Good morning, good afternoon to all. I'm Luca Borlini, Head of Nestlé Investor Relations. We are pleased to welcome you to our virtual investor seminar. While we cannot host an in-person event, we still wanted to take the opportunity to engage with the investment community on some of the important work we are doing. As the food and beverage industry has reached a tipping point in terms of digitalization, we want to provide greater insight on how we use data and digital technologies to unlock growth opportunities at Nestlé. In the following pre-recorded presentation, Bernard Meunier, our Head of Strategic Business Units, Marketing and Sales, and Aude Gandon, our Global Chief Marketing Officer, outline their views on Nestlé's digital transformation. By way of brief introduction, Bernard has been a pioneer in building digitally powered business models in our pet care business.
Aude brings extensive digital and brand-building experience, having worked for major international brands and more recently, a leading technology company. Our CFO, François-Xavier Roger, will then outline how the digital work we are doing ties into our value creation strategy. Following the presentation, we will open up for questions from financial analysts and investors who have pre-registered for the event. The Q&A session will be hosted by our CEO, Mark Schneider, along with François, Bernard, and Aude. Before we begin, I direct you towards our usual disclaimer. With that, let's move to Bernard and Aude's pre-recorded presentation.
The last 18 months have been pivotal for Nestlé, with massive shifts impacting every consumer in every market in which we operate. Our purpose, as always, is to unlock the power of food to enhance the quality of life for everyone today and for generations to come. This is what good food, good life means. Unprecedented times call for unprecedented solutions. Our industry is transforming into one that is driven and shaped almost entirely by data and technology. Now is the time to move forward in our digital transformation with even greater purpose and determination. Now is the time to accelerate. Today is about having a conversation with you investors, financial analysts, and media to unpack our digital transformation strategy and answer any question you might have concerning our ambitious, and we believe, exciting plans for the future.
COVID has, without a doubt, accelerated even more the changes in consumer behavior brought upon us by digitalization. We all know how that translates. More content hungry, connected consumers, more demand for frictionless shopping experiences, more desire to explore the universe of food digitally overlaying seamlessly the physical world around us. E-commerce penetration has increased dramatically as consumers spend more time at home and value convenience as their key need. This has significant implications for our brands, our innovation and distribution strategies, and for the capabilities we need to develop and attract in order to succeed. The speed of digitalization in the consumer goods industry has accelerated exponentially over the last 10 years, initially driven by categories like electronics or beauty. However, the speed of change in the food and beverage industry has accelerated so rapidly in recent years that it is now comparable to these pioneering categories.
With new actors appearing along the value chain, especially in the last mile delivery space, and new competitors entering the categories through innovative business models such as meal kits and personalized subscriptions, a new competitive reality is emerging. Nestlé is not only fully embracing this reality, but is consistently outperforming its peers in the industry. The way successful brands are being built and managed has changed completely. Today, it is about designing the optimum product concept and the optimum experience. Brands need to engage very differently with their consumers to stay relevant and earn their active brand recall. A product proposition needs to be sustainable by design, delivering the right experience and the right content to fit different audiences, optimized for every platform they appear on.
Quick access to actionable data insights is key to understanding fast-changing consumer needs and, of course, to optimizing our demand generation activities, thus maximizing each and every one of the dollars we invest. At the same time, we continue to see the rise in the importance of digital communities. Today more than ever, those communities can exert more influence than traditional awareness vehicles and become advocates for our brands. When we put together those insights, we come to our first big takeaway. Direct access to consumer data is not just a plus. It is a prerequisite to be the leading data-powered experience brands company. We wanted to share with you our goals for 2025, and as I said in the introduction, they're ambitious, but in reality, very achievable given the power of the strategic plan that we will be revealing later on.
We believe these objectives will establish Nestlé as a leader in all key digital battlegrounds over the coming years. Obviously, we will continue to enhance our e-commerce offerings and increase our spend in digital marketing. In parallel, we will focus on capturing more valuable consumer data points in the ongoing quest to deeply understand our consumers and build more impactful and personalized experiences for them, taking our sales online from around 13% at the end of 2020 to 25% by 2025, double the average of total consumer goods. Marketing investment spent online will go from around 47% today to 70% in 2025, with continuous strong return on investment of digital channels. To create more meaningful connections with our consumers through relevant experiences, consumer data records will double over the next four years, which will drive sales across all our key channels.
Our second big takeaway today, acceleration is now. This is a unique time for society and a unique time in Nestlé's history. As our CEO likes to remind us when talking about digital opportunities, the best is yet to come. With our scale and our complex portfolio, transformation comes through two horizons, rejuvenate our core and amplify the digital native brands and new business models we are bringing into Nestlé. This is our dual transformation roadmap. We have built solid digital foundations for our billionaire brands. We are bringing digital intensity to all categories, and we will amplify fully our digital first brands to act as lighthouses for our organization worldwide. As an example, tails.com for Purina or Garden of Life for Nestlé Health Science help transform our billionaire brands into digital first brands.
I have personally witnessed it taking place in Nestlé over the last few years and recently in leading the accelerated transformation in pet care. However, it will come as no surprise to my colleagues when I say the key to success is execution, w hich is why I'm so delighted to introduce Aude Gandon, my transformation partner, because she's going to tell us where we are going to focus our efforts on which strategies and how we are going to execute them. Over to you, Aude.
Thank you, Bernard. Acceleration is now. This is the time, and I'm very excited to share with you our strategy for the years to come. This is where all the leverage is in a rapidly changing world. We have three strategic priority areas which we believe are essential to growth. It is these three priorities which will transform our brands. It is these three priorities which will redefine the way we connect and engage with our consumers. It is these three priorities which will ultimately change the way we drive continued growth. The first, as Bernard has already mentioned, is critical. Direct access to consumer at scale. Use our penetration in every household as a critical competitive advantage to collect consumers' data at scale and leverage this access to create value throughout our portfolio. The second, channel-less commerce. Make shopping effortless, something consumers don't even have to think about.
A world where we focus together with our retail partners on the actual brand experience rather than thinking about individual channels. Consumers don't think channel. They don't care about channels. They have a need, and they think about what brands can fulfill that need. For us, it means being there at the right demand moment, providing the right experience to each consumer's need, preference, and location. Third, always-on analytics. Identify new growth opportunities through the strategic use of data and analytics capabilities. Tracking the ROI of every dollar we spend using more advanced data science capabilities to improve sales performance and make smarter investment decisions. As you can see, these three priorities feed off and are amplified by each other, to nourish one overarching objective, to raise our Growth IQ throughout the whole organization, all categories and all markets. This is for everyone.
Everyone in our organization should be concerned with raising their growth intelligence, their ability to detect growth potential, to deliver actionable initiative that fuel growth. The seeds of Growth IQ, its critical components and key enablers are all in these three strategic priorities. Let's go into each one of them in more detail. Direct access to consumers at scale requires more first-party data collected across our category ecosystems through key digital properties that have such authority to drive traffic. In each category ecosystem, we leverage the data across the consumer journey to create more impactful experiences and identify new business opportunities for our brands and any partner we bring in this ecosystem, bringing growth for all concerned. For example, in the culinary category, some Nestlé recipe websites reach a monthly traffic of above 200 million visits already.
We're using this asset to drive more sales of our culinary brands or connect it with our direct-to-consumer businesses that we have recently invested in. Bernard, you led the digital transformation of Nestlé's pet care business. What can you tell us about the importance of consumer data in this business?
I think about the value of data in very simple terms. It gives us a considerable competitive advantage that we never enjoyed in the analog world to be connected directly to our consumers more often and at the right demand moment. I also consider first-party data as a critical asset, especially looking at our near-term future, which will, of course, eventually become cookieless.
You are right, Bernard. In a world where the third-party cookie is slowly disappearing, reducing our ability to find qualified audiences in the marketplace, first-party consumer data is even more strategic. Nestlé is uniquely positioned to build direct relationships across the entire food and beverage ecosystem, which will bring business opportunities for the entire household, from babies to grandparents to pets. How do we use that consumer data to drive growth? We take into account four personalization principles. For our brand campaigns, the goal is to identify more precise and effective audience segments through data. This is what we refer to as precision marketing, enabling us to target them with more personalized content and experiences, integrating more and more AI technology to dynamically associate the right content to the right audience.
For a more direct engagement, the opportunity is to deliver programs across the entire consumer journey to increase loyalty with the category portfolio and identify new growth opportunities beyond our core product offer with personalized products or services. We are looking at scaling and monetizing this data ecosystem over the next few years by moving from simply reaching consumers to really engaging and serving them. Let's take a look at the transformation journey in pet care. Video.
Welcome. I am proud to represent Purina EMENA today. We are passionate pet care professionals and are driven by a brand purpose, creating richer lives for pets and the people who love them. Since 2017, we have been on a journey of digital transformation. On this journey, we transform from being a pet food to a pet care business. We have challenged ourselves to be at the forefront of consumer evolutions to disrupt the category, creating digital experiences for pet owners and building partnerships that strengthen the bond between people and their pets. Let me tell you more about this journey and what's next for Purina. The pet care competitive landscape has evolved rapidly due to digitalization, disruptive innovation, new direct-to-consumer models, and hundreds of startups. This has increased fragmentation of the pet parenthood journey. Consumers have changed, too.
They are younger, more digitalized, and expect a more personalized, tailor-made proposition, seamless experience, and convenient shopping. Starting from 2017, Purina EMENA began rapidly digitalizing its pet experience. We added Wamiz, the most successful digital pet publisher and adoption platform in France to our portfolio for granting access to a large audience of pet lovers and pet owners. In 2018, Nestlé acquired a majority stake in tails.com, the most advanced player in the direct-to-consumer tailor-made pet food category, boosting our data and analytic capabilities. In 2019 and 2021, through our IVC Evidensia partnership, we strengthened our collaboration with scientists, veterinarians, and pet care professionals to help deliver advanced pet food solutions and first-class pet care services. In parallel, we enriched our pet food portfolio by acquiring two leading natural pet food brands, Terra Canis in Germany and Lily's Kitchen in the U.K.
These strategic investments have delivered strong business results, demonstrating growth against all our key success metrics, leading in direct-to-consumer in EMENA above 30% market share, leading in digital pet media, and making a step change in first-party data. We are now focused on scaling and rolling out our strategic investments across EMENA to help our portfolio thrive in this transformed pet care market. Thanks to this momentum, we have become an attractive partner of choice for startups in Europe. In 2020, we launched Unleashed, the Purina Accelerator Lab, designed to be at the cutting edge of next-generation pet services, novel nutrition, and health technologies, always aiming to strengthen the bond between pets and their owners. This year, more than 300 startups from 50 countries applied to be part of our 2021 cohort.
We are proud of how, with our ecosystem powered by data, we have been able to redefine the category by consolidating a network of partners, alliances, and investments which leverage the expertise, people, and resources of Purina. That is why we will continue to accelerate the consolidation of our ecosystem to become the first and most trusted pet care company across Europe, the Middle East, and North Africa.
As you saw in the video, this journey from pet food to pet care will accelerate further, solidifying our leadership in pet data, in pet media, and in e-commerce, driving solid growth by delivering first-class data-powered experiences through our brands, a blueprint and source of inspiration for all other categories and brands at Nestlé. Now let's move to our second priority, Aude.
Channel-less commerce. Now, I know that omni-channel is a word you have heard a lot over the past few years, and it's of course focusing on connecting more channels to the consumer. The more, the merrier. Well, we believe that this traditional approach no longer really reflects what's actually going on in the world. In reality, consumers are not in love with a channel or channels. They are in love with getting their needs met as quickly and as seamlessly as possible. This is an important distinction. With channel-less commerce, we are anticipating a world where the focus is about the actual brand experience and not in which channel or where it takes place. This paradigm shift positions shopping as being effortless, something consumers don't even have to think about. This means, of course, they don't necessarily see the fragmented ecosystem of partners delivering the experiences.
For them, it feels like there are no channels, hence channel-less commerce. As an example, say a family wants to enjoy a last-minute meal at home on a Friday night. Nowadays, with the blurring lines between out-of-home channel and at-home consumption, which has accelerated during COVID, this family has many options to get this meal delivered to their door, but the channel is not the driver. It is the experience itself and the brand recall that is the driver. For us, it means providing the relevant solutions in every channel to deliver that frictionless shopping journey for each and every consumer. The opportunity here is to be ready to create best-in-class experiences across the full consumer journey with partners to excel in every outlet, anywhere, at any time. This is where Nestlé has to focus Growth IQ and deploy resources to fully leverage this emerging reality. Channel-less commerce.
Bernard, you spoke about Nestlé e-commerce intensity in your introduction. Can you tell us more about where we are in 2021, and how do you see the progress we have made in this new reality?
Our investment and focus to date have already delivered strong results with enhanced organic growth in 2021 after a big acceleration in 2020. This has been driven by a combined acceleration of all eCommerce models through pure players and click and mortar models where we outperform competition in almost 2/3 of the sales we monitor with growth continuing even beyond the COVID peak and through direct to consumer models already representing 6% of total group sales. Our eCommerce teams in the markets have been able to work strategically with our retail partners to retain new online shoppers acquired during the pandemic and maintain strong profitability levels. What are the critical enablers we are investing in for this second priority?
With our scale and our understanding of online shoppers and online retailers, we have equipped our business operations with new capabilities, new e-commerce packaging solutions, and a more agile supply chain to handle different logistics challenges. Already more than 40% of our e-commerce sales are in fit for purpose packaging formats, and our supply chain has been strengthened to cope with increased demand, especially in pet care and coffee. Since 2019, our e-retail media investment made directly with e-commerce platforms has more than doubled. We know we need to win in every shelf everywhere from organic search to advanced content. This is what drives the highest conversion rates.
Like digital native brands, we currently track daily all key online stores that carry our brands in more than 60 markets to ensure content accuracy, product availability, and to review consumer feedbacks, critical details that can increase our products' add to cart rate by up to 30%. This is the new reality of our markets to support the eCommerce acceleration. This is how we win every day when we sell directly online and build a full channel-less experience.
Now, let me tell you a little more about a perfect example of excellence in consumer experience that is driving considerable business growth, and I'm sure you all know very well, Nespresso. Nespresso has always been about elevating the simple act of drinking coffee as a daily routine into a true experience for the consumer. In a very competitive environment, our unique direct to consumer business model is a true competitive advantage. It, above all, enables us to know, understand, and serve our consumers where and when they expect us with a truly seamless experience, especially through digital and the strategic use of data and personalization at scale. A few weeks back, I spoke with Guillaume Le Cunff, Nespresso's CEO, about data and technology and how they have transformed their business models. Video. Hello, Guillaume. Thank you so much for welcoming us in one of your 800 stores.
Welcome. Obviously, it starts with a great cup of coffee. That's why we put so much effort and expertise to really craft the best coffee experience from a product standpoint. Now, once you have that's where you can start to build an experience around this cup. Welcoming in a boutique is definitely one great example. Obviously, when you're online, it has to be absolutely frictionless. We are directly connected to our customers. We can personalize and customize an experience you might have. While it has to be relevant, it has also to be different from one touchpoint to another one. When you mix channels, this is where we have the, you know, the best customers. Working with Chiara Ferragni is the perfect example of when the channels merge.
When she started to post on this partnership, the same minute you had people lining up at the door of this boutique. There was no wall anymore between the online activities, even starting up in the funnel on social media activation till the product sells. Data is a great asset if we use it to better serve you. We have an amazing set of data, and make this data talk and be able to move into actions through the algorithm that we put behind that, we can adapt the experience, the offers, anything we will offer you, and it has to be real time. That's what we call personalization at scale. Now, we can also predict the risk. You know, we can also, based on different algorithm, know, depending on your first contact to the brand, how much risk we have for you to stay or leave.
As we want you to stay, we can adapt and react in advance. Innovation has been at the core of what we've been doing for years. To innovate, being on coffee, on any kind of experiences, but I see Nespresso becoming even more a relational brand. You know, we have the chance to be connected with many stakeholders from the farms to the end consumers. It's a unique opportunity to create relations. We can connect you directly to the farmers who produce this cup of coffee. I think this is the future, you know, just building and leveraging the business model to create new relationships.
With Nespresso, we talked about using consumer data to identify consumers who were at risk of leaving. Obviously, this is not just valid for direct to consumer. Transforming data into an asset by building new analytics capabilities is a true competitive advantage across all business models. This is why always-on analytics is our third priority. Because of our scale, we have access to a very large quantity of data, granular information such as store level data, e-commerce sales data, or online consumer behavior data. On a weekly basis, we speak with more than 200,000 consumers. We monitor 500,000 product reviews every month and analyze millions of interactions. We have developed advanced data science capabilities to use these data sources strategically, build predictive analytical models to help improve sales outcomes and consumer lifetime value, and surface these in real time to identify early trend and innovation opportunities.
Let's see how this translates into specific advantages in different areas in the world with many retail partners. First up the U.S., then India, and finally China. In the U.S., we now use predictive capability to identify potential opportunities for new items, detect possible out of stock, and propose to our retail partners store level personalized recommendation on pricing, promotion, or assortment optimization, taking strategic revenue management to a different level to drive incremental sales for us and the retailer. In India, in a much more fragmented and traditional trading landscape, we consolidated all store data to capture the effect of generating demand activities, media, trade investment, promotion, so as to identify optimal allocation of resources, depending on the geography or the channel we operate in.
We use data solutions to better segment retail outlets, suggesting must-carry SKUs per store and mapping more strategic areas to focus our sales force effort, helping us to enhance significantly distribution, availability, and visibility. We use predictive models to improve sales demand accuracy and better anticipate out of stock. These capabilities combined drove incremental sales from 2%-4% and help us optimize 10% of our investment to be more productive. These are all examples of concrete applications of Growth IQ in action. Of course, the U.S. and India are just illustration of what is happening worldwide. Those new capabilities now power our commercial teams in many markets to drive significant investment optimization and growth opportunities, transforming the way we engage with all our retail partners. Now, let's look at how we bring consumer data into our innovation engine.
For this, we wanted to share some insight from China. China is arguably the most innovation-led market in food and beverages. Incredibly competitive with a pace for new product launches that is unmatched in the rest of the world. Rashid Qureshi, our Nestlé Greater China CEO, will tell us more about what they're doing at the moment.
I'm Rashid Qureshi, Chairman and CEO of Nestlé Greater China Region. Today, I would like to talk about innovation agility. No matter how you describe innovation, it is happening right now in China and provide us with the challenges and opportunities that keep defining our future success. China is arguably the most innovation-led market in F&B. Brands are rising exponentially in China. This is powered by digitization of the business environment and an open data ecosystem. In fact, most CPGs are challenged by the overall velocity of the market. Nestlé stepped up to this challenge by digitizing the innovation process to fast-track output and to fine-tune concepts based on data insights. We can now leverage our innovation big data tool to screen out key trends and innovation opportunities using real-time social data.
This data and insights get translated into innovation ideas and concepts, which are accelerated through our local product innovation centers and manufacturing capabilities. With our e-commerce partner platform, we are capable of testing these concepts very rapidly. Looking back at some results, Nestlé China multiplied its innovation intensity by three in three years. Let's take an example. Some of you may have heard of our Nescafé Youth Line. With Tmall Innovation Center, we verified the concept and food flavor recommendations within two weeks, and even identified specific target audience profiles. Youth Line was launched in three flavors, penetrated over 3 million families. 20% were new category users, demonstrating a strong recruiter role to the brand. In six months' time, Nescafé 1+2 shares drove up by 50 basis points.
With the positive feedback gained from the test launch, we expanded to always-on formats plus seasonal additions to continuously excite consumers. This case truly exemplifies how we can leverage data and technology to innovate faster and increase success rate. We are rolling out these capabilities to more categories. We will keep on elevating our innovations as this demand keeps increasing. This edge is truly where everything begins.
Thank you, Rashid and the team in China for giving us a glimpse of what the future might look like for other parts of the world in just a few years from now. There you have our three priorities. This is where we will be focusing our energy. Of all the predictions about what's going to happen over the next 30 years, one thing we can be sure of, the world's population will increase and will be even more connected. To meet that challenge as a business, our entire organization has to evolve fast, creating the condition for our talents to grow across the different dimensions of our digital transformation. The prerequisite of our success will be our people, empowered by the right technology. This is where Growth IQ takes center stage.
Nestlé has been investing tremendously in its workforce over the past years, getting ourselves ready for the accelerated transformation we are all experiencing today. We have been investing in upskilling more than 31,000 marketing and sales employees, representing 75% of our generating demand population, enhancing their digital literacy, using cutting-edge training developed in partnership with our technology platform partners, Facebook and Google. That means that from Nigeria to the Philippines, from Brazil to the U.S. and to Europe, our people will follow the same world-class bespoke training delivered by the finest in the digital world. We have integrated new talents and experts to further accelerate in areas such as data science, digital experience, and digital media, more than 500 digital experts worldwide and even more account managers dedicated to e-commerce, creating a culture where people are not afraid to experiment, to innovate, and to lead.
This is what Growth IQ is all about, to champion innovation and digital creativity across the whole organization. This agile mindset is already embedded in our innovation cycle, orchestrated with our R&D colleagues. Bernard, can you explain how we do it consistently?
Yes, Aude. In the last few years, we have created multiple R&D accelerators to embrace a test and learn mindset and accelerate our speed to market for our innovative new concepts. This test and learn methodology is a critical enabler as it allows us to quickly validate our ideas with consumers and make faster, smarter go-to-market decisions. Our multidisciplinary teams are equipped with the latest technology to create products and experiences. They can test and validate them with consumers all in record time. It's what we call fast-paced trial and error. An example you may have heard of is the development of Wunda, where we utilized those capabilities to develop and test a new non-dairy drink in record time. The product concept and branding was tested first with consumers online with a direct-to-consumer website set up in four weeks.
Following successful reactions gathered online, the product is now running out across Europe. We have taken a similar digital agile approach in the way we communicate. As the number of digital platforms soars, the need for creative assets has dramatically increased. To answer this challenge, we created a more effective, more agile end-to-end content production model. Let me now show you a short video that brings it all to life. Video.
Our brands today need to connect with consumers in millions of micro moments, to connect where and when they're receptive. To be relevant in a world of extreme competition for attention, the need for digital creative assets has never been greater. To answer this challenge, we've built a more effective, more agile content production model, powered by Nestlé in-house content studios operating across our Zones and markets, consolidating the creation and the adaptation of original brand content for all digital channels, removing the inefficiency of multiple specialized digital agencies. Since 2017, we moved from five to a network of 35 content studios with over 400 dedicated resources and have reduced our number of digital agencies by 60%. Today, our studios are at the forefront of our digital transformation journey.
They're filled by world-class digital creators, powered by social listening tools and always-on insights to drive effectiveness and relevance, and supported by best-in-class digital technology services to localize creative assets faster. For hundreds of brands across Nestlé, this new model is delivering hardworking digital content 40% faster and helped us reduce production costs by 50%. A true competitive advantage for our brand to be agile and remain current in a fast-changing digital world.
New content production, new digital experience capabilities are available in markets and for central teams to roll out more efficiently for best-in-class digital communication for global brands. The best example to bring this transformation to life is Starbucks at Home, where new capabilities helped us deploy successfully the launch campaign in 70 countries in record time. Video.
Over the last two and a half years, Starbucks coffee has come home with the launch of the global coffee alliance between Nestlé and the iconic coffeehouse brand from Seattle. To support the ambitious rollout of Starbucks at Home, our coffee team leveraged our new content operating model. To deliver at scale, the new Starbucks is Coming Home campaign and all creative assets designed to deliver a unique brand experience in all major digital platforms and retailers worldwide. An integrated communication plan with more than 600 master creative assets created centrally by our lead agency partner and newly created coffee content studio. Rich content tailored for every social media platform, product content design to win the e-shelf, and a full website experience to drive consumer awareness and engagement of the new coffee offerings. Localization of global master assets operated through our integrated marketing services.
With a fully automated process, CGI product images technology accelerated by AI capability for content identification, 30,000 local assets have been developed in 60 languages and deployed one master website into 49 local Starbucks websites operated by digital experts in content management and search engine optimization. With this new model, the Starbucks at Home is now live in 79 markets, ensuring a consistent and premium brand experience across the globe, bringing agility and speed with efficiencies of 65% for content creation and website deployment. This is an industry-leading practice to support the successful rollout of the Starbucks at Home, becoming one of the fastest-growing billion-dollar brands at Nestlé, setting the new standard for all Nestlé global brands rolling out this new content operating model.
With that final inspiring example from Starbucks, we would like to bring this presentation to a conclusion and then answer any question you may have. The accelerated phase of Nestlé's transformation journey has begun. Acceleration is now. The future of the food and beverage industry is technology and data-driven, and Nestlé will lead this transformation.
With three strategic pillars. First, direct access to consumer at scale. To move from selling to serving, to build category ecosystems, to partnering disruptive startups with our lighthouse brands. Second, channel-less commerce is our new normal to win with shoppers anywhere. Third, always on analytics to identify growth opportunities through data. Innovation, M&A, marketing investment decisions, and portfolio choices. We have the right people in place worldwide. They have the necessary state-of-the-art digital knowledge. They are equipped with the right tools, R&D, and content engines. This is the right time now to bring Growth IQ center stage to champion a culture of innovation and digital creativity across the whole organization.
Through this transformation journey to a more data and technology-driven company, led by our teams across all our categories and markets, we will continue to deliver profitable growth while serving our purpose of enhancing quality of life for people and pets. As the leading experience brands company in the food and beverage industry, Nestlé will ensure that good food, good life remains a reality in today's world and for generations to come. I'm now delighted to hand over to François-Xavier Roger for some closing remarks before we move to Q&A.
Thank you, Bernard, and good morning, good afternoon to all. I would like to start with a reminder of our value creation model and the important role that digital transformation plays. Our value creation model starts with freeing up financial resources, which allows us to invest for future growth. We have been generating such resources over recent years through a combination of disciplined control of our structural cost base and the acceleration of our organic growth. We expect to follow a similar model going forward, with more of the freed up resources being used to invest behind growth platform, with a key focus on digitalization and sustainability. Our focus investments are driving market share gains. This is clearly evidenced by our recent strong market share performance, gaining or holding share in more than 60% of business sales, the highest levels since 2013.
We expect our value creation model to enable the delivery of profitable growth and capital efficiency. Of course, we believe our company will only be successful in the long term if we create value for both society and our shareholders. When all these elements come together, the result is a virtuous circle of value creation. We have delivered on this value creation strategy over the last few years. Since 2016, we have reduced our structural cost base by around 300 basis points as a percentage of sales. Structural costs amount to around CHF 16 billion, representing 19% of our 2020 sales, and they include fixed industrial costs, fixed distribution costs, and G&A. At the same time, we stepped up our growth investments.
Since 2016, we have increased our investment in trade spend, consumer-facing marketing, and R&D by around 200 basis points as a percentage of sales. Over the last four years, a lot of our value creation came from reductions and improvements in items such as structural costs and working capital. Going forward, while further opportunities exist in these areas, increasingly we expect value creation to be driven by softer elements such as digitalization and data analytics. The digital transformation of Nestlé should not only drive growth, but it can also generate savings and free up financial resources. Over the last few years, we have been very focused on increasing the returns on our investments. For example, last year, we improved our return on invested capital for the sixth consecutive year.
Looking at our marketing spend more specifically, we have been increasing the return on our investments through two key pillars. Firstly, we are increasing the share of our marketing investment that is tracked and assessed systematically for ROI. Today, we conduct systematic ROI analysis on around 50% of our media investment. We can do more, and we are accelerating our coverage to better track every Swiss franc we invest. Last year, we increased tracking by 40%, and this resulted in a 10% increase in ROI in our test markets. Secondly, we have been increasing the proportion of our media spend that is digital. Last year, digital media spend represented 47% of our total spend, a significant increase compared to 32% in 2017.
Importantly, the shift to digital media generates even higher returns as it enables us to move faster, to better focus on investments, and to increase personalization. Indeed, we estimate that the return on digital media spend at Nestlé is around two times higher compared to traditional media. We see that across categories and across geographies. For example, Dog Chow in Mexico or KitKat in Spain have seen double the return on digital spend versus traditional media. Even if we look at Nescafé in South Africa, it has even seen three times the return. Enhancing our efficiency and effectiveness goes beyond marketing spend. We are significantly investing in artificial intelligence, in data analytics and algorithm, as well as in talent and competencies to support our digital journey.
For example, we have built three data and analytics hubs, starting with Barcelona in 2018, which has now been expanded to Argentina and India. Since these digital hubs started, they have rolled out over 500 initiatives in 40 countries. Digitalization is clearly an area where we see a lot of value creation going forward across the entire company. To conclude, we are moving faster. We are becoming more effective and more efficient with our investment across the board. In turn, these free up financial resources that can be invested behind key growth platforms. Accelerating our digital transformation is clearly an important area of investment to support growth along with technology, innovation, and sustainability. Our digital investments are clearly not limited to marketing, and we're also digitalizing other functions such as R&D, operations, finance, and HR.
Such investments support our medium-term outlook to deliver sustainable mid-single-digit growth, continued moderate margin improvement, and prudent capital allocation, as well as value creation for both society and our shareholders. I will now hand over to Luca for the Q&A session.
Thank you, François. With that, we move to the Q&A session. We open the lines for questions from investors. As a friendly reminder, please focus your questions on the topic of today's presentation, and also please limit yourself to a maximum of two questions. The first question is now coming from Warren Ackerman at Barclays. Please go ahead, Warren.
Yeah. Hi, Luca. It's Warren here from Barclays. Yeah, very interesting presentation on digital. I guess my two questions are, firstly, on that doubling to 25% by 2025, I mean, that's quite a big step up. Are you able to maybe share some details on kind of key timelines, so we can kinda track how quickly you get there? And maybe can you say how different, you know, categories or geographies will obviously get there at different times. It'd just be interesting to understand what the kinda near-term priorities are and, you know, what categories will require more investment in either AI or other kind of, you know, digital tools to get you there. I'd just be interested to understand that.
Then secondly, just on the cost side, I mean, clearly what you're trying to do is to transform your entire business digitally, and some of these investments, you know, do sound pretty expensive. I know it's kind of baked into the value creation model, but would you be able to give us some idea of, you know, how much per annum, or maybe kind of a, you know, a Swiss franc number over kind of five years to digitalize Nestlé? I mean, given the size of Nestlé, I'm sure it's a very significant number, and give us some confidence that, you know, there is gonna be a payback on this.
Because I imagine everybody else in the industry is doing the same sort of thing, and I suppose, you know, what I'm trying to understand is how much is it gonna cost, what's the payback, and where are you actually gonna have a genuine competitive advantage relative to everybody else that will be doing the same thing? Thank you.
Warren, thanks so much. Maybe I'll take the lead and then hand over to François with some more information on the cost. Let me say, as much as we're trying to be helpful here, when it comes to the years ahead towards 2025, we believe we have very good initiatives to make that happen. I think a turbulent moment like this, as we're hopefully exiting the COVID pandemic, is a very difficult time for pinpoint accuracy when it comes to forecasting. Our solution is something that you've already seen for the last few quarters, and that is every quarter we're giving you that data point on how these e-commerce sales are developing, and we're committing to doing that going forward as well. You'll be able quarter by quarter to track our progress.
Obviously between now and 2025, the one thing that's for certain is that there will be changes in that plan. We have very good building blocks. We're very confident about what we're forecasting, but there will be changes in that plan just simply because the world around us is changing so fast and nimbleness is key. The other thing I'd like to assure you about is I have zero doubt about the return. I think some of the metrics that François has shared with you make it very clear the returns are there because the consumer is there. Consumers reward those types of investments. The returns I'm very much certain about and even if everyone else is doing the same thing because consumers reward essentially leadership in that space.
I hope what you took away from the presentation is that this is not just abstract concepts, but, you know, in some parts, like in Starbucks, the roll out there internationally or Petcare EMENA, we made it happen. This is essentially something that we've already experienced and that we're now scaling to some of the other categories.
Maybe, yes, Warren, I can add a couple of things. Obviously, it—I won't be able to give you a cost because it hits different lines of the P&L. What I can tell you, though, is that there is very little in terms of CapEx. It's essentially about a cost item in the P&L, but it hits some lines in IS/IT, some of them in marketing and so forth, so it's difficult to provide you a number. That being said, exactly as Mark said, and as I did during my presentation as well, a lot of it we will self-finance through saving and efficiencies. You saw it, for example, when we invest in digital media, usually we have a return which is two times better than on traditional media.
We have been able to free up resources in order to be able to invest in that. Digitalization as a whole and e-commerce valid, totally valid as well, we are really driving growth, we are driving market share, and we can absolutely finance, self-finance all of this investment that are essentially hitting the P&L.
Thanks, Warren, for your questions. Next question is from Jon Cox at Kepler. Please go ahead, John.
Thanks, Luca. Good afternoon, guys. Two questions on my side. Really just on the first one, on the goal of 25% again, currently your direct to consumer is, as you mentioned, I think less than 6 points of the 13 points in 2020, which is digital. Just wondering where you think that figure will go, and whether you really wanna do more direct to consumer. As a result, would you imagine by 2025 that, you know, maybe closer to 15 points is direct to consumer, rather than sort of less than half, currently. That's the first question.
The second question, just to come back really on the costs and the benefits, you know, really, so is this we should really look at this as maintaining the Nestlé model, or enhancing, particularly, potentially, the Nestlé model. I know you're not, you don't really wanna talk about, you know, how much would be savings and, you know, that sort of stuff.
I'm just wondering what, you know, what would be existing spending on those lines, which will then just be shifting to digital. That would be, you know, 80%, but you still need to find 20% savings, something like that. More of an abstract, you know, thought rather than a number if you're uncomfortable mentioning numbers specifically. Thank you.
John, I think that we are trying to find as many efficiencies and savings as we can, and I think that we have demonstrated historically that we are in a good position to try that. I can't, you know, attach necessarily one saving to one investment either. We try to generate as many efficiencies as we can, by the way, not only in marketing, but we do that in manufacturing, we do that in G&A as well. Direct these resources into areas where we will drive growth. Certainly digitalization is one of them. We are investing as well a lot, as you know, in sustainability. But we can't necessarily attach one saving to one investment. I think it's a little bit difficult to link, I would say the two.
As far as DTC is concerned, we are not providing any guidance in terms of DTC as a percentage of sales of where we will be in the future. One of the reasons why we don't do it is that it could be impacted by M&A as well. You have seen that we have invested quite a lot as well, you know, recently in assets in the DTC space.
John, rest assured that DTC, of course, is also projected to be up steeply, even though, as François explained, we're not thinking at this point about pinpointing a specific number, and I think that's understandable. In terms of maintaining or enhancing the Nestlé model, clearly, what we're still sticking to is the Nestlé model. What we're showing you is that even in this new world and this turbulent world of the 2020s, we have a very good shot of keeping that incredibly attractive financial model.
John, thanks for your questions. The next question comes from Celine Pannuti at JP Morgan. Please go ahead, Celine.
Thank you. Good afternoon, everyone. My first question on data. I'm a bit surprised you took 400 million data points. That doesn't sound to be a lot. What's the definition of this data point exactly? And can you say how much of that is yours directly through your website and how much you buy from a third party and who are this third party? And all together, data collection, I mean, in terms of your investment, how big is it? And is that included in AAP? Would you include that? And then finally on the same data, are they linked between your categories? Are you able to see if someone who buys pets also buys Starbucks, for instance? My second question will be shorter, I promise, on China.
Can you remind us, how much of your sales are online and, you know, how much there is in DTC in China? Also, given the changes that are happening in terms of regulation, do you think that will impact the way the digital ecosystem in China works? Thank you.
Just Aude begin on the first question, then François takes the second one.
Yeah. Perfect. Hello, Celine. 400 million. Today we are at 205 million data points. We are talking first party data. We already have properties. If I take an example, we have some Nestlé recipe sites today who have more than 200 million visitors every month. This is exactly the type of data that we're talking about. We are very confident that we will reach the 400 million by 2025. It's first party data only.
On China, Celine, you know, our e-commerce today, even digital investment are highly concentrated in five or six countries, starting with U.S., U.K., France, Germany, Japan, and China. China is certainly the most advanced country that we have as far as e-commerce is concerned and digital investment as well. Rashid talked a lot about it during the video. Which is a reason why we are really much more advanced. Just for your information, even in some categories, we have up to a third of our business, which is actually sold through digital channel in China. I can't provide you a more granularity because this is, commercially sensitive information.
Celine, thanks for your questions. Next question is coming from James Targett at Berenberg. Please go ahead, James.
Hello. Good afternoon, everyone. Two from me. I mean, it's clear that one of the, you know, big focus of digital transformation is on innovation and speed to market. I wonder if you could update us with sort of what do new products account for as a percentage of sales on an annual basis and how has that, you know, been trending, you know, over the last few years? And are there any issues with, you know, increased complexity in terms of manufacturing, et cetera, as you increase the rate of innovation? And then my second question is on, I guess you just mentioned about how the e-commerce is weighted towards particular markets.
When you think about the 25%, how much of that is coming from those markets, you know, really driven by those same markets or whether it's, you know, the newer markets really seeing a big increase of penetration as well? Thanks.
Yeah. Starting with the second one, 25% is, of course, the average. You know that sales are very much weighted towards e-com in the big markets like U.S. and also Europe and China. We see this progression everywhere. We were 40% up last year, and again this year, on the basis of the 40%, we have another 20% up.
Since or even through COVID, with now COVID recessing in some geographies, we do not see a return to pre-COVID numbers. The 25% will be weighted strongly, of course, in the geographies where today already it's above the 14% average that we have. First question was? Excuse me.
Maybe I can take the first one on innovation.
Innovation.
James. I think that there are many different ways to calculate innovation. It's always a little bit complicated, because we could throw numbers of, you know, the number of SKUs that we have in new SKUs on the market and so forth. I would like to point out to one KPI, which is the composition within organic growth, what is coming from mix, product mix. Consistently over the last couple of years, we had about 2.5 percentage points of organic growth coming from mix. Product mix is an excellent illustration of premiumization and innovation. I think that it speaks for itself, the fact that we had, with the exception of last year, but because of COVID, around two-thirds of our growth coming from mix, which shows the power of innovation.
We saw that clearly accelerating four to five years ago when we really reduced time to market in terms of innovation, from formerly two years to develop new products to about six months. We did see a difference at the same time in our market share dynamics. As you know, we started to regain market share already, significantly over the last two years, to the point now where we have more than 60% of our business is gaining or holding market share, and we are at the highest level since 2013.
James, if I can build on that. I think what the presentation made clear is that our innovation model and the digital business model are really two sides of the same coin, and they kind of build on each other and, they're highly synergistic. I think before when we had quarterly calls and investor meetings, we did not have had the chance yet to fully make that point. I think it's no coincidence that some of the most digitally advanced categories are also our highest growth categories. This is where we bring that innovation strength to the table, and then we use digital tools to actually get it out to the market.
James, thanks for your questions. Next question is coming from Bruno Monteyne at Bernstein. Please go ahead, Bruno.
Hi, good afternoon. My question is: How do you know, how do you measure that brands, your brands are better off in this digital world? Are you able to measure whether the relationship with your customer, their experience is stronger? Because obviously there's an alternative storyline, which potentially is digital world is more transactional. Nestlé might be ahead, but you might end up being the first in a world that's a lot more transactional and less attractive for brands. I'm not saying that's the case, but how do you know and measure that your brand experience is better, more profitable, more sustainable online than in the old world, please?
Bruno, I think the fast and easy answer to that is consistent market share performance over time. Then, of course, incrementally, as you look ahead, it's about the ROI on specific marketing decisions that you take. I think both of these need to go hand in hand. If you only have high ROI marketing investments, and then it turns out the product is suffering, something's off. If both of these apply, then I think it's a good indication that you're on the right track.
Thanks, Bruno, for your question. Next question is from Pinar Ergun at Morgan Stanley. Please go ahead, Pinar.
Hello, thanks for taking my question. The first one is, how centralized are your data and analytics capabilities across the organization? Would you look at M&A to enhance Nestlé's data analytics capabilities? The second one is, it's interesting to see how digital has enhanced your expansion from pet food further into pet care. Do you see similar opportunities in other large categories where digital can open up new horizons for Nestlé? Thank you.
Hello, Pinar Ergun. Thank you very much. We have obviously data is now being housed both at a market level, but we also can bring it above market on the categories to make sure that we actually have access to it and, you know, deliver the best experience, but also the best analytics on all the marketing efforts that we're doing. That's the access to data has really increased more and more. On M&A, you want to, Bernard Meunier?
Yes. If you think of ecosystems as connected platforms of digital assets that are brought in by partners through either M&A or partnership. Through these ecosystems of digital assets that cover all the consumer journey, all the pain points, all the need states of consumers along their journey, that opens up obviously new opportunities for brand experience, going beyond product into services, content, information. That's indeed the transformation from pet food to pet care. You can think of the same from baby food to baby care, and also in food from ingredients to menu planning to healthy and balanced diets. Yes, this opens up this orchestration of these connected ecosystems, a lot of new opportunities for seamless brand experiences.
Pinar, thanks for your question. Next question is from James Edwardes Jones at RBC. Please go ahead, James.
Hi, Luca. Thank you. Couple of things. How does the environmental and sustainability footprint of e-com sales compare with conventional sales?
Secondly, can I go back to Warren's question, which I don't think really got an answer. You've told us a lot about your plans. What parts of those fundamentally differentiate Nestlé so your competition won't be able to replicate them rapidly?
On the sustainability side, of course, it depends a lot on what exactly the type of business model is. Obviously, there is a part that goes through our e-commerce partners. There's others that are direct to consumer. I think for direct to consumer, for what we have the best under our control, you see with Nespresso significant efforts to reduce the environmental footprint from packaging point of view and distribution, recycling point of view, and being able to access the consumer directly and communicate with the consumer directly also gives us many more chances to nudge them towards the right behavior and suggest best in class behaviors when it comes to environmental friendliness. It's hard to judge at this point where exactly this will stack up and how exactly it compares to a retail environment.
We do believe we have good chances here to improve our environmental footprint with the e-commerce model just as much as on the retail side. François, do you want to comment on the question about competitive?
I think that if I take back what Bernard said during the presentation, I think that a certain number of things of what we do can be obviously copied by competitors, but a lot has to do with execution. I think that this is really what is going to make a difference. I think that we will execute, and we are executing extremely well. You see it through our market share gains. We have a lot of experience as well because we have been in the digital world and in this e-commerce world for very long with Nespresso and that we have rolled out, for example, with PetCare, and we're expanding into new categories and all categories now.
I think that the mere fact of having experience, having a lot of capabilities in terms of execution, I think, and you see through the results that we are really differentiating ourselves from the competition.
James, thanks for your question. Next question is from Tom Sykes at Deutsche Bank. Please go ahead, Tom.
Yeah, good afternoon, everybody. A couple of questions just on the specifics on one brand and the route you chose. I think purina.com to transact, you use a where to buy basket, and on purina.co.uk you have a direct business model. Just wondering why you would go down different routes and what the thought process was on that, and yeah, what are the different economics behind the two models and how we should think therefore about which route you would take. Then if you do go down the direct route, is that an outsourced business model? Obviously, the delivery is probably largely outsourced, but will you use third-party logistics providers, warehousing, et cetera, please?
Yeah. Thank you, Tom, for your questions. First of all, when do we use D2C? What would be the trigger to go D2C? First of all, if we have consumer pain points which are not well answered by the regular B2B2C business model. Recurrent high-value purchases which are very regular by nature is a good example. If we have a chance to personalize also the relationship and the product or the service that we offer, this is another reason to go D2C. In the case of Purina in the U.K., I think the examples you've picked on is that we leverage the learnings we have from the tails.com platform, and we now are bringing those back to our traditional brands like Felix, like Pro Plan.
Leveraging all the learnings and the digital capabilities that we have acquired through the tails.com acquisition. On the outsourced versus insourced, yes, we use third parties, and you have a whole spectrum of D2C business models from the lightest ones, which are basically fully leveraging third parties for the fulfillment, the payment, the delivery, all the way to the more integrated business models such as, of course, Nespresso, where we are capable of processing up to 100,000 orders in a given day.
Thanks for your question, Tom. Next question is from Guillaume Delmas at UBS. Please go ahead, Guillaume.
Hi. Thank you, Luca. Good afternoon, Mark and François-Xavier. Two questions for me, please. The first one is, could you talk about the gross margin impact from e-commerce becoming a larger proportion of your total turnover? Basically, would it be fair to assume it is overall nicely accretive to group gross margin, and primarily, I would think because of a favorable category and regional mix? Also, how should we think about your online gross margin going forward? I would think that with better, more personalized content, experiences, services, we should see some further premiumization occurring online and this providing a nice tailwind to your online gross margin. Then my second question, it's about your predictive algorithms.
I mean, could you provide some granularity on how you're using this, at the moment, as you are looking at passing some of the inflationary pressures you are facing on to consumers? So effectively
Do these tools help to predict the potential knock-on impact on your volumes that could arise from price increases? Thank you.
Guillaume, I will take the first question on the gross margin. You are right that directionally the gross margin on e-commerce is slightly better than the average of on Nestlé product. That being said, I mean, we have higher distribution costs as well, so which tends to neutralize it. I would rather focus on the margin, operating margin. I would say that today, overall, our total e-commerce business is not dilutive to the group. That being said, it's an average, so I will be a little bit prudent in drawing conclusion from that because it's a mixed bag of geographies and categories, but directionally, at least for the time being, no dilution at all.
It's very different if you look by geography, by category, and even in terms of profile of some of these assets, because you have some like Nespresso, where we have been in business for long, and you have new assets where obviously we are clearly in an investment position and having a significant negative operating margin. We are very comfortable with that because we are really investing and growing extremely fast.
Hello, Guillaume. On the predictive algorithm we use, digital is now really kind of being spread across the different aspects of sales and marketing. What we do is, as we were showing, for example, in the example in India, we're really using for our sales force very fragmented environments which help us to really see where we should focus our sales efforts, what type of product, where we can risk of out of stock. Also it's enabled us to really run some pricing elasticity on different categories, different product, different SKUs, and also different market and different type of retailers. That's kind of where today it's a very helpful tool for us.
Guillaume, thanks for your question. Next question is from John Ennis at Goldman Sachs. Please go ahead, John.
Hello, everyone. Just one question from me, please, on content creation. I guess you're doing more in-house and therefore saving on agency fees, and at the same time, you're also spending more on total marketing and R&D expenditure. Can you detail where these agency savings are being redeployed? Is more of it going on internal personnel costs as you build out effectively your own content hubs, or are you able to use that saving to buy more ad starts, effectively more airtime for your brands? Thank you.
I would say, John, that it's a combination of both. I think that anywhere we like investing in, any driver in terms of growth, be it R&D, be it commercial operation and marketing. If you look at over the last couple of years, we have increased our marketing investment year after year in absolute value, and very happy with that. Part of it, exactly as you say, part of the reinvestment that we are doing is even in structural costs internally. Because if we have built all of these content studios, and we have a large number of them by now, and obviously it's creating structural costs within the organization, but we are saving on external costs as well. We are really looking at it on a case by case.
Ideally, the more we can invest in terms of project and airtime, for example, that is driving growth, the more we will do it. That being said, we do not hesitate to invest in infrastructure and organization as we do with this content studio, if it contributes either to savings or to accelerating our growth as well.
Thank you, John. We have no further questions at this point in time, so we come to an end of our session today. I now hand over to Mark for his closing remarks.
Luca, thank you, and thank you to all of you for joining us today. I think it was a great opportunity to bring you up to speed on our recent work in digital and how it has accelerated and how much opportunity we see in that space down the line. I also hope that it showed you the connectedness between the digital model and our plans in the digital arena and the innovation model that we're pursuing, that we have been steadfastly pursuing now for a number of years, and which I think has already started to pay off very nice dividends for our company. François rounded it off with the underlying financial model that connects it all, where we build on some of the efficiencies in order to invest and drive growth and keep that flywheel going.
I think it was also a great opportunity for Bernard and Aude to firsthand show you some of the really exciting work that they have kicked off. Again, it was important to us to not only show you concepts, but also proof points, specifically in some of our categories and geographies and how we make it happen. In a world where there is no rule book that you follow, where you have to do a lot of the learning by yourself, I think a lot of exciting learning has been done already, and now we're in the process of actually scaling that up, rolling it out to other categories, other geographies. A lot of the heavy lifting has been done, and we're looking forward to the next few years in bringing that to full fruition.
Thanks again for joining us today, and we look forward to talking to you again in February for our full year update and the outlook towards the year 2022. Thanks.