Ready to go.
Welcome, everyone. Next presenter here we have is Gavin O'Dowd from the Haypp Group. Please enjoy.
Thank you all for taking the time to join me here today. It's greatly appreciated. Maybe just to kick off before I go to here, can I just get a quick show of hands? Who in this room knows what a nicotine pouch is, such as this? Okay. I don't need to start from absolute basics here. That's a pretty good start. Thank you. Let me just give a quick sort of summary of our investment case, and then I'll walk through in a little bit more detail, and hopefully I'll have a few minutes at the end for some questions. If I don't get them all, I hope to catch you guys out at some of the booths later on. Maybe a quick summary on our investment case as it comes through. One, we are an online retailer of nicotine pouches. We do not own any brands.
We sell all of the leading brands across the U.S. and six select European countries. We feel as though we've been benefiting greatly from two significant trends which have been coming through. One, the movement towards risk-reduced products. People moving away from cigarettes at rapid pace, and nicotine pouches is the fastest growing category in that, surpassing vaping and heat-not-burn products by far. We are also at the trend of online and the benefits of online for consumers for buying these products online. We have been performing quite well on the back of that. We have also been running with the basis of a shared economies of scale philosophy for the last eight years since I took over the business.
Because of that, we've been able to continuously improve on our offers to the consumers and also on our offers to our business partners, such as the large tobacco companies, and also on our scale around compliance with regulators. Everybody's been benefiting, but most of all the consumer from our scale on this place. Just to give some context on this when it comes to our scale, we're the largest retailer of nicotine pouches in the world, whether you talk online or offline. When it comes to online specifically, we're about 14 times the size of the second biggest player. We're in the nicotine industry, so for that reason, we shouldn't necessarily be raising money externally for it.
We have been driving all of our growth with internal funding to date, and we see no main reason why we should not be able to continue to do that. Since we IPO'd back in 2021, we have been growing by about 20% per annum in revenue and about twice that when it comes to profit. You have to bear in mind that when we IPO'd, two-thirds of our business was traditional snus products in Scandinavia. That is now become, and one-third was nicotine pouches. That has now gone in the opposite direction. Nicotine pouches for that window have been growing by over 40% per annum, and that has been the main driver of the profitability as it has been coming through. Lastly, all nicotine products operate in a highly regulated and complex area to work with here.
The benefits of scale that we have have been fantastic for being able to navigate that regulation and been able to dedicate enough energy and enough support to making sure that we are by far the most compliant retailer, either online or offline within the category, which gives us the license to be able to operate and continue to expand in a way that others can't. If I pull back from that for a moment and start with the bigger picture on nicotine pouches here, this is what's often referred to as the tobacco and nicotine risk continuum. It's well recognized by all health specialists around the world, including the World Health Organization, and it rates the full range of tobacco and nicotine products when it comes to the harm that it has on the consumer from left to right.
On the left, they rank them towards 100%, which is the likes of a cigarette or a rolling tobacco or a cigar or products like that, round towards significantly lower products once you get away from inhaling something which is burning. It does not matter whether it is tobacco or not. If something is burning and smoking, you should not be inhaling it 20 times a day into your lungs. We operate in this space here. We originally started with snus. That was the basis of it. When I took over the business, I moved us rapidly into nicotine pouches. In the last year to 18 months, across some of our European markets, we have also started to expand across for vaping and heat-not-burn tobacco products. We will only operate with products which are sub 5% the harm of a cigarette.
When it comes to the geographies that we operate within, our origins were in Sweden. We then expanded across to Norway, German-speaking Europe, the U.K., and more recently towards the U.S. Those markets, as you can see on the left, make up the vast majority of where the consumption of these products are already existing. There is a range of other European markets where these categories are starting to get traction, but it is insignificant today relative to the geographies we are already in. When it comes to where online is on this space, if I start off here, first of all, with total for online, you can see that across Sweden and Norway, where we have been pushing hard for a number of years, online is a significant share of the market.
It is also a significant share in Germany because there are some regulatory benefits for within Germany explicitly.
When I look at those three markets, we operate with an 80%-85% share of the total online market within that. To contextualize this, we are over 30% share of the total nicotine pouches within Sweden. We are over 20% share of the total nicotine pouches sold within Norway, and we are a significant share within the over half of the German-speaking Europe space as well here. The biggest challenge for us has been within the U.S., where we were later coming to the game, and there was not such a broad assortment of products within the U.S. because the regulatory environment for the last five years in the U.S. stopped modern nicotine pouch products coming to the market. You are very much dealing with what we will call first generation, others might call inferior products within the U.S. at this point in time as they come through.
We have about an 80% share of the online channel within the U.S., but it's still only 3%. This is where a lot of our focus is going at this point in time. If I take a quick look at our operating model, I think the first part of this is very simple. We are a marketplace online. We are like an Amazon for nicotine pouches, partly because the likes of Amazon and eBay do not do any nicotine products and never will. We buy products from the brand owners. We sell them to the consumers. I think that part of the business is reasonably well understood. Perhaps what's often less understood is that we package a lot of the information that we get and the data we get from the consumers, we aggregate it, and we sell it back to the brand owners.
We are the largest provider of insights to the industry globally at this point in time. I will touch a little bit on that further on. We also offer, similar to a lot of other online platforms, media within our platforms whereby new brands which are coming to market can generate awareness and trial of their brands on our platforms as it comes through. Just to contextualize this, our media and our insights generate roughly 10% of our revenue as we come through as a business. It is significant. It gives us some significant scale advantages as we go through on this. When it comes to how we view the world and the outside world and where it gets to and the principles behind our decisions, there are a few things that we sort of take for granted within this.
The first one is on the consumer space. We recognize that in quite an uncertain world, there's a few suggestions or there's a few assumptions we're prepared to make around the future consumer. One, the consumer is always going to want consistent value. They're never going to want to say, "I wish I'd paid more for that product." They're always going to want the broadest possible choice. They're going to want it curated so that they're guided towards the products which are right for them, but they're never going to want to say, "I wish I had less choice." Particularly when it comes to e-commerce, they're never going to say, particularly for this category, "I wish I had to wait longer for my product to arrive." For that reason, convenience is a key aspect to this one as well.
When it comes to the suppliers, they always want to operate with very credible partners who can help them launch their products and give them information on it, and partners who will always be compliant with laws and regulations so that there's no risk of blowback in such a highly regulated category for their products. When it comes to regulators, the first thing the regulators will want in every market is to make sure that these products only ever turn up in the hands of legal age users. In the U.S., that's 21. In Europe, that's 18. They will also want to make sure that the companies which are operating are complying with all of the local legislations and local licensing within it.
Lastly, our assumption is that technology will continue to evolve, and as it has continued to evolve in the last 5 to 10 years, it provides significant benefits for an online player to continue to offer these services more and more smoothly for the consumer, particularly when it comes to managing some of the regulation and some of the legal age access to the products. We also see that the largest player in this space, which is ourselves, tends to be able to benefit greatly from the onset in technology and has done in recent years and will continue to do so. Our strategy is very simple. We break it down. We used to call it a SPAC, but then some of those guys in New York had kind of changed the term of what SPAC meant. We had to change the letters around a little bit.
It was a search. It used to be search, price, assortment, and convenience. Now we had to change it to search, assortment, price, and convenience. These are the four key features which the consumer wants. I think the price, assortment, and convenience are relatively easy to understand. I'll touch a little bit on them. Perhaps the search one is something which is unique for our category here and where we are. Firstly, when you look at search, because we operate with products which generate a dependency, we're generally restricted from any paid marketing within our space. You cannot generally buy Google AdWords. You cannot buy TikTok advertising. You cannot buy Facebook advertising, etc. If you operate with nicotine products, there is a general policy within these companies that you cannot utilize digital advertising for them.
You will find adverts cropping up every now and again within those channels, but you will see them disappearing quite quickly and new ones cropping up again. This creates an environment whereby 97% of the traffic that we get to our platform on every given day comes from our organic positions within Google. We will run multiple stores across different markets. Within the U.S., we trade under two store names here. One is called Nicokick.com, and the other is called Northerner.com. The reasoning why we run multiple stores across each market is that if we optimize for having the leading positions within the organic ranking positions, the number one store will take the bulk of the traffic. The number two store will take the bulk of the remaining traffic. In some of the markets, we have a number three and number four.
Hence why we leave no oxygen for anybody else to come in. Now, when it comes to how you dominate organic rankings, there are a few nuances to this, but the base assumption behind it is whether it's Google or anybody else, they will always optimize that they prioritize sending traffic to sites where the consumers have the best experience. For that, they will look at four different fundamentals within it. They will look at the infrastructure, how quick are your sites to load, how easy is it to navigate, how quickly do the images render, etc. We build the vast majority of our front ends in-house with SEO as a primary chromosome within it. They will look at content. Is the content on your sites unique to your sites? Is it content the consumer interacts with?
Is it content that the consumers will refer others to along the way as well? Because of our scale, we have the ability to generate a quality and quantum of content beyond that of anybody else. We also get a substantial amount of content generated for us by the brand owners who want to use that content to engage on the brand equity of their brands. They will also take a look at what are the conversion rates within your site and what are the return rates within your site. Because we have 85% of our consumers come back to us a second time, particularly after they bought with us a second order.
All of this aggregates together to why, irrespective of which market we look at here, whether it is the U.S., Sweden, Norway, or the U.K., and this is equally valid for our German-speaking markets as well, you will see our stores will be the number one, two, three, and sometimes four within each of the markets that goes through. This creates a couple of dynamics to it here. One, it means that we get multitudes of the volume of traffic of anybody else coming through. It also means that even if somebody else can get their permits in place, get a site, get it up, get it running, because they cannot get traffic through to their site, it generates a scenario where they generally go out of business over the first couple of years.
I've seen maybe 80 competitors come and go over the last few years, and we still operate with 85% share of the channel in each of the markets. It also means we have an extremely low marketing cost relative to our revenue. Our marketing cost at this point in time is sub 1% of our revenue, not because we're not happy to spend more money on getting customers. They're very valuable to get, but because there's simply no viable option to go out and buy traffic to your stores because of the nature of the category that we're within. If I move along there from search, that's the primary aspect here. The second piece is assortment. And this is fundamentally different. Has anybody in this room ever smoked? Okay. Roughly how many times in your life did you change your cigarette brand? I'm seeing two fingers up there.
I'm hoping that means two rather than anything else coming my direction here. This is fundamental. Thank you. Thank you. This is a fundamentally different category when it comes to here. What we see across our consumers, and this is starting now in the last 12 months within the U.S. as well, is that firstly, the average consumer puts between six and nine different SKUs, mostly different brands, in their basket in any given year. They are putting about 2.4 different brands in their basket on any individual time they come and shop with us. People do not come to shop with us for a can. You come to us to buy 25 cans. You buy your month's worth of gear with us. You would generally run for multiple different products going through it because they are all very different flavors, different strengths.
You want to use different products on different occasions, whether it's the product you use for the morning is different to what you use for the afternoon, is different to what you use for the evenings, different flavors, etc. Because of that, it's creating an environment where there's a lot of new products coming to the market. You guys can see that even here in the U.S. in the last six months. What you can see now is about 30% of the products that we're selling across our portfolio are products that did not exist one year ago.
Most of these products are pre-launched with us, often six months in advance of them coming out into the mainstream market, because the brand owners want to see what will work and what will not work before they spend a fortune to actually go for nationwide distribution to it. For the consumer, this creates the benefit of come to us, and you can understand what the difference is between the products. In our European markets, we carry about 800 SKUs. You can see what the difference is within the products. You can sample what's right, what's not right for you. You can get learnings on where it is. You can also get access to products generally well in advance to what you can get in the physical universe for us. Assortment is a very important part for us here as it comes through.
I'm then going to go along, but before I get to pricing, I'm going to touch a little bit on our Media & Insights business and how that feeds into pricing for us here. Prior to taking over this role, I was actually the General Manager for British American Tobacco for Scandinavia. I was the guy who actually bought the first nicotine pouch brand in Europe for that company at the time, which is still the market leader in Europe at this stage. One of my biggest problems at that point in time was when you brought a new product to market, the two problems were, could you generate awareness of the product and could you generate trial? There's a huge demand for that.
We've created a range of solutions on the platforms from banners when you come in to proposing products to people as they're going through the checkout to when they've actually checked out and bought 10 cans of X and 10 cans of Y, would they like to try one can of product Z for $1 in the checkout as it goes through? All of this, we get a substantial amount of support in the form of cash from the brand owners to be able to get their ever-changing portfolios onto the market as it comes through. Across markets, we're generally perceived as controlling two to four times our market share when it comes to generating new trial and awareness of products. To contextualize that, in Sweden, we have a 32% share of market.
We're generally perceived as being accountable for about 64% or 65% share of the new product trials which goes through the market. In the U.S., we're about a 2.5% share of market. We're accounting for about 10% of the share of new product trials which is coming through because it's much easier to generate a new product trial online than it is when somebody walks into a petrol station to grab a can and go to the next place. In addition to our media offering, the second piece we do here is the insights piece. We collect a substantial amount of data. We have about 1 million customers that operate with us in any given quarter as it goes through.
We collect a substantial amount of data from them, both from their buying behaviors, and we ask them a lot of questions along the way, which means that we have become, we set up a section of the business called Haypp Labs back in 2020, and very rapidly, it became the leading consumer insights provider for the industry globally at this point in time. It helps them through all stages of the consumer funnel from figuring out where are their blank spots in the market, what should they launch, what's the awareness of the product when they've launched it, what is the trial, where are the problems that's not allowing for that awareness or that trial, down the whole way to understanding what is the loyalty, what is the price elasticity, etc. in it.
It also started to expand across about two years ago where they started utilizing our data much more so for M&A. Pretty much any public M&A transaction which has occurred in this category in the last two to three years, our data will be behind it. You will often see our data referred to within the large five nicotine majors when they're doing their quarterly results. More recently, they started leaning on our data where we support them for the regulatory filings. We can explain who is it that's actually using your products, what share of them came from smoking, what products did they smoke before, what age are they, what age were they when they started smoking, what age were they when they switched, etc. This is all coming together quite well.
If I put these two together, like I sort of alluded to at the beginning, the media and the insights generates about 10% of our revenue for us. This goes a long way towards why we can have such competitive offers for our consumers. It is a combination of that 10% for the media and insights. We also, it's generally accepted by the brand owners that when they sell to us, if they were selling to us at comparable terms to what they were selling to offline at, it would make 15% more margin for us because you only have one location in each country where you ship to. You never get returns. You do not need trade reps driving around from store to store. You do not need point of sale material. There is no auditing, etc. It is all much easier.
Now, generally, that 15% they give to us in the form of better inbound pricing and where it gets to here. Particularly to online, the economies of scale, particularly within our distribution, we have fully automated warehouses in all of our markets, which means that the variable cost for each new order is pretty low. You got to bear in mind that irrespective of brands, the dimensions of each product here are quite simple, similar. It is very simple for setting automation to run them. This gives us a huge pricing advantage to be able to offer to the consumer.
That combined with the traditional retail margins, which have been quite high across the nicotine industry for decades, creates an environment that in our core markets, such as Sweden and Norway, which are the most competitive markets in the world in this space, we still operate with a 20%-30% price discount versus offline, and we are able to continue to make money there. In our growth markets, because the retail margins are even higher since they are not as competitive of environments within the retail space, we operate with a 40%-50% discount. The benefit of that discount is a prime reason why consumers flock across to buy online from us. I have just seen the five-minute sign come up a moment ago, so I better hurry up a little bit. There is also the third aspect on our scale advantages here, which is on regulation.
Because of our ability to dedicate so much resources towards ensuring that we are at the forefront of legal age access only and be able to utilize technology to guarantee that. For example, here in the U.S., we connect every consumer up to the DMV database to confirm that that is the person, that is where they live, that is their date of birth before we will send any product to them. Very small variable costs, quite a significant fixed cost to get it up and running in the first place. Maybe a little bit of how our performance has been. Since the IPO, we've grown by about 40% per annum in nicotine pouches.
There was a big part of our business, which was traditional snus that you can see here in the middle, which is actually going into decline across the Swedish and Norwegian markets. We have been generating reasonably healthy improvements in our EBIT over that time as well. We did a Capital Markets Day two, three weeks ago back in Sweden, and we announced our new targets out for 2028. We expanded them out, and we said that since we IPOed, we have doubled in revenue, quadrupled in profit. Between 2024 and 2028, we believe we will roughly double in revenue again, quadruple in profit once more and where it gets to. When it comes to the spectrum we gave, we said we would say 18%-25% CAGR in growth.
This gives us a SEK 7 billion- SEK 9 billion, which is roughly $700-$900 million as it runs through. That will be driven predominantly by the growth in nicotine pouches, where we assume those growth rates will slow down significantly to 25%-30% relative to the 40%-45% that we've been experiencing for the last four years. I think the one market which will have the biggest impact for us is actually right here in the U.S., which is where we're dedicating most of our resource now. Subject, we just want to lay out our assumptions on how the market will perform. It's currently growing by around about 45% per annum at this stage, maybe closer to 50%.
If we assume that it will grow roughly at the 20% for the next four years, which I consider to be quite conservative, and that we go from 2.5% - 4% share, that gets us coming in at around about SEK 7.5 billion. I think you guys can kind of play around with these numbers yourselves and see if you think our assumptions sound reasonable on it. When it comes to profitability, our core markets of Sweden and Norway were always, despite them being the most competitive markets relative to traditional retail on the face of the earth, they were always reasonably profitable running at 8%-9% EBITDA as it came true. Much of that money we invested into our growth markets of the rest of Europe and the U.S., which moved into profitability in the beginning of 2024.
Hence, when you put both together, we've been operating with a sort of around about a 6% EBITDA margin. We invest roughly 2%, 1.5%-2% over time into our CapEx. Hence, you can see an adjustment here of around about 2% going through from EBIT to adjusted EBITDA as it comes through. I think I'm down to the one-minute gig here. Maybe just a quick one here on our balance sheet. It's pretty healthy. We do not carry very much debt. We're operating with less than one times debt of our earnings at this point in time, and it's been coming down. Our working capital does appear to spike on occasion. That is where we take opportunistic stock loadings before tax increases come in on the category so that we can continue to offer the consumer even better offers for the following couple of months.
Our CapEx, as I've said, has always been running below 2%. It has gone up as we've done a platform overhaul over the last 12 months and will continue to be there for Q1 and Q2, but we expect it to come back down below 2% again from there on in. Capital allocation principles is that we see we're still very much in the infancy of this journey when it comes to both the growth of nicotine pouches and the growth of online within nicotine pouches. We will continue to invest in our current geographies to take more and more market share as it comes through. After that, we have a good history of buying some businesses back when we were much earlier back in 2018 and 2019, which succeeded very well for us. If we see the right assets, we will continue to buy them.
The biggest challenge for us is not paying for good assets. It's actually finding good assets along the way. Only then, if we do have excess capital, and I don't expect we will over the next three to four years, will we consider returning capital back to the shareholders. That's a rough dynamic on us. If anybody has, we would always be out of the booth, but in addition, there's some very fresh material from us on our website over the last, that's about two weeks old from our last Capital Markets Day in early April. Do I have time for any questions? I have two minutes. Annie, please. Yeah. We position ourselves very much in that we're in the risk-reduced space.
We believe that there's about as many people using nicotine today as there was 10 years ago as there was 20 years ago. In fact, it's starting to grow again. Nicotine, there's reasons why people use it. What is becoming more consistent is that people do not, and I guess makes a lot of sense when you say it out loud, people generally do not want cancer, right? There's a sort of a general basis here that people do not want to go back to using cigarettes. Whether it will be a pouch or another form of nicotine consumption, the underlying growth in risk-reduced nicotine I expect to be continuous. Our platform is designed for providing those services to the consumer irrespective of how the products evolve over time. Please. illicit? Yeah. Not so much.
I think it's a much bigger concern in the vaping space than it is in the pouch space, and hence why we don't touch any vaping in the U.S. and where it gets to. The reasoning why illicit is such a big issue here is that, or for this category for vaping, is that pretty much every vape on the face of the earth is made in southern China in Shenzhen. They had a huge technology advantage when it came to creating duplicate vapes and illicit vapes that's coming into here. If you look at all of the technology suites which have come out of nicotine pouches, it all originated within Scandinavia, whether it's Zyn, whether it's On!, whether it's Nordic Spirit, all of those products came from within Scandinavia. You don't have the same systemic advantage for illicit products here.
You can also see that the FDA have now started approving all-flavored nicotine pouches. That happened there in late January in the last days of the Biden administration, where they got approved as being substantially better for the public health. There is no need for illicit products coming through because you can legally get world-class products onto the market. One last one, I think. Yeah, I think it's probably dedicated our energy and our resources to it. There are 36 million smokers in the US. There are 48 million smokers within Europe, but most of those are actually sitting in the countries we are already in, like Germany, like the U.K., etc. We are kind of saying go for the core, you know, go for where you can have millions along the way rather than picking all the poor chicken that are in the back here and.