Good morning, and welcome to the presentation of the Linde and Sprungler Full Year Results 2020. Martin Hoek, CFO of the group and me are very pleased to provide you in the next 30 to 40 minutes with a detailed insight into our business activities in the highly challenging past year. First of all, I'm happy to present to you our group management members that have been again highly instrumental in achieving the presented results. In years as 2020, it becomes even more important to count on the insights and fast actions of a very strong and highly experienced management team That is unchanged to previous years. I'm very happy to count on Jennifer As General Counsel, the 3 country market responsibles Adalbert, Alain and Rolf Guido in operations and of course, Martin as CFO at my side today.
Today's agenda. First, we will give you a overview of the results. Then we follow on in the details of individual markets. The financials, Sustainability is a big theme nowadays and of course the outlook into the next 2, 3 years. The key figures and achievements in 2020 is the next chart.
The sales performance was a total of €4,000,000,000 Sales and an organic achievement of minus 6% already has been published in January. I'm very pleased to report that thanks to measures, initiatives, quick reaction in place, We achieved an EBIT of €420,000,000 with a margin of 10.5%. Net income is €320,000,000 with a margin of 8%. Those results are fully in line with the forecasts we have given in July. Very positive in our view is the development in operating cash flow and mainly in the free cash flow where we reached €470,000,000 or 11.8%.
Equity ratio suffered somewhat From the U. S. Dollar development, that declined strongly by roughly 10%, but the ratio still is very positive with a 57%. Further achievements during the year include Strong gains in market shares in most countries, improvement in the U. S.
Organizational setup and performance, The doubling of our e commerce business and the acquisition of our minority partner in Brazil as well as the franchise partner in Italy. Another very important fact for me is the reach Of the target to supply 100 percent traceable verified cocoa beans and last but not least, Not to neglect an increase of the ordinary dividend by 4.8% or CHF 50 to a total of CHF 1100. Now let's get to the most important one that accompanied us last year. That is how did we respond to the pandemic. And if we look at what happened last year, Then the fact of the pandemic closures, Easter just hit us some weeks of the last year's press conference.
First of all, we had to make sure at that time to apply all protecting measures for our employees, what is definitely a big challenge in our factories, making sure that we can maintain the supply chain without these eruptions that we can supply raw material, pack material And as well to control the logistics in and out of the factories that was a huge challenge. Fortunately, we are well stocked. We were well stocked last year and we had processes in place that needed quick decisions for adjustments what we finally well achieved. First reaction in finance was clearly to make sure we minimized costs in all areas and optimized cash management. Net free cash, for example.
Important to know, We did not save in R and D. We did not save in marketing nor advertising in order to make sure we can assure continuous future growth. In all those efforts, Our frontline employees in factory, logistics, purchasing have been key to make sure our product Get to the consumers. My great thanks go to them all. Now let's move to the next part of our presentation.
That is to give you some market insights into the individual geographies. First, I show you the overall split of sales. The Europe last year performing best with only a minus of 2.9% versus previous year. North America, minus 6.8%, and therefore, it is dropping below 40% of the total share of sales and the rest of the world area was heavily hit. Duty free was the main reason, but as well developments in emerging markets as Brazil and South Africa that were weak.
Before we go now into the individual markets, I would like to give you a overview of where we were hit and what happened indeed due to the COVID-nineteen impact in the individual businesses. Now if we go into the channels and let's go for the channels then, of course, the Positive part was we were clearly increasing in our online sales channels. Online was doubling last year to a total of roughly 5% of our sales. At the same time as well, we were doing very well in wholesale. We were growing in most of our markets heavily in market shares.
If we look at the negative side on the channels then of course We were clearly hit by the fact that we have roughly 500 stores. Now those 500 Stores depending on the country, depending on the market was closed. They were closed during the most Important Easter season, but as well during the rest of the year, it was a little bit on and off depending on the lockdowns in each individual market. You can imagine that was hitting us quite heavily. If we go into the categories, The product categories, the most positive one is that we were growing with our Clear, focused products that is Lindor and mainly as well Exelon's and Exelon's was growing close to double digit.
Where we were hit in products was Easter and Christmas and with that the whole business in seasonal where Lindt is as a premium producer very strong. Now going finally to geographies. In geographies, the positive part is that we were growing In markets in big markets in Europe like Germany, we were growing in the U. K. We are growing Nordics.
You see it on the chart. So we have a lot of products and markets where we had good growth. Ghirardelli baking was as well a very exceptional performance. Now on the negative side of the geographies, We have emerging markets that were hit heavily in the whole economy. We had as well on top of All that we had clearly duty free because as you can imagine in duty free no traffic at airports And duty free is a big business for Lindt and Sprungler.
That gives you an overview what generally happened. You can say Stores were hit, duty free was hit and last but not least as well I didn't mention Lindt Italy That is heavily dependent as well on the so called traditional stores that are little Independent shop owners that of course as well were unfortunately hit very much last year. Now let's go to the individual markets. We have the market split Europe. And if we look at Europe, Single biggest market is clearly Germany by France and then followed by U.
K. Now U. K. Overtook Italy In 2020 for the first time. Then Switzerland is ranking number 5 In this European group and included in the rest of Europe are Spain and Austria taking rank number 6 and 7 and as well performing quite well last year.
If we go to the highlights in Europe, the good news are market shares. We made good progress across all markets, gaining in the universe of Nielsen in grocery. The COVID impact is seen via closures of own stores, missing tourism and lockdowns during the seasonal business. As I said, the biggest hit we had in Italy due to the very big Easter business we have in that country. On the product side, we last year successfully launched Hello Vegan in Germany.
And Lanesquares in Switzerland are just hitting now the market. Both products Are doing very well according to the first reading of sellout results. Other achievements to mention include the opening of the biggest Lindt stores here in Kirschberg at the home of chocolate and as well the acquisition of the Lindt store network of Select Trade, our franchise partner in Italy. Now to lighten a little bit the presentation, I I'm pleased to show you a TV spot that is actually just aired in Switzerland for the launch of our Linde squares. Now let's get to North America and the in the market split.
In combination, there are 3 countries. It is Canada, U. S. A. And Mexico.
And this geographic segment reached a total of CHF1.5 billion. Clearly, leading market is the U. S. With the 3 companies Lindt, Girardelli and Ros Stor followed by Lindt Canada and Mexico. The 3 U.
S. Brands are complementary with The Lindt product or the Lindt company being a European specialties brand, Highly premium, we have 2nd Ghirardelli with a San Francisco domestic U. S. Heritage And last but not least, Russell Stover covering assorted and seasonal pralines mainly as well During the main seasons, they are very strong in Valentine's, they are very strong in Easter and last but not least as well in the assorted products during the Christmas period. Now all three companies they reach a weight of roughly 1 third of global Lindt sales.
Now let's get to the highlights in North America. And as in other markets, as I said before in Europe, the store closures, Seasonal gifting, Easter, Christmas and the Ghiradelli food service were impacted most. The good news again are that the market share gains we achieved are very substantial, with all brands in all 3 North American markets. To be mentioned on the positive side is as well That the Ghira Deli Baking division benefited from the fact that the in home food preparation including baking increased strongly in the market. Now the last 2, 3 years, we reported on needed Streamlining of our operations in North America.
I'm very proud that I can further report now positive news from our ongoing projects for improvements of the U. S. Business, be it in structure and as well processes. Number 1, logistics, combining logistics among the 3 companies. That project in the meantime has been completed successfully.
If we talk about production, we unfortunately had to close one of our Russell Stover factories. That as well is completed. The project started in June 2020. Now the next one is that we as Well streamlined our retail store network among the 3 companies. And last but not least as well, we out towards our merchandising force.
In combination, all those measures clearly will strengthen our U. S. Network among the organization. Now let's get to the Rest of the World segment. And as I already told you, the duty free and emerging markets sales with own Linde units and distributors suffered economically.
The duty free business came after a good start in the 1st 2 months in 20 20 practically to a halt. On the positive side, we have 2 markets doing very well. It is China and Japan with over 10% respectively 7% of sales increases. Despite the short term complex business environment, we look definitely forward via a unchanged Strengthening of the store network in Japan and Brazil. And in Brazil, we in addition last year could acquire the minority share of our joint venture partner.
Now again, to give you a little bit an insight into our activities in China, a huge market in chocolate and as well clearly with a lot of potential. And I show you the TV spot that was broadcast via digital channels on the occasion of the Chinese New Year 2020. The TV spot is starring the well known Chinese actress Xinxilei, who supports our advertising activities in China. Last but not least in my presentation of the actual 2020, I would like to Look at the e commerce and digital performance last year. We started in 2018 actively to strengthen our e sales by developing and afterwards implementing a OCR omnichannelretailing strategy.
This includes the sectors the own e commerce, Our stores, global platforms like for instance Amazon and the so called click to mortar customers That is our customers like cooprontoortesco.com where as well they are strengthening their efforts in that area. We are happy to have reached 5 percent of our sales in 2020, we gained further experience to strengthen business even more in the future. We expect increasing our sales via the newly launched Lindecom websites, where we already started in 5, 6 countries in the meantime and will be rolled out to all our countries during 2021. During among the many creative initiatives, I want to mention our online metric courses in South Africa and the U. K.
Now how did it work? I think you can inscribe yourself in advance for a mature Schuylkill idea course. You get a full box of ingredients and then afterwards you can participate via the web with a digital matter giving instructions on how you have to cook, on how you have to bake And at the end, of course, on how you can enjoy your delicious meals. So with that, you see what We had to do last year is in a lot of countries a little bit out of the extraordinary. We were forced, We were as well pushed to become creative and I think that will stay in our organization for the next years.
And With that, I conclude my part of the overview of the result 2020. And I would like to hand over to Martin that will give you more insight and details into the financial performance.
Ladies and gentlemen, it is my pleasure to welcome you to this year's Linde and Sprungler Financial Results Conference. And as usual, I will give you on the next few slides An overview of the most important financial numbers. I start with a summary of the key figures, which demonstrate our ability to limit the impact of COVID-nineteen on our business to the extent Of even improving the free cash flow margin as a percent of sales to 11.8%. Organic growth was minus 6%, which is in line with our full year guidance that we gave out in July 2020 of minus 5% to minus 7%. The EBIT margin came in at 10.5%, which is even slightly better than our guidance, which was around 10%.
Net income coming in at €320,000,000 which is 8% of net sales. Free cash flow, as I mentioned, I think really a great number here with €470,000,000 Or 11.8 percent. That leads us to our net debt position of CHF 200,000,000 If we exclude the lease accounting, we even have a net cash Positive of CHF 250,000,000 Looking at the dividend and at the shareholder return, We have increased our dividend each year. And for this year, we are proposing CHF1100 For the registered chair and CHF 110 for the participation certificate, which is higher than last year. Last year, we also had a special dividend For the 175 year anniversary of Linde and Sprungler.
Dividend yield at 1.2%, which It's more or less in line with the last year's payout ratio is 82.5%, which is actually at the same level roughly as last year, but higher than in the years 20 16 to 2018. And this shows the extraordinary impacts we had in 2020 on our business. In terms of the market capitalization, we're coming in at €21,000,000,000 which is, for the first time, above €20,000,000,000 It's actually roughly €1,000,000,000 higher Than at the end of 2019. Let's move on with organic sales growth. I've already mentioned this, minus 6.1%.
When we gave you the guidance of minus 5% to minus 7% during the half year conference in July, We said that we assume that there will be no further lockdowns. As you also know, in November, December, we had quite major lockdowns. And despite that, we have been able to achieve this minus 6%. I think it's also great to see, as Dieter Weisskopf already mentioned, that we have been able To increase our market shares in most important chocolate markets. So it shows us that we are really well positioned for the future.
Sales growth in Swiss francs was minus 10.9%. Once more, Swiss francs strengthened against the major currencies. So we had a negative impact here of 4.8 percentage points compared to the organic sales growth. Let's break down now the sales numbers in pricemix and volume. So the minus 6%, you can really see here, Roughly minus 2% is coming from volume, minus 4% coming from pricemix.
I think the good news here is within the pricemix element, Price was actually slightly positive, thanks to some price increases we implemented in some important strategic markets like Germany And Australia. As I mentioned before, ForEx had a negative impact of 4.8%. Dieter has already talked about the segments, so I'm just Going to be very brief here. Europe was more resilient, thanks to the very good performances in Germany and in the U. K, where we saw Small growth and also Scandinavia and Spain, where we saw also the business growing.
On the flip side, wherever the we have a big Easter business such as in Italy, in Austria or in Switzerland, we had a bigger impact. In Italy, we had even closed traditional retail stores during the important Easter months of March April. And in Switzerland, we basically had a complete absence of tourists. North America at minus 6.8%. I think these numbers actually don't show us some of the very positive underlying trends.
In Lindt and in Girardelli in the U. S, we grew in wholesale. Of course, we had an impact in our retail business. We declined actually double digit because of the fact that a lot of our retail stores are in touristic locations in the U. S.
The important foodservice business of Giardelli also suffered because of closed restaurants and cafes. Russell Stover is really focusing on the important sharing and gifting segment. And for Russell Stover, We had a good start with Valentine's. And then, of course, during the pandemic, we had an impact in the Easter season and also in the Christmas business. On the other side, the sugar free range of Rostovr had a very good performance and grew actually double digit.
Let's move on to Rest of the World. We had here a decline of 16.1%, and we actually report the entire Travel Retail division in Rest of the World. We had a good start into 2020 with travel retail. But of course, after the pandemic, the 10 months from March to December, The travel retail business basically came almost to a complete standstill. China had a good performance, Was severely hit in the beginning as the 1st country that was hit by the pandemic, but could recover well and we could actually show double digit growth in China.
Also Japan, Being quite resilient with mid single digit growth. I have no doubt that going forward after the pandemic, rest of the world is big chocolate markets in there And a lot of premiumization potential for Lindt. We'll see again double digit growth in the midterm. Let's move on now to the cost side, and I start with the material costs. Material costs came in at 35.3%, about 170 basis points higher than in 2019.
We have a couple of effects in here. 1st, sales per tonne declined because of the mix impact. Secondly, the costs Of cocoa beans, increased slightly because of living income differential that was implemented in the second half twenty twenty in Ghana and Ivory Coast, Relevant for us, Connor. Hazelnut prices also increased. So Let's move on now to the topic of cocos, and I'm showing you a separate chart here on the cocoa bean futures.
If you are looking at the current market, We are roughly trading at £1700 per tonne. When we go back 1 year, it was roughly at £1800 per pound. We should bear in mind that the living income differential is not part of this future price. And as I said before, it was implemented In October, in Ghana and Ivory Coast, dollars 400 per tonne, which equates to roughly £300 per tonne. If we add this back to the futures, including the living income differential, we are currently actually at about £2,000 per tonne compared to the 1801 year ago.
So you can see that the underlying cocoa bean price is slightly increasing. We have different trends in here. We have a supply which is slightly bigger than the demand. We have overproduction currently for the crop 2021 Of about 200,000 tonnes. So that's the reason why the future market itself came down.
But as I said, including living income differentially, we have slightly higher cost Cocoa beans, at the same time, actually, cocoa butter ratios came down from about 260 to 230. So if you combine those two effects of futures, living income differentials on the one side for the beans and cocoa butter ratios, our Costs for 'twenty one on cocoa as a total will be roughly at the same level as in 2020. Personnel expenses coming down by about €100,000,000 I think this shows that we have been able To offset a lot of the volume impact, stores are closed, so we needed less temporary staff. We had as you have seen in the beginning, we have had Slower or lower volumes in our factories, which also meant that we didn't need all the temporary stuff in our factories. So €100,000,000 less here at 22%.
I think going forward, past the pandemic, this number will be again below 22%. Number of employees came down by 1,000 from 14,600 to 13,500. We announced 1 year ago the streamlining for growth initiatives in the U. S. We closed actually the Colorado factory at Rostover in August, Which was even earlier than planned.
That was one element that led to this reduction in full time equivalents. The second one is also the outsourcing of our merchandising Kim in the U. S, which we also announced in 1 year ago in January. So those impacts, those effects Coupled, of course, with what I said before, with the store closure temporary store closure where we needed less temporary staff and also Less volume in the factory. So those all those elements led to 1,000 to this reduction of 1,000 full time equivalents.
Let's move on now with operating expenses. Within the category of operating expenses, we have a few elements. On the one side, we have advertising. We also have some fixed costs of the sales force and logistics. As Dieter Weisskopf already mentioned, Advertising is not a cost element that we reduced.
We actually increased advertising even slightly compared to 2019. Logistics, on the other side, benefited a little bit as well from well, 1st and foremost as well from the U. S. Project, which As brought cost savings, but we also had less volume that we had to transport. So we have some variable costs in there.
So this led to a Reduction of roughly €80,000,000 in operating costs overall and the ratio going slightly up from 24.7 percent to 25.9%. Depreciation and impairments. In here, we have two things. We have Impairments from the IFRS 16 standards, which is about €70,000,000 And then we have the underlying depreciation, which Comparable as well with the numbers 2016 to 2018. In 2019, we had the extraordinary impairments in the U.
S, So this number is not comparable. This was more than €50,000,000 So if you take the underlying depreciation in 2020, it was €206,000,000 If you compare it with 2018, it was €180,000,000 So you can see an increase of €26,000,000 The key driver of that Really the CapEx programs that I'll talk a little bit which I will talk about a bit later. In the U. S, CapEx is higher than our overall depreciation, so that has led to this increase in depreciation and impairments. So operating profit came in at €420,000,000 or 10.5%.
As I mentioned in the beginning, this is In line with our guidance that we gave in July at of around 10%. The ratio came down from 13 0.2%. And also overall, the number came down by about €170,000,000 And the reason for that Really all the factors I talked about in my previous slides, COVID related. When we break down EBIT by segment, Let's focus here on the middle column, North America. North America, Before restructuring in 2019, it was actually at 9.0%.
So we had a small decline here of 3 20 basis points in North America, which is smaller Then the decline in Europe and in Rest of the World. So this shows us that the measures we are implementing in the U. S. With the streamlining initiatives, But also all the other projects and cost savings programs we have in North America are paying dividends With this smaller decline than in Europe and in Rest of the World. I've also I'm convinced that in North America going forward, All these projects will lead to a quite nice increase of the EBIT margin in the years to come.
In Europe and in Rest of the World, the reason for the decline are COVID related. They're really driven by all the Reasons I talked about in the last few slides. Post COVID, Europe will come back to an EBIT ratio of 19% to 20% And Rest of the World to 17% to 18%. EBITDA was more or less resilient as well with €700,000,000 or 17.4%. We had a lower EBIT.
So of course, EBITDA also came down. We had special effects in 2019 With the restructuring, the impairments. But overall, I think no big surprise here with the EBITDA, which is as well on target. Free cash flow is really the positive news. Free cash flow came in at €473,000,000 Last year, we had Sure.
Well, 2019, we had a record free cash flow with €530,000,000 or 11.7%. Now we came in even slightly higher as a percent of net sales with 11.8%. We had really a Good networking capital management. We have been able to reduce inventory. We have been able to reduce accounts receivable, which led to this positive free cash flow.
It's higher Then in the years 2016 to 2018 as well as an absolute number, which I think is really a very good result. Capital expenditures coming in at €249,000,000 as well within the guidance. I gave you a guidance of €230,000,000 to €250,000,000 in July. We came in at €249,000,000 lower than we anticipated 1 year ago when we thought we will be rather around €300,000,000 Driven mainly by the New Hampshire buildout. New Hampshire factory, the Linde factory in the U.
S, Which is above €200,000,000 And we have been able to reface some of these investments because of the volume drop. In especially in the Retail division, we have been able to manage that and to push this project a little bit out to reface it. That also means that going forward, we expect CapEx to be back to about €300,000,000 in 2021 2022. I think also some good news on the tax rate. It's below 20%, even below 19% at 18.8%.
We had some special effects in 2019 because of the some special effects we had in tax. And This number we shouldn't compare this number actually. The 2019 number is 2020. In 2020, we had also some positive effects from the Swiss tax reform. And the underlying tax rate is actually rather below around 21% to 22%.
And I think that's The tax rate we have to look at when we think about 'twenty one and 'twenty 22, somewhere between 21% 22%. Net income coming at €320,000,000 If we exclude the extraordinary impact in 2019, net income was actually more resilient than EBIT. There are two factors. The one we have just talked about now, which is the tax rate, which was at 18.8%. And then secondly, we also had lower financial expenses Because of lower U.
S. Dollar interest rates, so we've been able to save quite a lot of money in the hedge costs for the U. S. Business, leading to this better performance of the net income at €320,000,000 So let's now look at the net financial position. The very positive free cash flow of €473,000,000 which I've already talked about, has really driven the dis improvement of more than €200,000,000 To €209,000,000 And let's also bear in mind that we have paid out a special dividend in 2019 Because of the 175 years anniversary of the Linde and Sprungle Group, we paid out a total dividend of about €420,000,000 Last year, and despite this special dividend, we have been able to improve the net financial position To €209,000,000 And this net financial position also includes the lease accounting of 400 lease liability actually of €460,000,000 So excluding that and on a pure cash basis, we would be on a net cash position of €250,000,000 positive.
We have liquidity on the one side of €1,250,000 at year end, and we have €1,000,000,000 bonds outstanding. So those 2 lead to this €250,000,000 net cash position, excluding the lease liability. That brings me to my last chart, The equity ratio, we have a very strong balance sheet with high liquidity, as I've just talked about. Dieter Weisskopf already talked about the impact from the U. S.
Dollar here, but we are still a equity ratio of 57%, total equity of €4,600,000,000 And the strong liquidity and the strong equity ratio led us to decide to Launch a share buyback program that Dieter Weisskopf will talk about in detail now. Thanks a lot for your attention. And I hand over now to Dieter Weisskrupp.
Thank you, Martin. And I would like now to get To a overview of our activities in sustainability or you can say environment, social and governance. The topic of environment and social as integrated part of our business model is and has been taken seriously already long ago and it is even more so today top urgent. The theme is at the top of the list by me as CEO and already was in my former role. When I was initiating the farming program back in 2,007 and 2,008.
It has to be part Of our premium business, any consumer is expecting from Lindt highest standards, which we clearly are committed to fulfill and we have plans in place. The goals we have achieved in 2020 makes us very proud. First of all, we have We achieved our first goal we have set already back in 2008. We wanted to have 100% of our cocoa beans traceable and verified in our own Lindt Farming program. Just to give you an idea from a total of 80,000 farmers In 5 origin countries, we have now full traceability of cocoa beans.
The reduction of greenhouse gas emissions is probably the most urgent task of our and future generations. And Lindt as company is ready to contribute its fair share to it. In scope 1, That means our own production process, we could reduce emissions per tonne by 10% since the benchmark year 2015. Another goal we achieved in 2020 is to set target to reduce our water usage and the production process by 10%. But this is not all.
I think now we have to look ahead and say what are we going to do in the future. Now past and future efforts to support our sustainable business model, They have been defined in our strategy. We have said some years ago, we call it the sustainability wheel. This sustainability wheel consists of 4 main segments. They are: number 1, Improvement of livelihood in the supply chain, mainly of course looking at raw materials and packaging materials.
The second area of that wheel is the environment. The third area is our business conduct. And last but not least, we have the consumer focus. I will go now quickly into the different segments of our Sustainability will. Now let's start with the livelihoods.
When you look at livelihoods, Sourcing raw material, packed material, we have to address first 2 big issues in our supply chain related with raw and pack. Goals we have set include that we have already achieved 100 percent traceability on beans 2020. And we will extend this program now to cocoa butter and powder where we want to be as well 100% traceable and verified by 2025. And as well, we extended to the rest Of all other raw materials where we want to achieve a rate of 80% traceable verified by 2025. Now the next part of our sustainability strategy It's looking at the environment.
Environment including, of course, Carbon emissions includes as well water usage, waste and biodiversity. We will set our new targets for the continuous reduction of water as well as the targets for greenhouse gas emissions in the next months. Already decided now by our Board of Directors is that we will move in regards of The carbon reduction to a science based target. The waste reduction in production as well should be achieved by 2025 by reducing 50% of our Total waste. Okay, the next part in our strategy sustainability strategy is looking at We call it performing together.
As you know, addressing topics of diversity, inclusion in our workforce And of course as well health and safety have a very big part in our strategy. Respective programs are in place In Health and Safety, to work towards 0 lost time accidents and of course we have as well programs in place that are looking to foster the whole area of diversity and inclusion. Needless to mention as well that we apply Highest standards of compliance with the laws and regulation of each country in which we operate. And now the last Part of the sustainability wheel is looking at our consumers. And looking at our consumers, They are in the focus of our daily efforts.
Highest quality in ingredients, highest quality in recipes And final products are key. Marketing communication and food safety fully comply with highest standards in the respective countries. With that, I hand over to Martin again That will give you now some more insights of the status of our farming program for the sourcing of our cocoa beans.
Linde and Sprungle is one of the few chocolate producers that produce from bean to bar. Most of our competitors actually buy chocolate, And the fact that we are producing from bean to bar has led us to decide in 2008 to launch our Linde and Sprungle sustainability plan, focusing On the sourcing of cocoa beans, because we really want to know from where cocoa beans are coming from. And I will give you now an overview of this Lindensprungle Farming program. What are really the objectives here? 1, we want to increase the productivity Of the farms because that's a win win for the farmer and for us.
Farmer can increase their income, and we can source High quality beans in higher volumes. We want to help the farmers to diversify their income by launching additional income streams. Then child labor, for sure, is always an important topic, and we want to reduce that. Finally, we want to improve the infrastructure of the communities. We have launched the Linde and Sprungle farming program in all our 5 cocoa bean origins In Ecuador, Dominican Republic, Ghana, Papua New Guinea and Madagascar, The most important orange ins for us are Ghana for consumer cocoa and Ecuador for fine grade cocoa.
I will give you now an overview of what we have achieved with the Linde and Springle Farming program in the last years. We are working with more than 400 trainers on the ground that train more than 80,000 cocoa farmers in those five origins. We have been able to train more than 20,000 farmers on diversifying their living income with programs such as Honey production or also livestock farming, and this really enables the farmers to diversify Their income from Cocoa. Also, we have distributed more than 6,000,000 seedlings To improve the and recultivate the farms of the of our cocoa suppliers, Also, we have distributed close to 2,000,000 seedlings for shade trees that actually increased the biodiversity in the farms. I've already talked about child labor.
Of course, the best thing for the children is to be in the schools. Therefore, we are Working on renovating schools, we are building schools. We have already worked on more than 30 schools renovation programs, Affecting in a positive way more than 5,000 children. Also infrastructure is very important. Access Just water is a real issue in many of those countries.
People have to walk for a long time to get fresh water. Therefore, we are working on Water supplies, we have improved and built more than 200 boreholes and water supply systems, which are impacting in a positive way About 130,000 community members. So that's an overview of the Sustainability achievements since 2008. And with that, I now hand over back to Dieter Weisskopf, who will talk about The outlook 'twenty one and beyond. Thanks a lot for your attention.
Thank you, Martin. And with that, I get to the last part of our presentation. It is the outlook. Now number 1, I have a good Information for all shareholders, that is we will initiate a share buyback program by June 2021. Now why can't we do that?
It is clear the background is our liquidity situation. The balance sheet is not leveraged at all. We have a net of cash position of €250,000,000 by end of 2020. We expect a further high free cash flow in the coming years and we have an equity ratio of close to 60%. That's the reason that the Board of Director has decided to start a buyback program for both share classes over a maximum amount of CHF 750,000,000.
The program is expected to start in June 2021 until maximum the end of 2022. Now looking into the performance expectation in the near future. Now what can you expect from Linde and Sprungler in the next years? Now the good first news is that we have Our business model well positioned in a worldwide growing market for premium chocolate as we have seen the last year. This allows us to focus on our given strategy around innovation, premiumization and the growth markets.
We will clearly continue to invest behind the brand. We will clearly roll out our initiatives in the online channels and of course We have ongoing initiatives to further improve profitability and growth in the U. S. Efficiency and cost It's clearly a focus that will help us as well to perform well over the next years. Now let's get to the strategic direction.
That means not the next 1 or 2 years, but looking a little bit more further into 2025 2030. Of course, we have made our thoughts and said, how is the environment impacting our targets and as well goals for the longer term? We have looked at that and we have defined a total of 6 pillars. And these 6 pillars are looked at in a way that we can put clear objectives and clear projects into each of those 6 ones. Now the first one of that six areas is organization.
Now why do we put organization in there? The point is that the group has grown over the last years In 2 in the meantime, 26 legal units, roughly 13,500 employees. Now The big issue is how can we guarantee that in a decentralized organization We are fast. We have employees with entrepreneurship and we make sure that We are going quicker than the market because if you look around, markets and the whole environment is changing. Now if we go into the products and consumers, clearly, we have to look what is the digitalization doing In the area of products, in the area of channels and as well in the area of how to get to the consumer with our message and as well with our advertising.
It has changed. It will change further. We have to be prepared. The next area are the channels. If we look at the channel change, One thing we already mentioned is the omni channel retailing strategy we have started 3 years ago.
We will move forward with that project. And at the end of the day, we see a further increase of online sales in the area of the channels. But as well, our own stores Adaptation depending on the country, our chances we have with own stores, with omni channel and clearly as well working together in a better way and more efficiently with our big estimated partners in grocery. Then next is cost efficiency. If we look at cost efficiency, there must be projects.
There are projects in place where we are improving year by year the cost base and as well becoming more efficient in all areas of our processes. Then sustainability we talked about. ESG is a theme. We take it seriously and achieving the goals we will set for 25 and further years Needs big efforts on our side and as well clear projects. And last but not least, We have the 6th pillar that is geographic expansion.
There are still countries where we are underdeveloped. There are countries where we have growing markets and a bigger consumer group That is looking for our premium products. So as well here, we have a project and as well openings of new countries in place. Now let's get to the outlook summary for the short and medium term. We are absolutely convinced that we are well placed for future growth.
We have laid in 2020 the base for continued success in the coming years, Giving short and midterm targets today is, of course, not an easy task in that environment we are in. We therefore give today our outlook under the assumption of a continuously improving pandemic situation over the next months. Having said that, we expect for 2021 Sales growth of 6% to 8%, what is higher than our mid Term outlook, thanks to the expectation of some catch up effect from last year. We as well expect for 2021 an EBIT margin of between 13% 14%. Looking into 2022, our sales should be back to a mid long term growth target of 5% to 7% and the EBIT margin should reach around 15%.
With that, I conclude here our formal presentation and I hand over to the organizer for the question and answer
session. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from the line of Jorn Iffert, UBS. Please go ahead.
Good morning, Dieter. Good morning, Martin. Thanks for taking my Questions. And the first one would be, please, on your next 5 to 10 years strategic roadmap. And can you give us some more clarity what kind of investments, how fast investments will materialize in emerging markets?
And what do you expect could be the sales contribution over the next 5, 6, 7 years? The Second question would be please on North America. Can you give us an update, I mean, regarding product pricing, gross profit margins? Is this Similar already to Europe? And by when would you expect North America supported by your SG and A savings to reach Margin and average on group levels, for example.
Many thanks.
Jorn, thank you very much for the question. First 5 to 10 years and the investments in markets. If you look back the last 6, 7 years, You will realize we have started Brazil, we have started South Africa, we have started as well Japan. I think we did that all without any dilution of the overall margin in general. And I think that shows you that we are able to open the one or the other additional market as well without any further dilution.
Investments will be made. Clearly, at the beginning, we have a higher investment of advertising per sales, but that is needed in order to make Some awareness and to create some awareness and that for that reason as well there will be one country After the order, we have identified 4, 5 regions where we still have some chances. So I think there should be going business as in the past with opening these additional markets. Now as regards North America, the North America we don't give details By company or let's say by EBIT margin and as well by category, I think you just can be assured that After the reorganization we did last year, as well you know our provisions we made end of 2019, We are right on track to increase the margins step by step in this American market, while at the same time guaranteeing that we can continue high growth levels because if you look at our market shares, there is still Great potential to gain.
Many thanks for this. If I just may follow-up on North America. Dieter, can you confirm that the Average selling price of the product and the gross profit is similar to Europe and it's more SG and A difference and operating leverage difference or is this a wrong assumption?
I think if you look at the U. S. And if you look at other competitors and if you look at U. S. Markets, the chance that at the end The market will be even more profitable in the U.
S. It's definitely given, but at least I can tell you we will get to the level we have as well in the rest of the world, mainly in Europe.
Thanks a lot.
The next question comes from the line of John Ennis, Goldman Sachs. Please go ahead.
Good morning, everyone, and thanks for taking my question. My first is on market share. Premium chocolate obviously continues to get market share from mainstream chocolate. But within the premium parts of the market, do you think you're gaining share? Or is it more driven by premium taking share from overall mainstream?
And then what price do you tend to consider premium Internally. And then my second question is on e commerce. I guess, if more of your sales migrate online, I just wanted to get an update And your strategy is to try and grow market share and promote what is still often an impulse purchase. Will it require a bigger shift of Marketing spend to that channel to help promote and grow the category, interested in your comments there. Thanks.
Okay. Thanks. The share, of course, we don't usually we don't give any details On shares, I think in the meantime, you have as well access all of you in as analysts looking at shares. But now talking about the premium market, talking about the premium market or the overall market, I think we measure the overall market because there is no Nielsen for premium. So I think saying that we have clear gains in As we say in our publication, in main markets, basically all markets and we have great share gains.
Now coming to the premium, I think it indicates us indirectly that in times as we are now in, The consumer staying at home, the consumer in an area where you have somewhat restricted Possibilities as well to enjoy yourself. You are in the home office. Clearly, Premium is the product to be. We have more and more consumers going into the store saying, I indulge myself And if I indulge myself, I deserve the best. I deserve the best quality.
I deserve as well the best ingredients and I think that's where we benefit from. So we are clearly of the opinion, we gain not only in the overall share, We gain as well mainly in the premium share and premium is growing overall. Now definition of premium, there are different benchmarks that is the price per kilo, but I don't go into Detail now because it is a little bit different country by country. Now as regards to e commerce, now e commerce is consisting of Different areas and if you look at us, we are absolutely committed to make sure that in the future we even push more Sales in that region and impulse definitely is important. But on the other hand, the easiness as well To access the product via e commerce, that is something that I don't say it is Same as Impulse, but I think it makes it definitely very easy to enjoin via computer and to put it on your daily or weekly shopping list.
And I think that is a changed behavior that we see as well compared to 2, 3 years ago.
That's great. Thank you very much.
The next question comes from the line of Patrick Schindiman, Zurcher Kantonalbank. Please go ahead.
Ciao, Dieter, Ciao, Martin. You are expecting 6% to 8% organic growth for 2021. What is your best guess per region For 2021 and also for the longer term per region? That's my first question. 2nd question, Linde's Squares launched in Switzerland, which I think is a great product.
What about the rollout in other markets? Thank you.
Can I expect what was the second one? The squares? Oh, yes, sorry. I got it.
The squares, yes.
Yes.
Okay. So I get into that, the region and the growth per region. I have to tell you that is still a very difficult one. So I think we are happy that we can give you An indication for the overall growth of the markets and that is our given 6% to 8% in 2021. I wouldn't like to go into the details by region.
And the squares?
For the longer term,
Sorry?
For the longer term, it's still the same assuming 5% to 7% is still the same assumption for the region for the longer term?
For the longer term, definitely, if you look at the European markets where we have already a higher share, where we have Some good pickup awareness is high, of course, reaching overall in Europe in the Existing markets, a somewhat lower growth, whereas if we look into the rest of the world and as well the U. S, Our expectations are a little bit higher. So it will be a mix. And how that mix will evolve over the longer or midterm, Of course, that is difficult to say, depends on the economic developments country by country and as well Competition is not to be forgotten. Now, squares rollout, we do a square rollout now.
You can say 2 test markets with Lindt. One is in Australia and the other one is in Switzerland. Depending on the results, Sweden as well will decide how and when and in which markets we will Roll it out as well in the future.
Thank you, Dieter.
Next question comes from the line of Silke Kaltrowitz from Reuters. Please go ahead. Yes. Hello. Good morning.
I was wondering whether you could already say anything at all about The upcoming Easter season, I know it was difficult last year, so I'm wondering if you expect an improvement this year for Easter sales, maybe you already have Medications from retail partners, etcetera. And also what do you think? What are the key issues this year to win the Easter business? Is that like technology, maybe new partnerships? I mean, I know you do some things with Shopify, for example.
Having the right products, are there different products this year in any way, different formats maybe? Anything you can say on that would be helpful. Thank you.
Now I start with the last one that is formats, products, innovations, new products. You can be sure But here again, we have done our best with colors, with products, with ideas that are new to make sure that the consumer will be absolutely enthusiastic when looking at our products. Sales teams are doing the best. If you go out now in the stores, You will see our huge efforts to make sure that we get as well the consumers' attention. Now Your question on how it will develop, now I may make a joke here.
If you have a direct line to Mrs. Merkel, You know, finding out whether she is opening the stores for Easter or not, you know, then we know better. I think it depends still a lot on decisions by local governments on how they will treat the opening of stores. Now, of course, we hope That not the same happens like last year and as well we can in Europe and as well the rest of the world. We can open up again the stores and we get an Easter fest That is as in the past.
If that is the case, you can be sure that we will perform very well again.
Thank you.
The next question comes from the line of Tina Toer, AWP. Please go ahead. I'd like to ask how much do Wheaton products Take up by now and what kind of growth are you expecting here?
Now the vegan product has been launched In Germany, just about 3 months ago, I think the pickup and as well the sellout is very good. We are very pleased and I even have to tell you that we have some issues in producing. I think the capacities are there, but as well the need is big. A lot of people just would like to try out the product and have it our first tasting. Now depending on the results we will have, we are looking at expanding over the next months depending as well on how we can get up in capacity.
Thank you. The next question comes from the line of Johannes Reiter, FAZ. Please go ahead.
Yes, good morning. I have two questions. The first one is on sustainability. You said that 100 percent of your cocoa beans are traceable now and verified. But if I understood you right, this does not mean that all of your beans are now coming from sustainable sources.
So in spite of the traceability, you can still not be sure that there's no child labor in your supply chain, right? That's the first question. The second one is around your product your new product, which uses the fruit of the cocoa As a sweetener instead of sugar, can you talk about this a little? What are your sales expectations? And Could this way of sweetening be also used in other chocolates In addition maybe also to sugar or not only as a substitute.
Okay. Thank you. I would like to hand over the first Question on sustainability to Martin and come back then with the sugar one.
Sure. Your question on traceability was about, if you can be sure from where the cocoa is coming from. I mean, that's exactly what we are trying to do, right? We Actually, we have identified all the 80,000 farmers from which we source cocoa. We even have a GPS Tracking of all the farms, we even know how big the farms are, how many trees are on the farm, etcetera, etcetera.
So it's really a full tracking Back to the farms of the cocoa beans, out of our Lindensprunglle farming programs. And not only that, we are actually also verifying this by a third party. So 3rd party is checking all the processes, all the systems and has double checked basically in 2020. And yes, we exactly know where the cocoa beans are coming from. With regard to child labor, we are talking, of course, about 80,000 farmers.
We are doing our utmost. We are building schools, as I talked about as well, to make sure the kids are cycling the school and not on the farms. So we are we have put in place all the processes and procedures and even invested a lot of money to make sure we can really limit child labor.
Other companies like Vericallerboard, they have a target saying that by 2025, They want to eradicate the child labor. Do you have a target like this as well?
I mean, that's the whole purpose of our Linde Trillie Farming program. That's one of the targets, one of the key targets to eliminate child labor, and that's absolutely the target. Can you guarantee that there is absolutely no child on the farm? That's very difficult, of course, for Barrick Oliver, for everybody else. But it's definitely our target to bring it down to 0,
But you don't have a certain year in which you want to reach this?
We already want it now, of course. That's why we are investing all the money and that's why we are building these schools. So it's fairly one of our targets, yes. So I think Dieter, you will take over the other question, right, on fuel.
Now I come in with the second one that is sugar and sugar is definitely a topic that the whole industry and as well in Lindt is highly interested in to see ways and means on how can you as well reduce, replace and as well change crystal sugar called sucrose with some Order, sugar or sweetener, and I think this is just in order as well to satisfy the needs of the consumer that would like to try out the one or the other alternative. Now you mentioned this fruit Sugar from cocoa and the fruit sugar from cocoa we use now in our product and as well I have to really recommend it as well to you. Try it out. It is a very fruity taste and it is 82% cocoa. So that mixture gives a new taste And as well, we are very happy that we went into that direction.
Now to what extent can it be used in other products? Definitely, it can be used. I think what it still needs is that we can build up the supply chain because that is a raw material that so far hasn't been used in the whole supply chain and the production. So over time, there will be more of that raw material available and we definitely will use what is available and try out on how we can surprise again the consumers.
Okay. And the problem which came up in Switzerland and Germany that you are not allowed to call this product chocolate. Is this a problem for you or is it doesn't really matter?
That's absolutely no problem. If you look at the packaging And you look at the brand Lindt, then you know what it is. Whether how it is called at the end doesn't matter so much. I think that is not an issue for us. It's just kind of the regulations say it has to be crystal sugar and cocoa.
Now it is fruit, sugar and cocoa. At the end, it is clear to everyone what it is.
Okay. Thank you.
The next question comes from the line of Bruno Montaigne, Bernstein. Please go ahead.
Hi, good morning.
As my first question, I would like
to come back on the sustainability topic because indeed 100% Certification doesn't mean that the livelihoods are better. I understand it's hard to have targets on livelihoods, But I noticed that at Unilever guarantees a living income for small farmers in the cocoa supply chain by 2,030. Some people have targets for reduction in child labor. Can you actually comment how much child labor has reduced by in the last 5 years? And so give more quantitative kind of certainty or targets about really targeting that rather than the inputs like certification.
My second question is on the growth target for 2021. It's basically 1% faster than your normal medium term growth rate. That would suggest that there's very little rebound or the very difficult time in 2020. So, Hoch, I mean, given the normalization, given Tanishi programs, is there really only 1% boost from the recovery? Thank you.
So I take the first one and then now the growth Tuan and then I hand over to Martin for sustainability again. I think if you look at the growth target we have given for 2021, Now we are already in February and the big question is on how markets will open up again, on how tourism is back. There are different opinions as regards whether that happens in second half, whether that half happens in the third quarter, Q4, that is all open questions. There will be a rebound, no doubt about that. And the degree Depends a lot on things.
We just don't know yet. So I think if you look at the 6% to 8%, That is the best guess we have today. There will be hopefully for us as well a surprise to the upside. But it's today Standing here and saying that's where we are going into 2021. That's still a little bit Risky and so for that reason, we might be a little bit on the Side that we say 6, 8 is okay.
We are confident we can get there, hopefully higher. But sustainability, Martin, please.
Yes, Bruno, I heard you saying something about certified cocoa. I think it's important to stress here we are not buying certified cocoa. We actually have our own Lindt farming program. You can also check our website farmingprogram.com. So that's very different, right?
So we have we work locally with 80,000 farmers, around 60,000 in Ghana alone. And we know exactly for each farmer where the farm is. We visit those farms. 3rd parties visit those farms to make sure there is no child labor. I think with regards to the income that we want to guarantee, I think there are different measures.
First of all, we are I mentioned in the presentation, we are working on diversifying the income streams for the farmers. So the farmers don't only depend on cocoa, So that they also have other things, other crops, livestock farming and things like that. That's another important point. And thirdly, I should mention, living income differential of $400 per tonne has been implemented by the West African countries, and Lindt is paying that, of course. That's $400 additional for each tonne of cocoa compared to the future price of $1700 that's another 20% on top of that.
So these are really the measures we are implementing. And I think it's very important that we bear in mind it's the Lindt farming program. It's not a certified cocoa that we buy.
Yes, I didn't mean to mislead there, Maarten. I understand that. But surely, there is probably an element of cloud labor still there. All the international statistics suggest it's hard to eradicate. And so my worry is obviously, are you measuring it?
I presume you do. What is the level of child labor? Is it getting better? And why not try to be more explicit targeting the most visible and painful element of deprivation Rather than focusing on the 100% sustainability. So do you have the measure internally of the level of child labor on those farms that we work closely?
Look, the problem to put this as a KPI is that it's really difficult to measure, right, because you cannot supervise at once what happens on 60,000 farms, let's say. So that's why it's very difficult to measure. But yes, we have, of course, reports where we check if there are children on the farms, and it has Been lower in the last years. But to know certainly if there are children on the farms, it's very difficult. That's why we don't want to put it out as a KPI.
It's definitely one of the underlying targets we have. That's why we build schools. That's why we really try to improve the livelihoods on the site.
But you aren't internally measuring, obviously, on a sampling basis, but people do go around because, obviously, there are international standards to define what child labor is and what it is not. So If there's an international standard, are you actively sampling and measuring as some other companies do and therefore you can See if on those individual visits, are things getting better or not over time? Do I understand it correctly?
Absolutely.
Okay. Thank you. Thank you.
The next question comes from the line of Jean Philippe Bertie from Doble. Please go ahead.
Good morning, gentlemen. The first one would be on your strategic direction, Especially the channel parts and longer term, as you said 2025, 2030, How do you expect the own retail to evolve, especially when you think that online is probably here to stick To consumer behavior, that's the first one. And related to that, my second one, if you can share with us The penetration of the online in different markets, probably China is the biggest one, obviously, with such a strong growth. And the third question is related to ESG. And thanks for sharing some of the targets, probably more to come in spring.
And question is whether you expect or if you intend, sorry, to include Some of the ESG targets in your long term incentive plan? Thanks a lot.
Sekti, Own retail has definitely its place. It has definitely its place in our whole group. And yes, online sales are increasing. But if you look at The shoppers as well in the future, they will be in shopping malls, they will be in High Street And I think I don't think that it will be overtaken by online only. It will be a mix.
And how that mix is looking like, it's difficult to say But if we look at our retail, we see mainly as well big chances in countries. I mentioned them. Countries we will open up in the future or we did already where we believe that the Shopping malls, the shopping centers in those countries, I mentioned for instance Brazil, they have A role to play, number 1, in order to build our brand awareness and number 2, to show to the consumers We are there. We have a huge assortment. Please come in and pick up the product.
I think there will be a role for new markets where we see chances that we start small, branding awareness and as well at the same time, we have existing markets Where we are in and as well here, be it in shopping malls, be it in standalones or be it as well in some Special outlets, we have a role to play. Now on how that develops mainly as well after we have now Fully surpassed over the COVID crisis that is still to be defined. And as well, if we look at 2,030, just to repeat again, stores will have a roll. How big the role is, it will be shown over the next years on how competitive environment and as well shopping environment will develop. Now penetration by market, I only can tell you that we have 3, 4 big markets, But as well orders to come up, U.
S. Is definitely a big market, Germany is a big market, Japan is 1. I think those are 3 that definitely as well benefited from closures last year And we could make up part of what we lost in sales in the stores, we could make up in the online. And if you talk about ESG, looking into the future, setting targets, I think that is my personal opinion That the climate action is definitely the biggest one we have in there. So we talked before about Sustainability and climate is for the whole world and as well for the existing and the second and next generations, it's definitely something we have to tackle.
And Lindt will definitely as well here contribute what is needed in order to improve the situation. Now clear targets will come out in the next 2 months.
The next question comes from the line of Graham Hunt, Morgan Stanley. Please go ahead.
Good morning, Dieter. Good morning, Martin. Thanks for the questions. Just 2 for me, please. I wondered if you could talk a little bit more about the partnership agreements that you called out in Italy and Brazil.
I just wanted to understand what drove that decision and maybe it brings any new opportunities for Lindt in those markets. And then coming back to digital, I wondered if you could give some color around how you're making sure that Lindt has the right expertise in that channel to support future growth, whether you're looking to build that capability internally or if you're engaging with external partners. Thanks.
Now talking about Italy and Brazil, where we I think you referred to the purchase of the Franchise operation in Italy and as well the joint venture partner in Brazil. I think if you look short term, then definitely you can ask Why are they doing that? We are talking shops. If you talk long term, then we clearly have to say that be it Italy as well Brazil, we see Still not today, not tomorrow, but over the next foreseeable future, we see big potential. And for that reason, there was an opportunity to get in and as well to purchase and to acquire those two operations.
So definitely fits into our strategy. Now as regards digital, we are definitely using the one or the other partner outside because we don't have All the know how inside today, but we build it up, number 1. We trust we can do that as well internally. And at the second time, wherever needed, we get in experts from the outside. So That's basically the situation in e sales.
And as you know, e sales are not Just our own e commerce, we are talking here click to mortar via our partners, grocery partners. We are talking about platforms that is Amazon and orders. And last but not least, it is our own e commerce. I think this is a group of activities we bundle together. We call it omnichannel retailing And we do definitely will do as well big progress in 2021.
Thanks very much.
The next question comes from the line of Ray Philippe from La Jaffee. Please go ahead.
Hello. Good morning. You are confident to increase the free cash flow in the next years, but can you keep on one Margin around 10% or a double digit margin of net total sales. And the second question is about this franchise operation in Italy and partnership in Brazil acquisition. Do you see Some other possibilities to do such transactions.
Thank you.
Martin, can you comment on cash flow?
Sure. I understood your question that you asked about free cash flow going forward. So yes, we believe as I've presented, we had really good performance in the last 2 years With close to 12% free cash flow as a percent of net sales, we anticipate our revenue to grow by 6% to 8%. So That alone will have a positive impact as well on the profit. I think we will have less impact from the pandemic in general.
So that's why we also say 13% to 14% EBIT margin going forward in 2021, So that will obviously also have a positive impact on our free cash flow. And I think It's important to bear in mind, 12% is a very important and good milestone to achieve. We have achieved it also thanks to good networking capital management. We've been able to reduce inventories and accounts receivable. With the growing business, hopefully going forward, inventories We'll probably not decline this year, so we have to see where net working capital will shape out.
Yes. So look, I would say free cash flow margin as Send to sales will probably be around 10% plus, so we try to be double digit, of course. It will be every year 12%, we have to see, But definitely, our goal is to be double digit going forward. Thank you.
The other question was on So the second question, are we open, be it franchise or joint venture? Depending on country, depending on the plan, Depending on our goals, definitely, it's a clear answer, yes.
Thank you much.
The next question comes from the line of Faham Baig, Credit Suisse. Please go ahead.
Hi, guys. Thank you for taking my questions. I also have 2. Can I start off with China to begin with? I believe it's around 1% of your sales, so Relatively low compared to the size of the economy.
What options do you have To potentially accelerate or increase your exposure in China and thereby accelerate growth, Are you would you be willing to look out for potential acquisitions? Are you willing to accelerate your store number of stores? What's the strategy behind increasing exposure over the next 2 to 3 years in that key potential growth market? And my second question is just going back to your top line guidance for FY 'twenty one of 6% to 8%. Within that, just so we can sort of track how you're potentially progressing this year, what are you assuming in terms of when stores open This year, what are you assuming for duty free recovery, if anything, this year?
And just any of the key moving parts that we should So bear in mind or back of our heads that you're including within that guidance? Thank you very much.
I take the second one first. I think I or we can give you more details once Easter is over. I think Easter still is the big question as regards openings. We are getting closer now. It looks so far so good, but it's really too early to say.
So basically the first question I can answer As regards Easter, once it is over, let's talk again in May. Now the duty free question That is another one. Is it 3rd quarter or is it 4th quarter? We definitely have in our plans already an improvement of duty free for the 3rd and the 4th quarter. Whether it happens or not, we will know later in the year.
So again, I cannot Say something different as we did before, the 2021 forecast definitely depends a lot on the progress the whole world is making in containing the pandemic. As regards the China question, when we get to China, if you look at size of the country, if you look at Population and if you look as well at chocolate consumption, this is a market that takes definitely time And we need some time. We started 4, 5 years ago. You mentioned 1%. So I don't comment that one, but it's probably not that far away.
And now if we look into the future, how can you accelerate? It is gaining brand awareness. But gaining brand awareness in a country with €1,300,000,000 it's not that easy and it's not that fast as we can imagine. So we have a lot of expectations for growth in that country. One thing I can assure is There is no target around where we could be tempted to make an acquisition.
So we will do it on our own. Do have stores, some space in there. There could be an opportunity. If we look at it, then it is probably more in the area of So called flagship stores that means by big city the one or the other biggest store. But that's still in the making and it depends on the progress we make in the next years.
Thank you.
The next question comes from the line of Alain Oberhuber, Stifel. Please go ahead.
Yes. Good morning. On our group MainFirst, good morning, Peter. Good morning, Marcin. I have two questions.
The first is regarding the Thanks a lot. The Asian markets, could you elaborate a little bit on the potential of the specific markets? And could you give us an insight Which segments Linde expects to improve, in particular, in the Asian markets? The second question is about U. S.
Could you be more specific regarding the organic growth development of the 3 brands you have in the U. S. And what you expect obviously to Come through. And how much of the restructuring in the U. S.
Has now been done? Are we already at 90%? Or have you Fully restructured and the business looks clean now? Thank you.
I think I take the first two. Asian Markets, if you look at Asia and if you look at population, the single biggest is China and that we just tackled before. And I think we are now looking at other opportunities, other markets in there. Absolutely Clear, there is a big potential, but I think it's too early to give you now an indication what after China is following. Then if you look at the U.
S. And the 3 brands, only an indication that is basically clear. We hope for a rebound of the seasonal business. That means all 3 will benefit from that. But if you look at the mid long term growth targets, then clearly we are talking about Linde and Girardelli with highest expectation.
And we will then talk about Russell Stover in the neighborhood of 3% to 5% over the next 3 to 5 years. I think that's a little bit the outlook we can give there. And for the 3rd question, that is U. S. Reorganization, I hand over to Martin.
Yes. As we announced last year, we actually kicked that off in 2020. And we have even closed the Colorado factory for us was over a bit earlier. We closed it in August. Originally, we have planned to close it now in April.
So that's done basically, 100% done. We have already outsourced the merchandising force. That's also something we did in the beginning of 2020. Then the piece that is not totally finished is the retail store Closure for the stores that we don't want to renew the rent agreements. So there, we have closed about 15 stores Last year, we closed another 15 stores more or less this year.
So and then there will be also big store closures or let's say, no renewals of Rents where we don't want to continue in 2022. So I would say on retail, it's probably somewhere around twothree done And on the others, basically 100% done. So overall, yes, 70%, 80% is done.
Given the advanced timing we have here as well already in the question and answer session, I propose we have one Last question before we conclude the session.
The next question comes from the line of John Cox, Kepler Cheuvreux. Please go ahead.
Yes. Thanks very much for taking my questions. Dieter and Martin, I hope you're well. A couple of questions for me. Just on this algorithm, growth algorithm going forward, I think I just remember a year or so ago when Russell Stover was really slowing down, You were saying maybe the Americas overall would be including Russell Stowe will be growing slightly lower rate than Europe.
And then you would say then The rest of the world will be growing even faster. You seem to be changing your message a little bit there. I'm wondering what you're seeing maybe at Russell Stover or elsewhere in the North America market, Which gives you the confidence that maybe that market will grow faster than Europe? Second question, just on the retail business and the store network. And I heard JP's question.
Basically, The just on that whole, you're around 500 stores now. Just wondering what your expansion targets are Over the next few years, you talk about it as a marketing tool. But clearly, I guess, you've seen that with e commerce now 5% of group revenue, you probably don't need Open up stores as much as you've done historically. And in the longer term, potentially, some of the footfall of the high street We'll continue to come under pressure from e commerce, maybe just outside of the main tourist areas, of course. And then just to come back to what one of my colleagues was saying on the free cash flow.
Obviously, we saw what happened this year, and there's some Big movements in working capital to make quite a big impression on that free cash flow. Sorry what your best guess would be for this year 2021 because I'd imagine a lot of that working capital will unwind. And You're probably going to see, I don't know, like €100,000,000 outflow this year, whereas this 2020, I think you had more than €100,000,000 inflow. I just wonder what your thoughts are on that working capital and free cash flow for 2021. And then to come back to what you were saying, Thanks for giving us that margin guidance on free cash flow.
We're just wondering what you thought on trade network. Net working capital That's typically been around 30%, 35%. Wonder what your thoughts are on the percentage of net working capital of sales going forward? Thank
you. I think I go first into the first two questions and I hand over then to Martin for the cash flow. I think the U. S, if you look at the U. S.
Then and compare it with other regions of the world, Then you always have to start, number 1, with what kind of market share have we achieved in that market. And the second one, what is the penetration? We have daily consumption or weekly consumption of our products in the respective market and clearly as well brand awareness. Now if you look at these three elements and there are of course a dozen more, Then there is definitely an opportunity in the U. S.
To grow slightly more than growth we see in long term established markets in Europe. If you look at the U. S, all three brands, they have about 11% market share, but each of those brands have a different positioning, has a different positioning allowing them from their level where they are to grow still well into the future. So we have the Russell store in gifting, in seasonal, in Valentine's, Easter and Christmas, Very strong that is as well the reason why we purchased the company. We have Lindt, you can say, the European specialty Positioning with Lindor with high end, absolutely high end product in recipe and quality.
And then we have finally the U. S. Heritage California and San Francisco Ghirardelli. All three are really complementary one to the other and all three have still great potential for growth. If you look at their existing market share and the potential that is to come.
That is the reason we are positive on the U. S. Market. If we look at the second question that is retail marketing tool, it is different things. It is marketing tool in the one or the other country, mainly when we tool in the one or the other country mainly when we talk about starting in a new country.
Then it is definitely as well a sales tool and profit tool in existing countries where we just cover areas of retailing and we cover that area with a huge assortment that would never be seen in grocery because we are there limited maybe to 20, 10 to 20 products. So Bringing the consumer into our stores definitely has marketing and sales aspects. Now how the split between Stores and e sales will be in the next 2, 3, 5 years. I definitely will be in a position to give you More details on that one once we get over 2021 and we see a little bit clearer on how the whole landscape between retail and eCell has developed. And with that, I ask Martin to get in here with cash flow.
Yes. Your question was about free cash flow guidance and the challenges we get, of course, from the net working capital, which we have improved in 2020. As I already mentioned before, we expect to improve EBIT margin so that we'll have a positive impact as well to the free cash flow ratio to the sales. I think from net working capital, there may be some pressure, but we have also projects in place where we really try very hard to improve our planning processes That will also have a positive impact on inventories. So we are really actively working our net working capital.
So as I said, going forward, we want to stay double digit as a percent of sales. Net working capital is key figure. What we, Of course, try to do that. We don't grow net working capital in line with sales, but we have some leverage there. We have to see if we can achieve that in 'twenty one.
But going forward, If you think long term, that's definitely what we target. So if you can grow sales by 6%, we try to grow net working capital less than the 6%. So we should have some positive leverage there. But overall assume roughly around 10% for 2021.
Ladies and gentlemen, thank you very much for your time, your attention and mainly your interest In Linde and Sprungli, we start to conclude our presentation of the 2020 results and as well the Q and A session. And thank you very much. And we will be back with news on our performance in July, talking about the first half year 'twenty one. Thank you.