Barclays Global Consumer Staples Conference

Sep 9, 2021

Summary

Input inflation is expected to rise in 2022, with pricing and revenue-management actions intended to offset pressure. Growth priorities include North American capacity, health science expansion and continued investment in plant-based products.

Hello, everybody. Welcome to the Barclays Global Consumer Staples Conference. I'm Warren Ackerman, Head of the EU Consumer Staples team, and delighted to welcome Nestlé today. We have CFO François-Xavier Roger and the Head of Zone Americas, Laurent Freixe. Welcome, gentlemen. The format will be a fireside chat. We will have about 30, 35 minutes, and I will be hosting that. So with that, let's get cracking. First one to François. I want to kick off with margins. You slightly lowered your margin guidance this year for around 17.5%, mainly due to input cost inflation, where you talked about a 4% COGS inflation in 2021. You've also said that the margin reduction in the second half is transitory, and you would expect next year to be back showing progress. Can I ask, as we stand at the moment, I know it's difficult with volatility in commodities, what do you think COGS inflation might do in 2022? How do we think about higher climate costs and the fact you're having to re-hedge at higher rates and the fact that also you want to improve the margins? How do we square that circle? What kind of offsetting positive factors might there be? Thank you. Thank you, Warren. It's a good question to start with. Good morning and good afternoon to all. If we talk of 2022, we see with what we know at the moment, that it is likely that the input cost inflation will be higher next year than it is this year. Yeah. It's too early to do a final call because, I mean, two of the three items that are really contributing to the input cost inflation, and more specifically, transportation costs and packaging material, we can't hedge. So we don't know to a certain extent till we enter into 2022. But with what we see today and what we know today, it is likely that the input cost inflation next year will be higher than what we're experiencing this year. We don't know if this is going to be permanent. We don't know if this will go even further into 2023. We will have a fairly pragmatic approach. Anyway, you know what our strategy is, which is to offset anything that we receive through pricing. The idea is really to pass it on to the trade, on to consumers whenever we receive it. There will be a time delay, which applies more for H2 2022 and is more specific to some zones and regions, by the way, more specifically Europe, because we are locked with a one-year pricing agreement. Still difficult to know exactly what it means, but more likely than anything to be higher next year. Okay. And maybe digging into a couple of commodities specifically. I mean, coffee's been in the news recently. There's been a big increase, particularly in Arabica, more delicate Arabica varieties because of the frost in Brazil. We've seen big increases in dairy in emerging markets, which was already one reason why your nutrition margins were down in the first half. Which actual commodities are you most concerned about? It's hard to say what's, you said it already, what's structural, what's temporary, but what's the kind of reading on the ground from your guys in terms of what they're telling you about that? It's a little bit difficult because there are still a lot of moving parts there. If we look at 2021, it was certainly much more about dairy and meat and grains. Next year, it will be more about coffee as well. But once again, the large part cannot be hedged, which has to do with transportation, which has to do with packaging material. So it's a little bit difficult. We have to adapt to a very different situation. By the way, it can even differ from one market, one region to the other, given that it is highly influenced by our portfolio as well in specific market and specific regions. So we are very pragmatic in terms of approach. Yeah. We can handle it with really the strategy of neutralizing it as quickly as we can. Okay. Just in terms of prices, pricing did step up a bit in the second quarter versus the first quarter. How much more pricing do you think you might need in the second half? Is it the case that in Europe there is a lag because of the way the contracts are structured in Europe? I am just trying to understand the pricing dynamic versus kind of mix. You also said you are going to roll out strategic revenue management tools as well as another weapon that you have got. Pricing over the last 10 years in the sector has been quite low, but suddenly we are going to see it kind of step up. How do we sort of think about that? Are you worried that there will be some volume reaction as you do take pricing? So do expect to see pricing ramping up. It is a reality already, because if you look at it last year, in its totality, we were at 0.5% of pricing, but already in Q4, we were at 0.9%. We were at 1.3% in H1 this year. Do expect that it will move up, and it will move up most probably with what I said earlier, even further in 2022, as well. So, still difficult to say exactly where it will apply and so forth. We are very confident about our pricing power as well. We do not see any specific issue there. It has to be looked at by category, by market, and so forth. It is very much a function of our brand equity. It is very much a function of our market position as well. As you know, we have in 80% to 85% of the cases, we have leading position number one, number two in our markets. So we are not necessarily worried about it. We have strong brands as well. We have 33 billionaire brands as well. So we believe that we are really in a strong position to pass on pricing. It depends as well on competitive forces, by market, by SKU. Pricing is a local decision, by the way. This is not something that we decide centrally. This is something that is really decided locally in local context. Okay. Maybe organic growth has been a remarkable period for Nestlé. I mean, 8% organic growth in the first half with the portfolio, winning share, holding winning share, about 60%. Can you discuss a little bit about how you measure market share? Because it has been a topic for some other companies in the sector. Then maybe dig into some of the sales, the other 40% where you are not winning share, and what your plans are to address that share loss. Actually, we have been quite happy to see our market share increasing over the last two years, and they continue to improve as we speak. We measure market share at operating level by market, by category, by channel, so we have a good level of granularity there. For the purpose of providing a global view for that, we look at the number of business cells gaining or holding share. A business sale is a combination of a market, a category, or a channel view. If we look at H1 2021, more specifically, in more than 60% of the business cells, we were gaining or holding shares. This is a level that was similar to what we saw at the end of March. This is, by the way, close to the highest level that we have seen over the last couple of years in 2013. Yeah. To be more specific in answer to your question, in terms of market share gains, I could speak more specifically of MENA, for example, where we are really gaining market share in coffee, in pet food, with vegetarian and plant-based products, with water. In AMS, we are really gaining market share in pet food, in coffee, in plant-based food as well, in water, in infant nutrition. Yeah. In AOA, in most categories, particularly pet food, coffee, confectionery, and culinary, with one exception, which is infant nutrition in China. I will come back to that. Yeah. If I look at it by category, this is there again, the same as what I just said, which is in coffee, in pet care, in water, in dairy, in ice cream, and with Nestlé Health Science, wherever we can measure our market share. If I look at it by channel, we are growing slightly ahead of the category anywhere across categories. Just to be specific as well in terms of market share losses- Yeah we are losing market share in very few instances now. The other interesting thing is that we are losing less than in the past wherever we lose market share. So where we lose market share is, as I just said, infant nutrition in China. Yeah. We have a turnaround plan in place. And in frozen pizza, but this is mainly due to supply chain constraints. Yeah. A little bit in confectionery as well. Okay. Just in terms of channel shift, there's a lot of moving parts in channel. On e-commerce, it's still growing 20%, but it has slowed. I guess it's a comp issue. On the other side, we're seeing the retail sales elevated, but slowing a little bit. But then we're now seeing out of home growing 20%. I know it's difficult given the comp effects, but what is your outlook for those three channels going forward into the second half and into next year? Yes, I can give you a little bit more data points there on the development by quarter. If you look at retail, for example, we were at 9% in Q1, growing at 9% in Q1 and 5% in Q2. But exactly as you said, I would take that with a grain of salt because it depends on the comps. Yeah. We start seeing a little bit of a slowdown somewhat in retail, but it remains at a very attractive level. Yeah. We do not expect to lose whatever we could have benefited from during the COVID time, because some of the underlying consumer trends that we benefited from during the COVID, like working from home, pet adoption, like search for immunity and health benefit, we don't think that everything will go. As you just said, before we started the conference, when we were discussing, you guys, for example, in your organization, you are working in between with a model, in between working from home and working from the office. Yeah. It will be probably a hybrid model, so we will continue benefiting from some of these trends. So once again, in retail, from 9% in Q1 to 5% in Q2. In out of home, you said it, big turnaround. We were still negative in Q1, which is -12%, and we went at +84% in Q2. Wow. But still at a lower level than where we were in 2019. So the percentages quarter by quarter do not necessarily mean much. The same applies to e-commerce, still growing 40%, 4-0, in Q1, and we were at 4%, I would say, only, in Q2, but of over a growth of 70% last year. Yeah. So let's be very careful when reading those data. What is important, though, is that whenever the situation normalizes, we can expect still a good level of growth in retail, as I said before, because we won't lose everything that we benefited from. Yeah. We will see certainly a higher growth of out of home because it will come back and because we are under indexed in that channel and investing in that channel. And even the highest growth, we will probably continue seeing it in e-commerce as it was the case before the pandemic. In e-commerce, before the pandemic, we were growing at 30%. Okay. Very helpful, thank you. We're going to switch gears, and I've got a couple of questions for Laurent. Laurent, a question on Zone Americas, and specifically North America. That's been a key part of the Nestlé investment case. It's been very impressive, the recovery, the renaissance, maybe we can call it, in the last few years. I think I'm right in saying up to 50% of the portfolio in the U.S. has been rotated. Correct me if I'm wrong. But what are your priorities going forward in the U.S., given the success you've already had? How do you go about sustaining that success? And what do you think is the sustainable growth looking out, I don't know, two, three years for Nestlé USA? You are absolutely right, Warren, about all your points. North America is doing extremely well and Yeah extremely well in all its components. It is Nestlé US, it is Nestlé North America, it is Nestlé Canada, and we could put on top Nestlé Health Science and Nespresso. All components are growing strongly. You are also right about the portfolio transformation. It is about 50% of rotation. As a result of this, we have increased our exposure to high growth categories. This is what makes us confident for the future of the business. I just would like to highlight that the depth of the transformation goes way beyond the transformation of the portfolio. We change our head office. We change distribution model for frozen food. We improved our culture to have it more open, connected, and agile. Transformation has really taken place across the board. To your question, what are the priorities? Now that growth is back, the priority is clearly to support the growth, to enable the growth, to fuel the growth, and that implies investments. There is no growth without investments. So investment in innovation, investment in manufacturing. One of our limitations short term is the tightness of our capacity in some areas. We have big CapEx investment plans on the way, but also investment in technology, the shift to e-commerce, which we want to embrace fully. Just a data point that our number two, number three customers for pet care are pure players e-commerce. That shows the importance of the e-commerce channel. We want to be able to embrace all of that, being connected end to end, from farm to fork. That implies putting in place supply chain control towers, planning control towers, transportation control towers, and so on and so forth, so that we are capable to manage in real time. Last, your question on what is the potential of the region? Every region has to contribute to the Nestlé's growth ambition. Clearly, I see North America as capable to deliver sustainably, the mid-single digit growth that we ambition for the group. Okay. That is very helpful. And maybe digging into a couple of the key businesses within the U.S. We could talk about lots of them, but the three I would maybe call out would be pet care, given the size of pet care for you in the U.S. Frozen food is a key category and coffee as well. Could you maybe just elaborate a little bit just on the trends that you are seeing in those three specifically? And then related to that, for those three specific categories, how you are dealing with those cost challenges on the ground? We do hear it is pretty acute in the U.S. around distribution and logistics issues. It must be quite a big headache for you day to day, given you cannot hedge those costs as well. Some color on those three categories and specifically related to those cost challenges that you are seeing on the ground in the U.S. would be really helpful. You are absolutely right to highlight those three categories because they are the three largest. There are a number of common points, of course, they are different dynamics. The common point is that we command clear leadership positions in all three. We got a unique portfolio of brands in all three. We got R&D capabilities in North America in all three of them. So there is a real ability to win, in those three categories and we got also a very good margin structure. So the foundations are extremely solid for the three categories. On pet food, pet care, which is the single largest one, of course, there are a number of things that are really favorable to the category. Number 1, pet adoption, as mentioned earlier by François. I would highlight as well the elevated role of the pet in the family, which we have seen kind of enhanced in the pandemic. So, dynamic is good, and we got a leading market share. We are gaining market share. Again, what is the biggest issue beyond the cost? I will talk about the cost. To date, our biggest issue, my single biggest issue with pet care in the U.S. is just to be able to supply the demand. Yeah. The demand is so strong, and we have a network with such a level of capacity utilization that we have to make wonders on a day to day basis to be able to supply the demand. The big priorities, and I referred to our CapEx programs, is to accelerate our capacity expansions and our investments across the network. We got two new factories on the way, one in Ohio and one in North Carolina to complement our dry network. We are expanding our footprint in wet and in pet litter. Big investments are happening to just expand capacity as the demand is so strong. This is the single biggest issue, honestly, I and my team have to deal with at the moment. We are also investing in technology, e-commerce. I refer to the two pure players that are number two, number three customers and growing very, very fast. Investing in our ecosystem as well. Big investments taking place to, again, support the growth and enable the growth. Now, you're right about the cost environment, and the comment I will make is valid across the three categories, with maybe pet care even more impacted. We have seen commodities, we have seen distribution and transport. We see labor. There are labor shortages as everyone can see and feel, operating in the U.S. So there are pressure points everywhere. The positive is that we can price in many, many ways. We can price through innovation, renovation, and this is a category which is really prone to premiumization. Our super premium, ultra-premium brands are actually the most dynamic in the portfolio, so that's helpful to create value, enhance value and offset the cost pressures. We are leveraging also strategic revenue management, price pack architecture, our promotional policies among others. Yeah. End price list, as the pressure is so visible that we got as well to increase our prices. Then once you have put in place or sent your price list, you need to realize your price increase. On those three fronts, I think we are on track. So, it's of course, a challenging environment as we speak, but I'm happy to see pricing developments in the category. On Coffee- Um- Yeah, sorry. No, sorry. Please, carry on. On coffee, we got also a unique portfolio of brands. The best in the industry, without any doubt, between Nescafé, Starbucks, Nespresso, and we should not forget Coffee-Mate. There are ample opportunities to grow through innovation, renovations, through channel development, through e-commerce. So there as well, this is to support the growth, invest in innovation, invest in the network and in new capabilities. On frozen, which has been a category discussed many, many times, well, we can see in a pandemic, that having a great portfolio of brands and brands that can resonate with various meal occasions at home is extremely relevant. We are clearly leveraging that opportunity in full. Category is good, is dynamic, is growing. Shares are growing in most parts. We relaunched successfully Lean Cuisine, Life Cuisine. We implemented successfully our new distribution model for pizza, which is giving us a much better margin structure, and we are leveraging the category to its full potential. Hot Pockets also is to be mentioned as a great opportunity going forward in the snacking area. So, there, the same as regards the cost environment. Yes, there is inflation in all the dimension, raw material, packaging material, distribution, labor. But we are embracing this with a view to both protect our margins and pass the cost pressure and at the same time protect our market shares. Okay. That is super. Thanks a lot. The other big part of the Zone Americas is Latin America. That grew, I think I am right in saying double digit in the first half. Can you say how much of that growth is share gains versus kind of elevated category growth? Because I remember a year ago, there was a lot of nervousness about macro in Latin, particularly Brazil, about tapering of checks being paid by the government in Brazil, plus COVID as well, high COVID numbers. Why has Latin bucked those concerns? Why has it been stronger this year than what we were thinking back end of last year? What is your outlook for the region? Yeah, that is a very good question, Warren. I would not argue that Latin has the same strengths as North America. It is very clear that there is less ability on the public side to support the economy. Economy is less diversified as well, so much more fragile and there are parts of the continent that is really under pressure. What has happened, there are two points that have been and that will be positive and supportive to the Latin economies. Number one, if there is commodity cost inflation, which is somewhat of a challenge for the business, this is a positive for those countries that are highly dependent on commodity costs. If you remember well, 10 years ago, Latin America was flying at the time of the commodity boom, the commodity cycle and went into difficulties the moment when commodities went down. We got petrol up, we got minerals rising, and especially the copper, which is so relevant to Chile and Peru, for instance. We got also agricultural raw material on the rise Soybean, wheat, coffee, cocoa, you name it. Dairy. This is a very positive factor for those economies, as it gives them money flowing in and capacity to support the economic agenda. The second positive is the remittances coming from the U.S. The fact that so much money has been flowing in the U.S., some of it has found its way to Latin America through the Latino population. Just to give you a flavor, the level of the remittances in Mexico has passed the 40 billion mark. This is a very significant increase compared to just a few years ago. All of this is going into consumption. This is also supporting those economies. Generally speaking, the consumption has been supported in most parts, maybe not everywhere, but especially in the larger countries for us, like Brazil, Mexico or Chile. In that context, where we enjoy also such a strong footprint and where we have kept investing in the brands, in innovation, we have indeed been gaining market share. Gaining market share in growing categories gives that kind of result. We have taken also price increases relatively early on because on top of commodity inflation and input cost inflation, we got also to cover for the Forex depreciation that has been significant in the last year. We are in a very good place when it comes to Latin America, and the prospect are also, or outlook is positive. I can confirm also that LATAM will be capable, sustainably, to contribute to the Nestlé agenda when it comes to the organic growth ambition. Thank you for that. François, a question for you, just back onto kind of Nestlé Health Science. I am just interested on two things, really. One, on Aimmune, you have talked about it being a CHF 1 billion brand in time. Can you tell us maybe what your assumptions are behind that? How do we get to that kind of number? Secondly, just on The Bountiful Company, it kind of takes your pro forma sales to CHF 6 billion. It is mainly a U.S. business with the exception of Solgar, which is more international. What are your plans to try and take it international? So two parts, one on Aimmune and one on The Bountiful Company expansion. Okay. Warren, I think it is a very good question. Let me give you a little bit of the global picture as far as Nestlé Health Science is concerned. As you know, we have three subgroup there. We have what we call consumer care, which is essentially covered with VMS, vitamin, minerals and supplements. We have medical nutrition, and then we have novel therapeutic nutrition. Novel therapeutic nutrition is where Palforzia sits, and I will come back to that. Let me start very quickly with consumer care and VMS, vitamin, minerals and supplement with The Bountiful Company acquisition. Let me tell you a little bit the way we see things there, because we had already some assets in that business, in that category before, like Boost, for example, in the U.S. or Carnation Breakfast Essentials, and doing very well. Then we did, four years ago, the acquisition of Atrium Innovation, which is positioned in the premium segment. By the way, we sell these vitamin, minerals and supplement on average at two times the price of average VMS in multivitamins in the U.S. We are number one, by the way, in the U.S. in multivitamins. So it is a premium brand, distributed exclusively through specialized distribution channels and e-commerce. So it is a little bit like, if I can make an analogy, the Nespresso of coffee, because in Nespresso we have super premium brand with specialized distribution network, our own e-commerce platform, our own boutiques. We needed something to complement it with what we call everyday premium, or if you want, even mainstream. The Bountiful Company is a very good complement from that point of view. Why? Because they are presently in this everyday premium channel, everyday premium positioning, very complementary to what we have with Atrium. They are in the mainstream retail channel. This is a very good addition. If you want, once again, with this analogy that I gave you earlier, The Bountiful Company is a little bit the Nescafé of VMS. Very complementary both in terms of brand architecture and positioning, and very good complementarity as well in terms of differentiated channel. We are very excited about it. The other benefit that we have with The Bountiful Company is that this company comes with seven industrial units, and we did not have such a strong industrial base with Atrium Innovations. They are very efficient from an industrial point of view and a cost point of view, so we will certainly benefit from what they are contributing there. In addition, as you mentioned, with The Bountiful Company, we can expand internationally. They have about 20% of their business which is outside of the U.S. today, but we clearly have the intention to leverage on our Nestlé Health Science global footprint and even further than that, on our Nestlé global footprint to leverage and globalize their brand. As you said, some of their brands have already traveled, like Solgar, but it goes beyond that, like Nature's Bounty. It is a brand that is already well established internationally, but clearly the intention is to push there and leverage on our assets, like, once again, in order to do an analogy with coffee, what we have done extremely well with Starbucks. Moving with Aimmune and Palforzia, this peanut allergy product, which is in the third category, which is what we call novel therapeutic nutrition, which is more pharma anyway. Even Palforzia is a drug that is registered with the FDA. As you mentioned, we expect to make this product a $1 billion product over time, and we are really investing. In terms of assumption behind this ambition, we have made conservative assumptions, which are essentially around an enrollment rate of children aged two to 17 years old, and that are suffering from peanut allergy. We have been very conservative in the assumption of enrollment of these children. After that, price-wise, we do not need even to make an assumption because the price is already set, is already approved by insurance companies in the U.S. There is no surprise there. There is no uncertainty. The only unknown, obviously, is that if we will manage to reach our enrollment assumption, but we are very positive about it. That is what I wanted to mention. Obviously with Nestlé Science, to date this year, we should reach about CHF 4 billion of sales. We are on a run rate with the full year impact of the acquisition of The Bountiful Company. That is around CHF 6 billion, obviously, and we expect to continue growing organically, potentially inorganically as well. We are not going to stop there. Okay. I've got to ask you about China infant nutrition because it's been a big topic for people in the last year. You were talking about turnaround initiatives. Things are improving a little bit. Can you maybe share a bit of an update on those initiatives? I'm quite interested in the Belsol launch in super premium. I know it's one of the drivers, but you are also pushing more aggressively into lower tier cities and building up your sales force. Could you maybe just update us on that? Absolutely. Infant nutrition is the only category where we have seen some declining sales since the beginning of the year. If we look at it outside of China, this is largely coming from the fact that we have seen across geographies as a consequence of the pandemic, declining birth rates everywhere in the world, including in China. Yeah. In addition to that, in China, we have had some self-inflicted issues that we have started to address last year. The plan was very clear. It's around innovation. We launched, for example, A2 milk formulas. We launched organic and natural formulas. We launched Belsol, which is a product which is specifically designed for Chinese babies, which is manufactured locally. And we expanded geographically within China, moving into tier 3, tier 4 cities. We put more feet on the ground as well in terms of sales force. Everything that we set, including Belsol that you mentioned, is working more or less as per the plan. We are quite happy with that. But it is still not sufficient to offset the decline of our main business and more specifically illuma within the range. We need to do more, so we are really working even further on that because we want to address it. We will not get back to growth in 2021 for sure, so we are really working very hard to address this and go even further with a full commitment to the category infant nutrition and a full commitment to China. Okay. A question maybe for both of you, just on plant-based food. You made a big push, plant-based meat initially, much more on plant-based dairy more recently. I would be interested, Laurent, if you could share what you are seeing in terms of trends in both plant-based meat and dairy. Obviously there is quite a few high-profile launches that you have been talking around, pea protein, for example, being a big thing for you. I am sure all the listeners will be very interested to hear your thoughts on this key category. Yes, it is topical item, but it is there to stay for the long run. The trends are very clear, very obvious. There is more and more interest in plant-based solution for dietary reasons, and increasingly there will be also the sustainability concern. I see, and we see powerful trends behind the category. We have a unique play there because of our portfolio, because the breadth of our portfolio that we can both play the pure play game with our pure play brands like Sweet Earth in the Americas. We have Garden Gourmet in Europe or Nature's Heart in Latin America and more broadly. We see great opportunities on all fronts actually, both meat replacement or plant-based beverages and the categories are dynamic and we are seeing strong developments. We see a second play as well, which is to integrate those plant-based ingredients into our offering both for at home and out of home consumption. If you look at it that way, you will see that the opportunity is really broad as we can leverage through our entire portfolio those plant-based arguments. I could mention the journal, of course, Stouffer's, but I could mention also Coffee-Mate, Nido, you name it. We see those two opportunities and we will invest and we are investing behind those two opportunities, the pure play game, but also integrating ingredients across our brands and our ranges and we see strong double-digit growth for the years to come in these focus areas. Okay. If I want to complement what Laurent is saying, just to give you the picture at group level. This total plant-based category for us is accounting for about north of 700 million CHF of sales. We are not small in that category. We have been there for long, more specifically in Europe, but with a lot of success. It is more than 700 million of sales, probably this year, growing double digits. And within that category, we have obviously the meat alternative, which accounts for about 200 million plus, which is growing very strongly and more specifically in Europe. But we are not limiting ourselves to the meat category, as Laurent said. We expect really through the significant investments that we do in plant protein, this is 10% of our total R&D investment today. But we want to go beyond meat. By the way, meat alternative could be possibly relatively commoditized going forward. We are a bit more careful in that category. We are moving further than that into a chicken alternative and shrimp alternative and fish alternative, you name it, because all of this product makes sense and we believe that we have both the route to market, we have the R&D, we have the brands. And across the world, by the way. We have them in the Americas, in Europe, in Asia. This is really an area where we invest a lot. Just one word on margin. For the time being, this is margin dilutive, but not an issue at all. I mean, we are clearly in an investment position in that business. We have to invest in R&D, we have to invest in marketing, building brands, and so forth, because we are certainly more interested in the retail part of the category. Okay. We are running a bit short of time, so I have just got a couple more for you. One for François, just on the ROIC, that has been a question from investors. It has improved from 10 almost to 15. But you also kind of said that most of the disposals are done, so you are going to be looking at more net acquisitions. Given acquisitions are quite expensive, are we starting to see the ROIC peaking, or do you still see upside beyond 15%? And if so, where will that come from? I think we have done well over the last couple of years because we were around 10% in ROIC back into 2015. We were at almost 15% last year, and we used our levers. We accelerated our growth, we improved our margin, we reduced our working capital very significantly. We reduced our underlying tax rate. We have been much more efficient in managing our CapEx as well. And we have been very disciplined in M&A, because even we managed to do that while making acquisitions as well. It is not only disposals, but we did acquisitions. We made acquisitions like Starbucks, like Atrium, and others as well. It is true what you said, that it is very difficult for us to give a guidance on that one because it is largely influenced as well by M&A. What I can assure you is that we will remain very disciplined on M&A, and ROIC is one of the KPIs that we are looking at when we built a business plan by how long will it take us in order to have the return on invested capital of that specific acquisition exceeding the WACC of that specific acquisition. We are targeting for mature businesses, not for startups, at around five to seven years to exceed the WACC in terms of ROIC for that specific acquisition. I can tell you for the last two large acquisitions that we did five years ago, namely Atrium and Starbucks, we may even reach that level even before the five years, which is actually good. We will remain disciplined. Okay. And final question. Since Mark Schneider became CEO, the aim was always to get to mid-single digit organic growth. Although the battle is not completely won, it sounds like you are pretty confident in delivering that target sustainably. I guess my question is, with that kind of now discounted by the market, what will be the investment case from your side for the next three to five years? And of course, the question around L'Oréal keeps coming up and the portfolio is being addressed. Is it right to think about it as acquisition currency if something transformational comes up on the horizon? In terms of investment case, we are looking for a balanced first rate of growth on margin, but maybe with a slight difference versus what we have done over the last couple of years. If you look over the last four to five years, we grew around 3% and we improved our margin by about 50 basis points, operating margin by about 50 basis points a year. Going forward, we expect to see our growth accelerating in the mid-single digit space, let us say for the sake of the example, around five. And our margin will increase at a moderate level. Why? Because we have a significant investment to do in sustainability, and we will invest as well to support our top line growth. It is the same strategy, but with slightly different output on outcome. We will invest significantly in ESG. We will continue to be active in portfolio. We have been. We rotated 18% of our portfolio over the last four years. We will continue to be active, probably more on the acquisition side. We will continue innovating as well. Just on the financial side, we will use share buyback as a value creation levers whenever appropriate. Okay. On the L'Oréal question, there is not much to add there. I cannot comment on one specific option regarding our L'Oréal investment. What we have done is that we have created significant value for Nestlé shareholders through our investments in L'Oréal, and we are very happy with that. The board has a fiduciary duty and does it, along with the management, to revisit all options, and we want to keep all options open, but we don't want to comment specifically on any option at this stage. Okay. Well, listen, with that, we're going to have to wrap it up. So thank you, François. Thank you, Laurent. It's been a very informative session. Thanks for participating in the Barclays Global Consumer Conference, and I hope to see you in person as soon as possible. Take care. Thank you. Looking forward. Take care.