Good afternoon and a very warm welcome to Cloetta's Investor Day 2025. My name is Laura Lindholm. I have had the pleasure for a bit more than a year to be the Director of Communications and Investor Relations. This is our first longer update since 2019, so we felt it was time to take the time and the whole afternoon today to talk a little bit about our journey ahead. Before we kick off, the compulsory health and safety statement. There is no fire drill today. If you hear an alarm, you use the door from which you came in, and then we move 100 meters very calmly to the right, your left.
Also, before we kick off, we know especially those of you who are looking at this online might be quite new to Cloetta, so we take the opportunity to present a little bit ourselves and what it is that we are all about.
At Cloetta, we believe in the power of true joy. Our story began over 150 years ago when the Cloetta brothers made a bold and daring decision to bring the world of confectionery to the Nordics rather than following the conventional path to Paris. Their bravery was rewarded, and their following journey was simple and inspiring to bring joy to everyone. Since then, we have held strong brands and embraced innovation. Leclerc pioneered influence in marketing in 1932 and partnered with Björn Borg in 1980. Yankee aired one of Finland's first tasting versions in 1957 and launched the world's first silent hot dog in 1975. Even the sky was not the limit. Sweden's first astronaut brought all beings he liked to space. Today, Cloetta has leading positions within all confectionery categories in Northern Europe: pastilles, gum, candy, chocolate, and anything that makes.
Our products are enjoyed in over 60 countries, proving our global appeal. Today, people seek joy more than ever, and that's exactly what everyone at Cloetta brings to the world. Led by our purpose, we believe in the power of true joy. Spotlight what we're most proud of: our products. We're making them the true heroes, showing them in larger-than-life proportions. Our passion for creating beloved products is evident in everything we do. This passion drives our new vision and underscores our expertise and leading position in the influence category. Our vision is to be the win-win confectionery company, inspiring a more joyful world. By outperforming the market, building on our roots, and expanding our brands, we continue to bring joyful treats to you and others around the world. Ultimately, everything we do is powered by joy. Cloetta powered by joy.
To kick off today and today's agenda, first we have Katarina Tell, our CEO, who will walk you through the market and our strategy ahead. Then it is over to our CMO, Thomas Biesterfeldt, who—I think we have a technical issue. Sorry, guys, we will just change the remote control. If we could have the agenda slide, maybe. Perfect. Thank you very much. First, it is Katarina Tell, our CEO. She will walk you through our market and our strategy ahead. Then it is over to Thomas Biesterfeldt, our CMO, who will take you through the marketing and innovation. Then we will just have a short section Q&A, and then we will only take questions from the room. We will have a longer Q&A then at the end, where it is also possible for everybody who is online to ask questions.
After that, it's Niklas Truedsson, who will take you through our Pick & Mix and the plans for that business area. He will hand over to Frans Ryden, our CFO. After that, it's time for our short wrap-up and then also the longer Q&A. Perfect. I will now hand over to our CEO, Katarina. I think that works.
Good afternoon, everyone, and a special good afternoon to you guys online as well. I'm really happy to see you here live and also for you who are online that you show this great interest and support for Cloetta. As Laura was saying, we have a really interesting day today. First, we're going to talk about Cloetta today. Then we're going to talk about our plans and strategies going forward. I'm also super happy to share our new vision.
Key message is we will continue to focus on profitable growth, and we will do that with clear priorities. I also look forward now for this day because you will be here in the room. We will have breaks and so on, and there will be opportunity for questions and answers and so on. I really look forward to have the interaction and also that we do this to a very inspirational day. Before I will go into and talk about Cloetta, I will just give a short introduction to myself. I'm Katarina and I'm the CEO for Cloetta. I've been at Cloetta for seven years. Before I stepped into this role, I was the area president for Sweden. Before that, I was working at Findus and at Kraft Heinz for 10 years.
The common nominator, I would say, for my 25 years in the fast-moving consumer goods industry, I say it's almost impossible. I can work so many years. I'm only 27. Regardless, the 25 years, it's been strong brands and to drive profitable growth. That is my passion and what I've always been focusing on during my career. Shortly, also I stepped in the role in June last year in the new role. When I approached this role, I was thinking, first, we need to set a vision, where do you want to go with the company. When we have the vision, of course, we need to set a strategy. How do we reach our vision? Then it's about how do we organize ourselves to make this happen? Then it's all about execution.
When I stepped into the role, I started to listen and talk to different stakeholders. I also did a survey on the entire Cloetta to ask, what is the feeling? How does your perfect Cloetta look like? All those information that I got, we use then to create a vision for the company. After we had created a vision, we started with the strategic work. During the strategic work, it also became clear rather soon that the planning or the project of building a new greenfield plant was not going in the right direction. We had issues with the permitting process, but primarily we were not able to get, or there was a lot of uncertainty around the power supply of the factory. We built in to do a reassessment also of the factory when or the plan of building the plant in the strategic work.
In February, we also came to the conclusion it was not the right decision to proceed with the greenfield plant. We also communicated that to the market. After that, we have continued with the strategic work. Today, we are launching the strategies. We do it both here with you, as well as we are doing that internally in Cloetta. Tomorrow, we are actually going to have a short town hall informing about the new strategies, and then we start the rollout of the strategies. I know there has been some discussions about the plant, the greenfield plant. I will come back to that later on in the presentation. I must say, I am really proud of the work that we have done, the team. I really feel confident that we have the right plans going forward.
This is really exciting to now be here to get the opportunity to present it for you. I'm super excited that we are entering into a new chapter where we are launching our new vision, and that is to be the winning confectionery company inspiring a more joyful world. What do we mean with winning? We are Northern European leading confectionery company. For us, it's of course about keeping that position. We don't want to lose the position of being the leading confectionery company. It's also about for us to be able to grow, then we need to win. We want to outperform the market. We want to be the top brand, the top employer, and the top investment. We want, of course, to embrace the winning culture in the team. Of course, what is the confectionery company?
For us, the confectionery company is what we come from. This is our roots. Confectionery is our root and the very high nature of the impulse it means with the confectionery. It is also about what is the next generation of confectionery. Of course, we want to be part of that journey and also maybe stretch our brands, our really lovely brands into new categories. We want to inspire a more joyful world. We want to be the expert in what things that sparks joys in people's life. I am so proud of the team that actually this week we launched the report, the joy report, Cloetta's joy report. We have done that together with Ipsos Sweden. You can find copies here. If you are online, you can download it from our webpage.
This is really a great step in our vision that we want to inspire a more joyful world. This morning, we sent out our new financial targets, and they are, of course, reflecting our vision and our strategies. We are increasing our ambition from previous target when it comes to organic sales growth from 1%-2% to 3%-4%. We keep our target to reach 14% EBIT margin. That is our long-term target. These are our long-term targets. We are also committed to reach 12% by 2027. Historically, we have leveraged around 2.5. The last quarter, we have been below 1.5. Considering our strategies and our ambitions, we will strengthen these targets as well, and we will be below 1.5. Of course, if there comes like a really compelling M&A, we will adjust the ratio for a time being.
Our ambition is to deleverage and come back to this level again. This is our long-term target to stay below 1.5. Also, the board, we have updated our dividend policy. Before, it was 40%-60% of our profit before taxes. Now we are saying we want to be attractive to invest in. We say that above 50% will be our updated dividend policy, and that is profit before taxes. It is a pleasure to be here and tell you about the incredible journey of Cloetta. Cloetta is Northern Europe's leading confectionery company. It has been on the market for 160 years. Of course, we want to ensure we stay for minimally 160 more years.
We were founded, as you saw in the video, in 1862 and go moving from a small confectionery company to today a northern powerhouse in the confectionery industry. I would say the success has been from the very, very start where it's built on joy. We have a purpose that we believe in the power of true joy. And that it's reflecting in everything we do. We operate in 11 countries. We have, or I have, 2,600 colleagues around the world. Today, we are launching what we call our superbrands. Our superbrands are scalable, and they are more than 50% of our total turnover. I will talk you through more about this. Our net sales 2024 was SEK 8.6 billion, and we had a profit of 10.6%. The target of 12% to 2027, it's a challenge, but it's of course achievable.
Since 2020, we have signed the science-based target where we have a commitment to reduce our carbon footprint by 46% to 2030. We are today in 60 markets as we were mentioning, but there are five markets where we call that are our core markets. It is Sweden, Finland, Denmark, Norway, and the Netherlands. The common thing for these five markets is that Cloetta has been there with the brand for more than 100 years. They have been there for 120 years at the minimum. We are very well known with our brands in these countries. We also have a market leading position in these countries. Together, they stand for 81% of our turnover. They are significant, these five markets, and 19% comes from outside our core markets. We act today in two segments. It is branded packed products, 72% of our turnover.
That is, yeah, what it says, products packed in branded bags, so to say. We have our Pick & Mix, and that is 28% of our turnover. That is where the consumer is picking their own favorite candy and puts it in a bag. You have an example for you who are in the room. We have an example here in the room where you can try to do the Pick & Mix experience. Pick & M ix as a category is growing faster than the packed business. Looking at the packed business, it is divided into four different categories. It is candy, it is chocolate, it is pastilles, and gum. It is really a strength for us to be in different categories. Because as you remember, last year, for instance, the chocolate price was up quite a bit. We were able to navigate because we have different portfolio.
We have a broad portfolio where we can play within and also the consumer can pick from. That is a very key strength for us. Also now we see the consumer looking more for Pick & M ix. We have a broad portfolio. We are offering this as well. We're saying we are Northern leading European markets. That means we are one of the top three players in the Nordics. It is quite interesting to see because if you look at each market, it is very clear it is not the same competitor in each market. If you see in Sweden, we have the competitors or peers. We should not maybe say competitors, but it is Fazer and Mondelez. In Finland, it is Fazer and Orkla. In Denmark, it is HARIBO and TOMS. In Norway, it is Mondelez and Orkla.
That gives us, like looking at all these markets, we are the only one that are one of the top three players in all markets. This is a strength. We're also really proud of the broad portfolio we have in all the markets. If we're looking at what position we have in the market, this is our core markets, as we mentioned, the five markets. Candy, that is our largest portfolio or category. There we are number one or number two in all the core markets. As I said, these products or this brand, not the products, the brands really, has been on the market for many years. They are loved by the consumers. In chocolate, we are only playing actually more or less in the countline segment.
But still, if we only play in the countline segment, we're still number two in Sweden and number three in Finland. We were really strong there as well. In pastilles, we're number one in Sweden, Finland, and Denmark. Having a strong position there. Gum, we today only have in Finland and the Netherlands. There we are number one and two. Pick & Mix, we are really the top player in all the markets where we exist. What is also interesting to see in this one, there's still some white spaces for us, which is also quite exciting. We have many customers, and we have divided them into three segments. The largest segment is grocery. There you find like those traditional where you go behind your shopping, your everyday food. In Sweden, for instance, ICA, Axfood, Coop, Lidl, etc.
In Denmark and Norway, there's REMA. We have in Holland, there's Albert Heijn, Jumbo. These are the biggest part of our customers and stand for 72%. Then we have the wholesalers. That's more like business-to-business sales. Then we have our incremental channels. That's quite exciting because these are customers who usually don't have their grocery as the main business, like IKEA, like NORMAL, Apoteket, and so on. They are having other kinds of business. Because we are such a high impulse nature, it creates incremental sales for them. They like to have it. This gives extra on top money for them. We have a very good business with them. We also all the online e-comm, Q-comm players, we also put in this bucket.
Looking at this picture, it's really we have stable good sales in wholesales and grocery, but incremental channels will grow more than double digits. It is a really interesting channel. It is also good that we have this broad base of customers because it is what you can say, it is a stability. We are not like if one customer has a problem or so, and it does not rock the boats because the broad and wide number of customers makes us stable and resilient. It is very good for our business to have this picture. Now I am moving over a little bit more to about the market itself we operated. This was more about Cloetta, now in general about the market. Quite exciting exactly this slide. It is of course only a graph. If you look in the bottom, you see 1% CAGR. This is the volumes,
this is what happened in confectionery category. It grows 1% annually as machinery, 1% is very much driven by consumption per capita. It is growing in line with the population. If you look on the top graph, there you see post-COVID, an inflationary shock, so to say. The inflation went up 7% because of raw material and so went up. Still, you see in the bottom line, it is still the volume going. The consumers, they really love this category. Even if there are some prices that have been changing, it is still a growth 1% annually. Of course, there is a little bit of shift in the volumes pending on trends and so on. For now, for instance, we see a little bit more Pick & Mix going up. If the chocolate price is going up, the candy goes up more and so.
Still, there's a 1% annual growth. We expect that to continue. We expect also the inflation going to go down a bit. It's going to be around 2% annually in value. The category will grow per year. What we can say also about this picture is that confectionery is growing about 1-1.5 percentage points more than the food in general, fast-moving consumer goods. If you look like an example, 2024, confectionery grew by 4.4%. Fast-moving consumer goods in general grew 3.3%. Cloetta grew 4.7%. To get a little bit of correlation around this, last week, I must say, it was a report called World Happiest Report that was published. In this report, it was very clear that the happiest people in the world lived in Finland, then in Denmark, then in Iceland, and then in Sweden.
I don't know if it's a coincidence or not, but this market also has the highest consumption of candy in the world. This is of course super exciting for us. If this core market, as we said, we see this is of course interesting and this is an interesting market to continue to work on. Looking at the market size, Sweden is about 1.9, but the largest market is in Netherlands in our core market and the smallest one is in Norway. Understanding the market dynamics is of course key for us because if we want to continue to exist for another 160 years minimally, we also need to understand the consumer and market dynamics. If we look at the consumers and you saw the 1% annually, we know consumers, they seek indulgence and joy. This is something people want to treat themselves.
We believe we will continue. We see some shifts in behavior. For instance, there is the demand for individualization. There we have, as we said, the Pick & M ix concept. Consumers, they want to pick their own mix of candy. We also see some increase in health consciousness and also there is an expectation that the product should be sustainable. It's not like you're willing to pay more for that. It's just expected that the product should be sustainable. We also see there is a desire for innovation. We need to constantly innovate because we want to be excited and test new products. We see a little bit of change in snacking habits, moving a little bit more to healthier kind of snacks.
We also see, and I think that is no new news, of course, the online, everybody's online, especially the younger generation, and the digital transformation is increasing in speed. When it comes to regulation, this is something of course we need to be aware of and act accordingly. That is, of course, the regulation is also to understand their role is to improve the public health and drive the sustainability. What we see is now there is an increased focus on sugar taxes in some countries. We also see they're doing some promotion limitation. In some cases, you can't have a cartoon, for instance, on the pack and so on. We also see for us to drive the sustainability agenda, we get some environmental fees and so on that all companies have to take care of.
We look at our customers where we see there, as mentioned, the incremental channels are growing. If we look at the grocery, we see that there is also movement that more hard discount is growing faster within grocery. We also see there are some in-store changes. They look how they are promoting the products differently in the stores. We also see their online sales is increasing and they have a little bit of an issue to get this efficient. They work on getting that efficient. They also demand that we should be sustainable. That is a request from our customer. You should be sustainable. Of course there is a push on price. They want to compete on price, but at the same time they need the volumes to create the scales. This is a little bit of the environment, how the consumers are acting.
Of course, understanding these market dynamics is super critical and we need to adapt our strategies and our innovation according to this. In summary about this first part, we are the Northern European. Sorry, now I think I need to fix with my mic. There. Okay, I think we are up again. We are Northern Europe's leading confectionery company and we have a vision. We want to be the winning confectionery company and we want to inspire to a more joyful world. We are on a non-cyclical market. As I said, there is a very stable consumer demand and we are outgrowing the food, fast-moving consumer goods. We have a market-leading position in our core markets and we have some iconic brands across in diverse categories.
We also have this strong and diversified customer base that we're really proud of that made us resilient and stable. Of course, we are on top of the changing consumer and market dynamics and we continue to innovate and adapt accordingly. How do we capture on these opportunities in the changing market environment? Now we come to our strategic framework that we now are going to present more about during the day. We have our vision that I mentioned several times, but we have also made three strategic priorities. This is very much about focus. It's about, so I have two small ears, I think. This is tickle. Yeah. Thank you. Yeah. Our three strategic focus areas, and I think the key message here is about focus. We don't want to run all over the place.
We need to focus to be efficient and also to drive the profitable growth. The first one, we are saying we want to win with our super brands in our core markets. I will go through how we will do that. The second one is we will grow beyond core markets, but we will do that in a very focused way. We are planning to do this on the U.K., on Germany, and we will leverage the demand for Swedish candy in North America. The third one is that we will excel in marketing and innovation to also be forward-leaning and meeting the changes in the market. We have put as an accelerator M&A. We have been driving organic growth the last seven years. We have not done any M&A the last seven years.
It is not like we're opening now Pandora's box and going to do every M&A that occurs on the market. It's about selective M&As. It's about we find companies or prospects with the right that make business sense that we can find synergies. Of course, they will accelerate our strategic priorities. They are not part of the long-term financial targets, so they come on top. We believe if we find the right prospect, this will accelerate our agenda to drive profitable growth. Of course, we have some enablers. We're going to enhance our operating model. I'm going to go through that. Of course, what is the company without the people in the company? It's just a black box. Of course, we need to leverage the future, the people and the culture in our company.
Now I'm going to go through about our win with our super brands. That is our first focus area, our first strategic pillar. Starting first, what is a super brand? I think that is something, it is a new definition that we have created. Of course, these are brands that have been loved by consumers for generations. These are not like just a fly coming up and going down again. These have been on the market for some of them for over 100 years. They are really loved by consumers for generation. Because they have a unique proposition, they have unique products. For us, they should have a turnover of minimum EUR 15 million. They should have multi-market presence and there should be multi-market opportunities. They should of course be scalable.
For us, it's also important to have a higher gross profit than average portfolio. Because if we grow with them, this will drive profitable growth. They are already successful. In average, they are growing twice as fast as the rest of the portfolio. We have identified, for us, it's 10 super brands. It's seven in chocolate and candy. It's two in pastille and gum. Then it's one in Pick & Mix. Of course, these are our jewels. These brands are super important for us. We will continue to ensure that they stay relevant for the consumers. We will stay close to the heart and soul of the consumers. We will also innovate and find new exciting products in this. To leverage and speed up the growth, it's about an expanding strategy.
This is about we're going to expand distribution in our core markets with this brand. We're going to expand these products, these brands into new channels. We're going to also expand them into new categories. I will take you through this and I will also give you some examples. I start with the candy and chocolate. First we go through the super brands, the candy and chocolate. We're going to take pastille and gum and then Pick & M ix. If we look at the candy and chocolate super brands, I hope you recognize some of the brands. It's Malaco, Red Band, it's Ahlgrens Bilar, Gott & Blandat, Juleskum, Kexchoklad, and Tupla. Together these brands stand for 59% of our candy and chocolate portfolio in core markets. The other brands, and we should also, these are local heroes.
We will of course not say, oh, we discontinue all those products in these because they are also loved and we have a lot of loyal consumers in this area. We will also continue to take care of those brands, but they will not be as significant supported as our super brands. Here we come a little bit of a busy slide, but these are the opportunities where we see according to our expanding strategies. If we look into where we can go in the core markets, for instance, Ahlgrens Bilar, we have in Sweden and Norway, but we see an opportunity that we can leverage this in all core markets. If you look for instance for Finland, Ahlgrens Bilar exists there today, but only with one SKU. The consumer knows about the brand, they have seen it in your shelf.
It's not that we have to launch a completely new brand because that costs quite a bit of investment, but we will leverage on what we have to and do much more with it. This is the kind of strategy. They usually are already in the market, but it's a very limited distribution. It's a few customers. There is an awareness of the brand, but it's an opportunity to grow. We also see these products, these brands, they have a very high impulse nature because they are so loved by the consumers. Again, as I mentioned, the incremental sales we can get. When you're shopping at the furniture store, when you come to the checkout, you grab an extra box of Läkerol and so on. These kind of opportunities are there and we haven't grabbed them all.
This is something we need to, we will continue to focus on. The last one is then how we will expand our loved brands into new categories. To make it more visible, I will make an example of each of these strategies, expanding strategies. This is an example actually of Kexchoklad. I think if you are here in Sweden, most of you have heard about Kexchoklad. It is actually the most sold food product in entire Sweden. No milk, nothing else. It is Kexchoklad who is the number one most sold product in Sweden. It is a success. The yellow color, the check marks, connecting it with skiing and an active lifestyle and so on. We have really built a strong brand here in Sweden and there is a high consumer demand for this product.
In Denmark, it existed at a few customers and the only way it was activated was with sometime doing some discount. Very small sales. What we did, we took the brand proposition and the marketing material that we have already developed in Sweden and launched Kexchoklad in Denmark, relaunched so to say. We created a consumer demand. We increased the listings. We did not have to do the promotion to get the trial. We have actually doubled the turnover in activating the brand this way in Denmark. I will just show a TVC that we are now going to also go in Denmark that we have done in Sweden. Maybe you recognize it. Yes. We have the next one. It is actually quite amazing because we have Christopher here today and Christopher is actually the daddy to this campaign.
This is where we took Juleskum, a seasonal product, also very loved in the Nordic markets. We said, okay, let's see to create incremental sales through a new sales channel. There it was created a pop-up store together with foodora. Foodora is the leading QCOM company in Sweden. This was also quite amazing. We got some, of course, we reached a new target group, younger, that was more like triggered. Actually, we sold also like underwear with Juleskum. That was almost the best sold item. It was really a nice success. We also became the supplier of the year at foodora because we did this campaign. It was really creating some extra sales. We also have this one. This is about going into a new category.
Here we took the beloved Tupla brand in Finland and we launched it into ice cream. It has been such a success. We got really good listings and really good visibility. The team is already developing new products in this area. Actually, this launch, it added 6% incremental sales to the Tupla brand with this product. This we did together with a partner. It was a licensing. It was not that we start to produce ice cream ourselves. A really interesting and nice success. Now we're going to move over to pastilles and gum. I've been talking so long. It's really good that we talked about pastilles and gum. I will get the opportunity to take a little bit of a sip and you will watch a little bit of a movie about this interesting category.
Discover the next level of freshness, Mynthon ZipMint. Feel the power of a snowstorm in a small mint. New Mynthon ZipMint. Instantly fresh.
Yes. Now we're going to talk about pastilles and gums. This is a really interesting category for us at Cloetta because it is actually our most profitable category. What we see is also, you know, the 1% growing per year in confectionery. This one is estimated to grow 1.3%. A growing category and profitable for Cloetta. We have two brands that's important for us and our super brands, and that's Menthol Läkerol. We have other brands that's really good and strong also in this area. Pastilles and gum, especially pastilles, is our strategic hero. This is an important category for Cloetta.
Today, Menthol Läkerol stands for 48% of the portfolio and the other brands stand for about 52%. One of the reasons why pastilles and gum are so interesting for us is also it's very well placed for the changing consumer market dynamics. If you think, for instance, Läkerol, you see them here in the front, a bigger size. Usually they're quite small boxes. They're sugar-free and you have a very long-lasting, nice taste. That is really for maybe the health-conscious consumer who doesn't want to just have a small, permissible treat. This is a perfect match. We have also, as you saw in the beginning of the film, with xylitol. Xylitol is an ingredient that has been approved by the EU and European Food and Safety Authorities, where we can do health claims. This is something Cloetta has been the very first in.
It has a health benefit because it is very good for your teeth. This is something we can claim and this is something we can leverage. We have a couple of brands and products that contain this xylitol. This is something we can leverage. As you saw in the commercial in the beginning, we also have the functional benefit. Especially after you maybe have been drinking some coffee and so on, you want to freshen up your breath. You have a nice little mint that could create some nice refreshment in your mouth. Pastilles and gums, we will also continue, of course, to work with these. These are loved brands. We continue to work on them. We continue with innovation. We also have here the expanding strategies. Mynthon, for instance, is today strong in Finland, very strong in Finland.
We have a little bit also in Norway. Here we are now rolling out in the rest of the Nordic. Läkerol, we are strong in the Nordic countries. We have a little bit of presence in Holland. We believe we can make it stronger and bigger in Holland as well. This is also about the expanding into new sales channels. It is also very important here. Here we also see we can do more with pharmacies, especially with the xylitol. There is an opportunity here to grow further on this one. I would just would like to give an example. You saw the movie in the beginning. That is about this ZipMint. I think you have it in your goodie bags and also on the tables. This is this fresh little mint that is freshening up your breath.
We took it as being in Finland for several years. We have taken it. We have adapted it to Scandic. Now we have created like one set of material and we are rolling it out in the entire Nordic. It is in a very early stage, but so far it is really promising. I think one customer went up to number one sales item like the first two weeks in the refreshment area or the pastilles and gum area. Really successful first start in this. We are coming to the last super brand, and that is Candy King. This one, Niklas will talk more about the Pick & Mix. I will not try to steal the thunder about this. If we look at the Pick & Mix, we divide it actually into two segments also. About 75% is what we call the concept.
The concept you see here to the left for you who are in the room is about we are having the fixtures, we have the products, we have the bags, there are merchandisers who come and fill up the products. It is really about selling a service of candy where you can pick it yourself. The other area is more what we call it's our branded packed products that we sell as bulk. You can also pick that. That is primarily Sweden. 75% is where we are offering the full concept. The 25% is where we only offer the products itself. As has been mentioned several times, Pick & Mix is on consumer trend because we see it is the fastest growing category in the Nordic. It is really growing faster than anything else.
It is about the consumer that they can pick their own choices. The retailers are also quite fond of it because it gives them the opportunity to do something special with their stores. They give the shoppers inspirations and experience in stores. They also want it. If they get the Candy King concept, then we take care of everything. We can ensure it looks really nice in the shelf. There are nice signs and so on. Also, as you said, the market has been growing since 2020, double digit every year. It went down during the pandemic, but 2022 it was up at the same level as before the pandemic. What we're going to do here with Candy King, we continue, of course, to increase the penetration. We do that investing in the brand.
We also convert more and more stores into the Candy King concept. As you saw, there was a white space with Candy King. We are number one in Pick & Mix in all four of the five core markets. It is a white space in the Netherlands. There we are now planning to launch Candy King as well. We have also done a very successful launch where we have done pre-packed Pick & Mix for the e-com. That has worked very well. You see, you have samples also in it here in the room. It has worked very well. We are also planning to work more with this, expand this. In short, we have 10 super brands, really important for us in the core markets. This is where we are going to grow.
This is how we're going to reach the 12% EBIT minimally 2027. Our long-term ambition is that we have more than 50% of our super brands today coming from these 10 brands. The ambition is that we will increase this to more than 60%. That was the first strategic focus area. This is how we're going to win with our super brands. The next one is that we talked about growing beyond our core markets. I think this slide tells quite a bit of the story. We have 81% today that is our core markets. 90% of the sales is outside core markets. If we look at what is outside these core markets, it's 5% U.K., 7% Germany, 3% in Canada and U.S., and 4% on 50 other markets.
Looking also, going back to the consumption, you know, the happy people in the north, we had high consumption of candy. Looking also in Germany, U.K., especially Germany has a high consumption as well, is on 12.1 kg and U.K. on 9.7 kg per capita. Also looking at the market size. We have today five core markets. If we add U.K. and Germany, we reach more than 50% of the total confectionery market in Europe. By focus on seven countries, we will reach more than half of the European confectionery market. That is our ambition, of course. We have already 7% of our turnover in Germany. We also have brand, you know, Red Band as a brand has been on the market since the 1960s. It has a high brand awareness in Germany.
It is not that we have to create something new. The focus historically has been on wine, gum, and liquid. We have been focused on distribution in the north and the west. By taking the Red Band brand and doing it bigger to launch more products under this and more concepts under Red Band. Also, what we are saying is, we have the Candy King. We have a repeatable model to do a test and see if there is a demand. We already have customers asking for Pick & Mix concepts. We believe there is a demand for this in Germany as well. We also see there is an opportunity to launch pastilles and gum in Germany. It is also then about creating a winning portfolio and then it is all about ensuring that we get the distribution.
We are today in the north and west to secure that we also get the east and south of Germany. It's about building distribution. Also, we continue to work with incremental channels as we have said, for instance, e-commerce. Here we see the coming brand that we will focus primarily on in Germany is then Red Band. We also have a brand called Jelly Bean Factory and Candy King. Looking in the U.K., we also have a brand there from the 1960s. It's called Schwetz. It's 5% of our turnover. Historically, the last 20 years, the focus has been on Candy King, to work on Candy King in the U.K. We also have an organization. We have quite a big organization with merchandisers and so on in the U.K. We believe there's really an opportunity we should grab.
That is in the packed business. We have to, it's really, Schwetz has a high brand awareness, has been on the market since the 1960s. Most consumers in the U.K. know what it is. We should expand this into a new category, use the brand and sell it and expand into a new category. We also should revamp Candy King because it's a little bit drifting versus the other market in the core market. We need to ensure that we are successful in the U.K. with Candy King as we are in the other markets, in the core markets. There we also see an opportunity to launch pastilles and gum. Here it's also about distribution game. Distribution, distribution. Ensure that we get the distribution at all the retailers in the U.K. and so on. This is super important to be winning also in the U.K.
Today we have a small business in Canada and the U.S. I would say that our Canadian business is slightly bigger than the U.S. We are selling primarily Jelly Bean and some products under Red Band. We have seen increased demand for Swedish candy, especially in the U.S. We see this as an opportunity. We want to understand more about it. We are planning to do this, but we want to do it in a secure and good way, of course. There we have the Candy King concept, which we believe is something that will be very appreciated. It really delivers on the Swedish candy trend. We will start the pilot. We will do that in the New York area to ensure that we are not doing pilots all over the country.
We do it in an isolated way as a start to see if we are successful there. We are going to work primarily with brokers. We also have, we will do the offerings through Amazon. We have a good business today with Amazon that we will continue to work on. Of course, we have some Swedish super brands that could be launched also under packed. The Swedish candy trend is mostly Pick & Mix linked. You know, there is a brand called Swedish Fish. It is not our brand, but it is quite big. It could be an opportunity to, of course, leverage on the Swedish there as well. The next priority, the third priority, is to excel in marketing and innovations. We have today created a very efficient marketing model.
It's about to, in a cost-efficient way, ensure that you reach as much consumer as possible. This is very much linked to that we are data-driven, but also that we have worked a lot of how to understand how the consumer consumes their media. We also have, and this is something that we believe that we now can take to the next step because this is a really good base for us to build our the coming years upon. We will use it now when we win with our super brands where we're going to create, we're going to create scale in our content. Instead of having different markets developing different material, we do it in a common way.
Instead, we invest more money to be used in consumer-faced media because that the consumer sees and that creates also demand and that creates sales that drives our top line. Of course, we also, when we do the NPDs, it's about to do the margin and creative NPDs. We focus on NPDs in this area also to stay relevant and interesting for the customers. As we have created such a great marketing model, we will take this now know-how and use it now, especially when we're scaling up in the U.K. and Germany. This is, of course, very important to bring with us. As we said, it's a changing consumer and market dynamics. We need to be prepared for the next generation, what is happening. We're going to accelerate our innovation. We will step up in this area.
I am super proud and happy that we are now taking the initiative to start a new program that we call the Cloetta Next, that will really embrace the speed and our passion to be relevant for the consumers and our ambition going forward. I will not steal all the thunder around this because this will be Thomas who presents this later on in his presentation. I am just going to shortly talk about the selective M&A that I was mentioning in the strategic framework. This is, as I said, this must make good business sense. We are going to evaluate if there will be, like for instance, a company for sales in the U.K. or Germany that will help us to get the distribution up and get us to have more shelf space.
That is one area where we'll look into if that could be a good opportunity for us. The next one is especially in pastil. This is a strategic focus area for us. If we can even find a new super brand in this, this will, of course, be interesting. Pastil is another area. As we said, we need to be prepared for the next generation confectionery. If there will be a company we find interesting, a good match that will make good business sense, that could also be interesting for us to do an M&A within. That is a little bit the framework how we look at this. I'm going to talk a little bit about how we're going to enhance the operating model. This is for us to support the profitable growth journey, of course.
We see this as three different areas. The first one is the margin and profit through what we call an NRM. That is very much about, we mentioned before, when we launch a new product, it should be margin and creative. It is also how we ensure the promo optimization, take out unprofitable small volumes that only create complexity, and really have a harmonized portfolio. Frans will later in his part also talk a little bit more about how we work with this. The second one is what we call the supply chain fit for purpose. During the reassessment, when we did a strategic, we look into the strategies and we also reassessed if we were going to build a greenfield plant or not. It became very clear that we can improve quite a bit in efficiency and productivity in our network.
We have to do it in a disciplined and focused way, but there are opportunities. We also know, and Frans will also take you through about this, we will do step up in the CapEx. This is to create efficiency and capacity, but also in capabilities. This is also part of our to ensuring that we have a supply chain fit for purpose. We know the whole market, consumers are shifting, there's different trend we see. This is also, we need to stay agile and depending on consumer demand and so on. This is also one of our strategies will be, should we produce it ourself or should we buy it from outside? It could be a component in our products or it could be the whole product.
This is something to increase our flexibility and for us to be more agile when it comes to our supply of our products. This is part of our creating a supply chain fit for purpose. It is about, of course, creating an effective operating structure. We have now strategic priorities and we need to ensure we have resources and focus on those strategic priorities because it will never happen if we do not work on it, of course. This is one of our goals that we will do this and we will also increase operational efficiency by doing this. We also will optimize our processes. We have, for instance, an integrated business plan. This one we can do more efficiently and this is also something we will optimize. We also will, of course, enhance the speed and agility.
One of those is like what we mentioned, the Cloetta Next, where we organize us in a slightly different way to get agility and speed in the organization. Coming back to the greenfield that we stopped this project, I think it's important to remember why we were supposed to do it. Of course, the reason why we once said we were going to build this factory, it was that we wanted a new production capacity. It was an EBIT uplift by efficiency. It was also part of the sustainability journey. We should also remember it was the single largest investment in Cloetta's history. During the strategy work and the reassessment, it became very clear there was increased geopolitical uncertainties. The power supply was not secure to the factory.
We also see in the strategic review that we need the production flexibility driven by the changing consumer market dynamics. This is important. We can find the capacity and the EBIT opportunities in our own and the 3P network. That is in short about the greenfield. Also, just to mention, we mentioned several times the sustainability is important. The consumer requests it or they just expect it. The customer expects it and the regulatory demands it. This is something we have to deliver upon. We have joined the science-based target. We did that in 2020. We are committed to reduce our carbon footprint by 46% by 2030. I'm also really proud that out of a reporting perspective, we have already started to align our reporting with the CSRD so that we are on top of.
Just how we work with it, we look at sustainability out of three perspectives. It's for the people, it's for you, for the people, and for the planet. We have different programs how we work with these different areas. What I just wanted to say for us is really we act in those areas where we have a responsibility to act and where we have the ability to act. We have this under control, so to say. The last but not least is, of course, what is the company without the people and what is the culture we are striving for. We have a vision and, of course, for us is also to create a culture where we have a winning and joyful culture. This is also about to attract and retain talents.
Also with the strategic focus, we also need to create clear roles and responsibility so everybody knows which area in the strategy to focus on, of course. We will also increase the focus on performance. We have been performance-driven, but we will now do it through a new methodology for us, a new methodology, sorry. It's called OKR. I don't know if you heard of it. I've worked with it. For me, it's about setting common goals for the company and the team that really creates alignment in the organization. That is something we look forward to do. I'm also convinced and committed to have one common vision, have one common strategy that will, of course, create good alignment and engagement in the organization. I'm super happy about that. Summary.
Three strategic focus areas, and that is super important for us that we will keep all our focus on. This is about our winning with our super brands. We have 10 super brands that we will focus on and secure that we win. They are key enablers also for us to deliver the 12%. The second one is to grow beyond core. And there we have taken the decision. It is about the U.K., it is about Germany, it is about exploring North America. Then we will excel in marketing and innovation. That we will do. We will continue to work on the marketing effectiveness. We will scale our super brand and we will work with exciting product development. Of course, we will achieve the operational excellence. This will happen through net revenue management, the supply chain optimization, as we talked about, and an efficiency-driven organization.
That was my long speak. I'm happy you're still sitting in the room. A lot to talk about. Now I'm going to hand over to Thomas, who will talk about how we will excel in marketing and innovation.
Good afternoon, everyone. I'm very, very happy to be here and very excited to talk more about marketing and innovation. I know it's been a lot of information, so I hope like between now and the break, approximately 20 minutes, I will talk about that. I hope it's going to be very exciting information for you. Thomas Biesterfeldt, as I said, I'm CMO, so I'm responsible for marketing, innovation, and sustainability at Cloetta. I joined Cloetta late 2018.
Prior to this, basically 20 plus years FMCG experiences in companies like British American Tobacco, L'Oréal in different countries, basically focusing a lot on consumer centricity, valorization, and brand excellency. That is also really what everything is about for us at Cloetta. It is about the consumer. We put the consumer at the center. That is why we call this consumer centricity. With consumer centricity, I would say it starts naturally looking at trends because trends are kind of the articulated, clustered opinions and perception of consumers. Let's take a look at six from our perspective, relevant trends for Cloetta. The first one, what we call searching for joy. I think when we look around today, we see that a lot of things are changing. Things are moving fast. There is quite some insecurity around us.
When we nowadays look online, we don't know whether the picture is for real or whether it's made by AI. A lot of insecurity. There's a phenomenon what researchers call high tech, high touch. Meaning the more technology around us, the more we are gearing towards things that give us security. We are looking joy in the small things. I think it's fantastic to say that this is an area where Cloetta has already been delivering products and catering into these occasions for decades. It is not something that we expect to get less. That was one of the reasons Katarina mentioned it. We have launched a joy report basically also to understand and share with the world more around the theme of joy. These occasions we basically can impact. We create moments of joy.
Always as with trends, you know it's a bit strange. Sometimes they are almost like working against each other. Like at the same time, consumers mentioned they love new experiences. They look for new experiences and change. Obviously, not only hyper-individualization, hyper-indulgence, and that's something we need to manage. At the same time, innovation is really at the core of our business. With Pick & Mix, we have a fantastic answer to personalization and shopping trends. Consumers look for products that support a healthy lifestyle. Yes. It's very good for me to say that already today, almost one fourth of our portfolio is sugar-free. We have further products that have reduced sugar, like to mention recently launched Chewits Jewels in the U.K., compliant with HFSS, the new rule in the U.K.
It is also important to mention, if we look at what consumers say, we would expect that this category would already be much bigger. Over the past two years, it is actually declining on the level of 2% share of the market. Nevertheless, we will be ready and we are ready to accelerate when the consumer is looking for this even more. The fourth trend, and this is very important from a marketing point of view, consumers are connected and they are connected all the time. We have trends that are built through communities, communities that are moderated even by AI or virtual YouTubers. That is the reality today. We need to understand in marketing which of these trends will really live and which are the trends we should not look into too much.
Also, it's very important to be effective in marketing, in our spends and in the consumer-facing media. We will come back to it. The shopping experiences and overall convenience, it's something that has grown over the past. E-commerce, for instance, or quick commerce nowadays are some examples of the convenience trend. We have all reason to believe that this will continue. I think I won't even call it a trend, but it's a hygiene factor. We mentioned it before. Consumers expect nowadays companies to be ecological conscious. As Katarina mentioned, we have signed up to our climate action plan with the science-based target initiative. We also have initiatives such as less and better plastic with plant pack order. We're removing, as we speak, the plastic wrapper on the liquor boxes as one example. How do we capitalize on these trends in Cloetta?
We said like we want to accelerate the marketing and innovation. The teams have worked hard on this over the coming years to really build a fantastic foundation. The first thing is I mentioned the consumer centricity. We work along a so-called four-step consumer connection model. The first thing is we spoke about trends. We need to understand what is happening, social listening, really have the ear on the pulse of what's happening. The next step is when we then talk about products. When we start to develop products, we are doing a full cycle research from the concept finally to test products in shelf, etc. Actually we have an own panel of 12,000 people that are testing our product, sensory panel that tells us whether they like it or not. If it's not good, back to the rework until it's really good.
Things like the joy report we just mentioned, research initiatives. When we have a product, obviously we need to understand that consumer needs change. We want to stay the number one for these occasions of consumers. Here we see examples how we move candy in boxes, so you can bring them with you in your purse. We have the example of Candy King moving in a pre-packed. Finally, it goes to the distribution. Go where the consumers are. Here we follow the consumer and we win with the winners and we grow those types of channels and our activities there. That is number one. The second one, how we leverage on these trends, is our marketing mix. Let me start by, it's good to realize the category we are actually operating in. I call it the triple E.
Everyone, every day, everywhere. Everyone is our consumer every day and can buy us everywhere. It's fantastic. It's not many categories that can claim that. This is very, very important to understand because it has a lot of impact and imperative on our marketing strategies. Think about every day, the consumers and the market, think about categories like a car or a vacuum cleaner for argument's sake. How many times do you buy a vacuum cleaner in your life? Unless you collect vacuum cleaners, but probably you do that three times a year. It is very important for the company to be there when the consumers are there. For us, consumers are in the market basically every day. That means in marketing we talk about a media planning KPI of reach.
Reach means we are trying to reach as many people as possible with the budget we have available. That is a big, big difference than micro-targeting consumers that are right now in the market to buy something. For us, it's a different model. The model is set up to be a very effective model if you master it. We are striving for availability, both in consumers' mind, when they come to the store, they should have a mental availability of our brands, but at the same time, they should see it in store. When they work together, then really the beauty happens. How do we work around this? We have a model that we call a marketing mix input model that really starts with our advanced media guidelines.
That could, for instance, be how do we build campaigns by building the optimal reach per age group and channel. You understand not every consumer you can reach through one channel. That's not possible. You need to have the right capping frequency, capping when do you reach the consumer when. We go into the KPIs, we adjust them if needed. We work with data and insight analysis. We work with partners like we do media mix modeling, where we understand like which type of advertising has the best ROI. I, for instance, can tell you, you saw a picture of Kexchoklad out-of-home advertising. It's very nice, it's very impactful, but we only do it very seldomly. It's kind of the cherry on the cake because it's a very expensive form of advertising and therefore not the most efficient one.
This is all things that we are working around with this model. Certainly it is about the non-stop appetite of our fantastic consumers for news. I make a difference by talking about either innovation or new product developments. With new product developments, I mean products that could be a new flavor. We see here Läkerol Strawberry launched last year. That is for me a new product development. Innovation is something that really creates a new segment or a new behavior. NPDs in this category are absolutely critical. About 10% of this industry sales is done by innovation. You will see like also because of the trade windows, etc., we have a lot of change of portfolio happening through NPDs. In Cloetta, we are quite well set up and we worked very hard to get there.
We have like 20% of our sales over the past three years are done by those types of NPDs. In 2025, 50% of our growth is made by NPDs. We have researched in Sweden over the past eight years in the candy category, which type of innovations were able to deliver most incremental market share. We outperformed with 50% of the competition. We are doing this well and this is a well-oiled machine. Nevertheless, we have great opportunities going forward. You can imagine when you touch so much of your assortment through NPDs, it allows you to each time bring new NPDs that are accretive in terms of margin versus what you actually take out or cannibalize on. That is a fantastic opportunity because it helps you to renew your portfolio in a profitable way.
We also work hard inside to bring more efficiency through, for instance, menu cards where markets can pick an already ready product or SKU catalogs that give us much more efficiencies. With that in mind, we have reached a point where we are in a position that this is also ready to scale to new markets. We have a very well-functioning marketing model. Katarina mentioned the strategy to grow beyond core markets. Think, for instance, about a new product that we want to bring to a new market. We have consumer insights available because across our markets, these consumer insights are usually very universal. We have done a well-working positioning that has been tested and that we know will deliver. We have a product at the end that has been tested either by the 12,000 people in our panel or external research.
Why that at the end is very important is actually because we can save time, we can save cost, and we have a much better chance to bring quality and success to that new market. It is really nice and a good moment to scale this. To go further from here, Katarina mentioned the strategy regarding our super brands. Think about we have now the consumer centricity. We have that marketing mix model that Cloetta marketing teams have perfectionized. Then we have the NPDs, a well-oiled machine. Now how could we with even more focus drive forward and accelerate growth on those super brands? What can we do in marketing and innovation to support this in the best way? Our ambition is to become the undisputed leader for all and each of these brands in their respective area of business. That is the ambition.
We have some very good marketing drivers. The first one, if we look at communication around these brands, because in FMCG we need to support our brands, we will bring more focus to our brands, to those super brands. The second one, Katarina mentioned it earlier, if you do one content creation, but you scale this to several markets, you can understand that you utilize this type of content at the same time to several markets. I am actually very proud standing here that we made such a progress already since 2018 from 54% consumer-facing media until today to 70%. Let me tell you, benchmarking a consumer FMCG, this is a very, very good number. With this super brand strategy, we feel we can utilize the scale and bring it even further and stretch our consumer-facing media to 75%.
That means 75% of AMP is meeting directly consumers. The other lever to drive efficiency is actually the product and the packaging itself. You can imagine for our factories utilizing an already proven and superior quality product like Mynthon ZipMint or like Tupla, which is also here and which we have done now. We do it exactly with the same packaging. We do it with the same label. We can then move into white spots in new markets. We do that and create scale, efficiencies, and quality. How do we go forward from here? I feel, yeah, we are very happy. We are very proud. We really want to push these super brands to grow further. Thinking about the future, I thought like when I look at these trends, it starts to become a bit foggy.
It's a bit difficult to say, so which of these trends in 10, 15 years from now will have relevance? We are not making these statements. Obviously, it's difficult to say. Obviously, we know that some of these trends or the combination of trends will accelerate. This is really the ambition. We want to be ready for the future. We want to not miss any incremental opportunity for Cloetta. We want to ensure relevancy for decades and generations to come. Therefore, I'm very, very happy also today to announce to you that we will start working with Cloetta Next, which is our innovation hub, a new organization muscle basically to say that will work in a different way with the objective to enable incremental growth, but also to ensure our future relevance. The ambition is very clear with this.
More value, future relevance, and incremental growth. To reach this ambition, Cloetta Next as an innovation acceleration program will help us to achieve this by focusing on three areas. The first area, we're going to do things simply faster. We have to become faster. The world is moving faster. We want to become even faster. We will do this through agile methods, prototyping, agile scrums, sprints. We will pick people from different teams to work in these teams and deliver prototyping faster. The second thing, not everything we need to do ourselves. Fantastic companies, fantastic minds out there to cooperate with. In a systematic way, we will work stronger together with the external world, with existing and new suppliers, external manufacturers, but also start-ups, scale-ups that we can engage with with Cloetta Next. The third thing is that we will reinvent the future of impulse.
What I mean with this is that we really want to look at with some of our top partners in retail, how can we define the future of impulse? How will consumers shop? What was 15 years ago the biggest impulse in a checkout aisle? Whereas now one could argue it is maybe quick commerce. What is the next impulse in 10 years from now? That is something we really want to be part of. Not only product, but also distribution and being really a pioneer in this area. From this future outlook slide, I come to my last slide to sum up. Four parts I'd like you to take with you when you think about our new strategy and when you think about marketing and innovation, how we can support this. We will, and first and foremost, and that's important, protect and grow our core.
This is our business today. All the fantastic brands you have seen, the Kexchoklad, Tupla, the Mynthon. We will do that evolving with the consumer trends. You remember we spoke about the best-in-class consumer centricity, but also about the marketing mix and the efficiency of our investments. We applied this know-how to secure success when entering into new markets. Super brands, we will win with our super brands. We focus on expansion with maximum efficiency and the best quality to recruit consumers and outperform the market. Fourth, it is about our innovation. Our innovation strategy to reinvent how we do it and to bring simply more incremental innovation to the market, to disrupt the market, to be part and ensure future growth. Thank you very much for listening. I invite Katarina and Laura back to the stage for a short Q&A.
Thomas, we are three minutes ahead of time.
Oh, that's very funny, I think.
No, the share price is up. We have clearly delivered some good news today. Now we only take questions from the room. I have reserved the first question for Nordea. Cecilia on one side and then Joel on the other side over there. We will hand you the microphones. Nordea, please go ahead.
Adrian Elmlund here from Nordea. Thanks for the presentation. I'll begin with, I guess, two sort of questions. You seem to have a lot of focus on marketing and innovation spending here. Could you maybe develop a bit on how you kind of want to reach your margin target? If you maybe begin with, as a percentage of sales, will marketing and innovation increase compared to historically? And how will you sort of reach the margin target? Is that, if I understand it correctly, if you focus more on your top brands, is it more or less gross margin increase? I think you're moving from 50% to 60% of top line sales. Could you maybe go through how that impacts adjusted EBIT in drop through sort of?
Should I take it? Yeah. No, Frans, he will go through this later on in the presentation a little bit more about what will come from the different areas in the profitability journey. If we're looking at the first years, as we said, until 2027, when we say we're going to reach the 12%, it is driven by the super brands. As I said, they have a higher gross margin and they're more profitable than the rest of the assortment. We're focusing on those primarily. This will, of course, help us. Of course, what we said, we're also doing the net revenue management, the efficiency in the portfolio. We're looking over the supply chain, as we said, fit for purpose. We make that one more efficient. That is also part of the journey.
To build on the point, today we are at 7% of net sales for AMP. As I mentioned, the first enabler to invest more into our brands is basically making those investments even more efficient. Nevertheless, if you look at the FMCG average, 7% is still a little bit on the low side. We feel we want to develop our AMP spend along our NSV growth. We see already today, we do the focus when you look at between categories, there are some categories as focus categories. We might spend a little bit more AMP on than others. The super brands, the idea is to finance that by focusing and driving more efficiency through the more consumer-facing media.
Okay, thanks.
Thank you, Nordea. Do we have any other questions from the room?
Hello everyone. Nicklas Skogman, also with Nordea. I can't help but think why you haven't tried this strategy before, i.e., moving into new geographies with your existing brands, because you've had these brands for a long time. Why now is the right time to do it?
I can maybe start answering. It's a very good question from a marketing point of view. Maybe it starts with, I want to put the attention to how the situation looked in 2018, where 54% of our spend marketing was simply not that efficient. We have worked very, very hard to trim it to the point where it is now. Now the teams have really built a model that we feel now it's time to scale that. I think it would be rather derailing if we would start to look too early at new things. We feel really now that everything is in good shape. We are ready to do that. We want to do it like a well-trained athlete and not running into a marathon without good training. That's simply the situation. Now we feel we are at a good moment now. Yes.
Excellent. Any further questions from the room today? Very good. We move on to the break. As you might have noticed, we have our super brands here today. We have Christopher. Where is Christopher? Over there. Our Director for E-commerce and More Tech, who can then also guide you through and tell you more also about that area during the break. We will see you back short. Thank you.
Thank you.
Yeah, we're going to miss you. Warmly welcome back, everyone. I hope the break was both refreshing and joyful. It is now my pleasure to hand over to Niklas, who will talk through the Pick & Mix journey ahead. The stage is yours.
Thank you, Laura. Thank you very much. My name is Niklas Truedsson. I have the privilege of taking care of the Pick & Mix business in Cloetta, in addition to also running the business of Cloetta in Denmark and Norway. I joined Cloetta in 2019, and that's also when I started working with Pick & Mix. Prior to that, my main background is 16 years with Unilever, both in Nordics as well as abroad. Today, I will talk Pick & Mix with you.
I thought that given Pick & Mix is one of the things that makes Cloetta fairly unique, but it's also somewhat of an odd bird if you compare us to many other FMCG companies. Therefore, I thought it would be a good idea to make sure we're all on the same page. What is Pick & Mix, and what are we talking about, and what is the role of Pick & Mix, and why is it the key pillar in Cloetta's business? I'll start with a short introduction. Basically, what Pick & Mix is, is that it's when we run a retailing concept with Pick & Mix confectionery in retail stores. That means essentially that we procure and set up all the fixtures for the Pick & Mix candy in the stores.
We manage the full assortment, which is a mix of Cloetta products as well as third-party products. We activate the category both in-store through theme promotions as well as out-of-store through social media or advertising using our Candy King brand. We do all the servicing of the stores, which essentially means we go to the stores, maintain the fixtures and the hygiene routines, and we replenish all the products. Essentially, the only thing a retailer should have to do is provide the space for the Pick & Mix section and then charge the consumer as they go through the cash-out. This model differs slightly between customers and markets, but in essence, this is how the model looks across. In addition to this, Cloetta also sells our brands and products to those retailers or, in some cases, competitors who run their own Pick & Mix operations.
That is when we get our brands and products, as we call it in bulk sales, into other Pick & Mix sections as well. As I said, Pick & Mix is a key pillar in Cloetta's business, and it is also a very strong competitive advantage for us as we strive to, and our ambition to be, to retain our position as Northern Europe's leading confectionery company. I will break that down in three parts for you. The first one is around category leadership. Now, as Katarina told you, Pick & Mix is by far the most growing or the fastest growing part of confectionery. We are talking double-digit growth in both volume and value for the past years. That is the same time as the rest of the confectionery section has been either stable or even slightly in decline.
That means if you want to be a growing company in confectionery, you probably need to be in Pick & Mix. Now, that growth, in addition to the margin it actually delivers for a retailer, makes this the most important part of any retailer's store in the Nordics. In addition to that, a consumer spends around two and a half minutes in average in front of the Pick & Mix shelves. The only places in a store that can rival that is basically fruits and vegetables and the dairy section, which in itself means that the Pick & Mix section or what kind of inspiration you bring there will have a disproportionate impact on the consumer's quality impression of your store.
Now, all of this makes Pick & Mix a very, very important part for any retailer in our core markets, which essentially means that we as Cloetta, as the clear market leader in all four Nordic markets, in addition to a very strong position in all the other confectionery categories, can have a dialogue and a relationship at a very different level with retailers than many of our competitors can. The second part of this is the commercial contribution it actually brings to our company. Again, we're talking a category that is growing 10%-15% year on year, and we're now at a margin with this business slightly above 7%. It is a EUR 200 million business for us. I would say any business of that size growing at that speed at that margin is fundamentally commercially attractive.
Now, so that also, of course, gives a significant contribution to the overall profitability of us in Cloetta. The last part is the scale benefits that we get through Pick & Mix. The first one is, of course, the fact that we have basically, we control the assortment in the Pick & Mix shelf of more than 4,000 retail outlets in the Nordics. That means we also set the standard of how much will Cloetta's products and brands be displayed in all of those stores. That means we can secure the availability and the visibility of our branded products as well in the Pick & Mix shelves. Secondly, there is an obvious synergy with this kind of volume growth in our production. The fact also that Pick & Mix as such is typically a fairly efficient production process.
Secondly, which was alluded to previously, when other parts of the confectionery category may be declining, this makes us less vulnerable having all this growth in our production network. Essentially, it gives us a competitive advantage both from a category leadership perspective, from a commercial perspective, as well as from an efficiency perspective. Now, we are ideally positioned as Cloetta to really leverage this competitive advantage because we are essentially, as I said, we're the market leader in all the four Nordic markets, and we're the only player who has a Pick & Mix business in more than one market. Essentially, we're the only Pick & Mix player who can scale this business. I did mention the commercial contribution and the positive commercial contribution of Pick & Mix.
Those of you who have followed us for a while are aware that that has not always been the case. Therefore, I thought I'd spend a few minutes on explaining the turnaround of Pick & Mix that we had and the re-engineering of the Pick & Mix model that we made. We acquired the Candy King Pick & Mix business back in 2017. At that point in time, it was very much a volume business. In 2018, we integrated that business into Cloetta, both in terms of production as well as organization. At that time, it delivered a EBIT slightly above 1%. I came into the company in 2019. We started, of course, looking at how do we make this model profitable, we set all the plans, and how do we re-engineer this model. We were getting quite well on our way.
As you may recall, what happened when you came back from your winter holidays in February 2020? The pandemic hit. That had a fundamental impact on all of society, on most businesses, and equally for us. Basically, during 2020 and 2021, we were very preoccupied managing the impacts of the pandemic. That meant it took until 2022, 2023, until we really started getting the implementation of the new model out in the market. We still started getting the traction from consumers and from retailers. It took another year for us to get the benefits of that in terms of the value that we were contributing to consumers and retailers into our pricing, as well as the efficiencies we had in the new model to really start having effect.
That meant in 2024, we had a EBIT slightly above 7%, which is at the upper tier or even slightly above our midterm stated target, which was between 5%-7%. Now, we believe this margin improvement is sustainable. To give you an understanding of why we feel that, I'll give you a little bit better view on what this re-engineering of this model actually means. At any point in time, when you want to turn a business that is turning 1% EBIT to 7%, you know, it doesn't have to be rocket science. Basically, what we do is you make sure that you contribute enough value in your model for retailers and consumers to be prepared to pay the price you need to be profitable.
Secondly, you manage your costs to make sure that that benefit comes all the way down into your P&L. Now, if you convert that thinking to our reality, two things we had to do. The first thing was creating consumer and retailer value in our Pick & Mix Candy King model. Secondly, using our multi-market leverage and scale to make sure we become much more efficient. I will take you through this, starting with the consumer retailer value, and you can follow it from the top right. Basically, what we have done is we went from generically and simply providing candy in bins in not necessarily inspirational executions and not in very consistent ways across markets to delivering what we mean a superior in-store experience, which has traction with both consumers and retailers.
The second thing we've done is we've gone from basically only activating this category through price promotions, which over time has a tendency to erode your margin, to actually activating in a much more qualitative way, where we do theme promotions in-store and we use social media and advertising through our Candy King brand. Now, to give you a better sense of what I'm talking about, this is essentially what our Pick & Mix business looked like in 2019 across the four markets in the Nordics, not necessarily inspirational, not necessarily consistent. This is what it looks like today. Much more inspirational, much more consistent. Even on the bottom right, you can get a glimpse of the digital screens that we have started introducing into the trade to take the experience to the next level.
We went from this kind of promotions, very generic, very price-oriented, to this, basically building our brand of Candy King as well as driving the Candy King Pick & Mix in social media and advertising, and also using inspirational packaging. Because at the end of the day, that's what the consumer puts their candy in, brings home, and puts on their table, which means the Candy King experience begins before you even enter the store. It's there when you are in the store, and it's actually after you've been in the store when you take it home. Going back to this slide and going back to the lower part, which is the operational efficiency. Back in 2019, we had very different assortments across the markets, very different products.
Now, we have a much more cross-market assortment where we, through the insights, we have known which products can play a similar role in the different markets and where you actually really need some local adaption. That has allowed us to cut down from over 1,100 SKUs in our system to around 650 today. The second piece is around merchandising, which is not an insignificant part of the cost of any retailing operation and certainly ours. We had very disparate merchandising models and setups in the markets. Today, we have a much more consistent way of working across the market in a much more efficient way.
This essentially, what this has done is not only has it landed us a much more profitable Pick & Mix model with more traction with both retailers and consumers, it had also landed us a repeatable model because basically, this is now something that we can scale and leverage both in our current as well as in new markets, which takes us to the more forward-looking part of this presentation. How do we now use this going forward? I'll take you back to this slide. Katarina showed it previously, but I'd like to touch a bit on the drivers behind Pick & Mix to make you understand what kind of potential we see in this concept.
Pick & Mix taps into two of the strongest FMCG trends that we have, the first one being consumer individualization or the need and expectancy for consumers to individualize their offer whatever they buy. That might be when they go to the Nike store to get their sneaker in exactly the right shape, exactly the right color, with exactly the right laces, with exactly the right padding, and obviously the right size. It may be when they go to the Sephora store to get exactly the right makeup kit for their skin complexion matching the preferred look that they want to have in that given point in time.
Now, if you turn that over to a grocery retailer perspective, there are few, if any, parts of that store that can answer up to individualization the way the Pick & Mix can because essentially, the consumer stands in front of the shelf with somewhere between 60 up to even 250 SKUs to choose from exactly what kind of candy you like in exactly the right amount they'd like it, and they can mix their own bag. Second one is the retailer trend, which is the trend and the need for retailers to drive more inspiration and more excitement in their stores, which actually accelerates the consumer trend I talked about because today, a consumer, if you're looking for convenience, you can go shop online. Yeah, basically in whatever thing you choose to shop on. If you're looking for prices, you can go to a discounter.
The retailers are increasingly need to find reasons to get consumers into their stores, and they have to offer inspiration and excitement. There are very few things, again, that can deliver this as well as a well-managed inspirational Pick & Mix shelf actually can do. With this in mind, when we look at our core markets, we see clear potential to grow further in all our core markets, essentially. We are now upgrading our EBIT ambition from the previous stated 5%-7% to a new level of 7%-9% for our Pick & Mix business. Four drivers behind this, and you will recognize them from Katarina's presentation. One, we will continue to increase Pick & Mix.
There are around 600-800 stores still in the Nordics that are not carrying Pick & Mix, even if the penetration is already high here, somewhere between 50% and 65% of the households. There is still room to grow. We are obviously looking to convert more stores to Candy King, both stores who are carrying either private label or other generic executions to what we now think is a superior Candy King model. There is an obvious one, but also to upgrade those Candy King stores who have a bit more standard execution to even more premium experience using digital screens, using even more premium assortment, which will allow the retailer to charge a bit more and needless to say maybe, but still get a bit of kickback to Cloetta in that. Third one is leveraging Candy King and extending it in e-comm. Also, Katarina alluded to it.
We have already a very strong business, thanks to Christopher back there, with foodora and Wolt, where we deliver a pre-packed Pick & Mix solution in a Candy King cup, which also allows us to bring Candy King into channels where a physical Pick & Mix shelf is not available. Finally, launching the Candy King model in the Netherlands. We talked about it. We have a very strong team down there already, but Pick & Mix is not commonplace in the Netherlands, and there is an obvious opportunity to bring Candy King into that market. Now, looking beyond our core markets, we, of course, come to beyond core, and we can look at several markets, and there are several opportunities of entry, but I'll call out three, and again, there will be no surprise on this.
The first one is the U.K., where we already have quite a wide distributed business with Pick & Mix, but we haven't revamped it to the Candy King level that we have in the Nordics, and obviously, that is something that we look to do, and we look to do a similar journey that we now have done in the Nordics there. The second one is Germany. Germany is Europe's biggest candy market and is completely virgin territory as well for Pick & Mix, and we will pilot that again using the team we have in place to do that and explore what kind of traction we can get in the German market for Candy King Pick & Mix. Finally, the last one, which is North America, that is the world's largest candy market, where a window of opportunity has opened through the Swedish candy trend.
There we also see a lot of traction and interest from a lot of players over there around Swedish candy and Pick & Mix, which is also seen as an interesting part of Swedish candy. We will start exploring that, piloting primarily in non-grocery and using those pilots to understand and perfect what the Americans are expecting or the Canadians are expecting from a Pick & Mix model and what gets traction. We can then use that model when we have perfected that to take into grocery retail and pilot it and potentially roll out later. A lot of interesting opportunity, of course, a lot of exciting opportunity, but we will, of course, do this in a very structured way, making sure that we make the best use of our resources available at any given time.
To sum this up, again, if there are three points I would like you to take with you from this presentation, Cloetta has now successfully re-engineered our Pick & Mix model. We are now delivering an EBIT slightly above our previously stated EBIT target between 5%-7%. The repeatable Candy King model that we now have re-engineered and have proven track record with is solid ground for continued profitable growth, and we are upgrading our EBIT ambition for Pick & Mix from 5%-7% to 7%-9%.
Finally, given our market leadership in all the core markets, as well as with the fact that we are fairly unique as the only cross-market player in Pick & Mix and the only player with a repeatable model, we feel we are ideally positioned to lead and leverage the grow and Pick & Mix consumer trend both in our current markets as well as in new markets. Thank you very much, and I'll hand over to Frans.
Good afternoon. My name is Frans Ryden. I joined Cloetta in 2018 as the CFO. Before that, I spent 20 years outside of my native Sweden working for a group of companies that includes Kraft Heinz, Mondelez, and Philip Morris. I am responsible for finance, but also for IT and legal, and together with Laura, communications and investor relations.
Now, over the next 30 minutes, I will take you through growth, profit, cash, and capital allocation. Starting with the growth, we are very happy to have shared that we are increasing our long-term organic net sales target from the previous 1%-2% growth to 3%-4% growth. You have to know then that the 1%-2% growth was based on the idea that that was roughly how fast the market was growing, and we were going to grow in line with or at times better than that market. If you look at the slide here on the last five years, we have obviously grown faster than that. It is a 5.1% CAGR since 2019, despite the dip there during the pandemic.
We also know that there's a lot of pricing in this, a lot of pricing we've taken on account of our own increasing input cost. I'm going to come back to that piece. Now, Katarina also presented that going forward, we're expecting a market that will grow at 2% CAGR. It's important to note that with this new target, we are significantly stepping up our ambition by saying that we will grow faster than the market. How we will do that, I think it's been well said a couple of times. It's focusing on our super brands in the core markets. They are already growing faster than the other brands. They are more profitable, and we think even more focus here is the right way to go.
Secondly, in the markets beyond the core, instead of going for 50 markets to, again, focus in on three markets where we have a great opportunity to win. It does not mean that we will exit the other markets, but this is about focusing harder. I am not going to repeat the whole strategy, but we expect that the core markets will grow roughly at the range of 3%-4% per annum, and that beyond the core markets, we will grow two to three times faster than that range. Now, everyone is bringing out their calculators, and you are saying, "Hey, if that is 80%, that probably means that the core markets would be at the lower end of this, maybe at three.
The beyond core could be at 8%. You get sort of to the 75% of the total sales that will be from the core markets in the future. You can do this in different ways. The main point here is that with this strategy, we will further diversify our geographic footprint. Katarina, she spoke about the benefit of being in many categories. When chocolate prices were going up, we could lean a little bit more heavy on other parts of our portfolio. Niklas spoke about what was happening during the general inflation surge, and we could lean a bit harder on the Pick & Mix. By diversifying our portfolio further, we will reduce the risk in the company, and also we're creating opportunities for further profitable growth. Ultimately, growth is the engine and the oxygen of an FMCG company. Moving then to the profit.
Yeah, maybe, why not? Moving then to the profit, and again, going back to the last sort of five years, our profit has been steadily growing, and we've also held a consistent EBIT margin, around 10%-11%. That still leaves quite the gap to the 14% long-term target that we've held for a number of years. Katarina shared high level how we intend to solve for this, and I'm representing it in the circle here. It is worth noting that scale is at the heart of this. That is the growth. That is really, really important for us. The three other areas that will support this are driving margins and profit through net revenue management. It is about securing a supply chain that is fit for purpose, and it is about creating an effective operational structure.
I'm going to go back into each one of these and provide more details. Starting with the net revenue management. There are four different areas predominantly we're tackling here. The first one, Thomas already spoke at length and eloquently about, and that is to drive margin accretive innovation. There's a large part of our portfolio that is turning over every year, and by making sure that every product in the funnel before it hits the market will make more money than the average and certainly more money than the product that it may be cannibalizing, that drives value. Number two, coming back to the pricing. There's a graph here on the pricing the last six years. I'm not giving the numbers because it's so sensitive, but it is at scale. It is at scale.
As you can see, the last three years, the amount of pricing we've taken vastly exceeds what we did the three years prior. Our brands have that kind of power. In net revenue management, it's about making sure we get full value for what we're bringing, for the effort that we're putting into the brands. We'll do that by balancing two things. On the one hand, healthy margins that allow us to invest in the brands and drive profit with a competitive proposition to the consumer, where they will go into our customer stores, buy our product, which of course then generates more sales for us. I think it's fair to say also that during the time when inflation was getting way ahead of salary increases, consumers had a tough choice.
In these circumstances, we're incredibly proud that they continued to go into our customer stores and buy our products. That's an incredible strength that we have in our brands. Thirdly, it's about mix. Super brands are part of that mix, but so is channel mix, customer mix, geographic mix. There's mix within a brand. There's a mix between products. We can maximize the value of the effort that we're putting in by working the mix. The fourth area is portfolio harmonization or optimization. We have previously shared that we have reduced about 30% of the number of products, stock keeping units that we have since 2021. That means getting rid of small product volumes, unprofitable ones, those that don't fit, and constantly replacing with something better.
There's more opportunities here for sure, but as you get closer to the bottom of the barrel, you have to also be a little bit more careful. You don't want to lose distribution. That's very expensive to recover. There's a second benefit with harmonizing the portfolio, and that is about that it makes it easier for supply chain to provide volumes and doing it at a good cost. Let me move to that side of the equation. If you imagine that if you have many different types of products, you have to make more changeovers for supply chain. If there's different recipes, you have to clean more often. When you start the machine again, it takes some time before it gets fully up to speed. Harmonizing the portfolio will help supply chain for sure.
Now, we're also going to have more focus on our existing supply chain going forward, and that means we can also have more focus on the own cost that we're generating in our business, and that will also drive efficiencies. Thirdly, how we manage on the procurement side, our vast amount of cost that goes into the actual product, 50% roughly, that's SEK 8 billion on the total circle there. 50% is raw and packaging material and consumables. How we manage the cost around this is incredibly important, especially now when sort of on the front page of every other day, they talk about cocoa prices going up or this happening. I'm going to zoom in on that area specifically for you, but I'll leave that as a cliffhanger. First, I just want to comment on the creation of an effective operational structure.
Katarina already mentioned a number of things that we want to do. I would phrase it the following way. A couple of years ago, we drove a lot of cost out of our systems through zero-based budgeting. It's about getting more money or more bang for your buck, and it's also about making sure you spend where it matters the most. Obviously, now we have a new strategy. Of course, we need to go back and revisit this and make sure that the resources are sitting where it matters the most for the new strategy. Now, coming then back to the procurement side. Simply put, and it's a very simplified model now, that when costs go up, unless you've locked in your prices on forward contract, you have to take that cost. If you have the contract, you're happy for a while, but eventually, it's over.
If costs are still up, you have to take those costs. If you try to lock in a contract for all eternity, I mean, good luck with the price you'll get today for doing that. What it really is about is making sure that we can time this so that we can get our own new pricing through before we get hit by the higher commodity costs. It's a game on timing, but it's not the only game in town. We have a professional function of buyers, roughly 20 people spread across Cloetta, who spend every day trying to figure out how we could spend less for what we are already buying. I'm listing four different examples here, which I think are quite interesting for you. The first one is, over the last few years, we've stepped up our professionalism, how we handle commodities significantly.
We have tools and processes not only to monitor the market, but also to make predictions about the future. That does not mean that we are always right, but it means that we can make conscious decisions when do we want to cover for how long and what percentage of the spend. Instead of doing this on a standard three, six, nine months or whatever, it does not go by default. We are covering 67% of our commodity spend this way, up from 46% just a couple of years ago. Of course, we want to take this further. The other one down on the side here is on the contract manufacturing. When we are outsourcing the manufacturing of our products to a third party, value upstreaming.
This is not only about having a transparent book about the cost that goes into the product and that will get charged to us, but this is that their volumes get consolidated with our volumes when we're negotiating with the suppliers. Simple terms, volume discounts. As you can see here, we're roughly at 30% on that. By next year, we expect to have more than doubled it to 70% of the spend. Obviously, we buy a lot more than any given contract manufacturer. Thirdly, is to have strategic agreements on the packaging side. 60% of our packaging purchases are set up this way. Yes, there's transparency on the cost side, but there's something more to it. It's the fact that this is long term. That means less risk for the supplier. It means lower cost for us. It also carries other benefits.
Actually, Thomas had it on one of his slides as well. When we work with suppliers, we can get novel packaging ideas coming out of it, which is an added value beyond just lowering the cost. The last area is on value engineering, which is a type of cost mitigation. There are many different ways you can do that, but again, with an increased focus on our own supply chain structure, we will also put more focus in this area. A couple of examples could be that you change something in the production process that reduces waste. This could be about replacing an expensive material with one that is less expensive, maybe permanently, or if it is a flexible recipe, you can use either one of them, and you always pick the cheaper one, but you still provide the same taste, mouthfeel, texture, smell that the consumer expects.
This could be about downgaging. Maybe you go to a thinner plastic foil that still gives the same amount of shelf life. It's good for the environment, and it's good for our costs. There are many different ways of doing this. In this, of course, is also the make versus buy, which brings us back to the whole contract manufacturing versus own investments. The key point on this slide is that we are not sitting idle, waiting for the market to turn in our favor and then reap rewards for that. This is about us actively working on our cost every day. Bringing it all together from a profit side, we expect with this strategy to be able to add 3%-5% total Cloetta EBIT margin upside in the long term and 1.5%-2.5% already by 2027.
In this table, and somewhat mirrored in the graph below, I have detailed this out, and hopefully, you will recognize yourself as I walk you through these lines. All the numbers are on total Cloetta EBIT margin change. They are all rounded to 0.5%, and I provide ranges as well. Ranges both because there are some interdependencies here. There are choices we will be making as we are progressing on the strategy, and some people would think there is probably also a little bit of uncertainty about the future. Starting with the core markets. Number one, scale. Remember, that is the heart of this. Now, scale from growth only works if your costs are not going up at the same rate. Scale is about growth and efficiency together.
We are expecting that we will deliver 1%-1.5% total Cloetta EBIT margin upside from the scale in the core markets in the long term and 0.5%-1% by 2027. We come to the mix. If you remember, mix is part of net revenue management, but here I am separating and showing you the mix effect specifically for the super brands because it is so high up on the agenda. The super brands also drive scale. That is on the top row, but we have the added benefit that this scale is also worth more because more of the scale comes from the super brands. That will deliver between 0.5%-1% EBIT margin in the long term and 0.5% by 2027. There is the rest of the net revenue management.
You remember, this was the margin accretive innovation. It was about the fair value. It was about the rest of the mix. It was about the portfolio harmonization. Again, in the long term, 1%-1.5% EBIT margin for total Cloetta on account of doing this in the core markets and 0.5%-1% by 2027. On the beyond the core, despite that it's only 20% of our business, I still allowed two rows there. It is a bit more detailed compared to size, but there are really two things I want to highlight here. The first one is, yes, we will drive scale and net revenue management, but also we will invest in this. This will not come for free. I wanted to separate the investment very clearly there.
Whereas in the core market, the investment which will come is paid for by net revenue management. Here, I want to break it out. What you see here is that initially by 2027, it's not such a big difference. It comes more in the years beyond 2027. You see it even more clearly in the waterfall graph here. If we think about the proposition and the level of risk up until 2027 and our commitment to reach at least 12% EBIT margin, that is not coming from a risky proposition to expand in North America. That is driven by what we're going to do by focusing in our core markets.
Then beyond 2027, while the core markets will still deliver more of the EBIT upside, you start seeing here that the beyond core markets are punching above their weight, an additional 1% EBIT margin versus the 1%-1.5% from the core markets. This is obviously about the growth, the net revenue management. You know that we're more profitable in the core markets than in the other markets. There is a bit of a turnaround that is required here. I think, as Niklas showed, we can do turnarounds. For the last two rows, on the operational side, we do see some potential here as well to actually deliver an accretiveness to the total Cloetta EBIT margin. You have to remember, this is net of the inflation that will come there. This is still a very strong number.
While both these sets of markets will grow in a profitable manner in their own rights, and we're very excited about both of them, with the less profitable beyond core growing faster and also with Pick & Mix expected to grow a little bit faster than the branded side, there is a mix effect. There are also a few others baked in there. Net net, when we look at this, we see 3%-5% EBIT upside in the long term, which means that we are reconfirming our commitment to reach 14% EBIT margin. As you can see, there's even some room for headwinds there. Then 1.5%-2.5% means that we are confirming the new target of reaching at least 12%, starting from 10.6 last year, at least 12% by 2027.
Now, profit is no good if you don't get the cash. Fortunately, of course, we have a business that does very well on delivering cash. We have a strong cash flow. Last year, that resulted in our lowest ever net debt of SEK 1.6 billion and also our lowest ever leverage of 1.3. We are in a really good position as we are embarking on this new strategy from a balance sheet point of view. Before I take you to the overall capital allocation, how we're going to use this cash, let me just zoom in on CapEx within operations and to some extent what we do on the Pick & Mix side. The last five years, on average, we spent about 3% of our net sales on CapEx investments. That is low.
That is low, and it makes sense that it was low because it was in anticipation of that we were going to build the greenfield. Now, as you know, and as Katarina spoke about, we did a proper reassessment at the end of last year, and we have identified a number of different options, which are about investing in our own network. It is about outsourcing. It is about leveraging portfolio harmonization. These can be combined in different ways. Today, we are not going to share with you exactly what the options are or which are our preferred option. What I can do is give guidance on the CapEx spend. We are looking over the next five years to increase our investment to 4%-5% of our net sales, after which this would come down to 3%-4% on an annual basis.
That, of course, is significantly less than what it would have been with a greenfield investment, where we would have landed more average over a five-year period on 8% of sales. Which brings me to my second last slide or the last slide before wrapping this up, and that's on the capital allocation. In the graph here, you can see the full set of money, if you will, that we've been allocating over the last five years on average, which is about a bit over SEK 1 billion average each year the last five years. How we're obviously, with this growth and improved margins, we'll have more cash to allocate out going forward. Now, the strategy for us here is that we're going to invest in organic profitable growth. This is about supporting the super brands.
It's about the distribution and route to market, whether that is within the core markets that Katarina spoke about or if it's for the beyond the core, and it's about creating a flexible supply network, as described previously. M&A used to be a very big part of Cloetta's growth journey. It was actually up until 2017 where the growth was coming from. Since then, as shared, we haven't bought anything. We have been focusing on driving organic growth with our own fantastic brands, and it's working. We have been focusing on turning around Pick & Mix that we had acquired. Now we're in a position where we say we are more open for M&A again. We never took it off the table, but we are now more open for it. It will be as an accelerator that drives the strategy forward.
It's about the access to the consumers through the route to market, pastilles and gum, and it's about next-generation treats, what will come sort of out of the Cloetta Next or similarly. Thirdly, we have a, as I mentioned, very strong balance sheet. We are also pleased to say that having reviewed our strategy in detail, what we want to do, what we can do, what we will do, we are lowering our leverage target from the previous around 2.5 down to below 1.5. Now, obviously, there could be an instance here where there's an interesting M&A that would require us to deviate from this temporarily. That would then happen, but with a very clear deleverage plan and how we will get back. The last box here is dividend, not because it's the least important. I just wanted to end the slide on a high note.
We are also happy that the board has changed the dividend policy from the previous 40%-60% of profit after tax to now saying above 50% of profit after tax. As you know, the board has recommended the shareholders to approve a dividend of SEK 1.10 later on in April, which would be an increase of almost 50% on the dividend since 2018. Which brings me to the wrap-up. Number one, net sales, organic growth target increased to 3%-4% driven by our super brands in the core markets, select three markets beyond those leading to higher diversification. We will fuel this growth and improve margins through scale, net revenue management, securing a supply chain fit for purpose, and creating an effective operational structure.
That allows us to retain our long-term EBIT margin target of 14%, but we're committed to reaching at least 12% by 2027. We have really strong cash flow, our lowest net debt ever, our lowest leverage ever. As I took you through the capital allocation strategy, the conclusion should be we are investing for organic profitable growth, M&A as an accelerator for this strategy, and at the same time, we share that we have strengthened targets on leverage and on dividend. With that, I will hand back to Katarina.
Yes. Thank you, Frans. Great. It is time for a wrap-up. Thank you for spending this afternoon so far with us. In short, the wrap-up looks as following. First of all, we are a North European leading confectionery company, and we are creating joy.
We have done that for 160 years, and we are committed to spread joy for at least 160 more years. The second bullet that we also want to summarize this presentation so far with is really we operate in a non-cyclic market, and there is, as I said, a stable consumer demand, and we are outgrowing the fast-moving consumer goods in food, coming back to the 1% every year on the volume going up. What is also something we are really proud of, we have a broad and flexible portfolio, and this meaning that we can also adapt and meet the change in the evolving consumer demand. Our brands are really our heroes. We have been brands that have been on the market for more than hundreds of years.
We have international super brands, but on top of that, we also have local heroes, we can say, and the loyalty for our brands is something that we're really proud of and also something that is a strength for us as a company. Today, we have presented we see growth opportunity. We really see growth opportunity. We do that through our super brands. We do that through focus on Germany, U.K., and also see the North America. We also see that we will excel in marketing and innovation. We have also talked about M&A. We are open to strategic M&A, and that is very much to focus on speed up the strategic agenda to get the geographic presence and do the category expansion. We're saying also it should be a good business case. In the financials target, these are not included.
We open up for an M&A. At Frans, we're saying we really have an attractive cash flow where we have a clear upside on the margin and, of course, the shareholder value. Today, we have presented our strategies, our vision, and now our new financial targets. Frans has already went through them, so I will not go through them in detail, but it is with ambition and the strategies we have. Our new long-term financial targets are 3%-4% organic sales growth. Our 14% EBIT stays, but we are committed to reach minimum 12% by 2027. The net debt over EBITDA, we are strengthening the leverage and saying we will stay below 1.5, with, of course, the exception in case of a big M&A.
The dividend policy, we are now saying minimum 50% of profit before taxes instead of 40%-60%. This is a summary of what we have presented during the afternoon. I will invite the gentleman and Laura to the scene, and we open up for some questions and answers. Thank you to all of the presenters, and thank you to everybody here in the room and also online for staying with us this far. Now starts the most exciting thing, the Q&A. Thank you, Inderis, for the fastest table delivery in the history of table deliveries. First, we take the questions from the room. If you have a question, raise your hand and kindly state your name, and then ask your question. We also know that we have questions online, but we will first take the ones from the room.
We have a gentleman in the back.
Hi. You're open for M&A, but how many targets are there available in your markets that fit what you want from a size perspective and opening up new distribution? Being open to M&A is different than having a list of names that you follow closely and even have coffees with. Can you talk a little bit about how big the opportunity is from an M&A perspective? The second question, probably for Frans, is what are you going to do with the money on the CapEx side? Is it refitting factories, extending lines, putting new lines in, going for a bit more capacity? Where is the incremental CapEx going into in terms of the footprint?
Thanks. Okay. I will start with the first question. It is, of course, a relevant and very good question.
We have worked with the strategic work now since September and until now. We have a list of interesting prospects. We are also being approached quite often by different candidates, but this is also about now to ensuring now we set the strategy, and so now it's more that we will actively go into this mode set. It has been more a screening and seeing what it is. I would say there are some interesting objects, but something still we said the business sense is very important, of course. We need to take that as a next step.
On the CapEx, Averyn, what we found through the reassessment is that there are different paths to deliver both the capacity that we seek with the right margins and also on the sustainability side. They are around our own investment, contract manufacturers, and the portfolio harmonization.
We have chosen not to sort of give the details on that today beyond the guidance on the CapEx that I shared. Obviously, when you do look at manufacturing, you would think about things like what is for production, what is for packaging, what is for automation to be able to do the same thing for a lesser cost. There are a number of different things that we are looking at there. Fortunately, I cannot give you more detail than that now. It would sort of be starting to pull the thread on the sweater, and then eventually, I have nothing on me.
Very good. Thank you very much. Yes, Nordea, please go ahead.
Yes. Audience here from Nordea again. Maybe I missed this, but could you perhaps break down the growth components a bit more? Historically, it has been a lot of price, you say.
Going forward, you expect to basically double the organic growth. Is that more or less volume, or are we still talking about price here? Maybe can you connect that to historically, the market, you say, grew roughly 1%, and now you're doubling the expectations for the market as well to 2% KGOR. Is that also like is it price and volume, or how come the market will grow faster than it has historically?
Yeah. I mean, first of all, the volume, as you saw from Katarina's slide, it's been 1%, and it's expected to be 1%. That's not really a change in the volume growth. I think what that graph really tells you is that no matter what happens, this is a category that people go back to.
In terms of the retail sales growth on that, we're talking about 2% going forward. Obviously, if we assumed another huge hike on inflation, you would have to change that number. We will just price for that, and then it becomes nonsensical. I think it's more the point of saying that volume for the market is 1%, retail value is 2%. We're saying that we will grow 3%-4%, so above that. Part of that will come from volume. Part of it will come from net revenue management, of course. Just also be super clear. The historical KGOR is 5.1%. There's a lot of pricing in that. It's not that we are increasing the speed going forward versus historical, but it will not come from hyperinflationary pricing.
Okay.
Another question, maybe regarding Germany that you said you wanted to test pilot. Was it the Pick & Mix segment? Do you have any recent historical examples of that happening, you entering a new market with Pick & Mix? How does it look? What's the cost? How long does it take to get a foothold, so to say?
No. The short answer is not really, because basically, we have been very occupied since 2019 with making the current upgrade of the Pick & Mix model to the state that we are now, both in profitability as well as in interaction with consumers and retailers. What we do have is a very clear way we want to do this by making sure we get the engagements from consumers before we sort of start rolling into retail. That's the answer, basically.
Have you had any pilot testing yet?
Yes. We've done some pilots in a few markets, but it's I wouldn't, that's very, very early days. Ask me again in a couple of months. If I can just build on that answer, because I think it's obvious for us. But if you question, if I would change the question to, do you have experience of going into a retailer who hasn't had a Pick & Mix concept before and establishing it there, then the answer will be many, many, many times, because that's when we take new contracts. We're going in a whole new setup. This is just the fact that we're doing it in a new geography.
Right. Okay. Thank you very much.
Thank you. We continue with Nicklas.
Yes. Thank you, Nicklas Skogman.
Nordea, you have this 12% margin target in 2027, but how should we think about the progression until 12% in 2027, i.e., this year and next in terms of the margin?
Yeah. Frans?
Yep. Okay. Yeah. It is at least 12% by 2027. We are sort of like early 2025 now, so it feels like it is fairly soon. Obviously, there will be a progression towards it. We are not providing, as you know, a guidance for the year. We have not done that before. We are starting off from 10.6. If I were going to give you a 2025 or 2026 number, I would have put it on the slide already. The 2027 is all I have to offer today.
Sure.
But I was thinking if we should sort of expect some upfront investments or anything like that, so the impact would be, say, would be sort of backend loaded rather than average.
No, no, no. Okay. No, fair enough. No, no. This will, no. It's not the hockey stick. This will be a gradual progression towards there. If anything, I'd like to think that we will be quicker in the beginning, but I'll leave that unsaid.
Very good. Thank you very much. Any further questions from the room? Yes. Please go ahead.
In the non-core brands, obviously, you sold the nuts business, right?
Are there any brands that could be up for sale that you think they could actually have some intrinsic value for another buyer and they are not core to us and we focus on the core brands and there could actually be some proceeds from that? Is there anything to be sold in that area?
Yeah. Thank you. I would say, of course, we sold Nutisal, and I say that was like the largest of the brands that was not really fitting the portfolio from that perspective. Of course, we're reviewing all the time and see what is happening in the portfolio. Those local brands are also very strong, and we have some high loyalty, and the consumers are loving them.
From that perspective, we need them as well, and we will continue also to support them, but not in such a scalable way as we will do with the super brands. I would say there are no large, then it's very, very small, and it doesn't make like it hardly impacts the P&L, so to say, or the balance sheet.
Thank you. Any questions from the room, or shall we go online? Very good. We'll move online. The first question comes from one of our U.S. shareholders. Good morning. Let's see here. Frans, I think this one is for you. Is the new growth ambition meant to be purely organic, or is selective M&A included in the 3%-4% annual growth ambition?
Yeah.
As Katarina actually also mentioned, no, no, that will be an accelerator to go above the 3%-4% growth target. That is not built into the financials.
Excellent. We continue. What's your take on the rise of Ozempic? Do you think it will impact Cloetta in the near future?
Yeah. I can take that answer. It's, of course, an interesting question, and there has been some concern about this. First of all, we are selling joy. Regardless if you own Ozempic or not, you want to have joy. We also have an assortment that is 20% sugar-free. We talked about the small boxes from Läkerol. That is really interesting from that perspective as well. Thomas and I, we also had some conversation with some experts in the U.S.
because they are far ahead in this, and we wanted to understand what is happening on your market. Do you see any shifts in this? Yes, of course, they raise it, but they could not say that they saw really big movements right now in this area. Of course, this is something we track. We are listening. We have been observant. Now also, when we are initiating the program of next, this will be something that the Cloetta Next will have under its radar. If we see some changes, we will, of course, be agile and see if we can find some alternatives going forward. We have a great portfolio, and I think regardless of which weight loss program or drugs you are going on, you still want to indulge, and you still want to experience joy.
Thank you very much, Katarina.
Then we have somebody who clearly wants to test our IR policy. Without going into details, can you elaborate on M&A? Do you have anything on the radar right now?
It was the same question, I think, that we answered right now.
Yes. Correct. Sorry. Good. I think that's everything from the online, unless we have somebody who wants to post new questions. Any further questions from the room? Yes. Nicklas, go ahead.
One quick last one. You have the one and a half times net at EBITDA target now, and you said you're willing to go beyond that in case of M&A. How far beyond that are you prepared to go temporarily? How high?
Frans, do you have any?
I mean, number one, I did, even though it was indicative on the slide, it talked about the last five years and the next five years in terms of capital allocation, and you had M&A up there, right? We do not really see that M&A would be a hugely disruptive thing. We are talking about that as an accelerator. If you look at that box compared to the organic investment that we are seeing, probably the sweet spot for us is maybe a company that is roughly around 10% of our sales. It is not going to, it would not really drive our leverage maybe above, it would not go above three, and then it would quickly come down again.
Thank you.
Thank you. We have new questions in the chat, also from our U.S. shareholders.
Given that your leverage target is already met, and in the absence of M&A, could the dividend be as high as 80%-100% of PAT?
Yeah. It could. Yeah. Frans, what do you say?
I think it's the board recommends. The board will recommend, and the shareholders will decide.
Yes. Of course, this is very much the board's decision.
Good. Thank you very much. It looks like we do not have any other new questions online. Any last questions from the room? Anyone? Very good. Maybe Katarina, a few words to thank everyone.
Yes. Thank you so much for spending this afternoon with us. Super appreciated. And to you guys online, I hope to see you next time live. Please, again, thank you so much. There will be an opportunity right afterwards. Yes. Yeah. Okay. Thank you very much for this afternoon.
Thank you.
Thank you.