Welcome back. My name is Christopher Barnes, and I'm part of Deutsche Bank's U.S. Consumer Packaged Goods team. It's my pleasure now to welcome Newell Brands to the stage. To start, President and Chief Executive Officer, Chris Peterson, and Chief Financial Officer, Mark Erceg, will lead us through a presentation, after which we'll get into some short Q&A. With that, the floor is yours.
Thank you. It's very exciting to be back here at Deutsche Bank. Last year, we were here, actually in this very room, and we unveiled a new corporate strategy. Today, I want to spend a little bit of time talking about that strategy, what we've done over the course of the past year, and where we're headed, and why we believe we have a significant opportunity to create shareholder value as we go ahead. Before I get started, today's remarks will contain forward-looking statements which involve risks and uncertainties. I refer you to the risk factors in the slide and our SEC filings. Today's remarks will also include non-GAAP measures for which explanations and available reconciliations can be found on our IR website. Let me start with a little bit of an overview of Newell.
Newell is an $8 billion consumer products goods company with about $850 million in EBITDA. We have 25 brands that represent 90% of the company's sales, and although the company has on-the-ground operations in 42 countries, the top 10 countries make up about 90% of the company's sales. 63% of the business is in the US, and about 37% is international. We organize those brands into three segments: a Home and Commercial Solutions segment, a learning and development segment, and an outdoor and recreation segment. And you can see from a geographic split, EMEA is our largest region outside of the US, followed by Latin America, Asia, and Canada.
Key messages for today: A year ago, as I mentioned, we initiated, actually on this stage, a multi-year turnaround plan for Newell Brands based on a comprehensive, capability assessment and a clear set of where-to-play and how-to-win choices, and designed to accelerate Newell's top-line growth, expand margins, and improve cash flow. Since that time, we've strengthened our, our team significantly. We've adopted a high-performance, high-accountability culture. We've put a new operating model in place, and we've continued our simplification journey. The new strategy is beginning to yield results, and I'll talk about some of those today. We have improved the rate of core sales growth trends. We've expanded operating margins and gross margins, and we've turned the company back to strong cash flow. We remain very confident in where we're headed, going forward in terms of shareholder value creation.
So let me spend a minute on each of those. This was the capability assessment that we unveiled a year ago. We identified 11 capabilities that we thought were critical to win in consumer products. We then subdivided these 11 capabilities into, on average, about five sub-capabilities each, and we did a data-based assessment of where we stood as a company versus best-in-class competition. From that capability assessment, we put in place a very specific and deliberate, integrated, where-to-play and how-to-win strategy, which is described here. Five key where-to-play choices. Number one, we wanted to distort investment resources to our largest and most profitable brands, the 25 brands that, that I mentioned that account for 90% of our sales and profit. We wanted to expand distribution of our brands, into faster-growing channels and winning retailers.
We wanted to focus our efforts on the top geographies, the U.S. and the top 10 international markets, which also represent 90% of the company's sales and profits. We wanted to premiumize many of our brands and focus disproportionately on mid and high price point segments because that's, in our categories, where the bulk of the profit is made. We wanted to focus our marketing efforts and our consumer understanding efforts specifically on Millennial and Gen Z consumers, which was a change from the past because Millennial and Gen Z consumers now represent the majority of the purchase dollars in the categories in which we compete. Underpinning that from a how-to-win standpoint, we recognized that we needed to make significant improvement in the company's front-end commercial capabilities. We invested in proprietary consumer understanding with an intent of developing superior new product innovation.
We have significantly focused on improving our brand building and brand communication capability, improving our go-to-market capability, building a global, scaled, and advantaged supply chain, and becoming a high-performance organization. From that strategy, we believe that there is a significant opportunity to drive meaningful shareholder value over the next several years, both in terms of top-line acceleration, margin improvement, and strong cash flow. In terms of top-line acceleration, the areas that we're focused on are new product innovation, as I mentioned, pricing and revenue growth management, new business development, and international as a growth engine. On the margin expansion side, which Mark will talk about in a few minutes, we have significant opportunity across our manufacturing network, our procurement, our distribution and transportation, and our overheads.
On the cash side, we believe that this business is capable of generating strong cash flow, and we continue to have an opportunity to take working capital out of the system by reducing the company's cash conversion cycle, which we believe can lead to outsized cash flow results. Since we unveiled this strategy a year ago, we've been doing a number of things. I mentioned that we've been focused on strengthening the team, adopting a high-performance, high-accountability culture, putting a new, more efficient and effective operating model in place, and continuing the simplification agenda. Let me just spend a couple minutes on what we've done... This is the executive committee, the top 12 or so people in the company that are part of my executive team.
This team, we've spent a considerable amount of time upgrading talent on this team. Four of the people on this team are new to the company in the last 18 months, and I believe we now have an outstanding leadership team to take the company forward. We've also looked at a level below, at our VP and above population. When we started the strategy and the operating model structure, we looked at the VP and above population. Over the course of the last 12-18 months, we've taken 22% of those positions out of the company and as a streamlining and simplification action. Of the remaining VP and above positions, we've replaced 24% of that population.
So half of our VP and above population from 18 months ago is no longer effectively with the company when you add those together. This was all done in the spirit of raising the bar and getting the right team on the field to lead the transition. On the right, we've also made a meaningful change in the marketing function. The first choice that we made was to implement brand management. The company was not operating in a brand management model. We have now instituted a brand management model. Each of the top 25 brands in the company have a full brand management team with brand strategies that are deeply embedded with consumer understanding and are working to develop innovation pipelines against those.
From that brand management construct, we've implemented exceptional performance standards, where we clearly spell out our performance expectation for those brand teams. And as we looked at the marketing talent that we had in the company, we had an opportunity to upgrade, and over the course of the past year, we've changed 50% of the talent and put a significantly stronger team on the field. We also implemented a new set of values in the company to try to change the culture to be more of a high-performing, innovative, and inclusive culture. And so the five values that we laid out were integrity, passion for winning, leadership, ownership, and teamwork.
These five values are now resonating in the company, and the company is moving to more of a performance-oriented culture, which is a good thing, to enable us to, to drive the strategy into action. From an operating model standpoint, I mentioned that we've implemented the global brand management organization. We also standardized the international operating model in the top 10 countries, so we now have a common and, standardized and simplified way of operating from the global brand management organization through the international countries. We have further centralized now the US sales team, so we go to market in the US as a single integrated company. In the past, you may recall, that we used to go to market as 23 distinct operating entities that were fragmented and were not leveraging the scale of the company.
We have created a new business development team, and we've centralized supply chain finance and HR, where we believe standardization and scale can drive, productivity and efficiency improvement. The organization model that we have today, can be sort of summarized on this page, where you see the 3 segments that have full end-to-end P&L ownership, and they control R&D, marketing, global strategy, the brand teams, et cetera. We have four regions, that are go-to-market organizations that take the, plans from the global teams and implement and execute in the local markets, and these are underpinned by a series of functional teams that bring functional expertise to bear, across, the enterprise. The new operating model that we've put in place has resulted in significant efficiency. Over the last two years, the company has reduced the company's headcount by 5,000 employees.
We've gone from 29,000 to 24,000, which is a 17% headcount reduction. In addition to that, we've had two programs that we've been executing, Project Phoenix and Organization Realignment, which both together are projected to deliver $285 million-$340 million of annual cost savings on the overhead line to the company to get ourselves more effective and more efficient. Our simplification agenda is also driving significant progress. So a year ago, when we put the strategy together, and we said we wanted to focus on the top 25 brands, the company had a portfolio of 80 brands that were in the total company portfolio.
Over the course of the past 12 months, we've eliminated 20 brands from the tail of the company, and we're down to about 60 brands today. We believe that by the end of this year, we will be down to 50, and the reason why that's important is we believe the quality of the portfolio that we are operating against is improving significantly, as we go forward, and we are no longer going to be dealing with small tail brands that are hard to grow and create an ongoing drag for the company. We've also made tremendous progress on SKU count reduction. Recall when we started this effort in 2018, we had 102,000 SKUs that the company was selling.
As we stand today, we are at 20,000 SKUs approximately, so we've taken 80% of the SKU count of the company out. This is also equally important for the company going forward because it allows us to drive scale with consumers across the supply chain with our innovation portfolio. And frankly, it's a dramatically easier model to operate in going forward. So we are excited about the progress that we've made here. The new strategy is beginning to yield results. We've since we announced the new strategy last June, we've reported three quarters. You've seen in those three quarters improvements in our top-line trends, margin expansion, and strong cash flow. With that, I wanna dive a little bit into the top-line accelerators specifically.
So the four that I mentioned were new product development, pricing and Revenue Growth Management, new business development, and international. So let me take each of those in turn and give you an example of why we're excited about the strategy and how it's starting to manifest itself across the business. So on the new product development side, this was one where we've taken a deliberate change to our innovation approach, focusing on fewer innovations that are larger, that are consumer meaningful, and pivoting from being customer-focused to consumer-focused. As we've done that, we've seen the pipeline of the projects we're working on be dramatically lower, but the value of what's in the pipeline is dramatically higher.
We're starting to see good examples of innovation that is material that can have a meaningful impact on the top line begin to show up in the market. So the first example that we've got from this change, we launched earlier this year two innovations, one, which are the Sharpie Creative Markers, which is a new category for the Sharpie brand of creative markers that have bold, paint-like ink that write on all different types of surfaces with patented technology. And on Paper Mate, we launched an InkJoy Gel Bright launch with patented pen technology that really pops on dark and light paper. These initiatives, when they launched, were supported with 360-degree marketing campaigns. We launched at South by Southwest in Austin, Texas.
We have a Sharpie bus tour that is traveling across the U.S. right now. We have now scaled these launches, and as we stand today, these products have launched in 17 countries around the world. And so far, we are off to a very strong start. We've had more than 1 billion media impressions from these launches. We've had more than 150 influencers, including Mindy Kaling, Happy Kelli, and others, get behind these products. The product results, although still early, are exceeding our expectations from a revenue standpoint. The going-in projection that we had for the innovation versus our actual sales, the actual sales are running about 2x what we thought when we launched these.
What I like about these is the gross margin of these products is about double the gross margin of the company. So it is. And they are HPP, MPP plus products. So it's very much in keeping with what we said from a strategy standpoint of focus on consumer understanding, proprietary, high gross margin, premiumization, consumer driven insights, and these are growing the categories where they've launched. So it is incremental, and so our retail partners are also very excited about these launches, and this is the first two of what will become a series of innovations across the top 25 brands. On pricing and revenue growth management, we've made significant progress on pricing. We have repopulated the innovation funnel. I mentioned that we're working on fewer projects.
97% of the projects that we're working on today are in the MPP, HPP area. That was not true previously. The company was focused on opening price points. That pivot has been made. In July of last year, we implemented strategic pricing actions focused on in the US market, on structurally unattractive parts of the portfolio. In some cases, that business has fallen away, which actually is good because we make more money if without doing that, because some of these products had negative gross margins. In other cases, the pricing has taken hold, and we've improved the structural economics of the business. We've exited certain low-margin SKUs, categories, and brands to strengthen the quality of the portfolio that we're dealing with. Looking forward, we are working on revenue growth management as an opportunity.
Many companies and consumer products have done this in the past. Newell has not done this in the past, and we believe we've got a big opportunity for us to continue the journey on pricing through Revenue Growth Management, because what we're seeing so far from the initial work is a lot of low-hanging fruit that we can go after to drive mix improvement, and price improvement. The new business development function, which we stood up last summer, has identified over $500 million of incremental revenue to go after.
We will not capture all of this revenue, but we are already capturing a lot of it, and this, this is, typically, existing brands that we have, like Calphalon or Rubbermaid or, Sharpie or Graco, or Crock-Pot, selling them to retailers that in the past have not carried those brands. And part of what's enabling this is the fact that we've now gone to a one Newell sales approach, and so we have the ability to penetrate many more retail customers than what we've done in the past, and we think this is going to be a significant top-line contributor, for the next several years. Or, as I mentioned, we're already starting to see significant progress in this area. On the international side, we believe that we've got a big opportunity.
International, as I mentioned, is about 37% of the company's revenue. The international business returned to core sales growth in the first quarter of this year already. The international business operates with higher gross margins than the US business, in part because, in the international business, we're not so much into the opening price point. We're more of an MPP, HPP business. And we've got a big opportunity here because we're putting together disparate sales forces into a single sales force, creating a one Newell go-to-market, opportunity. And the way I think about this is the international market that we compete in is about three times the size of the U.S market, but it's only 37% of our business.
So we think, international, can be a big growth opportunity for us for many years to come, and we think that over time, we're just at the start of unlocking outsized growth in the international markets. So with that, I'll turn it over to Mark to talk about the margin side.
Thanks, Chris, and welcome everyone. We're excited to have this opportunity to share the significant progress we have made over the past year as we strive to fully operationalize and monetize our new corporate strategy. Chris just shared how the capabilities we are building and the interventions we have made in new product development, pricing and revenue growth management, and distribution expansion via new business development and across our international business, is helping us accelerate and improve Newell's top-line performance.
To build on that, what we'd like to do now is provide an update on how a reimagined, unified, and optimized global plant network, a best-in-class procurement organization, a fully optimized distribution and transportation network, and additional overhead reduction opportunities are all being leveraged to expand margins and generate strong cash flow as part of our corporate turnaround, and importantly, how our significant progress across each of these four areas not only validates our strategy choices, but also provides us with confidence in our long-term financial evergreen targets. As some of you may recall, we have an ongoing company-wide productivity initiative called FUEL, which stands for Finding Untapped Efficiencies and Leverage. This comprehensive program focuses on driving savings across manufacturing, procurement, distribution, and transportation, as well as indirect overhead.
In the early days following the Jarden acquisition, Newell Brands' overall level of productivity savings was relatively low, as evidenced by the fact that between 2017 and 2018, on average, cost of goods sold was only lowered by less than two points from the company's cost savings efforts. Then, starting with 2019 and moving through 2022, we captured annual COGS savings in the 3% range as our capabilities improved, which, based on our benchmarking work, puts Newell Brands on par with what best-in-class companies typically achieve. More recently, we have dramatically outperformed what would be considered best-in-class productivity attainment. Specifically, we expect to save, on average, approximately 6% of COGS during 2023 and 2024, which is twice the rate we achieved between 2019 and 2022.
The dramatic step up in savings is driven by program maturity and our decision to create scale by consolidating all supply chain and real estate decisions into a corporate center of excellence as part of Project Phoenix, staffed by a remarkably talented and dedicated team of supply chain professionals. Looking forward, we see a very long margin expansion runway in front of us, which we believe has the potential to create significant value in the years ahead. The first of the four significant sources of margin improvement we are actively mining comes from a reimagined, unified, and optimized global plant network, where we have continued to make meaningful investments in automation and shop floor digitization as part of our ongoing efforts to make Newell supply chain a sustainable source of competitive advantage.
Those recent efforts, in conjunction with prior investments, allowed us to close four plants and reduce four-wall factory costs by more than 10% in the past year. Over the past 2+ years, we've reduced manufacturing headcount by about 17%, or approximately 3,000 roles. By the end of 2026, we expect to have less than 40 plants with capacity utilization north of 50%. But ultimately, as we build out a one Newell optimized global manufacturing network with fewer, more multi-sourced plants to create scale and leverage, we are targeting capacity utilization of approximately 70%. This level of capacity utilization, once achieved, will dramatically lower unit production costs versus today, while also providing the business with enough flexibility to accommodate seasonal production spikes and anticipated future unit volume growth.
Consistent with last year, we expect 1-1.5 points of COGS savings per year from plant network optimization. We expect procurement to be another major source of margin improvement for Newell Brands. Our One Newell procurement center of excellence has been designed to harness scale, drive out cost, ensure continuity of supply, and create maximum flexibility by aggregating global purchase pools and identifying, developing, and partnering with key regional and global strategic suppliers. Last year, Newell reduced its supply partners by approximately 15%, and this year, we expect to achieve an additional 10% reduction. Aggregating global purchase pools and reducing the number of suppliers has also allowed us to improve supplier payment terms. For example, we enhanced regional payment terms in Latin America by 27% over the past year.
We are also developing a global freight forwarding system to track and modify in-transit inventory in real time, which should help us reduce product lead times and lower working capital requirements. As we proactively shift our portfolio towards MPP and HPP segments, we are also supplementing internal R&D ideation with supplier-led innovation. Finally, we are qualifying multiple vendors for key purchase pools to ensure continuity of supply, competitive pricing, and tariff mitigation should the need arise. We continue to see opportunity for procurement-related savings to amount to 2%-3% of COGS per year. The third area we'd like to discuss is distribution and transportation. Since implementing the second go-live wave of Project Ovid in February 2023, we have focused on further optimizing the one Newell system in the U.S. and have begun to consolidate our North American distribution network.
Over the past year, we closed four DCs, reducing square footage by approximately 20%. We plan to continue reducing our North American warehouse network, getting down to approximately 20 sites from 25 currently, which should leave us with only about 15 million sq ft of space by the end of 2026. Reducing our distribution footprint has not lowered our customer service levels. In fact, during Q1 of this year, our global customer fill rate was 96%. Moreover, as we have moved into the Ovid network, we further improved 2023 U.S. full truckload volume by 400 basis points to 77%, and over the next 18 months, we expect to push that number into the low to mid-80s. And as Chris mentioned earlier, we've reduced the number of distributors across Latin America, Europe, and emerging Asia markets by more than 25%.
We continue to expect distribution and transportation improvement efforts to generate up to 0.5% of COGS savings each year. Overheads represent the last area of margin expansion we'll cover today. From 2018 through 2023, we have right-sized office space by approximately 1 million sq ft. Last year alone, we reduced both office count and square footage by more than 10%, and we expect to continue to further rationalize our real estate footprint in the years ahead. We've also continued to make progress on simplifying our ERP systems. Our goal remains to have 97% of our total company sales on one unified system by the end of 2026, and we remain on track for an S/4HANA full go live during the first half of 2027.
During 2023, we also reduced legal entities by more than 10% to 262. Just a few years ago, for perspective, that number was more than 500. For 2024, we are on pace to deliver about $30 million in overhead savings, which, please note, does not include the separate actions we have taken as part of Project Phoenix or organizational realignment to lower overhead costs and increase our effectiveness. Cash flow is another integral driver of value creation for us, and we have been laser-focused on driving strong cash flow, reducing the company's cash conversion cycle, and strengthening our balance sheet. During 2023, improving operating cash flow was our number one financial priority, and we increased Newell's operating cash flow by $1.2 billion year-over-year.
The largest area of improvement was in working capital, where we took out about $700 million in inventory, which drove a more than 20 day improvement in the company's cash conversion cycle. Strong cash flow generation also enabled us to reduce debt by about $500 million in 2023. Working capital reductions, together with operating income growth, resulted in positive operating cash flow during the first quarter of 2023, which, due to the seasonality of our business, has been very hard historically to achieve. This is the first time Newell has generated positive first quarter operating cash flow since 2020, and only the second time first quarter operating cash flow was positive since the Jarden acquisition in 2016. A big part of the improvement was driven by a 30 day reduction in our cash conversion cycle.
Newell’s strong cash performance also helped bring the company’s leverage ratio down from 6.3x - 5.4x over the three full quarters since Newell’s leadership transition occurred back in May 2023. We continue to expect to land around 5x at the end of the year, with a longer-term target of 2.5x, which we believe would represent an investment-grade credit ratio. 2023 was also an outstanding year on free cash flow productivity, which significantly exceeded our approximately 90% evergreen target. We expect 2024 to be another strong cash flow year, even as we fund high return restructuring projects to accelerate a comprehensive transformation of Newell Brands, which has been carefully designed to get us back to consistently winning in the marketplace.
When we combine the top line and gross margin building blocks from all the areas Chris and I just shared, we believe they have the potential to contribute up to 3-6 points in top-line growth and up to 100 basis points of gross margin improvement per year, respectively, in a normalized operating environment. Now, in any given year, there are other factors that might positively or negatively impact Newell's performance, such as the rate of market growth, the overall consumer and trade environment, inflation, competitive activity, et cetera. Therefore, we continue to believe that the appropriate annual evergreen financial targets for the business are low single-digit core sales growth, 50 basis points of operating margin improvement, and free cash flow productivity of about 90%.
I'll now turn the stage back over to Chris, who will reinforce why we remain confident in our ability to generate meaningful levels of shareholder value in the years ahead as we create and leverage scale to unlock the full potential of Newell's portfolio of leading brands.
Thanks, Mark. When we started this journey a year ago, really last year at this time, we were focused on the capability assessment and the strategy reset, and I think that was a lot of the focus of the company was doing that work, getting the strategy in place, and then rolling the strategy down to each of the different organizational units, functions, and actually into individual work plans, which has now been completed. As we think about 2024, the priority for this year is to really operationalize that strategy and operating model and drive it into execution in the market. And as we think about 2025, we are expecting to accelerate performance in 2025 from 2024.
Let's take a look at just a couple of the financial charts, since we've put the strategy into effect last June. The rate of core sales growth has improved by about 10 points, from -14.7 in the first half of 2023, - 9.3 in the second half of 2023, and -4.7 in the first quarter of 2024. We're not satisfied with being below zero, but we are certainly headed in the right direction, and we are committed to getting the core sales growth back to positive territory as fast as possible. If you look at the gross margin, we've had, since the strategy was put in place, three consecutive quarters of gross margin improvement.
We've averaged 370 basis points of improvement versus prior year in the back half of last year, 410 basis points in the first quarter of this year, which is a pretty remarkable turnaround in gross margin. I think it's a combination of what you saw throughout the presentation: strong productivity savings, focusing on improving the mix of the business by focusing on the top brands, eliminating structurally unprofitable parts of the business, and driving price benefit and mix benefit through our innovation. We expect that trend of strong gross margin improvement to continue as we go forward. That has led to operating margin improvement, and so in the first quarter, we improved operating margin by 220 basis points.
You might ask, "Well, why was gross margin up 410 and operating margin up 220?" We chose to invest 100 basis points back in higher advertising and promotion spending in the first quarter, because the innovation pipeline is getting stronger, and we're launching new innovation in the market. We think that's going to help get us into the virtuous cycle of driving top line, driving margins, driving strong EBITDA growth, and driving cash flow as we go forward. So if you look at what our outlook is for 2024, our outlook is to meaningfully improve the rate of core sales growth from -12.1 last year to -3 - 6 this year. Normalized gross margin, we expect to be up meaningfully this year versus last year.
We're up 410 basis points through the first quarter. We certainly expect the rate of gross margin improvement to be higher than operating margin improvement. Embedded in our guidance is higher advertising spend as a percentage of sales and in absolute dollars. We also are expecting to generate operating margin improvement this year of 80-120 basis points. When you do the math, that would suggest that EBITDA will be growing this year versus last year. We expect our cash conversion cycle to come down as we further reduce our inventory levels from the simplification agenda that we've been driving, and we expect to use the cash that we're generating and the EBITDA growth to improve our leverage ratio.
Last year, when we announced the new strategy, the company's leverage ratio was 6.3x . We ended last year at 5.6, and we expect to end this year at around 5x , and we think that we will continue to drive that leverage ratio down going forward. When you look at the evergreen targets, Mark mentioned them, we are committed as a company to profitable growth and strong cash flow. We intend to get back to consistent low single-digit core sales growth, 50 basis points of operating margin improvement, and about 90% free cash flow productivity. From that, our capital allocation strategy continues to be to fully fund investment for high return internal growth opportunities. Generally, we look for 30% rates of return or higher is what we're trying to fund internally.
We are then focused on delevering the company, through the EBITDA growth and debt paydown, from excess cash generation to get back to 2.5x and continuing a dividend payout ratio in the 30%-35% type of area. So let me stop where I started. A year ago, when we were here, we initiated a multi-year turnaround strategy. Over the course of the past year, we have driven that strategy into specific choices throughout the company. We have strengthened the management team. We've changed the culture and put a new operating model in place.
We've continued to drive simplification, and I think, by any objective lens, if you look at the financial results in the last three quarters, we've seen an inflection, particularly on the margin and the cash side, and significantly improving top-line trends over that period, which we expect to continue and accelerate as we go forward. So with that, I will stop and open for questions.
Great. Well, I guess we'll continue on from there. I mean, there's been a lot of change at Newell over the past year, over the past several years, but you guys have... Like you said, you've made a lot of progress over the last three quarters since unveiling the strategy a year ago. Like, I guess from here, like, what gives you confidence in we're like, that all the work you're doing is. Like, what are the proof points you can highlight that give you confidence that we're on the right trajectory to return to consistent evergreen growth over the next several years going forward?
Yeah, I think, if you go through the areas that we're focused on, and I start with the top line, in the first quarter, we took three of our six business units, we returned to positive core sales growth. So we grew core sales in writing and baby and commercial in the first quarter. We grew the international business in total in the first quarter. Also, as I go around and meet with top retailers, the joint business plans that we're now putting in place with our top retailers are different and feel different than they have in the past, and all of them are focused on top-line growth, and getting the company back to top-line growth. Because those retailers need us to drive growth in the category, because generally, we have the market-leading brands in those categories.
We also have the new business development team, as I mentioned earlier, which is driving significant pipeline of opportunities for us, and we've got the innovation of meaningful consumer-oriented innovation. The first example of which I referred to in the prepared remarks, but many more of those innovations are going to start coming out over the course of the next year or two. So we're confident that the top line is there. At the same time, on the gross margin side, we are exceptionally confident because we've got a very strong productivity program in place across the company with a lot of opportunity still ahead of us.
We also, now that we've got the company focused from a strategy standpoint of, of mixing up into MPP and HPP products and driving innovation that's gross margin accretive, I think we're going to see mixed benefit and productivity benefit that is going to far outstrip the rate of inflation, that we're dealing with. And then from a cash standpoint, we've proven that we can turn the cash cycle around, and, as Mark mentioned in his remarks, we're operating with the highest customer service levels that the company has ever operated with at a place where we're taking inventory down, and that's partly because we've gone from 102,000 SKUs down to 20,000 SKUs, and we just believe that there's a lot of opportunity to unlock cash going forward.
One quick point to reinforce the message Chris just delivered in the last 30 seconds we have. Last year, we had no Tier One, Tier Two initiatives of any consequence. We have a tiering system, so we really focus our efforts against our largest initiatives, and those are Tier One. This year, we will have eight Tier One, Tier Two initiatives that have a holistic 360 marketing plan to put against them. As we've done our work for next year, we expect to double that number, and then ultimately, we expect every one of our top 25 brands to have a Tier One or Tier Two initiative every year, effectively to launch. So we are rebuilding the innovation funnel, and that's why we have confidence in the growth trajectory.
Great, and with that, we're out of time. I want to thank you guys for presenting and, yeah, thank you very much.
Thank you.
Thank you.