Do you know that 400 million people suffer from incontinence? Last year, two out of five women in the world had to stay home from school or work due to menstruation? 2.4 billion people live without basic sanitation services?
More than 1.2 million people die each year from diseases caused by antimicrobial resistance.
What do you think about that? Do you care? We do. We want to improve the well-being of everybody by raising awareness, breaking taboos, and driving innovation. How? We are where you are. Our products are in your home, at your workplace, on your vacation. We make everything, from wearable technology for smarter care to digital solutions for sanitation and wound healing. You'll use our products from the day you are born until the day you don't need them anymore. But we need more talented people to help us move forward. People who wants to make a career and make a difference. Who want to make the world better by breaking barriers to well-being.
Work towards a circular and sustainable society.
In the end, we want more people like us. People of all ages and genders, sexual orientation, and ethnicities. That's what makes us better, not just as a company, but as people, because that's what we are, people who care.
Welcome to Essity's Business Area Web P resentation. Today is the first day of three when we will talk about Essity briefly before getting more detail on Health & Medical.
Hello, and a warm welcome also from me. I'm Joséphine Edwall-Björklund, Head of Communications, and today we are sending live from Essity headquarters in Stockholm. We will have three days, as you know. Today, we start focusing on Health & Medical, and tomorrow it's Business Area Professional Hygiene. On Friday, we will hear from Consumer Goods. Let's look at today's agenda. As Magnus said, Magnus will start talking about the Essity Group, and then we'll have a deep dive into our Health & Medical organization, where Ulrika Kolsrud, our President for Health & Medical Solutions, together with parts of her team member, will join on stage. In the end, we'll have a Q&A session, and you will find the dial-in details on the screen or on essity.com. With this, Magnus, I hand over to you. Let's start.
Thank you, Joséphine. To set the scene, in 2021, Essity had net sales of SEK 122 million. We were active in 150 countries with 46,000 employees. Our purpose is breaking barriers to well-being, and we do this with leading hygiene and health solutions. These solutions are re-represented in a portfolio of leading brands trusted by over 1 billion users every day. These brands are sold by our three business areas, three very distinct business areas that we have been presenting over the last year and in a form that we will also be fully organized by the first of next year, 2023. Very different in terms of customers, consumers, go-to market, competitors, but also with many, many synergies in the back end relating to the supply chain, to procurement, to R&D.
A lot of synergies and scale from being together, but a very distinct differences and a very customer and consumer-centric organization that we'll hear more about through these three days. All three of these business areas are benefiting from very favorable market trends, growing and aging populations, an increasing prevalence of chronic conditions following this, and increased disposable income. We know that people with a high disposable income tend to be more interested in hygiene and health. There are two strong mega trends, digitalization and sustainability, that are not specific to our industries, but they give us new opportunities to create innovations that give more value to our customers and consumers, but also the opportunity to differentiate from our competitors. Our current addressable market is EUR 120 billion.
Huge markets, of course. This means that approximately Essity today has 10% market share of the global market with a healthy long-term growth of above 3%, with big variations geographically and also between the different categories and business areas. We will learn more about this in the business area presentations also. Talking about the growth opportunities with our financial targets, our overall growth target is to be above 5%, combined organic and through acquisitions. Our adjusted return on capital employed target is to be above 17%, which was changed to a higher number in 2020 after we had achieved the previous target for an extended period.
Our policies regarding capital structure is to maintain a solid investment grade and to see that we have stable and increasing dividends over time. How we've been doing in this area, starting then with organic sales, a very positive trend, even including the two COVID years that did have a very, very negative impact on our top line for the simple reasons that lockdowns and restrictions leads to a lower consumptions of our hygiene and health offerings. In spite of this, on average, we have been growing at about 5%, SEK 5 billion per year, and with a huge recovery in the first nine months of 2020 to 18.4% compared to 2021. A big recovery coming this year.
This growth includes not only organic growth, but also a number of acquisitions, and we have been very active the last two years with over SEK 17 billion invested. All of these companies that you see here on the slide are contributing very positively, both to top line and to profitability. We are very focused on acquisitions in the areas where we see the highest growth opportunities, high gross margins, low capital intensity, and that's typical for all of these acquisitions. Moving over to the development of profitability, also an incredibly strong development over the last number of years. Even including the last year, 2021, we have an improvement year-over-year of over 5%.
What you see there is the combined impact of the COVID lockdowns and accelerating raw material and other costs. That was history. This is a very important slide, and because this describes how we aim to achieve our ROCE target to 2025, and we aim to achieve this in three distinct blocks, as you can see here. The first one being price increases, a strong focus. Price increases is what we do to cover our costs for raw materials, distribution, logistics, but also SG&A. Historically, and this time, we are always able to fully compensate for underlying cost increases with our own price increases because we have strong brands. More important for the longer term is the margin expansion in the second block here.
Margin expansion is about growing volumes, growing with mix, premiumization, higher margins, higher prices from improved product offerings, and consumer satisfaction. Increasing capital turnover by using our capital more efficiently, but also through top-line growth, which improves our capital turnover. I'll talk about these two first blocks now in turn. Starting with price increases, this is a slide that created quite some attention in our third quarter presentation. It shows the accumulated sequential development since costs started to really accelerate after Q4 in 2020. A massive cost increase sequentially quarter over quarter over quarter, and also the red line showing how we have been picking up and recovering that.
If we take that red line and just move it two quarters to the left, what this slide clearly shows that there's less than two quarters lag between the fact that we are encountering higher costs until we have compensated. We have been able to achieve this very, very fast with big variations between business areas and categories, as we'll hear more about later, but a huge achievement. As we presented during Q3, what's important to note is that we are for the fourth quarter guiding for stabilizing input costs and also guiding for approximately 3.5% higher pricing on our side sequentially compared to Q3. That's then about price increases. We will be able to compensate.
Over to the structural margin expansion that we're working with every year and that we've been working with over the last 10 years. We focus this on six distinct areas that you see here, and I'll say something about each of these. In addition to that, continuous portfolio optimization and performance management, of course. Starting with innovations, this is so important in order to raise prices now, of course also to gain leading market positions and build strong brands. We are really, really proud that 90% of our branded sales have a number one or number two position where we are present. The way we do this is to continuously with customer dialogues, customer insights, consumer insights, build new exciting solutions that our customers and our consumers prefer.
It's something that we measure continuously. This is not something that's achieved overnight. This is something developing year- over- year- over- year. This is then the percentage of our sales where customers and consumer prefer our products to other products. Typically, when they prefer a product, they stay with that product. It's a very, very important measurement. Moving into another one of our margin expansion priorities to lead in the fastest-growing channels. This is specifically an example from e-commerce, which we believe will continue to be the fastest-growing channel going forward. This accounts for 14% of our sales today, with big variations between regions and brands and categories.
We saw also this year, even though it's the first non-COVID year, a growth year-over-year in the first nine months of 20% in this important channel. It's still growing faster than Essity that also has huge growth in the first nine months this year. When it comes to geographies, we have a clear priority to grow in East Asia, in Latin America. These are markets that are growing very fast. They are under-penetrated. We see exactly what we're looking for here, increasing disposable incomes, higher spend on hygiene and health. The U.S., where we are to some extent underrepresented, and that is still today the world's largest hygiene and health market.
Sustainability is something that we are incredibly proud of in Essity, and here's a picture of our tissue site in southern Sweden that's completely fueled with biofuel. This is household waste from the local municipality that we convert to biogas and use to produce paper. Quite innovative and of course, in these days, highly relevant. It's just an example of one action that we're taking. We have eight important areas. We have clear, distinct targets and actions in all these areas. We were one of the first companies to sign up to Science-Based Targets. We're completely committed to the net zero emissions by 2050 and have strong ambitions for 2030. Within all of these eight areas, we have ongoing efforts to reach our short-term targets for 2030 and onto 2050.
Today's sustainability and efficiency is of course, very closely linked because being more efficient is using less resource and this is also good from a sustainability perspective. What we've been able to achieve over the last number of years and also aiming to achieve until 2025 at least, is a reduction in cost of goods sold from efficiency improvements by between SEK 500 million to SEK 1 billion per year. How we do that are some examples here. Over the last five years, we have a 20% efficiency improvements in terms of million pieces produced of personal care products per employee. We have 9% lower usage of energy per ton, so an energy efficiency measurement compared to 2010, and we're reduced our carbon emissions with 15% in Scope 1 and 2 compared to 2016.
It's a win-win for sustainability for our customers and of course, also from a cost and efficiency perspective. Finally, most important of all, a winning corporate culture. I can assure you that all our 45,000 employees are completely committed to delivering superior results that they are and have shown a lot of courage over these tough years with the COVID and the cost challenges, and that we will continue, as we've always done, to care for our customers and for each other, and doing that by collaborating across teams and with our suppliers and customers. Thank you for listening. I hand over to you, Joséphine.
Thank you, Magnus. Now it's actually time to hear the presentation about our business area, Health & Medical.
As global health priorities evolve, innovation must keep up. We are Essity Health & Medical, with a wide range of therapeutic solutions explicitly designed to care for you. We provide world-leading incontinence and skin care solutions for dignified care, compression therapy to manage and care for venous and lymphatic conditions, superior wound care for acute and complex wounds to prevent infection and manage all aspects of wound healing, orthopedics and medically engineered casts for fractures and ligament injuries, and solutions to deal with movement-related pain. In over 100 countries with highly trusted brands, we are continuously expanding, breaking taboos and stigmas through education and advocacy for health equity, supporting the fight against antimicrobial resistance, delivering health economic benefits to healthcare providers, innovating with patented medical technologies, and ambition to shrink our environmental footprint. We combine clinical expertise with modern design to support individuals, businesses, healthcare providers, and society.
By breaking barriers every day, we empower consumers, patients, and caregivers to live active and dignified lives at every stage of their journey.
Welcome, Ulrika Kolsrud. Nice to see you.
Thank you, Joséphine. Thank you. Why don't we start with putting some context to this? The Health & Medical business area stands for 18% of Essity sales
26% of Essity's profit. The composition of the business area, 60% of our business is Incontinence Care. Wound care stands for some 19% of sales, whereas Orthopedics and Compression Therapy accounts for 11 and 10%, respectively. We have 65% of our sales in Europe, 16% in North America, and then we have sales also in Asia and Latin America and Middle East Africa, making this business area truly global. If we zoom in on the nine first months of this year, we had a strong development in terms of sales growth with 10.8%, including organic growth and acquisitions. The gross margin, however, has come down to 37.3% due to the cost inflation. Following that, the adjusted EBITDA margin was at 11.8%, and the adjusted ROCE at 9.5%.
The cost headwinds have especially impacted our incontinence business, as incontinence products contain a lot of pulp and a lot of oil-based materials. As we speak, our first priority is to raise prices to compensate for these costs. In Q3, we managed to raise prices by a bit more than 6% in Health & Medical, which is a strong achievement considering the market conditions, but not enough to compensate for these costs.
Let's stay a little bit into the current environment before you take a deeper dive into your business. You said you had actually a good sales growth.
Yes, this is true.
Can you elaborate?
This is true. We are very pleased with the fact that we managed to grow Inco in healthcare during 2021, in spite of the market being quite hampered.
Yeah
by COVID-19. We've grown Medical Solutions now for six consecutive quarters, with double-digit growth in 2021 and a strong growth momentum also in this year. Besides the good organic growth, we have done four strategic M&As, ABIGO , AquaCast, Johnson & Johnson Ortho Tapes, and Hydrofera. These have increased our presence in high-yielding product segments and increased our positions in high-yielding product segments. With three of these companies being U.S.-based, we have also strengthened our position in this fast-moving market.
Four acquisitions, it's a clear acceleration in Medical Solutions. How do you see the future? Do you see more acquisitions to come?
Yes. I think we see opportunities for further acquisitions as we, especially in Medical Solutions, operate in quite fragmented markets, and we have the ambition to grow both organically and through acquisitions. With that said, short term, our focus is to integrate the latest acquisitions.
Yeah. Yeah. Just one more question on the current environment. It's a turbulent world. We all know that. We have seen cost inflation. It has heavily impacted your profitability. How are you managing this situation?
We are, of course, fully committed to restore our profit margins and enhance our profit margins. It takes longer time in Health & Medical than in our other business areas, as we operate in a regulated market, where we are dependent on the funding system for healthcare around the world. If we take incontinence in healthcare as an example, we have more than half of our business locked into longer-term contracts. Some of them are annual, but the majority is tender-based, with a typical contract length of three years. We do manage to raise prices also in this part of the business. The freedom to maneuver is dependent on the contractual obligations. We also work actively to increase the flexibility in this part of the business, for example, shortening the contract length.
Another part of the business is listing, where the pricing is set and dependent on the reimbursement system, and sometimes there are fixed or capped reimbursement levels. Price increases in this part is often subject to governmental decisions, and that doesn't happen overnight. What we do is that, while we work with price increases in the current reimbursement framework, we also work with industry associations to influence the reimbursement system and the reimbursement levels. We have self-pay, and there we have another level of flexibility. There we're quite flexible. I'm talking e-commerce and over-the-counter pharmacy, for example. We continue, of course, with raising prices in the coming quarters across our channels. We are... With these market dynamics in mind, we are pleased with the pricing development so far, but it's clear that we will continue.
Yeah. Good. Now let's hear a little bit about your categories.
Yes, let's do so. We have four categories: Incontinence Care, Wound Care, Compression Therapy, and Orthopedics. The base for pricing as well as for growth is the great offerings that we have across our categories. Our TENA Incontinence products range from thin liners for little leaks to highly absorbent products for heavy incontinence. We also have TENA skincare products specifically adapted to elderly skin. In Wound Care, we have products for all stages of chronic wound healing under the Cutimed brand, as well as a wide range of Leukoplast products for the hospital setting, so post-op dressings, surgical tapes, wide area fixations, et cetera.
Under the Leukoplast brand, we also have some specialized Band-Aids for the home environment to take care of a scratched elbow or a paper cut. In Compression Therapy, we have a comprehensive assortment of bandages, wraps, and compression garments for people with lymphatic conditions or venous conditions. We have JOBST garments for everyday use, as well as for special situations like maternity. We even have custom-made garments. In Orthopedics, we focus on non-invasive products, meaning products we apply on the body and not in the body. I'm talking casting, splinting, braces for fracture management, as well as different support products for after an injury, and physiotherapy products like strapping tapes. Our key brands for Orthopedics is Actimove and Delta-Cast.
One thing that is common across these different categories is that they target conditions that have a very high prevalence in the population. If we talk incontinence as an example, it affects the life of more than 400 million people worldwide. As many as one out of three women over 35 and one out of four men over 40 deal with urine leakage. That's more than what most people are aware of. I dare to say that the awareness about lymphedema is even smaller. Some are born with lymphedema, and then we have more than 150 million people that have lymphedema caused by, for example, cancer treatment or infection, or having other medical treatments of some kind. They are in need of compression garments to reduce the swelling and control the swelling.
Compression garments is also used for different venous conditions, for example, for chronic venous insufficiency. 5% of the population in mature markets suffer from chronic venous insufficiency. If that is not treated correctly, it can turn into a venous leg ulcer, so a chronic wound. Other type of chronic wounds are pressure ulcers and diabetic foot ulcers. It's 1.6% of the population that suffer from chronic wounds, mostly elderly. Acute wounds, on the other hand, come at all ages. The same goes for orthopedic injuries. I don't think there is anyone who's not experienced a broken wrist or an ankle sprain or something like that. There are hundreds of millions of orthopedic injuries to take care of every year.
Our products are also used for chronic conditions like arthritis, and 10% of the population over 60 suffer from the most common type being osteoarthritis. This high prevalence of the various conditions that I'm talking about here is also reflected in our market size, and we expect good market growth also moving forward since all of our categories are driven by an increase of the aging population and an increase of the prevalence of chronic conditions. The fact that we are in growing markets that are supported by favorable trends is putting us in a good position for profitable growth. We're also in categories that have high margins and low capital intensity, and as I said before, we have a good growth momentum to build from.
We also have some strong positions to build from, being number one in Incontinence Care, being number one in Compression Therapy, number three in Orthopedics, and number five in Wound Care, closing in on competition. We are well positioned for profitable growth. We are also well equipped for profitable growth. Many companies have strong medical expertise. Other companies are good at brand building, consumer insight, and other key capabilities for fast-moving consumer goods. Not many have the combination of strong medical expertise and strong consumer know-how. This is a competitive advantage for us. In the pharmacy channel, for example, we can see how this quite unique set of capabilities come to play. With Essity's state-of-the-art brand building capabilities, we have a wide portfolio of strong brands that makes us relevant to our customers.
With our medical expertise, we can support the pharmacy owners with clinical knowledge and also with training of staff. Thanks to our consumer know-how, we know how to bring shoppers into the pharmacy. Another strength that we have is our presence across the various channels. We are where the consumer and patient is, and we can also follow the demand and capture the demand if there is a channel shift. Thanks to our combination of B2B skills and B2C skills, we can also be successful across these various channels. Another critical success factor is that we have to delight or that we should delight all of the different stakeholders that we cater for. For example, we need to delight the payers, like health authorities.
We need to delight the healthcare providers like hospital leaders and owners. We need to delight caregivers, doctors and nurses, the business owners that I just talked about, for example, the pharmacy owners or medical distributors, and patients and consumers. These all have quite different priorities. The fact that we have a very deep understanding of their priorities and their needs in combination with strong R&D capabilities, that is what's behind our strong innovation performance. Because we have a high pace of relevant and insight-based innovations to continuously strengthen our portfolio of unique products and solutions. Speaking about unique products and solutions, one category in which we certainly have some really unique products and offerings is wound care. This gives us the right to win, and we have also gained position from number six to number five.
We have the ambition to strengthen our position even further, and we are well-equipped to do exactly that. Just listen to Karsten Hemmrich, who is Vice President for Global Marketing and Innovation.
Thank you, Ulrika. I have the pleasure to present two themes to you today that give us a leading position in the market. One being infection management and the other one being skin integrity. Let's dive right into it. From my early days as a physician when I worked on a burns unit, I still recall that we sometimes had patients where it was challenging to find antibiotics that still worked, and sometimes there was only one option left for treatment. This problem is called antimicrobial resistance, or AMR. We know from projections, in 2050, we will most likely face 10 million deaths per year worldwide if we do not manage AMR more forcefully. Antibiotics are too quickly losing their effectiveness, we notice that even established products like silver may face the challenge of resistance.
We at Essity have products that can prevent the dangerous incline in AMR. One of those unique product solutions is Cutimed Sorbact, a product that has a working mechanism preventing the development of resistance. For us, it is a great product. For society, it can be an effective means to push back antimicrobial resistance. We acquired the Swedish company ABIGO and their antimicrobial Sorbact technology in 2021, not only securing ownership of the technology but also strengthening our capabilities. Our thought leadership in antimicrobial stewardship is also reflected in the collaboration with United Nations Foundation. Sorbact is only one of several unique solutions that we have in our portfolio, giving us the right and reason to win in wound care. Our latest acquisition is the U.S. company Hydrofera. Their products and technologies have quite some similarities to Sorbact, providing scale in the U.S.
We have three R&D centers for Wound Care, one in Hamburg, one in Sweden, and one in the U.S. Much on infection management. Let me next take you to the topic of skin integrity. Why is skin integrity important? As a physician, a care-providing nurse, you need solutions that are reliable while doing no harm. As you see me here, putting this product on and gently removing it. Our Leukoplast and Fixomull portfolio, with its unique adhesion and surface technology, keeps the skin intact and takes away the pain when removing the products. Our latest launch, Leukoplast eco, is now combining these innovations with a sustainability boost, having 90% of the components of the product being derived from sustainable sources.
Our strategy in wound care builds on these multiple competitive advantages that I've outlined to you today, and our strongly growing sales numbers further confirm the potency and the potential of our unique solutions. We will continue to build on them to further accelerate the growth in Wound Care.
The recipe that Karsten has talked about now comes to life in our innovations. One of our recent launches is the extension of the skin sensitive range. Skin friendliness and skin integrity is a true differentiator for Leukoplast, justifying price premium and driving a positive mix. Karsten talked also about Leukoplast eco, we have sustainability integrated in everything we do, not the least our innovation processes. With every launch, we aim to take a step towards reduced climate impact. Leukoplast eco that we launched earlier this year is a good example of that. With 12% growth year-to-date in Wound Care, I think this shows that the recipe in Wound Care works. Moving to Compression Therapy, where we are global number one with 13% share of market.
Here, we have a very strong brand in JOBST and a strong portfolio to build on, so we aim to strengthen that position further. We will do that by winning with customers, winning with payers, and winning with patients. If we start with the customers, so typically fitters, for example, in medical device shops, they of course look for good patient outcomes. They are also looking for convenience in their everyday work. We continuously improve the convenience for them. We make it more easy to fit patients into the right garments, more easy to order products, more easy to access aftermarket services, et cetera. For the payers, we bring health economic benefits because with the right treatment of lymphedema, you not only improve well-being among a large population of people, you also save cost in society. Then we come to the patients.
You should know that most of the patients wear compression garments 24/7. What's on top of their agenda? It's comfort, and we bring superior comfort. An example of that is our JOBST Confidence line that I believe I talked about in the Capital Market Day a year ago. Now we have added more products to this range of next generation compression garments that is based on a unique and innovative technology. Now even more patients with lymphedema can enjoy to wear compression garments that feels like a second skin.[audio distortion] This was not to symbolize improved comfort, but actually to symbolize the other important characteristic of compression garments and what consumers are looking for. Consumers and patients, they are not only looking for comfort, they also want their products to be appealing.
What you just saw is our JOBST trend collection, that we have, the color trend collection that we have that enhances fashion in this category. With that, we move to Orthopedics, and there our 6% share of market brings us to a number three position. We do have different strengths in different segments in this category. In fracture management, we are number one. We aim to leverage that number one position to strengthen our share of market also in braces and support and in physiotherapy. Now you're going to listen to Koen Jorissen, our Global Therapy Area Director for Orthopedics, who will tell you exactly how we will do that across our sales channels.
Thank you, Ulrika. I would like to mention that the goal of an orthopedic treatment after injury is to get the patient back to movement. Essity has a unique offering and can address all phases to being active again with a comprehensive range of products. Please join me on our journey where we have a closer look into the segments and the related sales channels. Welcome to the cast room, where most of our fracture management products are used and which typically is in a hospital or orthoclinic. This segment contains all products and accessories related to immobilization. In the fracture management segment, we are number one worldwide with 25% market share. Essity offers an extensive portfolio in the cast room to cover all the needs of the cast technician and orthopedic surgeon.
In late 2021, Essity acquired the company AquaCast, which produces and markets a waterproof cast padding. This allows immobilized patients to wash their hands, shower or bathe, and further strengthens our leading market position in fracture management while extending our portfolio offering in the cast room. As the undisputed global market leader in fracture management, we will further expand our presence in the cast room and win by being the best partner to our customers. Next to fracture management products, there is an increased use of braces and supports in the cast room. Braces and Supports is the second segment in Essity Orthopedics, which are off-the-shelf products such as walkers. They require less time and skill to be applied, which drives increased usage.
Join me to my visit to a pharmacy that next to the cast room is our strategic focus for growth in braces and supports with higher profit margin. Braces and Supports is a EUR 2.5 billion market worldwide and our largest opportunity for growth. Actimove is our global brand in Braces and Supports, and these products are medically engineered based on biomechanics and stand for excellent functionality to help manage pain. The majority of orthopedic injuries are minor to moderate. They can be acute after a sports injury, as well as chronic conditions like osteoarthritis that develops with age, but all seeking pain relief. We win in the pharmacy by bundling our Actimove portfolio with a strong TENA and Leukoplast position supported by powerful marketing programs. Shoppers also expect to find physiotherapy products next to braces and supports in the pharmacy.
Let us have a closer look into this segment. This segment contains our strapping and taping products and non-adhesive bandages. After the recent acquisition of Coach, Zonas, and Elastikon in the U.S., we have become the global market leader in physiotherapy. Essity has a strong position within professional sports clubs all over the world, as our products are considered best in class. As the majority of orthopedic injuries are minor, and self-medication by consumer is a growing trend, we will make in 2023 our well-known branded physiotherapy products as co-branded products available under Actimove in both profitable online and pharmacy channels. This will allow active individuals to continue to do what they love while providing pain relief when they need it most. Thank you all for making the time to travel with me into the various channels.
Hope you now have a clear understanding of how successful we are already in certain channels, and will be even more successful in the future having this unique, differentiated, comprehensive portfolio in the various segments. Now back to you, Ulrika.
Thank you. With the acquisitions that Koen talked about in physiotherapy on top of a good organic growth, we have enjoyed 37% growth in this segment. Overall in Orthopedics, we have an organic growth of 8% in the first nine months of the year. Now, last but certainly not least, let's move to our biggest category, Incontinence Care. We are the expert in Incontinence Care, leading and shaping the market, and we aim to continue to do so. Today, we have 22% share of the healthcare market globally, with 14% in North America and 36%, so close to 40%, in Europe. What has taken us here is a combination of strong go to market, superior products, and a holistic offer. When we talk superior products, I want to highlight TENA ProSkin Flex.
This belted product that is a TENA innovation from some years back is making it more easy and ergonomic for caregivers to change Inco protection. It also has the TENA ProSkin technology that leaves the skin dry and healthy. Now we have introduced new features to this product that makes it even more convenient for healthcare staff, thereby supporting care efficiency in these times when there is staff shortages. This is a good example of how we enhance superiority of our premium products to justify price premium and to drive a positive mix. Another part of the recipe, as I said, is our holistic offer, and this makes us the best partner to healthcare in their ambition to provide good quality care at the lowest possible total cost of care.
Our wide range of TENA products that we've talked about earlier is of course part of this holistic offer, as is our digital solutions that support cost efficiency, individual care, and sustainability. On top of this, our customers have access to our profound experience and expertise in incontinence care through our TENA trainings, through our TENA Incontinence nurse advisors that provide clinical support, and through tools that we have developed for their benefit, like TENA Incontinence Care plans. This holistic offer that we call TENA Solutions, that really makes a difference. 95% of the nursing homes that have applied TENA Solutions experience an improvement. In a recent case study that we have done, we can see that using TENA products in the right way can reduce healthcare staff time up to 50%.
We use these type of results and outcomes to shape the market towards a total cost approach. To purchase incontinence products on lowest cost per piece is not cost efficient. You have to think about costs for laundry, cost for staff, et cetera. We will continue to influence towards a total cost approach, towards value-based procurement, and towards a reimbursement system and levels that are adapted to an inflationary environment and that allows for a good quality care. In those markets where we do not have a reimbursement system that allows us to have healthy margins and allows a good quality of care, we focus on other channels. That brings me to our expansion strategy because with the pressure on public funding and healthcare staff shortages, there is an accelerated trend towards home care, self-care, and self-contribution.
Family members, they need to take more and more responsibility to care for their loved ones, and we aim to capture these market shifts that we see across our different categories. We will win in home care, we will win with caregiving relatives, and we will expand in self-pay by having the relevant assortment and innovations by investing in A&P, and not the least by leveraging this combination of medical expertise and consumer know-how that I talked about before. Another opportunity for profitable growth is geographical expansion. Not the least in Medical Solutions where we have the ambition to grow double-digit in D&E markets, both through organic growth where we're already present, as well as by investing in selective new markets.
When it comes to offers, we see opportunities of expansion of our sustainable offers, but also expansion in continuum of care. Now I have Anand Chandarana with me to explain what we mean with that. Anand is Vice President, Sales Excellence and New Business. Welcome, Anand.
Thanks.
Over to you.
Thanks, Ulrika.
It's true that we continue to innovate with solutions that support consumers, patients, and caregivers in managing conditions. This is the mainstay of our business and represents an addressable market of around EUR 15 billion across our core categories. We think we can do more. We believe we can impact healthcare outcomes in a better way, and we think we can tap into new markets by expanding along the continuum of care. The continuum of care describes how healthcare providers see patients moving from preventative care through to medical intervention to rehabilitation and even maintenance. You may ask, why is expansion along the continuum of care important to Essity? Well, simply put, it's because we reflect and we are responding to the evolving focus of health systems around the world.
They now put more emphasis on prevention and remote monitoring, both to preempt conditions, but also to preserve well-being in patients and consumers. The evidence of this shift of focus is very, very clear. We see that between 2015 and 2019, 2/3 of OECD economies increased the proportion of healthcare spend on preventative care. If we look forward, I mean, if you take 2019, 18% of global healthcare spend was dedicated to prevention. If we forecast forward, in 2040, this is expected to rise to over 60% of healthcare spend dedicated, devoted to preventative care, and we really want to be in that. What are we doing about this?
Well, firstly, it's clear, and you can see from the slide shown, that we are quite deliberate on where we put our efforts, our focus, and where we explore. That is based on where we feel we have the highest ability to win, which is based on legacy positions in the different therapy areas. Also where we see the absolute market size big enough and growing enough for us to take a position. Some of the examples that I can share with you about our expansion along the continuum of care is in Wound Care, where we position dressings with Sorbact and Hydrofera technology on postoperative wounds to prevent surgical site infections. Another is the use of mobile apps to assess patients and even select products from our portfolio.
We do that to a good extent within the compression therapy and wound care areas. Probably the area we're furthest ahead with is incontinence care, where we now have commercialized the solutions TENA Identifi and TENA SmartCare to optimize care delivery via remote monitoring.
This is totally right. Actually now we will, I will welcome Axel Nordberg, who is Global Director for Digital Solutions in Incontinence Care. Axel, I think the solutions that, Anand just talked about, we are continuously sharpening these offers. Even more importantly, you now have some recent new evidence that this is the future of Incontinence Care, right?
Absolutely. In fact, if we take a look at the next picture, we already know that TENA SmartCare provides value to our customers. For example, we see up to 28% of waste reduction, and we see that we can provide up to 29% fewer leakages and also a significant reduction in response time. This is absolutely great, but what we also see now is an increasing awareness around these things among payers and policymakers. To take an example, in U.K., TENA SmartCare was recently selected as a part of the Greener NHS programme to support a more sustainable healthcare. The first trust implemented in 2023 has the potential to reduce the CO2 of incontinence care with up to 15%.
If we take Belgium as an example, TENA SmartCare again was piloted recently and the conclusion was that smart incontinence care increases the well-being of residents and also lowers or decreases the time spent from caregivers. The conclusion again was that more individualized care, sustainable care, and lower waste, which means that the end conclusion in this was that this is an absolutely must-have going forward. We also were recently labeled in the Netherlands as sensible care. On the European level, Essity was recently invited on a workshop on sustainable consumption. Essity was specifically invited to present TENA SmartCare and TENA Wear around the sustainable consumption. If we take a look at this, we see that this is basically a new paradigm of incontinence care going forward.
That things like sustainability and also the more efficient care and also the better outcomes that we can provide becomes must-have in incontinence care going forward. TENA SmartCare can provide an important impact in this field and also give us a stronger premium position at Essity and with TENA.
Thank you, Axel. I think these are some fantastic results, and the recognitions really show that we are doing the right thing. Thank you again.
Thanks.
Anand, why don't you stay?
Sure.
I will come back to you in a minute because, before we wrap up, I really want to talk efficiency improvements. We work with continuous efficiency improvements in our supply chain. We work with continuously optimizing and reducing material usage in our products through state-of-the-art technologies, as well as through value engineering. We work to automate and digitize to become as efficient as possible in our internal processes. In Health & Medical, on top of this, there is one area that is especially important for efficiency improvements. Right, Anand?
Absolutely, Ulrika. Just as you say. The commercial model in the med tech environment is traditionally associated with a high cost to serve. We deploy, and others deploy a lot of feet on the street or resources, both to interact with our customers and reach them, but also to deliver important parts of our value proposition, like education and service. While we expect better leverage of our cost to serve over the coming years as we scale our Medical Solutions business, we do put a lot of emphasis on sales and marketing productivity. The way we interact with our customers has been changing over the past few years, but over the last two, there's been a pronounced shift in the way we work and also in customer behavior. We see higher overall digital maturity in society.
We see a customer preference for more digital interactions, we also see improvements or advancements in marketing technology, which allow us really some opportunities to capitalize on. Whilst our sales teams remain critically important to our go-to market, what we know is that we can leverage the digital and omnichannel interaction model to a better extent to optimize our SG&A investments. Some of the examples that we've already put in place are, one, having a digital marketing engagement team installed. This team executes digital marketing campaigns for our country organizations, and it does it in a precise and efficient manner, serving our sales force with high quality leads. This is something that we've actually leveraged from our B2C knowledge in the organizations, which gives us kind of a unique position.
We've employed what we call a blended selling model amongst our field sales force, where we mix virtual and in-person interactions with our customers because they prefer it that way, to even increase the intimacy. We sometimes even increase the frequency of calls and interactions with our customers by using the same resources. Thirdly, we've started seeding what we call inside sales teams, so purely virtual or remote sales forces to interact with certain customer segments where it makes sense, and we see that also as a good leverage of our resources and capabilities. It's all really about improving customer experience, but also about leveraging some of the opportunities with efficiency in SG&A.
Thank you, Anand. If I now summarize our priorities to drive profitable growth and to contribute to Essity's ROCE target, you find both enhanced customer experience and efficiency improvements on that list. Needless to say, price increases is a key priority, as is innovation. I'm talking about innovation to drive differentiation and pricing power, but also to improve cost position and support sustainability. Innovation is driving growth. We continue to have high growth ambitions in Health & Medical, with specific focus on accelerating growth in our highest margin areas. With that, I think we open up for Q&As, right, Joséphine?
Yes. Thank you, Ulrika, for this interesting presentations. Now we also have Magnus joining, so we will open up for the Q&A session, and you will find the dial-in details on your screens or at essity.com. We're welcoming a lot of great questions. Before the first question, though, Magnus, what are your key takeaways from today?
It's that we have a fantastic business already today and so many opportunities, and these presentations make me really excited and positive for the future. Really, really interesting and many opportunities.
Good. Please, Operator, now you can open up for the first question.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. Please ensure the mute function of your telephone is switched off to allow your signal to reach our equipment. Again, star one to ask a question. The first question today comes from Oskar Lindström of Danske Bank.
Yes, good afternoon, and thank you all for those presentations. I think I appreciate very much this. It's the first time that we have this, that you have these focus on a specific business area, which is very helpful. I have two questions, if I may. The first one is in the Health & Medical segment. I mean, you described the factors sort of holding back the pace of price increases that, you know, contracts and tenders and so on. What can you say about the size of price increases that you are expecting going forward? That would be my first question, I guess to you, Ulrika. The second one is on acquisitions for the overall group. I mean, and growth.
In the past, you've had this sort of strategic triangle showing where the focus for Essity is in terms of growth and acquisitions. I noticed we didn't see it in today's presentation. Is that still sort of how you like to present your strategy? That's my second question.
If I start with the pricing question. As I said, our ambition is to restore our profit margins. It's more that it takes longer time in Health & Medical due to us operating in a regulated market. It's both about the contract lengths and the structure of contracts, but also about the reimbursement systems and levels in the reimbursement. When it comes to the size of the price increases, it's also very different across markets and these different segments. As an example now, we have worked with this shaping of the market and together with industry associations, try to change pricing levels. In the Netherlands, the health index has now increased to 9.5% as from January, which will have a positive impact.
It's these type of decisions that we need to shape for and influence for in order to drive our price increases. It might not be the full price increase at the same time, but then we will continue, because as I said, our ambition is to restore profit margin and compensate for the costs.
All right. Thank you.
Good. To the strategic pyramid, for those of you who haven't seen it's a pyramid based on our categories with Medical and Feminine Care, Incontinence Care at the top, followed by Professional Hygiene and Baby Care, with Consumer Tissue as the base. What we showed with this pyramid was that our strategic intent from both an M&A, but also from an organic perspective, was to grow the top of the pyramid faster while focusing on then improving margins at the bottom of the pyramid. This is very much what we've been working on. Of course, you have challenges or opportunities that change the shape of this pyramid anyway.
For instance, we have significantly higher price increases in Consumer Tissue currently than we have in some of the categories at the top of the pyramid. The pyramid priorities are still unchanged. There's no difference. Maybe a way of thinking around this is that we have three pyramids, per each business area with really interesting opportunities to grow both organically and through acquisitions in all three business areas. So in Ulrika's Health & Medical, of course, it's all very attractive, and we should find opportunities to continue to do the type of acquisitions that we've done in Wound Care, but also in other areas. While in Professional Hygiene, it's a lot about the adjacencies. It's similar to the Legacy Converting acquisition that we did earlier this year, specializing in advanced wipers.
The same in Consumer Goods, where we did the two leak-proof apparel acquisitions, Knix and Modibodi. There are really attractive, interesting pyramids in all three business area. That's the way I'd like to reposition it. Thanks for the question.
Thank you.
Again, it is star one if you'd like to ask a question. The next question is from Faham Baig of Credit Suisse.
Hi, guys. Good afternoon, and thank you for the presentations as well. I'll take two as well, if that's okay. The first thing I want to try better understand is where are we with the integration of the Medical Solutions business and the Incontinence business with regards to the sales force in particular? The sort of follow-up from that is you presented an efficiency program through focusing on an omnichannel approach, which sounds highly intriguing. Are you able to maybe quantify to what extent that could potentially reduce your current sales force in the division as well? Where are we?
How many sales force do we have in Health & Medical right now? Then my second question is probably one for Magnus, but how does the business manage capital decisions and tensions between the retail and the business-to-business channels, particularly within Inco, given one of the areas may be slightly lower growth than the other?
Shall I start with the integration then of Inco and medical sales force? We are integrated where we want to be integrated because we structure our sales force based on how we can best meet the customer needs and the consumer needs. In the pharmacy, for example, we have a joint sales force in most of the markets because there we have a benefit in going together as one, as one company. We can build on the strong position for TENA in order to gain listings also for example, Wound Care and Orthopedics.
Also in the hospital channel, by having a key account manager approach that is across our different channels, or sorry, our different categories, we have a better negotiation power, and also we have a wider portfolio and become more relevant with the customers. With that said, there are some parts of the business where it's important to have dedicated sales people. Once you have reached a commercial agreement on the key account management level with the hospital, with our full portfolio at hand, you also need to convince the clinicians, for example, in the cast room or in a wound clinic. In those places, it's very important to really know and be the expert on that specific therapy area. In those cases, we have dedicated sales forces for that reason.
We have integrated in the sales force Inco and Medical to the level that we want to integrate it. Maybe to talk about this, I mean, there are other synergies between Inco and Medical that are important besides the go-to-market synergies. Magnus, you talked about R&D, and I think that is a typical example where things like absorption, and skin health and skin integrity, these areas are relevant across Inco and Medical, there we have synergies. Also we should remember that a lot of the patients that experience one of the conditions also experience the other condition. For example, many people that have chronic wounds, they also are incontinent, and the same with lymphedema, for example.
We build knowledge about the consumers and the patients and about caregiving relatives, for example, that we use across the categories. That was a bit of a longer answer to that question. Maybe you can take yours in between, Magnus, and I'll come back-
Yeah
... to the sales force and so.
Sure. I mean, we see efficiencies, but I don't think we're providing any specific numbers yet. Definitely going forward in light of the current inflation, there's an increasing focus on SG&A costs of course in general for us, like for any other company. When it comes to how we allocate capital, very much according to the strategic pyramid or the overall priorities, and this goes both for how we allocate for organic growth and for M&A. As I think it's clearly reflected in the acquisitions that we have done over the last two years. Of course, different hurdle rates for different types of business and comparing to other opportunities in the short term and in the longer and medium term.
Of course, also always comparing to doing nothing or doing something later. It's a very strong priority with where I'm very much engaged myself, of course, prioritizing between the different business areas and the different categories.
If I then go back to SG&A, I just want to emphasize, I mean, we have thousands of people in the sales force. What our ambition with the efficiency improvements is not to reduce the sales force. We need all the people in the organization. It is to get more mileage out of the sales force to accelerate our growth. That is our ambition with that program.
That's a good point.
Also to become, as Anand was talking about, also to increase the customer interaction and the intimacy with the customer. Not only do we become more efficient, but we also can interact with the same customer more times and in a more effective way. We can reach more customers with the same resources when we use digital tools and this type of technology.
Faster profitable growth.
Exactly.
Okay. Good.
Very clear. Thank you very much.
Once again, please press star one to ask a question.
There was somebody who tried. Do you want to try again? If not, Operator, you can take the next question and see if the other person can come back.
There are no further questions at this time.
Okay. I think we conclude today's session. Thank you, Ulrika. Thank you, Magnus. Thank you, all of you, who called in today. We hope to see you again tomorrow when we'll make presentations around the business area Professional Hygiene. Goodbye and see you tomorrow.
See you tomorrow.
Thank you.