Hello everyone, and welcome to Essity's webcast on today's announcement, Essity acquires Knix and takes the global lead in leakproof apparel. Magnus Groth, our President and CEO, together with Fredrik Rystedt, our CFO and Executive Vice President, will go through some of the details in today's announcement. We also have the pleasure to have Joanna Griffiths with us, Founder and CEO of Knix Wear. I'm your moderator. I'm Joséphine Edwall-Björklund, Senior Vice President, Communications. We will also have a Q&A session in the end, like normal. With that, I hand over to you, Magnus.
Thank you, Joséphine. Yes, this is an exciting day for Essity, and I think this will be a very, very interesting press conference, because we have as a presenter Joanna Griffiths, the Founder and CEO of Knix, the company that we are acquiring today. I will start by setting the scene, in how we're taking the global lead in leakproof apparel and why that's important. To start with, what are we talking about here? We're talking about intimate hygiene and the two important categories, feminine care and incontinence care. Of course, Essity is the global leader in incontinence care and a major and fast-growing player also in feminine care.
In both these categories, leakproof apparel is quickly growing as a sub-segment, then replacing liners, pads, disposable pants, and the typical products that you would see or use today. Why is this happening? Basically because leakproof apparel is more sustainable than disposable products. Typically, the CO2 footprint from using leakproof apparel is about half or less than half of that using disposable products. Also from a waste perspective, there's much less waste, 75% less waste using reusable products as opposed to disposable products. Maybe most important, leakproof apparel is comfortable, discreet, and reliable, and Joanna will talk more about this in a minute. Also something that has accelerated the growth in this segment is the increasing awareness and availability of these types of products.
This leads to very, very attractive growth opportunities for Essity. It's the fastest-growing segment in intimate hygiene. It's growing with approximately 20% per year. We believe it will continue to grow with around 20% per year for the next 5 years. This would mean that from being approximately 7.5% or 7% of the overall intimate hygiene market today, it will grow to become 15% of the overall intimate hygiene market. It's a very important segment to be in for Essity. With that, I would like to show you then the picture of Essity and all our fantastic brands.
Now with the addition of Knix and Modibodi, we are offering leakproof apparel under all these brands, but now with the addition of Knix and Modibodi taking the global lead. Without further background, I think we're all now looking forward to hear Joanna. I want to welcome you too and your team and also the team of Modibodi to Essity and hear about your exciting journey as a founder and the CEO of Knix. Over to you, Joanna.
Had to happen, right? I'm so sorry about that. I was just saying that it's a pleasure to be here today, and it's a pleasure to share a little bit more information about Knix and this exciting growing category that is leakproof apparel that we have been at the forefront of for the better part of the last 10 years. Whenever I speak about Knix, I think it's very important for us to start by rooting ourselves in our mission because we are an impact-led company. Very much like Essity, we look to have a big impact in our community from a sustainability standpoint on our customers and on our team. At Knix, our mission is to inspire our customers to be totally unapologetically free, and we really are an entirely new kind of intimates company.
We combine product innovation with authentic storytelling to redefine what an intimates brand can be. When we think of Knix, we really define ourselves as three things. The first thing is that we are a category creator. We have been pioneers within the leakproof underwear and leakproof apparel space. As we've just heard, this is becoming an increasingly fast-growing category within the intimate hygiene space and really demanding a lot of attention from consumers and from the market. Secondly, we are product innovators. We have a best-in-class product design team and have won numerous accolades. Last year, we were named Consumer Reports' number one leakproof underwear brand. We were named the number one leakproof underwear brand by Good Housekeeping for both women and for our teen line, Kt by Knix.
We love innovating at a product standpoint and bringing life-changing products to market. We are a movement brand. We love to tackle taboos to really be at the forefront of some of these huge and really positive trends that are taking place more broadly within the industry in the intimates category. We've been pioneers around the body positivity space, and I'm sure over time you'll learn to discover all of the great things that we've been up to as a brand and will continue to be up to. As we think about Knix and redefining intimates, we are the leading player in leakproof period and incontinence wear. We do this through an assortment of functional intimate apparel and active wear, so we have a large and growing assortment based on the feedback from our customers and the market.
We love to innovate and have built a very strong and trusted brand, and we are best in class when it comes to digital capabilities. We are a direct to consumer brand. 98% of our sales come from direct to consumer. This is exclusively through our own websites, as well as our 6 owned and operated retail branded stores. At the moment, we share about 30% of the market share in North America and have been growing at a very rapid rate as well. Our sales are split, almost equally between Canada and the U.S. Finally, it really is a high gross margin category in business and is capital light as well, so we've been able to scale quite quickly and efficiently to date.
When we think about Knix, there are two main categories, and there's a third category as well, which was made reference to, which is this everyday care. When I created Knix and had the idea for leakproof underwear, it was really driven by two main statistics. The first one was that 80% of women experience leaks during their period, and the second was that one in three women experience light bladder leaks. There wasn't really a solution on the market that was discreet, reliable, and that gave people the confidence and comfort and peace of mind that I thought that they deserved, and we pioneered this category. A new and exciting part of this category as well is the more everyday use.
At the moment, over 50% of our customers are actually wearing leakproof underwear every single day, and this is a long-term vision for Knix. We really believe that leakproof underwear is the future of both intimate hygiene as well as intimate apparel, more generally speaking. We've taken our expertise in our leakproof technology, and we have now rolled this out across a growing category of products, hence, the title of leakproof apparel. What started in leakproof underwear, we've now expanded into maternity. We offer great maternity options as well as leakproof nursing bras and pads. We have a growing leakproof swim assortment, which is very important for consumers that are not comfortable wearing tampons, and rely on pads, which are not suitable for the water. Then our most recent big move has been in active.
We really believe that leakproof and active is where the next frontier is. It makes a lot of sense when you think about things like sweat and the fact that many leaks happen during exercise. We are very bullish and excited about our foray into the active wear space. Finally, we have reusable pads as well. Something that from an intimate apparel standpoint is unique to Knix, but also we share with Essity, is the fact that we are there for our customers through every single stage of life. In 2017, we launched our teen brand, Kt, which stands for Knix Teen, by Knix.
The goal here was really to be here for consumers from cycle one, to help give comfort and peace of mind for the next generation around their periods and to offer a sustainable alternative for them to approach periods from the very, very beginning. Our Knix suite and assortment of products really are there for women and people of all ages, starting from young adult. I made reference to our maternity and postpartum offering that we have, and then through menopause and into later in life. We pride ourselves on at Knix is that we will have women who will buy for their daughters and for their mothers, and it really is a multi-generational brand that speaks to so many people.
How we've been able to accomplish this is actually quite simple, in theory, and that is that we put our customers at the epicenter of absolutely everything that we do, and we use our growing platform. We have over 820,000 social media followers now that are highly engaged to tell their incredible life stories and the incredible things that they are doing in our products. At Knix, our customers are our models, they're our inspiration for new products and how we get all of our great ideas around where to innovate next. They're also our ambassadors, as well, who really help us grow and scale effectively through word of mouth, and keep people coming back time and time again. That concludes my side of the presentation.
Joanna, it's such an exciting and inspiring story, and I really also see the touch points with Essity, how we try to improve wellbeing for our consumers and customers every day and also the huge focus on innovation that's so important and where you are really at the forefront. Thank you very much, and I'm sure there will be many questions for you later. With that, I'd like to hand over to our CFO, Fredrik, to talk more about the numbers. Over to you, Fredrik.
Yeah. Thanks, Magnus. I will not be able to do that with the same kind of excitement maybe as you, Joanna, but let me just go through that real quick. The purchase price on a cash and debt-free basis is SEK 3.3 billion for 80%. For 100% or the full enterprise value that amounts to SEK 4.1 billion.
As we've mentioned also in the release, Joanna will remain as owner of 20% of the shares of Knix Wear. If you look at the financials for Knix Wear in 2021, sales amounted to a bit over 900 million SEK, with very high gross margin. The EBITA margin is attractive, but it's also reflecting the significant investment in growth that's within the numbers. Of course, over time, we expect the growth level of the whole market and of course Knix in particular, to remain very high. As a consequence of increasing scale, also EBITA margins are expected to increase over time.
We expect to finalize this transaction during the second half of 2022, after completion of customary regulatory approvals. That's it, Magnus.
We will run this as a separate business and learn from all the experiences and fantastic achievements that Knix has seen over the last 10 years. Look forward to working together going forward. Before moving to Q&A, want to just remind us that we also announced an acquisition yesterday, an important and exciting acquisition of Modibodi, which is the leader in leakproof apparel in Australia, New Zealand, and also with a presence in the U.K, and also with a full portfolio of leakproof apparel. Very strong direct-to-consumer competency with over 95% of sales online.
Similar to Knix, high gross margin and that much of that gross margin being reinvested into accelerating growth and with the similar EBITA margin levels as Knix. Combined, enabling and supporting Essity's vision of being and building the fastest-growing company in intimate hygiene, now through taking the lead in leakproof apparel with all the benefits that we've heard from sustainability, from comfort, wellbeing, and with the increasing awareness and increasing accessibility through the great job that these companies are doing in attracting consumers and customers in D2C. With that, we summarize the presentation and move over to questions and answers. Just since we've had a number of speakers here, I move to the next slide, and we are all available here now to answer your questions.
Let's open up for that. Thank you for listening.
Operator, please help us open up for the questions.
If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for question. We'll take our first line. Your line is open. Please go ahead.
Hello. Good morning. It's Carl from the Kepler Cheuvreux. Can you touch upon the possibility for the brands to potentially play in mass market retail, or will this remain a D2C brand for the near term? That's basically the question I have. Thank you.
Currently, we are launching the Essity brands, TENA, Saba, Libresse, in the mass market. Modibodi has started doing a little bit of that in Australia. We do believe that D2C is the biggest opportunity for Knix and for Modibodi. That's really over to you, Joanna. You will run this business and what you see going forward.
I think, from our perspective, a dual approach strategy in the long run is the right strategy. We really see that consumers are buying at mass, and so for Essity to continue to have their brands at mass, I think makes a lot of sense. We have developed products that would be suitable for the mass channels and markets. But we also believe that continuing to pursue our D2C strategy is important as well, as this, the future of leak-proof underwear, we truly believe will sit within the broader intimate apparel space and will replace everyday underwear. We think it's important to have both.
It's also obvious with the huge amount of SKUs and the complexity of this business that it's very suitable for D2C. It's impossible in kind of brick-and-mortar retail to keep the assortment that Knix and Modibodi offers today.
Thank you.
We'll take our next question. The line is open. Please go ahead.
Yes, hello. This is Oskar Lindström from Danske Bank. I have three questions actually if I may. The first one, I suppose, will be for Fredrik, and that is the growth outlook in terms of sales growth, for both of these companies for the first half and if possible, for the budget for 2022.
Hi, Oskar, and thanks for the question. We're not giving any specific outlook for the immediate future, but as we have been alluding to the expected growth rate for the market and specifically also for both of these companies, not least Knix, is of course their growth levels will continue to be high. You've seen from the slide I showed earlier that the growth rate in 2021 was 97%. That may be kind of on the very high side, but generally speaking, growth is high. We're not giving any specific forecast, but of course these markets or this category is expecting to grow quite significantly.
All right. Thank you. My second question is, I suppose to you, Magnus, is did Essity have any presence in the leakproof segment before this? Will these brands be used sort of across the entire Essity platform? Also, will it be part of health and medical or consumer goods?
This is definitely a consumer goods product range, and when it comes to the incontinence care part, it's in the consumer space as well. This will fit into our reporting into the consumer goods business area. We launched leakproof apparel approximately 2 years ago now under the TENA brand, our different fem care brands, and also TOM Organic, the acquired brand through Asaleo, also has an assortment of leakproof. This is still in a startup phase, even though it's growing very nicely. With these two acquisitions and especially Knix, of course, we take a leading position globally. It's a huge step forward.
you know, how we will address the different markets and so on is really up to Joanna, how she wants to develop and run the Knix brand going forward. Of course, this is by far the biggest part of our leakproof offering going forward. Of course, with the stronghold in Australia, New Zealand and U.K. Of Modibodi as well. We will be leveraging all these strong and attractive brands.
Thank you. My final question is more general, I suppose. I mean, are these two acquisitions indicative of a wider shift in incontinence and I suppose in all the personal care market towards more sort of niche products, more SKUs, D2C, and if so, I mean, does Essity need to make more investments into these types of businesses or markets?
It's not that we need to make these.
within other product category?
Yeah. Thanks, Oskar. It's not that we need to make these investments. We want to make these investments because they're incredibly attractive. Over the last number of years, we've been talking about our success in feminine care, how we continue to grow market share more or less everywhere we are present, how we continue to be the market leader in incontinence care globally, and of course, we want to pursue that further. We see this increased interest in sustainability, in wellbeing, and that fits very well with this leakproof apparel trend that's very, very strong and that we believe will have the strongest growth in intimate hygiene over the next five years. It's definitely where we want to be. After listening to Joanna, I'm absolutely convinced that this is not niche.
It will be 20% at least of the overall intimate hygiene market. Listening to Joanna, assuming that everyone will be using leakproof apparel every day, this will be the mainstream and not the niche. Over to you, Joanna, what do you say?
That's the trend that we're seeing internally within Knix based on the consumer studies that we've done with their customer base is that people might try them for menstruation or for incontinence, but the convenience and comfort of wearing them every day and the discreetness in the way that we've built the products, they are products that people are reaching for almost every single day. We have a very long-term perspective on leakproof. We fundamentally believe that it is a core part of the future, not only of intimate hygiene, but of intimate apparel, and underwear more broadly speaking as well.
All right. Thank you very much.
Again, press star one to ask a question. We'll take our next question. Your line is open. Please go ahead.
Hello. It's John Ennis from Goldman. Good morning, everyone. My first question is just whether we can get a bit more detail on the gross margin structure, because I guess the 10% EBITDA margin looks relatively low compared to some of your other categories, but you did cite a high gross margin. Can you maybe quantify that in rough terms perhaps? That's the first question. My next question was on the sort of Knix growth rate. The sales growth was remarkably strong in 2021. Your sales doubled. I guess we're halfway through 2022. Can you give a sense of the current growth rates for the first half or a bit of a sense of what you're expecting, roughly speaking, for 2022 so we can think about forward-looking multiples here?
My third question, it really relates to, I guess, the net sales growth accretion you're expecting from this category, leakproof underwear as a whole, because you cite a 20% CAGR over the next five years. Is there a modest cannibalization effect that we should consider as well when we think about the sales growth accretion here? They're my three. Thank you.
Okay. I will give it a try. Yes, high gross margin, and for competitive reasons we've decided not to give details on that. They are very high and also from an asset perspective, some of the highest gross margins that we have in the business and enables significant investments in advertising and promotion and advertising and in spite of those significant investments having a 10% EBITDA margin. Without being more specific, it's good. It's asset light. Of course, we Knix, Modibodi asset, we buy these products, we source them externally.
Over to the growth rate, Fredrik stated already that we will not provide specific figures for this year or the first half. I think the 20% market growth is maybe something that could be used as a starting point because I'm sure this will be, as in some of our other categories also, varying between the quarters going forward. When it comes to the net sales accretion, it's too early to say if there will be cannibalization. We haven't seen that so far with the experience we have now from TENA and Saba and where we have launched our own leakproof apparel. We haven't seen any cannibalization yet.
There seems to be quite a lot of use, both of these leakproof washable products and the disposable products, but I think that remains to be seen. Fredrik, do you want to add something there?
No, not really. I think you said it, Magnus. Maybe on the cannibalization, obviously, when we look at Knix being present, as Joanna you said, Canada and the United States, and when it comes to feminine products, of course, we're not really active in or present in that market. We are very active, of course, in the incontinence side. So there could be a bit over time, in the longer perspective, cannibalization that may happen. But the net is certainly net accretion, so to speak, is certainly very, very positive when it comes to those markets. So generally, it is definitely accretive for sales. Cannibalization is expected to be relatively small.
Thanks. Thanks, Fredrik. That's a good point.
That's very helpful.
That, of course.
Thank you.
Yeah.
Again, press star one to ask a question. Once again, if you would like to ask a question, press star one. There are no questions at this time. I will pass the conference back to the speaker.
Thank you.
Okay.
Yeah. Over to you, Joséphine. We always do this.
Magnus, if you have any final conclusion, but I think you have already said this is a perfect match. This is the future. Do you wanna add anything, Magnus, before we end?
Well, I can add high growth, high gross margin, profitable, sustainable, incredibly attractive from a consumer and customer perspective, high level of innovation. It's a perfect match. We're really excited, and I look forward to working together with Joanna and her team and the team of Modibodi and growing this business very successfully over the next number of years. Thank you all for calling in and listening.
With this, we conclude.