To be here. Good morning. So I'm very excited again to be back at the conference and sharing Ecolab's great growth story, whether it's new to you or you've heard the story before and can learn something new today. Before we do that, I do need to start with some housekeeping, which you are all probably very familiar with, our cautionary statements around forward-looking information, non-GAAP information, et cetera, et cetera. I'm sure you're all very familiar with it, so I won't read that verbatim, and I'll move on to the fun stuff. So Ecolab's purpose is really to protect what's vital, and that starts with people health. And around people health, I mean helping to protect people from infections, whether it's in general public spaces or across the entire food chain.
We're also protecting planet health, and we do that by helping our customers address their sustainability needs, using as little water as possible, while also doing that in a way that helps to improve their PNL. And through both of those, we protect what we call business health, helping our customers operate more efficiently while also reducing their environmental impact. It is our belief, and we've shown this in fact, where there's not such thing called a green premium, that we can help our customers operate more efficiently while using less water and less energy. So we are a trusted partner at over 1 million customer locations and sites.
We're the global leader in sustainability, and through our 48,000 associates worldwide and across the 170 countries, our science-based approach, data-driven insights, and that world-class service that we provide these on-site experts in more than 40 industries, we help our customers advance their needs around food safety, clean and sanitary environments, and water and energy, and ultimately, CO₂ emissions. We help protect some of the world's most trusted brands, which we have for many decades with many of these relationships, starting in our institutional and specialty business. We help our customers in hotels and restaurants maintain consistent standards across their global footprint. Across our industrial business, which represents about half of the company, that business is focused on water. It is effectively a water business that operates across many industries, helping our customers address their water and energy needs.
And then in healthcare and life sciences, where we help hospitals and pharmaceutical companies maintain clean and sanitary environments, but also help purify medications with our PureLite business and life sciences. And then last, but certainly not least, is our fantastic pest elimination business. This is a business that sells across the rest of our portfolio, bringing science-based approach to make sure our customers have both clean and sanitary environments. And as you look across this portfolio, across each of these segments, and I'll talk more about geographies later, but you can see that we have great balance, operate in many segments and industries, but also have great geographical balance. And our business model is essentially that of a razor-razor blade, in that more than 90% of our sales come from consumable products.
Those products, combined with our technology and our world-class service, make us critical to our customers' operations. So both the consumable revenue and being critical to customer operations make us very sticky and have a very predictable revenue stream. Looking at that revenue stream over the last few years, here's our sales growth. You can see the top-line performance over the last three years has been fantastic and has been driven by the value we create for our customers. But our sales teams are driving exceptional values at our customers, and this is inclusive of both the value-based pricing that we demonstrate to our customers and realize, but also new business growth, new solutions, and new locations.
That strong sales growth, combined with the short term of the moderating delivered product costs, AKA raw materials that we've seen moderating in the short term, but that sales growth, the lower delivered product cost, has resulted in very significant OI margin expansion, about 400 basis points in Q1 alone. We are well on our way to achieving our long-term objective, which is 20% OI margins, which I'll talk about a little bit more here in a second. So here at a high level is just stepping back about how we get to our 20% OI margin target. In 2023, our OI margins were at 14%. In 2019, they were at 16%.
Given the work that we've done and the changes that we've made, coming out of the last few years, we feel even stronger and very bullish about getting this 20% OI margin target. We do that in large part by getting back to our high-water mark gross margins. But that is not the destination. We will get beyond that. That gross margin recovery and expanding beyond that will be the lion's share about how we deliver that 20% OI margin target, and then delivering incremental SG&A productivity, as we always have, will get us the rest of the way, again, to this 20% OI milestone. It's not the destination. This is showing our EPS growth over many years. We are back to our long-term double-digit EPS compounding.
Certainly, the last few years have been challenging with the pandemic and the impact it had on our institutional specialty business, as well as the unprecedented inflation that we saw across most of our portfolio. But as I mentioned, given the work that we've done over the last few years, we've come out of these crises even stronger, which is why we feel very confident in achieving our long-term financial objectives, which you'll see on the right side of the slide here. That includes 5%-7% sales growth, the 20% OI margin target, which I had talked to and 12%-15% EPS growth on an annual basis. So now I want to take a few minutes and sort of click down on what the long-term opportunity is at a macro level and in some of our businesses.
So as you're probably all aware, the world continues to face very significant challenges around people health, food scarcity, water stress, and climate change. Here's some facts on the page that I'll, I'll go through. It's estimated that by 2050, we're going to have 30% more people in the world. That's about 2 billion more people, putting even more stress on food resources and natural resources. There's also estimated to be a 56% gap between the supply and demand for fresh water by 2030, and that's evident as we've seen global droughts. Those droughts have also been occurring in the U.S. and Europe, and so that water shortage has only become more evident, and we're not going to be producing more water.
There's also estimated to be another—an additional 40%, 47% more energy needed by 2050 as a result of this increasing population. At the center of all of those issues, the nexus of those issues is water, and this is where Ecolab has expertise, a leading market position, leading technology and services, to help customers solve some of these huge challenges. Smart water management is core to what we do, and we deploy it across our portfolio in many industries. Certainly, the industrial business here, you'll see in the middle, has a significant portion of the sales related to related to water, water-related revenue. But if you look at our institutional specialty business, a significant portion of those sales are also connected to water through our warewashing and laundry programs.
Healthcare and life sciences also touches water through our disinfecting programs and infection prevention and in our Purolite business. Stepping up, back a little bit and just talking about our broader market. So we serve a very large and growing and fragmented market. The total market is north of $150 billion, and it continues to expand as we add new products and new solutions to help our customers solve some of these problems. And frankly, we love growing our sales fast, but we want to continue to grow our market even faster, so we never run out of growth opportunities. And you'll see at the bottom how we compare against the competitive set, and we have leading positions in most of the industries that we serve. This leadership has been the result of the dedicated on-site expertise we deploy in each of these industries.
Each of these fields that we operate in have dedicated experts in that field, whether it's power generation, data centers, restaurants, pharmaceuticals, hotels, you name it. We have experts that are dedicated to those industries. Those experts work to understand our customers' operations fundamentally, and then they deploy technology, data-driven insights, and the world-class service to help them operate more efficiently. This best results at low- lowest total cost, and we do that while using less natural resources. There's not a trade-off. We can improve their PNL and reduce their environmental impact. There we go. Wrong button. As we think about our value proposition, it has always been core around the strong returns that we drive for our customers. And that return has been driven by the fact that the investment they make in Ecolab is small relative to the value that we generate for them.
Whether it's the business impact, operational impact, we're helping to reduce their water, energy, labor savings, and waste. The combination of those is what we call total value delivered, and that's the numerator in our EROI equation. That's the value that we deliver relative to the investment. That value delivery has been helped for a long time by innovation. Innovation has been key to our growth, it's been key to our margins. Last year, we launched the largest pipeline that we've ever had, of $1.3 billion estimated at $1.3 billion in sales by year 5. And if you look at it on an accumulative basis over that period of time, it's going to be 2.5 or 3 times that as it ramps up.
We've historically grown our innovation pipeline about 2 times organic sales growth, which has helped us get to what we call our Vitality Index. What that Vitality Index is, and here it's 30% right now, it represents the percentage of our sales that have come from products launched in the last 5 years. As you look at this bar chart, you can see the innovation increases, but you can also see in the dark blue. That dark blue is what we call breakthrough innovation. Bigger and more impactful innovation, we've continued to shift our focus to fewer things that have a bigger impact on our customers. Here are a few examples of these innovations. We're focused these innovation on our biggest opportunities to help solve the biggest issues at our customers.
So it's very tightly aligned with their needs, and here are a few examples, whether it be in data centers, MicroE, Life Sciences, both growth engine segments or intelligent operations, so they're our industrial business, or adding new capabilities within our Institutional and Specialty Segment. As part of the innovation, we've continued to build on our digital foundation, which we've been doing for a long time, and it's a very strong foundation. We've been building on this concept of what we call Connected Chemistry for decades, and that started with the advent of the 3D TRASAR technology, which we use primarily in our industrial business. We innovated that technology to the current state where customers can use our 3D TRASAR technology to remotely monitor and manage their water processes and quality.
So core to this, as you'll see on here, is our ability to have connected devices in over 40 industries and gathering more than 90 billion bits of data annually. And that allows us to monitor and manage these operations remotely. And then we can also look at customer sites across their global footprint and understand which operations operate most optimally, most efficiently, and then help our customers replicate that across their global footprint. And we do this through the technologies, but also our dedicated team of experts in these fields. Industrial Asset Intelligence is a good example of this. For example, in a power generation plant, where we're simultaneously monitoring and managing multiple assets to help manage water, energy, CO₂ emissions, but we're also helping to maximize uptime for our customers and their productivity.
We can do this by also looking across the footprint, understanding which assets and which locations are operating most efficiently, and help our customers replicate that, again, across their global footprint. This is a model and technology that we can replicate in other segments as well: data centers, restaurants, pharmaceutical customers, F&B plants, on and on. So taking another look at—I talked about the $152 billion market opportunity that we have. This splits it between our existing customer set and customers we have not yet sold. So if you look at that $152 billion, almost half of it is with customers which we already have relationships with. So last year, we had $15 billion in sales, and we have a $55 billion opportunity to penetrate customers that we already have relationships with. We're already selling products.
It may not be every solution we have, or we are in some locations, but not all of their locations. And we get after both of these opportunities, that and the $80 billion+ of customers we have not yet sold, through the same approach, and it's this innovative end-to-end solutions combined with this world-class sales and service team. So we've had this Circle the Customer strategy for many, many years, decades. Circle the Customer is how we sell solutions across our different businesses and help our customers operate more efficiently. So here's an example of the Circle the Customer strategy, and this is a lodging property as an example. And so we start with our institutional business that serves this customer from the front of the house, but also the housekeeping, the pool and spa, into the restaurant, the laundry.
But at the same time, we bring in our other divisions: pest elimination, our Nalco Water business to help optimize water usage within the hotel, our EcoSure business, at the same time deploying digital assets. The combination of that Circle the Customer strategy drives significant savings. In this particular case, it was 160+ million gallons of water saved and a TBD, as I talked about before, of $10 million. Here's another example of that Circle the Customer strategy. This is for a data center. So obviously, data centers are growing at a very rapid pace, given the increases in AI and cloud computing, and certainly with the advent of GenAI, that's even accelerating.
A typical data center will generate a lot of heat, and that heat has to be managed and dissipated to ensure that the data center can maximize their uptime, okay? And water usage is critical to that cooling process. A single data center can use as much water as a city the size of 30,000-50,000 people, or another way to compare it is a hospital could use as much water as 80 hospitals. So being the water expert, we're a critical component of their operations. So our offerings go from pre-treatment, treating the influent water, their water system, cooling system management, their managed operations, humidification systems, but also helping consulting and to optimize the water and energy usage, leveraging our digital tools.
The combination of those solutions circling the customer can drive significant savings, in this case, saving over 30 million gallons of water and deriving an eROI of $8 million in this particular customer example. So, as I've talked about a lot, is that in driving, helping our customers improve their PNLs, we can have a significant impact on their sustainability as well. Customers come to us with some of their biggest challenges. I talked about the macro trends the world is facing around water, energy, food. Customers come to us to help solve those problems. They set sustainability goals and come to us to help us meet, help them meet those goals. We do that by being embedded in their operations, understanding what their targets are, understanding what the gap is, and then deploying solutions to help address those needs. Those trends are increasing.
Here, we look at the companies that are disclosing on climate and water. We can see significant, in the green line, the increases in the climate-related disclosures. Water disclosures are also increasing, but certainly not at the same pace, and we think there's a big opportunity here because we know that smart water strategies are critical, given that a significant portion of greenhouse gases are actually related to water, okay? And so those water disclosures and addressing water is the only way they're gonna be able to meet their sustainability goals. And the biggest impact that we can have a company, in addition to sustainability in our own operations, is what we do for our customers, and here are our customer impact goals. So through our technologies and our expertise, this is where we can have the most material impact from a sustainability impact perspective.
We help our customers drive progress on these goals around water, climate, food, and health. In 2023, you'll see at the bottom in the, in the graphs, in 2023, we helped customers conserve 226 billion gallons of water. That's equivalent to the drinking needs, just for perspective, of over 780 million people. We also helped our customers avoid 3.8 million metric tons of greenhouse gas emissions, helping prevent over 6 million pollution-related illnesses, and provided safe food to 1.4 billion people, and cleaned 60 billion hands, if that wasn't enough. And we've done this while also demonstrating our ability to generate great financial returns for our shareholders. Those returns start with our long-term financial targets.
I talked about it before in the upper left, 5%-7% sales growth, 20% OI margin, we feel very confident about getting to in the next few years, and back to our double-digit EPS growth, and that target being 12%-15%. We also have a very strong cash-generating model. We generate about 90%-100% free cash flow conversion on an annual basis, and we've maintained a very strong balance sheet. Our leverage target is 2x net debt to adjusted EBITDA. That balance sheet strength provides us flexibility to go do important investments and acquisitions, but it also provides us resiliency through more difficult times that the world has seen. And we've been very consistent for a very long period of time on our capital deployment priorities.
The first being, we continue to increase our dividend aligned with earnings, which we've done for more than 30 years. Investing in the business, which includes making acquisitions, which we've done many over the last decade, dozens, as a matter of fact, and then with excess cash, we'll repurchase shares. So as you can see, we've been very committed to shareholder returns for a long period of time, that includes returning cash to shareholders. So in addition to our great operating performance, and over the last decade, you'll see here in the blue and green charts, through a combination of dividends and share repurchases, we've returned $10 billion of cash to shareholders over the last decade. So here in closing, we love our mission, we love our position. We know what we do matters for our customers immensely, but it also impacts the communities around them.
We do this in a way that helps their profitability, but also to be sustainable. We have a proven and powerful business model that drives significant sales growth. We've shown the great margin expansion that we're capable of doing, and we continue to generate great returns for our shareholders. That's all I have, Andy.
Perfect.
I got a few minutes for some questions.
We do.
Thank you.
We can take them from the audience. Have a seat, if you like. Whatever you want to do, Scott.
Awesome.
The question's open to you guys. I have one to get started here, and it's around pricing. You've talked about the fact that historically, the company's been, you know, maybe 1%-2% pricing. It sounds like you think you've got a sustainable ability to do a little bit better than that. Can you talk about how much better you think you can do, and what the drivers are of your confidence around the pricing model?
Yeah, it's a great question, Andy. It's been something that it's been a muscle that we've really built in a new way over the last few years. As we always say, is any time the world's going through a crisis, you go through challenges. If you don't come out stronger, you've missed an opportunity. And we've been, we've been pricing on an annual basis at 1%-1.5% for many, many years. And obviously, the unprecedented inflation made us rethink about how we were pricing. Historically, we've driven that 1%-1.5%. Obviously, the last couple of years, we've driven over $3 billion of pricing. It peaked at 13% in Q1, which is not the run rate.
But as a result of what we've learned over the last few years, our approach to pricing, really our approach to understanding value, because it's not just about pricing, it's not about a list price. For us, pricing is always about customer value and sharing in the value we deliver. And what we've learned over the last few years is the level of value that we create for our customers, right, in a different way, in a systematic way. And as a result of that, we believe this long-term pricing, we've said 2+ is in that 2%-3% range, we think, relative to that 1-1.5 we've driven on an annual basis for a very long time.
But again, it gets back to value, which is why we've driven pricing for a long period of time, and as a company, never had negative pricing, and don't plan to start now, but that's because of the value. And so we're always looking at the value first. This TBD that I talked about earlier, understanding that value, because you have to create the value, which we always have, right? But you have to capture the value. You have to really understand that value fundamentally, which we've done in a different way over the last few years, and then you have to be able to communicate that to your customers. And it's not just to the corporate account, it's not just to the C-suite.
You have to communicate that value at the local level every day, every month, as well as at the corporate account level, and doing that consistently. And that's a muscle that we've changed, that we've built differently over the last few years.
One of the, one of the addendums to that, question on pricing is around, your gross margins and your 20% overall, margin goal that you articulated, showed on the slide. Most of the, the margin growth, that you expect to get to 20% comes from that gross margin leverage. Can you talk about other levers inside of, the company or your initiatives besides pricing that could help you to deliver the gross margin expectations that you have?
Yeah, as I said here, certainly the gross margin is gonna be the lion's share of which gets us to that 20% OI margin target. But it's, it's getting back to that, that high water mark, as we call it, the 2019 gross margin, which is 44%. That is not the destination. That's, that's a milestone on the journey. And, and the levers we have, certainly, pricing is gonna be the, the biggest contributor to that. As you think about the math going from 1% to 1.5% to 2% to 3% pricing, the math gets pretty easy, and it's a big impact on that. But we also have businesses like Global High-Tech, like Life Sciences, that are higher gross margin business and higher OI margin businesses that are growing faster.
Certainly, they're smaller, and so the you gotta do the weighting of the size and the speed at which it grows, but as they grow faster, those margins will benefit the overall mix of the business. And then we have the institutional specialty business, a very large business that historically has been one of our higher gross margin business, and that is operating really well. In the first quarter, it was up north of 10%. And so as that business recovers from continued challenging times within the segment, within food service and lodging, as we've seen foot traffic sort of stall out, you know, still below pre-pandemic levels, but that business is gaining share, and they have lots of opportunity, and a great margin business, so as that grows, that'll help from a mix perspective.
And then the last thing I would say, Andy, is digital, which is still early innings, and our ability to continue to build on that digital foundation, as you think about digital and the incremental impact it can have, and it has to have value, right? And how do we understand that value? And as we did with pricing, we're understanding how digital content can create value to our customers and how we can share in that value, and so that will also be incremental, I think, to that long-term margin.
Great. Just last one from me in here before we were to go to the breakout room, would be around your capital allocation, Scott. You've got a pending sale of part of your healthcare unit. The business always has generated cash flow reliably. Just wondering, your thoughts and the company's strategy around doing large-scale M&A in particular.
You mentioned you've done dozens of deals over the decade. Some of those have been very consequential, some of them have been less consequential in terms of materiality. I'm just wondering what your outlook is and your propensity is, desire really for larger scale M&A is today?
Yeah, as you said-
Or is it more of an organic story-
Yeah
... getting that-
Yeah
... that margin?
Yeah. First of all, yes, we, we've been very inquisitive and have done dozens of acquisitions over the last decade, most of which, as you probably don't hear about, they tend to be more bolt-on deals that we do and know how to do very well and drive great returns. Certainly, the more significant strategic deals, we've done a few over the last decade. But we're very disciplined about our approach to M&A. But I would get back to this balance sheet strength and, and as you talked about the capital allocation, it's this balance sheet strength is what's given us the flexibility to go do an acquisition like we did, a little more than 10 years ago with the Nalco acquisition, and then Purolite, which was a significant acquisition in terms of both strategy and price, of course.
And, you know, we did that acquisition in the middle of a pandemic and this global inflation, right? But because we had the strength of the balance sheet, it allowed us the flexibility to go do these more, as you said, impactful deals. And we'll continue to look at those. But again, we're very disciplined in both our capital allocation and our investment in M&A.
Great. Okay, we're going to leave it there. The breakout session here is in the Astor Suite. It's Astor Suite B. It's on the mezzanine level. So if you have any further questions, we'll see you there. Otherwise, thanks, Scott, for the presentation.
Thanks, Andy.