Thank you. So there you see happy consumers, exciting new innovative products and investments in automation and modernization. That's exactly what we are going to talk about today. Welcome also to Pordenone and our deep dive into professional products. Today, we will show you how Electrolux is well positioned to create value.
It's great to see so many here in Pordenone and also a warm welcome to those of you following us via the webcast. My name is Sofia Arnaos. I'm Head of Investor Relations and today will also be your moderator. Looking at the agenda, you can see there are 2 key themes for this year's CMD. Firstly, how we are accelerating profitable growth in our consumer business.
Secondly, how our industry unique position of professional products will capture further growth. Throughout today's sessions, there will be opportunities to ask questions both from our audience here as well as via the webcast. So let's get started with a deeper look on how we are innovating to further improve consumer experiences. It's a great pleasure to present our CEO, Jonas Samuelson.
Thank you, Sophie. Good morning. Good morning, everybody. Great to see you all here. Looking forward to a really exciting day and lots of challenging questions, I'm sure, from the audience as well as our webcast audience.
As Sophie mentioned, we will focus on 3 main reasons why we are well positioned to capture profitable growth in our consumer business. So first of all, and very importantly, and that's where I will focus my remarks on, is our focus on consumer experience innovation through focused brands to drive profitable mix. Today's, we'll focus more on our focus on modernization, automation, digital transformation in our operations. And of course, the foundation of an extremely strong balance sheet and financial position cash flow generation brings together our promise to deliver on 6% EBIT over the cycle, 4% net sales growth and a return on net assets over 20%, also for our consumer business ex professional. So we're going to tell you here and show you why we're confident in, in fact, raising the objective for our consumer business.
Before touching into that, I wanted to give you a brief update on our separation process for professional products. The three main reasons that we highlighted for why it would make sense to create a separately traded business for Professional remain intact. It will allow them sharper focus on their on the professional business as well as the consumer business has sharper focus on really driving profitable growth in the consumer business. So the 2 will be stronger separately. It will create greater agility and more avenues, more tools to grow the business.
And specifically for Professional, their ability to have a separate balance sheet and capital market access will give them the opportunity to further accelerate inorganic growth in an industry that's consolidating rapidly. We think it's really important to give them that opportunity to participate and lead that industry consolidation. So those are the main reasons. Now we're still in the early phase of that review, that analysis. The Board announced on January 31st the initiation of the study.
We expect to get an output from the Board in the middle of the year or in the summer about whether this still makes sense and whether we're going to propose separation to our shareholders. Following then eventual approval by the shareholders, we expect separation in the first half of twenty twenty. And we are early in this process. And I think it's important to say that today we will not reveal new financial targets or objectives for the Professional business. That will come later on in the process.
But we will give you a very deep dive into how this business works, why we're different, why we're well positioned to accelerate value creation. Coming back to the overall group. In 2018, we said we're taking the first step into targeted growth. About half of our business is in that stage of development where we can invest in growing the business faster, and we did that in 2018. Overall sales grew 1.7%, but we have to remember that we had a big negative drag from private label sales in North America in the year.
So actually our branded sales globally grew substantially faster than that 1.7% and we gained market share. We were able to offset significant and unprecedented headwinds through price increases and mix and we continue to invest in the business. So this has helped us deliver increasing earnings resilience. The headwinds that we faced in 2018, over SEK3 1,000,000,000 are the largest that we've seen in our history, at least our recorded history. And we were able to offset over SEK2 billion of that headwind through pricing, through innovative products driving mix and through continued very strong cost productivity.
I mentioned that we're taking the first steps into targeted growth, but and approximately half again of our business, including the Professional of course, is in that stage where we're delivering over our 6% EBIT margin target and we started to invest in growing that business and we delivered solid growth in those two business areas in 2018. We have 2 business areas that are still in the earlier stage of that journey, right? In North America, massive market transformation and big investments in our manufacturing. I want to give you an update on how we're making progress in bringing North America from that stability and focus mode into sustainable profitability and eventually into profitable growth mode following a similar journey that we took our European business on. Latin America fundamentally has a more stable operational situation, but facing massive macro headwinds.
And we want to talk to you about how we're facing those macro headwinds in 2018 and beyond. So my first the first part of my remarks will focus really on North America and Latin America and the progress we're making. So North America really took the brunt of the headwinds that we faced last year, both in terms of raw material cost headwinds, tariffs, issues like transport cost inflation, really putting a lot of pressure on our cost base. And on top of that, of course, as you know, we had a sharp drop in our very large private label customer. So you can see the big headwinds we saw from private label volumes, raw material and tariff inflation.
We were able to offset a good part of that through pricing and mix and new product introductions, but we're sort of a little bit there's always a little bit of a time lag to offset that. And we've implemented further price increases late last year early this year to offset all of those cost headwinds. But it is a market in transition and we are a business in transition in North America. And I want to give you a little bit more of a view on that. So last 2 years, a big part of our focus has been to optimize our product offering and our distribution in the face of that changing demand situation and distribution situation.
So we've sharpened the Frigidaire brand promise, we've upgraded our products, and we've massively reduced the complexity of our offering by 50%. And at the same time, we've built the capability to reach 95% of U. S. Households with direct deliveries. So huge effort to really sharpen focus and improve our offering and the ability to reach more consumers, right?
The phase we're in right now is of consolidation of our manufacturing footprint going from 7 factories to 5, investing heavily in modularization of our product architectures and automation. So huge investments bringing up our automation level. I think here importantly, and we've said this before, this is not these are not things that we're inventing anew. These are the type of investments that we've already made in other parts of the company. We know exactly what we're doing and we're implementing that same blueprint on our big North American factories.
So we see great progress in that work. And now we're approaching that time where we take off, right? So starting from mid-twenty 19, we start to launch our new modularized refrigeration products. And then step by step, following that with Cooking starting the Q1 of 2021, we will refresh 2 thirds of our product offering in North America. And this is not a I said the wrong word, refresh.
It's a fundamental new architecture and carrier of innovation that we will bring to market. And I'll talk a little bit more about that and with significant material cost savings from modernization. So we're making fantastic progress on that journey. It's not the short journey. It takes time, but we're really convinced about the progress.
So we're going to, as you know, consolidate our refrigeration manufacturing from 2 factories to 1 in the U. S, massive increase in automation, significant reduction in direct labor and complexity. Same with Cooking, consolidating in Springfield, similar level of investment, massive increase in automation and massive complexity and cost reduction. And we're making fantastic progress on these initiatives. Of course, it's important that these products when they come out, they hit the market with strong demand.
And I'm extremely pleased to show you the progress that we've made in terms of sharpening the appeal and the attractiveness of the Frigidaire brand. And the new refreshed products that we launched in 2018, for example, the Frigidaire wall oven and French door refrigerators that are really premium products in the U. S. Market were massively outgrowing the market in these very attractive segments. So the Frigidaire brand with the right product and the right brand positioning is really appealing in North America.
You can see that our branded share is basically stable over the last several years, despite the fact that we have not had these new product architectures in the market. Now as I said, starting in the second half of twenty nineteen, we will launch a whole new range of refrigeration products and Frigidaire is the number one appeal brand in terms of refrigeration in North America. This will be fantastic products launching into a market that's receptive to the Frigidaire brand. And then following that, we will launch our new product, now new cooking architectures that will bring all both freestanding and built in cooking products to 1 architecture, a carrier of innovation, the type of innovation that we brought to market in Europe over the last several years and we'll show you a little bit what impact that can have. Turning to North America, it's a volatile macro environment.
However, we have super strong positions, particularly in Argentina, Brazil and Chile, which makes up the vast majority as you can see of our sales and we have leading positions in these markets. So for us, it's about making sure that we have very clear brand and portfolio set up like we've done in the other sectors, really sharpening our brand offering, sharpening our portfolio and making sure we're delivering those with a competitive cost base through automation modernization. Outside of Argentina, Brazil and Chile, it's more niche positions, but we are positioning ourselves to be profitable niche players outside of ABC as we call them. Also here, we're making great progress in the automation, modernization investments that we're making. These products these investments are very similar to what we're doing in North America.
New refrigeration architecture, modernized automation, bringing all of our cooking architectures built in and freestanding to 1 modularized platform. And the big opportunity here that we have in Brazil is that we have a massively growing built in segment, but we haven't had high efficiency local manufacturing of those products. And this will be a huge boost for us as we go forward. So it's both cost automation, modularization, but also new innovative products that we're bringing to market. So that's the update on the business area progress.
And I think you can see that we're following the same sort of step by step journey as we've done in Europe and in Asia Pacific, also in North America and Latin America. And we're really confident that we'll bring all our business area up over that 6% target. So we're really confident in that journey. Apologies. So the rest of our remarks here will focus on the 3 main drivers that we see for accelerated profitable growth and delivering that over 6 percent EBIT margin.
So why is consumer experience innovation so important? I think many of you think it sounds a little bit fluffy. It's kind of marketing speak. It is, but it's not. What's happening in our industry is that the world is changing at an accelerating pace.
Consumers are more well informed now than they've ever been before in history. They're in charge. The consumers are voting. They're buying products that fulfill their needs and their experiences. And they're able to figure out which products do and which products don't.
Historically, that's been a very tough challenge for consumers. But now through digital, through mobile, they know exactly what other people think about their products and if they're delivering on their needs and their aspirations. So for us, for anybody to be a winner in this industry, you have to provide experiences that consumers desire and are willing to pay for, And that's our focus. So we're making significant organizational changes to really accelerate on that journey. We talked about that in our Q4 release.
So we're creating 4 regional consumer facing business areas, combining our small appliances and our major appliances business to make sure we have 1 branded platform, 1 consumer interface, especially in view of the changing buying behaviors and more and more online and digital interactions, we need to have one face and one focus to make sure we leverage that and deliver on that. We're also creating 2 very focused business areas focused on driving emerging markets growth. So APAC and EMEA combined and Latin America joining forces to go after the emerging urban premium consumer. And we'll talk more about that. At the group level, we're creating this consumer experience organization.
If we're going to drive consumer experience innovation, we need to really make sure that our product line work, our digital work, our marketing, our design work is all aligned to drive experience innovation and the related storytelling to make that come alive. And that's what this new organization is geared up to do. And of course, with a huge focus on digital transformation and digital interaction with consumers. So that's, of course, the backdrop for some very significant organizational changes that we're currently implementing. That's going very well.
What is then we're trying to do? So it's these five areas that we're focusing on. So first of all, I will really talk now in detail about what I mean with consumer experience innovation, because I think you're a very practical crowd. You need to see us show what it means, and we will do that. As I mentioned, we're sharpening our brand and our portfolio focus.
We talk about star products, meaning products under our most attractive brands at high volume price points where we can really make money and all the focus is put on those products. Aftermarket sales is a huge opportunity. We'll dig into that. And again, this opportunity to accelerate our emerging markets growth by focusing on the urban mass premium consumers. We'll talk more about that as well.
And then finally, the importance of the fact that we are by far the sustainability leader in our industry and how we're going to leverage that to further accelerate growth. All right, those are our 5 themes here. So experience innovation, we're focusing on 3 areas. We've talked about this for a while. In Europe, we've been driving it this way since 2013 and we're really getting results.
So taste is by far our biggest innovation area, great tasting food, so our kitchen product. And this is all about developing responsive and sustainable kitchen systems that helps consumer get better results in their cooking with less effort, less risk of failure, less do overs, more freedom to create new things on that Saturday evening when you want to surprise your family. That's what we want to innovate on there. In care, it's about, yes, the washing machine is of course about cleaning clothes, but you have to do it in a way that doesn't deteriorate them. And we have massive innovation to help consumers really care for their clothes.
And then well-being, we know that the majority of the world's population live in cities that are polluted and one of their biggest worries is about the quality of the air that they breathe and the indoor air quality. We have a systemic solution to their problems. So these are about core experiences that people feel extremely strongly about. And if we can deliver differentiated relevant innovation, they buy and that's what we're going to show. So the first case here is about great tasting food.
And we know and you will see actually later on today that steam is a huge factor in improving the taste and texture and healthiness of most kinds of food. People think about steam when they think about steam and vegetables or steam and fish, that's only one small part of what you can do with steam. The problem is that people don't know it and they haven't been offered products at price points that they would consider when it comes to buying a steam oven. That was the great insight that we had. Let's get the fantastic benefits of steam to more products with a stronger story.
And that's what we did. And since 2015, our market share in steam ovens has increased by 6 points. We were already leaders. Our volumes have gone from 140,000 units in Europe to 530,000 and we've massively increased our gross profit in this journey. So this is very specific relevant things.
If consumers say, wow, I can bake bread with crustier crust, I can make chicken that's juicier and succulent. That's a product that I want. And if we can tell that story, people will buy it and we will make more money. With taste, with care, it's a similar story, right? People trust their machines to clean their clothes.
They don't trust their machine to care for their clothes. And hence they don't put many of their favorite objects in their washing machine. People are even afraid of wearing their favorite clothes because they think they're going to get come out of the machine being worn, losing color, losing shape. So we found a number of key innovations that helps reduce the wear and tear of the washing machine. In this case, this is one of the innovations, but this is about pre mixing the laundry detergent with water before injecting it into the drum, which means you get a better distribution, shorter cleaning time, which means less agitation, lower temperature, which means less color fading, huge improvement.
And we've been able to roll this out globally over the last several years through these modularized product architectures where we can plug and play with new innovation modules. So you can see the results. We've doubled our EBIT in Europe. We've increased very profitable business already by 65% in Southeast Asia and we've quadrupled our profit contribution in North America through this pre mixing technology. We've called them different things because we have different consumers in different markets, but it's the same experience benefit.
And of course, when you deliver on those innovations, you have to do it with strong brands. We know that consumers basically look at the top 3 brands that they consider. They have a they know a lot of brands, but they only really have enough time to do research on 3 brands. So it's so important to be in that top 3 group. And we know that stronger brands have substantially higher sales growth than weaker brands.
And what we've done is we've taken our 3 top brands, which accounts for over 80% of our gross profit already, and we're investing the vast majority of our resources behind those and making sure that we have a really clear position in terms of the consumer target audience and the price points that we're going to play in. So Frigidaire, more conservative, mass consumer, It's about getting the results done quickly, no do overs, save me time, family, community. AEG, premium modern consumer, German engineering, quality precision control results. Electrolux, more progressive, inclusive, sustainability, Swedish values, great results, but for my family, right. So very clear propositions.
And when we get that right, it has a huge impact. You combine the innovation, in this case, care for AG with a super strong brand platform for AG, really focusing on that. You can watch this dress 50 times and it's still going to look like new. It's a little black dress guardian. Very strong messaging, bold and very focused on the targeted AEG consumer at the right price points.
And you can see the stats here. There are significant improvements in an already profitable brand. So this really works. And we've done that sharpening for Frigidaire, for AG already in the last few years. And for Electrolux, it's a little bit trickier because it's a global brand.
So we've worked on creating a new and much more progressive, much more appealing, much more emotional brand platform for Electrolux. It's about delivering the progressive home life brand that makes desirable experiences more sustainable from Sweden. We're really delivering on our promises through our provenance. Swedish values, sustainability and of course, leveraging our professional expertise in terms of quality, in terms of really knowing the technologies that deliver on great experiences. So this is a fantastic platform.
We're rolling that out globally right now. We just last week launched a new premium Electrolux kitchen built in kitchen range with lots of innovation, great reviews. Same in Australia, just recently rolling out the same products in Southeast Asia as well. So global launch of really strong innovative Electrolux Kitchen products, leveraging the new brand positioning. Similarly, in Latin America, we're coming with the new products from the reengineering, of course, leveraging the same brand platform.
And step by step, we're rebuilding and reintroducing the Electrolux brand also in North America. We already have a really strong laundry position for Electrolux and step by step we will reintroduce a premium kitchen range also in North America. So I'm super excited about continuing to leverage that fantastic journey that we have in Europe also in terms of global implementation of a strong innovation roadmap, very clear brand positioning. So that's coming. Of course, we do see a gradual transformation in terms of IoT.
The approach that we've taken is that to make sure that we have a scalable IoT platform in place all over the world. And the products that we're developing and launching now are all IoT ready. So we have the readiness in terms of technical capability, but for us it's mainly about can we enhance people's experiences through connectivity. And the only way you can do that is by truly understanding their frustrations, their needs, their aspirations. And we're really focusing on these 3 consumer value propositions.
Enhance the results of my product, give me peace of mind, I don't want to worry about my meal or my product breaking down, And if I have a problem, help me fix it quickly. So that's the these are the points that allow us a more sort of value creating relationship through connectivity. And we have products on the market already and we're ready to scale that up as the cost of connectivity goes down and the acceptance levels increase. So we're well positioned. The other thing that we've taken as a strategic decision already from the start is that we're going to deliver on this through partnerships.
So we're partnering with interesting new startups like Innis, Stropp, SideChef to help us develop that kitchen ecosystem. Our IoT platform is open. It's open based on the Open Connectivity Foundation. We were a founding member of that to really make sure that consumers are not going to be frustrated by lack of interoperability between different brands that they may have in their home. And we truly don't believe that people will accept single branded solutions.
And then of course, we were very early on with voice. So we've had an Amazon controlled air conditioner in the market for 2 years already in North America. We're launching the 1st Google voice controlled oven as part of the Electrolux launch that we're doing right now. So this is still a small business, but it will grow rapidly and we're extremely well positioned just because we understand real consumer needs and we're developing the solutions to address those. This will be a big opportunity for us going forward in terms of aftermarket sales.
And that's the 3rd bucket that we wanted to talk about. The aftermarket potential is enormous and we're only scratching the surface right now. The total aftermarket business in Europe right now is about €11,000,000,000 That's for all brands. It's okay. Our fair share of that should be 15%, 16%.
But today, most of our business is done in that in warranty period. When the products go out of warranty, our market in house market share goes down dramatically. And that's what we're working on addressing right now. Through offering extended warranties, through offering a sharper and better consumables and accessories offering, through offering fixed price repairs that give people peace of mind in terms of what their services are going to cost. And our objective is to double our penetration and aftermarket business from currently 5% globally to 10% by 2025.
And we're doing that, as I mentioned, by really strengthening our service product offering. So just one simple fact is that if we sell an extended warranty to a consumer, we immediately increase our aftermarket revenue per product by 2 to 3 times. So extended warranties give great peace of mind and a great sort of opportunity to continuously connect with our consumers and offer them relevant solutions. Fixed price repair, I mentioned, right? So today, most people go to independent service provider.
They have no idea what the repair is going to cost. It gives a lot of frustration and heartburn. We can offer fixed price repairs. And we're developing an in house digitally supported sales force to accelerate this initiative. And of course, this will be all digital.
We have 100 of millions of products in the market. The only way we can scale up this business is digitally. And today about 15%, 20% of consumers make some sort of contact with us when they have a repair need. We need to be much better at capturing that need on our websites and with our call centers. But we also need more to make sure that more consumers visit us automatically when they have a service need.
And we're doing that by things like search word marketing and so on, right, to make sure we funnel people into our websites and that we have the CRM systems and digital tools available to serve them. And this is a rollout that we're in the middle of right now, We're making good progress. It's a big initiative. We have tens of thousands of service technicians that we need to hook up digitally. So it's a big initiative.
It doesn't happen from one day to the next, but the opportunity is magnificent in terms of accelerating aftermarket sales growth. And the benefit that we have is, of course, that we have a huge installed base, over 400,000,000 major appliances installed in people's home around the world. And we're already delivering a great quality experience to them. You can see our service call rate has gone down and last year was now only 3.3%. This is industry best levels in terms of quality.
So we're earning people's trust. We have an installed base and we're developing the tools to reach consumers with a great and predictable and satisfying offer. So our 4th initiative is to accelerate emerging markets growth. And I think the piece that we have historically not done as well is that we haven't been as targeted in identifying our target consumer in emerging markets as we've been in, for example, Europe and also in North America. We've looked at the markets as a whole, but the reality is and I think you will all agree with me on that is that if somebody leaves in Bogota or Nairobi or Delhi or Bangkok or Shanghai, these consumers have the same need more or less, right?
Large cities, congested air, small apartments, we really have an opportunity to develop a targeted offer for all of those premium emerging market consumers. So that's what we're doing. We're leveraging our scale. We're setting up the organization to do that. And then we've segmented the markets based on our position in them and our ability to grow, right?
So we have seed markets like China and India where we're really small, but we're going in, for example, with the AEG joint venture that we launched a little while ago to position AEG as a super premium brand in anticipation of that growth that we see taking off in terms of premium consumers in China. So that's more of a seed market. In markets like Middle East, Africa, Latin America, outside of Brazil, we have a brand position. In some cases, we have national sales companies and others we have independent importer, but it's more of a nurture, make sure they get the right products at the right cost with very targeted marketing, not huge investments, but the right level of investment to start nurturing the brand journey. But then we have the markets where we really have a strong position already, like Argentina, Brazil and Chile, massive investments to take advantage of that huge market opportunity.
And then finally, we have the markets where we're already on a roll, right? Eastern Europe, Southeast Asia, invest more to accelerate further, more categories, more reach, more coverage. So we have a clear segmentation of the markets. We have a clear proposition. And now we have the organizational setup to leverage and drive that.
I wanted to give you a couple of examples of what we're doing right now to accelerate our emerging markets growth. So again, this urban mass premium consumer, they have relatively common needs, common space requirements, electricity and the environment that they're living in. So we've taken the opportunity to leverage our Rayong, Thailand manufacturing compound to make sure to deliver targeted product architectures for those consumers, whether it's refrigeration, laundry, air conditioning or water care. And of course, the merge that we did of Asia Pacific and Middle East Africa helps us further leverage that scale in our operation. Already talked about the big investments we're making in Argentina, Brazil and Chile to make sure we have the most competitive, the most innovative offering to take advantage of the growth opportunities there.
And of course, we're making sure that we're really on the journey in Africa. We were early with our acquisition in Egypt. We acquired Quickot in South Africa. And last year, we also established a sales company in Morocco. So we're addressing the African continent from the three corners, if you will, and expanding further from there.
We really want to make sure that we are on that journey as that moves from being sort of an early emerging to a really accelerating market in terms of appliances. Southeast Asia, I mentioned, we have a really strong position. We're growing double digits. We're profitable. We're accelerating that further.
And then as mentioned, we have launched the AEG joint venture in China. So we're taking very significant and systematic strategic actions to accelerate our emerging markets growth. And now in the new setup that we have, we can accelerate that further. And it's really a huge opportunity. I think people have a tendency to look a little bit too much at China and China is by far the biggest emerging market, but that's not going to be where we really bring home the bacon, so to speak.
Our big opportunity is in Southeast Asia, Middle East, Africa, Latin America and of course, Eastern Europe. And combined, there's an even bigger opportunity that we see a high return on investment on in terms of our opportunity. And again, I mentioned it, they have similar needs, growing income, more ability to focus on their homes, really desire progressive Western brands like Electrolux. It's all about covering the big cities. The countryside is not for us.
It's the big cities where we can have the density, the service network reach to really deliver great experiences. And these people are online all the time, mobile, more than we are. So it's not about how do you reach them, they're there. And of course, we can leverage our global scale to go after those opportunities. So I'm really excited about driving that.
And then finally, sustainability. I think it's clear clearer and clearer to all of us the importance in terms of being a leader in sustainability and the risk of being laggard. The fortunate thing is that we've been a leader in sustainability for the last 12 years. We've been the leader in consumer durables in the Dow Jones Sustainability Index for 12 years in a row. We are one of the 100 most sustainable companies in the world.
We're on the CDP climate change A list since the last 3 years. We have the credibility and the capability to drive sustainable development. And it's paying off already now in terms of profitability. Our most sustainable products make up 21% of our net sales and 29% profitability. So sustainability is profitable and it's driving down cost.
So it's about reducing the cost of resources ultimately. And we're now really taking ready to take the next step in terms of being more visibly towards consumer sustainability leader. With the relaunch that we're doing of and sharpening of the Electrolux brand, the sustainability mindset will be a core part of that brand promise. And we have fantastic products and innovations to support that. Okay.
So we are extremely well positioned to accelerate profitable growth in our consumer business. Again, strong focus and results from consumer experience innovation, strong focus and results from our Sharpen brand profile focusing on 3 main brands, really focusing on the most important product categories and products. We're accelerating our aftermarket growth through engaging ownership and quality experience. And this is not a slow burn, but when you have it and we're seeing growth everywhere in our aftermarket sales, it's very profitable and it's steady. It's not subject to the business cycle.
It's really steady revenue streams and increasing the share of aftermarket sales is really going to increase the quality of our profitability. Emerging markets, again, mainly outside of China, but huge opportunities in having a globally aligned targeted offer towards that premium urban emerging market consumer. And of course, there are hidden strength and power from being a sustainability leader that we will accelerate further. Thank you very much and look forward to be back soon to answer your questions. Thank you.
Thank you, Jonas. So let's dig a little bit deeper in how we are improving our business and increasing the margins through automation and modernization. And here, I would like to introduce our new CFO, Therese Reberg. Therese has been with Electrolux for 20 years, working right across the organization in finance. Welcome, Therese.
Thank you, Sophie, and great to be here. So we are talking about profitable growth here today. And I will help you understand during this session how we will be able to deliver on our high ambitions when it comes to operational excellence, but also how we can leverage our very strong balance sheet and financial position to execute in the future. I know that you have all been longing for this moment to understand better about our reengineering initiatives and what that can mean in terms of cost efficiencies, but also what it can mean in terms of mix improvements, as we were talking about a little bit earlier today. And that's what we will do right now.
But what does reengineering really then comprise for us? Well, the base is a modularized product architecture. And with that base, it is a great acceleration for standardization and simplification that can then also drive large cost efficiencies, mainly, of course, through direct material savings. But maybe even more importantly, it's also a great base for an improved product design as well as an accelerator for fast innovation and quicker speed to our consumers. It is also a great base for design for manufacturing that is then driving a higher automation level, which is the second part of what we're talking about with the reengineering initiatives.
And there, of course, we are seeing even higher or additional, I would say, cost savings when it comes to labor productivity, but it's also a great tool to improve the quality levels as well as the safety aspects. And what are we then investing in these programs? I think you have all seen this slide. And we can reconfirm the SEK 8,000,000,000 of investments in our reengineering initiatives over the time period of 4 to 5 years, starting from 2018. And the largest programs that we have already talked about a little bit earlier is, of course, in North America and also in Latin America.
But also in Europe, we are building new architectures when it comes specifically to our coal products that has been initiated right now in anticipation as well of a new energy legislation that is coming into place in Europe. And now we will actually take a deeper look at our Anderson facility for you to see what it looks like in reality. So this is a movie. It's about 1 week old from our facility that is starting up production quite soon. I was there one month ago.
And as you can see, this is a top modern facility that is already now in preproduction. It will go up to full production around midyear, and then we will launch, as Jonas mentioned, a totally new refrigeration range to the Visi Frigidaire family during the second half of this year. And with that investment, as you heard, we are increasing the automation level significantly that you could also see from the footage, so from around 10% to a level of 35%. That is, of course, bringing a lot of savings. And I guess right now, you're wondering how much savings are we then talking about when it comes to these reengineering initiatives.
And this is an important slide for today. And what you can see in this slide then is that we can confirm around SEK 800,000,000 of savings coming in 2020 and then ramping up to a steady state saving of around SEK 3,000,000,000 in 2024, as you can see in the graph over here. And the vast majority of this is then coming from North America, as you can understand. But also, I would say, in relation to its size, also substantial savings from Latin America. Important to notice in this chart as well is still that our continuous improvement efforts will continue to be a substantial part of our cost savings going forward.
So it's not only about the reengineering initiatives. And then to move over to the second part of the benefits of reengineering, which is really around being able to drive mix improvements. So to do that, I would like to share with you a case from Europe. So I would say it's a similar case, as you saw from Jonas earlier, but with the angle of the AG brand. So this is the laundry business in Europe that has been going through a similar transformation as we are doing right now in North America.
So coming back to that, we have done this before. We know how to do this. It was based on a complexity reduction. And then the complexity reduction was enabling a manufacturing consolidation. And from that complexity reduction, of course, you get a lot of savings when it comes to standardization as well as creating efficiencies and automation.
But the other part is then the base of the modularized platform. And I think that is what is interesting with this case that you see that the benefits coming from mix improvements is actually larger than the benefits coming both from the fixed cost reduction but also from the variable cost reduction. And this is then about being able to apply the perfect design, being able to apply updated designs when you have a modularized base. And as well as if you find new consumer relevant innovation, you can quicker apply it to the product to become relevant for the consumers all the time. So I think this is important for you to understand when we talk about reengineering.
Then moving over to a second part that is, of course, of very large importance to us as well when we talk about cost efficiencies, but also when we talk about making our consumers happier. So with a digitally integrated supply chain and manufacturing and increased visibility, this brings a large benefit for us, for sure, from a planning perspective, which means that we can then optimize our supply, we can optimize our manufacturing process, And we can then also keep track of where our products are at the moment and thereby also manage inventory levels. The ultimate thing with this is, of course, that we can also make sure that we have our star products at a very, very high availability to our end consumers. With that, I would like to close-up this session in trying to, yes, sort out the different types of cost metrics that we are talking about and trying to explain how what we've been talking about here with the reengineering initiatives and also continuous improvement initiatives are then linking to our measurement in net cost efficiency. And of course, both of these, the reengineering initiatives and the continuous improvements, are key for us to drive our mix adjusted variable cost measurement, where we have a target, as you know, of a 3% year over year cost reduction.
And that then comprises of direct material, direct labor, but also warranty and logistics cost. What is important to note this in this one is that it is excluding raw material that we are treating separately. It is also excluding the high inflation levels, so inflation levels about 2% that we have had over the last couple of years in direct labor in places like Eastern Europe, for instance. But also as Jonas said, we have, in certain cases, had very high rising costs when it comes to logistics. So that is also outside of our mix adjusted variable cost.
And then the last part, that is then our structural cost, which is structural cost both in our operations, but also in terms of marketing and innovation investments. And these are both areas that we are investing in. But these are also cost areas that we can actually manage quite well. Dependent on how the business is developing, we can maneuver a little bit how much we would like to invest in these areas. So I hope that this journey is now more clear to you.
Because now we will move over to our last strength when it comes to driving profitable growth, which is a super strong balance sheet and financial position and a very healthy cash flow generation and return over a number of years. And then taking a look at how we actually delivered versus our targets during 2018. And as Jonas mentioned before, 2018 was a very tough year in terms of headwinds. But despite this, we're actually able then to deliver on our runa target. And excluding the nonrecurring items that we had in 2018, we were actually closer to 30% on our Runa delivery.
Also on the EBIT margin then, we were quite close to our long term target under the circumstances. Sales growth, as we mentioned a little bit earlier, was the area where we fell short, mainly related to the large drop in the private label volume business in North America. When it comes to CO2 reduction, we are progressing well to the target. And with the initiatives that we talked about earlier with the reengineerings in North America and in Latin America, we feel confident that we will close this gap and deliver on the 50% reduction by 2020. And when it comes to the last measurement on employee engagement index, we are not yet at the world class 80 level, but we improved by 3 steps to an index of 72 during 2018.
So all in all, we are very happy with our development in 2018. And then coming back to this chart to show that we really have a much higher resilience in our business now than what we used to have some years ago. And as Jonas mentioned, we had record high headwinds in 2018. It actually then wiped out 40% of our profit from 2017. And we were able to offset the majority of this, I would say.
And some years back, I'm quite confident that we would not have been able to do so. So we are a much stronger company today than some years ago. And then moving over quickly to 2019. I think that you have all seen our business outlook that we communicated in together with our Q4 release. Even though we see some slowing pace in the headwinds, we can still confirm this business outlook for the full year of 2019 to be within the range.
And we also would like to reiterate then that we believe we will be able to offset the headwinds with price increases for the full year of 2019. And then looking further ahead. So again, we can confirm our targets for over a business cycle. And this is then relevant, as Jonas mentioned, for the consumer business as a stand alone. So underlying, it means a sharpening of the targets for our consumer business.
And then to, yes, show you some very nice charts to convince you that we have a very, very strong financial position. We have generated high cash flow and high returns over a number of years. We are, at this point, essentially debt free. We have a very strong firepower to invest in profitable growth for the future. And also from a capital management perspective, we believe that shaping living for the better is a great advantage for us as a company.
So I hope that you have all seen that we announced a green bond during last week based on a newly developed green bond framework, then to support our initiatives that we are doing in the climate area, but also generally in on environmental initiatives. Then when it comes to capital allocation, where do we really spend our money? I think that you have seen during the presentation today, we have spent most of the time, I would say, on the organic part. And this, of course, is some is a place where we really are spending a lot of our investments and efforts, both when it comes to reengineering, driving digitization, driving innovation as well as marketing. So this is a key area for us.
The second part that we talked less about is related to acquisitions. Most of the acquisitions we have done has been in the professional sector. Moving forward, the area of higher importance, as you can understand, is in the emerging markets to boost that growth. We're also a shareholder friendly company. So we have a target of the dividend to be at least 30% of our net income.
And this is something that we have delivered well above, I would say, for the last 10 years. And then yes, talking about shareholder friendly and giving or gaining high returns, if you combine the dividend with our share price development, we actually have a total return of 18 percent over the last 10 years. So then to sum up, I hope I have been able to show you how our reengineering initiatives, but also an integrated supply help us making our consumers happier. And then the second part, with a very healthy financial position, we are well positioned to drive profitable growth and to execute on our sharpened financial targets for the consumer business. Thank you.
Thank you, Therese. We will now open up for questions to Jonas and Therese regarding our Consumer business. And we have 2 microphones. So please, when you receive that, wait for that, state your name and also institution. And since this session is also being webcast, please post your questions.
So do we have any questions? I see one from James Moore. We have a microphone on the way.
Good morning, everyone. It's James Moore from Redburn. Thank you very much for the explanation of the reengineering. You've obviously gone through a big journey over the last few years with modularization and now this. Could you give us a rough idea as to what proportion of your consumer revenues are modularized today?
And are we all the way there? Or is there still an aspect that has to change? And by the time you get to 2023, 2024, what proportion of your manufacturing footprint will have been reengineered or automated? Will there still be a lot to do? I mean, I understand business is always a constant change process, but is there going to be an obvious area that is then to do?
It's a good question. I would say that for sure in Europe, all of our major manufacturing facilities are modularized and are automated to a certain degree. I would say not to the degree though that we are currently developing for North America and Brazil. So there will be another sort of round to take them up to that level. So we're constantly learning, constantly evolving, of course.
So it is a never ending journey. What I would say though is that is by 2024, the vast majority of our manufacturing footprint globally will be based on modularized products with automated manufacturing. The SEK8 billion doesn't cover all of that because, of course, we have a layer of CapEx below the SEK8 1,000,000,000 that continues to add productivity, digitalization, automation in all over our manufacturing footprint. But we wanted to highlight these specific initiatives because they're big and they're hugely impactful. But yes, by 'twenty four, we'd be pretty much there.
And we have a question from Peter Lawrence.
Hi, it's Peter Lawrence from JPMorgan Asset Management. 2 unrelated questions, please. Firstly, on the dividend, the payout policy. As you say, it's antiquated both because you've beaten that track record that the target your financial position is much stronger and also it's uncompetitive versus your peers. So why don't you adjust the official target given that it's relatively easy to do that even if you want to leave the other financial targets in place?
And secondly, on Electrolux in North America, I was interested that you're relaunching the brand ex washers. What confidence what lessons were learned from what happened before? And why are you confident that this time the launch will be more successful and not cannibalize off the development for Frigida? Thank you.
You want to take a dividend?
Yes, of course, this is a question that we are reviewing every year as part of our capital structure. And right now, we feel that we have so many opportunities to drive our organic business for a higher profitable growth in the future. So yes, we have also increased our dividend, as you know, over the last couple of years. But right now, we feel that we have, yes, very good ways to invest the capital.
So in terms of Electrolux in North America, we made a very big launch, as most of you are aware, back in 2,008, and this is not what we're going to do again going forward. The main difference now is that we will have and we are in the process of developing the right product architectures to carry a more premium brand architecture. That was the main, let's say, issue that stopped us back in 2,008 that we're developing the Electrolux range off of existing product architectures that really didn't deliver on the premium value with the exception of laundry. And front load laundry, the vast majority of our front load laundry business today in North America is Electrolux, and it's growing massively and growing profitably. So we don't have a brand issue.
We have a product premium product opportunity, and that's what we're going to leverage in the coming years. It won't change our focus though. The Frigidaire is by far our most important brand. That's what we're going to cover first and profitably. And then we'll layer on top of a premium limited premium offering from Electrolux.
We have a question from Bjorn, in Natura.
Bjorn, Danske Bank. On your new round of investments in later on in Europe, how long should we see an elevated CapEx for the group? Or what kind of CapEx levels are more normalized looking at?
Yes. I mean for these reengineering initiatives, we are talking about 4 to 5 years. But then going beyond that and how much we would like them to invest, maybe not in reengineering, but in innovation, etcetera, that we haven't really reviewed moving I
I think we are honestly at a stage in our industry where return on investment from product innovation is better than it ever has been. And it's because of the points that we mentioned in terms of consumers are willing to pay for relevant innovation. So even though, I mean, our as you said, our detailed forecast don't go more than, let's say, 4 years or 5 years out, But I do expect indeed to be at a higher level than the historical averages because the return on investment is there.
In relation to sales? Yes.
Yes, in relation to sales.
And on your comments on the AEG JV in China, you give us some more details on that? Or it appears to have low expectations. Or how should we put those comments?
I think it's in that seed bucket where we really see a big opportunity, but we're a small, small player in China. And by the way, the AEG brand is completely unknown there. So it was just literally introduced to consumers 9 months ago. So of course, it will be a slow burn. But the commitment is there, both from us in terms of the brand, the innovation, the products and from our partner in terms of seeing the opportunity of a over time rapidly growing sort of real premium consumer segment in China.
And that consumer segment wants Western brands, premium brands. We see it, they see it. So this is a long term opportunity. But don't expect to make be able to read about it in our income statement anytime soon. It will take time.
Okay. I'll wait. And then last question. On the capital structure on the consumer business post separation, what's your thinking?
Yes. So of course, all of that will be worked on here over the coming years coming year, I mean, in terms of setting up professional with the right structure and the same for the consumer business. Of course, the benefit that we have, as Andreas talked about, is that we have a super strong capital structure to start with and we'll make sure that both entities are well capitalized as we go forward. But beyond that, we don't have any detailed guidance right now. Thank you.
And I see we have a question from Johan Eliason.
Johan Eliason, Kepler Cheuvreux. Just a short update on your private label business in the North American How is it developing? And where do you see it going this year? Right. So of course, it's hard for me to comment on individual customers, but you're aware that Sears is our biggest private label customer.
They've gone through a Chapter 11 proceeding. They've come out of that with a more condensed store footprint. We are continuing as a supplier to them and we're kind of progressing on a day by day basis to support their sort of relaunch. Of course, the business will be mathematically much smaller, given that it's a much reduced store footprint, but we're continuing to support them.
And I see we have a question from Andreas. So if you can just pass the microphone. Thank you.
Thank you very much.
How should
we think about the ramp up of factory in the U. S. In the second half of the year also in terms of any costs inventory build ahead of that? And when you look at restructuring spending over the next few years as you do some of these factory moves, obviously, we had the charge already announced for 'nineteen, but does it need is that something we should expect at a later stage again, either in North America or elsewhere, where you do these factory moves? Then just to follow-up on the CS question, do you expect the kind of the production contract to get renewed and that to remain part of your business for the coming years as well?
Yes. If we start about start with the ramp up of the North American factories, as you saw in the film, we are right on schedule. So we are now ramping up, as you saw, to full production with the launch going during the second half. So we can reconfirm what we have talked about in terms of additional then ramp up costs during the second half as we are driving multiple manufacturing facilities at that point. But other than that, I think that we are yes, we are right on schedule as has been communicated before.
There are some costs, of course, to your point, because we're ramping down the same cloud facility while we're ramping up Anderson. So inevitably there are some duplication
perspective, it also means that we are consolidating that footprint. So we are going down from 7 facilities today down to 5. So then we have a very lean and efficient manufacturing setup in North America. Is there additional provision in the
That's already been taken, right?
Yes, yes. That has already been communicated. It will be taken in the Q1 as we communicated earlier this quarter.
So I think generally speaking, the reengineering program per se isn't about closing factories, right? It's about improving the efficiency in the existing footprint. Here and there where it's either needed or makes sense, there will be some could be some further consolidation, but it's not the manufacturing footprint program per se. That's clear. Okay.
Sears. So yes, we'll see how Sears progresses with their sourcing footprint. It's of course their decision who they want to source from. So it's hard for me to comment on that. But yes, we're there and we have a long standing relationship with them.
We need to make sure that it works from a credit and business perspective and all those things, but we're happy to continue.
And then we have a question from Andre.
Yes. Thank you. It's Andre from Credit Suisse. I've got two questions. Firstly, on Electrolux brand revamp or sharpening, as you put it.
Thinking about the payback from that, comparing that to AEG, how do you think it will compare in terms of kind of size and also the balance of it? AEG clearly yielded a lot more kind of margin improvement with ASP improvement rather and a bit of market share gain as well. So how do you think Electrolux revamp is going to compare to that? And the second question is on Teresa's most important slide on the cost savings composition. So if we think about next year from here and think about absolute numbers, how should we think about the continuous cost improvement?
Because you hear Sherrod as a percentage of total, do we think about that as a sort of continuous level of absolute savings? And then we have the reengineering ramp up on top? Or is there anything kind of to move there?
Okay. I'll take the first one. So Electrolux is a much bigger brand than AEG for us, right, in terms of revenue. You saw that on the bar graph. So of course, this is more significant for us.
And that's also why it's taking a little bit longer to make sure we have the right brand profile for a global and very diverse consumer group and the right product offering. But again, as I said, we have that now. And I think the opportunities both to mix up and to grow net sales are just as big as they are for AG, if not greater in terms of proportion. So we're really excited about it. The actual sort of rollout of the new products are, of course, to some extent tied to these reengineering investments.
So it's not everything all at once. It will take a little bit of time before we have the full offer out there. But it's probably the most important launch that we've ever done as a company over the coming effectively 3 years actually, but with a big first launch happening right now in built in kitchen in Europe and in Australia.
Yes. And then when it comes to savings, so yes, we don't go into those specifics, but your hypothesis about that continuous improvement will stay exactly the same and then you add the reengineering on top, I would say it's a little bit exaggerated. As part of as Jonas said, it's not to do reengineering is not totally new to us. We have done modularization and automation over a number of years. So also going back from a continuous improvement perspective, you see those types of savings from the European factories.
So they are already, let's say, part of our base. But for sure, they will be a larger part in the years to come as this is where our main efforts when it comes to cost productivity is focused on. And we have time for one final question, and that's from Olof. So we have a microphone on the way.
Hi, Olof Serra, ABG. So I have a question around pricing power. Your response to higher raw material costs the last couple of years have been impressive. The whole industry, I guess, have raised prices. But could you talk about your ability to raise prices over and above the industry?
And also is price increases something we should get used to going forward? We're not used to that yet, but is it changing?
So I think you kind of have to at least we break it into 2 buckets. So net price for us is price for products, similar products that were in the market a year ago. And typically, the trend, the long term trend is that those prices go down because of competition, because new products get introduced that are more attractive that make the old products look less attractive and then you have to put more incentives on it. So those prices go down. What is special about these recent years is that the cost headwinds impacting all our products have been so massive that we've had no choice but to raise prices on those existing products.
And that's something we've done and that's something all of our competitors more or less are forced to do. I would say on that metric, it's very difficult to be better than the industry. You can be faster or slower, but you kind of end up in the same place. And that's kind of what we've the message we've given all along in this day. This is it makes the journey bumpier, but it doesn't fundamentally impact our long term profitability because, yes, with a certain amount of lag, we catch up and with a certain amount of lag, we catch up on the way down as prices and currencies go up and down.
The real issue for us is mix, what we call mix. And that is introducing new innovative products that consumers are willing to pay for more than for the predecessor products. And here, for sure, we can do better in the industry, and we are doing better than the industry, primarily in Europe, but also increasingly in the other regions. And for sure, that's absolutely our strategy, more launching more new innovative products at higher price point, mixing up improving our price index as we talk about. So our share of the higher priced products sold in the market should increase.
And that's really the basis of the first bucket here.
Thank you.
Yes. Good.
Thank you so much, Joanna Santurias. So let's switch track then from consumer to our very successful professional product business area. Alberto Sanate, Head of Professional Products, will share with you on how he is driving growth through this industry unique position.
Thank you. Good morning, and now welcome not only in Porta None but in the professional industry. I spent all my professional life in this company and in this industry. And so clearly, you understand that I love what I'm doing and I love the business we are running here. And what I hope I will be able you to take away after this time we will spend together not only here, but for the ones that are here in Porta Noni, also later on when you will visit the facility, the center of excellence and obviously, the one that are streaming, that are on web, you are more than welcome to join whenever you have time, is to take away why is that?
Why every day, every morning, we wake up and we come here with passion and enthusiasm. And we do this for 3 basic things. 1st, because it's a great industry, it's a industry that is steadily growing, It's an industry that make us enjoying life more because it's the industry that take care in some way what we are doing out of home. Secondly, because the Le Plaque has a unique position in this industry. We will talk about this later on, but we are the only company that can provide the player of this industry with everything they need, when they need to serve beverage, food or caring about people sleeping outside of home, because we have a large installed base customer that are already using this product and I think we can care about them.
And 3rd, because whatever we are doing to improve our performance in this industry, to further grow our business in this industry is credible because we have a track record. And what is the future? And this is the third reason because the future is bright, at least we believe it's bright, because we have actions in place that are all around the mission that we have that is to make the customer's life easier, more profitable and sustainable every day. And we can do this around these four areas that we will further analyze, looking at investing and developing new solution that are improving the operations of our customers, that we are expanding by segment and geographically because we are investing to further accelerate the growth of the what we call aftermarket sales with a business terminology, but I would call it caring about our customers. And last but not least, further enhancing what I said beginning, the uniqueness of Alatorux, being the only company providing one solution for all these customers.
So if this is the takeaway, the industry, the lateral position and the possibility to further grow this business, let's start from what we are. This is a picture of professional and I would like you to focus on a couple of things. The one on the right, 140 markets is where we are present. If there is an industry that is global, it's exactly this one, the hospitality industry. The player in this industry are playing global.
The same brand of the hotel, the same brand of the restaurant, you can find them everywhere around the world. And if they move and expand globally, they look for global partner and we are there. We are present, one 140 countries means basically everywhere, supporting them before, during and after sales mainly. The other number that is important is the one on the left, the 7% growth. That means outgrowing the market.
We will see how the market is developing, outgrowing the market. And the mix, one thing, one comment about that. Beverage is the last part of this one. The last sub segment is roughly 10%. But if we consider the last acquisition done in October last year, this number is higher and the total turnover run rate is around €9,000,000,000 If this is us, how we position there in this 140 countries all around the world, we have a leading position in most of the areas, in most of the geographies And we are playing with 1 brand.
While the market, the characteristic of this industry is to see many companies focus on a single product category. We address the market with 1 brand. More than 85% of our sales are done with 1 brand, only one brand that is Electrolux, that is the one providing the full solution. And that is the unique offer that we are making to all our customers because who needs our product? They are hotels, hospitals, staff canteen, restaurants, educational leisure sports, every place where people are drinking, eating or spending the night out of home.
And we do this with a geographical coverage. We are more present in Europe. If you want to have an idea about the market, roughly, you can say that a third of the market is Europe, a third of the market is North America and a third is the rest of the world. So the emerging markets are still small compared to the 2 big mature regions. And now is the legacy, is the legacy the presence in Europe.
In North America, we started the business in 2004. I was there on that time, opening basically from greenfield, the food operations, while laundry we had a long term relation with a partner. And also industrial side, we are globally present, close to the customer. And why is important this one. Because I remember 10, 15 years ago, customer were asking the product with 4 weeks ahead of delivering.
So we had 4 weeks of time to start producing and delivering. Now they are looking for more customized solution delivered in a shorter time. And that is the reason why the factory that you will visit has been transforming and we produce in 3 days after having received the orders. And we need to be close to the customers because that's the trend. That is where we will go.
And we have been doing this with a track record of delivering over a business cycle, a long business cycle, both at the top line and the bottom line. And we have been accelerating this growth recently with some bolt on acquisition based on 3 strategic pillars: helping us in accelerating the growth in North America, that is the home country of the chains, of those chains that are expanding globally. The second one is building a strong presence in the emerging markets. Why is that? Because that will be the market of the future.
And we have been doing this with an acquisition 2015 of a company in China. Now we are playing a key role in China, a leading role in China, having a profitable business there. And 3rd, further announcing the beverage business. Beverage is the last part of our business that we added only United States and we further enforced last year with the acquisition of SBM, the company in Italy. And why beverage, for instance, is important is because among the 3 sub segments of this industry is the one that is growing faster.
All the three parts of this industry, food, laundry, beverage are growing steadily and they are expected to grow steadily. Beverage is faster in growing, in particular, some sub area like the coffee, for instance. And why is that? Let me spend a few minutes about the trends that are impacting these indices. Some of them are very similar to the one that are also affecting the consumer business.
At the end, all the professional and also consumer, the world is the same and is developing in the same way. But there are 3 elements that are more specific to this industry. The first one is what we call out of home spending. It is the reason why I said that this is a great industry that is steadily growing. Out of home spending is what we all, the consumer, are spending when we are out of home for eating, drinking or sleeping.
Out of home spending is expected to grow and to grow mainly for two reasons: 1 is because there will be more people with the economical power to enjoy life also out of home. And this is mainly happening in the emerging market and this is connected to what I said before about the need to put the seeds in this market. Secondly, because people are upgrading themselves, They want to eat and drink, in particular, better than before. And this is affecting the second important trend. The complexity of the business of our customer is increasing because people are looking for better solutions.
I remember years ago in the English pub, they were serving beer. Now all the English pub are full restaurants. In an Italian coffee shop, you could get only coffee. In the morning, the Croissant. Now you can eat.
So it's mixing up the picture of Avera on your right. I don't know if you guess what it is, but reality, that is a coin shop. I don't know if you ever had the possibility to see a coin shop, at least on a movie, you should. It was a room full of washer and dryers with people sitting there and waiting that their linen is ready and looking at the tumble going around, around, around for an hour. And here is a business opportunity.
This is a picture in Japan where they created a coffee shop inside of the coin shop. They take the opportunity to have the customer there for an hour, to have an additional business serving drinks, food, in this case, even offering a kindergarten solution for mom and dad that are going there with the kids. And what it means this one, it means that their business is becoming more complex because they cannot be specialists in everything. And they look for digital solution to address this complexity, and that is where we come in the game. And it's becoming more complex also because, as we said before, people are looking for healthier solution.
When we go out for dinner with friends, at least for me, it's always the challenge to find the right place because they have to offer vegetarian food, fish but also meat and somebody is also with an allergy. This is a complexity in the back that we as a consumer, we don't see but our customer they are clearly facing. And now it's back why? For all these reasons, we as Electrolux, we have a unique position to make the life of our customer easier and more profitable and sustainable. We can do it with a product that we have been developing and we will develop because we focus on making sure that for our customer, they have solution that are improving not only what they spend when they buy, but what they spend when they run the product along the life cycle.
I remember in the past talking about green solution, it was pretty difficult with people that were buying appliances to run their business. But when we started to talk about solution that are reducing your running cost and making you paying or saving what you spend more after 1.5 year, just 1.5 year. That is becoming really interesting because after that 1.5 year they are saving money and their business is based on the running cost. And not only, again, investing on the ergonomic solution is not enough to deliver a washer with a big door or a powerful gas burner or a large dishwasher. These are the operation of our customer like our factory.
For us, it is a nightmare the day workers are not showing up because we have to cover the absence. We are developing ergonomic solution. This is the only company with a product that are certified ErgoCert, the one that you will see later on, because they care about the ergonomic, how the workers are using this product. This will help the operator, our customer to reduce the sick leave. And not only it will create a better environment for all the workers in the kitchen or in the laundry operations.
And we have a long track of investing and bringing new products to the market, investing over 3.7 percent around 3.7 percent of our net sales innovation that is above the average of the industry. And we continue to do this and the ones at least that are present here we'll have the possibility to see what we mean and what we get from these investments, bringing products that are different from the one that we can find in the industry, that we can find in the market because being different is key, at least to me, to have a leading position in every kind of industry. But why we are investing so much? That could be a question. Why doing so?
Why doing more than the average of the industry? Because we need to bring new solution and it is successful to bring new solution. When I said that after investing, we are expanding. We are expanding geographically and by Chains are the multiunit companies. Chains are the multiunit companies.
You have in mind many names. The ones where you can find exactly the same kind of food, exactly the same service in terms of hotel all over the world. Our industry, we can estimate, organized around chains in roughly onethree of the industry globally. But in North America, it's very close to 50%. We are growing our presence in the chains.
We are growing sales to chain customers quickly, but it's still a number that is representing us compared to the market and the potential. And I look at this one as a great potential for the future. Why is that? And what is proving this? Here, I have a couple of example.
The one is Crackle Barrel. It's an American chain, it's more than 600 restaurant around the country, probably not so known for Europeans or non Americans. But it's an example where I try to explain how we entered this one because I got a question, how can you do it having this change long time established supplier, supplier that have been growing together with these chains. We can do this is an example. We can do it if we bring innovative solutions, solutions that are changing the rules of the game for their operation.
With this company, the picture is there, it seems to be a cabinet, a fridge is what we call thawing cabinet. So it's a machine that is defrosting food. Typically, the previous process, they were forced to defrost food, start the defrosting of the food 24 hours ahead of using the food. This means that this morning, they start to defrost what they are going to serve tomorrow. And they have to guess based on the last year sales, based on whatever.
But if it's raining, if it's the sun is shining, customer typology changing. You can have more or less customer. And if you have less customer, you throw away the food that you defrosted. And if you have more customer than expected or the year before, then you don't serve them anymore because you don't have time to have other new food. With this product, you can defrost the food 2 hours ahead of serving it.
You can change your business along the day according to what it happens. And then after having served this product, after having gained trust and credibility with this customer, after having shown that we have great solution improving their performances, making their life easier and more profitable, They started to trust us. They started to look at other products in our portfolio, the fact that we can provide them with everything they have in a kitchen. And why is that? Because when we run a factory, one of the things that we look is surely reducing the number of supplier, because it makes our life easier.
So why not for them? Every restaurant is like a small factory. And this is indeed what is happening. And they are adding other products to this to the first one. The second one is subway is a much, much larger chain.
It's obviously present in North America with over 24,000 restaurants and playing globally. And in this case, we have been leveraging the acquired companies. The credibility that the acquired companies having these customers. And we are currently in the middle of a large rollout of a device, a beverage device that they are adopting because they are improving, following the trend, they are improving their offer, introducing healthy drinks in addition to the carbonated one. They are introducing healthy drinks, and we can provide a solution to have these healthy drinks distributed and served to their customers.
And this is done in North America right now. But we clearly have the hope that the same will apply globally, because if they need to expand this concept globally, why not looking for a company that can follow them for in 140 countries, probably everywhere they have another restaurant. And later on, why not looking at this company for other products that they have in their kitchen, because this will make their life easier and more profitable. So this is the first area of expansion. The other two main area of expansions are the emerging market, China in particular.
And why is that? Because I said we seeded the market, thanks to the acquisitions. Having a company that is a Chinese company that now is upgrading to our standards, having the value of our brand in front of the customers, but with the competitiveness and the vicinity of being there with service organizations, sales organization in every Tier 1 and Tier 2 cities that is basically all the large city, medium large city in China. We can serve the customer during their expansions. And the third one is clearly the beverage.
I said it at the beginning, we entered the beverage part of the business just recently, thanks to the acquisition of the company in North America. We completed the offer. We see the possibility to further accelerate this one, making the beverage an integral part of the Alatora's portfolio. Every customer serving food, they must serve drinks. There is no way to drink to eat without drinking.
But all these things, these are of expansions that are supported by the pipeline of innovations, they need to be supported with something more. That is what we call customer care. It is what is said after sales business because it is a great business. More we grow here, better it is also financially. We all know that.
But it's also a way for us to care about our customers, to stay in contact with our customers, not only until we sell the product, but also after having sold the product, along the life of our product. And we can do this supporting their global expansion, being local but global. And we do this having developed a program that we call Ascension. And why is that? Because the reality is that we can estimate that the so called after sales market is roughly a fourth of the market.
And we are also, in this case, underrepresented. Our net sales are around 15% of that. So there is room for improvement. That make us stronger and closer to the customers, but also helping us in delivering a profitable growth. And how we do it?
We do it, again, through this program Ascension, turning what it is an habit of this industry to work in a reactive way. So waiting to call the service when the product is down into a proactive way, making sure that I go there, making sure that our customers don't have the product down, because a product down is a problem for an estimate. It is a problem for us when our one of our robot is down because we cannot produce. They cannot produce. So this is the reason why we developed this program, starting from the left with a program that we are offering when we sell products to the customer, telling them, okay, here we are.
Obviously, you have the service, you call and we come, but you can also work in a preventive way. And knowing where the customer are, the second picture that is UK, but you can get it all over the world, we already know where more than a third of our customer are using our products. And if we know where the products are installed, then we have a great opportunity to support them, to make their life easier and more profitable. How? Offering solutions that can help them to improve the performance of the product, but also along the life of the product.
That is what we call accessories and consumable business, products that we develop and we are bringing to the markets. And that is the reason why we treat the after sales or customer care business like a product, exactly like a product, with a product roadmap of accessories, consumable, programs, offers. This offer year after year with the objective next year to have what we call 4.0, very fashionable number. But what it means? It means that we will have the product remotely monitored and connected.
And when I use the word we will, realities that we already have, And you will see later in the day the example of products that have been already monitored. And doing so, I can easily help the customer to use in a better way their product and to unlock the life of this product. So if it is investing to expand and caring about our customer, all these things together, they play in what we say being different. In an industry that is built in this way, is built with specialists that are saying, I know everything about this single product. I am a specialist.
You get the best from there. To others that are portfolio company, conglomerates with several brands, we position ourselves uniquely there, saying that we are the only full solution provider and we want to leverage this one. In the year to come, the trends, the digitalization in particular are helping us in this development. The growing complexity on the customer side is helping us in doing so because we are creating what we call a platform. We call V1 platform.
That is not only the product that you can see on the left, but it's also the service we provide with our customers. It's also the opportunity for them to decide if they want to buy or rent. We acquired Schneider Electric last year, a German company that is specialist in this kind of business because you need the different skills. If you think about your offices, you surely have a copy printer, and I bet that no one of you acquired or purchased that one. We are all leasing, renting, paying per user those appliances.
We see this happening in some part of the world and in some segment of the business. We are there to give the right solution to our customer because it's a community at the end. They talk to each other and it is good that they share these good experiences, experiences related to the one.
What if there was one who connects the worlds one. 1 who supports you with planning and installation, with optimizing your workflows, with tailored training, and dedicated service, and creating ground breaking innovation and services. No matter whether you run a hotel, a restaurant, or a launderette, One who gives you complete control, and makes your potential visible. Visible. Thanks to real time access to your operating gear.
1 who's always there for you. With local presence and global expertise. Making your work life easier, more profitable, and truly sustainable every day. Electrolux, the 1.
I really hope that you got it. Great industry, steadily growing, making people enjoying life more than before unique position, the 1 and only player in this industry that can follow customer globally with a full solution. The plan accompanying with a trustable, because of the past, a trustable plan to further enhance our presence, to make sure that we make the life of our customer easier, more profitable and truly sustainable, staying closer to them, but also away from competition. Thank you very much.
So we will now open up for questions for our Professional Products business. Jonas, please join us on stage. I see we have a question from Karri.
Yes. Thank you. Karri in the Handelsbanken. I actually wanted to ask this slide that you have up there. So if you look at the I mean, improvement potential for Electrolux consumer is pretty easy because that's mostly North America.
But if you look at professional and if you look at this slide, so the first part is like license to operate, that you have to keep doing. The last one is maybe your unique selling point, which is then maybe allows you to differentiate. But the other 2, the expansion chains and aftermarket sales, are those then the key levers that we should look at when we think about growth and especially margins for the next 5 years?
I would say absolutely, yes. Combined also with the first one, because you rightly said that we have to do it. You can call it normal business. But reality is that we are focusing our development on the high margin products. On products the variety of product is huge in this industry, but there are some categories that are with higher margin, and we focus our investment and our development exactly in this category.
So also, the first one will help us in improving the profitability as much as rebalancing the geographical presence, North America change and clearly boosting the aftermarket.
Okay. And then two follow ups. I'm not sure if you mentioned, but can you give us a ballpark of how much aftermarket is your sales?
I said that the potential that we are estimating is a quarter of the market, so 25%. Currently, we are around 15%. Right.
And then finally, a branding question. Typically, in these kinds of situations, one of the new companies will rebrand. So can you discuss maybe historically how useful Electrolux brand has been for you in Europe? And how do you see the way going forward, especially maybe in North America with Electrolux brand?
I'll let you in on that. I'll just say the plan is not for any of the companies to rebrand. I think there's a great benefit for both companies in having for the consumer business to have their professional heritage linked to the Electrolux brand, something we treasure and want to continue. And of course, Electrolux is the biggest brand in the professional industry, So it would not be a very good idea for them to rebrand. I'll let you answer the specific question, but the plan is to have a very, very long sort of license agreement for consumer product versus then commercial products, split responsibility.
Absolutely.
You said it. Electrolux is, as you've said, the industry is addressed by specialists. Also the company that I in term of to know are larger than Electrolux, they are addressing the market with several brands. So as a single brand, we are the leading brands across the hospitality industry and it is a strength of this one.
Okay. Thank you.
And we have a question from Jack. We have a microphone on the way.
Hi. It's Jack O'Brien from Goldman Sachs. You helpfully showed us the split in your net sales between food, beverage and laundry, 50, 10, 40. Can you give us a hint as to the profitability variance between those? Is there a distinct variance in profitability and margin in between those three sort of products
and markets? I think this one is an information that we are not ready to disclose.
Okay.
Secondly, obviously, there's been a big focus on beverage growing, so that will grow as a proportion of the pie. When we look at food and laundry, do you have a preference there as to how do you see stronger growth prospects for 1 or the other relative there?
If I look at the market, if you remember the chart of the market, the food market is growing more than the laundry 1, okay? So that's the external point of view, the growth. We have to say that the laundry industry is more consolidated and we have a leading position. You saw that we are one of the 2 brands leading the market globally. So I would say that in both cases, in these cases, more or less the same, but that.
And just one final question. If we look at your product portfolio, is there a proportion of products which are earning sort of materially lower margins, let's say, less than 10, for example, or a tail that you could potentially dispose of or eradicate as we think about the trajectory of this business?
Okay. In general, as I said, there are some category where the margin is much higher than the average. There are some categories where we have a lower margin that we use to complete the total offer. So to be the full system solution provider, that is a winning element, In particular, in some parts of the world, I would say, in particular in the emerging markets, we are completing the offer with some product that have lower margin than the average of the entire business.
We have a question from the gentleman here.
Yes. Thank you, Mr. Leo. Zadig Asset Management. I just wanted to come back to the balance sheet at start because effectively you started your presentation showing us all the opportunity in M and A and consolidation.
If I work it out, your market share is roughly 2%. So it makes absolute sense. You are loaded with cash to start with. And Air Products is a little bit more leverage. So why is it The previous question you didn't answer straightforward about this?
And then I have a follow-up question.
It's not hesitation. It's just that we're not there yet in the process. We'll make sure that Professional is well capitalized for sure, but we're not at the point where we've decided exactly how yet.
Okay. But we agree that they didn't want it to do shopping. And I have a follow-up question, which goes also for electronics. On the after sales market, you say you go from 10% to 25%. Can you disclose the margin?
And can I ask the same question for electronics? Would you say you want to go from 4% to 10% and was it excluding professional?
That's excluding professional and we don't disclose the specific margins in aftermarket neither for consumer nor professional. It's more profitable.
It's more for professional than the average?
Well, it's more aftermarket is more profitable than finished goods sales, both in consumer and in professional.
Only one point. I didn't say that we go from 15% to 25%.
I said
that we are we have 15% now and the potential is there. Just
We usually like to beat the potential. Absolutely.
Absolutely.
Thank you. And we have a question from Lucy.
Thank you. Lucy Carrier from Morgan Stanley. I was hoping we could go back to the aftermarket expansion that you're looking at. My first question around that is how much more does that involve in terms of hiring and ramping up and getting density in specific area to be able to serve the installed base and kind of monetize that? So that's my first question in terms of investment.
And then secondly, when we think about on average whether this is a food system or a laundry system, How much value is in the aftermarket? Are we talking 2 times, 3 times the value of the initial equipment that you could generate from that aftermarket opportunity? And then just maybe lastly around the aftermarket, is there more opportunity in your view in the food chains business and this is why you are maybe below market in terms of your penetration? Or can you develop that also in what I would say your core business today, which is not necessarily so strong in the food chain? Thank you.
So the first one are investment, right, to develop the aftermarket. Here depends about the geography and the customer direct service through exclusive agents or service company or through 3rd party that are also serving other customers. So clearly, according to the way of going to market and serve our customer, the investment is completely different. What I can say is that we are planning this one and the return is very easy or very short of this investment because it's coming immediately. And according to the geography, we are deciding how to go, sometimes also in mixed models.
So this means in countries where we can have direct service in the large cities and indirect in other. The second one was? Yes, you're right. I would say that I don't have honestly this value, but we have an example that is what we call Laguna. That is when you enter it on the right, there is a shop that is a laundry installation, where we developed a complete system with the appliances and the specific chemicals to wash this kind of stuffs instead of bringing them to the dry cleaning to wash them with water.
That is super ecological, super green, but is a great business for our customers because they offer something new to their customers. But it's also good for us because when we sell the product, then along the life of the product, they are buying all the detergent from us. And if I remember well, the two things are basically equivalent. So it is an important element, in particular the consumable. I'm not talking about the parts and the services for our business.
But again, differ country by country and product by product. Chains versus And the third one is chains. Thank you, Veolia. Here is related to the legacy that we have. So from where we come, the European market is mainly institutions and the commercial restaurant was mainly based on independence.
We are a leading company in the kitchen, in particular, I would say, laundry and kitchens in Europe. Moving to the United States. And as I said, beside laundry that we have been there partnering with this strategic partner, I would say, since several is the longest business relation we have. We have been starting just recently. In the U.
S, it's the way around. So the institutional business is smaller compared to the commercial restaurant chains. So you need to grow there in the chain business to play a significant role in North America. And what I try to explain is how we address these customer segments. Then about the profitability you said is also related to the geography.
So the cost to sell in Europe is higher than in the North America. But I think this is known for every industry in Europe. We are an aggregation of several countries, each and every one with its own organization, with its own structure, logistics, languages, product differentiation. In North America, you address one market with 1 structure, 1 logistics. And with the chain size, the other thing, so if you have the possibility, you will see when you will visit the kitchen here in the typical kitchen of a single restaurant of an institution, you can have the staff contain here, you can find 100 different product.
In the chase, you go there for 25,000 restaurants with one product only. So it's creating completely different economies. Yes. Are still related to the aftermarket? Not necessarily.
I think the issue is, of course, how heavily the products are used. So if somebody is open 24 hours a day, constantly frying burgers versus just for lunch,
yes, that makes it a difference. Absolutely. The life of the product is much shorter in the chains. And clearly, in particular, the request. So the service demand is much tougher in the meaning that they want to have service typically in 4 hours in many cases.
While in a hospital, you can wait the day after because they serve or in a staff campaign like this one, we use the product once a day just for lunch, for serving lunch for the workers, for the employees.
Thank you. We have time for one more question, please. We have a microphone on the way.
Thanks. Matsper, Exane. I'll stick to one question then. It's just one sort of contradiction that I see potentially. You've got this one brand strategy, but you also plan to be a consolidator, which obviously means buying other brands.
How do you plan to solve that issue of buying other brands and leveraging the 1 platform?
The brands and the company that we are acquiring are bolt on acquisition on this one. So they have a strength typically in geography in one product category. And we think we will leverage this one because it is a strength. But all the products that are part of that portfolio, they are integrated also in the Alatorlasse 1. So this means that in some way, we are approaching the market both with the V1 solution, the Atlas 1 providing the full system, the full solution for the customer, but we are also have the possibility to approach the market with a specialty brand, at least in the area where they have a legacy, where they have a value, where they have a relation with customers.
And we are competing in that way exactly like all the other competitors are doing with specialty brand focus on one product category. So I don't see this one absolutely as an obstacle. On the opposite, I would see this Strahn as an opportunity.
Thank you. Before Jonas concludes this session, I just want to remind our audience via the webcast that today's presentation is available on our website as well as the highlights from the breakout sessions that will follow. Please join us.
Thank you, Sophie. So thank you for staying with us for this introduction into the Professional business and update on our consumer business strategy. So I think the key messages here today is that we are well positioned to accelerate growth in our consumer business through a strong focus on consumer experience innovation with targeted growth and targeted product offering. And we've shown you the great cases that show that we have excellent traction on that. We're continuing our investments in modularization, automation and digital transformation to further accelerate our operational excellence and we have a strong balance sheet and strong cash flow generation to continue to generate strong shareholder returns as well as reinvesting in the health of our business.
So very strong strategic objectives to continue to drive profitable growth, EBIT over 6%, net sales growth over 4% and return on net assets over 20%. In our professional business, I think you got the taste of the unique position, a truly unique position that we have in the hospitality industry with a cross category offering under one brand, lots of innovation, you will see much more of that coming in the coming hours. And with the one platform that ties together the needs of the consumer, both for products, aftermarket service, different ways of financing and the community of sharing best practices. So very strong platform for accelerated growth also for Professional. Thank you so much.
Hope you had an interesting morning and look forward to seeing you all soon again. Thank you.