Our people really endeavored quite a challenging year last year. The second platform that we're working on is transformation. As you know, the organization is going through a transformation to have a better future fit to our strategy, and this transformation is focused on two main areas: centralizing areas in our group to make sure that we are building the best center of excellence, and make sure that we are achieving the maximum efficiency and optimization in our functions. We're centralizing, or we are in the last stages of the process of centralizing our operations, IT, HR, finance. On the other hand, we are focusing. We want to focus more on being consumer-centric, and therefore building the right focus in our business units for that matter.
Raanan Kovalsky, the CEO of Strauss Israel, will focus mainly on the sale and marketing side of our operations here in Israel. The last pillar of our program for 2023 is performance. We want to make sure that we are going back to our regular normal performance metrics. First and foremost, we must go back to our strategy plan. We must regain our performance KPIs and come back to what we targeted for the next five years when we issued our strategy at the beginning of last year. Certainly, this year we will revise whatever need to be revised in our strategy to make sure that we are heading on the right course for the next three or four years.
The second item is productivity. We have initiated last year, at the end of last year, the One Strauss reorganization program, which in terms of productivity, should bring us a platform or a cost-saving platform of roughly 65 million ILS-80 million ILS that will be achieved finally by the first half of 2024. We are going according to plan, everything goes as we planned for, this is not enough. We are focusing on additional productivity endeavors in many more channels, including procurement, logistics, revenue management, design to value, and other supply chain areas.
...and believe that at the end of this year, we will come back to you with a more detailed plan and share with you our goals for our productivity improvement for the next two years. We'll dive a little bit into the four major business segments of our group, Strauss Israel, we can see sales above ILS 1 billion. This is the first quarter that we exceeded the ILS 1 billion mark, and a nice growth of 7.6%. About half of it came from the price adjustment that we declared at the end of December and implemented at the beginning of January.
We've seen a full go through of the this pricing in our first quarter results. The second half, close to 4% quantity growth and volume growth, which is very good news, and we can see that we are gaining market shares, continuing to gain market shares, also through this first quarter. We are also, on the other hand, continue to suffer from very, very high input inflation. Actually, we are not seeing in the first quarter any reduction in the input inflation, and this causes a deterioration and a decrease in our profitability, gross profitability, and then this deterioration goes down to the EBIT profitability.
Unfortunately, also, if we look at the input prices after the balance sheet date, up until today, the 30th of May, we can still see very high prices, and even in some inputs and the commodities, the prices went even higher than what we've seen in the first quarter. It is very hard now to say what will be at the second half of the year, and it seems like also the analysts' projections are somewhat divided on this matter. Looking at our confectionery business, we can see that we are regaining our share, we are regaining our sales, but still not achieving the full previous normalized platform that we've seen in the year 2020 and 2021.
We have reached the 21.6% market share in the confectionery market in Israel for the first quarter. Actually, if we look at the StoreNext results for the month of May, we can see that we are continuing to regain market share, and we've reached the 23% mark, but still, we're not at the mark of where we were before the recall, which was roughly anywhere between 27%-29% market share. Roughly, we've reached 80% of the sales platform that was there before the recall. In Strauss Coffee, we can see a good growth achievements in the first quarter.
10% organic growth, almost 20%, including the translation effect, because of the devaluation of the Israeli shekel against most of the foreign currencies. This organic growth is also divided roughly half with to price increases, with the price increases of coffee that were made through the year of 2022, and an additional 2 price increases that were made this quarter in Poland and Romania. The other half, roughly, is due to a volume increase. Brazil continues its very solid momentum of increasing market share to 33.6%.
In Israel, Coffee Israel, we see gross margins deteriorate or continue to erode because of the high green coffee prices. Still, a nice profitability for the first quarter of above 16% EBIT profitability, erosion from what we were used to see in the years 2020 and 2021. Excellent results for our CEE countries with also improvement in our EBITDA there for the first quarter. Strauss Water is growing in sales about 3%, a slight slowdown in our growth rate that was between 5% and 7% in the previous quarters.
This is a little bit due to the inflation and the interest increase here in Israel, which contributes to the decrease of consumption of electronic machines and also our water machines. Still, we see a nice momentum of growth, just a slower growth here in Israel. Excellent results in the Haier Strauss Water China, with almost 9% growth in sales and a solid net profitability of way above 10%. We continue investing in our infrastructure, also in China, and not only in Israel.
We approved a second manufacturing facility to make sure that we will have the right capacity for our growth because the first facility, manufacturing facility, is reaching its capacity in the next couple of years. Also a very promising partnership with Culligan, the biggest water company in the world. We're starting our journey together in the U.K., trying to broaden our business there and build there a good, solid business that will be relevant also in our profit lines in the next few years, and then even considering to go outside of the U.K. to explore other geographies.
Sabra and Obela still challenges, lots of challenges in Sabra. Sabra is recovering, but the rate of recovery, as we said in our last quarter talk, is slower than what we expected, and the rate of recovery continues to be slow, although there is a constant recovery all the time. We're gaining constantly market share. We've reached in April, the market share of almost 39%, but we're still very far away from our previous market share before the adjustment plan in the factory and the closure of the factory, which was roughly 60% in the past. Obela, we completed the investment of Obela in Western Europe, mainly Germany.
Therefore, we are expecting from now on to see Obela break even or positive results in the future. Other activities, we're continuing our journey in cutting-edge with cutting-edge innovation. We launched a new platform called the Strauss Neo. I'm sure we will be able to tell you about some of the initiatives that we have there in the next couple of quarters. Stay tuned. Number two, our second kitchen hub opened, already invested in into a startup food tech investments. Of course, the environment for startups today is quite rough, and not we do not expect in the very near future any material rounds of money-raising for our startups.
When we have to do that, of course, we delist from our balance sheet, those investments that we do not see their ability to continue to exist in the future. Having said that, the fair value of our startups portfolio for today is roughly half a billion ILS, which is quite nice and quite promising for the future that it will add a very nice economic value to the group. Shai Babad just joined me and just came. As we said, we apologize, we had a few misfortunes there, I will let Shai to wrap up this part of the presentation, and then I'll continue with a short summary of the financial results.
Hello, everybody. I'm very, very sorry for the delay. We are running some hectic things today, which were urgent, and we needed to take care of them, so I apologize for delaying today. Just to sum up the first quarter, major focuses as we see them, and also looking ahead. One of the things which we started to do in this, in the first quarter, were to work very, very hard on productivity, and to put a major focus on improving our productivity from understanding that although we are growing very much when it comes to our top line, and there's substantial growth, and we do see substantial growth also looking forward, we do see our margins being deteriorated, and therefore, there'll be a large focus on that.
We already started that with working on ONE, ONE initiative, which will save between ILS 65 million-80 million. We'll see the full platform in quarter one of 2024, adding to ONE was also the organizational change, which basically changed us from a holding company to one company, making the decision-making processes and implementation much faster and much more agile than it was before, whether we talk about finance, HR, operations, or consumer centricity. On the other hand, we also focus very much on portfolio optimization. This is something we started this quarter, we'll continue in the future to come.
As you know, we already, as reported, we changed our partnership in the U.K., taking out Virgin, coming in with Culligan, making a new structure, new partnership, which we already see the seeds that we plant being giving some prosperity, a small prosperity that has started, and we see nice growth there. We also decided after many years of loss, that we will go out and divest our Obela salad activity within Europe, and we took that out. We also sold. We are in the process of selling Serbia, our coffee business there. As I said before, we also looked at our confectionery and took out some of the categories that were tails, and that we saw that are not profitable.
We will continue to look at our portfolio, we will continue to look at optimizing our portfolio on the one hand, on productivity, on the other hand, one, and the ILS 65 million-ILS 80 million, which we set to do, is a start, it's an initial start. We're also looking at eight different layers of revenue management, marketing and sales, design to value, procurement, manufacturing, complexity, and S&OP. All those projects that we are launching these days, we'll set our targets, which we'll share in the near future, regarding how we're going to increase the margins from the 8%-9% we have today, to a much higher target, getting us back to the average of the industry and to places where we in the past.
That we will work, on the one hand, on continuing the 5% growth that we committed to in our strategy, that we just published last year. On the one hand, we will continue to grow 5% and above, on the other hand, we will improve the margin drastically, and we'll work on that. We do understand that price increase will not cover All the erosion that we had in the COGS, in the cost of goods. We do understand that besides increasing prices, and increasing prices internationally is easier, in Israel, it's higher. We have more obstacles in increasing prices here in Israel.
We do understand that a lot of improvement in the margins will come from productivity, and will come from portfolio optimization, and we are working on that, very, very hard. Another thing which is very important also to note, we started this quarter, it will continue in the next quarters, is our investments, our CapEx. Our CapEx has drastically increased. We are putting a lot of investments in core business, in infrastructure, in our factories, in our logistics warehouses. We will continue to upgrade them from an understanding that. If we want to be more productive, if we want to be more efficient, we need to make sure that we upgrade our infrastructure in a substantial way. That's one stream that is already in place.
Another stream which we started already in place and will continue with us in the next quarters, is also our IT strategic investments. We are investing a lot, almost, I think, doubled our investments in IT, with putting a big attention on moving into cloud, on data gathering and data analysis, on digitizing our plants and our supply chain and our warehouses, and bringing much higher level of digitization and IT system into our infrastructure, into our business. I think that both layers today, investing in IT and investing in infrastructure, is something which will assist us a lot in being more productive and also much faster when it comes to innovation and entering new categories and improving our portfolio.
Those are the major highlights when it comes to the first quarter and also looking ahead. We are talking about. As I said, we talked about productivity, we talked about one, we talked about portfolio optimization and also investments in CapEx, in infrastructure, in IT, and on the other hand, we will continue our growth. Last and not least, is because the world is changing and because the economic environment is different than what was a year ago, whether we look at inflation, whether we look at regulation in Israel, whether we look at interest rates, and looking at the international arena, whether we look at coffee prices. We will revise our strategy, and we will look at what we committed.
We are not gonna change the 5% increase. We are gonna look and focus more and give directions and more concrete and more focused directions on what we're gonna do in each geography, whether it's Brazil, whether it's the U.S., whether it's China, whether it's Israel, those geographies that we said that we're gonna focus on. We are gonna set specific targets for them and revise and see that through everything that changed macroeconomic, do we still set the same targets? Do we still aim the same directions? Specifically in Israel, we are gonna look at things because due to everything that is happening now in Israel. Those are the major focuses that we did focus in quarter one and will continue to focus in the next few quarters.
You will see that going ahead, some of the things that were done here in the first quarter will also come into place, in the next couple quarters.
Thank you very much, Shai. Let's continue with a very brief summary of our financial results. If we look first at our sales, we can see that our sales increased by 12.4%, and organically taking neutralizing the translation effect, almost 8%. We can see that we grew in all of our businesses, and roughly half of the organic growth came from price increases, both in Israel and abroad, and the other half came from volume increases. What we can see that on the other hand, gross profitability eroded with relation to the comparative years of 2021 and 2020.
We were used to see a growth profitability rates of almost 40% in the first quarter. Now, we've reached only about 33%. This erosion is happening in all of our business segments due to the high inflation of our inputs. We can see that this erosion is going down to the EBITDA margins, where our EBITDA margins are much lower than what we were used to see in previous quarters in 2021 and 2020. This is mainly due to the again, the increase in input inflation, and also due to the fact that our recovery in Sabra and in the confectionery is not completed yet.
If we look at specifically at the four business segments, we can see that in Strauss Israel, we're almost at the same platform, absolute monetary platform of EBIT profit. The difference between the current platform in the first quarter of 2023 to the previous platform in the first quarters of 2021 and 2020, is mainly due to not gaining back our 100% profit platform in our confectionery division. If we look at the coffee, we can see that the first quarter EBIT platform is roughly the same as we've seen in previous first quarters in last years.
The main difference between this quarter and the first quarters of 2021 and 2020, is that we're missing profit in Strauss Coffee Israel, because of the very high green coffee prices that eroded our gross profitability in Strauss Coffee Israel. If we look on Brazil for the first quarter of 2023, we can see that sales grew only by 1%. This is mainly due to a price decrease compared to the first quarter of 2022. In the first quarter of 2022, we increased prices very sharply, selling prices very sharply, more than the increase in the raw materials, the green coffee prices, therefore resulting in very high sales and very high profits.
After the first half of 2022, we lowered the prices to normalize the selling prices and make them more correlative to the input green coffee prices, and therefore, comparing the first quarter of this year and the first quarter of last year, we see a very small increase in sales, which is mainly due to an increase in volumes in Brazil, and therefore, you can see the nice increase in our market share in Brazil. If we look at the gross profit and gross profitability in Brazil, we can see that the numbers are roughly the same this quarter and the previous quarter, the first quarter of 2022. The main reason, again, is that we are now on a lower selling price platform, and therefore, the gross profit is not increasing.
The first quarter of last year was a very high selling price platform that was not sustainable. Going down to our EBIT margin, we see two effects. The first effect is normalizing the gross profitability and gross profit in Brazil. The second effect is an increase in our marketing and selling expenses in this quarter due to seasonality and due to the fact that we launched a program to increase our distribution system in Brazil. We expect to see the results of increasing this distribution system in adding a lot of new selling points for our business in Brazil, and therefore, increasing our growth rate in the future. We will see the fruit from this increase in the OPEX in Três Corações.
Having said all that, we can still see that our profit is more than double than what the EBIT profits that we were used to see in 2021 and 2020. We are in a new zone of profit. As we said last year, we roughly doubled or close to doubled our profit platform in Brazil, and we will continue to make sure that this new platform of profit will go on for the next years. Sabra reached only... As you see here, in terms of sales, 2/3 of her normalized sales platform, as you see in 2021 and in the first quarter of 2020.
This is not enough to give us the right, the good leverage to be profitable, and therefore, we were only break-even this quarter in our profits in Sabra. Last but not least, if we look at Water China, again, very nice growth rate in the, in the top line and bottom line, net income profitability, much higher than 10%. By the way, the decrease of profits, compared to the first quarter of 2022, is because a one-time government grant that we received in the first quarter of 2022. We are very pleased of our results in terms of profit and sales in Haier Strauss Water China.
Last slide, if we look at the net profit, we can see the recovery that we've seen in our EBIT line, going down to our net profit, but still, in terms of profitability, we see there's an erosion of profitability. The main two reason for this erosion is, first and foremost, the continuing very high inflation in our inputs, and second, the fact that we have not came back to our normalized platform of activity, both in the confectionery business and in our Sabra business. Looking at our net debt to EBITDA ratio, the ratio remained the same as it was at the end of 2022, around 3:3.1
The causes for this ratio to be high is the fact that our EBITDA is very, very low. We have, we put in this KPI, the EBITDA of the last 12 months. Therefore, the EBITDA contains nine months of 2022, which was a very low result, EBITDA, affecting very much this high leverage value. Going forward, we expect, at the end of this year, to reach two or even lower gearing rates, because the EBITDA will be normalized, and because we do not expect our net debt to rise anymore, we have enough sources to fund our activities in the group. I will stop here, and let's share the last few minutes for a few Q&As.
Thank you both, Shai and Ariel. Yes, we have a couple of questions from investors. I'm starting with Chris Reimer from Barclays. Chris, thank you so much for your questions. First one is: What's the timeline for the Serbia divestment, and are there more similar divestments in the pipeline? Are you guys with us? Seems like you've frozen.
... Competition Authority in Serbia will decide and give an approval to the deal. We hope they will. We are waiting for it. Only after that confirmation, we'll be able to move forward.
Shai, just start please from the first sentence, because you guys were frozen. We only hear the beginning of your answer. Sorry.
All right. Start again. The deal is pending the approval of the Serbian Competition Authority. Till we have that approval, we can't move forward. Right now, all the material has been sent to the Competition Authority in Serbia. They will have a look at it, something like that, from what they told us, not something that we can guarantee, can take something between 2- 4 months. Hopefully, it will be done quickly, but we can't say more than that at the moment. Regarding, are we foreseeing any further divestment? I will say this, as I said before, when I summarized the presentation Ariel gave, instead of me here, I would like to say thank you to Ariel for covering for me.
We are going to look very, very thoroughly at our portfolio and decide how do we optimize our portfolio, and what are the businesses that are in line with our strategy, in line with the margins and the profitability targets that we set to ourselves, in line with the future growth that we are foreseeing and targeting. Anything that will fall under that, will continue. Anything that we'll think that doesn't fall under that, then we'll have two options. One, fix it and see if we can get it there. If we can't, then we'll divest. Everything is open. We will continue to optimize our portfolio, but more than that, at the moment, unfortunately, I can't say.
Thank you. The second question from Chris is: The net debt to EBITDA ratio has increased steadily over the last year. What is the company's view on the higher debt level in terms of sustainability, and is there a plan to lower it? I think, Ariel, you kind of answered that question, but maybe just a one-liner-
Yeah.
If you have anything to add.
Yes. I think I answered that question at the, on my last slide presentation. Just to say, to add to that we will Once we normalize our EBITDA platform, therefore, at this point, we believe that our gearing rate will be back to normal or the normal rates that the Strauss Group used to have roughly around two. With relation to our net debt, we do not see any reason for an increase in the net debt. We will know to bring our sources from other places, i.e improvement in our profitability, improvement in our optimization in our cost structure, if we need optimization in our portfolio and other divestments like we've done in Serbia.
Great, thank you. We're moving on to David Kaplan from Psagot. Thank you, David, for your questions. First question is quite lengthy. If I did my math right, it seems the price increases in the local market versus Q1 2022 led to a ILS 37 million, 3.8% of the ILS 74 million increase in revenues, compared to the same quarter last year, which was entirely offset by the approximately ILS 40 million increase in input inflation. Can you confirm?
Roughly, it is correct.
Great. The second question from David is: What is driving customers in CEE, in Central and Eastern Europe, to buy more coffee?
What we see in Central, at least in Europe, we see that consumers do not buy more coffee, they buy coffee, okay. They consume coffee as they have consumed coffee before. We see our position there strengthening, okay, which means that on average, we are having very good innovation and good business programs in place there. What I can say, which is not surprising to us, but might be surprising to people who are not familiar with the coffee industry, although we are seeing dozens of percentage of increases in coffee prices, selling prices to consumers, we are not seeing any major decrease in volume consumption, okay. Maybe in some places, 1% decrease, 2%, or even an increase in volume consumption.
This is very reassuring, but we have to say that this is what we see in the coffee industry for the past three decades, so it's not a new phenomenon.
Great, thank you. The final question from David today is: What are the challenges that Sabra is facing in getting back on the shelves in the US? Bit of a freeze there again.
On the shelves for approximately-
Sorry, Shai, you guys were frozen again. You've got to start from the beginning. Sorry.
All right. Can you hear me now?
Yes.
Can you see me now?
Yeah.
The obstacles that Sabra are facing is the fact that for six, seven months in the last year, Sabra was not on the shelves. Huge retailers which used to depend mostly on Sabra, sometimes only on Sabra, and maybe private label, were faced with the fact that Sabra is not there, and had to find other solutions. Private label since then grew very much, and also they entered new competitors into the market. When Sabra now is coming back, retailers are telling Sabra: "We'll take you back," and they are taking us back. I don't know if Ariel mentioned it before, but we are back to 38%, 39%, and we are the market leader.
They are getting us back with telling us that we are not gonna be alone anymore. They're not gonna put all their, all the eggs in one basket. Most of them are now using at least three different hummus manufacturers, which is us, private label, and at least another competitor. That situation is a new situation to what we had before, and we're hearing it from Walmart, from Costco, from Kroger, from all the big retailers. Because this is the situation, we do understand that getting back to above 60% is probably not relevant anymore. We are seeing still a very big potential to grow back to around 45%-50%. We do think also that we're going to extend, and not only look at the hummus category.
We understand today that looking at the fresh dips and spreads, and also looking into Mediterranean food, is something which is a much larger category in the United States. Playing in that category and extending our products beyond hummus, is something that Sabra will look at in the near future. Understanding that growing back to 60% is not feasible. The hummus category by itself, just hummus, is not growing by much. Now, it's growing because Sabra is going back. The category is a category without...
In taking into consideration, Sabra is there, and Sabra is not returning, is not growing by much, and we need to extend beyond hummus and to look at the portfolio, fresh dips and spreads, and as I said, Mediterranean food, and to look at products within those categories as well.
Thanks, Shai. The final couple of questions from Feng Zhang at Jefferies. Thank you, Feng, for your questions. The first one is, Q1 operating profit delivery is largely driven by the recovery of confectionery business. When should we expect top line and margins to be fully recovered for confectionery?
Regarding confectionery, we also did some portfolio optimization in the confectionery, and some of the categories, the baked categories and the biscuit category, we took out. If we wanna compare apples to apples, we are not gonna get back to the same level and to the same categories that we had before. What we are looking at, is that in the categories which we will be playing very, very strongly, which is the impulse chatifim snacks, impulse snacks, and also the chocolate tabs. There, we hope that by the end of this year, we'll be back with the full range of SKUs that we wanna be with. Also there, we are substantially reducing the number of SKUs that we were in the past.
Since we are going through a portfolio optimization, deciding which is the tail that we don't wanna be there anymore, and what are the major SKUs that we wanna play with. We are still not back with all SKUs that we wanna be in the chocolate tabs. We are, by the way, in the impulse, in the snacks. Impulse snacks, we are back to the same, almost the same market share as we had before the recall event, but there's still work there to be done. We hope that by the end of the year, we will be with the full range of products that we wanna be with, and hopefully, and we believe that will get us back very close to what we were before the recall.
Thank you. The second question from Feng is: Understand the major focus for 2023 is about recovery and cost savings. What kind of businesses would you be interested to buy or enter after cutting the tails of portfolio? What criteria scorecards are you looking at?
I think once we will revise our strategy and we'll go out with a revised strategy, we'll give some signals to that as well. At this stage, it's very early to share the information on what's exactly the directions that we're going to look at. I will say that the geographies that we are interested in are the same geographies we said in the strategy, which is Brazil, extending the in that geography beyond coffee. It's in the U.S. As I mentioned before, Sabra extending itself beyond hummus. It's within China, it's of course, within Israel. In all of those categories, we will look at what is the potential. Also, our water business, as you can see, we started our expansion internationally with...
We renewed our expansion internationally with Culligan. We don't only look at Culligan as a partner for the U.K., we have aspirations to do things bigger than that. We do believe that our water business is something that can have an international twist into it, with the right products and the right approach, and the right geographies. There are things that we are looking at, but to be more specific and to give better directions, we will do after we will do the revision for our strategy.
Fantastic. Well, thank you very much. It seems like we have no more questions at this point. I'd like to thank everybody for joining us today. Before I give Shai opportunity for a couple of closing remarks, I'd just like to remind everybody that all the materials are posted on our website, and a recording of this conference call will be available at a later stage. Shai, please go ahead with a couple of closing remarks.
First of all, thank you very, very much for joining us today. Again, I apologize for being late. There really are urgent things which we had to take care of today besides the reports. I apologize for that. I just, you know, I just want to wrap up and said if there are three things that I wanted you to take out from this conversation with us today, is one, that we are very, very focused on producing the 5% growth that we aimed and that we targeted in our strategy. We do believe that our current plans and also the future plans will help us make that sustainable growth for us.
The second is that we are looking very, very thoroughly into our margins and improving our margins, and productivity is gonna be the name of the game. We don't think a price increase is gonna be the whole answer for the erosion in the margins. We do think that we will have to do substantial work in productivity. We will share with you the targets, as we did with One Strauss, we will share with you the future targets on this, on those eight layers that I described before, from manufacturing, human, S&OP, complexity, design to value, revenue management, marketing and sales, et cetera. We will share with you the targets that we have there.
Of course, once we will issue out our strategy, we'll also a little bit give more directions regarding. If I go back to the last question, to the potential directions for growth and where do we look into investing? I will say this, not everything we will do is maybe greenfield or M&As. We will also maybe look at partnering up. One of the strengths of Strauss, I think compared to all Israeli companies, is that we are very, very good at partnerships. With partnerships, we have very, very strong partners.
We know we have a methodology of how to run businesses with partners and how to be partners, and I think that strong arm which we have developed in Strauss, we can leverage outside Israel and in our, the geographies that we are focusing on to extend our business into new categories and new products. This is definitely something that we are looking at as well. I think, the sum up. I think that in the next few quarters, as you see in this quarter, that we've done the portfolio optimization and we've put heads on productivity.
This will continue in enhancement, and hopefully we'll see you soon in the next quarter, discussing already what we have also, we have gained and achieved in the second quarter, and the targets for the rest of the year to come.
Thank you so much. That wraps up our first quarter results call. Thank you all for joining, and we'll see you next quarter. Bye-bye.