Well, good morning. How's everybody? How are we doing on the weather? It's pretty nice. You know the reason it's important?
Guess where you're eating lunch? Outside. So here we go. It's always a bit risky. I think we pulled it off.
It's like having a wedding. All right. So welcome, Mark. Glad to have you here. And we're especially glad that you made the trek to Naperville.
This is where our water team is headquartered. So we have our water R and D, our water university, which you can go through. It's one of the tours that Mike just highlighted, etcetera. So I think there's a great opportunity to see additional capabilities that we have as a corporation as you come through here. Many of you have beaten the rug, if you will, at Eagan a number of times.
So we thought it was good to get you in another facility to see the capabilities and understand it firsthand in real time. So here are the themes you're going to hear today. 1, we're working hard and I believe we're making strides and continuing to improve. We are a better company than we were 5 years ago, 10 years ago, 15 years ago and we felt we were pretty good then. And we know that that same has to be true 5 years from now, 10 years from now, 15 years from now.
You can't stand still. You've got to continue to push, learn, and evolve or ultimately bad things happen. And so that's our mindset and we continue to work to do it. That means you've got to be open to things that you're doing that aren't correct. And we work hard to have that openness in the company because it is not a perfect company.
We have 50,000 people. And the fact that it's run by people means by nature it's going to be imperfect. And so we work to understand it and drive it and move forward. 2nd, the world clearly has become more complicated. We always have joked that whatever era we're living is probably going to be considered the good old days, I.
E. Where people reminisce about how easy it was in 2019. And that may be true. We don't know. But 2019 is what we're dealing with now and understanding how some of the things going on are gonna impact potentially us, but honestly, more importantly, our customers.
And so what does that mean? What do tariffs mean, etcetera? So a nutshell is we believe our strategy is as relevant and I would even suggest maybe more relevant than ever. But we know we're going to have to continue to adjust our execution of that strategy given the reality on the ground. And finally, our opportunities remain huge and in front of us and we remain focused forward on what we need to do to capitalize.
So since we last saw you, it's been a busy 2 years. We reviewed and of course, I reviewed what I said 2 years ago. And as I was doing so, we opened with an update on Hurricane Harvey. So that was the Houston event. And so here we sit again with another hurricane, this one moving up a different part of the United States.
But it was sort of an interesting issue. Harvey obviously was a monster issue for us because of its location in Houston and what it was doing to a number of facilities. But we've done a lot in the last 2 years besides survive Harvey. We've invested significantly. So there's the company's not perfect but it's not underinvested, I will say that.
We've made 15 acquisitions. We deployed SAP in North America. Ecolab now has 80% of its sales on SAP platform. We have $380,000,000 that's been invested in our digital technology. You'll obviously see a number of, the results of that when we walk through both the trade show and the tours.
And we also built the life sciences business really by taking 2 small parts of F and B and healthcare, putting it together to get a focused business. And it's now growing at mid single it's like mid teens growth rate, doing great. We've grown share over this period of time. We've added $2,200,000,000 net new business, that's new minus losses of chain business, stuff over $250,000 This is a metric we use because it's one of the best indicators for us of what kind of organic growth we should expect to see in out quarters. So it's one of the better forward looking indicators that we have in our business.
And then innovation. And this is really new technology introduced and the $2,600,000,000 represents the going value that's expected at the 5 year run rate, which is typically how long takes us to ramp up technology in terms of the sales curve. As a consequence, we've delivered in terms of EPS growth. So when we were here 2 years ago, we were talking about our ability to ramp back up to double digits and we quickly did so and have been delivering in the double digit EPS range for quite a period of time. Dan will go in more detail later on today.
We also sharpened our focus. So shortly after the meeting, we announced that we were selling our kitchen equipment repair business, AKA GCS. We also announced efficiency initiative and we have since and subsequently early this year announced that we are going to be spinning off our upstream energy business. Simply Ecolab will go from 1 to 2. The majority will be still called Ecolab and these are 2018 numbers and will be $12,000,000,000 and change, obviously larger by the time we spend.
And Champion X, which is the name that the new business will be traded under and sold under the new brand, will be a roughly $2,500,000,000 business as we go out. There is a lot of work involved in spinning out a company. Buying companies, not so hard. Selling or spinning companies, a lot harder. I won't make any marriage comments.
I've had one wife. I've avoided divorce. But marriage and weddings are quick. I do. Divorces seem a lot messier.
So while this isn't a divorce from acrimony or anything else, disentangling a company from another is a lot of work. And I would just like to say our team is doing a great job doing this. And it's important for us because at the end of this, we will be smaller temporarily, but we are going to be permanently stronger. And so if you look at metrics, which we'll do in a second and Dan will walk through, or you just look at some of the qualitative standpoints, we will be more focused. We will be less cyclical.
We are going to have higher returns, higher margins as a consequence. And I'd say most importantly, we're still going to have huge growth upside. So even after we get out of the upstream business, which isn't a small market, we estimate that our market in 2020 is going to be $130,000,000,000 We're going to be roughly $12,000,000,000 $13,000,000,000 hence the 10% and we have significant upside. Now strategically, we've always said we want to increase our market opportunity at least at the same pace that we grow our business so that we don't run into a wall. We've all watched companies who are wildly successful and run and ramp up, but then they run into the wall, I.
E, they gain the share they're going to gain, but they don't have the skills to enter a new business or enter a new market. And we've worked hard to gain those skills, so we have them in advance. And we've used that skill to increase our market opportunity and that's what the slide depicts. And if you break this down granularly, you can see that we've got opportunity in every one of the businesses, including the top one, which is food service, which is a business we've been in as long as any other. And as we've looked at this, we continue to enter new businesses.
So we announced life sciences. I get asked all the time, is there another life science? Yes. The answer is we have other opportunities. We believe we'll be announcing both of these, one probably by year end and the other by in 2020 at some time, what businesses we're getting into.
We tend not to tell people before we announce it publicly because then competition knows. And we're not really interested in giving them 3 or 4 months or 6 months head start in whatever they're going to go do. But there are other opportunities and we believe we've got good plans to get after them. And it's the same logic that we've used in food retail, pest elimination, audit businesses, life sciences, focus wins. And we want to make sure we have focused businesses getting after opportunities.
Now with all that said, those markets are going to continue to be propelled going forward by the macro trends that we focused on. Population is going to grow. Tariffs are not going to stop that or belief systems. That population is also going to have an emerging middle class, particularly in Asia. That represents opportunity but it's also gonna create stress on earth.
Because that population is gonna change its diet and it's going to demand more power. They're going to want air conditioning and refrigeration just like the rest of the developed world. And the 2 biggest uses of water, food and energy. And so we know a water stress environment is only going to become more stressed as a consequence of population growing and middle classes emerging. Populations are aging at the same time in China, in Japan, in Europe and probably in the U.
S. If our immigration policy doesn't get figured out. And so as a consequence of that, we know healthcare and others have got waves behind them. And technology overshadows everything. The new advent of digital capabilities, their accessibility, their costs coming down change the business equation for everybody.
And we want to make sure we capitalize, which we'll talk about. But this Nexus, which somebody famously called it, is more true today than it was when people started characterizing it as an important feature to look on. So the fact is water, energy and food are completely interconnected. Demand on one affects the other. And so if we are going to solve a way and find a means of feeding 9,000,000,000 people, we're going to have to do it with crops that take less energy and less water or we're going to have to deforest the balance of Brazil with or without the fires.
So we are going to have to figure out this technology nexus and we know water pressure is only going to increase. So as a consequence, we like our positioning. We think it's very relevant. So clean water, safe food, abundant energy and healthy environments is as relevant today as it was when we introduced it. And we are making a difference here.
So you'll hear our businesses talk about best delivery in terms of results at the lowest cost. We are priced high. So how do we get low cost? We get it by delivering great results in terms of clean water and safe food, but doing it by reducing water and energy footprints for our customers. And when we do that, that cost typically supersedes the cost of our programs.
So we end up to be quite an economic answer. Why is this important? It's important in good times, but it's really important in down markets because cost out becomes a high priority. When we can show customers how to do it without sacrificing quality, their ears perk up. And so that's what's driving the 188,000,000,000 gallons of water saved fact that we share frequently or the $19,000,000,000,000 of BTUs of energy saved for customers.
And those 2 are related. When you save water, you save energy. And we know that's an important part of our story. It's important for our customer value and it's also important for delivering on our purpose as a company and establishing ourselves as a very credible player in the world in terms of not just financial performance, but in value to society. And while this is getting a lot of talk because of the business roundtable new pledge, I've never quite understood how you're going to deliver for shareholders if you hack off communities, customers and your associates.
It seems to me like a hard road to follow that the only way to deliver for shareholders is make sure all folks are taken care of and you create a virtuous cycle. But we've worked hard to do it. And we want to integrate our purpose in our offering, hence this idea of delivering best outcomes at low cost, low cost coming from reduced footprints in very environmental sensitive areas. And so we're recognized for this leadership. We're proud of that, but we don't rest on it.
We can do more and we need to do more because more is going to be demanded. So those macro stats in situations remain we believe quite relevant going forward. But the micro trends aren't consistent. There's a lot going on. You know it as well as I.
Turn on the news. We're watching it too. Some of this stuff is a lot of flares and we can't chase every darn thing that happens. But we try to understand what it's going to mean for the world we live in. So the political and trade policies and what it's going to mean for trade patterns, climate change pressure.
We certainly have more consumer awareness. It's turning into activism. This is kind of a natural evolution. We've seen it really have major effect in plastics in terms of focus on shopping bags and plastic straws. It's like a start, I guess.
It's not going to change plastic in the ocean, by the way, but it's a start. And those are the things that we also can expect, I think, to take more shape and pressure companies and governments to continue to push in these areas. We don't think it's going away. We think it's going to grow over time. And so the what we do remains relevant and consistent, but how we do it's got to change.
And so in a very simplistic way, here's how we depict it. So historically, our strategy has been to make where we sell. So in China, something like 92% of what we sell in China is made in China. China isn't an export import arm for us. The plants there are really for China.
The reason we did it wasn't because we foresaw tariffs, it was because we didn't want currency to be a strategic problem for us. It's always going to be an optical challenge, I. E, when you convert OI from 1 currency into other. But we didn't want it to be, if you will, prices out of a market if all of our production was in the U. S.
And the dollar got strong, suddenly we're no longer competitive. That was a genesis for that strategy. But it's also proven to be a pretty good strategy in a tariff world because we don't have as much goods transferring as let's say other industries do. We also focused on best in class technology which we'll consider and talent. We know that talent and technology are the secrets to our success.
But we are evolving our global execution as a consequence of what we see is a bit of localization and we want to be more in front of it. This is what I would call evolutionary steps and ones that we are really comfortable that we can take and frankly we think will improve our ability to execute going forward. So the global businesses will remain focused on what we call our 3 mega markets, U. S, China and Europe. It's where all the money is.
If you do a Pareto chart of markets, even though how BRIC gets into the conversation or some of these others, all the money is in those 3 markets. They will be the 3 largest markets in 10 years, 15 years, 20 years. It's almost impossible for that fact to change going forward. So that focus is there. But we know we need to enable markets through more marketing and targeted R and D investments in key markets to enable them to get after local markets in a more effective way.
But that's a very small number of markets for us, call it 8 to 10. And we know that we believe is going to enable us to accelerate growth in our international businesses. It will also move decisions and accountability closer to the market. Now digital is going to foster better communication, better visibility through all this capability. And you'll see a lot of that through our 3DT where we had an announcement I guess yesterday.
I say I guess because I probably saw it 3 months ago. It's taken a while to get through the chain. But that type of capability is what's going to enable us to do this in a way and still frankly enhance visibility. And while I'm on digital, I'll just talk this. We view digital and it's a broad term as a historic opportunity.
And we believe it's really critical. We start in our minds with an advantaged position. There was talk a few years ago about us versus Amazon and the like. And I don't believe that's the way to think about it. We've discussed that a number of times.
We view our advantage as a fact that we've got 3,000,000 customer sites nearly and we're collecting data in the vast majority. So we're all over this. How do we leverage this advantage and this opportunity? The fact that we collect unique data. Unique data streams, nobody else would even know what to ask, gives us the opportunity to come up with unique answers for customers.
Today, the vast majority of these 3,000,000 sites, the data is housed and held into that site until one of our people walks in and downloads it on their computer or laptop or iPad through an RF port. And so we need that data connected to the cloud to give us a much better data stream which is one of the objectives. And Christophe will talk about our digital metrics, if you will. And one of them is how do we drive connectivity? With costs coming down, we can afford to do that as we move forward.
But creating this world, we believe gives us huge, huge advantage and a way to make a step function change again versus competition, which is what we are set to do. We aren't happy with our current advantage. Whatever it is, it's not enough. We want to extend it. By extending it, we got to become more valuable customers.
And we believe this marriage of digital virtuous cycle and a field force that can actually deliver against what we learned digitally is the killer app in this space. And where we've won today with like a large retailer, why did we win? Was our software sexier? No. It was because we had a field team that could actually deliver against what we learned versus the digital technology.
Their words. Because learning it and not being able to do anything about it is maybe even a worse place to be. And so it's very important that this fulfills and frankly builds on our current capabilities. So benefits, we believe it's going to enhance our value with customers. Point number 1, make us easier to do business with.
We're not as easy as we'd like to be. And finally, it will also drive natural efficiency by helping our sales team become able to handle even more customers because we'll do a lot of their legwork for them in advance before they walk into the unit. All this, we believe is what's going to continue to put us in a position to be true to our targets. 20% OI, which ultimately is the biggest driver of ROIC. We'll work to manage capital well.
But it's not a question of like having working capital is a magic answer for us. The magic answer is make more money in our existing business, on our existing assets. That's how we drive ROIC. And this combined will drive 15% EPS or put us in a position to regularly deliver, I would say, outsized EPS versus any of our peers, industries, indexes, etcetera. So today, you're going to hear from a lot on our team.
Christophe will be up next. But you'll also hear from each of our global presidents. We have a great team. We highlight our team. Our team is out talking to investors frequently.
I don't know if there's another company that has as many people at investor conferences as we do. Now I'd like to say I invented that. Actually, my predecessor Schuman had me out and other people out early. And it was a benefit, I thought, because it helped the team to understand not just customer pressures, but investor pressures and how you got to marry all these things for a happy outcome. And so we want to make sure that we stay attuned to investor and the financial community's concerns, opportunities and everything else.
It's important. And the way we do it is we get out and we listen and you'll get a chance to see everybody today. So as we go through, I think you'll understand how we can create a step function change and ideally even a better future for the company and in our value. That we still have a monster opportunity in front of us. We're focused on it and I would say more focused than ever.
And most importantly, what I'm most proud of and I think what should give you the most confidence is the team. That's really what people bet on when they bet on a company. You can bet on the strategy and everything else, but somebody's got to execute it. And typically, if I even make little investments in my personal life, it's mostly around who's leading it and who's driving it. And I'm very proud of the team that's been built, starting with Christophe, who will come up and walk through some of the execution components of our strategy.
So
Christophe? Thank you, Doug, and good morning to everyone. Good to be back here in Naperville and together with you. And welcome to this place that the mayor of Naperville actually calls the World Water Capital, which helps his community as well at the same time. But it's a little bit as well of a good description of the expertise that we have here in Naperville on the campus that you will have the opportunity as well.
So to visit and meet, We have over 1,000 people who are the world experts in all the technology and science and how to turn that into business growth as well at the same time. So today, I'm also glad to be here together with our team to really share with you how we're going to continue to evolve to continue to deliver high performance for our customers and for our shareholders naturally. As you've heard it as well, so from Doug before, we're very uniquely positioned to win, obviously by addressing some of the world's most pressing problems like you've heard, but at the same time as well by focusing on delivering high performance year after year, but really focusing on seamless exceptional execution day after day, which is the most important part. But at the same time, as I will share with you, as well making sure that we keep evolving as we've done over the past many years in order to stay ahead and really delivering better performance for everyone out there. So yes, we will keep growing because we're focusing on long term growth trends like food safety, like clean water, like infection prevention and abundant energy as you've heard it many times.
But most importantly is really that what we do is helping customers perform better. And you've heard it many times today, you'll hear it as well, and you've heard it as well over the past few years. But it's really helping customers of all industries that we're serving perform better. We help them produce more products, better products at a lower total operating cost. And how do they get there?
It's because they use less labor, they create less waste that need less natural resources, Other call it sustainability, sustainable development. Well, for us, it's really seeing that as a means to an end to really help customers doing the right thing for the communities and for the consumers, which is a good thing ultimately so for everyone. The way we measure that is actually an interesting metric that we call EROI. You've seen it as well so many times. It's a very simple equation is how much do we have customers save and how much do they invest for that.
Simple ratio, which is a return ratio, which is also driving as you've heard it from Doug, the interest or continued interest from customers to invest more because the more they invest in what we do for them, the higher their return. And in many cases, we even guarantee that return because we are so convinced that we can truly provide it to them. That helps us as well drive higher pricing as you've seen it as well over the past few quarters. And it helps us as well sell more new business in more difficult times that we hope will never come, but we know life comes in cycles as well. Well, when times are tougher for our customers, getting more productivity is ultimately something that's even more important for them.
That's exactly what we sell as well to them at the same time. But ultimately, the most important part is really so to step back and to look at what's the opportunity that we have in front of us, dollars 130,000,000,000 which is post spin of upstream, by the way. So we're looking at that every single day and saying, well, we have $118,000,000,000 out of $130,000,000 that we can go and get every single day. So I talked about driving high performance. That's something that you've seen in the past.
It's something that you see as well. So from us and this team as well going forward, because we're focusing on very simple things at the end of the day, which is really focusing on growth first, which is new business and entering white spaces, as you've heard it as well. And I'll comment that as well in a moment, But we work hard as well at improving our margins, even when it's difficult by driving innovation and pricing that's driven by value for our customers, as you saw it as well a little bit earlier and also working on our productivity in order to really leverage our investments for the good of our customers and our investors. So yes, it leads to great performance in terms of share or growth of earnings per share, as you've seen over the past few quarters. And at the same time, we try to really work as hard as we can in order to improve the resilience of our model and the predictability as well of our earnings.
And how do we do that? We don't have any magic solution. It's really working on the fundamentals that we're quite known for, really making sure that our portfolio is as diverse as we can, really leveraging the same model. And you've seen it as what we've done as well in our water business that we segmented as well creating natural water light, which has been a terrific story as well in the past. But it's also pending our footprint and being as spread as we can, but really focused as well on a few markets as you've heard it from Doug and I'll come back to that as well towards the end of my presentation.
But it's also leveraged this unique opportunity of digital with which we have acquired some of those but also developed as well in home as you will see a little bit later and really working in continuous improvement. You've heard about SAP, 80% of our sales will be on SAP, so very soon. And we've as well so worked hard on this efficiency initiative, which is leveraging the work that we've done over the past few years in terms of infrastructure, in terms of acquisition and as well with the merger, so with Nalco. But at the end of the day, it's all about execution. And with our team, the 4 things that we're continuously talking about and you'll hear that so all along today as well is really about this new business.
We've had a great track record over the past few years and this year has been a good one as well for that. Pricing has been a good story as well and making sure we deliver as expected driven by value that we are creating for our customers, really getting the right innovation and not just innovating and bringing on the market, but implementing that properly as well. So with our customers to drive growth and drive margin and ultimately making sure that we get as well more productive as an organization going forward. But at the end of the day, it's about culture. It's this culture of accountability that is very close to our heart as an organization and is really making sure that we deliver what we've promised.
We set stretch targets. We're famous for that, obviously, because we want to go this little extra mile that we think maybe we could get there by running a bit faster, a bit smarter as well than competition. At the same time as well making sure we invest wisely and properly as well behind our teams and our businesses. And ultimately, as well, delivering the short term while we build the long term as well at the same time. So I'd like to talk a little bit about the longer term and how we build it and then come back to the short term as we always do because that's where we spend 80% of our time.
But if we think about continuing our evolution in building our future, well, it starts with what's the opportunity that we have out there. So 130,000,000,000, again, post the spin of Upstream, while we have 12,000,000,000 today, interestingly enough, while you can see so the 118,000,000,000 that are out there. The interesting part is really the circle, the customer, which is the strategy that we've been following very successfully for many, many years. I don't even remember when it was invented, but it's been perfected every single year. What does it mean?
Circling the customer means selling all our offering to one site in one customer and circling the globe means serving all the sites of that customers anywhere around the world. Circle the customers, Circle the globe has been very successful and useful for us and for our customers because it helped them as well get the best standards of quality and of performance anywhere as well around the world. And how do we get there? Well, it's by leveraging our proven model, which is really having on-site service and we firmly believe that our teams, our experts going in a power plant, in a restaurant, in a hospital, in a pharma plant, well, other ones knowing best the process of our customers. They're supported by technology, by chemistry, they provide training and they provide as well data insights, which is what's coming out as well of our leverage investments, which will help our teams create even more value for our customers and our as well to improve.
So as you can see on the right side of that circle in here, we can move from 12,000,000,000, adding DKK46 1,000,000,000 by selling all our offering to our existing customers today, people we have already relationship with. And that's where we focus most of our time. It's easier to sell to those customer and it's cheaper as well because we have people obviously so working already on those sites. But at the same time, it's also about growing the pie. You've seen it from Doug a little bit earlier today.
This is something that we've been focusing on for many, many years. And we get there by globalizing our footprint, by segmenting our expertise, by expanding our offering and enhancing our capabilities. This is something that we've been doing since 1923 when the company has been as well so put on the market. As you can see, so globalization where we started in North America, we expanded international and now we focusing really on mega markets. I'll come back to that as well.
Our Our offerings are really focusing on cleaning and sanitation initially and now talking about infection prevention. But it can be as well capabilities where we were leaders in liquids, we moved to solids and now it's really about digital and artificial intelligence as well. So it's a very natural evolution that we try to keep fueling as fast as we can, but really with a consistent view on where we came from and where we're going as well, so tomorrow. So let me take them 1 by 1 and illustrating. So with a few examples, what I truly mean with that.
Starting with the offering, we have many of those examples, but I think one of them, which is the most interesting one is when we acquired Nalco a few years ago, which was really driven by that idea of bringing food safety, which we've been perfecting for many, many years and water expertise together, which is an absolute unique proposition because we need water to clean. And when we talk about the infection prevention, food safety, ultimately, it's also driven by water. So bringing that together, we're the only company that can truly do that on a global basis, which is very unique. So we promised to deliver €500,000,000 of sales synergies after the merger. We've over delivered that, as you know, and now we've moved as well towards organization, which is even more integrated to serve the global companies out there, the global food and beverage companies.
You'll hear that as well from the Califano a little bit later today. And we're going towards the next period so to get to the billion. And then it's really leveraging water in institutional, water in healthcare, water in life science, which is one way of expanding really our offering and putting us in a place that competition so can't copy very easily, which brings me as well to the capabilities. The second dimension as well as to expand our pie. You've heard it as well.
So this morning, technology development, digital being one of them started many, many years in our company. Nalco put on the market 3 d trays are in 1988, creating this concept of connected chemistry that was 3 years before the Internet was invented as well. Ecolab moved afterwards with remote monitoring for pools and spa. We've invented as well, so new system for way washing like Apex, which has moved obviously into even better technology today. Then we connected thousands of sites as well around the world to the system assurance center, which is measuring performance and making sure that performance improves insights anywhere around the world in real time.
And then as you've heard from Doug as well, we just launched Ecolab 3 d, which is a new version of what was called Envision before. You'd see that as well later today. With all those connected sites, what do we do with that data? It's been moved to the cloud and we've created to the largest cloud of Internet of Things connected devices in the industry as well. So very proud of that, a very good story.
And that's just a continuation of what we started many years ago. So we have very rich offering in terms of digital for our customers in all of our businesses today. It's not all equal created. Some have started earlier. Some have been there for a little bit less time as well.
But everyone is really on that journey learning from each other and our customers most importantly. So believe in our
technology and what we can deliver
because we've been doing that as well in the world. You heard it as well a little bit earlier today. Well, digital is not for the sake of being digital out there. Many are talking about connecting a lot of things, not really knowing why the hell we do that. Well, we know exactly why we're doing that.
And it's driven by 3 objectives. The first one is really so to drive revenue by creating more value for our customers. The second one is really driving productivity, our field sales and service. And the third one is to improve our operational performance. Those are the 3 pillars.
All our investments in digital, the 325,000,000 that you've heard as well from Doug earlier today, well, I invested behind those 3 pillars, which are improving customer performance, which means our performance ultimately and building as well capabilities going forward. Talking about metrics, we are metrics driven company. As you know, we have many metrics to drive, to plan and to drive our progress in digital. I'd like to share with you 2, which are fairly critical here for us. 1, you just heard as well.
So from Doug is the number of connected sites that we have out there. And the second one is the share of our sales that is digitally enabled. And as you can see that industrial is ahead, it's less sites, it's way bigger sites because those are plants, industrial sites, obviously, as you can see, so 20% of the sites are connected. It's 40,000 plants around the world. Is a lot and that keeps growing because the moment it's connected, well, we can help the performance get even better for our customers.
But more importantly, we can drive CTC. So the customer, as we've talked before, by adding new offerings, really helping the customers ultimately get to a place where their whole plant, their whole site is optimized across the world as well. At the same time, it can be true for a food retailer without naming them, for instance, and ensuring food safety anywhere around the world. We can do that, thanks to that kind of technology. So really thinking how many sites do we have connected and how much of our sales is digitally enabled.
And as you can see, institutional represents the largest opportunity. It's 2,700,000 sites out there. So we have thousands of sites that are connected today. Well, it's small percentage because it's millions of sites out there. And it's really a journey that we've started many years ago.
And it's a journey that's accelerating today and that's going to accelerate even more tomorrow. So it's good for customers, as mentioned earlier. So for that example of this food retailer as one, but it's also really good for us and for our investors at the same time, because the moment that the customer is connected, it's usually a customer that's going to stay as well much longer with us as well because it's important for them. So while not only to have a real time performance management, same time as well understanding where they came from in terms of data and as well as driving it across their fleet as well. So going forward, so a very good tool to drive retention as well so far our business.
The 3rd pillar in order to increase that pie as mentioned a bit earlier today, well, it's to segment even further our expertise of our industries. You've heard many examples during the past few years and as well. So this morning, we talked about Waterlight, we talked about Life Sciences, Doug shared. So the 2 new ones that we're going to talk about in the future. Well, one of them I can unveil today because it's something that is happening right now.
It's really focusing on data centers. You're familiar with that. It's obviously an industry that is growing extremely fast. It's an industry that we've been part of for a very long time since it started actually. It's an industry that needs huge amounts of water.
An average data center requires as much water as 80 hospitals in average because they need so much water in order to cool down the service and the computers that they have in their data centers, obviously. And what's most important for them is not so much how much they spend or invest with us in terms of really cooling the operations. It's making absolutely sure that the operations never stop because we always want to be connected as consumers as you are right now, for instance. And the second segment is one that we will talk probably more in the year to come that we're preparing as well. And I think we will have prime time in the next 12 months.
And the last pillar really is to expand our pie, as mentioned before, is really so to drive this globalization to really get the right organization, which needs to be very agile. And we have a very agile organization, but at the same time being really focused. And we want to make sure that our global businesses are focused 1st and foremost, where most of the money is, as you've heard it, and that's really North America, Europe and China. And we have a separate but really well connected organization that we call the international markets, where it's much more empowered at the local level to do what's right without creating any distraction for our global businesses. But at the end of the day, and I'd like to wrap up on that, it's about 3 major priorities, which are execution priorities for our people around the world.
It's really about driving your business. This is what's most important every single day when we wake up. The second one is really sort of driving our margin through pricing and innovation and exceptional service, as you know. And last but not least, it's building our teams, our capabilities in order to drive productivity anywhere around the world. So at the end of the day, I think that we are extremely well positioned with where we are today, but even more where we going to tomorrow with a great team, great capabilities, we have a proven model of circle the customer and circle the globe that's been successful for many years.
We're bringing it to the next level, thanks to new technology as shared with you. And the high performance that we've been delivering to our customers and our shareholders over the past few years, while it's going to be the same story as well going forward because I think that we have the best team in the industry and you'll see that as well in action during the day. So take as much opportunity to discuss and ask questions and really share your views with our teams. We would love to get your input as well and I hope that you're going to have a great day. So with that, I'd like to introduce you to my friend and successor, Darryl Brown, here in Naperville, who is going to share with you sort of the story on water.
Okay, good morning everyone. I'm Daryl Brown. I've been with Ecolab now for start Houston, this is quite the change for me. Okay. Now Cut Water have a fabulous opportunity.
We have a really great growth opportunity. We see the increasing need to manage water globally. We find that customer core needs are something that we're focusing on We have very strong and sustainable growth momentum right now in the Nalco Water business and really emphasizing the need to create and maintain value with our customers. We have a very, very unique global capability, both from a capability perspective, but also from a supply chain and network capability perspective across the globe. And we're also making sure that we're enabling our global offerings around the globe as well.
So when we look at the Nalco Water model, water in, water out and the processes in between, Nalco Water do a fabulous job managing that. Whether it be pre or post treatment, whether it be on cooling process water, we have solutions for all of that. Making 3 main things that we're really focusing on here minimizing water, maximizing results and also optimizing total cost of operation. For the world, we have the ambition to reduce the industrial water consumption, which also leads to $300,000,000,000 worth of water saving, which then leads to drinking water for over 1,000,000,000 people in the world. We're also very heavily segmented, and it's a strategy that we have in the organization.
You can see from the Nalco Water team here, we have 5 global divisions, light, heavy, mining, paper and downstream. We also operate across 11 global industries across 4 core platforms operating in 170 countries. So we have a very ubiquitous footprint across the globe with very strong segmentation subject matter expertise. We have a big opportunity. Christophe talked about it, so did Doug.
We operate in a $47,000,000,000 market and we only have a 9% share. So when you take a look at the sales that we have by region, yes, we have a big share in North America 50% of the pie, but then also in Greater China and Asia Pacific 20%, Europe 15% Latin America 10% and the Middle East 5%. When we take a look at our business portfolio by segment, we feel that we have a very balanced portfolio. Downstream, 25%, which is a new entrant into the industrial group, light at 25%, paper 20%, heavy 20%, and then you've got mining at 5% and other. So a very, very balanced portfolio across the segments that we operate within.
We also have a very strong strategic ambition. We'd like to grow our business 6% to 8% organically, of course, making sure that we are the global leader in water treatment technology and management, leveraging the digital solutions investment that Christophe talked about to make sure that we're strengthening our offerings day in and day out for our customers. Also making sure that we again minimize water, maximize results and drive an optimization in total cost of operation. Of course, making sure that we meet our ambition of delivering 300,000,000,000 gallons of water by 2,030 and delivering drinking water for 1,000,000,000 people around the globe. So let me talk to you a little bit about the performance and the acceleration of the performance.
So as you can see over a 3 year CAGR from 2014 through 2016, we grew at 3% and we've really stepped up the growth over the last 3 years, including 2019 to 7%. We have an ambition to grow 6% to 8% and so we're midpoint of that ambition right now. So continuing along a very good journey to continue to accelerate the growth in the business. We feel that we have our growth fundamentals in place. Again, you heard Christophe talk about circle the customer, circle the globe that continues to be a very strong theme for us in Alco Water along with the growth strategy we have around retain, grow, gain.
So retaining our best customers, growing within those customers and then bringing on new business. So new business acquisition for us incredibly important. And of course across these four pillars, making sure that we have long and deep customer relationships, driving that global knowledge platform and training activity we have not only for new entrants, but also for existing associates, making sure that we have a world class sales and service organization and leading in innovation and making sure that we're making the appropriate investments in digital. And when we think about digital as a growth lever for industrial and for Nalco Water, it's driving 3 main pillars. It's It's enabling us to drive revenue, increase our productivity and maximize customer performance.
You can see on the bottom there, there's a lot of initiatives that we have that fold under each one of those. But what I would say is that Nalco Water has been involved in this digital space now for 30 years. As Christophe said, back in 1988, we started. And so we have a very, very strong Christophe talked about, which again drive value for our customers.
When we
look at water innovation strategy for Nalco Water, we're making sure that we're focusing on growth markets. We're making sure that we understand the megatrends that are occurring in the markets. We're making sure we also understand the differentiated technologies that it takes and I think you'll see some of that today as we showcase some of those and also making sure that we continue to create and maintain value for our customers. So we want to create it, we want to collect it, we want to communicate it, and we want to make sure that we maintain that value each and every day for our customers. And to do that, we have an integrated offering.
That integrated offering that we have around chemistry, monitoring and control, performance models and data analytics and insights, as well as making sure that we have a good understanding of how we manage our customers' assets and also understand the performance of those assets and dashboard those so that we can benchmark them is incredibly important for us. When we look at our innovation pipeline and again you'll hear Larry talk a little more about this during the research and development engineering piece, but I thought I'd just touch on some of the innovations that we've got underneath the segments that we operate within industrial. So firstly on the heavy side, Omni is one for condensers that we're working very consciously on, pureate, which is a chlorine dioxide generation chemistry. Downstream, you'll hear a little more from Larry today and the team on CrudeFlex, which we're very, very excited about. In the light space, Legion Guard also 3 d tracer, solids for cooling.
So you again heard Christophe talk about the generation from liquids to solids and you'll see more of that today particularly in the light spaces we've segmented that particular business portfolio. On the mining side, oxalate control and on paper, of course, we have some new dry polymer applications with Altus and also FilaTec technology. So a lot happening here. We feel we have a very strong and robust innovation pipeline in Alco Water and it continues to improve. Our service model really is the fundamental of how we take care of our customers.
It has 4 pieces to it, the segmentation, which we've already talked about, making sure that we have dedicated subject matter expertise down the vertical. These are very technically oriented segments, and we need to have that subject matter expertise aligned with those segments. And I think we've done a very good job achieving that. Training is incredibly important for us, for our existing employees, but also for new employees joining the company. So we have a of accelerated university programs in the company.
You'll be going through our water university here today if you're on one of the tours. So really take the opportunity to see how we onboard our associates and train our associates to understand the complexities around some of these segments. Customer insights from those 90,000,000,000 data points that we're collecting each and every day and of course making sure that we can enable our field team to drive productivity and gain that extra edge to make sure that our customers get the value they deserve. So in terms of long term growth trajectory, we know that there's a differential between demand and supply around water supply heading into 2,030. We know that there are stressed water environments around the world, and we're doing everything we possibly can to make sure that we address those.
We also understand that the demand for water solutions industry is outstripping industry growth. Now that's a gap that we see as a huge opportunity for us to be able to fill. And of course, the cost of water just continue to increase and we see those each and every year and here's a couple of examples just across a couple of countries where you can see sort of exponential increases in water cost, which we're focused very heavily on in regards to us making sure we understand what those costs are and how to best manage those for our customers. In regards to growing our market, we know that we have a $47,000,000,000 but there's a lot we can do to increase the scope and drive expanded offerings. And so 3 areas we're concentrating on: a and drive expanded offerings.
And so 3 areas we're concentrating on: a new technology, new services and unique chemistry services. Again, you'll hear a little bit more about these expanded offerings as part of the tour today, but a couple just to point to. Filtration treatment, wastewater and pretreatment in new technologies, big developing areas for us and expanded offering opportunities. Certainly, in regards to consulting and on-site service for new services where we see opportunity to expand our revenue and I'll talk a little bit more about that in an upcoming slide. And of course, 3 d tracer, which we've managed to leverage now for over 30 years, driving our protected chemistries and making sure that we can understand how best to leverage that data in terms of personalized service delivery.
Downstream, so one of the pleasures that I had was to lead the Downstream business when I was running energy for Ecolab. I'm pleased to say now Downstream forms part of the industrial group. It's a fabulous business, it's annuity business, it operates in a very segmented approach like we have in the balance of our businesses in Ekelab across refining, fuel additives, ethylene, reactive monomers and polymers. So highly technical, highly annuity based. The business model for Downstream is almost an exact replica of what we have in our other industrial businesses, so it's a great fit.
And we think that we have a great opportunity to continue to expand some of the offerings we have in the hydrocarbon space. Again, as Christophe pointed to a little earlier, it's downstream plus water. There's huge process and water opportunities in the downstream refining and petrochemical areas. So in terms terms of expanding our end to end offerings, we think there's exponential growth opportunity for us there as well. Here's just a couple of examples from our light business in transportation, food and beverage and also data centers where we feel where we already have an offering, we already have revenue streams.
We feel we can expand those offerings simply by going a little deeper and making sure that we circle the customer, circle the globe and get everything we possibly can within the confines of whether it be a refinery fence, whether it be a food manufacturing facility or a data center. And if we look at transportation, owning the paint booth for us provides us what we think to be a 5x potential in terms of future growth opportunity. In light industry, we know that if we concentrate there, we can get an 8x increase in our revenue. Some of those sites now around $65,000 we feel we can take those to over $500,000 simply by looking at different applications within the
and also digital insights.
So lastly, and to close, I think we're uniquely positioned for growth in Alco Water. We have sustained business performance as you've seen in the last 3 years. Our performance in terms of growth has kicked up substantially up to 7% CAGR. We feel we are making very, very impactful innovations for our customers, driving those digitally enabled solutions, making sure that we stay true to the segmentation of the business and driving corporate account growth, not only growth with our corporate account customers, but also with our team and making big investments in the corporate account environment, making sure that we continue to create and maintain value for our customers. That's an absolute critical piece for us, driving that value not only through what we do out in the field, but how we price our products and programs and how those fold into the value proposition we have as a company.
And lastly, making sure that we expand our offering. Circle the customer, retain, grow, gain has been a fundamental growth strategy for EcoLab, I think, since day dot. We will continue to drive that strategy. We see huge opportunity there to expand our growth revenues around that expanded offering. And we also want to make sure that we have a continued focus on the protected chemistries and technologies we have in the organization.
And again, you'll hear a little bit more about those today. So I think without any further ado, that's it for Nalco Water. So questions, please, if you have
any. Yes. Does the
growth from 'fourteen to 'sixteen step up
So I think it's a couple of things. So I think growth for us is partly volume and partly pricing. And I think we've done a very, very nice job over the last couple of years understanding some of those inflationary headwinds that we've had and being able to price for those and be able to price for them in a value environment. So yes, we've seen incremental increase in our volume growth, but we've also seen a growth aspect related to the pricing activity and the value that we're able to capture with our customers. So I think it's a combination of both pricing, but also volume growth.
Hi. Mike Harrison with Seaport Global. You talked about the potential for exponential increases in the cost of water. But I know that at least in the past, there are some regions of the world where the actual cost of water is kind of separated from or divorced from the real economic cost. Are you seeing that there are certain regions of the world where the market cost of water is really starting to change and you're starting to see that have a real impact on customers in those regions where water is becoming more scarce?
Yes, we are. But I would say the pace of change there is glacial. And I think that's the big issue. Where we you looked at the chart a little earlier there where we had all of those distressed areas that we saw around the globe, all of the areas in red. More often than not, the areas in red have the lowest cost of water.
And they are the areas that are changing the slowest. And I think if we can gain some momentum there to try and drive an improved circumstance where those areas are driving higher cost of water, I think we'll then start to see some change. But we certainly haven't seen that today. And I think the pace of change there is a lot slower than we would anticipate and certainly a lot slower than we'd like. Yes.
That's right. Yes, Doug's just making the point there. When we reduce water, we absolutely reduce energy at the same time. And so that's a concentrated focus we have to make sure that 2 go hand in hand. And we see that in almost every environment, in almost every customer base that we have, whether it be in a downstream space, whether it be in a food and beverage space or whether it be in an Alco Water Light space.
Where we reduce water, we always reduce energy.
Hey, it's Schwimmer Rosenbaum from Stifel. I just wanted to ask you a little bit about the institutional potential from digital. You talked about 2,700,000 customer sites. How many of these sites are realistically an option to be digitally connected? There are certain sites that are just kind of the smaller end, they're never going to migrate over there.
For the addressable amount of these, is this an 80%, 50%, 70%, how would you think about that? And then kind of the leverage you can get after you're able to kind of collect data over there, if you can just put some numbers around that?
Yes. Look, I think it's a great question. It's probably something that Tim's more capable of being able to answer than me. Tim, that's more of an institutional question than he's an industrial question. So maybe if we can kind of hold that question over and Tim could probably take that as part of his Q and A session.
It's Manav Patnaik with Barclays. Just a quick question using the data center opportunity as an example. They've always needed water for cooling and so forth. So I guess what I'm just trying to frame is, how do you find these breakout opportunities? And I guess why does it take what's the limitation in taking so long to find them?
Well, I think it's certainly a new area for us. We see it as a huge opportunity, of course. One of the things about data centers, and this is very new to me as well, is that a lot of the data centers that exist around the globe aren't exactly visible. And so having access to those in the early days, I think has proven to be a little challenging. We're now getting that connection.
And so we're now understanding, how the customers are positioning themselves around the data centers that they have and the future growth potential that exists there. As Christophe said, it is huge for us. These data centers use an enormous amount of water. Their number one imperative is to make sure that they have zero downtime. It is 100% uptime all the time.
And so yes, they're huge consumers of water. We need to understand exactly where these facilities exist and how best to access them. They're highly connected in certain geographies and there are customers there that have these data centers in multiple geographies, which we see as an opportunity around circle the customer, circle the globe. So we see a big opportunity not only to drive what we have on our existing portfolio, but also to drive into different geographies where they have an expanded platform.
Can I add something maybe just to that? Andy, so the data centers opportunity is something that has been evolving. So quite interestingly over the past few years. It was mostly owned by individual companies in the past. It can be banks, it can be us by the way as well.
And that's something that is shifting. Now those are the Amazon, the Microsoft, the Facebook and all those companies. So the way we sell to them has changed dramatically in a way that we are used to sell because it's bringing our technology to global companies that are just doing that. So that's why it's such a sweet spot. So for us, just wanted to
add it that respect.
Just a question, you'd shown on the one of the slides in terms of the industrial applications in the digital connectivity where 20% of the sites are linked and about 13% of the sales are linked. I guess on that data source that you have, that 13% of the sales, is the margin and profitability on those sales versus the rest of the industrial segment, is it stronger? And then can you speak to the turnover that you see at the ones that are digitally connected versus the ones that are not digitally connected? That's a
much We know where we have digitally enabled solutions driving better customer value in those facilities, we end up having a much, much higher retention rate. We're actually tracking that as well, particularly in our downstream space where we've moved very heavily towards the RK platform solution. We know where we have RK installed, we have a much higher retention rate there and we see much higher margins. So great question and yes, that's exactly the case.
Okay. Thank you. Now we'll have Nick Alfano present F and B.
Okay. Nick Alfano, Global Food and Beverage.
All right. Well, good morning. And Daryl, thank you for that. So my name is Nick Alfano, and I've been with the company for 24 years, different roles, sales, marketing, general management. Now I have the privilege of leading the global food and beverage business.
So what I'd like to tell you is, so food and beverage is a $2,000,000,000 business organized in the following segments. The first one is obviously our dairy and agribusiness, which essentially we follow we follow it from where the milk is produced into the plants where it ends up into cheese, yogurt, ice cream, butter and even infant formula. You know, then we move into protein. So protein is about raw and ready to eat chicken, beef, pork. And it also includes now the non protein forms, plant based protein that we see now into those plants.
Fruit processing is a very large segment for us. So that's comprising baking, snack, produce, meals, confectionery, energy drinks and then the big mass produced beers, craft brews and spirits. So at the bottom of the chart, what you see there is what we deliver every day is food safety and operational efficiency through the platforms you see there. So CIP is the major cleaning platform. Antimicrobials is how we kill pathogens and spoilage organisms.
Bottle wash, you see that a lot in beverage and brew. Conveyor lubrication, that's a major platform for us that's keeping efficiency in the beverage and brew facilities moving the bottles and cans down the line efficiently. So if you think about opportunity, we've all said the same thing. So we play at food and beverage in an $11,000,000,000 addressable market. We've got less than 20 shares, so there's plenty of room to grow there.
As I mentioned before, this is a truly global business with good balance between the 2 megamarkets in North America and Europe and the emerging market portfolios in Asia, Latin America, Middle East, Africa and China. The growth in consumption of protein and processed foods in Asia, Latin America and Middle East Africa is a great opportunity for us along with our ability to expand our dairy platforms globally into markets like Greater China, Middle East Africa and Latin America. So as Daryl said, the business continues to accelerate sales even as our customer growth stays at low single digits. So our ambition has shown 6% to 8% top line growth and we're right on the path in the midstream to achieve that. We're growing well in the largest global food companies as our value prop, we've mentioned this before, integrating hygiene, food safety and water conservation is resonating well with the largest customers.
Additionally, innovation in digital provide new sources of revenue and promote excellent
customer outcomes and solid
gross margins. I'll show you a few stay ahead of input costs and drive value delivery to customers to get paid for it. So if you look at this slide, so the megatrends are clearly in our favor, namely food safety and changing consumer preferences, where we see a lot more health and wellness and natural and organic products becoming very important. The need for hygiene solutions in our business increases as preservatives are removed to produce clean label products. Similarly, productivity and sustainability enabled by digital solutions change the outcomes we deliver.
So our customers then desire integrated model we form between Nalco Water and Food and Beverage on end to end solutions positions us uniquely to capitalize on this. Now on the topic of consumer preference, I want to take you through this very quickly. You see the evolution here from taste and price, which were the initial tickets to entry for the food market for many companies or for many years. And 20 years ago, with the onset of 2 parents working, meals being consumed outside the home, more ready to eat and prepared meals and better packaging, now you see convenience becoming a major attribute for food companies. And then today, it's all about health and wellness, simple clean labels, natural ingredients and staying ahead of consumer reactions on social media.
So what I wanted to do was show you how 2 of our customers have fared against those trends I just talked about. So if you look at Hormel, for example, Hormel is one of our preeminent protein customers pork producer, basic pork producer. As you move to the right on the slide, what you see is they got into ready to eat through spam. They entered into the Turkey market in the mid-80s, right. And then you see the shift towards natural and organic, right.
Some brands that they acquired. Similarly, if you look at PepsiCo, another one of our large global customers, they started out as a carbonated soft drink company, then moved into sports drinks, then moved into juices with Tropicana Naked Juice. They have a huge water platform driven from Aquafine and others. And now they're into probiotics, which is Covita, which is a very sensitive beverage they produce. On the bottom of the side, you'll see that on the you all know the Frito Lay brand, right, is a preeminent snack brand, but they're moving also to healthier, right.
They acquired the Quaker business, right, Sabra. And then now they're into protein and shelf life like things like that. So here's the situation. In that same period of time as those customers have evolved, we've evolved with them. So our sales at Hormel in that period of time have doubled and our sales at PepsiCo that during that period of time have tripled.
And the reasons are as you move to the right on that slide, what you see is preservatives are minimized, the shelf life's become shorter, rapid changeovers due to SKU proliferations are the norm and more natural ingredients are used. When those things happen, the need for cleaning and sanitation hygiene goes up. So our value proposition, as Daryl said, continues to change to these large global customers. So you think about where we started in this business, it was on the right hand side of the slide. We were a food safety business focused on the key unit operations in a food plant.
You'll see a CIP system there, you'll see conveyor systems, you'll see bottle washing. So that's all around treating stainless steel surfaces for food safety. With the Nalco acquisition 2011, now we have the ability to follow the water influent to effluent in a plant, right? So now we had that holistic view that Daryl talked about of following that water and hoping our customers reuse and recycle it, okay? Now, the intersection of those 2, if you think about when the hygiene side and the water side came together, now we're reusing water.
We're taking water from the plant side, right? So in this example, it's shown here, repurposing repurposing it back into the utility side of the plant, right? So we call this our reuse reduce, reuse, recycle. And it's a very powerful message to our customers in terms of integrating a food safety offering and a water solution for the best outcome possible. Now on the topic of the large customer value proposition, we took circle the customer out as was mentioned several times to a new level in 2018 by forming a dedicated enterprise selling and marketing team to focus on the 30 largest food companies in the world, okay?
So the team delivers the value proposition I described on the last slide focused on food safety, sustainability and operational efficiency at the lowest total cost. We experienced great receptivity to the approach and are winning big with some of the customers you see on the slide and well positioned to deliver this model anywhere in the world based on our large network of field associates and technical support. So this was a big move for us. And I think it when you think about the future growth of the business, it was a bet on big customers, it was a bet on the integration of food safety and water and taking it to the biggest food companies in the world and delivering on that promise. Okay.
So digital and innovation, what I want to talk about here is the way that we view digital innovation in the businesses. We try to couple it as much as possible. So I wanted to take you through kind of where the markets were before we took this approach. If you think about a dairy plant, you see a lot of analog monitoring in a dairy plant. You'll see like a chart recorder there just recording point by point data.
And similarly in a protein plant, you'll see people doing manual titrations to make sure that the titrations to make sure that the concentration of the chemicals are in the right range. So now with the combination in our dairy business of Synergex, which is a sanitizer and 3DT tracer, we're continually monitoring the performance of the chemicals in the system. We're taking data points, millions of data points and making sense of it. And we're giving our customers a real time view of what's happening in that plant to stay ahead of problems, increase their quality and their shelf life. Similarly in a poultry plant, we've combined our InSpecs 250 antimicrobial with our antimicrobial insights digital platform.
And what that does is it real time monitors the concentration of the antimicrobial in the chiller, makes adjustments real time, reduces pathogen risk and keeps the customer in compliance. And to show you an example of that in real practice, this is it. So this is a North American poultry producer. And in this particular operation, we installed both solutions, the InSpecs 250 antimicrobial and the antimicrobial Insights digital solution. We were able to take this customer from what's known in the industry as Category 3.
Category 3 is a higher level of salmonella on the chicken to category 1. Okay. And category 1 is the highest quality chicken you can produce and then that would be obviously sold for a higher price to the quick serve restaurant organizations. Additionally, because we're controlling the pH better through the antimicrobial insights, $18,000,000 of value created, okay? And customer, dollars 18,000,000 of value created, okay.
And that's simply because switching from category 3 to category 1, the better quality poultry resulted in a much higher level of sales for them. Okay. So here's another example in our dairy. So this is a North American whey producer. So in this particular plant, we dropped in our Synergex most advanced sanitizer.
And what Synergex is, it's a single stage sanitizer. So it eliminates the need to do an acid rinse, okay. So here what happened was we were able to give them a better operation, reduce the amount of CIP time and because there's no acid, no nitric acid, 0 nitrates in the system. What that allows them to do then is sell that way to the export market, generating a lot more revenue. And again, with the overall reduction in chemical usage and time on the CIP system, we reduced the water by 1,200,000 gallons.
Again, creating $15,000,000 of value for this customer, mostly driven by the fact that the better quality allows them to sell that way to the export market. Okay. So if you think about the future of food and beverage, we think we're in a very, very good position right now in terms of where we go. So I talked about our segment approach. So we like where we are in dairy and bev and brew.
The protein segment continues to globalize outside of North America and Europe. We like that. We entered a new segment this year called biofuels in North America, which is the ethanol market. And we follow emerging trends like small food. So small food is cropping up everywhere.
So there's lots of different offerings. We have the ability to get to those small food companies. A lot of what they manufacture right now is manufactured in co manufacturing plants. So we have a good footprint to go after that. If you think about digital and innovation, I talked about that a lot.
So we like the fact that we're coupling a lot of our innovation offerings with digital to give the customer a much better outcome. And one of the things that we like very much is and how we're thinking about the market in the time in the future we can get them to clean based on demand. So we can tell them when they need to clean, for how long and they get their capital assets and their valuable piece of equipment back in production quicker, okay. So just in summary, when you think about Food and Beverage, I think we're very well positioned to continue to accelerate sales, capitalize on global trends at the segment level and use the enterprise selling model to maximize customer operations. As the 2 case studies illustrated, the combination of products and digital generate superior outcomes and new revenue streams.
And we remain committed to provide the best result at the lowest total operating cost. So I'd like to thank you for your attention. I think now we'll open it up for some questions.
Vincent Andrews from Morgan Stanley. Could you talk a little bit about the sort of this plant based protein trend and just sort of the intensity of that process for your products versus the sort of traditional meat based proteins and sort of where the opportunity is there?
Yes. So I mean, you know the story there. It's picking up very fast. There's a lot of interest in it both and two types of it. There's the plant pace and then there's the cultured.
So right now, the plant base is on the market. We have several of those customers, so beyond an impossible customers right now. There's no change. There's absolutely no change in cleaning and sanitation in those type of plants. I mean, as a matter of fact, because they're so worried about the taste profile, they are amping up what they do from a cleaning and sanitation standpoint and very much worried about any kind of carryover in the plant.
So we're seeing good receptivity to our programs from a cleaning and sanitation perspective. We like the category. I mean, the category to us, it's growth for us. We don't see it coming out of any other sources of protein right now. So and we're well equipped to go after it.
Thank you.
Over here in the bleachers, John Roberts from UBS. How penetrated is water into the food and beverage customers? Have you are you nearing saturation that you have got almost all of the Ecolab legacy food and beverage customers now on Nalco Water?
That's a great question. No, we're not having saturation at all. So I think as I talked to you, we made a bet on that initiative last year on the 30 largest customers. So we're focused on some very, very big operations right now, big customers. I think our penetration rate right now is in the 20% range right now with a tremendous amount of upside.
But what we're seeing is the receptivity of that model between what we do with hygiene and then we bring the water in, we're creating huge amounts of savings for the customers because we can optimize their water systems, while at the same time give them improved quality. So a lot of runway to go and we like where we are right now.
Yes. Hi, Gary Bisbee, Bank of America I guess, so what's the key to delivering the acceleration to 6 to 8? I think everybody knows there's been some headwinds of plant consolidation and other things you've grown the business much faster than the industry. But what really is the key? Is it that water penetration?
How real is the digital opportunity in the next few years as an incremental growth driver? And what gets you to deliver that level of growth?
Yeah, we I mean, we've got a good value proposition. So I think the, you know, the inflection point was really when we, when we took that, that, that water business and that hygiene business and shape that value proposition around it. And so look, it's a lot of it is pure share gains, right? So we as I said, we still have a roughly a 20% share in those largest 30 customers in the world. We've been able to take a nice value proposition and we're winning big there.
Additionally, I mean, there is inside of that acceleration, there is digital revenue. Right now, it's small. So I think as we build out those platforms I talked about, I think the ability to drive more digital revenue is going to be tremendous in the future. But really, it's about it's really about share gains with very, very large customers with the value proposition I talked about.
Eric Petervit with Citi. A question on the $15,000,000 $18,000,000 of savings. Is that typical? And is that against a competitor technology platform? And how much of that does Ecolab capture?
Yes. So I mean, is it typical? I mean, so those are examples of when we can affect productivity. So the most amount of value we deliver is when we affect productivity, right? So when the customer can create more time, sell more, that's when you see those kind of big numbers.
So I mean that is it is pretty typical that when we see that kind of example, that's what the customer sees. Do we get every dollar for that? No, I mean, what we
get is better margins. We get the ability to bring our innovation
in, right. And we keep those off of us, right? Because now they've achieved the top quality protein, right? And we're not going to be able to off price, right, because now they've achieved the top quality protein, right? And when they're selling it to the end market in QSR, it's pretty hard for them to switch and go backwards.
It's time for one
more. Colin Ducharme with Sterling Capital. Thanks, Nick. I guess this question would be as true for your segment it would for any other, but I'm curious how you measure success against the Circle the Customer strategy. How do you manage that internally, especially as you try to penetrate with things like digital and water?
Is it an individual customer? Is it on a portfolio basis? Are you using a metric akin to like retail or same store sales or a net dollar expansion in software? Because we see price and mix and volume on the outside, but we don't necessarily get a like metric. So I just wanted to hear comments.
Thanks.
Yes. The way we look at it is, it's kind of what you said. It's on the amount of solutions we can sell, right? So we know the broadest portfolio we can sell. You take a big brewer in the world, right?
We know the broadest portfolio of hygiene solutions and water solutions that we could sell. And then we track it, including new innovation and including digital. So it's really about we size the market based on all in, right? And then we when we trickle sales targets to our people, it's by application. So we have to make we make sure that when they sell it, we're trying to sell as much as we can the bundle.
And the bundle includes the water, the hygiene, digital offerings and new innovation. And then we have metrics around all that. Okay. Now it's my pleasure to introduce Beth Semmerweier from Life Sciences. Beth?
Okay. Well, good morning, everyone. I'm thrilled to be here to talk to you about Life actually really understand what we do. So in my 10 minutes here, my goal is to tell you about who our customers are, what their pain points are, and then how we create value to win with them. So our and to answer the first one, our customers are pharmaceutical manufacturers and personal care manufacturers.
There are other groups we could go after, but those are really the places we're targeting. It's a $5,000,000,000 plus marketplace. It is growing. As you heard earlier, it's one of the markets that is really advantaged by the macro trends, right? So aging population, more medicine, growing population, more consumption of both pharmaceutical and personal care products, a lot of cost pressure and a lot of regulation.
So we think it's ideal for the Ecolab So we think it's ideal for the Ecolab model because it's a very consolidated customer base. Within pharmaceuticals, the top 10 companies control over 40% market share. And it's increasingly It's also a very fragmented competitive base. So a lot of small local players. In fact, in personal care, a lot of times the competitor is water or steam.
So it's quite fragmented. And then we have an outcome based program, which is really gaining traction, which is around safety, compliance and operational efficiency. And we're building our global franchise. So in the few years we've been set up, we've really been investing in these growth enabling opportunities with sales, marketing. And you'll hear a little bit more about our technical support, which is critical.
It's critical to how we deliver value to these customers and it differentiates us versus the competition. So again, large market $4,000,000,000 plus, we have only a 4 share. So we have a lot of runway ahead of us. Now we set up in the end of 2015, early 2016, I think Doug mentioned, there was a small business in food and beverage and there was a small business in healthcare. Neither were really sweet spots for those businesses.
So we combined them and we put a team dedicated to waking up in the morning and figuring out these customers and how to win with them. Okay. So our CAGR, organic CAGR has been 11% and we have aspirations of accelerating that, as we move forward. Now has anyone here been in a manufacturing facility for pharmaceutical? Okay.
I think I saw one Most people don't get in. They're incredibly closed. They're incredibly private. It's hard to get in there. So we thought we might talk a little bit about what goes on in a plant.
The left side of the slide is non sterile manufacturing areas, still incredibly high standards for cleaning and disinfecting, but it wouldn't look the equipment itself wouldn't look dissimilar from a food and beverage plant. Okay. And there's clean in place technologies, which you're probably familiar with. We do have different chemicals that suit them better, but that's more typical for an Ecolab setting. The right side is a clean room.
And I don't know if you've heard much about clean rooms, but those are the sterile manufacturing areas. They are a clean room means it's a closed and highly controlled space. It has to stay sterile. Everything that goes into it has to stay sterile. So when you go back to our booth later on, you'll see some spray bottles that are in several packages, several bags.
We double or triple bag things because what happens is they want to avoid what they call transfer contamination. So they want to avoid anything coming into that sterile space and causing problems. So you pack in several bags, they're sterile. And as they go through the different stages to get into the clean room, they tear off a bag, sterilize the outer packaging then and it keeps going through the process to make sure there's absolutely nothing gets in. So we have 4 unique programs, 3 for pharmaceutical.
I should say pharmaceutical is the majority of our business and of the market opportunity. We have the clean room program, which is a variety of cleaning products, wipes, chemicals, mopping systems. We then have vaporized hydrogen peroxide, which came with our Bio Quell acquisition in the beginning of the year. That is a generator that provide it's sort of for deeper sanitizing and sterilization. Different companies use it in a wide variety of ways.
They can use it when they start up after they've had some sort of contamination or they can use it more regularly. It's been a great complement to our already existing portfolio. Then we have the clean in place. And then in Personal Care, it's more of this clean in place technology. They do not have needs for sterile manufacturing in personal care, but they do still want it to be clean and disinfected.
Now to talk a little bit about their pain points. So in the pharmaceutical industry, they're very, very change averse. They don't want to take risk. And when they do have changes, it's required that they do something called validation, which it's a timely process. It takes them out of production.
It takes a lot of resources. And really what they're doing is they're trying to prove that any change in cleaning product or process gets them the end results that they're looking for. And so that's one of the big barriers to change, which we I'll show you in a minute have a plan against on how to break down that barrier. There's also just increasing regulation that they always are trying to stay ahead of. Personal Care is interesting.
So Personal Care, the big categories would be hair care, skin care, oral care and cosmetics. And as consumers, you know, those are constantly changing. So pretty much every year over 30% of the SKUs change over. There's constant changes in the need for cleaning and manufacturing. And also if you think particularly about cosmetics, those are formulated to be water resistant and long lasting and they are tough to clean.
A lot of these companies have used water, hot water or steam, which is a safety hazard and
consumers are really demanding more natural
ingredients, consumers are really demanding more natural ingredients, less preservatives and all of that leads to scenarios where they could have more micro bio outbreaks. So they have a lot of challenges. Now the way we go and win and provide outstanding value to them are 3 big areas. So first and foremost is always safety. It's the safety of their products for their ultimate users.
It's also the safety for their operators. Regulatory compliance, and we say we're going to help them stay always audit ready, right? One of the worst things that can happen to you in these industries is to have an audit where something goes wrong. And then operational excellence. And you could see below some of the ways we deliver those 3 big benefits in terms of less waste, labor efficiency, comprehensive training programs, because one of their big challenges is operator error, of course.
We deliver nice water and energy savings, and then also help them with their innovation programs to get those launched. Now this is the way we talk to consumers or customers about how we give them incredible value. So in the mill, you see the 3 benefits of safety, compliance and operational efficiency. And starting up at the top, we of course have cleaning and disinfecting programs. We also have once you're there and entrenched.
So how do we help make that not a barrier for us to get in? We have a team of micro bio experts who go in and work with customers to really help make sure the validation process goes as smoothly as possible. We also have technical lab support. You're going to see a little bit of that at the booth. So before we ever have to go do trials and plants and cost them plant.
Now we've invested in regulatory and scientific insights above and beyond what would be normal regulatory keep up with current regulation. What we really want to do is see where the regulation is going, and how we can help our customers stay ahead of it too. The other thing is, the FDA tends to have themes that are going on. So all their citations are public knowledge, but they're not easily accessible. So we have resources that go in and are watching where the FDA is doing warning letters, citations.
And we inform our customers of that so they can stay ahead of that. And that's real value to them as well. And then we do something called the site survey, which is we go in our team of experts go in again and work with the customer in a kind of a mini audit to find their opportunities in safety, compliance and operational efficiency. And then we work together to come up with a prioritized plan of how we can deliver those things. And finally, the customer training, we have these great plans.
We want to make sure they get implemented well. So we see the full value of the plans. We do customer training on-site for our customers as well as do centralized training, where they can send a certain number of people to the training program. So these are some of the customers that we've built strong relationship in the time that we've been in place. I'm sure you
I'm sure
you recognize most or all of these names, maybe the one is KDC. So it's a contract manufacturer, which is also a nice part of our business. And I wanted to give you a couple of customer examples, so you could really understand kind of how do we deliver this value to the customers. So the first example is a pharmaceutical example. The customer was looking to they were having real problems cleaning their centrifuge.
Now this is not a normal centrifuge. This is 4 stories high. It is a huge centrifuge and very hard to clean. So our team of experts went in. They worked with the team to understand the best way to clean and sanitize that critical piece of equipment.
We were able to save almost 2,000,000 gallons of water a year, increase in production worth more than $1,000,000 per year. And then we reduced the clean in place time by over 1,000 hours a year with by their standards resulting in $2,000,000 in savings. So for a total of over $3,000,000 of value created in just that one site. This is a personal care example. It's a toothpaste example.
This particular company really thought they needed efficiency improvements, as well as they were not meeting their stated sustainability I And they would flush through their system 3 to 5 times with hot water, just to try to get the right results, very inefficient. So we were able to help them with our programs to save again almost 2,000,000 gallons of water, significantly decrease the energy and their CO2 emissions that were avoided, actually give them 9 full weeks of cleaning and sanitizing time saved per year, which just the labor alone associated with that those 9 weeks was over $4,000,000 of value created for them. So it's we're able to really go in and show the value versus the competitive set, which would sell them chemicals and not be involved in these other areas. So just in summary, there are a lot challenges in this industry. We're chasing a large and growing opportunity with a lot of runway ahead with only a 4% share.
It is a highly consolidated customer base, so we can focus on the top players in a highly fragmented competitive set. And then the solutions are gaining traction. So we went in there with what you see is typical of many of the Ecolab businesses at best results, lowest cost of operation. And it's a model that's really transferred well to this industry. And then our performance is accelerating organically and we continue to look at opportunities to grow with through acquisition.
So that's the very brief story on Life Sciences. And I would be very open to any questions.
Yes.
John McNulty, BMO. So on the validation process, it sounds like it's a pretty costly thing for a pharmaceutical company to take everything down, trial it out, prove it out and go on. I guess, how prohibitive is that? And is it are you winning those customers? Or is it more a function of, okay, they're going to put in a new line or a new facility and that's where the win is coming from, where they don't have to take on that incremental cost?
I guess, how should we think about that?
Well, we look for some sort of compelling event. So if there's a regulatory change, if they have to change anyway, if there's a new plan, those are a little bit easier, but we are definitely winning places where our story is strong enough for them to revalidate. And with the validation resources we provide them, we can make it a lot easier for them. But you're right, if there's some something else going on, that's a little bit easier entree point. Do I see another question up here?
Hi.
Dave Begleiter, Deutsche Bank. Who has the bulk of share in this business with the companies? And what's the opportunity to grow them at a very accelerated rate?
I'm sorry, I didn't hear the last one.
What's the opportunity to grow them at a much faster rate going forward?
Grow us or grow?
Grow the pharma customers at a faster rate. Who has the bulk of share?
Yes. So STERIS is probably the biggest player, but it really is very fragmented. And so there are other companies that are in the $300,000,000 to $500,000,000 range. There's a lot of small regional competitors. In personal care, there's a lot of water or home made brews.
And the biggest opportunity for us to grow is just to to continue. I mean, we're adding sales people. We just we have more corporate accounts people starting up. It is a long sales cycle. So it's the longest in the company that I'm aware of.
It's about 18 to 24 months. And because we have to go through all these hurdles. And so the single best thing we can do and have total support from the company is to add more salespeople. Any other questions? I know I stand between you and your first break, but I will be back at the booth.
I would encourage you to come to the booth certainly because we have more examples of what's going on in the pharma industry that might be interesting to you. All right. Mike Monahan is coming up to talk to you about your break. Thank you.
I'm Tim Mulhare. I've been with Ecolab 19 years. I've been in a number of businesses, food and beverage, Nalco Water Business and then now most recently here in institutional. So that's what obviously I'll be talking to you about today. Our focus in institutional, let me start off with some context on the business, right?
So we focus on customer outcomes. You've heard that from Doug and Christophe and Daryl and Nick as well. We focus on customer outcomes. And for us, those customer outcomes are slightly different, although very much related to those in the industrial world. And so really 3 parameters that we focus on with the customer.
And the first is delighted guess, where we can have a big impact for our customer on their customers, right? The second is their reputations, right? And this relates directly to food safety and the comment I made earlier regarding Schlomo's question. And then the third is optimized operations. And we have a big impact, not unlike the other businesses on efficiency of the operations.
And of course, importantly, doing that all of that while delivering the best in class food safety. So about a 3,400,000,000 business with 4 principal market segments, food service, lodging, long term care and facilities with 4 core anchor programs, wear washing, laundry, housekeeping and floor. I did want to give you some context of the customers that we serve and most of you probably have already been a global customer and global operator, but also a number of customers across the globe, many who we've had for many years, Marriott would be an example of that, right, Hyatt, etcetera, but also newer ones like Belmond is a lodging company out of Europe and we feel like we're making great strides in some of those areas as well. So look, again, a little context on the business. If you look at the pie chart on the left, you can see that sales broken down by region 70% still in North America, 18% in Europe, Middle East, Africa and you can see Asia and Latin America.
Obviously, the other regions represent significant growth opportunity, but I will show you in a moment North America does as well, right? And then sales by segment, 50% in food service. This is the biggest opportunity we have. It's also the biggest sales segment we have in terms of sales, lodging 25 percent, facilities 15% and long term care 10%. So look, we have a huge opportunity, dollars 27,000,000,000 opportunity.
You can see in the bottom of chart, our current share represents 12%. So $3,400,000,000 represents 12%. We have another $10,000,000,000 and Christophe emphasized this this morning in terms of penetrating solutions into our existing customers. So very significant opportunity to grow within our existing customers with new solutions. And then $14,000,000,000 in terms of new customers.
So plenty of opportunity for growth. When you look at it by region, you can see that we also and I'll just orient you with the chart. The bars are the opportunity, obviously, in blue. Green is our sales. The number at the end in the box is effectively our sales CAGR in that region.
So plenty of opportunity to grow in each of the regions. You see North America, obviously, the biggest share, but again, plenty of growth opportunity in terms of the overall market. From a sales growth standpoint in terms of the CAGR, North America at 5% is performing very well. We feel like we can continue to accelerate but it's performing relatively well. Europe at 1%, obviously, we believe that we have to accelerate and will accelerate that.
I'm going to talk to you a little about how we're going to do that in the next number of slides. And China, 10% solid, but frankly, we believe that should be higher. And I'll talk to you about how we're approaching that and the investments that we're making in China to drive that growth. We believe it should be significantly higher given the size of the market, the growth opportunity and frankly the dynamic environment in China. So look, I mentioned that we have a huge market, right, dollars 27,000,000,000 We have very significant built in advantages, our global accounts position, right?
So we believe we have great relationships. I showed you the chart before with a number of the brands, best in class technology. And when I say this, I don't just mean our chemistry and dispensing, but increasingly important is digital. And I'll talk about that as we move through the presentation. We're performing well in North America, as I said, particularly in the underlying business, even though we've exited a couple of businesses, but underlying we feel the performance has been there.
We need to get the rest of the markets moving. That's clearly the biggest opportunity here, right? And sharpening our focus and winning where it matters and Christophe talked a little bit about this in terms of kind of how we're thinking times this morning, but it's certainly something that we continue to follow. Follow our customers around the world, solve their problems, continue to grow with them. The second area is national or local, regional, if you will, accounts, particularly in the megamarkets, North America, Europe and China.
The fastest growing segment within sub segment within full service restaurants is regional chains. So 6 to 50 units and that applies in all 3 megamarket regions and that's where we're making the investments in terms of sales firepower. So let me peel that back for you just a little bit more in terms of kind of the what and the how. So the first thing is continue to extend our advantage and leverage that to drive share gains. So first, leverage our technology and innovation, right?
You heard it a number of times this morning, but best results at the lowest total cost. That's what we drive in our innovation. That's what we drive into our customers. Driving corporate accounts and the advantage we have with our global account team and continuing to invest particularly outside of North America, but also in these emerging chains kind of the 6 to 50 plus unit chains. And then last, but very important and increasingly important is leveraging digital.
And I'll talk more about this in the presentation, so I won't spend some time on it now, but we have a Ecolab intelligence platform. I encourage you to come by the trade show booth. We'll have a team there demonstrating that. I think you'll really enjoy it. But a big part of that and a critically important part of that is the food safety intelligence component.
And I'll talk about that more as we move through the presentation. The second area is unlocking growth outside North America. And particularly, as I said, focusing on the mega markets, Europe and China, and focused on segmentation. So you heard this morning focus segmentation from just about every presenter, you're hearing it from me, really getting focused on the key countries that matter in Europe, right? So this is Germany, France, Italy, Great Britain, right?
And in addition to that, the segments and this is really full service restaurants, global lodging, but local chains as well in Europe and building the segmentation and that tend to be obviously restaurants that tend to be smaller in Europe and making sure we've got the right segmentation and product line in terms of serving them. And then last but certainly not least is enabling productivity. And you heard that this morning a number of times. And we are investing in a mobile sales and service platform that I think is really going to drive tremendous efficiency and effectiveness for us across the globe. And I won't go through all of the kind of gory details of it, but I'll just give you one sort of example that I think will illustrate it.
If when our salesperson rolls up to an account, they're going to break out their iPad or their iPhone. All of the sort of standard data, of course, will be there, the orders and this kind of stuff. But more importantly, the food safety intelligence components, where we can help that customer, where there are potential risks in that customer, the health department data that we have from the audits we're doing for that customer with our EcoShore business and importantly, what innovation we should be thinking about for that customer to solve some of those problems. So that's the really, I think, kind of cool stuff that we'll be able to do for them in terms of making them more effective and obviously more efficient at the same time. So the early indicators I think are very positive.
We've been at this now for just under a year, big investments, new leadership in Europe and China. The leaders that we put in Europe and China have significant Ecolab experience and tremendous institutional domain depth. We've been, as I said, driving segmentation, etcetera. New business up 14% in the first half and pricing strong at 2%. So we feel like the early indicators are strong and making progress.
So innovation is a critical component and I talked about it earlier. And on the left hand side of this slide, you can see some of the recent innovation that we have launched. And I think many of you have heard of Aquanomic, a laundry program that we introduced a few years ago. But we continue to leverage that platform as we introduce extensions on the platform and continue to drive growth with that both on existing customers and new customers. The other area that I'll hit on is Smart Power.
I think you've heard us talk about this over the last couple of years introduced Smart Power. We've seen tremendous results from customers. The feedback is very positive. In addition to that, we are ahead of our plan for new business. So think about that $14,000,000,000 part of the pie in terms of going out and getting new customers.
This is helping do that. And the last piece I'll hit on the recent anyway is the advanced health department diagnostics and intelligence. And this is really an important component of what we do in terms of our Ecosure audits, understanding where there might be problems for the customer, getting ahead of those proactively. And it's also a key feeder, frankly, for our Ecolab intelligence and food safety intelligence platforms, which I'll talk about in just a moment. Now the future, I mentioned this segmentation approach and really focus on making sure we have a fit for purpose solutions both in Europe and in China, right?
And so one of the things is taking smart power and the technology that we've deployed there and thinking about how we bring that to smaller units to have success in Europe, etcetera. And so that's the work we're doing now. We're very excited about it. Obviously, a lot smaller units in Europe and China. And frankly, it's applicable in North America as well.
The other thing and I don't want you to think we're not continuing to invest in our base technology. The other thing that I would hit here is that we just are about to introduce new hands care line as well as a new hard surface disinfectant line that has a norovirus claims, obviously a very critical component for our customers where norovirus is a very significant problem. Obviously, cruise ships, restaurants, hotels, etcetera. And so we continue to innovate on our base programs as well, but of course on digital too. So the Ecolab intelligence platform, again, I encourage you to come over.
Christophe talked about this earlier this morning. We'll be demonstrating it as I said at the trade show. This is a we're super excited about this. The customer feedback has been fantastic. We're collecting data from multiple sources, right?
So we've got the advanced health department data. We've got the data from our field sales and service organization, their observations, where there were problems, where there were opportunities for the customer, both in terms of efficiency of operation, but certainly in terms of food safety. We also are collecting data right directly off our Smart Power and other dispensers, right, and both in warewashing and in other units. And then importantly, bringing in customer information that is critical to decision making and prioritization in terms of risk. So for example, remote temperature monitoring, right, where the customer is doing that and we can pull that data in.
Proprietary algorithm, right, gives us an opportunity to predict not unlike and we're leveraging the technology that we saw introduced from the industrial group, but not unlike the industrial group to predict risk both within a unit for the customer and also frankly across their units, right? And then frankly benchmarking. We also are moving into the predictive analytics that we believe will have not only in terms of risk profile for the customer, in terms of their units, but also in terms of social media and potential negative social media scores. So it's a very powerful tool and we're super excited about it. Feedback has been great from customers.
So look, what I'd like you to take away is this. We have a huge opportunity, dollars 27,000,000,000 We have a great position today, technology work and again increasingly include in that the digital component. We have unmatched capabilities in terms of food safety, water. You heard it this morning from the water team and some of the nexus that Nick Alfano is working with food and beverage and water, there's an opportunity here in institutional as well, digital. And I think most importantly, that's all built on worth repeating.
We think this works for all customers. And while it works in good times, it certainly also works in more difficult times. And so,
from UBS. Have you had specific programs targeting Diversey customers' products? And how do you understand their strategy now under the new ownership since the last Investor Day we had?
Yes. We how shall I say this? We target all of our customers. We do have a special place in our heart for our largest competitor. We believe we are having success against them.
I've mentioned that the mid level chains, we're taking a ton of business there, right? And their strategy, look, I don't we haven't seen significant changes in their strategy. We've seen this over a number of years, right? They kind of cycle through how they approach the business. They've certainly been aggressive, but I would say no significant change in the strategy.
And we continue to operate particularly driving the value creation that I just mentioned, best results, lowest total costs. And I think in the end, we believe that's the right way to do it. And we've won historically and continue to, we believe, win today.
Thanks. I just wanted to piggyback quickly on the Diversey question. So they've got negative free cash flow. Bain's had a problem growing that asset. That sounds great if you're Ecolab, particularly in the European geography.
Yet, I'm juxtaposing that against some slower growth in that geo for you guys. So if you could just help us think historically about the competitive landscape as you see it today, Because that sounds pretty advantageous in my opinion, yet we've got a little bit of a challenge growth wise, at least versus some other geographies.
Joint venture with Henkel, right? And it was largely a facilities based business, right? And so the team has been building, I'd say, over the last number of years, the fundamentals around how we get after in terms of portfolio, infrastructure, sales firepower, corporate accounts, lodging and full service restaurants, right? So that a lot of that work was kind of fundamental work over a period of time to kind of build out the capability. Now I think we've got an opportunity really to accelerate.
As I mentioned before, we put in a new leadership, upgraded leadership, tremendous individual who's got a long time Ecolab experience and very significant domain knowledge in institutional, including some of the team working with him, etcetera. The segmentation approach and really focusing in on both lodging, but not just global lodging, regional lodging in Europe, which is much bigger part of the pie than it is in North America. And then of course, full service restaurants, the same thing. There is chain business. We need to focus on that, but there's a much bigger piece that is regional, right?
So focusing in on those with a segmented approach and really dialing in the programs, right, and products, that's what the team has been working on who we are the last and I do believe we're gaining traction. Look, I don't blame you for being skeptical. Obviously, the numbers aren't there. I showed you, right? And certainly, we are too.
And we will be until we see it. But I believe we've got the right team in place and we're now building off the right fundamentals.
Hi, Tim. Bob Koort with Goldman Sachs. Has the takeaway services done any had any impact on your business, food delivery service? And then secondly, I know a couple of years ago in your business, you guys called a little bit of the portfolio, sort of high graded the portfolio or took out some of the weaker margin accounts or customers. Is that a continuous process now?
Or would we expect to see that every couple of years, that kind of effort?
Yes. So let's go to the takeout first. So we were talking about that at the break. Look, here's what I'd say. Our customers have not seen a significant impact.
We have not seen a significant impact. And clearly, it's here to stay. Doug was mentioning I mean, and particularly young people, it's breakfast, lunch and dinner they're ordering out. So this is here to stay. But so far, it's really we our customers feel like there's been some upside opportunity, but largely hasn't been an impact.
And so anyway, that's the first question. Second question you asked was the portfolio. No, I don't think we feel like we're in pretty good shape. Obviously, we continue to manage lower margin businesses and how we might improve them. But usually, we can do that through continuing to sell upgrades in technology, new innovation, etcetera.
And that's the kind of the standard procedure. So we wouldn't expect to see significant exits of any kind. Of course, there's always some, but it's not any different than historical norms. Those obviously that you were referencing were a little bigger than historical norms.
So I wouldn't expect to see any more.
Time for one more.
Eric Petrie with Citi. On the opportunity in China, is it easier to buy versus build out your platform?
Well, I don't think necessarily it's easier to buy. If there is a right opportunity, certainly, we're open to that. But we believe we're positioned really well. We're investing heavily in sales firepower and particularly the segmentation that I referenced earlier in the Europe conversation doing the same thing in China. Global lodging represents a significant opportunity for us and we'll continue to invest there.
But local lodging companies and you've seen Chinese lodging companies expanding outside China, right, as well as local food service chains. And when I say local, I'm not saying they're small, right? These are and in terms of the field service as well as the sales firepower to focus on the growth there. So I think we believe we've got the right plan organically. If there an opportunity to do something inorganically, we certainly would leverage that, but I don't think it's necessarily an advantage.
Thank you. With that, I'd like to introduce Bobby Mendez, who runs our Global Specialty and Services Sector.
Good morning, everyone. Happy to be here with you guys today. And ladies, so my name is Bobby Mendez. I've been with the company 37 years. Throughout that period of time, I've had the privilege of doing a lot of different things in the company.
Most recently, over the last 10 years or better, I've been directly involved with the specialty and services that includes the food retail business, the QSR business and the global pest elimination business. And as you can see in this first slide, they've been high growth engines for the company for a very long time. And like many of my friends and peers before said, these businesses are built on the fact that we delivered for our customers the best possible outcomes and results for the lowest possible costs. And we're fortunate to be in industries that over the years have proven to be pretty resilient to bad economies and still thriving good economies. So your average worker will stop at a quick service restaurant in the morning to grab a $2 breakfast, no matter what the deal is economically.
So we've been fortunate in that area. I'll start by talking about specialty, which you probably know as the K Businesses, we're headquartered in Greensboro, North Carolina. These are the quick service restaurant and the food retail business. And in these businesses, we're number 1 or 2 in every country that we serve, and we serve 130 countries around the world. We are known as the leaders in innovation.
We provide premium customized cleaning and sanitation programs. We're leading the way in food safety technology. We've been, for a decade or better now, pursuing digital innovation in many of these businesses, particularly in the food retail businesses. We have a very unique product line, which is safe for younger people as well as all kinds of operators to use their non corrosive to skin and eyes. And we have the largest on-site food safety professional organization of any company or fundamentally combined in the world providing services to our customers.
And as you can see here in the slide, we do business in both these markets with the very well recognized brands along anywhere in the world. And we're proud that with many of these brands, we have 30, 40 years of relationships based on that statement I made earlier, we deliver the best possible outcomes for the lowest possible cost, albeit be in the premium price offer. And so like many of our other markets, we work on large market potentials. This is a $5,000,000,000 global market just for the specialty portion of the business, so QSR and FRS. These markets are moving very quickly.
They're moving to fresh foods prepared in small areas like a quick service restaurant where the risk of contamination and possible foodborne illness grow. So we are playing a very important role. Hygiene is so much more important now to the rest of the world where the average consumer has better wages. And social media has made an extraordinary impact here, because if there's a problem in a store, if they see a bug or if there's an issue, they can get this around very quickly to millions of people and it's very detrimental to the brands. So I mentioned earlier, we lead in innovation and we're focused in 4 areas.
We're focusing on expanding our solids technology and our concentrated technologies. We're simplifying the product line to kind of fit, one product can do 2 or 3 different functions. We're broadening our services, just recently acquired a program to evaluate how strong is the food safety culture inside our customers. And we're working very hard in digital around both of these businesses, working towards improving predictability on analytics that can help our customers avoid problems that are coming. So in a way, I guess the easiest way for me to describe our digital objective here is, we've transitioned these units from a lot of paper to no paper, and to creating data that is actionable and that operators can use specifically to improve areas that they really need to do better and perform better in their restaurants to save money and to be able to keep their food safe.
So these industry trends are all creating opportunity for us. Nick mentioned earlier, the new proteins that are coming in, a lot of these new trends are creating heavier soils. In our industry, we're seeing a very big move towards delivery. So that's impacting volume in a positive way, creating more soils and more things for us to work and clean. And ultimately, the risk that these operators are seeing on using fresh chicken and fresh beef instead of frozen pre cooked items is increase the need for our products and our services tremendously.
So we're trying to align our offerings to that. So another big trend in the industry is shortage of workforce, higher wages, I'm sure you've all heard, wages have been rising in our country and around the world. So that's making a big push to mechanization. When I started my career early on, I would have never guessed that you would see a dish machine in a quick service restaurant. Now they're all over the quick service restaurant industry.
And we drive the premium because we generate a tremendous amount of value and we allow operators to be able to take that limited workforce and put it to interact with their customers, instead of having to clean stuff behind the shelves. And so the outlook for these businesses 16% share. This opportunity continues to expand, as I've been mentioning through now with all the new offerings and market trends that are happening. And so we continue to see our chains expanding globally and regional chains sprouting up all over the world in parts of Asia as well as Latin America and Europe. So we see, for the foreseeable future, a high single digit, possibly even bumping double digit growth for many, many years to come.
And so with that, I will transition quickly to the pest elimination business. And I say elimination and not pest control because we don't control, we eliminate. And that's just been a tradition of us for a long time. I'll talk about that in a minute. But fundamentally, the same concept, premium offering, catering to a very basic similar industry in the food service as well as food and beverage, I'll share some slides with that.
We help customers protect their brands because I just mentioned media would destroy a brand in minutes. And we operate this business in about 34 countries well, not in about in 34 countries. And so here's what I really see as our different. I break it into 4 pieces. We create partnerships with our customers, and we have long standing relationships because our offerings are all science based and our technicians drive that science based approach.
So something very important in this industry is the industry experienced a very high turnover of technicians. We have over 5,500 people around the fields in the United States, around the field for us, servicing accounts. We enjoy a 90% retention rate of our employees. And that is because we focus on good training, good compensation. We treat our employees with a lot of pride and they love working for our company.
This is not an easy job, by the way, to go kill cockroaches at 12 midnight. It's a tough job. So we also innovate tremendously here. We have over 140 patents in this industry. We believe we're the largest holder of patents in the pest industry worldwide.
And we clearly have superior solutions. And most important of all, through digital as well as through our ongoing visits, we have great communications with our customers. Again, you can see in our slide here that we do business with the greatest brands across many segments of the different businesses of Ecolab, whether it be food and beverage or retail or mining, I would have never thought, but mining villages create tremendous opportunities for us where they're doing significant excavation and other service because they have big food operations. So much larger market for us than specialty, dollars 11,000,000,000 where we currently have about a 7%, growing very quickly this business in China. And here again, all the trends are favoring us, okay, because the more complex the menus get and the more complex the food production gets, the more that's attractive for bugs to hang out.
And so we got to go in there and get rid of them. So it's a very attractive environment for us that is favoring the premium service provider. And again, we do this because we have superior solutions, we focus on market segments, we have distinct R and D support for each one of these market segments. So you see here that we have either restaurant protect, retail protect, those are specific programs that are catered to those specific industries. Again, 100% sign based, we were the 1st company in this industry that used an outside in protection approach.
So the idea is not to let the bugs get in, not to get rid of them once they're in, but try to protect the environment of the unit so that they can get in. And ultimately, we have again 140 patents here, great innovation from fly programs to rodents, second to none. And again, here we're doing a lot of digital work. Many of our work here most of our work here is being done in trying to monitor traps and in trying to monitor activity of bugs by being able to put sensors and being able to detect areas in which rodent are going to be more or cockroaches are going to be more prevalent or other bugs. So we've done a tremendous amount of work here, also a lot of work in being able to gather all this information and giving it back or offering it back to our customers in a way that it becomes actionable and simple to work with.
We've also been expanding our markets here very significantly. Most recently, we made 3 acquisitions in an area we called the deal at the time Triple Crown and they put us very well positioned into the fumigation business for crops and for grain and for all the import of fruits and vegetables that are coming in. So we do a lot of this work in the ports. We do it in silos. We do it in fields.
And it's a very unique business that requires very heavy expertise and we're becoming quickly strong force in this area. And we also continue to focus very strongly in our 3 imperatives, which is, we want to provide the best customer outcomes for our customers and be recognized as very customer centric. We want to continue to offer world class experience to our customers through our people, through our products and through our technology. And last but probably one of the most important of all is we want to be the place where talent wants to come and we want to continue to improve on this retention rate that we've worked so hard in creating because our product connect our product to our customer and the best business is our people. It's not a chemical or a cleaner or equipment, it's people.
So we got to make sure that they're well trained and that they're going to provide the right services. So in closing, I love these businesses. I think they have an extraordinary track record. Very recently, we announced also an acquisition in food retail, just a privately held company called Chemstar and Sterilox. This company has a very unique technology that is applicable in the flower industry.
So every grocery store, every area where you can buy flowers, we have a technology now that actually keeps the flower longer, keeps the water in the vase in a more sanitary and more suitable way for the flower to be bloomed and to look nicer in our homes for a longer period of time. So this is a very cool technology, very exciting, and I'm really looking forward to it. I think the future of these businesses as well as the many other businesses in Ecolab are positioned to perform exceptionally well, whether the economy is great or it's not. So with that, I'll take some questions if you have them. Sure.
Microphone is coming right here.
John Roberts from UBS. So this is a great business. Ecolab for a long time has been looking for other businesses like this from Chemlon, GCS. What is it about this business? Or do you have a sense why the other attempts are not successful in pest elimination has been such a great opportunity?
I think, first of all, I think we have extraordinary people. These businesses have been great incubators for our senior executive team. Doug managed the K Business. Many of our executives here had gone through that. I think that it's in a great industry.
And I think that at the heart of it is, look, we provide an extraordinarily service to these industries. And I think in reference to what their risk of not doing this right is versus our cost, it's like a no brainer. I mean, even though we're the premium price and we have some of the highest margins in the industry in our businesses, we provide such a valuable and such a unique service that the match between the industry and our offering is second to none. But I would say, most of all is, I think we have extraordinary people. And that's what makes us great.
Dave Begleiter, Deutsche Bank. Bobby, in QSR amongst the large U. S. Chains, McDonald's Burger King, can you discuss what your share is in the U. S.
And how that's translating into their overseas operations and the challenges to gain the same share over there?
Yes. So the overseas business for us the international business for us is growing in 2 avenues. So it's the unit growth international of the largest U. S. Chains continues to be very strong.
So they're expanding in China, they're expanding in other parts of Asia, they're expanding in Latin America. So we have a very good growth pattern, and they're doing very well there. A lot of the chicken based QSR operations are doing very well in China and in Asia. At the same time, there's an enormous amount of regional chains growing that are sort of like a they start as a copycat of these large U. S.
Chains. And all of a sudden, they pick tremendous amount of speed. And so we're probably growing our businesses internationally at, in many instances, 4x the rate of the industry. We're growing in China at a high teens year after year after year. And it doesn't look like it's stopping anytime soon.
And so I think that I think also in the United States, as we continue to see expansion of urban development, the QSR industry follows the highways. So whenever they're building new highways in North Carolina, where is my home, they're building highways all the time. Every time there's a new exit, there's 5 QSR stores. And so that's creating a tremendous opportunity, too. And I think that that's going to be way past my lifetime.
Labor. Time for 1 more?
Cost of labor.
Yes, cost of labor is another issue. Right.
I mean, I want you to talk about mechanization. I think the big thing that you guys are doing that I'm not warewashing in some of the other Yes.
I mentioned that in the one slide. But obviously, it's becoming harder to find work. In fact, stores have a hard time opening at times for work because they can't get workers. So we've moved a lot of mechanization to the quick service restaurant industry. So in an operation that's like a sandwich shop, for example, we now put an under counter washing unit that will do anything from trays to utensils.
Obviously, they don't serve in glass or China. But I think that's going to be a tremendous opportunity for us there is water filtration. So we're expanding heavily into the water filtration area. And so I foresee a lot of opportunities, particularly driven by digital, and digital is also helping tremendously on the labor side because like for example, in the burger industry, they need to do these checklists to make sure that all the burgers are at the right temperature. So they're doing that properly now with digital.
So I got to stop here. So with that said, I'm going to introduce my dear friend, Jill Wyatt, who is our President for our regions and for healthcare. Jill?
Thank you, Bob.
You're welcome.
Well, good morning, everyone. As Bobby said, I'm Jill Wyand. I've been with the company for 10 years and I lead our international regions organization and also global healthcare and reside in Zurich, Switzerland. So I'm going to talk a bit about the Healthcare business today. And I think the headlines are fairly straightforward.
It's a big market, dollars 20,000,000,000 and growing with not unlike what you heard from Beth in Life Sciences challenges that we think we're uniquely positioned to help solve. It's got good macro trends, namely aging populations and middle classes as middle classes emerge, people consume more health care. And our plan is working, I would say, albeit not as fast as we would want. So and I'll talk about and dimensionalize that for you this morning. We are on growth.
We are on digital. And so over time, it's an exercise in continuing to drive gravity in the portfolio to our advantage in terms of top line growth. But on net, we feel it remains a very good business for the company. Healthcare is about a $20,000,000,000 opportunity. So this is about an $800,000,000 business, so very small share.
We're present in the largest economies with the biggest healthcare spend around the world, namely in the U. S. And in Europe, the big economies in Europe. And then in Rest of World, we're aggressively getting after investing in and expanding. And I'll talk about how the Anyos acquisition we made in 2017 is really helping us fuel growth outside the U.
S. But it's a big wide world and across the big opportunity are some different themes, if you will, in terms of a pretty diverse set of market drivers. So in the U. S. Industry, obviously, it's a stressed marketplace in the sense that they are in great need of operational efficiency and they are amidst a sea change towards value based care.
This idea of your knee replacement work, so you get your money back. So more has heightened focus not only on efficiency and effectiveness, but also reduction in infections. It tends to be a more consolidated market in the U. S. Than in Europe, which by comparison is a bit more fragmented given the number of countries across the continent.
Europe, we see real capacity constraints. And so as populations continue to age, hospitals continue to get crowded. This is also a bit of an issue in China. And so again, real acute needs for operational efficiency. And of course, Europe is also a very dynamic and ever changing regulatory environment, which we feel on net for us is tailwind because many of our fragmented more local competitors in Europe just can't make the investment of time, money and resources to keep pace with regulation.
For those of you who might be new to the healthcare we effectively focus our efforts around the big drivers or the big vectors of transmission of infections in healthcare settings. And so those are hands, surfaces, whether those be surfaces in patient rooms or other areas throughout the hospital, instrument hygiene, both a presence in central sterile, but also increasingly in endoscopy, which are very complex diagnostic devices that we keep clean and safe, as well as of course in the operating room, which is the heart of the hospital, the profit center of the hospital and surgeons, most demanding customers are there as well. And so we go to market largely via the 4 programs that I'll talk about and really help improve efficiency, drive labor savings and reduce infections. This really outlines our strategy. So first and foremost, as a business about $800,000,000 in size, we're continuing to drive growth scale and ultimately growth driven efficiency.
And so the Agnios acquisition and the connection that that's had for us in transforming our Europe business, but also expanding internationally has been huge. And we have and continue to do select M and to drive growth scale and efficiency. We go to market uniquely and I think enjoy 1st mover advantage with our program based approach. And 100% of our program sales are digitally enabled, meaning our hand care, surgical changeover and patient room programs all have a very powerful digital engine at the core of what they do and you can see that later today during the trade show. We're also selling technologies like endoscopy capability that Agnios brought to the equation as well as continuing to build partnerships with original equipment manufacturers.
And I'll talk about that in more depth. International is a very high growth piece of the portfolio. Anyos had a great presence around the world. And so we've plugged Anyos products and Anyos brand into Ecolab Growth Infrastructure to grow into some of the smaller healthcare economies around the world. And we're building a full Ecolab business in China as we speak.
And then last but not least, there's pieces of the portfolio that will never be fast growers, but we're working on either shifting those to faster growers. And again, programs are a big lever there. And where we can't get pieces of the portfolio into higher growth, we're working to do better and shore up execution. And that plan, that approach, if you will, from a portfolio is working. And so these really show the high growth pieces of the global healthcare business, which comprise about 60% or 65% of our sales.
And so you have Europe, which is growing in the mid single digits range, a business which was fundamentally transformed by the acquisition of Anjos. And so there we are we have one business located at a center of excellence in Lille, France on the French Belgian border. We are actively cross selling each other's products and technologies. Ecolab brought programs in the hand hygiene, patient room space and we're leveraging Onyos' programs in areas like endoscopy to bring a program based solution to that aspect of the market. And then international, which is growing well into the teens, 15%, 20%, 25% was also really jump started by the Anyos acquisition.
And so we continue to feed that with products and capabilities, but that will also be an area of select M and A focus for us going forward. The original equipment manufacturer business has been a nice grower. This is a little bit of hunting elephants. It's not unlike some of Bobby's businesses in that you have big players. And so you win them in big chunks, but nonetheless, that's been a nice grower in the 7% to 9% range for us.
And then lastly, as I said, program selling, growing in the healthy teens and completely digitally enabled. And so that's about 60%, 65% of the business growing in that Ecolab aspirational range of 5% to 7%. And so the work here is really to continue to transform the portfolio in that direction. We are on the growth levers, investing in them. We're on the digital work.
And the team knows what our must do's are as we continue to make those growth aspects of this portfolio a bigger piece of the pie, which will ultimately power us to 6%, 7%, 8% growth and beyond. And one example of how this is at play in the business and shifting this portfolio to growth is really in so I talked about our programs. So we have a program called that we refer to as the Hand But just core hand soap in healthcare, there's a lot of competition. But just core hand soap in healthcare, there's a lot of competition. Oftentimes the products can be very there's a lot of growing fast at all.
And so what we've done here is combined innovative effective hand soaps and sanitizers with cutting edge IoT driven digital devices to leverage technology to transform our hand care offering. And so in a simple nutshell, what this does is creates a zone around the patient's bed and gives each healthcare provider wears a badge that is RFID enabled that gives you almost a seat belt reminder like when you get and start your car and you get the beep, if you don't fasten your seat belt, you get a seat belt like reminder to sanitize your hands at the most important moment of truth, which is right before and right after you touch a patient. And so this is an example of installation that we did 2 years ago across 5 hospitals, 1600 beds, 200 to 300 beds per hospital, if you will, and 130,000,000 dispenses of hand hygiene later over that 2 year time period. We've driven an almost 40 point improvement in hand hygiene compliance rates, holding them at the 87%, 88%, 90% compliant rate, driven a 30% reduction in hospital acquired infections and delivered real savings to this customer, not only from a $4,000,000 savings in the sense of paying for additional treatments and things to address the fact that somebody got an infection they didn't walk into the hospital with, but also freeing up patient beds because patients who acquire HAIs stay in the hospital longer at lower or no reimbursement rates and so effectively giving them more patient throughput and therefore higher revenues.
So an example of taking a category that was highly competitive and pretty commoditized transforming it with this addition of technology and smart insights and on-site service to transform it to growth. And high end hygiene isn't our only offering. We have a series of programs through which we're taking this type of an approach. So we talked about hand hygiene. We also have our OR program.
As I said about 15% to 20% of U. S. Hospitals operate at negative margins and the operating room is the heart center of the hospital and it's the profit generator by several multiples. And so here we go in and teach and train and audit and digitally enable cleaning faster, cleaning better, which improves turnaround time in the OR. When you clean faster, you can turn more ORs, reduces infection rates and consistent cleaning in a labor force that again, not unlike some of the dynamics in Bobby's faster, meaning they increase revenues through patient throughput, reduce infections and again clean consistently and more quickly every time generating on average $700,000 of savings per hospital.
And then last but not least is the central sterile program, which is probably most important. This is where surgical instruments get cleaned. And it's important in and of itself. But what central sterile really does is enable the OR to function on time because you can't do a surgery if your instruments aren't clean, sterile and at the surgeon's bedside. And so this is not only an important driver of efficiency savings in and of itself, but important enabler of the OR.
So really flipped our approach, if you will, and flipped these products and categories to growth by focusing on digitally enabled programs, which deliver savings and infection reduction. A second piece of that 2 thirds of the portfolio that's quickly growing are our partnerships with big original equipment manufacturers. And so quite simply, you can think of these folks as so much of what's happening in health care is procedures and surgeries are becoming ultrasound procedure or the like. And so as surgery shift to more minimally invasive, robotically conducted and diagnostics become a bigger piece the play. These big OEMs need custom designed single use draping technology.
So for example, for an ultrasound procedure, you might put a sleeve on the ultrasound or for an intuitive surgical robot, you literally have to drape the entire robot so that you maintain a sterile design and manufacture these devices. They are classified as medical devices in a safe and compliant way. So while this is an elephant hunting exercise, as I mentioned, it's been a nice high single digit grower for us. And for example, we just renewed and got additional volume out of a major player in the robotic surgical space. Out of a major player in the robotic surgical space for a 5 year period.
And in addition to our innovative technology, they loved our quality and compliance of the structure. And so now we have to are out finding 5, 6, 10 more of those relationships. And then lastly, the Agnios acquisition for us, which was closed in 2017 was a very big bet certainly for the company and obviously a big undertaking for healthcare. But this has been everything we thought it would be from an investment thesis perspective and more. And so as I said, the Europe business is growing in the mid and accelerating single digit rate.
And we are continuing to invest in and double down in multiple growth bets here. Adding firepower to sell more throughout Europe, East and Russia are huge opportunities for us. Expanding into new segments and categories. So taking Anyos' endoscopy solutions to Northern Europe and taking our outstanding talent that we acquired in that acquisition and adding to our R and D manufacturing and innovation capabilities there. This has also been key to that piece of the business that is international sales growing 15% to 25% because Anyos had technologies, distribution partnerships and registrations around the world.
And what we bring is infrastructure so that they can grow even faster. And so this will be an area that we will and are continuing to invest in both organically and through M and A. And so in summary, a big market with the wind at our back, if you will, in terms of aging populations and rising middle classes, continuing to invest and really focus on growth, on digital and feeding and driving and accelerating that 2 thirds of the portfolio that's growing in the 5% to 7% range, continuing to build out the global franchise, both Europe, North America and abroad. And then last but not least, getting that portfolio mix, the gravity of that to work to our advantage and shoring up our execution everywhere else. And so that's my overview.
And now I'd be glad to take any questions.
Yes. Hi, Gary Bisbee, Bank of America. So that all sounds interesting and yet the performance of the business has been pretty inconsistent, I'd say, for years below the company's long term aspirations. And what's created that volatility in the growth rates and performance? Is that 35% to 40%, has that been declining?
Or I know there's been fits and starts with the program based approach over time, but like are we at that jumping off point where you actually think this can be a more consistent grower or is the expectation that given the various parts of the portfolio, it continues to be choppy? Thank you.
We think over time, this could continue to be a more consistent grower. I mean, if we run the math, if we can grow that 60% to 65% of the portfolio that is performing today, 50 to 100 basis points faster per year over the next 3 to 5 years. And even if we assume that everything else stays flat, grows nothing, we can be in that aspirational 6% to 8% range in 3 to 5 years, again, depending upon if it's a 50 basis point growth per year or 100 basis point growth per year. And so we've done that math. The team knows what those big growth drivers are.
We've made the investments in our growth drivers. We're all over the digital work. And that's really what we're banking on to not only grow those pieces, but in so doing shift them to a bigger more material piece of the portfolio over time.
John Roberts, UBS. Is there a parallel here between your business in pest elimination that they deal with macro sized bugs and you deal with micro sized bugs? And I don't know what a hospital does once they've got an infection, but do they need qualified professionals to come in and deal with an acute situation so that you would the bulk of your business would be maintenance, which is what you're doing preventing infections from occurring in the 1st place, but there must be sort of an emergency response requirement that healthcare facilities need once they have a problem?
Yes, I would say there is. I mean, clearly, if you've ever had anyone that you know or a family member impacted by a C. Difficile or MRSA, it's pretty devastating for you both personally and then of course in the hospital, they have to do a thorough clean. Really the direction we're trying to move the industry towards particularly with our digital focus is predicting infection. So part of our OR program as well as our patient room program, we gather data around product usage, training results, audit results.
So we actually go in and ourselves as well as train our customers on how to audit patient room to ensure that the high objects that are the frequent culprits in transmitting infections are cleaned efficiently and effectively every single time. And we gather that data through a mobile app and then move that along with those other pieces of information I talked about into the cloud to begin to predict with 90%, 95% confidence where an infection outbreak is likely to occur. So if you're a 100 hospital system, that's dispersed and you've got people all over the place. That's a really important technology for you to head that off at the pass and be able to identify the 2 to 3 hospitals that looked like they're highest at risk. So our big focus where we yes come in and support our customers with thoroughly cleaning and sanitizing a room after they've had an outbreak are also very focused on predicting that long before it might be prone to occur.
Andy Wittmann from Baird. I just had a question on the 40% of the business. You talked a lot about the 60% that's growing more rapidly. But the 40, can you talk a little bit more detail about what that is? It sounds like it's mostly in the U.
S. And even where you've had tough industry conditions in some of your other business at Eagle Lab, innovation has always allowed you a degree of growth. Can you talk about how innovation and or pricing things of that nature are driving growth even in those slower growth markets?
Yes. Yes. A larger portion of that is in the U. S. Where you see a more consolidated distribution environment and a more consolidated group purchasing organization presence than you do in some other parts of the And I think our approach, 1st and foremost, is a little bit of what I talked about in the HandCare example.
So Hand Soap on a stand alone basis was not a growing margin accreting aspect of the business for us on a stand alone basis. So what we've done through that hand hygiene compliance monitoring approach is take innovation in hand care, which we'll continue to do, and combine that with our digital capabilities to bring that predictive capability and drive sustainable repeatable reductions in hand care. So the first thing we've done to that 35% or 40% of the portfolio that's not growing as fast is say, how can we use innovation whether with digital or chemical innovation to transform that to growth. There will be other parts of the portfolio where we may have to focus on where innovation may not be as big of a lever on taking cost out so that we can get that stuff through the GPOs. I mean, anyone who competes in any facet of the healthcare industry today has to do that.
So it's really what I would characterize as flip it to growth, trying to leverage digital as plan A. Plan B would be fit for purpose in terms of right mix of product, right cost position, right approach with channel and distribution players. And then if neither of those works, just try to do the best we can to manage the situation. But those strategies thus far, we like what we see.
Time for one more.
Good. Okay. Thank
you. Thank you. I'm pleased to turn it over to Larry Berger, our Chief Technical Officer. Thanks.
Hey, good morning, everyone. I'm Larry Burger and I head up R and D and Digital Technology for Ecolab, working in close partnership with all the commercial leaders that you've heard from already today. What I'd like to do is give you a brief update overview of our innovation programs. I will say brief because you'll have opportunity to see much it during the trade fair. And I understand many of you also have signed on to participate in the tour.
I encourage you to do that. That is really best way to see and understand technology in action here at Ecolab is rooted in industry leading service combined with best in class technology. And when we think about technology, it's really all inclusive. We're talking about specialty chemicals, unique form factors, super concentrates, dispensing system to do controlled dosing, and increasingly a variety of ways to collect unique data streams through embedded sensors, product consumption data, a variety of data inputs that allow us to put together proprietary algorithms to help optimize operations at our customer sites and deliver best outcomes. And indeed, we practice that model as you've heard already across the entire enterprise.
So this year, we launch our largest innovation pipeline at $1,300,000,000 that's forecasted revenue in year 5. The cumulative revenue over that period is roughly 2.5 to 3 times that. That is led by a team of roughly 1600 scientists and engineers with unique and specialized domain knowledge in application areas across different fields, who are working in cross functional new product development often the best way we take share. And we do a lot of work in and around portfolio management to get a good return on this investment. We optimize the portfolio both within divisions and naturally across the enterprise.
So, we operate in the describe it by saying customer pain points are rich opportunities for us. We hunt for those. That's the way we often help our customers best. In foodservice, for example, both upstream, you've heard that from Tim Mulhare and from Nick Alfano and then from Tim Mulhare and Bobby Mendez, what's going on in food service and food retail. Fundamentally, consumers are expecting a lot more around food safety than simply compliance.
And so those big drivers around on-site preparation, locally sourced, transparent sourcing creates a rich opportunity set for us and frankly changes the risk profile for many of our customers. Naturally labor shortage, worker training and churn. Bobby also indicated stalled starts for restaurants because you can't even hire people in some instances. Joe covered healthcare. And I would also say this whole area around water management, it's not simply reducing, reusing and recycling.
We love that. We do a lot of it. But it's also finding ways to do more with less water, not just managing with less water. And I'll show you some exemplifications of big productivity gains we've helped enable our customers to achieve with dramatically less water than we could even imagine, frankly, 5 years ago. You've heard us talk about our mantra, best results at lowest total cost.
And I would add here, again, we tend to be a relatively small part of our customer spend, but we are very potent way for them to manage their overall performance. And when I say total cost and performance, we do a lot of work helping our customers drive top line as well. And I have a few examples to show that. We've talked a little bit about our circle of customer strategy, and we do historically, we've approached that with largely tangible product solutions derived from multiple divisions. Increasingly, we're using digital technology.
This is data driven, digitally enabled solutions to also circle the customer. And we're doing so in a way that we are capturing unique data streams. And I won't go through all of those, but I would say that we're in a privileged position in capturing product consumption data, a lot of intrinsic and extrinsic data that we can bring together in unique ways to do a variety of different predictive algorithms that help our customers optimize operations in ways in which they couldn't previously see. And so this whole idea of delivering more with less is very much enabled with digital. So I will walk you through now just a handful of examples.
This is always a bit of a dangerous thing if you put a technical person on a stage with a microphone and slides and he's passionate and you give him just a short period of time, but I will do my best and encourage you naturally to ask questions as appropriate offline as well. So the first example is one in our food retail and our quick service business. And this looks at trying to help bring into real time management the food preparation program and food safety. So the state of the art historically has been paper logs, which are both inconsistent and I'd say the lack of inconsistent and incomplete. And so there's no way really of learning or capturing, if you will, a risk score or benefiting from an event feedback optimization loop.
These are largely done, I would say, sadly, most of the time when I've looked at it, well less than 50% of the time. So people go through these food safety laws as part of a requirement. What we brought is a shiny flashlight to help illuminate opportunities are. And so here we have simple, easy to use applications that are customizable and configurable for different locations and our customers' workers can go through and do their food safety compliance routines. Now in real time capture that, we can assign a risk score, if you will, and a visualization of opportunities and mismatch of food standard compliance delivery what actually is being achieved.
And so we've been able to take food compliance management programs from well less than 50% to above 90% typically in a few months. So this is a big step forward in helping reduce food safety outbreaks. Tim alluded to this too and I won't say much here other than say we're doing an awful lot of work now also with artificial intelligence, collecting information that helps point to where we think a restaurant is at risk in and around a health department violation. I would say the smart money today could probably predict with fairly sophisticated software around 20%, 25%. The work we're doing takes that to well over 70% now.
And you'll see the data points because we have a very rich data library of experiences and so we can find hotspots that typically lead to department violations. The second example is in water safety intelligence. Probably all of you are familiar with Legionella has a high morbidity rate. This is a bacteria that's airborne. Cooling towers are open, organic matter gets in there.
This program, Water Safety Intelligence, stands on the shoulders of a great chemical program. Here we have the industry leading portfolio for scale and corrosion inhibition, but on top of that, a rich variety of different biocide specific for applications where we can control microbial growth. And again, I would say that Legionella is a naturally occurring bacteria. If you went and you were smart and you looked and you tested, and this is typically a 10 day offline test, it's notoriously difficult to act on it quickly. You would probably find Legionella 10% to 25% of the time.
We've built these models. And frankly, these models get better and better. There's a natural evolution. They get better can do a very good job of predicting the conditions which are supportive for Legionella growth in about 75% at a time. So that helps you pinpoint and isolate high risk areas and do an intervention before you have an outbreak.
The third example is 1 in our heavy water, and it speaks to power plants. Probably most of you have heard and understand all the transformation that's going on from coal fired plants to cogen plants. This one's really a neat example. It's a methane gas plant where you have both steam generation as well as gas turbine. The magic of these cogen plants to get the high efficiency is to be able to manage the steam generation part, obviously, treating a lot of water.
Here, what we're doing and I would say the condenser, which governs the heat exchange performance, is notoriously difficult to operate precisely. You can't see on the inside of it. We have put unique sensors and looking at scale growth and microbial growth, it gives us a little bit, if you will, an x-ray into how the condenser is operating with an early intervention to be able to treat the water. We've been able to improve the thermal efficiency for the steam generation part of the plant by 25%. That is enormous.
And you can see the output then if the plant is getting higher production, you get more power generated when you get better thermal efficiency and you do that by consuming less energy. So I'd say this is sort of the trifecta of benefits. We're doing it broadly across power plants. We're really excited about this technology. We've launched it just in the last 60 days.
The next example is in our downstream business. And so here, the challenge is trying to take trying to isolate different cuts. So the way refiners typically try to maximize profitability of asset is they take crude oil, which is a mixture of a complex set of hydrocarbons, they try to isolate it during a refinery process. It's a difficult process to control the temperatures and do a mix enrichment strategy where you can isolate, for example, preferentially jet fuel versus gasoline is more valuable, of course. Here, what we've done is we have a data library of really decades of work in the downstream business, billions of data points that allow us to understand how best to control the crude overhead unit.
Again, this program too I point out stands on the shoulders a great chemical program. So the digital enablement allows our customers to run, in this case, at lower temperatures, several degrees lower temperature of the refinery with confidence. Why is this important? Everyone has known for a long time, you can run at lower temperature, but if you do, you run the risk of fouling and corrosion.
These are expensive assets.
They're difficult to manage. 90% of having companion confidence and being able to manage this well basically is the trade off customers can't make. We've allowed them now to operate with a different performance window. And you can see the benefits here are enormous. And so we've increased the throughput, as well as the output of jet fuel in this refinery example.
Here's an example in our paper business. And so in paper, customers are routinely trying to get to stronger boxes, lighter weight with less fiber, right? So stronger, lighter with less. And the Board Manufacturing business is a profitable growth business for us. The state of the art historically has been liquid additives to promote adhesion between fibers.
We've developed really a breakthrough technology in this space that uses dry polymer. And you'll recall, we practice dry and concentrates technology across the Ecolab and Nalco portfolio. So we brought this expertise to bear in our paper business. So now we have a dry additive that uniquely adsorbs onto the surface, promotes fiber adhesion with lower basis weights. Lower basis weights means less paper, lighter weight.
And again, I would say this sort of has the trifecta of benefits. So one is we get higher throughput and performance. 2, because we're using a dry product versus adding a lot of water. Typical paper mill might have 5 tractor trailers coming per day. I mean, this is voluminous quantities of material that are added.
But the dry product has less than 1 5th of that volume. And so you don't have to dewater or refine as it's known in the industry. So the dry product allows you to put in less energy to make the paper as well as be able to run a lot faster. So we really are excited about this opportunity. It has sort of triple benefits
our
I'd just share maybe one way to think about in terms of new product innovation and how to quantify this. This is a look back over the past 3 years of our pipeline. Again, these are forecasted revenues in year 5. You can see just back in 2016, the contribution of digital, which is shown in the green area in those bar charts, was relatively small. So digital is really outpacing the overall growth of the pipeline.
Fully today, 25% or in excess of our pipeline is digitally enabled. And it's really for us a very exciting way of delivering on our mission of best results, lowest total cost because we can further optimize at each location our customers' operations and that's true in hotels and hospitals and power plants and a variety of different end use applications. So with that, let me just summarize by saying we feel very good about our innovation pipeline this year. We're teeing up equally well a very strong growth pipeline next year. We typically launch about 100 new products a year off of platform.
So we get a lot of leverage and cross pollination of technology across the enterprise. So with that, why don't I open it up if there are any questions?
Thank you. Vincent Andrews from Morgan Stanley. This might be a bit outside of your zip code, but you kind of got to One of the knocks on single use plastic is the recyclability rate and a lot of that has to do with the fact that the collection is improve the ability to reduce the cost of cleaning it, which obviously involves a lot of water in the separation process. So I don't know if there's anything you have to say around that.
Yes. I think, Vincent, in your question is embedded. We're not big plastic users or producers other than largely in packaging. Obviously, our Downstream business does support plastics manufacturing. I'd say the biggest dog we have in the fight, though, frankly, are concentrates.
We've made a huge step forward in reducing packaging waste going from more solid high density polyethylene to some shrink-wrap. And you can see the institutional business is probably the prima facie example, a really radical step forwards over the last 5 years. We continue to move to more solids, less water, packaging innovation. So we are using a hell of a lot less plastic than we ever have. And then when we use plastic, we use more recyclable plastic and then plastic that is more easily sorted so that it can be further recycled.
Thank you. Good question.
Hi, Rosemarie Morbelli with G. A. Research. Of that $1,300,000,000 of innovation pipeline, how much are you going to lose in terms of cannibalization of existing product lines? So what would be the net revenue?
Yes. So I will answer that by saying first, we are very that's a good question. We are very aggressive about cannibalizing our own technology. So roughly 60% or more of this pipeline is new revenue growth and an enterprise average. In some places, it's substantially higher than sort of an enterprise average.
In some places, it's substantially higher. In some places, we've been pretty aggressive about. We have this vitality index, which is a measure of the new products that we brought to market over the last 5 years. It's typically around 30 percent. It's higher in some divisions, lower in others.
But we ultimately try to optimize the value creation from our new products. And so the synchronicity and the delivery of that really is time to maximize value extraction. Other questions? Okay. With that, I'll say thank you and turn it back to Mike Monahan.
Well, thank you, Mike. And yes, my lunch was excellent and the conversation was productive. So you got one positive report. So yes, I'm Dan Schmeichel. I have been with Ecolab for almost 25 years.
I've been the CFO now for 7 years. So I guess all of that together officially makes me no longer one of the young guys on the team. I'd like to welcome all of you here to Ecolab Investor Day. So look, I'd start here, please. As you can perhaps tell by all the conversation that has gone on this morning, we're very proud of what we've accomplished since we were together with you last in September of 2017.
It's been busy. Doug has given you a lot of the highlights of what we've been after the net though. I think that we have delivered. We have continued to invest in the business and importantly, we're very well set up for the future. So Doug and Christophe both showed this chart.
This is the quarter on quarter EPS since the last time that we were together, had a bit of a conversation on this with the team that I was gathered on at lunch, right? And they said, well, how do you feel about it and how has this time played out differently than you might have expected? Well, I feel great about it, right? And the time since we were together last has played out very differently than we expected in ways that are both bad and good, I would say. I didn't really anticipate at the front end the continued significant inflation across the raw materials and logistics space.
Energy downturn was a little bumpier and more prolonged maybe than we expected. There have been some good things too, of course, we did get after on a very timely way, efficiency initiatives to help us deliver the results that you see here, had some help in the early parts of these quarters from tax reform in the U. S. Happening a little earlier than I would have expected. Interest rates of course remained historically low and the U.
S. Dollar net has been a detractor, but that also has shown some volatility. So I look at this chart and my high level interpretation of it is, it is a great track record of a team that has consistently found ways to win, beginning really on the top line. So if you look beneath the numbers, the consistency and let me say at the outset here that I've taken out the upstream energy business from the sales progression charts here, mainly to give you kind of a better understanding of what is going on across the other businesses, also perhaps to point to the future. So this is everybody else, the sales growth that they have delivered quarter by quarter.
This has been the consistent story of our EPS delivery. Behind it too, there's this, which is a continuing improvement of our operating income margin. Is being driven also by the increasing focus on pricing initiatives to offset the increasing raw materials and logistic costs in the marketplace as we encounter them. Also in the later years, the contribution of the efficiency initiative that, as you know, we have been on. I thought I would include this chart too on improving ROIC.
Here's where we see a bit of a dent from our efficiency initiatives. So you know and we've been very upfront about targeting ROIC improvement of 100 basis points a year. We delivered between the full year 2017 when we were last together and the full year 2018 about 60 basis points. We actually added more than that, so a little bit of a dent from FX. And if you think about the pattern on our return on invested capital of our efficiency initiative, the expense obviously comes before the benefits.
So we saw a little bit of leakage from efficiency initiative that of course will flip and drive increasing ROIC improvement as we go forward. Very proud of the work that we've done with the balance sheet. Those of you that know me well and we talked at lunch, this is a wonderful business. I've always described Ecolab as a high quality growth company that is also a cash and return machine. We pay a lot of attention to cash flow in the business and also we're proud, I would say, of the strength of the balance sheet and the flexibility that it gives to the business.
So you see on the top chart here, the stretch that we put on the balance sheet when we did the Nalco transaction, communicated our commitment to return our leverage number to a net debt to adjusted EBITDA target of about 2. I think that we have done that very consistently. We have also taken full advantage of the low interest rate environments in our financing activity to continue to extend the weighted average maturity of our debt portfolio, while at the same time maintaining a consistent weighted average coupon. So I think in the 2 years since I saw you last, we've done a good job tending to the balance sheet and making sure that we're good financial stewards of the capital strength of the company. We've invested a lot in digital.
You've heard about that all morning long. So the blue is the ramp on digital spend. Green, as Doug mentioned, our continuing investment in SAP technology and the bottom, global HR. So this is really technology that we've invested in to give us much improved capabilities to track and monitor and frankly develop the talent in the business, which is really the source of the growth and particularly the future growth of the company. More than just the dollars that are represented here, I would encourage you to think about all of the activity that is behind the spend.
You get the sense from this morning's conversation about some of the complexity of integrating digital technology with our commercial models to continue to drive benefits for the customer and productivity benefits for us. And the green bars, anybody here who's been close to SAP deployment will just have an instinctive sense for all of the work that that represents even in addition to the dollars. If you haven't been close to it, please just take my word for it. There's a lot of work represented on that chart in addition to a lot of spend. Christophe summarized our approach to digital really across the finding ways to continue to enhance our customer value, to increase our field productivity and to drive operational performance.
Let me just say that in my life in the finance world, we're very much at the right hand side of this chart, right? So we're about increasing operational performance. I thought I'd take just a minute to comment to you sort of how the SAP expansion is giving the finance team a much better toolkit to continue to play the vital role that we play within the business. The secret sauce of Ecolab Finance is really not the work that I do, it's the work that is done by the finance teams that work shoulder to shoulder with the corporate account groups and the business leadership team. We have with this SAP technology much improved tools to help do what is required to continue to drive profitable and accretive growth, including deep analysis of customer contracts and product profitability to come up with pricing strategies and arrangement to continue to capture our fair share of the value, right, that we're delivering to customers.
Clearly, with 80% of the business now deployed, we've got great visibility to or improving, going to great visibility of the business around the world, making us more effective corporate account finance support team and also supporting more efficient channel management. Let's pause here for a minute to talk about the upstream energy spend. So we announced in February, the planned spend of Ecolab's upstream business. We included in the announcement the dimensions of the business based on 2018 information, so 2.4 $1,000,000,000 in sales, about $340,000,000 of EBITDA and we do expect that this will be completed in the first half of twenty twenty. It will allow importantly each company, this is the strategic rationale, to continue to focus on what we do best, right, and allow the upstream business, which is, let me just take a moment and say, an absolutely terrific business within its space, a prize asset with great product technology, great customer relationships and a terrific management team to focus on what they do best and allow the rest of Ecolab to do the same.
We expect that this will be accomplished in a tax free distribution to Ecolab shareholders. Likewise, that importantly, I think that Ecolab will continue to maintain its cash dividend even post spin and that is of course subject to customary approvals and approval by the Ecolab Board of Directors. I dimensionalize here a little bit the impact of the energy spin on Ecolab. So on the left is Ecolab today actually based on 20 18 actuals. Doug gave high level the impact of the spin on what Ecolab looks like.
I thought I'd give you a little bit of focus down below. So the OI margin you'll see accelerating by about 180 basis points, just reflecting the fact that the upstream energy business in total has a lower OI margin net income. You can see the improvement and likewise core ROIC because the energy business is higher invested base against the return that it generates, we'll see something like a 300 basis point acceleration in ROIC. Related to this, in some ways, we announced a $200,000,000 efficiency initiative in the Q2 of 20 $325,000,000 when we did the spin announcement. So look, this was very intentional.
We need this additional traction to continue to cover the stranded costs at Ecolab that we will have once we spin the energy business and also to cover the $35,000,000 of anticipated public company costs for upstream energy. So the net of this with the expansion of the efficiency initiative is that we will still deliver net $200,000,000 of savings for the benefit of Ecolab shareholders on the base Ecolab business. Talked us a little bit at launch as well. So just to orient you to the chart for the moment, right, the gray line is total Ecolab, the blue line is excluding the upstream business. So you can see that the overall trajectory of the lines is maybe the same, but it sure is a lot smoother path if you just focus on Ecolab ex upstream.
We talked at launch about the joy it was to be in the upstream business in 2014 and then the kind of payback in some ways of that joy in 2015 2016, but the net of it as noticed here is that the benefit of our being a more focused business model is continued more sustained delivery, more consistent financial performance and frankly I think a much clearer view for all of you into what is really a terrific business model that has sometimes been masked or obscured by the more cyclical energy performance. So net post spin, Ecolab will continue to be a terrific high quality growth model. We will be continuing to deliver financial performance, which is highly consistent with low capital intensity, we will continue to drive improving margins and to generate strong returns. I thought I'd take a moment just to remind ourselves of the great record that we have of generating consistent strong returns, so 11% over 10 years and 11% over 20 years target at the midpoint of the range, 12% for this year. I did not show the 5 year CAGR here.
It's depressed, right, for all the reasons that you're familiar with. You can see the flattening of the EPS progression in 2015, 2016, which is part energy, part strong U. S. Dollar, the beginnings at least of raw material inflation, the 5 year CAGR is an 8% number. Here's the good news in that though we continue to focus extensively on free cash flow generation all during this period.
The CAGR on free cash flow is actually 10%, right. And so we have delivered a net free cash flow conversion of 94%, meaning that 94% of our net income that we capture in any one year shows up directly in the bank account. We'll continue to be guided by very consistent cash flow priorities or cash use priorities and we expect that this business will continue to be a very moderate consumer of capital, something in the neighborhood of 6% of sales and we've shown what we anticipate would be a continuing split with the strong component of that really being offensive capital, meaning merchandising equipment that we're essentially installing on the walls of our customers to continue to drive new sales. We're very proud of the fact that we're good stewards of shareholder capital. It's not a cash intensive business and it is a very cash, it's a strong cash generator.
We are committed to continue to increase our dividend in line with our net income growth and our view of share repurchase is that we will repurchase shares to offset the dilutive impact of share based compensation programs and at the same time, we view share repurchase as a very efficient way to return cash to shareholders if it is more than we can deploy in the business. I will continue to do it. You note here that we've returned in total like $5,000,000,000 through share repurchase and $3,000,000,000 in dividends to shareholders over this time period. I mentioned our financial objectives are very simple and we're not going to change it. We'll continue to be targeting 15% EPS growth and 100 basis points of improvement to return on invested capital every year.
We'll continue to manage the balance sheet at a number that's about 2x net debt to adjusted EBITDA. This is very consistent with the idea that we want to preserve balance sheet strength for the future, including for transformative M and A should an opportunity present itself and we'll kind of be we'll continue to be very much guided by our consistent cash priorities to grow dividend in line with EPS growth to make smart acquisitions, which are terrific bolt ons and very accretive to OI margins as well as to the top line. And share repurchase, frankly, is what we think of as being the sort of optional swing use of free cash flow. I thought I'd just show you this chart. I had a little bit of a conversation at lunch today too about the role of finance at Ecolab.
Talked about our job working closely with the business partners and particularly corporate accounts teams to make sure that we are generating great returns and contract structure. So I spent a lot of time looking at business performance at the contract and product profitability level. But I always think that that's the hard work that gets done for the Ecolab Finance team. For me, this is like a dream finance job to be part of such a powerful organization, such as a sustainable contributor to work with great business partners like you've seen here today. And from my point of view, the financial strategy of the business and the consistency in how we think about it, and frankly, the same points that I articulate in terms of how we think about financial management and business were written on the wall somewhere when I arrived 25 years ago.
They haven't changed, they shouldn't change. So our finance position and our strategy is a direct reflection of the business strategy. It's all based on consistency, predictability, transparency. I would also say accountability, and I'm very proud to lead this team, which is very, very strong. And increasingly, I think we got the right focus and we're equipped with the right tools.
So I'll just end here, which is a little bit of the I showed it last time and frankly, the time before that, the testimonial to what I think that the finance team at Ecolab is all about. So we are partners in the business providing rigorous operating discipline. We view ourselves as bring the stewards of strong financials of cash flow and of returns. We've got this very sustainable and proven strategy to deliver top line growth. We will be full partners in it, not only in building a great EPS story going forward, but making sure that it's pulling along with it a lot of cash and that we're investing cash to deliver increasingly accretive levels of return on invested capital, which is our commitment to the shareholder.
So with that, I would pause and please ask any questions.
Dan, John Roberts here from UBS. You pick up 300 bps of ROIC from the spin separation. Do you increase your longer term target? I think it's been aspirational to be 20% for some time or because you're not there yet, just hold that target?
Yes. Well, I'll take the 300 basis points as a head start on the 20 and then we'll see on where it goes from there. Look, prior to Nalco, for years years, this business delivered returns in the 20% and a little bit plus. There's a natural limit, of course, on, you got to deploy assets in the business and they're not going to be infinitely generating. I view the 300 basis points as kind of the accelerated payback of the dip we took on the Nalco transaction.
And thank you for not asking the rev rec question by the way. Anyone else? Yes, one here.
The 15% EPS growth, could you just give us the buckets of where that's coming from? I mean, you're going to get top line growth,
you're
going to get margin
and you're going
to use capital deployment. So when you think about that 15 over the longer run, how much should be coming from each bucket?
Yes. So the equate, I didn't show the chart, although I might have, I remember to do it last time. So we talk about targeting organic sales growth rates in the 6% to 8% range, OI accretion of 50 to 75 basis points a year, that should deliver organic EPS growth in the 11% to 12% range, low double digits. And the balance really comes from M and A and also comes from share buyback. I would say the balance comes from effective deployment of all the cash that the business is generating, which can go to and preferentially to highly accretive M and A.
And if not, it will go to share repurchase, which is also accretive, although I want to be clear not why we do it. Okay. Andy?
Colin Ducharme with Sterling Capital. Simple strategy, circle the customer, circle the globe. We've got a good proxy circling the globe with geo revenue progression over time. But in terms of circling the customer, any thought towards increasing disclosure on a I asked it earlier to one of the segment heads like a same store sales metric, wallet share metric? Sounds like you're measuring customer wallet share on a portfolio basis.
But to the extent you could disclose to the outside analysts looking in, so we can measure against a milestone like that, why or why not would something like that make more sense against those two pillars? Thanks.
Yes, I guess my immediate reaction is, we operate across public segments and beneath those there are a lot of divisions that have a lot of variation in terms of their sort of go to customer strategies, customer size and growth plans, etcetera. So I don't I think that the sort of the diffusion of it in a way across the segment portfolio would be distracting. It's not really how we look at the business. We tend to look very much at the contract and product profitability view. And I guess what I would encourage you, so I'm not jumping at the idea, let me be clear about that and would encourage you to think about the best indicator of how that is progressing is by looking at top line performance and top line performance by segment.
And I think that Mike and the team and really all of us are reasonably proud of the transparency that we provide on how the top line is progressing. We don't back away from things like lost business. We talk very openly about what's driving it. I think it's frankly more meaningful and probably a little bit more analytically helpful.
Andy Wittmann from Baird. Dan, I was hoping you could just talk about the gross margin in your business. I think coming into 2019, you talked a lot about pricing and the 3% run rate that you've posted at least year to date being additive to that. Gross margins haven't really seen much of a lift yet. I was wondering if you could discuss that and also your outlook for gross margin accretion post energy spin.
Potentially, that's been one of the factors that's held back your gross margins from expanding
further? Yes, the spin impact, you're right, first of all. So the energy business, the upstream energy business in total has a lower gross margin. Well Chem strangely is like quite high, there's very little service content in that business. The bigger impact from energy frankly is there's some mix, but more recently the decline in the Well Chem business has had a quite negative impact on gross margin just because Well Chem products absorb a lot of overhead through the production process and we talked about that in the Q2 on the call.
More broadly, maybe, let me just say this, you're right, frankly, that we have nosed up a gross margin year on year improvement and then given a little bit of it back, we're forecasting for the full year 50 basis points improvement in gross margin and I think we talked about that in our forecast for the full year too. We also have talked about how this is supported by absolutely terrific pricing efforts by the team. Let me just say in an environment where the raw materials are backing off, right, our ability to continue to push pricing at that sustained level is not like guaranteed, we'll continue to push it. But this is what all of the business leaders understand. I think the high margin point for gross margin at Ecolab for most of our businesses with 2016, We've worked our tails off to get us to where we are.
We know that we have more work to do. This will come not only from pricing, but also from the benefit of innovation that hopefully you saw evidence of all through the trade show. So you're right, we got work to do. Pricing has helped significantly. It can't be the whole story.
Some of this is going to have to be by continuing to innovate new solutions that add more value for shareholders and capturing our part of it. I think we're good at it. We've got some work to do.
Thank you. Dave Begleiter, Deutsche Bank. Dan, you didn't touch on either Q3 guidance or 2019 guidance. Anything in the current trends that could be concerned about meeting either Q3 EPS guidance or full year EPS guidance?
Every week is a different week, let me just say that. We put out the guidance and we're not changing it one way or the other here today. It's a dynamic world of course. I drive to work every day not expecting all the challenge that I'm going to get. I drive home most days feeling a lot better than when I was driving in.
Time for one more.
Eric Petrie with Citi. How do you measure the return performance of your digital investments or asked another way, what's kind of a payback period on the $600,000,000 of total investment?
Yes, thank you. We talked about this a little bit at lunch too. So here's what I'll say. And let me I commented too when I showed the ramp on that spend, which is significant, so you're right to ask the question, as well as the complexity of really integrating this digital technology effectively into sometimes complex business models, which we drive with customers. We don't charge for it either, by the way.
And so for the most part, there are minor exceptions, but for the most the indicator that I would look for in the impact of digital is exactly where you would think it would show up in the P and L, which is when you think about what it drives, it is integral to the customer offering. So the additional ability to acquire and to retain customers and to deliver pricing, value based pricing with customers is the direct payoff of that digital investment and the same on the parts of it that are designed at improving our productivity, right. So we will continue to be able to add field headcount at rates that are much below the top line sales performance that we drive and the function spend, like the spend of the team that I represent, will continue to benefit from investment in both field digital technology to automate order process and to and from transaction processing. I mentioned on my slide, one of the key unlockers for the finance team of this SPA tech or SAP technology is significant headcount reduction just on the number of people who are involved in transaction management. So I'd look at it on gross margin and OI accretion, it's going to be absolutely integral.
We do not value the return on a platform by platform basis, we think it is an incorporated part of the offering. Okay, so with that, thank you. Mr. Baker?
All right. Short and sweet. You guys heard a lot, seen a lot of charts. I won't kill you with many more. In fact, maybe I won't kill you with any more.
All right, here we go. So I would say the messages, I think, are fairly straightforward. And I was asked at launch, how do you feel at the business? It's like what is underappreciated? What's overappreciated?
And I think by and large, our company, we work to make sure that it's transparent and fairly understood. We are a company that's been around since 1923, But we are still, I believe, very early in the story and a lot of it is because of outlook, principally the outlook of our team. And I encourage, but even if I wasn't here, we have an optimistic view of what opportunity is. And so I could show share that we have a 20 share instead of a 10 share, etcetera.
But I
think it's important for us to look expansively at the opportunities. And there is dramatic upside in our business. We showed charts with our 10 share. The 130,000,000,000 dollars is designed to be representative of what we sell, where we sell it. So Bobby, when he is talking about his pest business, mentioned they were in, I believe, 34 countries.
Well, we're in 34. So all that's in here is the 34 country pest market, not the other 140 countries where we're not. So it is designed to talk about what we can access today. Is it all equally accessible? No, of course not.
But at the same time, it's a realistic view we believe of what we chase. And we know there's a lot in front of us and customers we don't sell and obviously within customers. In the CTC world, we have continued to drive further penetration. It does get complicated because a number of variables, but that isn't important. Yet, we continue to enter new space.
So we bought Lobster, which is a digital training space. All that increases the market opportunity and it also increases what we can sell to existing customers which may look like we never make any progress, but the truth is that's how we grow. And when we look at the macro factors behind the $130,000,000,000 they're much more in our favor than not. Now I showed you earlier the chart of the green bars, kind of the sideways Pareto chart of our markets and the blue was how much we had. Well, we may have a recession.
I imagine we will in the next few years. I don't know when it's coming, what it's going to look like. And those blue bars may temporarily or green bars shrink, but they're going to shrink from the right edge. It's not there's a gap suddenly created that we've got to jump over from our share to the market opportunity. And so we view the world either way whether the economy grows 2% or shrinks 1%, we don't believe is going to ultimately dictate our ability to succeed.
It's better to have a good economy. We will do marginally better in a good economy, but our ability to go gain share, drive business consistently, especially with our best results, lowest cost formula is equally as strong, maybe even stronger on a relative basis in a bad economy. And we deliver great value in terms of not just economic performance, but also in ESG performance. We will adjust to the world. So we aren't sitting here saying, jeez, this is how we've always done.
Here's our model. We are continually looking and striving to understand what do we do well and what we don't do well. So I was having a conversation coming in from lunch. Okay. We just finished North America.
I mean, finished is a strong word. We're through a lot of the execution of SAP North America. I don't know if you're ever finished. And you know what? We learn a lot.
Some of it is how stupid we've been. And so you have the shock and awe of learning about how dumb we've been for a while. And then you quickly realize, oh, that's a lot of money. Let's get better and let's get after this and let's go fix this. And so there is a lot to do in this company.
We can be a lot better than we are. I view that as positive. I don't want to run a company with 8 cylinders all running perfectly. That will be the exit strategy, I guess. Not really.
That's not and that's not what you want to invest in. And so this company, I assure you, has a lot of cylinders. They're not all running perfectly. We have more juice. And the team is who's going to go get the juice out of the business.
So the best part of these investor days besides slides is your opportunity to talk to the team. And it's certainly our senior team, but you have a chance to see most of our senior team when they're out at conferences. So you're not at every conference. They're out frequently with investors. And we do that on purpose because the strength of the company is the depth of the team.
But you also had a chance, I hope you were able to take advantage of it, to see the other and the other part of our team that was here who put all this together and did such a great job working to be able to demonstrate how we bring value to customers. And I'm quite proud of the team. The team is a heart and soul of our company and I think ours is well placed in the people that we've picked to lead the team and that they have in turn picked to lead their businesses. So what's new? I would say several things.
We are all over digital. We are investing in digital. We will continue to invest in digital. We do believe it's historic and we do believe that it's transformational. I believe it's going to double, triple our competitive edge capabilities because I know we are out investing and I believe we've got a better team on it.
That's going to be huge for us. If I'm wrong, we wasted some money. I don't think we're going to be wrong. I think this is going to be absolutely important. 2nd is we are out searching for new markets.
So life science is a great example of a market we recently entered. FRS is a better example of 1 we entered quite a while ago. We had 0 share in FRS. We are by far the leaders in FRS. So I think out of the 10 top retailers, I think we got 8 or maybe just got 9 now and add 0.
So we can develop positions and capabilities to go thrive in these markets. And we have a number now and we've been working on it and the segmentation focus has been purposeful. And then finally M and A. So I don't know, am I begging for a recession? No.
There are upsides and I don't mind a recession every once in a while. I hate the damage and the pain it costs to a number of people. That's no fun. But from a purely company point of view it will give us new M and A opportunity. And I do believe that we do M and A based on our ability to generate a return.
So while we can borrow money cheap, we still have to pay it back. So if we borrow a $1,000,000,000 it's great that it's at 3 points and maybe go into 2. But ultimately, we still have to pay the 1,000,000,000 back and I need to make 200,000,000 on it. And that's how we view it. What's the return on this darn investment we're making over the long term?
It's not hard to make it accretive, but accretive can't be the benchmark. It's got to be. Can you get a return on this thing because in 10 years people are going to wake up and go, jeez, that was a bunch of dumb deals you did back then. What's going on? And this business needs to be set up for the future.
It's how we've always managed it. That's why we've done so well for so many years and we'll continue to manage that way. And we are committed to our targets. Our 20% operating income, no, we're not going to take the 20% ROIC up. Let us at least hit it.
And then we can argue about it. It will be a fair argument at that time. And the 15% EPS growth, we recognize we put up the charts and say it's 11% and 12% over these horizons. We know we don't regularly hit the 15%. I guess the way we're programmed is we'd rather put 15 out there, shoot for it and hit 12 than give you a 10 target and hit 11.
And so that's how we view it. We are not going to do stupid things to hit a target. We're going to manage and invest in the business. And the best evidence is exactly what we've done. We've pounded in money during an uncertain time period in the digital area because we know it's transformational and critical to our future.
And if we hadn't done it, we could have given you a few more points of EPS growth. I don't think the company would be more valuable, and I know for certain our future wouldn't be as bright. So that's the trade we'll make every time. Continue to invest in the company so it's set up for the future. And I think we've done a good job there.
So that's my close. So we're back to agenda. I'll take any more questions if you have them. And then after that, I think Mike will come up and do the MC job on where do you go for what tour. Fair enough?
So any Q and A?
Hey, Doug. Manav with Barclays. Just on this, if there's a recession, you will do M and A. Presumably, it's the larger deals that you're referring to. Like, are they can you give us some flavor of like what kind of deals you'd be looking for?
Are they adjacent markets? Are they competitors, etcetera?
Well, Matt, we have, I would say, a fairly rich list of M and A targets. And some are clearly, I mean, when we look at them just not really actionable based on how we think the financial performance plays out and given their current valuation. So, I imagine more come under the line or over the line of actionable in that situation. But they would be all kinds. I mean, I would say, very consistent with what you see from us today.
We buy new technologies to sell in existing markets. We buy bolt ons in some cases, right? Some of it gives us geographic scale like Anyos that we didn't have. So there would be a host of those. There are certainly some that would be an adjacent businesses that we think run a very similar model.
Nalco would have been a good example of that. So we have examples of all of them. The way it works, and you know it better than I do, is a number of things have to come together to get one of these things over the line. So you have to have alignment between the respective management teams, you're going to have to have financial alignment like this works somehow. And obviously, that's all predicated on strategic or industrial logic fit.
So I think we've got a good list. I think we know what we hope for. We will be ready to jump fairly quickly if we get there. Our balance sheet certainly is in good shape. I think the market appetite, if we do something smart and we have a good case for it, we'll be receptive.
So none of those things hold us back. But at the same time, we aren't going to be so antsy to do a deal that we end up doing a dumb one. And you pay too much, it's a sin you can never overcome, Right? It's just it's impossible to fix. Everything else you can fix.
John Roberts, Doug. You keep adding SBUs. Is complexity an issue at some point in terms of how long this list gets of SBUs? Do you need to regroup them into different clusters, maybe the energy spend is an opportunity to have a different structure for the organization?
Yes, I would say more business units in a way reduces complexity for those operating the business unit because what we're asking them to do is focus on either a given market or a given technology. So in a lot of ways, it reduces complexity where it matters most, which is closest to the customer. We want focused people delivering great value and that really comes from know how, experience and just knowledge of the market. So that's how we think about it. Now you're right, when you get a plethora of these business units, there is a little more complexity in management.
But I will also point out, it's like 3, 4 steps from where the magic happens in the customer. And I would rather have that trade a complexity. We have recently organized more closely to our public segments. So we have the institutional public segment, the industrial public segment and historically in other and in energy. And the institutional businesses are more oriented under institutional and industrial like in terms of management structure too.
And the reason we did it was somewhat to get rid of some of the complexity, but 2, there's just natural synergies along and around our industrial business set and our institutional. Industrial has big units in a few of them, institutional has many units and they're small. So the technology it takes to address those markets is a little different, capital sensitivity is different. So it's good grouping from a strategic standpoint. But that's how we view it.
Eric Petrie with Citi. As a front runner, Doug, in digital, how long do you think the nearest competitor could replicate your systems and processes and actually present a fair fight?
Well, I think in this world, I don't believe it's really going to be around the system. I don't think systems and software are long term advantages, if you will. So I think what it is, is unique data streams and data sets and the ability to access them, which we have, because we've already installed all this equipment in customers. I don't know who you're going to get to go install dispensing equipment that aggregates data in 2,700,000 customers in 170 countries. That's like a daunting task for any company.
I mean, I don't know who could do it. So that's a big built in advantage. And then it's the know how to take the data that you hopefully can assimilate effectively in the cloud to analyze and understand what the heck it all means. But if you've got no food safety competency, if you have no HAIC or water or corrosive technology background, it's not easy to make sense of it. So that's why I like this digital world because in a lot of ways, I think it puts primacy on datasets and unique data and know how Because the software is going to be ubiquitous, like a field technology to gather data and or the ability to transmit data.
I mean, that's going to be frankly, I think, generic. Just like Word is generic for everybody. Some people really write smart memos and they write dumb memos all on Word. But Word isn't the advantage, it's the intelligence being used. And I think that's the world we see.
And so that's what we're trying to create. So I don't think it's easy to go replicate it because it's not going to be easy to replicate our know how. But that's why we want to get a jump on it and be first. The last thing I'll say is it's just hard to do. So if somebody set out to do it, okay, one of our competitors, what to go take us out, you still got to go install all this stuff.
It's not you can't just mail a customer a kit and they somehow put it in their restaurant or their food and beverage account. And so as a consequence, the field really matters. So I say the only way to obsolete the field is have the field. And I think quite the opposite will happen as we put in the data collection capabilities. I think our field advantage becomes more important, not less important, because they are the ones who can close the loop and fix what we have learned through all this digital technology.
Doug, thanks. Just was interested to get your take on your thoughts on how we should best measure success against the digital initiatives over time. What 1, 2 or 3 things should we be looking to? And then secondarily, you talked about valuations being up in your discussion on potential M and A. That also holds true for Ecolab stock.
Could you refresh us on your willingness to use stock as currency for deals? And alternatively, how you're measuring return on investment for the repo program over time at these levels? Thanks.
On the repurchase? Well, I guess I'll do digital first and then come to the other question. I would say on digital, we're focusing right now on how we're doing building the capability, I. E, how many connected customers do we have and everything else because it's vital. You can't create this virtuous circle that we're talking about unless we can get the darn data out of the dispenser into the cloud.
And I can't do artificial intelligence until we get X data. So we know that's an important piece, which is why I think Christoph's presentation he shared, these are some of the early things that we're doing and measuring because it's really measuring the build, as you will. The other metrics you can use, I think, over time, we will talk about digitally enabled sales. I think increasingly, we'll probably come up with other sales networks. But what this needs to do is feed our capability to continue to grow like we're growing and to continue to feed EPS growth, right?
You get larger, you get bigger, you have to have new initiatives. We believe this capital spend is going to be in lieu of ultimately other things. But when you start any new initiative, you've got to have kind of it's honestly dead capital for a little bit as you're putting it out there. I'm going to get 0 return. I had this argument with somebody right now.
Somebody I said, well, nobody will start a business if I got to get an immediate return on capital. I can't do anything. I'm kind of stuck. Because the first restaurant you build, right, I got to build it before a customer comes in. So I have zero return for x period of time until something happens.
And that's we view that early stages over on digital. And now we're more mature at stasis in terms of I think we're at the right level of annual. So we've gotten that build behind us. And then it's really can we turn this into money making and all the rest. So it should be in our old fashioned way.
If it doesn't show up in the P and L, I get quite nervous, right? If you don't see OI expansion, sales growth, etcetera, well then what the heck, right? Where is it? In terms of stock price, I was taught long ago, I have very limited I can crash the stock price. It's hard for me to increase the stock price is what I would say.
I can just say something out outlandishly stupid. I will try to avoid that. And but what we work to do is drive earnings in a way that's sustainable. My favorite chart of Dan's is basically, look, our cash flow is equal or better to our adjusted earnings. And we try to give adjusted earnings that are a legitimate proxy for what's going on in the company.
We think they're more accurate honestly than the other is a legitimate. And I think tying it to cash flow is the best way to find out, is it fairly accurate? And if you look at ours, it's very similar to cash flow. And so that's what we strive to do. Honestly, the market decides what our multiple is and everything else.
In terms of stock repurchase, I can guarantee there is probably no finance committee that goes through more work to figure out are we doing the right thing when we look at repurchase. And we look at a number of metrics. We have a large shareholder on, which I think has been very healthy for us, investor, right, on our Finance Committee, which takes a very much an investor view. I mean, it's a complicated mix of things. At the end of the day, the only thing that matters on share repurchase is did you buy it cheaper than it trades for?
Because if the answer is no, I can tell you all the perfect measurements we use to show that it was a great value and you go, Yeah, great. But it trades at 80 and you paid 100. Right? I mean, it's really all that ultimately people look at. So we are very careful on that.
I think if you look at our history, we've been fairly conservative. We do try to offset dilution, be wise as we're doing this and have a relatively constant base. Dan said, we don't try to go game it. I would say we typically underspend our budget on an annual basis versus what we say we're going to go do. Simply as we get through the year, we try to be where we're going to go and we try to be wise as we go, right?
It's not our primary focus. Growing earnings is right the right way. All right, anybody else? All right.