Good morning and welcome to Ingredion's 2025 Investor Day here in New York, and greetings to everyone joining us online around the world. My name is Noah Weiss, Vice President of Investor Relations, and it's great to see so many familiar faces this morning, as well as some newcomers. Before we begin, I kindly ask that you switch off your mobile devices as we are webcasting the session today. The presentations that we will be giving this morning are available under the Investor section of Ingredion.com. Please note that we'll be making certain statements today that will contain forward-looking information that are governed by our safe harbor provisions. Since our last Investor Day, the company has undergone a significant transformation. Today, you will hear from our executive team on what's next. Jim Zallie, our President and CEO, will share our vision for Ingredion's future and our strategic priorities.
Michael Reardon, our Senior Vice President of Texture and Healthful Solutions, will update our strategy since the segment and our Texture Day last November and share some of the accomplishments in building a global texture house. Rob Ritchie, our Executive Vice President of Food and Industrial Ingredients LATAM and Food and Industrial Ingredients US-Canada, will highlight how these segments are leveraging their unique strengths to meet changing consumer needs. Mike Leonard, our Chief Innovation Officer, will explain how we are accelerating our R&D strategies to drive innovation from soil to shelf. Jim Gray, our Executive Vice President and CFO, will explain how we will bring it all together with a comprehensive financial overview and an update on our long-term outlook. Before we go into the presentations, you have an agenda there in front of you. Please note that there will be two distinct Q&A sessions today.
The first will cover the four presentations, and please keep your questions only to those. At the end of the morning, we'll have a full Q&A where I'll invite all the executives up on stage. After which, in the adjacent room, we'll have an informal lunch where we can continue the conversation with the executive team. With that, let's get started.
Ladies and gentlemen, welcome Jim Zallie.
Good morning, everybody. It's great to be with all of you. I want to thank you all for taking the time to join us here in New York. We've got a very informative and engaging program for the next few hours. We're going to update our long-term financial targets, and we're going to outline the steps that we're taking to deliver on those commitments. Let me get started and start discussing our strategic vision to drive growth. As Noah mentioned, Ingredion has been on a business transformation journey the last number of years. That's been built on strategy development, first and foremost, being clear on where we want to go and where we believe we can win. Second, portfolio optimization, and we'll talk more about that as well. Starting last year, business resegmentation, a big focus on innovation.
You're going to hear from Mike Leonard, our Chief Innovation Officer, and certainly driving cost competitiveness. Eric Sype, the Head of Global Operations, is with us here today as well. Through all of those efforts, we are diversifying our presence and offerings through geographic expansion, capabilities building across functions. It's been very, very significant and part of the transformation and part of the success that's permeating through all aspects of our business, especially in relationship to something that you probably don't have visibility into, which is digital capabilities, some infrastructure investments for efficiency that we think are going to position us in the future to more readily adopt the impacts that AI will have on our business. Certainly, and you'll hear more about this, operationalizing solution selling.
I think it's very important that you take away today what we have done to organize for success as it relates to moving from being an ingredients company to a company that truly is selling solutions and what that can and will do for us going forward. We're committed going forward to building on our track record for value creation. With what you've come to expect from Ingredion, disciplined capital allocation, strong risk management, and those centers of excellence that I've talked about to drive efficiency and productivity. The long-term growth targets that we're sharing today, we believe are achievable and will allow us to build on our strong financial position as we continue to work to maximize shareholder returns. I know many, many of you are very familiar with our company.
In fact, I was talking to one lady, and she's been a very long-term shareholder and was telling me that I'm the third CEO for Ingredion that she has known personally. For those of you that are not familiar with Ingredion, we are a global ingredient solutions provider primarily to food and beverage customers, which represent more than 70% of our net sales, but also increasingly selling higher value, more functional ingredients for industrial, pharma, and beauty and home companies. Something that you probably haven't realized and something that we don't talk a lot about is that over the last, I would say, six, seven years, we've really focused on those two, say, smaller industrial parts of our business in relationship to beauty and home and pharma. We've significantly improved our margin structures.
We've dedicated separate manufacturing operations to them from a standpoint of being able to make them reliably and be able to meet regulatory requirements. Those have contributed to the overall success, small but growing. We've been in business, most importantly, as a company for more than 100 years. We're well positioned and diversified, and that's key as well, with more than 16,000 global and local customers, which we service through 30 Idea Labs in 22 countries. A very diversified company when it comes to customers, product mix, geographies, and we think that also positions us well for future success. Since we were last together, and I know a number of you were with us in Bridgewater, New Jersey, in November of 2024, we've made significant progress both strategically and financially.
We, of course, completed a resegmentation of our business last year that we believe strengthens both the parts and the whole of the business. We've made purposeful changes in our portfolio, divesting our Korea sweetener and industrial starch business, and announcing our intent to sell our majority stake in our Pakistan business. Last year, we reached record levels of EBITDA, earnings per share, and cash, and increased our gross profit margins to a new higher level. We've exceeded the growth targets we established at our Investor Day in 2022 for net sales, operating income, as well as gross profit margins and cash from operations. We've also exceeded our cost competitiveness targets, and we've reinvested some of the savings and the cash in key manufacturing facilities and in R&D and in go-to-market capabilities to increase capabilities building.
That's, again, to drive more from the innovation engine, but also to operationalize solution selling. We'll talk more about that here in a moment. These results allowed us to deliver strong shareholder returns compared to a peer set in our industry over the last one, three, and five years. We believe we're well positioned going forward to build upon our recent success. What we're focused on now, and it started with the strategy development, is to build competitive advantage in a pursuit of our winning aspiration. Our winning aspiration is to be the go-to provider for texture and healthful solutions that make healthy taste better. You're going to hear from Mike Leonard on what we're doing to accelerate on-trend innovation, and we're segmenting our markets and our customers within the regions and the countries in which we operate to pursue pockets of growth.
I think in the food industry right now, it is challenging from a standpoint of overall volume growth. You certainly know that, and we all are working towards where are the pockets of growth. That's what we are actively pursuing, leveraging deep customer relationships in the local markets in which we operate. We're investing to maintain leading market positions in target categories, very clear about the categories we want to play to win, and improve profitability and margins. We're using our strong balance sheet to, first and foremost, invest in the business, expand capacity to strategically grow, as well as make carefully timed investments in reliability and infrastructure to secure earnings and cash generation.
We want to do that as well to continue to have the cash-generative businesses that we have that are very high ROIC businesses as well, continue to help fuel the investments to drive growth primarily in texture and healthful solutions when you see the projections on the long-term targets by segment. The segment structure we introduced last year combines better coordinated global reach, for example, in the case of global texture and healthful solutions, with strong local expertise, leveraging again our longstanding presence and deep relationships in region and in country with customers. You're going to hear Rob Ritchie talk about this from a standpoint of how long we've had a respected presence in the LATAM countries and what kind of a competitive moat that presents for that particular region and that business. I'll make some brief comments right now, profiling the compelling business characteristics of each of the segments.
Texture and healthful solutions, for example, you ask yourself, why did you go through the resegmentation, moving away from a regional structure with high-level commentary previously around what was called core and specialties to move to this segment structure? Texture and healthful solutions, we have global, multinational, regional customers across multiple channels. One of the things right now that we're working on is identifying, as part of our strategy development, what are our shared measures of success globally across the business. One of them is something called markets that matter. We've been very clear on that. Relevant channels for growth across branded, private label, food service. We're dissecting, segmenting all of these opportunities and doing that where there is global relevance from a standpoint of the customer base or where there's an opportunity to benchmark and drive best practice for companies that are regional and/or local.
In that business, it's become over time a business with limited business seasonality. The average selling price, and you'll hear Michael Reardon talk about this, is 2x what it is in the other segments. We're driving growth there and making more investment. Rob's going to talk about food and industrial ingredients LATAM, we have a competitive advantage and we believe a strategic moat as it relates to the market positions that we have in those countries. Rob will talk about it, and I believe it'll be very compelling. In those countries, the long-term prospects are bright because of the trend towards affordability. These are ingredients that we provide that are mainstay ingredients in many of the food products that are sold in those regions, driven by just population growth overall and the trend towards urbanization.
One of the success stories, certainly over the last few years, and you'll see the numbers, is in the food and industrial ingredients US-Canada business. That's a business that for many years we used to get some very intense questions about, but that business has performed outstandingly. We believe, certainly over the last year, 18 months, it's also because of the focus from a segment standpoint and how we've driven operational excellence and improved the gross profit margins and operating income margins significantly. One of the other things is we are the only producer in Canada, and that's a very important business for us that probably gets not enough notoriety. We have a segment called Other, but that was designated at the time because it had Pakistan and Korea. I've talked about the plans there or what we've already done.
In addition, that segment has two other operating units that are higher growth units. One is leveraging sugar reduction or stevia business, where we're the leader in stevia-based ingredients, and also for protein fortification in the case of pea protein isolate, which this year is growing high double digits. The segment structure really is creating better alignment with market opportunities, customer needs, and our business objectives. Within each of these segments, Ingredion's market position is significant. We're a significant player in large and growing markets, each with attractive growth potential. You'll hear from Michael Reardon and Rob Ritchie shortly on how we intend to grow at or above the market in each segment. This is the simple long-term strategic framework that defines our three key priorities over the next period.
Each of the presenters that will follow will speak to the specifics on how we're going to execute against each priority for each of the segments. Overall, for Ingredion, when it comes to profitable growth, we're focused on what is happening and co-creating with customers. We're leveraging customer relationships and capitalizing on the amount of reformulation that's currently happening in the industry, especially driven by the quest for health and wellness, new product innovation. You'll hear from Mike and Rob on how we're defining those markets that matter and looking to expand internationally where we have a right to win. We're extending our solution selling globally. When it comes to innovation, we're investing in differentiating R&D and capabilities building, especially as it relates to texture science. I'll speak more on this in the next couple of slides.
When it comes to operational excellence, we've been on a mission to make service and quality differentiators and drive positive operating leverage from what Eric Sype, who again is in the back of the room, calls the four Cs. Care, Ingredion, and I hope you all know this, especially those of you that have followed us for many years, we pride ourselves on one of our foundational values, which is care first. We operate at world-class levels of safety. Eric is driving the same sort of culture that we have for safety and care for employees and process safety as it relates to food safety and quality. Second is customers.
We have our operations very connected at the hip with the go-to-market teams as it relates to multi-level selling of all that we bring to customers as one integrated organization, especially leveraging the investments we're making in functional excellence to bring that before the customer. Capacity. What Eric has brought to the organization is looking where we can make sure we have headroom for growth capacity to capitalize on opportunities when they arise from a standpoint of accurate supply-demand forecasting, driving the brilliant basics, but also looking at capital efficiency, how we can either avoid or delay capital. Lastly, it's about cost. You'll hear Jim Gray talk about it. Again, Eric lives this, which is net structural savings and how we can operate to offset inflation. You'll hear more about these three priorities in each and every one of the presentations.
There are five macro trends that I think you'll all identify with that we believe will offer and shape opportunities in the future. Mike Leonard will discuss and share examples of progress we're making against a few of these. Let me make some brief comments about each very quickly. As it relates to clean label, there's, of course, the desire for transparency for folks to know what's in their food. I don't know if you realize, but Ingredion has the market-leading position in functional native starches. These are starches that are not chemically modified. They're physically modified. They're labeled simply as corn starch, potato starch, tapioca starch. They have all the performance characteristics of highly specialized products. They enable clean label formulating. That's an opportunity that we think we can broaden and leverage when it comes to solution selling to deliver clean label enabled solutions.
Affordability, especially today more than ever, where consumers are pinched with the price points of food and trying to make their discretionary spend go farther. Ingredion works with its understanding of functionality on how to replace expensive ingredients, substitutes for eggs and cocoa, for example. Sugar reduction, leveraging that toolbox of stevia for high-intensity natural sweetening, the protein fortification, along with the sugar reduction, pick up on the trend for the GLP-1 drugs and what you read about and hear about from a standpoint of how their diets may be changing when it comes to consuming products that have more fiber fortification, meal replacements, and certainly protein fortification. You will hear more from Michael on that as well. When it comes to the key priorities of innovation, our focus is on clean label texturizers. This is something that we are leveraging, again, that unique portfolio that we have.
We have made decades of investments in proprietary manufacturing on how to make these products. It is a customized process that we have. Again, building out these clean label formulating capabilities. Investment in expanding texture science leadership. Michael talked more about some of that, and we have some examples of the equipment that we are using and that we have made investments in. We are really the first to market with a texture solution service model. This is consumer insights-driven. We have had Larry Fernandez in the back, who is responsible for commercial excellence. We have a really very respected group in the industry that works with customers to really understand where the consumer is going.
We share perspectives and ideas and then back that up with the science-based approach towards how we can deliver a texture that meets a white space, an opportunity for white space innovation for a customer. We have examples and case studies we are going to share with you. We have piloted this in 2025 with broader rollout in 2026. I want to give you just a feel for how this has permeated through the organization. I just literally yesterday got an email from Nancy Wolfe, who is in the back of the room, and she is our CHRO. Nancy has a gentleman who works for her that has been on point the last year, who knows our organization extremely well from a standpoint of all the go-to-market capabilities.
He has led the sea change that's taken place over the last 18 months in relationship to how we go to market with customers to really develop solution selling capabilities. It was an email exchange, and I got a chance to read it yesterday. It was celebrating a success at a customer delivering on a mochi texture, which is a chewy elastic texture in China. It was a new win that we delivered in two months. What was notable in the email exchange was that the gentleman that works for Nancy said he was on the customer visit. This is an HR person on the customer visit with the go-to-market team because he's working to make sure organizationally we put the right skills and talents on how to operationalize that.
At the end, Nancy says, "Yes, and I'm excited because I'm going to be in the U.K., and I'm going to be visiting a customer with our sales manager for an opportunity that they see that they're about to close on for solution selling." That's where we're excited about what the future holds. Lastly, Rob's going to talk about, and Mike's going to talk about, Leonard, about the investments we're making, where we see an opportunity, especially in sustainable food packaging with regulatory changes, the needs for more biodegradable, sustainable solutions for coating. Rob's going to talk about grease resistance and PFAS replacement. We see an opportunity to invest there in industrial applications that are high value, high function. I do want to talk a little bit more about operational excellence because it's really played a key role, I think, in our success over the last four years.
Our focus is on making service a differentiator and driving cost competitiveness. We only stood up the global operating model a little more than four years ago. That may sound like a long time, it's really not. The point of highlighting that is that I think, and Jim Gray would say, we're in the early innings of the delivery of the benefits from going to this global operating model as opposed to the regional structure that we had with duplicative manufacturing, different standards. We weren't doing benchmarking. We did that to develop operational standards and systems, require benchmarking, and drive excellence across the global supply chain and operations, stand up a global procurement organization. We're going to have the first ever global procurement supplier summit in the history of the company on October 1st, inviting in key suppliers to have that.
We weren't capable to do that four, five, six years ago. In addition, what Eric has done is the ability to leverage machine learning and other AI tools to improve forecasting, scheduling, and reliability. It's also noteworthy to highlight that one of the most significant achievements in operations in recent years is the investments we've made to strengthen and regionalize and de-risk our supply chains. Coming out of the supply chain crisis, COVID, 2021, we were exposed. We ship a lot of product around the world. We've made strategic investments in countries to be more locally and regionally self-sufficient. It's something else you may not have fully appreciated about Ingredion. All of this has enabled us to raise the bar on ourselves. For example, we used to just measure our service based on on time and full, delivered on time and full.
Now we measure against a perfect order standard, taking every single possible customer dissatisfier and measuring it and making sure that we can deliver against a perfect order standard. That's led to improvements and increases in our net promoter scores. Eric's also strengthened our centralized engineering team, and that's optimizing our asset footprint. If you've paid close attention, we've announced the closure of a few facilities. We're executing against those, and those have financial returns heading into next year, as well as obviously making sure we have that capacity at a cost to enable growth and again minimizing, delaying, or avoiding capital spend. This has delivered, honestly, and Jim will say it as well, millions of dollars of savings with an ability to optimize again over this next period that we're going to talk about.
The long-term targets we are establishing for the next three years are for 2% - 4% net sales growth. That compares to 3% for the 2022 to 2024 period, 5% - 7% adjusted operating income growth. That compares to 14% that we delivered from 2022 to 2024 and slightly higher adjusted EPS growth of 7% - 9%. That compares to 17% EPS growth from 2022 to 2024. Our recent track record has demonstrated that we have an experienced, execution-focused leadership team that operates with a strong drive for results. We want to win. In addition to today's presenters that you're going to hear from and you're going to meet, you'll also have a chance over lunch to meet the rest of our Executive Leadership Team that are here today. They're all sitting in the back of the room.
I'd like to quickly, if it's okay, introduce each one of them and ask them to stand in case you'd like to connect with any of them later today during lunch. First, I'll start with Larry Fernandez. Larry, if you could stand up, our Chief Commercial and Sustainability Officer. Tanya Yeager de Foras, our Chief Legal Officer. Mark Carnes, our Vice President of Corporate Development and M&A. Eric Sype, our Senior Vice President of Global Operations and Chief Supply Chain Officer. Lastly, Nancy Wolfe, our Chief Human Resources Officer. Now it's my pleasure to introduce Michael Reardon, who will discuss with an Irish accent our strategic vision for growth and our global texture and healthful solution segment. Mike, over to you.
Thank you. Good morning, everybody. Thank you, Jim, for mentioning I've got an Irish accent. I am from Ireland, and there's a translation Irish bot at the back if you have any difficulties understanding me. I've been with the company for about 25 years, and I consider myself to be somewhat of a solutions warrior. I've been through the process. I started out in operations in the go-to-market front in the innovation area and general management in EMEA, Asia-Pacific, and in the U.S. I've been on the journey quite a while. Hopefully this morning you get a feel for why we've demonstrated success in the last 12 months or so, and of course preceding that as well. There are four kind of key areas hopefully that you'll take away from my presentation. Why is it that we grew by 7% volume last year in a very, very difficult market?
One of the reasons is that we have a very significant footprint in the emerging markets where I spend a lot of time. We see quite a long runway there to pick up volume. We're in more and more recipes, particularly in Asia-Pacific. The second reason is that a lot of our customers are struggling, I would say, in the developed markets for growth, and they're renovating their recipes. We are co-creating and reformulating with them, which helps improve product mix. Particularly in a market like the U.S., clean label is one of those areas where we are upgrading recipes and helping our customers. The third reason why we're growing is really around the area of innovation. Mike Leonard will talk a lot more depth about the innovation that we have, but we're really finding a lot of success with solutions. I know a lot of people talk about solutions.
Hopefully, by the end of my presentation, I will share with you how we define solutions, what it means to us as an organization. It is delivering, as you will see, margin expansion. There is something behind what we're doing in the solutions front that's really very profitable for our organization. The last area which Jim was discussing, which has been very important for us, is the operational excellence. We've invested a lot in assets. We do have the capacity for growth. We've invested over $300 million in the last couple of years, and we have a pipeline to continue to invest to enable that growth to happen. This is a little history of time. Maybe I start on the right-hand side first. You can see that obviously we've got a nice portfolio of products with a number of patents, highly differentiated.
Underpinning all of that, we've got these labs and manufacturing facilities. Jim mentioned it a little bit, and Nancy's here as our CHRO. I think our culture is a bit like a good wine, has distilled over time very well. We have a very strong culture, a very high-performance culture. You'll also know that we have very high engagement scores. There's been a lot of warriors on this journey for quite some time that has really helped to build the expertise we have in our organization. We look at how are we getting above market performance. I would say that we have two areas: texture and healthful solutions. Texture solutions is probably about 90% right now of where our success is coming from with these clean label, high-performance starches. We've also broadened in recent years with hydrocolloids, and we're starting to get more into customized formulation.
We'll talk a little bit more about that as we go through the presentation. There's overlap with some of the healthful solutions where we have areas where some of our technologies can be transferred to these healthful solutions into areas like beauty and home. Clean label is very important in food, but nature-based ingredients are also very important in areas like beauty and home. We can transfer some of those technologies into those areas which are very high margins. This is where we get some synergies. You can see the results here. The net sales are a little deflated between 2022 to 2024 because we had raw material deflation. As I mentioned earlier, we had 7% volume growth last year, very strong and good volume growth, as you know, this year as well, and the margin expansion.
I can say a lot of words on the stage here, but you can see from the results that we're getting significant margin expansion. Hopefully, as I go through the next few slides, you begin to understand a little bit more where that is coming from. Our results this year are north of these margins as well, if you've seen our results for the first half of the year. We have really very strong momentum here. I presented to you at the November Day, and I wouldn't have turned up today if we hadn't made progress, but we have. I have a little bit of confidence to share with you what has happened since we last met some of you in November. Jim was very passionate talking about operationalizing our texture solutions. Everybody talks about solutions, but it's bigger than just sales or go-to-market. It was led by our HR.
It's a, I would say, a cultural transformation that you also got to look at things like operations and your supply chain because you need the agility to be able to also supply the solutions on time. We've brought a lot of training and accountability to how we do solutions. We'll also talk about things like customer briefs, how we have formalized certain tools to capture data when we're interacting with customers. Every time we capture data, it brings more insight in terms of what customers need, but we can track it throughout. For example, with these customer briefs, first of all, it's very formalized. Our conversations with customers make sure we've got the right target. We send these briefs to customers after our meeting to make sure that we've captured all of the right things to solve the problem.
We're tracking throughout the entire process how these briefs are being managed and their level of success and so forth. This is all building our knowledge to be able to get more solutions to hit the target and do it faster. Our pipeline has grown significantly. When I say significantly, since the last time we met, it's doubled. That is transformational. I think as a company, you know us, we're a high-performance company, but we are going through a bit of a transformational change. We have seen a significant pipeline growth, which gives us a lot of confidence moving forward. Clean label, very much something that we've been doing for 30 years. We have a lot of expertise. Fortunately, the environment is changing where more and more customers at one stage, it was more of a push for us. Now it's more of a pull.
We're seeing significant opportunities, not only in the U.S., it's been in Europe for quite some time, but also in places like China where there is significant upside with this. Sometimes we have starch as a backbone, but we need other types of technologies. We've recently also been looking at these citrus fibers to give us unique clean label properties. Mike Leonard will talk to you a lot more about what we're doing in predictive formulation, but it's certainly helping us to reduce cycle times at customers. Our close win rate at customers is also improving. We are beginning to see the benefits of predictive formulation. You have a picture here on the right-hand side of this confocal laser. We're utilizing tomography and some of these imaging capabilities to link consumer liking to textural preferences.
All of this here, there's a lot of data that is being captured with this instrumentation. Every time we have data, obviously we can utilize that data to help us with predictive formulation. The type of data we would capture with this instrumentation, if you were thinking something like a French fry, you're looking at audible crunchiness. You have certain instrumentation to do that. The crispiness as you compact, the bite resistance, and toothpacking. These are an example. I have to say in the French fries area, I spoke to you about that in November. It's a market of about $17 billion, growing at about 15% CAGR. We have tremendous expertise, particularly here in the U.S. There has been a shift, if you're following it, in moving towards Asia-Pacific.
We're helping customers reformulate with some of these coatings with this type of knowledge to be able to help them to develop these nice coatings to be able to make the journeys with some of these new delivery formats as well in Asia-Pacific very successfully. Finally, we're experimenting a little bit. I don't know. I've been in the industry a long time. We have something which we say that when we go to see some of our customers, particularly the small to medium-sized customers, they have people in their organization which have the golden tongue. The golden tongue is somebody that is the owner or quite senior in the organization. They make the calls in terms of the launches that go out into the marketplace. That probably explains to some degree the high failure rate of launches in the marketplace.
With all of this sort of capabilities, we're really moving more towards data-driven decision-making and linking it to predictive consumer liking. The probability of success is higher. We're piloting these services at customers. I don't want to get ahead of my skis at this stage to say, you know, how successful that is because we're still working it. We feel very confident that maybe at some stage we will look to maybe monetize. This could be another part of our toolbox with solutions. It's really the tip of the spear at the moment as we develop these capabilities. We've showed this before. This is the market packaged food where texture is on the front of pack, is about $600 billion. I think what's also interesting for me is about 25% of those claims are linked to clean label. That's really, you know, our wheelhouse.
We have, nobody else in the industry has as much expertise in the area of clean label. The total addressable market for us, as we're looking at that right now, is about $1 billion. That's where we're seeing significant speed in that lane. On the right-hand side, you can see that texture is the new flavor. It is something that we talked about, mochi a little bit earlier in terms of what the new generation is looking at, Gen Z and social platforms. They talk a lot about texture. You see that we have, through our proprietary research here, it's very, very relevant in many different areas. The other part that's evolving more and more is the health benefits that people are looking for in their products. These are the trends. I'm sure you know them very well.
All I would say here is that the trend is our friend right now because some of these areas like clean label, as I mentioned, and wellness, these would be particularly very important for us in the developed markets. Convenience, we see a lot of momentum, as I said, in the emerging markets. Delivery formats in terms of how products are brought to consumers are creating new opportunities for us. In mochi, Jim Zallie mentioned at the November Texture Day, there are 140 texture terms for texture in China alone and 400 in Japan. We have a very solid foundation in that part of the world.
We're leveraging some of that knowledge to bring to some of the developed markets where, again, we want to be known not just only as the go-to provider for texture and healthful solutions, but also when you want to do mochi, we have the expertise. Mike's going to show you a very nice video later in terms of some of the capabilities that we have to demonstrate our leadership in that space. You've seen this before. We launched about 18, 24 months ago our play-to-win strategy. Where do we play to win and what capabilities do we need? Obviously, we've selected these categories. I would say just behind these categories, besides the growth rates and the opportunity, you can see how the $20 billion is broken down between the different segments here, categories.
Is that we're also looking at, and that's where we need our colleagues in HR, is what are some of those differentiated capabilities that we need behind these categories to win? That's where we're developing those capabilities. We have, of course, a long history. I would like to say it's been a cumulative effect over many, many years where now we have the momentum, but we need to continue to make sure we stay on the front line of some of these capabilities to make sure we're seen as a pioneer in our space. We have management systems that are behind these categories to bring accountability for delivery to hit the type of targets that we have set, and we're demonstrating already in the last 18 months. Jim split this really three strategic imperatives here for our enterprise, and it keeps it very simple, and I like it.
What is it that we're doing in profitable volume? What's driving that? Where is the innovation coming from? Underlining all of that, you need to have operational excellence. I'm going to give you just some examples in texture healthful solutions on all three. The first one is I talk about, you know, it's where emerging markets. One of the things that we have a heritage of about 100 years on is starch. We know that very well. Starch is good because it is the texture backbone for most texture solutions. The reason why it's the backbone is because it's got tremendous versatility, unlike some other types of ingredients. It's available in abundance in nature, and it's very affordable. That gives us a tremendous advantage over anybody else that's trying to enter the space, is we have that heritage.
We also know that starch is in the developed markets, the per capita consumption is quite high. In a place like the U.S., but in the emerging markets, it's at least one-sixth lower. That's where we see the potential. If I go to a place like India, it's very early days. It's, I would say, one-tenth of the consumption that we have here in the U.S. With all of these emerging trends here with urbanization, affordability, and middle-class growth, there's tremendous opportunity for us still in this market for profitable growth. I did promise you at the very beginning, people talk flippantly about solutions. I really want to, because we've been on a journey for a long time, to really optimize what is it that solutions really mean. We have defined it very, very carefully. Solutions for us are ingredients that are highly differentiated within our organization.
These typically are high-margin ingredients and also with a high selling price. Jim mentioned earlier, typically for these types of ingredients, they're two to three times the average selling price of our baseline products. We also are launching every five years new products. We include that as well because we always want to be innovating and staying ahead of our competitors. Customized formulations, historically we call them systems. That's where we bring different ingredients together to give unique functionality. It's really helping our customers deliver more holistic formulations for them. Finally, we're looking at these value-added services. I just talk a bit lightly about it today because we're piloting at the moment. I don't want to, as I said, overpromise here yet. This is really our solutions portfolio that's driving the margin expansion. We're holding everybody accountable behind that.
It's very clearly defined what they are and what our expectations are going forward. I talked about some of the way we structured solutions. We need these briefs that are done with customers in a very formalized way to uncover unmet needs. We also have developed, again, we had a very good foundation, but we need master formulation experts. We have a program developed within our organization for different grades. If you get to a certain level, then you become part of the global team. You travel around the world because we're trying to scale solutions globally. I gave you the example of the French fry earlier, success in one market, but how can you scale that in other markets? We'll move these formulation experts around the world to help us to scale these solutions.
We have a lot of proprietary consumer insights now to help us to link to consumer liking. How do you link that then? The overall consumer liking, which many companies do, but back to texture preferences, back to our ingredients. That's where the predictive AI tools that we are developing are making those connections. If we can make those connections successfully, then we help to increase the speed of bringing launches successfully to market. I keep repeating the importance of a successful solutions approach is not just go-to-market. It's holistic. You also need to make sure you've got a global procurement that's got the agility to source ingredients from around the world and do it quickly. When we're bringing these customized formulations to market, it's faster and faster and faster. Very often somebody's going to be made to order. They have to be out in weeks rather than months.
We have these capabilities. Overall, you see that on the right-hand side, if you are bringing more of these solutions to market, more of a recipe, then obviously that is driving faster growth and helping you to have margin expansion. One of the great, and I call out Eric Sype, our Head of Global Operations, for his leadership in helping us to do that. What has happened, and I talked, it really is transformational on the front line, is that in the last number of years, we have spent a lot less time worried about service to customers and having issues of supply because we have the assets in the way that we're set up now as a global enterprise to deliver superior service to customers.
We're getting feedback from customers in terms of what we talk about, net promoter score, which are very high, which is helping us to win more and more opportunities with our customers. We've also changed as an organization where we used to have our regional assets and we managed those kind of ourselves, now having global assets. We can move things around very quickly to make sure we have optimal service for customers. That is a tremendous upside because rather than go-to-market organizations spending time trying to worry about production planning and service to get to customers and what have you, we have a centralized team that do all of that. The go-to-market teams can focus a lot more on commercializing solutions with customers. We spend a lot more time with customers, which is why we're seeing a lot more briefs.
Behind that, and I'm very excited that we're continuing to do that, we have made investments of about $300 million to enable the growth, but we have more in the pipeline. Thank you to our shareholders for making these investments, is that we need to make sure also that we improve our cost competitiveness. We don't necessarily have to be the cost leader, but we have to be cost competitive. We are making a number of improvements in our plans to ensure that we are cost competitive. I am very excited and biased, of course, because in Asia-Pacific, we have not only a fantastic team there, but we are also the franchise leader for tapioca as an example, which solutions can be utilized around the world that are very unique.
We want to continue to invest in those markets to make sure that we have the capacity for the future growth plans that we have in place. Finally, we're seeing through this reorganization in terms of centralization, a lot of productivity gains. I can tell you from the area where I work in EMEA as an example, we have reduced our SKUs by 50%, which enables a lot more capacity going through assets. Also, it's better for customers to get rid of some of that complexity to really have the products that they need. I took this example rather selfishly because I was traveling through Hamburg Airport a few weeks back, and I was on the go, and there was this food in a bottle which is filled with about 45 different ingredients of nutrients, vitamins, and things like that.
You can tell I'm not an avid user of these products, but in this particular case, I actually did need to have something quickly. It was a fantastic product. When I went back and I spoke to the team and said, "Wow, have you tried this product?" They said that they were, yeah, we were involved in developing the product. They didn't know that at that time. It's for a private label, which again, private label, as you may understand, is really beginning to challenge some of the leading brands. In this particular case, the private label came to us and said, "This is the brand out there today. Why are they so successful with this brand?" That is where we can then start to look at overall liking characteristics and understand that brand and explain that to private label.
You can link it back to the type of textures that would enable that overall consumer liking through our ingredients. The solution in this particular case, which is full, I don't know if you've ever tasted these products, which is why I was surprised. They're usually quite chalky and dry in your mouth. I don't particularly like them. This was very silky and smooth. Actually, our solution, as part of our solution to this particular example, was a rice, clean label rice solution, which gives you that silkiness, that white color, that full-body mouthfeel. It was done in record time. 45 ingredients. It was done in less than three months. That's, you know, if you get an opportunity to be in that part of the world, you can taste some of our success here.
What I like also about this example is we talk about being a go-to provider for texture and healthful solutions. We're helping customers not only to get the texture right because of our knowledge with sugar reduction, with plant-based proteins, and so forth. We bring it all together. That gives us a much more informative and holistic approach with our customers. These are our commitments that we have laid out. We have said that we expect for a portfolio like ours to be growing at 4% - 6%, and we're very confident that we're going to deliver in that range. I think also you're beginning to see for the gross profit in November, we said 27% - 28%, and in a CAGNI, we said around 28%. Now we're seeing GP from 28% - 30%.
It should give you an indication that our confidence level is growing with the success that we're having with solutions, that we feel that we can start to raise the bar higher and higher with this margin expansion that we're seeing. We're seeing significant operating income upside as well from the 8% to 10% level. Let me wrap up. What you should take away is where is all this growth coming from? I think one of the things you should take away is we're in more recipes. We're in a lot more recipes. We have a lot more customers coming to us, like working with us, and particularly in the emerging markets. We're seeing margin expansion because we're reformulating to improve product mix.
One of the key competencies that we have that's very much on trend now, not just in the developed markets, but also I explained in places like China, that we're seeing clean label. That's really helping us to reformulate and build on our expertise to help customers. We talked about innovation and our area of expertise and solutions. We're more in recipe. We're a bigger percentage of the recipe. When we bring some of these solutions to our customers, it's not just one single ingredient, but we talked about customized formulation. We're a bigger part of the recipe, which helps with revenue generation and also, of course, margin expansion because it's a much more differentiated offering. Finally, very excited, we do have a wonderful operating model, and we have the capacity for growth.
Thank you for believing in us, and we will continue to make these investments to continue to make sure that we have the capacity that's needed to deliver on these solutions. With that, I'm going to hand over to my colleague, Rob Ritchie, to talk to you a little bit about our success in LATAM.
Thank you, Mike. Good morning, everyone. Thank you again for joining us. Similar to Mike, I've been here for a few years, 28 years. Originally started working up in Canada, spent time in the U.S. and in Mexico as well. Thank you for being here. I'm going to talk about two segments today. I'm going to talk about our food and industrial ingredients business in LATAM, which includes Mexico now. I'll talk about our U.S.-Canada business after we go through this. Some of the key takeaway messages for our LATAM business are we have a lot of experience in that market. I know past success does not always guarantee future success.
In this particular case, I think our knowledge, our market position, number one throughout the LATAM markets, helps us drive innovation and growth for our customers and dealing with all the volatility and instability that can happen in those types of markets. We've been able to deliver consistent and profitable growth through longstanding customer relationships, operational excellence, and network optimization. I'll just say this, as global accounts that we have relationships with begin to grow in those markets, we're positioned for that, as well as regional brands that are starting up in the LATAM market as well. Finally, on the trend around innovation in line with the consumer trends and anticipating customer needs, we'll talk about this a little bit, but different than maybe in some of the developed markets in terms of affordability and those types of things as well.
It will continue to further reinforce our regional innovation position while leveraging what Mike Leonard is going to talk about from a global perspective as well. Over the past several years, Ingredion has been able to deliver very strong performance in the LATAM region, driven by local manufacturing presence in some of the world's most dynamic and growing CPG markets. A couple of stats here, net sales down slightly, mainly just due to the price of corn on a past year from that perspective. Gross margins have gone up 500 basis points at 26% in 2024. Our OI margins have gone up to 20%, up 300 basis points as well. As you can see, we touch a lot of different applications in the region. We actually sell the whole portfolio to all of the customers within the LATAM region.
A couple of things here, and Jim talked about this, you can use words like competitive moat, but we have a very, very strong right to win in LATAM that I want to take away from this as a key message. In addition to our four Idea Labs/innovation centers, we have 15 production plants from Mexico down to Brazil, and our competitors combined have six. We have a very, very strong position. When you think about 90% of the products we make are sold within the region, that local service, that local knowledge really gives us a competitive advantage over our competitors based on our past. I talked about that history. Actually, this October, we're going to celebrate 100 years operating in Mexico. Brazil, we're at 96 years. Colombia, 92 years. We've got a smaller operation in Peru, but that's at 61 years as well.
A long history in the region. We have over 1,300 customers, and we supply over 950 unique products in the LATAM region. Very strong position from a business point of view, but also in the future as well. In this region, we have the widest variety of products and solutions across the key categories in LATAM. In addition to the food ingredients business, we have texturizers, sugar reduction. Jim talked about our beauty and home care as well, our industrial business, and our agribusiness. The good news is, as we look at this, we have the playbook in place to leverage that portfolio for today. We also have the global experience and knowledge to grow with customers as the consumer's demands and preferences continue to evolve. What do I mean by that?
If you talk about some of the things that Mike Leonard talked about, or, I'm sorry, Michael Reardon, we have a lift and shift approach. We've developed those solutions in Bridgewater, in Europe, in the United States. As the LATAM market moves up the food chain in terms of packaged foods consumption, we can bring those ideas and solutions to the marketplace. We're well positioned for growth today, but also set up with an eye in the future. We've got a great playbook moving forward. The LATAM market is very dynamic, as we mentioned, and poised for long-term growth as economic fundamentals continue to grow, supporting the development of our food, beverage, and industrial markets. A couple of trends, economic-wise, approximately 2% GDP growth over the next planned period of three years. This increase in the formal economy of 7 percentage points since 2004.
That means instead of maybe getting paid every day and going to the market every day, people are getting paid weekly, every two weeks, and they're out going to the grocery stores, buying products, packaged goods specifically, and bringing them back to their home. There are some challenges. You know, we're dealing with some front-of-label pack issues here in the U.S., but in LATAM, these have been around for quite some time, whether it's sugar taxes, front-of-label packs in Mexico. We've been able to navigate through those, again, by leveraging our global knowledge and innovation, but also looking at reformulation with some of our sugar reduction and other texture solutions to help through that process. Demographic-wise, 62% of the population in LATAM is 40 years old or younger versus 51% in the U.S.
If you think of a population histogram, that kind of pear-shaped at the bottom, those people are moving up into middle class. They're better educated. GDP is growing, income is growing, which bodes very well for us versus the U.S., where it's probably a more older population moving up. That trend is our friend in that area. The other part is the urbanization. We talked about this a little bit. Two of the largest cities in the world are in LATAM, in Mexico City and São Paulo. 82% of the population living in urban areas is expected to grow to 2050, to 86% by 2050. Again, in those urban environments, working in different jobs, going to the grocery store places versus maybe working out in the fields. In terms of consumption, we expect packaged food consumption in the market to have a CAGR of approximately 3.9%.
That's very different if you look at the U.S. market and just U.K. for reference. They're about 2.3% and 2.6%. Almost approaching double the rate of growth in those particular markets. I think this next stat is very interesting. 24% of consumers in LATAM's disposable income is spent on food, right? That's a big number. In the U.S., it's approximately 7% - 8%. How we go to market, how we innovate, the type of products our customers want is very different than maybe in some of the developed markets. That being said, as that innovation moves up, we've got the innovation solutions to bring those in as that market continues to grow over the next 10 - 15 years. Again, the trends such as functionality, affordability, and wellness will be significant. We have the products and solutions to address those trends today and in the future. Just another stat here.
The gray bar is per capita consumption of packaged food on the left, and on the right is beverage. The blue ones are Latin America. You can see the consumption rates are much less. We forecast as we go forward over the next several years that that consumption rate in LATAM will continue to grow, which bodes well for our customers as well. Long-term volume growth in CPG is expected to continue even beyond that three-year horizon that we've seen.
terms of the addressable market, the CAGR rate for CPG products is expected to grow at 2% - 3% over the next several years. You can see our sales there today about $2.4 billion and an addressable market of $5 billion that should continue to grow. Some of the key areas that are driving that growth are continued packaged foods consumption, the trade up for value-added ingredients as consumers start to earn more money and look at the products they consume differently. Affordability, that's not going to go away. We have to take that into account when we develop new products and innovation for the LATAM region. Diversification of that end product, I'll talk about that a little bit, as we continue to trade up from maybe more commoditized type project to value-added ingredients.
It's a concern in the region that happens with many global companies as the FX has been a little volatile lately, but we have good ways with our finance team to work through that as well. As I mentioned, in LATAM, very, very sustainable competitive advantage today and into the future. That historical presence gives us a lot of knowledge and confidence from our past learnings as we go forward. Our local go-to-market and innovation, our customer relationships are very, very strong. They rely on us for the products today, but they're also asking about how can you help me in the future, reducing sugar, adding texture, perhaps including protein in some of these ingredients as well. We have that complete portfolio, right?
As I said, we can sell the more basic ingredients today, but as they move forward and they want to replace products with stevia, we're set up to do that and we'll tap into our global innovation teams to execute against that in the region. The other size is scale and cost advantage. Having those 15 plants versus our competitors only having six in the region gives us size, cost, and service advantage, which is critical in those markets as well. Again, very deep knowledge in the LATAM market. We know how to adapt to change with our local teams. Despite some challenging business environments, we've survived and actually thrived in those marketplaces. Just to build upon Jim's pillars and what Mike talked about as well, the three key areas of strategic growth for LATAM will be profitable growth, innovation for the region, and operational excellence and execution.
One of the key initiatives to enable that from a profitable growth perspective is to diversify somewhat beyond corn and the brewing industry. Mainly today we use corn. However, we're now making investments in growing our tapioca business in the Andean region, where we've got very unique properties with that product. We've launched a potato starch business in Brazil, and we're using that model from the United States to grow in that area as well. Brewing is a very important segment to us in LATAM and around the world. However, the raw materials sold into that are somewhat commoditized, right? When we have opportunities to trade up our mix to add more value-added ingredients, we're certainly going to pursue those opportunities moving forward. We mentioned elevating our Idea Labs, connecting more closely with Mike Leonard and his team in our global side.
We're going to accelerate sugar reduction, texturizer portfolio, as well as some other ingredients. We also sell a lot of specialty syrups in the region, and the confectionery segment in LATAM is a very important segment for us. It's growing not domestically, but some of the largest exporters of confectioneries are based in LATAM in Mexico and Colombia. We've been able to develop specialized syrups that look at different carbohydrate profiles, reduce sugar, and actually protect the product integrity during shipping, given some of the temperatures down there as well. We've got some really unique ideas there. Finally, as Jim talked about beauty and home care, for us globally, it's a growing market, and LATAM is actually the largest region for Ingredion for beauty and home products. We see that trend continuing.
The whole clean and simple that goes for ingredients that go into beauty products and home products as well is a trend that we're positioned very well for to continue to drive that growth. In terms of the innovation side in LATAM, we're going to focus on texture and sugar reduction, affordable cost and use, which is very important. Sustainability is critical in those markets as well, and we've got a strong focus in that area. Larry leads that up as well, and we usually bring that together with our business to talk to our customers about that. Solutions and responses to taxes and regulations. Sometimes in LATAM, there's good intention, but a lot of it's about tax revenue coming into the government. Just working through that and our customers as they look to reformulate, and then really optimizing that local presence and expanding our regional market.
Here's a great example, and you know, you talk about trends today. We made this investment in Mexico, and I was actually living there back in 2018. This is an investment in liquid allulose, which is used in sugar reduction across many different areas. It's a low-calorie sweetener with functional bulking properties. Not only can it replace sugar in application, it gives the bulkiness, enables significant calorie reduction, and keeps that stop sign in Mexico off the front of the package, good flavor and mouthfeel. The beauty of this is we are approaching sold out on this particular channel and product line across North America, and we're looking at what that next investment potentially looks like for allulose as we continue to grow that and focus on sugar reduction. Again, we're going to strengthen our market position.
We're getting more channel expertise and understanding our customers better, and we really think beyond the products today, there's really great opportunities for long-term growth related to innovation, and this is a great example of an investment that's paid off very well. This goes without saying in this market as well, we talked about affordability is a key issue. Enhancing our cost leadership to maintain high-level margins, right? We've expanded our LATAM sourcing model. I think under Eric's team under global procurement put a lot of good resources in there. Keeping our costs down, looking at our raw materials and our chemicals as well that we use and making sure we're cost competitive. We will continue to tweak and optimize our network. What's the best place to sell from? Where do we source from? Optimize freight, logistics, and some of the tariff issues that we're facing today.
We're going to boost plant reliability and efficiency, and we're going to continue to invest in bottlenecking and reliability for those products to maintain our leading position. I think this regionalization of supply chains, as I'd mentioned, about 90% of what we produce in LATAM is sold in LATAM, right? It's hard for people to come in and penetrate that, but we're going to continue to invest and reinforce that position in the marketplace. We do feel that operational excellence is a key driver for continuing to maintain, but also grow our gross margins as we move forward. Our outlook for the food and industrial ingredients in LATAM is net sales growth of 2%- 3%, somewhat dependent on the price of corn a little bit, but we're confident that will be our number off a base of $2.4 billion.
Gross profit margin of 26% - 28% and coming off a base right now of about 25.7%. We continue to see margin expansion in the region and adjusted operating income of 5%- 6% growth on a CAGR basis. That's coming off a base of $483 million as well. Very large contributor to Ingredion's overall OI. Just to summarize for LATAM, I don't want to minimize that experience, but also those leading positions, number one in the markets in which we operate. It gives us access to the customers today for those products, but also the innovation as we go forward, delivering consistent profitable growth, customer intimacy, knowledge. When they come to us looking for challenges, they're going to call us first.
They're going to look at opportunities to reformulate, and we're going to be on the front of that to work with them to help those work as long as our and in line with our network optimization. The innovation side as well. This will continue to be an important part of our business there and our journey there. The good news is our global network is very strong. As I said, we can lift and shift those ideas from other parts of the world as LATAM consumer trends change. With that, I'm going to pivot here to our food and industrial ingredients business in the United States and Canada.
Again, the key messages for US-Canada in this particular situation is we have a strong position in mature markets, and we'll talk about that a little bit, but we've been able to deliver stabilized margins over the last several years through our trusted customer relationships and the strength of our business model. We'll talk about that a little bit in a few minutes. We've been able to drive profitable growth through our expanded industrial product offerings. Jim Zallie touched upon this. We are the leader in US-Canada in terms of corrugating paper supply, sustainable solutions for packaging. We have a number one position. Our customer intimacy is second to none. We know that market very well, and it's actually growing. You think about everything that shows up on your doorstep today and food delivered, it usually has a packaging format in there.
We are very well positioned to tap into that growth and continue with that. There are some solutions that we are going to bring into that area as well. We are going to look at our operational efficiencies. It is critical in this region. We have some very large competitors in the space as well. Cost is critical, spending a lot of money and effort and resources around maintaining our margins, making sure that we have that customer intimacy and to have better supply to our customers. Finally, this is the, I think, the other side of this business is it delivers stable cash generation, right? That fuels growth not just for food and industrial ingredients US-Canada, but that cash is used across the corporation, whether it is in CapEx projects, M&A, or cost savings projects that we move going forward.
It is a good generator of cash that is used across the organization in line with our strategic capital allocation. In this particular case, again, over the past several years, this business has performed extremely well. We have got a very unique position in the region, leading positions in Dextrose and the only corn wet miller in Canada. You can see we have two Idea Labs and then we have our six plants. We have our two plants up in Canada as well. Net sales flat, but again, somewhat related to the price of corn in that area. Gross margin percentage up 900 basis points, right, in the last couple of years from 13% to 22%. That was necessary. We needed to reinvest in this business from a reliability point of view and an efficiency point of view. At 13% gross margins, that was not possible.
We can explain a little bit on how that happened. On an OI basis, from 9% up to 17%. Really exceeded expectations. The team worked very hard together cross-functionally, pricing center of excellence. We will talk about raw material hedging and also our operations and supply chain delivering that. You see the product applications there. I think one of the other key things that we did is raw material volatility. This has been a bit of a problem, right? We are in a global market, soy proteins, dealing with corn, other things, global trade. We did a pretty comprehensive risk management evaluation in partnering with our finance team. What we've been able to do through some different hedging techniques is reduce our exposure to commodity volatility. We're not talking about dislocations between soybean protein and corn protein.
We've been able to cross hedge across other ways to protect that corn price and that net starch price that we have. It's been very effective as we go forward. Delivering stable cash generation to fuel growth and support our capital priorities across the whole organization. This is our mix. You think about we have a strong local presence with a diversified sweetener and starch portfolio. By product, you can see the mix there. High-fructose corn syrup, approximately 20% of our sales in US-Canada. Actually, just for a company point of view, it's just slightly less than 10%. There is some exposure to that. However, we are looking at new ways to take that grind and use it for other advanced products. Locally sourced ingredients. If you think about where our plants are located, they're closer to the customers, not so reliant on rail shipments and things like that.
We can deliver directly from our plants using our trucks. As I'd mentioned, we've got a very strong leading position in the industrial business, and that is continuing to grow. Sustainability will continue to drive demand for those products. Upgrading that mix, right? High-fructose corn syrup is a great product. There's nothing unsafe about it. As consumer preferences change and demand levels change, we have to adapt and find new avenues for that stream. We've been very successful at that going forward. Continuing to transform that portfolio, looking for pockets of growth to drive that, that will continue to maintain and grow our margins in the US-Canada region. From an addressable market point of view, we think it's about a $10 billion market with a relatively lower CAGR of 0.9% - 1.3%. This is just for this portfolio. That's a line. It's a mature market. We understand that.
The key factors that we're going to do to look at this is strategic diversification into the growth markets. We talked about biosolutions, products like liquid dextrose for industrial use or food use and fermentation. Glucose shipments have actually increased over the last few years as well, offsetting the fructose declines. Sustainable materials, we'll talk about that in a second. Biosolutions, this is replacing petroleum-based products in chemistry and other applications with corn. The sweetener side, trying to maintain stable positive performance in other categories than beverage like baked goods, confectionery, and ready-to-drink beverages. Our competitive position in US-Canada, we have strong market and customer presence. I think that's very important. We have a very focused go-to-market team in Canada and the United States with a larger percentage of our business mix being smaller and medium-sized accounts, right?
They're dependent on us not just because of supply of service and logistics, but also the innovation side as well. They tend to rely on us more versus some of the larger accounts, which are a very important part of our portfolio as well. I would say our competitors have a larger position with them. We have the ability to react quickly to trends and customers' needs based on our plant locations. Continuing to optimize our portfolio. We're the leading supplier of food and pharma-grade dextrose, which is a very unique product to us, corrugated paper making starches, and I'd mentioned specialized glucose syrups as well. Continue to optimize that mix based on the trends moving forward. Driving value through our service, which is critical, customization and agility, and continue to look for new opportunities to trade up.
Similar to the past couple of segments, three key areas of profitable growth. I'd mentioned finding those pockets of growth in this industry and finding where we can continue to trade up in those areas. Innovation, delivering focused innovation and leverage our overall Ingredion network, and then operational excellence focused on cost and service and the optimization of that network, which keeps our competitiveness very important in the marketplace. As we continue to shift that mix, I'd mentioned, developing and scale a portfolio of plant-based barrier coatings and functional binders, and this is to replace plastic in the marketplace. I'll give you an example of that in a second. Accelerate the development of our next generation sustainable packaging solutions. I'd mention innovation as well. Innovation goes beyond products. There's supply chain innovation, finance innovation.
In this particular case, we put a lot of effort and resources into risk management to making sure that we have stability of our raw materials so we don't have all these predictabilities when we're reporting our earnings. Some of the trends that are in our favor here is paperization, right? You think of paper packaging. I've seen alcohol now in paper packages, right? This trend away from plastics, even glass. Plastic reduction, right? Single-use plastics and PFAS, which are forever chemicals. Those are an issue. The development of biosolutions. This is using liquid dextrose and other starch streams to make green chemistry products that traditionally maybe use petroleum products. Looking at consumer preferences, right? Many people reading the label, not just what's inside the product or the package, but what's on the outside of that package. Was it made sustainably? Is it biocomposable? Our local and reliable servicing.
Again, corn starch and its derivatives is the perfect economic raw material source to drive growth and innovation in this segment. We'll continue to use that moving forward. We're positioned to meet the rising demand and needs for sustainable, bio-based, and locally sourced solutions in the US-Canada region. Just another example here is next generation sustainable packaging solutions. Supporting paper and packaged goods trends with deep customer relationships and industry expertise. We're supplying them with the majority of their ingredients today. As they look to follow these trends in the solutions, they're going to rely on us, our relationships, and our knowledge of the industry to help that growth. Talked about chemical replacement, biodegradability, bio-based materials. We debated this one at 4%. I think we're being a little conservative. I think we're going to do better than that. It's a growth segment.
Sometimes in this segment, a lot of the news is around what's not growing. This area is growing, and it's going to continue to grow. We're positioned very uniquely versus our competitors to be successful in this marketplace. Another example here is with replacing PFAS, which again are these forever chemicals. You've probably heard about them in soils and waters and things like that. Regulations are looking at how do you replace oil and grease-resistant food packaging alternatives. I think as we all know, New York is probably a great example. Since COVID, pre-COVID, pizza was pretty much it. Now you can get anything delivered in food, steak, French fries, whatever it is, McDonald's, right? Before, there wasn't much of that going on. One, that product integrity, how do you keep it hot, crispy moving forward?
How do you do it in a sustainable way to kind of balance the performance that you need and the cost competitiveness? Some of the applications, think of a popcorn bag, pizza boxes, burger wraps, French fry sleeves, things like that, is where this application and coating can work. Our unique solution, we've got some modified corn starch, which enables grease resistance in a paper packaging. No one wants to eat a burger if it's covered in grease on the packaging. These are certified compostable modified starch that preserves package recyclability. They can work through our plants as well. We're allowing our customers to make these claims: 100% PFAS-free packaging with better compliance and sustainability metrics while still being cost competitive. I think it's very important moving forward. We see some big ideas in this area.
We're making some investments in R&D and go-to-market resources to further capitalize on this growing segment in the US-Canada market. Finally, on the cost leadership to support higher margins, it's about cost, right? We don't add a lot of OpEx to this group per se. We're very mindful of the costs that are invested in this area of the business. However, we do invest in cost savings projects, digitization, as Mike had talked about as well, and keeping our costs in line so we can continue to grow margins in this business. How do we streamline plant operations? Should we make this product at all three plants, maybe one of them, and get that mix so the plants can run more efficiently and operationally? That's important. We didn't talk a whole bunch about customer order fulfillment and demand forecasting.
We've done a really good job under our supply chain team with Eric of forecast accuracy, right? We give the plants what we want to make. We match it up with demand, and our levels have increased a lot. That has a lot of benefits from cash flow, working capital, but also maintaining the right level of inventories for our customers. That's a big part of it as well. Mike talked about rationalization, right? Do we need to make all these products? Every time there's a changeover, it slows down our operations. How do we manufacture that and make it go forward? Again, the reliability side, we've talked about this. We have our largest plant in the world in Argo. We need to invest in that, and we need to make sure that we continue the reliability in that moving forward.
Very well positioned to build upon the positive momentum today. As we go forward, great opportunities for expansion as well. Our outlook here is about 0 %- 1% CAGR on a revenue basis. Gross profit margins of 21 %- 23%. Stable-ish, moving up a little bit in this segment, which I think is critical. I think there's been a lot of volatility in earnings for people in this sort of segment. This is our third year of stabilizing, and I feel very good about the changes we've made that we'll be able to maintain and enhance these margins. Similar with our operating income, a very big part of our business, $373 million of operating income in 2024. Very cash-generative business, very high return on invested capital with profitable growth in industrial product offerings. Finally, just the key takeaways is, you know, that strong position in the mature market, right?
I think the criticality of this is delivering stable margins, which I feel very confident we will with the changes. Our growth through our expanded industrial product offerings, it's growing. We're positioned as the number one person in that area. We'll continue to upgrade and upgrade and bring our global solutions in. We'll look at our efficiencies that we talked about as well. That's part of our DNA. It's going to continue moving forward. That stable cash generation, right? We're able to use that money to reinvest in other parts of the business as well as maintaining the reliability and de-bottlenecking within our plants today. With that, I'm going to pause and I'm going to ask Noah to come back up. I think Jim and Mike are going to join us and we'll have a Q&A session here on some of the topics that were covered this morning.
Thank you. Thanks, Rob. Just as a quick reminder, this is going to be a shortened Q&A session. We'll have a longer one at the end. If I can ask that we keep the questions just to the material that we've already covered so far, we can do a full at the end. Ben.
Yeah, good morning. Ben Tora from Barclays. Just wanted to real quick follow up on some of the material just recently on the US-Canada business. You talked about some of the things you'd look into to innovate to kind of like get away more from the high-fructose corn syrup business, et cetera. We've seen a little footnote that actually there's a growth caveat into it in your outlook. Just want to understand what are your investments into innovation. What are the opportunities you're looking at to get away from high-fructose corn syrup just in light of what's the political pressure right now. Certain companies making announcements. Where do you see the opportunities here and what are the more short-term risks?
Yeah, I think Rob, you want to take that one?
Yeah, I think two things. This is not a new problem, by the way, right? The decline of high-fructose corn syrup has been going on in the US-Canada market for quite some time. It's not a new topic that we're used to. I think what has changed is innovation, somewhat of a necessity, but also market trends. There's not another plant to close. It's about what are you going to do with that plant differently in the future, right? I think a couple of things have happened within the fructose market, which, you know, we forecast maybe a 1% - 2% decline moving forward. We're offsetting that with growth in other areas like liquid dextrose and glucose. We've got a project at Argo where we're going to repurpose HFCS into glucose production based on a growing need in the marketplace.
I'd mentioned around biosolutions, advanced packaging materials in our industrial business. The benefit, Ben, is we have that starch stream and we can make choices, right? We can make fructose, dextrose, glucose, biofermentation opportunities, and we can determine that based on profitability and opportunity. We've also got a development team that's looking at over-the-fence supply for green solutions and biofermentation, right? That means they'd co-locate potentially at one of our plants. There's industry news out there where that's happened in a very big way, where anywhere from $ 800 million - $1 billion pounds of fructose will be replaced in, for example, BioMag for plastic replacement as well.
It's a focus that we're looking at, but I think we've been able to demonstrate to the industry that, yes, fructose is declining based on consumer preference, but we're able to pivot our resources in that grind towards those types of areas, which will keep our plants full and also continue to bring those stable margins that we have moving forward. Yeah.
I think just to build on what Rob Ritchie is saying, he said it, but I want to make sure it really resonates. Over the last 20 years, the rate of decline of HFCS has been - 1% to 2% per year. Today, the industry, a very rational industry, is operating at high levels of capacity utilization according to one of the leading market intelligence firms in our industry that covers the corn wet milling industry, McKeany-Flavell. Correct?
Yeah, I think, you know, Jim, I'll build upon that. The term is grind utilization, right? Yes, there may be finishing capacity, but if the grind utilization remains high, upper 80s, low 90s, that means they're pivoting away from products that are declining and making things like liquid dextrose for industrial applications and fermentation or over-the-fence supply for chemical replacement using instead of oil. There's stable, and I think the supply-demand is in balance partly over the last five to six years on this innovation focus, on biosolutions and the whole bioeconomy within the United States market.
Okay. Kristen.
Hi, Kristen Owen from Oppenheimer. Wanted to ask more about the solutions platform. I understand it's still early days, so you don't want to dig too much into it, but just help us understand what does the business model look like? Do you charge separately for a solutions or co-creation opportunity? Is that an exclusive opportunity? Just help us understand how we should think about that going forward.
Yeah, I'm going to turn it over to Mike. I just wanted to make some comments. First of all, we have done an awful lot of work upfront to define the solutions clearly within our organization, representing differentiated products, representing co-creation opportunities as well. A very strict definition. Today, based on that definition, it is not an insignificant quantity of our, or an amount of our overall texture and healthful solutions revenue today. We're starting off with not an insignificant base and then enhancing it from a standpoint of how do we go to market. Mike, why don't you take that and expand upon it from a standpoint of how we're approaching it?
I think if you look at it in a few different areas. First of all, solutions are differentiated, highly differentiated ingredients, and they're technologies that bring significant value to our customers, and we're able to capture quite a bit of margins. That's the foundation, and we have a certain amount of portfolio of these products. We evolve a little bit to always try to bring some new stuff to the market. We have this innovation that has been launched within a five-year period. We're really trying to drive that to stay relevant with customers. That's another element where, again, we would have certain targets to commercialize that with customers every year.
The next evolution, which we've gone through in the last couple of years, which also involves some acquisitions, is we acquired some systems houses that enabled us to look beyond just what we have within our own portfolio to see if we can help customers to formulate more of a recipe. That's the customized formulation where it now is representing a bigger part of the solutions we bring to market. The next kind of last part of that is with these capabilities and being able to get deep consumer insights and understand consumer overall liking, which I know a number of other companies have also looked at that, but it's the piece where you start to connect that to texture preferences and to ingredients and the AI-driven predictive formulation to be able to come up with some of these recipes.
We're at the moment running pilots where we're testing to see how can we, how quickly can we work with customers to come up with these recipes to launch success in the marketplace. We're finding we're getting very positive feedback from customers. There are different ways to monetize that. It could be as a consultancy service. It is one area that we could look at. Sometimes it could also be not just the consultancy piece, but it could be tied into the sale of ingredients. I keep saying this is kind of like the head of the spear where we're beginning to see this where we're really pioneering. Also, you're probably aware, a lot of companies are struggling to be relevant in their categories and they're outsourcing more R&D. This is our opportunity to become that co-creation partner with them.
We are trying to work out how much resources that require, how are we able to scale with these predictive tools because it's very important that we can make sure we can do that in a very cost-effective way and also the rate of success and the speed to customers. We are still putting those pieces together. It's a bit too early before we want to commit ourselves too much on that, but we really do feel we're at the forefront and being able to work with customers on this area is also enabling us to collect a lot of data to help our own innovation processes.
You will also hear from Mike Leonard about how we're going to be scaling that based on the work that we're doing on AI-driven predictive formulation as well to help scale it without just incremental SG&A.
Charlie?
Your shareholder equation so far is not a very robust top line, but you're sort of talking about predictability and sort of managing the business in a much more aggressive way to deal with positives and negatives. You're taking out some volatility with respect to the commodity risk of the business. Can you talk about, are you trying to really talk about predictability and cash flow in a way that, how does that relate to the shareholder equation that you're trying to deliver? I'm trying to understand that a little better because, you know, you're talking about a low single-digit top line and maybe that translates to a high single-digit bottom line. Does that involve volatility or does it involve more linearity going forward? Does the hedging process help manage that volatility in a more constructive way? I'm trying to understand that a bit better.
Yeah, first of all, Jim Gray.
And thanks.
Okay, yeah, thanks, Charlie. Jim Gray is going to actually address that. He has a slide in his deck towards the close that addresses the top line growth issue. One of the things to highlight for those of you that track us, obviously, is corn is a significant input. With corn costs coming down, say 30%, there is that pass-through. Naturally, our revenues would move consistent with that. The business model, though, that we have has proven that we're able to navigate increases and decreases in the movement of corn, and yet we've continuously increased our operating income. As far as how we're using the cash, we're operating at record levels of cash. We're deploying that very, I think, strategically for the investments that we're talking about on how to continue to grow.
At the same time, yes, we have been communicating a message over the last few years in all of our earnings calls and at CAGNY about what we have done to reduce earnings volatility in the business. That is through expanded hedging practices, which has been a big, significant issue. It's one of the things I talked to Rob about in his oversight of the US-Canada business in relationship to the first Trump administration and what happened in relationship to co-product dislocations. The work that we've done has really taken the risk and mitigated the risk associated with that. We have systematically, not just in US-Canada, but looked at every corner of our business consciously because it was feedback we were getting from the investment community. I'm talking five to seven, eight years ago about the earnings volatility and what can you do to mitigate it. We've done that.
In addition, we manage the price movements because of the strength of our business model and how we hedge not just corn on the front end, but for the back end on co-products.
Yeah.
Yeah, I would say.
I think, Charlie, one of the things that we've seen is you looked at margin growth and texture and health and even LATAM. We've been able to stabilize and continue to grow that. I think in US-Canada, we call it the roller coaster, right? Probably over the last 20 years of earnings. A lot of that was related sometimes to the volatility or the hedging of not just the corn, but the raw materials or the co-products. I think some of the things we put in place, there's still a little bit of noise, but instead of this, it's tighter like that. That's actually delivered consistent earnings, which I think is something Jim's mentioned that we need moving forward specifically for the US-Canada food and industrial ingredients business. We're kind of three years into that.
You can see we've had very healthy margin performance and we're actually keeping the margins, which I think is something maybe different than from the past.
Okay. Let's take one more very quick question right here. Kristen?
Yeah. My question is for Rob on LATAM. You talked about the GDP growth in the region. We've had benefits in Mexico recently from the whole nearshoring trend, but that seems to be reversing now. Also, remittances are down, which could be more of a structural issue. I'm just curious about the growth algo going forward since Mexico is such a big part of it and a profitable piece if we do see a slowdown in the Mexican economy.
I think it's a great question. I think with nearshoring coming out of COVID, a lot of companies did relocate there. I still think ultimately at the end of the day, they are geographically positioned like no one else, right, to benefit from the trade across the border in many distinct categories. I think over the long-term basis, we feel that Mexico from a GDP perspective, from a consumption perspective, and the proximity to the United States will continue to drive that growth. The good thing about LATAM, again, we have other options, right? Our Andean business has performed very well. Brazil has been facing some challenges economically, politically. Over the next few years, we may rely a little more on Brazil to deliver that OI growth going forward. Our forecast for Mexico continues to be very strong. Like I mentioned, we're very uniquely positioned there in the marketplace.
We've got a leading position and most of the competition comes from, you know, sort of imports or exports from the United States down there as well. Maybe not quite as accelerated growth, but we're still very optimistic because of that population growth, GDP growth, the growth of packaged foods in the region. There's some issues with beer now, obviously with immigration in the United States. For example, Constellation Brands has come out and made public statements where they were growing 10% - 12% in the United States. They dialed that back a little bit, but that'll be a short-term fix where domestically in Mexico, the rates of consumption are still very strong.
Okay. At this point, let's take a quick five-minute break, and then we'll come back in and continue.
Ladies and gentlemen if you would please take your seats, we will begin shortly. Please take your seats we will begin shortly. Welcome, Mike Leonard.
Good morning, everyone. My name is Mike Leonard. I'm the Chief Innovation Officer here at Ingredion. I know I'm a relatively new face to some members of this audience. I'd like to take a moment just to introduce myself and my background. I've spent my whole career in the food industry, about 22 years now. I'm trained as a chemist and a material science scientist. It plays into a lot of the texture themes that we'll talk about today. I've spent my career mostly in larger B2B and CPG companies like IFF, DuPont, PepsiCo, and Kraft Heinz before spending around five years in the food technology startup world. I was able to lead a company called Motif FoodWorks in Boston, where I served as the CEO for four years, and then served as CEO of MycoTechnology in Denver, Colorado, focused on fermentation technology for alternative proteins.
I've been at Ingredion for just about a year and a half now, and it's my privilege to be able to introduce you to our innovation agenda, building on a lot of the themes that you've heard earlier today. Let's get right to it. The first thing I'd like to help you understand is that we've made some choices over the past year with respect to our innovation portfolio. Today, we're driving a very focused and targeted agenda that's focused on delivering growth in three key areas. The first is texture. We're going to talk about that a lot today. The second is around clean label and healthful solutions. The third is around functional ingredients for sustainable packaging. It's taken several months to consolidate our resourcing and agenda to those three topics that we're driving very aggressively right now.
We're also making investments and establishing external partnerships to extend our capabilities in texture science, sugar reduction, and protein technology, which I think we all understand represent significantly growing consumer benefit areas for our world and for our business in particular. All of this is based on now over a century's and counting's worth of data, proprietary data, which is the foundation of our new AI-driven predictive formulation capabilities that we're building to co-create more effectively and efficiently with customers. You've heard some examples of that already today. We'll go into a little more detail now. This is really a foundational capability that without enough data and the right kind of data that links chemistry, structure, and consumer liking, AI doesn't have much of a role to play. Thankfully, we have a lot of those data, which allows us to very effectively use AI as a development tool.
Let me tell you about our team. Our global R&D team comprises over 500 associates in 30 Idea Labs locations around the world, and we deliver $300 million in annual new product sales. To continue fueling that growth, we're investing 3% of our Texture and Healthful Solutions sales and R&D to expand and protect our portfolio of over 1,000 ingredient solutions. You heard Mike talk a lot about solutions this morning. Innovation is a key component to this. We're focusing our investments on strengthening our most differentiated capabilities in texture science, product development, and food design. Think about customer-driven formulation expertise, which is enabled now with new AI tools, and molecular discovery, which includes plant science and biotransformation.
Some of you may remember during Texture Day last November, we talked a lot about plant science and the role that our plant science program plays in developing new ingredients with new functionality and also improving operational efficiency. All of this is underpinned by our world-class capabilities in process innovation, scientific and regulatory affairs, IP management, and open innovation, which continue to provide a strong foundation for technology development and growth. Coming from the startup ecosystem, having this sort of historical data at our fingertips combined with world-class organization and the types of capabilities that we're investing in here is really a rare combination. We believe it's going to provide us with a competitive edge as we look to continue innovating in multiple categories. Let's talk about our innovation process. How do we come up with new ideas? How do we bring new ideas to market?
The process starts with understanding the unmet needs of our consumers and our customers and their consumers to identify the most critical challenges to address and where innovation can be most impactful. The most underrated question in business is defining what problem are we trying to solve? That's where our insights come into play, and it's the initial part of our process. We can then translate those needs into technical specifications and ingredient performance targets, which we deliver through our differentiated capabilities, including the foundational understanding we have on texture science and emerging capabilities in biotransformation, data science, and AI. Now is where our customers come in. With this deep understanding, we're able to co-create very effectively with our customers at our 30 global Idea Labs locations to co-create and scale up new solutions that deliver new benefits and consumer experiences in a margin-accretive way.
We're doing this even faster than we have before because of our new capabilities and predictive formulation. We do this repeatedly to drive commercial growth and ongoing investment in new technology. The faster we can go through all these stages and with higher probability of success, the more success we're going to have in the marketplace, the more success our customers are going to have, the stickier innovation is going to be for them, and the more benefits we can deliver. We're positioned to innovate and win across the five major food trends that Jim discussed earlier with scalable on-trend ingredient solutions. We're addressing the growing demand for clean label options through functional and native clean label starches and multifunctional flours. We're helping to manage volatility and supply chain risks through egg and cocoa replacement solutions.
We're capturing significant growth opportunities across sugar reduction via our stevia and allulose businesses and through our protein fortification portfolio, which unlocks new benefits for plant protein-enhanced beverages and nutritional bars. Our soluble probiotic fibers and resistant starches provide clinically demonstrated metabolic and digestive health benefits, and we're continuing to explore new investments in this space. We've said before that eating is simple, but food is complicated. We talk about this idea of texture science and understanding structure. To design great products, we need to understand the entire continuum of the eating experience. It starts on the left-hand side of this chart with taste and texture. What do you experience as a consumer when you take that first bite of a product?
That sets the stage for a lot of things that come next in terms of your decision whether or not you like that product and whether you want to come back for more. There's the first bite. There's the complicated physics of chewing and moving that food around in your mouth and mixing with saliva that come into play. We call this oral processing, also known as chewing. It's pretty complicated physics, and we can measure it. Those physics are driven by how food is fundamentally structured, all the way from the carbohydrates, proteins, and fats, those molecules, how they organize themselves together, all the way to the cell structure that you observe when you cut a waffle in half or you bite into a snack product and you look at what's inside. That structure is directly related to the chemistry and the molecular structure of the components.
This is a hierarchy of structures, a hierarchy of physics that we can understand because of our deep knowledge of texture and chemistry. Understanding that continuum of the eating experience requires critical knowledge about how food is structured, the physics of how it's consumed, and how all of this drives consumer preferences. We're investing in cutting-edge imaging and mechanical testing techniques to visualize and quantify that structure. It's one thing to look at pretty pictures and to sort of guess and check to see if you can design good products. If you can quantify that structural information related to chemistry that you can manipulate, related to new characteristics and properties that we can create with ingredients, and then relate that to what people like and come back for repeat purchase, then you've got a winning equation.
We're establishing new capabilities and open innovation partnerships to understand how that structure impacts the eating experience and consumer preference. We're not trying to do this all by ourselves. Innovation is a team sport. We've got critical capabilities internally that we're investing in, but we're also very mindful of where we need to partner and extend those capabilities with academic partners and other innovation partners around the world. This is a particularly hot area for innovation right now. I'd like to bring this to life for you with an example of how we're relating fundamental food structure to sensory performance in a high protein snack formulation. Product structure and morphology drive the eating experience. We've talked about Ingredion having tools to measure and optimize that performance. For applications like high protein snacks, balancing nutrition and texture is a significant challenge.
If anyone here is a high protein snack consumer, you know that there's always a trade-off between getting the nutrition you want versus the eating experience that you might want in a perfect world. If the texture is not amazing, people aren't going to come back for seconds, right? How do you balance those things? It turns out that different formulations, different levels of protein versus carbohydrate, result in different structures and consumer experiences. The picture that we're showing in the center of this slide is actually tomography analysis. Think about X-rays being used to look at the internal structure of food. We can also do this as the food is deformed and moved around. I'll show you an example of that in a second.
Being able to look inside a food structure at the fundamental way that these cells are organized really helps us understand how our ingredients impact that structure. We can tie that all the way back to chemistry and ingredient design. The picture on the left is just a pea protein puff. The picture on the right is a pea and rice protein puff. You can see qualitatively there are differences in the cell structure. The wall thicknesses are different, and the chemistry that goes into that structure is different. We can use this imagery to understand differences in sensory and to relate it to what consumers experience. The pea protein product is significantly more crispy, airy, and less hard than pea and rice protein.
Our sensory data tells us that we can relate it right back to structure, and then we can go back to the lab and optimize the formulation to try to tune the formulation to a point where the target texture is reached. We can use this technology to help us not just understand what consumers experience today, but to help inform future ingredient design. I want to show you some examples of what this looks like and how we actually test the product. You can see the puff on the left-hand side. That's what the product looks like when you take it out of the bag and just about to put it into your mouth. What you're seeing on the right is a computed tomography video, which we'll show in a second, of the internal cell structure of that puff.
These are X-rays looking inside the product, and we can see how that product breaks down under compression. This simulates first bite. It's actually really important to know how food is broken down. It's just as important as knowing how to build food up in a formulation because this has everything to do with setting your initial impression of texture and liking. Doing those kinds of experiments over and over again with different formulations gives us a lot of insight into food structure and eventually food design. This is now a video of a mochi roll that we've developed in our lab. It's one formulation, and it's also a tomography video using X-rays looking through a product at a cross-section of a mochi roll as it's developing, and we can watch the cell structure develop in real time.
That cell structure is fundamental to the eating experience, and you can see in this case, we have big voids that have formed in the product. We can adjust the formulation to where those voids don't form, or we can create even bigger ones if we want to create that crispy shell with a very sort of popover type interior. Without the ability to visualize and quantify what happens on the inside of the product as it's baking, we're pretty much guessing and checking, which is what a lot of food science has been based on over the past several decades. This is a very powerful tool to help us understand what's actually going on with the fundamental structure of food as we're preparing it. We can also look on the exterior of this mochi roll, and we can see how the crust develops while the interior is developing.
This uses the same tomography technique, and it looks like you look through the window in your oven. This is kind of what I see. With this type of image, we can actually quantify it. It's digitized. We can get real data from this that tells us a lot about the texture of that crust and the eventual performance of that crust in sensory applications. This is a new technique that we've just brought online in the past year, and we're generating a ton of data day in, day out about how all sorts of different formulations perform and linking that to sensory performance. Of course, protein isn't just for snacks. The plant protein fortified beverage category is growing at a very attractive rate, as all of you know, and will continue to be on trend in both ready-to-drink and ready-to-mix formats.
Now, if you consume plant-based protein beverages like I do, you understand the trade-offs you often have to accept in order to hit your macros. You'd like to have an experience similar to dairy. You tolerate some element of grittiness and pain to get the nutrition you need. As products get better and better, that tolerance is getting lower and lower. Consumers like me expect a lot more of high protein beverages, and I want the plant-based experience. We've been able to create a protein that's able to balance that trade-off a lot better than we've ever been able to do in the past. Through our knowledge of protein processing and texture science, we developed a unique solution to that challenge called VITESSENCE 200D .
This is a product that delivers excellent solubility, smooth texture, and neutral flavor, which allows our customers to have a blank canvas for formulation for high protein plant-based beverages everywhere. We've had tremendous success with this. It's one of our newest, most successful products. It leverages the combination of know-how for ingredient design plus know-how of texture and how that relates to consumer liking. We've talked a bit about our predictive formulation and how we're leveraging that with customers to accelerate product development and to increase the probability of success of their launches. This is related to our co-creation trend. Today, customers are expecting more from their suppliers than they ever have before. That includes us. They're looking to us to provide complete solutions end-to-end from consumer insight all the way through how do I scale a product up in my facility with my unique process requirements.
That knowledge, it's now incumbent on us to come to the table with customers with that knowledge. By the way, you have to do it at least 50% faster than you've done it in the past because our brand strategy requires fast innovation and high levels of growth. That's what this is all about. That ton of potential or proprietary data that we have, we're generating more and more every day across all categories, helps us to relate chemistry, food structure, and liking. We're leveraging those data with new AI-assisted formulation tools to deliver these winning formulations in less time with a lot less iteration on the bench. We have scientists that are now doing other things than developing formulations and cranking through experimental designs and iterative formulation manually. We've launched this as a consulting service this year in a pilot format. We'll be launching globally next year.
As Mike said earlier, we're very interested to see what potential this capability can have from a consulting perspective. Last example I'll talk about is in the industrial space around molded fiber packaging. Sustainability is a critical driver for a lot of our customers, and we as a scale supplier in this industry have an obligation to help provide solutions to improve sustainability. One area we'll focus on, in addition to the PFAS reduction project Rob talked about, is around molded fiber packaging. One of the challenges around this packaging, which you've probably seen, especially here in Manhattan, if you're out and going to restaurants, fiber packaging is becoming more and more common. It's got its own challenges in terms of manufacturing cost, weight of materials, and also the sustainability of additives that have to go into that material to make it stronger and perform better.
We've developed a range of plant-based biodegradable binders for use in existing operations, so our customers don't need to change their manufacturing footprint, don't need to change the way they formulate, that improves fiber-to-fiber retention, the cohesiveness of the material, improves bonding, imparts greater rigidity and internal strength, and enables lightweighting of the material. At the end of the day, we can eliminate the use of synthetic additives, we can expand the size of the addressable market for these products, and enable real end-of-life claims that are meaningful in terms of biodegradability, recyclability, and compostability. As you've seen, our innovation priorities are well aligned with growing sources of demand and our sustainability drivers.
Hopefully, you've taken away that we're focused on clean label and fully functional ingredients, developing new and preferred textures with our vast knowledge of texture science and data, and we're doing all this in a way that's better for the world, better for the planet, and better for nutrition. As I wrap up here, I just wanted to reiterate that we focus our agenda from an innovation perspective around three key themes. Number one is texture. Number two is around clean label and healthful solutions, and then functional ingredients for sustainable packaging. The investments that we're making in texture science, sugar reduction, and protein technology are really on trend and represent growing consumer benefit areas that are worth investing more in.
All this is underpinned by over a century's worth of data that we keep adding to every day that we can now operate on with our AI-driven predictive formulation tools to make the co-creation process even more effective and faster for our customers. Thanks for your attention. With that, I'll hand over to Jim Gray, our CFO.
Thanks, Mike. It's kind of easy to see why innovation is our second strategic pillar and priority as we go forward. It's also pretty hard to follow, Mike. I hope what you do is take away that what each of our segment leaders are finding in their business are where the growth opportunities are both today as well as tomorrow.
I'll talk a little bit about how we're investing to stay ahead of that curve, but I also hope you take away that there's a medium to longer term possibility as we look at this space in texture and healthful solutions, a $20 billion addressable market. You think about what Mike Leonard and his team are doing to be able to say, hey, where has texture failed today? Where can we actually make texture as a part of taste more successful for our customers in any part of the globe? I think that is fuel and upside as we think about our top line. I want you to consider our business model and that it's quite resilient to both uncontrollable and unexpected changes in the global agricultural supply, as well as the fact that we actually do business in many, many countries.
Those countries can have at any moment in time a wide range of economic growth or recession or stability. From time to time, we're going to face headwinds and challenges. With time, we overcome those challenges and prove that we can actually grow the business. I'll tie together the growth opportunities mentioned previously by my peers, and then I'll tie that to our long-term financial outlook and also share a few more comments on efficiency. Finally, I'll talk about the balance sheet and our capital allocation priorities to drive shareholder return. In the fall of 2021, we put forth our last long-term financial outlook.
As you can see by the check marks and the pluses, we really exceeded our targets despite the fact that we had a global supply chain crunch in 2021, the invasion of Ukraine and the subsequent run-up in the global inflation of the cost of corn, as well as customer destocking in 2023 and 2024. While we faced these challenges the whole time, we were repositioning the product portfolio and building organizational capabilities to address changes in our business environment. 14% average annual operating income growth has been driven in part by the growth in the markets in which we compete, but also by building new capabilities to better manage revenue development and cost containment. Many of those have been commented by Jim and my peers today. One of those is we invested in pricing centers of excellence. We've talked about hedging tools.
Eric has led both supply chain as well as procurement teams to really build out these teams so that we can manage the business more consistently. If we look back to 2022, Ingredion's profit, cash generation, and ROIC figures have all increased. Now you can say, wait a minute, Jim, net sales have gone down. Which does that fit with the growth model? For some of you listening to our story who may be new, our pricing practices to customers generally reflect up and down movements in the value of the underlying raw materials such as corn or tapioca. I'll call out here just on the bottom left that over this short time period, corn values decreased about 30%. Clearly, sales didn't go down 30%. In addition, in 2024, it is reflecting the sale of our Korea business. That's kind of taking away from sales in 2024.
What we do, given everything's moving in the raw material market, we have this very agile revenue generation model with our customers. We're very straightforward with our customers about changes in our costs. Internally, we really strive to manage gross profit dollars per ton. We watch gross margins carefully as a metric for overall customer and product portfolio potential. Some of the profit improvement over the last three years has really been driven by the team's efforts towards operational excellence. I think you've heard a lot about that today. What our operations team has done is taken an owner's mindset to continually find cost savings to offset inflation. At the same time, they're improving service delivery. You heard Jim talk about perfect order, as well as as we continue to invest reliability capital, we're upgrading and optimizing capacity, which then pushes out capital investment.
About three years ago, we led the centralization and expansion of our global procurement team. Those efforts today are contributing tens of millions of dollars of savings to offset inflation and drive what we call net structural savings. Net structural savings, Eric's team has implemented this throughout the company globally. Finance separately tracks it. Basically what we're doing is very much trying to say if we have inflation in our non-raw material COGs, how are we doing our best to try and offset that and level that? We also believe that investing in the capability during normal business environments enables actually more resilient performance when the business environment proves to be more challenging. The business environment becomes more challenging, and that's not the time to say, oh my gosh, we need to do cost cutting.
You need to actually do the cost cutting now as reflected in our Cost Smart program, which we will exceed our $50 million run rate savings target. Most of that savings in 2025 will come from our supply chain and operations team. You need to be thinking about all the time about how you can re-engineer your business and make it more resilient and lower cost when both business is good as well as when business becomes more challenging. You're going to see us continue to invest in digital solutions through AI. We're going to be thinking about enterprise productivity because AI is not just a tool. AI is you have to step back and think about the entire process. Where's the information coming in? Where's it being converted? Who's touching it? Who's making decisions? Can you actually significantly shorten and/or accelerate that process, therefore using less organization resources?
We believe this combination of focus on growth and pursuing operational excellence leads to strong financial results. Versus our peers, we've delivered a better net sales change. We've expanded margins and we've grown EBITDA more. On a comparable value measure, valuation measure, you know, our stock trades just above maybe eight times enterprise value to EBITDA based on trailing 12 months in 2024. I'd highlight maybe that this is slightly lower than that peer comparison, which I believe invites a further look into what we offer as a company. Looking forward for the next three years, we anticipate low single-digit net sales growth and adjusted operating income growth in the 5% - 7% range.
Although our forward growth outlook is not 14%, which we have stated was partially driven by capability building, we have confidence in the growth investments that we have already started, which will commission in 2026 and 2027. Let me take a minute to expand on assumptions in our outlook. We hold corn cost constant. We also hold pricing constant. We hold FX constant. Right now, even though I may be able to look at a 2026 futures curve for corn, when we plan 2026 and 2027 in our outlook, we're holding that constant today to 2025 levels, to 2025 levels.
That's important because therefore the change and the improvement that you see in the overall algorithm, the outlook, is actually driven by continued upgrading of the products that are in our portfolio and continuing to work with those customers that value innovation, that are going to value the solutions that we bring in the future. On an adjusted EPS basis, we have assumed repurchase on a kind of historical average over the last four years. The business generates enough cash that we should be looking forward and assuming that, and you should be assuming that we'll be disciplined in at least repurchasing shares. Maybe then to address, what potential risks are out there? Our outlook incorporates tariff changes that we've seen thus far in Q2, through Q2 2025. We've noted that in the vast majority of our business is actually made locally and sold locally.
Our geographic diversification has turned out to be a benefit in that, you know, we really aren't exposed as much to tariffs. We can't anticipate kind of further tariff changes or revisions to trade agreements over the next three years. We're kind of watchful of those developments through specific U.S. country pairs. Those actually may create, oftentimes everybody talks about risks, but we also see opportunities as well because some of our global competitors' manufacturing footprint isn't the same as ours. We're watchful both of is it a risk, is it an opportunity to whether our trade volumes or pricing and our margins. Ingredion's free cash flow generation runs about 50% - 60% in that range on average over a period of two to three years. I like to call that out because it's really kind of a global corn cycle.
Corn price fluctuations really depend on both, on really the size of the U.S. and the Brazilian crops. Those may take one to two years to rebalance. We may see corn rise up, corn may come back down. Over that time, we have to invest our working capital or we're going to get cash generation from our working capital. It's really mostly, if you look at our balance sheets, either in receivables, as we're passing through a higher price or lower price product to our customers, or the value of our inventory, which is generally finished goods inventory value. That moves up or down with corn values. In 2024, you know, as corn values decrease, our net working capital change generated excess cash flow and enabling a significant buildup of cash. Currently, our balance sheet, we have really no commercial paper outstanding and really only long-term debt.
We are comfortable with a long-term debt to EBITDA ratio of greater than two times. I would say that we have creditworthiness capacity up to kind of three and a half times if an M&A did present itself and we thought, boy, this is strategically right and this is also at the kind of the right type of financial return for our shareholders. Our capital allocation priorities are balanced between high return growth opportunities and returning value to shareholders. Our first priority for many of the past years has been organic growth investment to ensure that we have the capacity to serve future customer demand. Why we like organic growth? One, we usually know the plants and the people and the place where we're adding capacity. It tends to be lower risk. It also tends to be supporting capacity on a business that we already have a customer base.
We tend to see really high returns on organic growth investment. Just as an aside, you know, in the food ingredients space and the pharma ingredients space, when customers select a supplier, you know, they have an expectation of quality, availability, delivery service, you know, and value to meet their 24/7 demand requirements. Those requirements often lead to a very low turnover of customer buying in our industry. Once they've sourced your plant, that is generally the habituation you see in the buying. Therefore, organic growth investments for us lead to kind of deeper supply relationships with customers, maybe adding new customers. When we add those customers, they tend to be pretty sticky. Also, we always look at M&A. I'll speak to it in a minute. We're actually looking at it so that it's accretive to our strategic growth.
Finally, in terms of returning capital to shareholders, it's an equally important priority. We do have a very consistent dividend, and we've been able to grow that dividend over the last 10+ years. We look at share repurchases as opportunistic relative to both market volatility and our mid to long-term view of the value of our business. We're always running a DCF. We have an intrinsic value, and we're going to look at the stock price relative to what we believe is the future growth where we know we're investing capital, where we have high confidence that our profit is going to grow in certain countries and certain products. We actually look at share repurchase not on a kind of mechanistic basis. We're going to look at it opportunistically. We take a strategic and disciplined approach to M&A.
I think maybe first to recognize is that the global ingredients and solutions industry is not fragmented. There's not a lot of little roll-up opportunities. For those opportunities in our pipeline, we're going to first have, I'm going to say, the commercial and the general management leadership take a view that it's strategic. How does this capability add to what we want to do and what our market position is in texture and healthful? How can it have kind of a multiplicative effect on our competitive position? Then we look at a disciplined financial approach. I believe we've demonstrated success in the past in finding synergies and executing on the integration plans. I really think that's Ingredion's powerhouse is that we plan the business. We know what we're going to do for the first, second, and third year.
Different functions have to come into place once we've actually acquired a company and brought it into our culture, into our business. We target a return by year three of at least a 10% ROIC. That includes at least some time for synergies to develop, but it's not so far out that you can't hold us accountable for, you know, how did that M&A, how did that M&A perform? We also look at a variety of other financial KPIs, but I think that an ROIC relative to our WACC does indicate that we're going to seek economically value-creating opportunities, even though our ROIC today is more in the kind of 14% range. If we can deploy capital and we know that it's going to be deep in our strategic competitive mode, and it's also going to return value to shareholders, we think that those are really good opportunities.
Finally, I think we have a consistent track record of returning capital to shareholders. As I mentioned, first, growing operating income is the best way to create future shareholder value. Just driving up consistent op income, being disciplined about adjusted EPS growth turns out that I think that's what has driven the performance in the last five years. Jim and I can lament together on our multiple, but we're going to stay very focused on the top line, growing adjusted op income, and being disciplined in our fiscal policy. We're going to return part of our cash each year through a dividend. Finally, as I mentioned, we'll pursue share repurchase, but we've been quite consistent in the last four years in share repurchases. With that, I will thank you for your time. I'll hand back off to Jim to wrap us up.
Thank you, Jim. Okay, we're at that moment where we're at the end of the presentation and we're going to get ready for the Q&A. I just wanted to thank you again for your attention and hopefully what you've heard, not just with the messages that we've delivered about the transformation and about how balanced and how strong of a company that we are, but how well positioned we are also for the future. We think that all makes for a very compelling investment thesis. Specifically, it's because of who we are in the market. We're a market leading, again, very diversified geographically, diversified with customers, as well as with our product lines, and are increasingly positioning ourselves to engage with customers, providing solutions. Those solutions will, we believe, drive higher rates of growth, as well as higher margins over time.
We're a very, very trusted and well-established supplier to a growing global customer base. As Jim just described, we're in a very strong position right now financially from a standpoint of the strength of our balance sheet, as well as the performance that we've delivered in the last three years. We have generated, which is a sign of any great company, a consistent and increasing amount of cash flow. We believe that is insulated by the business model stability that we've described across all three segments and the competitive moat, which we believe we have deepened over these last three years. I think we've also proven that when interest rates were extremely low, a lot of companies chased M&A at multiples that have since come down. Now they have faced a higher interest rate environment where we've stayed very disciplined, found opportunities to invest organically with target disciplined hurdle rates.
That's all driven improved shareholder returns. In addition, we have a very experienced and deep leadership team. Not just at the leadership level, but below that, our culture, I think, is something that really has sustained us. We have great values, a great purpose, and we always lead with integrity. That's another reason why I think Ingredion is a great investment of choice. With that, I'm going to turn it over to Noah, and Noah is going to moderate all of you. I'll field the questions, and we're going to ask everybody to come on up right now to take the Q&A. I'll sit next to Jim.
Okay, as we're getting situated up here, we'll have about 30 minutes for the Q&A. I think we could probably get to everybody. If we have time, we'll go around for another one. We'll start it off now. Sal?
Thank you very much. Salvator Tiano, Bank of America. I'm just wondering, with the focus on innovation R&D that you discussed before, have you set any specific financial targets, metrics, or benchmarks for your R&D investments? Is there any, for example, compensation scheme tied to that?
Yeah, let me turn it over to Mike.
Sure.
Yeah, we do set targets internally for annual new product revenue from new products. That's built into our annual bonus scheme. There are components of our compensation that are based on our ability to deliver against top line growth from innovation. We also benchmark the organization against the competitive landscape and our peer set in terms of project cycle time, how quickly we can develop new products, how quickly we can be ready for product launches two, three years in the future. Readiness targets. Plus, we also have a stage gate process that helps us to manage risk and spending as we run projects. All the metrics you'd expect from an R&D organization for a company like Ingredion, we have in place.
Top line growth is a key part of our incentive scheme, not just for the innovation team per se, but also as part of our go-to-market team's incentives as well. We're all working together.
Obviously, solutions, right? We're going to be measuring, and we are measuring solutions because we have that definition, strict definition. From a standpoint of building that into incentivization, Jim is working on the governance, the financial governance model, which we, by the way, had in place for specialties. For those of you that have covered us for a long time, you know, we went back from 2009 to 5% specialties to, I think, 34% before we transitioned to the resegmentation. That was a strict governance process that Jim had in place to track it. We had incentivization in place for that. We're evolving now for the same for solution selling and what constitutes solutions.
We're good to end here. If I could just remind everybody, if you could just state your name and your company, just for the record, it'd be great.
Okay. Ben Theurer Barclays. Just following up a little bit on the capital flexibility and the opportunities of growth. If we take a look at your balance sheet and you've highlighted a very low leverage ratio with a target that is higher. At the same time, obviously, the growth opportunities within texture and health resolutions. Just wondering, as you look into the balance between M&A or organic growth investments into TNH, just given the flexibility of the balance sheet, how could you potentially accelerate some of the growth in TNH using just the strength of the balance sheet, be it M&A or investment?
Yes. I think it's a great question because we've often thought about our capital budget. We've highlighted that we like to put about $80 million- $100 million a year towards organic growth opportunities. That tends to be kind of a nice pace for setting up the type of growth that we're looking for and really texture solutions part of the business. Please understand, we may have a lot of discretion and flexibility, right? If we found that we had two, three, four plant investment opportunities and they were going to overlap, then we'll come back and say, hey, we're changing our growth investment pace. We'll reflect that in terms of how we're thinking about tapping the balance sheet and/or actually the cash flow generation. I think organic growth, we really shouldn't be kind of constrained by necessarily what's on the balance sheet.
It's really actually, do we have the people to actually make sure that we're building the type of asset that we want with the right type of process if we have partners involved with the right type of partner structure? Maybe on the M&A side, to the extent that we actually see that we have M&A, particularly in other texture solutions or healthful solutions that can actually accelerate kind of the strategic position that we want to be in. I think we've always said that we'll take that approach. Even more so now, as we've, I think, really tightened our portfolio, we're seeing those opportunities in that broader space of texture and healthful solutions, that $20 billion market. That's probably our first priority.
Yeah, I would say we're opening up the aperture as it relates to all the things that can influence texture beyond starch and hydrocolloids. We see trends towards, obviously, clean label ingredients and process technologies. Our aperture as it relates to how do we become that comprehensive go-to provider for enabling texture solutions, along with the fundamental understandings of the why behind it, which Mike talked so well about, that will also come into the consideration set for M&A, for example. Hopefully that gives you a good feeling for where we're looking at deploying our balance sheet for growth through M&A.
Kristen?
I wanted to ask about your other portfolio because you've called out both protein fortification and sugar reduction in your texture opportunity set. Previously, I think we had a target where we were looking at break-even profitability in that other segment. Just wondering, how should we think about the growth of that other segment as it relates to the solution set for protein fortification and sugar reduction?
Let me ask Jim to just first remind everybody about what Other is comprised of and how that's evolving. We can maybe have Mike talk about what's happening in protein, and maybe Rob can talk about sugar reduction. Why don't you frame it first?
Right. Our all other grouping of our reporting is our Pakistan business in which we own 70%. It's our protein fortification and it's our sugar reduction business, which is primarily PureCircle. I think over the medium term, each of those businesses are both growing and kind of improving the overall bottom line. As we look forward, right now, I think we have some guidance that we're trying to get to break even. Continuing to lessen the loss on the protein fortification, growing both the top line on both the protein fortification and the sugar reduction businesses significantly, and then having our normal kind of expectations for a Pakistan business. Let me turn it over to.
There have been significant improvements the last couple of years in our protein fortification business, which Jim's right to highlight because we have highlighted it publicly that it has been loss-making. That being said, we're mitigating the loss each year, each successive year. Mike, under his leadership, really has driven a lot of the R&D innovation for the preferred products. Why don't you talk a little bit about the growth that you're seeing, the pipeline that you're seeing, and how the R&D pipeline is looking there?
Sure. There are significant tailwinds behind protein fortification as a category, and we're enjoying the benefits of that. We've grown the business significantly over the past two years and have taken advantage of the capacity we have. We have better fixed cost absorption, terrific top line growth, and we believe that protein fortification, in conjunction with other elements of our portfolio like sugar reduction and the texture portfolio, will continue to represent a pretty strong area for growth for consumers. We don't think that the demand for balanced nutrition and especially a focus on protein is going to wane anytime soon. We talked about 200D as an example of innovation in this space. It's our newest product and has really exceeded our expectations less than a year after introduction. We're continuing to look for ways to diversify that pipeline to address consumer needs that balance nutrition and texture.
The biggest challenge with a lot of these products, if you want to put a meaningful amount of protein and a nutritionally relevant amount of protein in these products, is how do you maintain that desirable texture while you fortify? We're making significant advancements in that space. We've been very happy with the growth that we've seen and are doing our best to keep up with demand at this point.
Yeah, I think sports nutrition, meal replacement, the GLP-1 diets that are driving the protein fortification, all very positive. Rob, why don't you take sugar reduction and what we're seeing there? Yeah.
I would just say, first of all, from a trend perspective, it is truly global, right? You think about, I mentioned even LATAM, front of pack labeling, added sugar. It's a global trend. I think to Jim Gray's point, it's in an accelerated growth period. We're over-investing in people, resources, R&D, and actually products as we go forward. You think about our portfolio today, as mentioned, we're the largest stevia producer in the world, our allulose investment, look at fiber. The beauty of it is when you take sugar out of a product, typically if you replace it with a high-intensity natural sweetener, there's a piece of that that's missing, right? That's that texture buildback. It's a beautiful combination with texture. You pull something out, we deliver the sweetness in a natural format, and we build back the texture with our other portfolios, including potential new fibers as well.
We're very excited about the growth of that. The trend will continue. I think we're positioned in the next three to five years to capture that trend and truly be the leader in global sugar reduction from a food ingredients and solutions point of view.
I think, as Rob just said, when you replace sugar, obviously, you need the high-intensity natural sweetness to build back and replace the sugar, but you also need the mouthfeel. That's where the synergies between us being a texturizing company as well as having the high-intensity natural sweetness is very synergistic.
James.
Hi, James Cannon, UBS. I just wanted to ask on the innovation platform as you try and move that to more of the innovation as a service consultancy format. What do you think differentiates your platform from any of your competitors? Maybe on the M&A front, is there anything in the portfolio that you could specifically call out that you could stand to bolster through the M&A market?
Why don't I ask Michael Reardon to take that from a standpoint of how we're approaching that, that is different from others and different this time for us as well.
Yeah, I think some of the competencies that we have that would differentiate us from some of the others is in the area of clean label, deep expertise in that area. I think we've also built over a number of years a very deep understanding of consumer insights and our ability, and we've been analyzing that for some time on the consumer liking and linking that back to our texture. I think we're pretty advanced in that area. We're obviously looking to scale it with some of these AI tools. This gives us the right, I think, and we've got the respect of the industry to really go out and work closely with a number of customers. Customers are coming to us as that go-to provider to look for some support in launching their products.
We've run some pilots already, and we've had some very, very positive feedback in our ability to significantly reduce the launch time. What happens traditionally, companies do outsource the early stage of launches, but where it fails very often is scaling it up industrially. Companies come with a nice prototype, but to actually scale it up in the affordability of industrial ingredients to actually bring something successfully to the market, that's where sometimes it falls down. We have that expertise along the entire value chain, and the probability of launching something successfully in the marketplace is increased because of that competency. We've done pilots. We're piloting around the world. We've started in the U.S. We're now looking at some other markets.
Sometimes the needs and markets are different, and we're just taking it step by step to see how do we get the balance right in terms of being able to scale it correctly. What's the best way to monetize it? Always thinking in the mind of the customer, why it creates value for them and why they'll keep coming back to us time after time so that, you know, it's a win-win for both the customer and ourselves.
Yeah, I want to be clear, it's not all contingent upon the service model. The service model is one complementary aspect to the overall solution selling. I would say what's differentiating us today is the amount of training that we've put in place with the go-to-market teams globally and how they need to pass a certain level of proficiency in relationship to a solution selling certification. We actually have the person that I was telling you about that reports to Nancy, who's been leading this for us, has developed a whole certification process for proficiency in how to actually sell solutions. We've invested deeply in that. There's role-playing with customers. There's what's called a digital brief that you guys could probably do better justice than me as to what constitutes that. Mike Leonard said something very profound actually during his presentation.
I'm going to ask you to say it again because you're going to be able to say it better than I can. That is in R&D, one of the most important but most difficult things is upfront defining the problem, right?
The problem to solve.
The problem to solve. We have put a lot of work in that digital brief upfront part of making sure our go-to-market teams understand how to engage a customer to not just try to bring a solution upfront, but to define the problem upfront so that we can deliver and design the right solution. There is all of that that I think we are 18 months into this and we are feeling very good about what we see. This service model is something that, to be quite frank, we did not know, do not know exactly how big it could be or what it will contribute. We think there is going to be a high percentage where we are going to get the ingredient sale along with it, of course. We are not actually holding customers' hands to that.
There is a fee for service that will compensate us, make us completely whole, and maybe some other things that they are willing to do in response to speed and also probabilities of success. We are very excited. This has also unleashed a lot of excitement in our go-to-market teams as well on the way they sell.
Pooran.
Hi, Pooran Sharma from Stephens. Just wanted to revisit the comment about kind of shifting away from HFCS over time and finding other uses for the grind. I believe you mentioned there, you know, you're in paper making, kind of sustainable packaging. I was just wondering, A, over the intermediate and longer term, what do you think that mix can get to? I'm looking at page eight on the deck, and I think 2024 revenue had about 19% industrial applications. I was just wondering, as we think, you know, intermediate term, longer term, how much further can that go up? B, as I think about the margin potential of these products, I know texture and healthful solutions have margins that are twice that of core. How should I think about the industrial applications and these sustainable packaging margins?
Let me have both Rob and then Jim Gray tag team on this one, but let's have Rob go first and then Jim, you can.
I'll say initially, as we mentioned, it's approximately 10% to slightly under that in terms of total revenue today. Maybe the history, Jim, you can comment, but it was probably a lot higher than that five to ten years ago. Over time, as that demand has shifted away from high-fructose, we've pivoted towards, as you've mentioned, industrial applications in starch, so we can use that stream to make more. We just made an investment in Cedar Rapids for $50 million to put in another starch dryer. The other opportunity there is around liquid dextrose. Instead of making that fructose product, we'll use that. Mike's working on a fermentation strategy in that space as well. Enzyme manufacturing, green chemicals. Those things are happening as well. It has not been a black swan event where it's dropped 30%. It's kind of been this 1% - 2%.
I think for ourselves, this focus and pivot of keeping our plants full. From a profit point of view, if you saw the mix, the margins are very healthy right now in our US-Canada business, right? They're not double or double below where maybe TNHS is as well. We're at some fairly profitable levels. The idea is to perhaps replace that, but have it on more of a consistent basis, in a growth category. I don't think we're looking to double the margins in that particular space, but if we can find opportunities to sell those products at similar margins consistently, and a lot of those deals too are long-term deals, we may be colocating as well and provide that predictability, which I think again is very important from an investment point of view.
Rob, obviously, to answer the question, we're obviously trying to control what we can control to mitigate our own exposure over time to that. Rob also said something during his presentation that I want him to repeat in regards to what we see also happening in the industry that also sees the same challenge and some of the steps that are being taken. You mentioned, for example, the Sustainia investment and just give them a feel for size of how significant when and if that materializes, and we understand it is progressing, but what that does to the industry as well.
Yeah, if you think about that opportunity, which we participated in the evaluation of our own Biomag, which is to make plastic bottles and things like that, it was approximately 800 million to $1 billion pounds, right? Which, depending on who you talk to, could be 3% - 5% of the full industry with what we've seen longer-term plans to double or triple that size. When you think about, hey, a 1% - 2% reduction, as I said, it's not necessarily about closing any plants. It's about what can you do with your plant differently? Those opportunities are real. Moving forward, these colocations where they're tapping into efficiency, energy, water, and all those things, and you're going to supply a pipeline over them to make these products.
If that demand continues, which we think it will, we think that we can offset the potential reduction in HFCS along with some of the other things, like we mentioned industrial, but also on the food side, products like glucose, it's actually not shrinking, right? It's doing very well in the marketplace as well. We feel comfortable keeping that supply-demand balance. The other one portion you mentioned around margins as well, these are usually big fixed cost absorptions. Our plants are pretty big. We need to maintain that level to keep our cost level at the same level as we make other products in those plants as well.
The other thing is, you know, all of us are obviously most familiar with the big kerfuffle in relationship to the Coke situation with HFCS, right? Coke handled that situation, we thought, extremely well with the statement that they then issued in relationship to HFCS, obviously being safe, a very important and affordable economic ingredient as well. Rob, you're very familiar, just explain the outlook for HFCS from a standpoint of how established it is and what your sensing is in relationship to the threat of sugar from a standpoint that you have.
Yeah, it's obviously a very large market for the industry here in the U.S.-Canada and for Mexico as well. I know there's this portion that, hey, refined sugar is used in Mexico. They actually use HFCS in their products down there as well. I think as it goes forward, I don't think there's intention to move away from high-fructose corn syrup. Pepsi has tried this, Coke has done it, it's kind of a niche product. Theoretically, there's just not enough refined sugar to ever come close to replacing high-fructose corn syrup. In fact, you would probably have to go and import sugar from Brazil, which now is a 50% import tariff, and you're actually going to hurt U.S. farmers, right? You think about that balance as well.
Corn grown in the Midwest, used by our industry in the production of those products, it wouldn't make sense to replace that with refined sugar as well. There's not only maybe a theoretical approach, but there's also an economic and what is actually an available approach to replace that product. We monitor it very carefully. Consumer preference drives that. I think I feel very confident about what we're doing within Ingredion's control to make sure that our plants are full and looking at those pockets of growth in the industry.
Heather?
Heather Jones with Heather Jones Research. I wanted to ask a clarifying question on assumptions for the top line. You had mentioned that you're holding price flat. Of that 2% - 4%, do you have a rough idea of how much of that is volume versus upgrades and the visibility into the upgrade side? You said you're not assuming economic weakness. There are some economies out there that are obviously struggling right now. Are you assuming a recovery to normal or are you assuming what we have today is the status quo for your assumptions?
Yeah.
Thanks.
Maybe I'll take the first. With regard to, again, it's probably most relevant within texture and healthful because that's the biggest growth. The underlying markets that Mike and the team are competing in, from a volume basis, those are probably 2% - 2.5% to 3% type of volume growth. One, there tends to be a skew towards populations in the world that are both larger as well as growing faster. Two, there's also a skew towards younger populations. Rob has highlighted those, but also across Asia, across Africa, and some of the Middle East where you have younger populations and kind of rising household incomes, which tends to drive demand for packaged foods. The two big drivers there are probably, that's a, probably 2.5% or so. The rest is really driven by upgrade, right?
Just as Mike mentioned, hey, if we're going to sell more clean label, clean label is a higher price per ton to our customers than, say, a PO waxy starch versus an acetylated starch versus a native food starch. What we see, whether it's in developed countries pulling even more functional products that have to abide by wellness and labeling and a lot of the trends that Mike and Jim highlighted, or we just see greater functionality moving from just a native food starch, which doesn't have a lot of functionality. It's affordable, but doesn't have a lot of functionality. We move to that first modified level. We really see an uptick in terms of the value that the customers demand. That's really that mix as we see that country by country, product line by product line, that's really driving.
I can add a couple of things.
Yeah.
Sure. The other thing we can do, and I think you referred to that, is we're able to correlate our pipeline to future outlook in terms of what we think. I think in the 4% - 6% range for texture and healthful solutions, we're pretty confident looking at the pipeline, just like you said, Jim, in terms of what percentage of that is due to market growth and reformulation, probably around 3%. 1% of it is coming from the innovation, 1% is coming through market penetration. We are pretty confident when we look at that pipeline, being able to grow at those sorts of levels.
Yeah. The only other thing that I would say is, obviously in the near term, we're all observing what the unknown impacts of tariffs might be. I don't think the full effect of that has made its way through the economy at large. There are always going to be some short-term, you know, watch-outs. Long-term, we feel the market positions that we have, how we're positioned, the competitive advantage, and our strategy and our ability to execute, and how we view the trends and how we're positioned, we feel very confident long-term in relationship to our ability to deliver on the growth targets.
Yeah. Maybe the second half of that question was kind of which economies around the world and where they're at. I think someone asked a little bit about Mexico. Right now we're just looking at Mexico today in 2025 and seeing some economic slowdown, can be related to remittances, which Rob had highlighted. I think we have to be able to say, hey, if you look forward over a three-year horizon, how have various economies performed? We kind of would assume a return to an average type of historical growth, right? Maybe that'll be new news, right? We highlighted as a risk trade agreements, who knows what that posturing can be 2026 and 2027, right? Just stay awake.
Good. Charlie?
The question I have is back to the stock market issue. Your multiples that you were showing, Jim, were all based on TTM analysis. When you go forward, your multiples are even lower. It's probably in the sevens. You look at your free cash flow yield and you look at your deleveraging effects. Is this industry ripe for some consolidation or is it just going to be bolt-on acquisitions or is it going to be some other distribution of dividends or what's the game we're playing? You are entering a new financial format that's different than it's been a couple of years ago when you were sort of adding on pieces of the puzzle to reshape the company a bit. Now you're in a game of obviously financially integrating these businesses and getting the company on a trajectory of some form of steady improvement.
I don't quite get what the shareholder equation is yet because you are in a deleveraging mode that's quite remarkable. It's good. I'm not saying it's bad. The question is how do you, and I'm not trying to be negative. I'm trying to understand how does, what's the, what do you want to accomplish? What are aspirations maybe that you'd like to see realized as a result of this?
Charlie, I may not have all the answers to your questions, but I'm going to state the one that's most obvious, I think, to us, right? The reason that we wanted to create a global Texture and Healthful Solutions segment is to focus on the addressable market opportunity that we think is, you know, around the globe, right? Traditionally, we've had local Idea Labs. We now have a centralized R&D team, you know, led by Mike. We have a global innovation focus across that, which is, you know, we're terming solutions. I think that allows us not just to sell the next texture, but to actually get into other products that offer either fiber fortification or other means of texture solutions within specific categories. I think it allows us not only to go deeper within certain customers, but also into adjacencies that we will invest in all day long, right?
Right now, what we can see is an algorithm for Texture and Healthful Solutions, which is 2026 and 2027. Trust me, the upside that these teams are working on, I think, is beyond that, right? We're just at this point, say this is what we can see. We're thinking about our innovation. We're thinking about our customer pipeline, as Mike has highlighted. We'll use M&A to accelerate that. I think that profile of what texture and healthful looks like globally is really, I think, something that we're all striving for and is part of our purpose that we, if a team has outlined.
I think that, you know, what we're striving for is to continue to execute extremely well and leverage the assets that we have to continue to drive growth at a higher rate and increase. Jim and I were talking during the break about just accelerating the probability of success, which we think we can do with texture and healthful solutions that will grow volumes, higher margins. The other thing is, and this is important, there is an opportunity in our business to further increase fixed cost absorption through volume growth and a tremendous positive lever, we believe, from a standpoint of incremental value creation. At the same time, look, we are going to look to use our balance sheet to grow where we think M&A at a reasonable value, at a value where we can create value long-term for shareholders, you know, makes sense for us.
That'll be part of the equation going forward as well.
This brings us to the end of our Q&A session. The presenters, as well as our extended management team, will be around for lunch. Please join us in the next room for an interactive lunch. Thank you.
Thank you.
Thanks.