about sustainable and profitable growth. Thirdly, retail media. We launched the business as a pilot in 2024. We had some early traction, and we scaled up in 2025. As you can see, we have six times more campaigns this year. Many of the brands, 80% of them are repeat customers. They have enjoyed our solution. They have good ROCE. That gives us confidence to continue to invest as we are now rolling out the solution beyond just the online assets, but also across the stores.
Last but not least, the entire Digital Ecosystem is driving sustainable growth. We delivered 30% year-on-year revenue growth up to September this year. Next, let me explain a bit about the Digital Ecosystem. Digital interactions with our members or customers starts with two aspects. One, you are either our loyalty member, where then we have a good understanding of who you are, or two, you digitally transact with us. These are the two core important ingredients for us as we think about the whole digital and data ecosystem. Then with this, we are able to build out extension. Just to give you a bit of a sense of what yuu is. Yuu in Hong Kong as well as in Singapore is a coalition loyalty program. What that means is that it has partners both from DFI as well as outside of DFI.
If you see this number, $9 billion worth of transactions annually, that is far bigger than our entire Hong Kong subsidiary business of DFI. So that gives us tremendous insights into the retail and shopping behavior of customers to allow us, in many instances, as my former CEOs have described, a more increased share of wallet because we have a better penetration. What is more important is that every quarter, our loyalty members shop in more than one of our partners. So they do not join us because they only like one brand, but actually, they like the whole coalition concept, and they enjoy shopping across the different partners. With knowing our customer better, we have two opportunities. We give them better offers, then we actually also use it for our operations. We drive better sales, not just online, but actually also in-store.
We are just beginning to drive this capability. As you think about all the digital assets that we have, we have a much improved quantity as well as quality of engagement and transaction data. All of that builds into insights for us to do a better business, for our brands to have better promotions, as well as then overall opportunities for us to monetize as retail media or insights. Overall, we would expect the digital ecosystem to be profitable by 2026 and will be more accretive than the offline business by 2027. E-commerce. Over the last two years, we have improved our e-commerce penetration. In 2023, it was less than 3%, and by 2024, it is around 5%. We want to re-emphasize that half the business of e-commerce is done on our own sites, and the other half on third-party platform.
That gives us a good balance to acquire customers, as well as then to serve them on our own platforms. That has also been shared by some of my colleagues in their earlier explanation as well. We are hedging against the increasing costs of doing business on third-party platform, that is also why we need to have this balanced strategy. All being equal, I want to iterate, also that's what many of the format CEOs, including Martin in his articulation, has talked about. All being equal, we bias better experience, assortment, pricing, and services on our own sites, because that's where we can deliver the best experience as well as longer-term monetization opportunity for DFI.
In Health & Beauty , Andrew spent a lot of time talking about tools and all this, I wanted to emphasize our e-commerce online strategy is actually underpinned by the format-specific strategy. It's differentiated by what the formats are doing. When he talked about Wellness, we are doing the tools, as I've also tested. They say I have pigmentary concerns, so they recommend me sunscreens, to avoid more sun damage to my skin. That is actually what we're trying to do. With the diagnostic tools, we collect more data, we can then provide better offers and personalize them to our customers. In 7-Eleven, you've heard Yoep repeatedly talk about ready-to-eat. The digital strategy is an extension of that strategy.
We provide Click and Collect services you can pick up in store, as well as we focus on quick commerce platforms because it is coherent and consistent with the whole value proposition of convenience and speed. In the last 12 months, they have launched their own app for 7-Eleven Hong Kong and Singapore. With that, they've delivered more than 200% order growth year-on-year. Food. Curtis has been relentless about value and focus. The value focus extends online as well. We provide the value assortment as our core hero product or perhaps at the last mile of your journey as a final add-on item.
Together with that, we've grown tremendously on home delivery in 2024 as well as 2025, but going forward, we'll double-click on Click and Collect in-store experience because no one is more than a few hundred meters away from the next Wellcome store, that will be a significant growth driver. Last but not least, with IKEA, Martin talked about marketplaces, we continue to focus on leveraging them because we know they can help us access customers in the regions that we don't have a store today. Across all the businesses, we continue to uplift experiences. Example, search. Why? Because we want customers to like what they find and they can find what they like. These are all very core, and we build that upon the customer data that we have.
I want to give you one data point why we are relentless in going after the omnishopper. The omnishopper spends 70% more with us annually, 16% from bigger basket, and 60% from higher visit frequency. That is why the omni strategy is driving our customers to be not mono channel and driving into omni channel. Yuu today is the largest loyalty program in Hong Kong by far. We continue to drive members' active rate and usage of the program. Today, the program accesses more than 2,500 stores and restaurants in Hong Kong, and we have more than 40 digital touch points, both ourselves as with our partners within the program. As we go forth, we need to be relevant to our customers and continue to grow the new partners so that we can be overall relevant to the whole retail share of wallet.
What that means, as in Curtis' presentation, he showed a bit of this outbound shopping into Shenzhen, Greater Bay Area. We need to go where our customers are. We are going to expand the program into Greater Bay Area to allow our customers who shop sometimes in Shenzhen to also be able to enjoy the program. Likewise, we are also seeing the trend of many new Hong Kongers, and it is better that we interact and touch them even before they come. Perhaps even the occasional Chinese mainland tourist. We want them to have an ability to use the program even back in Guangdong Province. That is where we are positioning ourself for the increasingly porous GBA borders. I also wanted to talk about paid loyalty. As you think about how do we continue to grow frequency as well as, basket.
When we reference the top loyalty programs, some of the paid loyalty programs in the world, whether Amazon Prime, Alibaba's 88VIP, or perhaps even closer to home, Walmart's Walmart+. All of them consistently have delivered higher frequency and higher baskets annual spend of the paid members relative to non-paid members. That is also part of our segmentation. We will continue to define new benefits, new propositions for our customers on value, convenience, and access in order to serve them better. That is what we need to do to continue to upgrade ourselves. Within this group, I also want to mention the top 25% of yuu customers. They account for more than 40% of the DFI Hong Kong retail sales.
They are the group that we need to continue to serve and also to increase their omnichannel penetration, that they can continue to deliver the value that I just described earlier. With this, we continue to have then a differentiated retail media proposition. Why? There could be Chinese brands who want to test in Hong Kong. We could have Hong Kong brands who want to grow into Greater Bay Area. All of them can then access our retail media solution across the entire GBA because we know the customers. As we have all of these data, we have two opportunities. One, as with more engagement and transaction data, we can personalize offers, and that has allowed us cumulatively to improve our customer share of wallet. We will continue to do so. Secondly, we can do better business.
And that is where you see increased sales per square foot and all that. What it means for the category team, as what Andrew shared earlier, they use the data in order to decide what assortment I need to put. For Yoep, he will say, "Well, rather than put two phasing, I will do one phasing because it does not need so much space." For Curtis, he will say, "I do not need so much promotion. I can cut back on promotion. I do value as a strategy." I think that helps inform us, as well as our brand suppliers, to do better business. All of that cumulatively allows us to improve revenue as well as profit margins. Data insights.
What are we offering and how does it. First, as a vendor scorecard, I think it is always important for us as a brand, for our brands and suppliers who work with us to have a healthy view of how their business is doing. They know how the sales is. They know how operationally are their items in stock, not in stock. That is then the honest view of how their business is. At the same time, we will give them a benchmarking, how they are doing against their category peers, a bit to create that competition. At the same time, we will have the next solution. If you want to be able to see not just top-line sales, you are curious to know your sales broken down by store, by offline, online channels, sales by different splits across different touch points, we can provide that in product performance.
At the same time, how they are doing on supply chain and many other factors will all be part of product performance. This solution will be addressable to the entire base of suppliers and brands that we work with. Thirdly, there will be some brands who may have a bit more sophistication and have a bit more resources to do analysis themselves, and then they will ask for shopper insights. If you recall, I mentioned about the 33 million of customers. Where relevant and where applicable, we will ingest that into this data platform. What brands need to know, they can actually identify which segments like their product and which segments do not. With that, they can also choose then later on potential intervention to retail media to assess these customers. Last but not least, we are going to build new solutions like customer surveys.
Brands are always interested how much brand uplift I have or how much brand recall I have, and that is something that we can offer them, as well as even new product. As they launch a new product in a store, they will be able to do a survey of customers through our digital touch points, whether a loyalty or e-commerce app. Retail media. I just want to explain to everyone why we have a chance to win in this business. Number one, we have traffic, right? We have significant offline and online traffic, and that is the starting point of all retail media or advertising, eyeballs. Number two, we have member loyalty. As I mentioned, we have 33 million member base, and that gives us insights. This audience is what differentiates the quality of a retail media solution.
And last but not least, we have surfaces, digital assets, screens, and apps. This will allow us to have to build a differentiated and unique proposition. Why is this different? Because we will be the only retailer or only network that will be Pan-Asia, and you can actually serve different propositions based on that. Let me explain to you the three use cases. For example, one, you can be a local SME. You have launched a product, you decided to do a single market advertising in Malaysia. That is one. Number two, you can be a global or regional brand and then decide, "I want to run a multi-country brand campaign," and you can access our network with that. Thirdly, we will also be plugging in to open retail media network, where then we can have non-suppliers, whom we call non-endemic.
They will then be able to access and advertise with us as well. Across this network, we will be having a tremendous amount of assets with more than 8,000 screens in our home market in Hong Kong and at least 1,000 each in our Southeast Asian markets. Next, I wanted to share with you about DFIQ vendor portal, which Scott mentioned earlier. Maybe I will show you a video on our launch.
[Presentation]
In building this DFIQ vendor portal, we have been inspired by Amazon with their Vendor Central, or even Walmart with their Supplier One, which they launched just about two years ago. We want to provide this as an integrated experience for suppliers to be able to do day-to-day trade activities, their performance of their business insights, and have a choice to intervene, right? To amplify their business through promotions or retail media. Now to the flywheel, the economic flywheel. There are three parts to this. Number one, e-commerce. As I mentioned, we have already turned this business a positive unit economics in 2024. It will continue to become increasingly profitable. However, it will not be as profitable as the offline business.
But with part two, we will then have retail media and insights, which will both be highly accretive, and they will be able to deliver growth that would enable the entire digital ecosystem to be more accretive than the offline business by 2027. As a key takeaway, I have four points to leave with you. Number one, we are building a highly accretive digital ecosystem through the disciplined use of CapEx and other resources. Number two, we have a positive unit economics in e-commerce, and we will further build out our loyalty network. Number three, our retail media is unique, differentiated proposition for advertisers. Last but not least, we offer simplicity for our suppliers to use, to understand, and to buy solutions. Thank you very much.
Good morning. Good to see you all here. I think the last few years, we have simplified our portfolio, we reset our strategy, and we strengthened our balance sheet. As Scott shared, the TSR this year-to-date, is well over 80%. Even excluding our special dividend, it is more than 60%. If you go back to January 2024 to now, it is 40% TSR. Very strong numbers for return to the shareholders. So you have heard our format leaders and Wee Lee on our key priorities, very solid strategies anchored in data and forward-looking statements. I am going to all bring us together now in how that all rolls up in our financials, both in growth, in margins, and very importantly, in returns. Let me start to go a bit back on our financial progress the past few years.
Starting with the operating margin on the left side, we have done a strong executional strategy. We improved market share gains and result in profit growth, supported by underlying reductions in cost. You can see our operating margin moved from 2.3% back in 2022 all the way up to 4% in the first half of this year. As you will see later, that is going to improve even further in the years to come. We saw a like-for-like sales recovery starting in the second quarter of this year after four quarters of consecutive decline. Also in the third quarter, we see very strong results on like-for-like, and we expect that to continue going forward.
As a result of this, you see our underlying PAT, our outlook for this year, our guidance is now between $ 250 million-$ 270 million, which is a 30% increase on the midpoint. Even if you exclude divestments, Yonghui divestments, Robinsons divestments, and the related lower interest cost, we are still up 11% year- on- year. All driven by the underlying business and their performance. Moving on to the right side to the balance sheet. We have simplified our portfolio. We have sold Yonghui minority share. We have sold Robinsons Retail, again, a minority share. Now we move to a focused operating business. So no longer a portfolio, but really operating business. As a result, we have strengthened our balance sheet. Yonghui divestments and Robinsons divestments together were $ 900 million of proceeds.
So where we had a net debt of almost $620 million back in 2023, in the first half of this year, September this year, we had $648 million. That was before we paid out our special dividend, which was up in October. Shared by Scott, by the end of the year, we will still be net cash positive. Our special dividend, which we paid out in mid-October, with the special dividend and the interim dividend, resulted in a net dividend yield of 16% for 2025. So strong numbers also on the underlying dividend, driven mainly this time by the special dividend going forward. Going to the next few years, I will sum all up our portfolio or property, sorry, four levers have shared. The first key lever for us is growth.
Our top-line growth, if we add it all up for the next few years, is between 2%-3%. We focus on market share gain, like-for-like sales growth, both stores and online, and selective store growth in Health & Beauty , and in our convenience formats. Over the past 12-18 months, our strategy demonstrated that we are gaining market share, even in markets where we have very strong leading positions. That is Hong Kong. Hong Kong, we are a strong player, and even in Hong Kong, we have gained market share in all our formats. If I then touch on each key format, starting with Health & Beauty . Health & Beauty , customers are spending more and more on Wellness. That Wellness trend, which Andrew shared, we are capturing. So this market, the Health & Beauty market, the Wellness market is growing, and we are well-positioned to capture that.
In addition, there is a growing middle class in Indonesia and in Vietnam. We have got a strong position in Indonesia, and we are growing in Vietnam. That growing middle class means more spend on Health & Beauty , and therefore, also gives us confidence on our top-line growth for Health & Beauty . Convenience, this 6%-8% is excluding cigarettes. Our focus is the non-cigarette sales.
That what drives us forward. There is a rising demand for quick prepared hot meals, and 7-Eleven is turning into a food destination. In the past, we were more around cigarettes. More and more, people go to us for a quick food, for a snack, for a meal, breakfast, lunch, and even dinner. That is a transformation of 7-Eleven, as you have shared, and that drives partly the growth of 7-Eleven. The other driver for 7-Eleven is store growth. Again, store growth here is in South China.
As we are going to go from 1,008, 1,009 - 2,800 stores in the next few years, which also drives a non-like-to-like sales growth for 7-Eleven. Food, here you see a bit lower growth, but bear in mind, there is a deflationary cycle happened in Hong Kong, our largest market for food, which gives pressure on the total growth of the market, as well as a mature market as Hong Kong population not growing. Despite that, we see, and it is in the past 12, 18 months, we are gaining market share, not only from the supermarket operators, but also from wet markets. So the way we look at market is not a like-for-like competition. We say, what is the total share of stomach or share of wallet we are competing against?
And there, we are gaining share in the last 12 - 18 months, and we will continue to do so in the next few years. Home furnishing, 2%-4% growth. Taiwan is very resilient, and I see Martin share that, but we're also capturing the growing middle class in Indonesia. There you see income is rising, there's a growth of the middle class, and also increased urbanization, and that drives the underlying growth for IKEA in Indonesia, and that on a total level as well. Last, as you can see on this slide here, we are growing faster in higher margin businesses. So Health & Beauty and Con venience are becoming a bigger part of our business compared to what they are today. It is because these markets are growing faster and also we are gaining market share in these markets.
All that is driven by market share gains. The second key lever for us is margin growth. I think this is also very important for the future. I'll come to the total later, but let's go format by format. For Health & Beauty , the current margin is 8.3%. We aspire 9%-11% by 2028. Again, driven by Wellness as well as retail media. Moving on to Con venience , 4.3%-5.6%. Here we see a shift of low margin cigarettes to much higher margin and higher quality of RTE sales, ready-to-eat sales, which drives underlying margin for Con venience . Food, 1.7% - 2.5% - 4%, so a significant increase in food, which is I think is almost comparable to best in class. Here, although Curtis shared, we're going to lower our prices. But we're lowering our prices by improving our sourcing. We no longer buy from distributors.
We go straight to the source for fresh products, but also non-fresh products. The lower costs are partly passed on to our customers, and that drives volume and drives sales, but it also helps us improve our margins. That's a key driver for us to improve the total margin for the food business. IKEA, as Martin shared, is a lot of cost optimization. Here we see the rental for IKEA, as many in Hong Kong and Macau, coming down significantly. But also other costs throughout the IKEA business and supply chain are coming down. Partly, we reinvest in price, which is very important for our customers, but also partly driving to bottom-line improvements. I want to be very clear, margin growth can never come at the expense of quality, of service, or value. Those are the key drivers for every good retail business.
The focus is on strategy, on quality, on service, and on value. Then the last one is cost, and Scott mentioned it. Cost is very important for retail. It's a very large cost base. We spoke about rental earlier, but also overhead costs. So our overhead costs in the next few years, also the SG&A costs as we report, back in 2024, 1.5%. We've got programs in place to drive that down to 1.1%. We've started the programs this year, and we're well on the way to deliver this. So I'm very confident that we get to that number by 2028, and hopefully even earlier. That reduction of our $30 million-$35 million improvement on the bottom line. Let me move on to the key building blocks, how we get from the profits in 2024 to our indication and ambition in 2028.
The ambition is between $310 million -$ 350 million on profit by 2028, coming from $201 million. That is 11%-15% CAGR over the next few years. It excludes divestment, by the way, so it is a like-for-like comparison. On the key building blocks, starting on the left side, the first two key building blocks have been delivered. They are not hopes, they are done. The first one is our portfolio optimization. We have sold Yonghui, which was a loss-making business. We sold Robinsons, which was profitable. As a result, we also lowered our debt. The first two building blocks are a result of our portfolio simplification and lowering our total financing cost. The next few years' focus, as shared by the business leaders, is on growing our sales density and on e-commerce.
The sales density, the focus here is like-for-like sales growth, as well as growing stores for Health & Beauty and Con venience . Margin expansion in all our formats as we are lowering our cost and growing faster also in higher margin businesses. The last block is e-commerce. Whilst e-commerce is less profitable than the store business, that is more than offset by the growth in retail media, as well as data monetization. On retail media, we are just starting. If you look in Europe or North America, where retail media is a big part already of the income of larger retailers, we are just starting the journey. We as DFI, given our network in all our countries, our offline presence, our online presence, we are confident that will drive a significant part of our profits going forward. The third lever is our return on capital.
Back in 2022, we delivered a 1.7% ROCE, which is low, I say very low. We improved that by end of this year to between 9%-9.5%. How? We simplified our portfolio, so Yonghui, Robinsons. We are very disciplined on CapEx. We improved our working capital. Importantly, we improved the underlying margins of all our formats. Our ROCE target for 2028 is 15%. The key drivers is improving our margins by improving our like-for-like sales and operational efficiency, capital-light store growth, and we are growing faster in our higher ROCE businesses, being Health & Beauty and 7-Eleven, which improves the mix overall, which help us deliver the 15% target by 2028. Just one note on CapEx, and I mentioned we are disciplined. If we are looking at CapEx, we do not open stores for opening stores' sake. That has to be very disciplined.
Every store opening, for every store renovation, there is a clear focus on ROI or ROCE. If it does not meet its targets, we will not do it. Even after one month, two months, or one year of opening, we will look back, did we meet the targets or not? If not, why not? How can we improve? A very disciplined focus on return on capital employed, also on CapEx, which drives part of the ROCE base. On CapEx, what is our outlook on CapEx? Starting on the left side. We will continue to spend between 2%-2.5% of sales on CapEx. I was trying to break it down in the key components on the left side. A few notes.
On stores, on Health & Beauty , on new stores, I mean, on Health & Beauty , we are growing mainly in Indonesia, but up to 750 stores by 2028, although a lot of that is franchise. New store growth in Con venience , that is mainly South China, up to 2,400 stores by 2028. Food store growth, that is in Cambodia. Home furnishing, we are aiming to open one more store in Taiwan, but there is still room for us to grow in the market.
The second block is store remodel. On store remodel, here, Health & Beauty , we are refurbing all our store to better cater for Wellness, making sure we have space for the health advisors. On Con venience , an example is here, the 1,250 so-called food bars in South China, as well as refitting over 1,000 stores across the network, and that drives also sales.
Food, as mentioned by Curtis, is a standard remodeling cycle, although our focus here will be to make the stores ready for Click and Collect so we can drive the online sales in the food business. You can see there is more spend on new stores and more spend on store remodeling, and that also drives underlying sales. On IT and automation, although it is smaller than maybe in 2024, but in 2024, we had a large tech debt. We had a lot of old systems, old infrastructure, which we slowly replaced the last few years. Going forward, therefore, we will spend less on IT and CapEx because the tech debt is dealt with. However, there is more spend in there on AI and on automation. It is lower the spend, but the spend will return more on investment. The last one is sustainability and supply chain.
On the right side, how are we going to use all the cash we generate? The CapEx is about 35% of our total cash generation. The other 35% is going to spend on dividends. The last one is 30% on strategic value accretive, TSR accretive, TSR. I want to be clear, if we cannot find or we not find the right value accretive M&As, we will return the cash to the shareholders, either via special dividends or other ways. We are not going to spend the dividends there. We want to make sure it is helping to grow our TSR and helps the company to grow going forward. The last one, you see the flywheel here, but as you can see here, a very balanced approach on organic growth.
The focus is on organic growth, and the focus there is on ROCE and TSR, as our former leaders have shared this morning. A healthy balance sheet. So we target a leverage ratio of 25%. However, if we need to flex this for strategic value accretive M&A, we will do so, but it will be temporary. On M&A, it has got to be accretive in the medium term to our TSR, and the target here is, as I shared, 15%. The last one is growing dividend, and this is new. So far, we give you a guidance of 60%. We are going to move to a 70% dividend payout policy. From a 60% guidance to a 70% policy, and we will start as of financial year 2025.
The first, the final dividend payout, which happens in May next year, is going to be based on 70% payout ratio and no longer 60% guidance. Let's say change in the guidance we've given so far. To sum it all up, summary of the key initiatives. As you can see, growth, 2%-3% organic growth delivered by the key formats. Again, here you see a very strong growth of Health & Beauty as well as Con venience . The underlying PAT growth between $310 million-$350 million by 2028, which is a CAGR of 11%-15%. Our underlying profit is growing faster than our top line growth, driven by mix, but also initiatives for us to grow margin and to lower cost across the business.
CapEx, 2%-2.5% of our revenue, in line with we do so far to make sure. But in CapEx, the focus is on store growth and store remodel, which helps us to generate top line growth as well as profitability. The payouts, the ordinary payouts, from a 60% guidance to a 70% payout policy starting 2025, and the first payment will be May 2026. ROCE, we came from a very low base back in 2023, end of this year, 9%-9.5%, and we are confident that by 2028, our return on capital employed will be around 15%. Free cash flow will be in line with our profit growth. We'll try to do better working capital, but I'm confident that free cash will align with profit growth. I shared earlier on our free cash flow. We will spend on strategic M&A.
Again, if we cannot find good targets, we will return the cash to shareholders, as we've done so this year with our special dividends. That sums it up. I look forward later on to the Q&A session, where we might go into a bit more details, but this is my sharing. Thank you.
While the chairs are being set up, maybe I just give you some closing thoughts. This leadership team has worked very hard over the last two years to reset DFI, and we're a very different business. I understand if you've been a long-term shareholder, you might be a bit skeptical. Based on a few of the analyst reports, I think some of the skeptics may be in the room. That's fine. That's fair enough. But we built this plan on three principles. Principle number one, constructive dissatisfaction. In retail, I'm a huge believer that you celebrate for 20 seconds, and then for 20 minutes, you work on how you can do better. To me, that's really critical given the complexity of all the businesses and markets, formats that we operate. I think we do constructive criticism well. The second, underpromise, overdeliver.
There is opportunity for us to do a bit better in this plan. This is not an aspirational plan. Our ambition, we are comfortable we can deliver. The third is aligned rewards. In 2024, we completely reset our executive compensation. For the top 80 executives of DFI, of our nearly 70,000 team members, somewhere between 15%-40% as you go higher up in the organization of compensation, 15%-40% of compensation is based upon delivering to shareholders. 50% in terms of the relative TSR, we worked very hard to benchmark ourselves against what we believe to be peer companies. The second upon return on capital employed. As we, again, go through those three principles, we are laser-focused on ensuring that we live up to that strategy. Customer first, absolutely focused on the customer. People-led.
We have to be supportive in retail in terms of our team member, but that is shareholder driven. We are pretty comfortable that what we have put together is deliverable. We have got the right people. We have got the right, I believe, culture in the organization. You get best-in-class retailer in Asia. Clear leader in Hong Kong, which we shared to you in detail. We are expanding rapidly in growth markets in what we believe to be a capital-efficient way, and focused relentlessly upon operator as retail excellence.
Clear business strategy that is aligned to what we call the sustainable growth loop, driving retail growth and margin expansion. We shared with you many of the initiatives underway in terms of how we are going to deliver on that margin expansion. The store network will grow. It will grow across all four, but primarily in Health & Beauty and CVS, which have significantly higher ROCE.
Targeting a revenue growth CAGR of 2%-3% as an ambition, not an aspiration, with an underlying PATMI of $310 million-$350 million as shared by Tom. Upside from digital monetization. This is something where it is underdeveloped in Asia. It is becoming quite mature, you will see, in North America, growing as well in Europe. We think there is great opportunity in terms of the margin to allow you to be able to drive market expansion through your share by being able to invest in price, while also increasing your overall profitability margin.
We will continue to focus on that fair share, making sure that our e-commerce penetration is equal to the market so that we do not lose customers. We meet the customer where they want to be met. Capital structure, again, ready to support that growth. Simplified portfolio as we have delivered here, disciplined capital allocation as we have reviewed.
Strategic M&A, where it is TSR accretive. We are very focused upon, as Tom said, that if we are not able to find a good target, we will give it back to shareholders. Finally, we are comfortable that our balance sheet can support a 70% dividend payout policy. Quite an action-packed, content-packed morning. Look forward to being able to hear some of your questions. The management committee will be ready to answer those, and I believe I am handing it over to Karen Chan now. Thank you.
Thank you, Scott. We will now start our Q&A session. May I invite our MC members to the stage. Martin, Curtis, Crystal, Andrew, Ella, Scott, Tom, Yoep, Erica, Wee Lee, and Joy. In the meantime, let me go through some housekeeping. We will start by taking questions from the room, followed by online. Please keep to a maximum of two questions so that we can try to get to as many attendees as possible. For those in the room, if you have a question, please raise your hand. We will get you a microphone. Please kindly state your name and company before asking the question. For online participants, you can type your question in the Zoom chat, and we will direct them to your speakers. Again, please state your name and organization before asking the question. All right, I saw a couple of hands already. Let's open up the floor.
Hi, this is Jayden from Macquarie. First of all, thank you so much for hosting today and sharing very detailed plans for the next three years. It is very interesting. My first question is about Maxim's. We have not heard it mentioned at all today. I just want to understand how it fits into the strategy, how they will contribute to the profit aspiration. Where is the opportunity to work better with that business and other parts of the group? My second was just on the digital strategy. In terms of the ownership of data, you have obviously quite a few partners with yuu. How does that work between the various partnerships, and how can you leverage that even better? To what extent do your partners have claim on that data as well, and could they potentially leverage it for their benefit? Thanks.
Why don't I take the first question, I will pass it to Wee Lee on the second. The last two years has been a little bit busy, and we have not focused upon the food restaurant synergy that I believe exists. We have reviewed operating units to date, and we still refer to Maxim's as an associate. I think there is upside opportunity over the next couple of years to drive Maxim's to be more of an operating unit. We own 50%. We have substantial say in how that business is run. We have never really looked at how you drive synergy in sourcing, procurement, the background in terms of landlords, let alone some of the growth initiatives across some of Southeast Asia. I still think that there is upside in the portfolio from doing a much better job of driving a synergistic value between the two.
On to digital, Wee Lee?
Yeah. Thanks for the question. I think first on the yuu, let me first just reiterate that it is a coalition loyalty program, which fundamentally means, both the program and all the partners need to be happy. They need to be sustainable, and they need to appreciate how the program works. To do that, actually, to your question in a more direct way, the yuu program owns and have access to all of the data that transacts the $9 billion that we talked about. But we do need to provide support and insights to all the partners of the program so that they can benefit in a meaningful way, to engage and use the data for their own targeting and all that, and including actually being able to access customers on the yuu-enabled channels.
I think it is a healthy balance, but at the same time, that's what we need to also safeguard the customer privacy and data at the same time.
Next question.
Hello, Simon Weston from AXA Investment Managers. Thanks very much for the presentation. Just one question, and you talked a lot about simplification of the portfolio so far. I just wondered, to what extent that is complete or whether you would consider further simplification, and if so, on what basis? Thank you.
I think in terms of divestments, for the most part, we are done. I think there may be one banner in a market that is not strategic we may think about, but for the most part, I think we are in good shape to build from here.
Max.
Hi. Thank you so much everybody for today. I have three questions, if I may. The first one is actually regarding the franchise model. We have heard it so much today. But maybe if we could just get a little bit more color on how this works in terms of the revenue and your cost recognition and sharing between yourself and your franchise partners. How does that model work? And if there is any difference in how this model is between Health & Beauty in Indonesia versus 7-Eleven in China, just some color on that. My second one is about 7-Eleven a little more specifically, where you have mentioned that, I think on one of the slides, RTE would be 28% of your revenue share target for 2028. Just wondering if your food bars in China is also included in this RTE.
If not, because you have a significant amount, 50% coming from your non-sig category, which is subject to competition from a lot of online players. Just wondering your strategy on how to prevent from margin erosion on the non-RTE, non-sig, part of your business. Third would be on the shareholder returns. It was mentioned the 30% where if you do not identify opportunities, you would return it back to shareholders. Just wondering what kind of timeline you give yourselves to decide between, okay, when do we stop pursuing an opportunity and when do we give it back to shareholders? Thank you.
Three questions. Got it. First, maybe Andrew can talk about what we learned from 7-Eleven, which is one of the great values of the portfolio around franchising. Then we will turn it over to Yoep to talk around the RTE question, and then maybe Tom, you can talk about the approach in terms of our timeline for dividend.
Sure, Scott. Thank you. Thanks for the question. As Scott mentioned, we actually took a lot of learning from Yoep, from our 7-Eleven business, which has been a master in running franchise. One of the very early guardrail we set for ourselves, it has to be a win-win opportunity for us and our franchisee partners. Secondly, we are also in the market to compete of our potential franchisees investment versus the other operators, albeit might not be in Health & Beauty sector within the market. Even though this is early stage where we are starting this journey, we have actually got the assessment all done that we are confident of offering a better solution for prospective franchisees to be able to deliver the value for them as much as it is for us.
Yeah. The 7-Eleven is a beautiful business, but it is really around making the flywheel stronger and stronger. It really starts with the 7-Eleven as a brand, and it is being brought to life by assortment as well as experience. The experience could happen either in the store or it could happen on the digital channel. In terms of the assortment, RTE plays a very important role. The numbers that we have quoted, 28%. China specifically, it is over-scoring. Yeah. For the fact that it is a competitive market, there is a lower cigarette penetration, and also our franchisees partners are buying into the differentiated assortment so that they have the ability to compete. We believe in this model, and we continue to push this one forward. Food bar is a critical element to bring the RTE strategy to life in China.
Thank you. Just to supplement your question on revenue recognition for franchise. We recognize all the revenue of the franchise. The way it works, we share our margins. There is a margin sharing agreement between us and the franchisee. On the question on dividends, on returns to shareholders. The first step for us is to increase to 70%. Starting what I shared earlier, our dividend policy will be 70%. That is the first increase to shareholders. I do not expect any other special dividends in the next 24 months as we are looking for acquisitions. If we cannot find them and there are no value accretive acquisitions, maybe after that we will have a look again to see what is the right timing to return the cash back to the shareholders.
Next question. Jamie?
Hi. Thanks a lot. Jamie Zhou from M&G Investments. Couple of questions for you guys here. I do not know how much you guys have been following the retail landscape change in China these days, especially with the Pangdonglai model, as well as the discount snacks and beverage retailers. It seems to me that there is a lot of channel disintermediation happening, especially from a procurement side. I think this could be applicable to a lot of your business from Convenience stores to fresh grocery, and potentially to Health & Beauty as well.
What is the lesson that you guys can draw from what is happening in mainland China? That is my question number one. Secondly, you mentioned value accretive acquisitions numerous times. Can you directionally share with the group here, broadly speaking, what are the gaps and molds that you are trying to fill here with potentially an acquisition? Thank you.
Yoep, why do you talk about our learnings in terms of some of the other competitors, and then Ella will talk about the M&A strategy.
Yeah. A lot of our management committee members have a lot of experience in China, so we know China very well. If you look at the China retail market, and it does not matter in which format, it could be supermarkets, hypermarkets, convenience stores, snacks, even into the club model, it is very competitive. Some companies are able to get to scale without being profitable because they drive a different strategy. We as 7-Eleven as a brand, first of all, we are the largest franchisee of the 7-Eleven brand in China, and we are the most profitable. To answer your question, there are many things that we are able to learn, but we cannot just copy what they have been doing because it might bring us down the path of getting to scale without being profitable.
So, if you look at what we are doing in China for the 7-Eleven brand, we try to get to scale by means of serving customers better. Hence, we have been listening to them and addressing the right shopping occasions. We believe we are able to get to margin expansion by means of being differentiated. We are different in our fresh assortment, especially around RTE, which other channels do not operate. For the non-RTE, non-cigarette element, we are working towards own brand program, private brand. At the same time, we are working on exclusive launches so that again, we are able to be differentiated. We want to do two things at the same time, getting to scale and at the same time being profitable whilst we are growing.
Thanks, Yoep. I think this morning you have heard about DFI's journey, and we are now a strong multi-format, omnichannel retail platform. We are focused on serving our customers' everyday moments. We believe we have the right mix of businesses to capitalize on our leading positions across Asia. You have heard a lot of our strategies from across our formats. We are focused on reinvesting and strengthening our value proposition, our customers' omnichannel experiences.
Alongside our focus on organic growth, our portfolio decisions will be laser-focused on delivering against two key financial metrics, the return on capital employed and the TSR, along with the strategic fit to our overall business. Given the lessons that we have learned from our past acquisitions, I think to sum it up, we would only be looking at opportunities that support the growth that you have heard our leaders talk about, as well as investments where we have operating control, where we have a majority stake, investments where there is clear strategic fit and synergies, as well as investments that accelerate our businesses in Asia and deliver against our return on capital employed and TSR within a reasonable timeframe. Thanks so much for the question.
Let us take a moment and move to online. Two questions from Brian Tso of Citigroup. First, on Health and Beauty, how do you compete with online platforms that are known for offering competitive pricing for Health and Wellness products? The second question is, for CVS, location is of vital importance. In China, how do you compete with other brands in securing good location? We have a 12-18 months payback, and how does that compare to our peers? What is our franchisee store margin versus peers?
Andrew then Yoep.
Thank you very much. I think like what we share in our session, we are an omnichannel player. Yes, there are online competition coming in, but as we mentioned from our presentation as well, it is about focusing on Wellness. It is about the expert advice that our team members are also able to provide with them. Actually, there is also one more element, which is exclusive branding, partnership with suppliers. With our scale in Asia, we are actually very confident of continuing that sort of exclusive partnership with our key partners, including also bringing local suppliers to a wider portfolio of our stores as well. At the same time, when we continuously improve our digital capability, we are very confident that we will continue to drive the growth and hit our target.
Yeah. I think it was Brian who asked the question, right? I think Brian and Jamie asked a similar question around competition in China. Yes, China is very competitive. We are competing on proposition, we are competing for the best talents, and we are also competing for the best locations. The good thing around 7-Eleven brand in China, we are an omnichannel player. For the offline part, we are not being disrupted for offline property locations. But for the offline locations, we are moving our margins up by means of focusing on a differentiated assortment so that we are able to afford better locations than our competitors. When it comes to return on investment versus our peers, we are better than our peers. We are able to provide our franchisees between 12 - 18 months return on their investments.
By means of growing scale, we are able to drive economies of scale and bring the overall CapEx down, and hence we have been improving our return on investment for our franchisees.
When we say competitor, we just do not mean Con venience stores. We look at coffee shops, lots and lots of opportunities for somebody who has property and wants to get into that business for a franchise. We have been very, very aggressive about making sure that we are competitive against all of them. I know we have got a lot of questions, but I think, as I look over the next three years, there are some important areas that are critical enablers for us moving forward.
Crystal, you can talk a little bit about where we are in the AI journey, and then Joy, what that means in terms of how we develop our people to be able to be prepared for this world in which we're operating.
Okay. Thanks, Scott. AI has been mentioned quite a few times through the presentation. As we are reducing our tech debts, we are now investing in more modern technology. The principle that we apply to that is really customer first, and second is where we get the best return on investment. Based on that, we have set some very clear focus priority to help our merchant to be using AI to help them plan the assortment, plan pricing, promotion, and replenishment as well. With our scale, we believe there is a lot of opportunity there to improve our sales and our margin as well by providing our customers the right choice. The second focus area is AI for customer. You have heard personalization a few times.
This is really leveraging our data to increase loyalty and increase basket size and also increase visit frequency as well. All this is going to drive the top line for DFI. Last but not least, we are also investing AI to improve team member efficiency. Overall, where we see the biggest return on investment is where we will be investing on the core of retail. A lot of our business case at the moment is less than two years payback, and some are really just less than one year payback. We have got a huge ambition to bring AI into DFI to make sure we have more modern ways of working.
Thanks.
Okay, great. I am going to share with you the people strategy, how we are going to embrace AI adoption. Firstly, as a company, we are aimed to build DFI into best-in-class retailer in high growth Asia markets. In order to do that, we believe it is very important to upskill our organization with the latest knowledge around AI, data, digital technology to really bring our omnichannel strategy to life. Secondly, it is also about we shape the future of work and the future job design so that the AI will become a tool to help our team members to do their job better, easier, and faster. It is very important to bring the future work and then reimagine that and what that really means in our commercial teams, operation teams, and our supporting functions.
So all bring this together, I think it is all important to anchor our all the people strategies in people-led, meaning that how we support our frontline team members and live a servant leadership culture in DFI.
Thank you, Joy. Any questions from the floor? If not, I will continue on online, another investor. What are the biggest challenges preventing you from reaching your 2028 targets?
Tom.
I think it is always macro, right? So macro always plays a big role. So if macro is against us, we will challenge. So I think macro will be the key underlying risk, I would say, going forward. So far, we spoke about Hong Kong, but the macro actually is also in our favor. If you look at the number of tourists coming to Hong Kong from mainland China, which drives our Health & Beauty and CVS business. So also spoke about the outflow in Curtis's presentation.
Do not forget the inflow as well, which is a macro trend. And the same we see on tourist arrivals across Asia. So macro is working well. I think you never know what happens, right? So we know back in 2019, there is always risks on the horizon. That is I think the one key one. Secondly, I think, it is all about execution.
It all sounds very simple today, but it is very hard work every single day and a lot can go wrong. We have got a strong team, strong focus, but we have still got to deliver the plans going forward.
Of the four formats, I think home furnishing, IKEA, has probably been the one that has been the most disrupted, both in terms of consumer spending and as well competitive. Martin, maybe you talk a little bit about how you're seeing the next three years.
Yeah. Thank you, Scott. What we are seeing, post-COVID really from an IKEA business point of view, we see a change in consumer behavior and a need for acting on our markets. What I explained in my presentation is our pivoting to value. I think to Tom's points as well, this is about staying firm. To manage the next few years is to stay firm on our plans. It is to keep on delivering Everyday V alue and having our ears to the ground and listen and really understand what the customers are needing and providing what the customer wants. To be that super laser customer-focused and continue on delivering on value. I think that will be the absolute key and keeping our cost so low that we can have the room to invest in prices.
I would point out, IKEA is probably the most strict franchise anyone can have in the world. Having a Swedish person running the business helps. He's brought a lot of influence to help our franchisor understand we have to compete differently in Asia. We have to have a different assortment, a different proposition that builds upon the integrity, the positioning, the aspiration of what that means, but execute a little bit locally. It's been a bit of a challenge the last 2.5 , three years. It's not been entirely within our decision-making, but we've made a lot of good progress.
Thank you. Jayden?
Thanks. Can I ask a couple of follow-up questions? The first is about the profit target, I think 11%-15% CAGR. Just want to check, that is before any M&A. If we could have a sense of if there was any M&A, how much higher could that be? How much additional leverage could we get out of business? The second question is, just about, I guess, collaborating across the different business lines. It does feel like there is sort of four separate businesses, but what about selling of each other's products in different formats? Like if the food is very popular at IKEA, why not sell it in 7-Eleven, for example? Or if the smoothies do really well in 7-Eleven, why not sell them in the supermarket format, for example? Has there much thought gone into that?
Tom, maybe you cover the first, and then Curtis, you talk a little bit about how much we have been leveraging Meadows across the format as an example.
It is correct. It is all organic business growth. There is no M&A in these numbers. What can M&A bring? It depends on the target, and depends on the size of the targets, and depends on the level of accretive ROCE and TSR. Again, it has got to be accretive to our overall numbers. It cannot dilute. We will see what these opportunities bring us in the next few years.
Yeah, I think for the leverage, own brand will be one of the best example. Our own brand should be for food. That is not the name of the Wellcome brand. We are under Meadows. Now Meadows not only sell within the DFI, so even the IKEA, we sell Meadows. 7-Eleven, we sell Meadows. Mannings, we sell Meadows. Indonesia IKEA, and we are thinking about outside of the DFI for the IKEA, the other country. Maybe they will also buy the Meadows. For the supermarket, actually, thanks for the Andrew, we also sell some of the Mannings and Guardian's household products. We were finding the opportunity to leverage all of them together. That will be the point one, particularly on the own brand.
Secondly, I think in the future we have a more cooperating opportunity because now with data transparency, all the famous brand, actually, they are sell across all three banners. Through the data we can see, and also through the retail media, we will see how can we further leverage. We using our leverage power and we can get the more returns from all our suppliers.
Thank you. Any more questions? Jeff?
Hi, thanks very much. Jeffrey from CLSA. Just want to check on the DFIQ. We know it is quite early stage, but I just want to hear any colors on the take-up so far and also maybe the roadmap or target for the next few years, regarding the rollout. Thank you.
Wee Lee, do you think we are moving fast enough?
Can always be faster. Thank you for the question. I think one, we have just soft launched. Actually, we have offered this solution to a very curated and very important group of suppliers who help us to co-develop. Actually, that is the spirit of how we want to do our new business in collaboration with partners and for partners. They will help us to shape what is to come, and they will give us good feedback as to how to construct the product. That is the first. I think secondly, as with all products, Rome wasn't built in a day. We are actually going to launch it in multi-phase. Amongst the sequencing, I had trade, retail media, and insights. I am prioritizing the revenue generating ones first.
Media as well as insights, where then you can go towards self-serve a bit like what you could do on Meta as well, Google. Those are the solutions we want to roll out first. All being equal, I think, we are prioritizing where there is value creation. At the same time, to uplift the service that will be along the way as we roll as a multi-phase rollout for our partners as well. I think it is a very intentional approach which will scale accordingly.
I am sure there are more questions, but again, another important point that I want to make and maybe I will ask Erica to support. The politicization of what has been traditionally called ESG is happening globally, but I am absolutely convinced over the next 5 - 10 years with weather events, et cetera, this will become another huge topic. It can be, I think, dilutive if you are not well prepared, et cetera. Maybe Erica, you talk a little bit about some of the global benchmarking and activities that we are doing to ensure that we can be on top of this in Asia.
Sure, Scott. We have been on track on our reduction plan for Scope 1 and 2 and which is a 50% reduction by the end of 2030. In terms of Scope 3, this is really important for our role to play, to be the voice of Asia. Working along with the other suppliers and also being part of the Consumer Goods Forum, along with the other suppliers and also retailers, and also being part of the food coalitions, with the World Economic Forum, it is important for us to collaborate with the other suppliers and think of low costs options to make reduction. Maybe as an example, you can see in the booth that we are part of a pilot on the rice project and to produce low carbon emissions rice for own brand.
And that is also being sold on our supermarket and also IKEA across. From this project, we are selling this low carbon rice and giving options to our customer at no increase of retail price. At the same time for our sales, it has been up by 25% because I think we are giving an options to our customers. It is important for us to collaborate with the other suppliers and to drive that demand signal, to drive more influence. Also working along not just with our own brand suppliers, but also our national brand to make a difference in Asia.
Any more questions from the floor? If you have any follow Oh, sorry. Jonathan?
Yeah.
Hi. Just one question because, with the exit of Singapore Food, could you share how important is the digital aspect, the yuu, in Singapore? Is that a key priority now with the exit?
Singapore Food, while they have exited from the DFI portfolio, they continue to be a member of a yuu program. I think, as with the next time period, and I think, it's up for everyone's discussion, but I think, it's for the program to continue to demonstrate value to all of its partners that they will continue to engage and use the program as a meaningful part of their business. I think that's always the way we like to approach this.
Thank you. Maybe a follow-up in terms. Maybe a follow-up in terms of the exit, right? Is there a plan to continue selling Meadows own brand product under this new management or there will be a potential exit in the next few years?
Yeah, I think they continue selling the Meadows. If you like grocery Meadows, please, or you can still buy in the Cold Storage .
All right, thank you. That's good news to hear. Thank you.
Okay, great. Thank you all. If you have any follow-up queries, please email to the investor relations team at dfinvestor@dfiretailgroup.com. We've now come to the end of Q&A session. I'll turn it back to Scott briefly for his final remarks.
Yes. Thanks everyone. We do appreciate the time. I know everyone is very busy. We think that we have got a solid story to tell in terms of the investment case in DFI. As I said, we are not aspiration, in terms of how we have put forward a plan. It has been well thought through. We have a very active board of directors who have guided us and have given us input. We are very comfortable that this is the base case for our business moving forward, and that as we find inorganic opportunities, they will be incremental opportunity we believe for shareholders moving forward. With that, thank you very much and look forward to having chats over lunch.