Strauss Group Ltd. (STRS) Earnings Call Transcript

Thank you for joining Strauss Group 2030 strategy presentation. Hello, everyone, and thank you for joining us today. Welcome to Strauss 2030 party presentation. On our call today, management will provide a review of the group's strategy, followed by a questions-and-answer session. You are encouraged to post your questions to the Q&A function in the. As a reminder, this online Zoom earnings call is being recorded Thursday, October 26, 2020. A recording of this call will be available on the company's website a few hours after the call. With me today are Mr. Shai Babad, Strauss Group's President and CEO; and Mr. Tobi Fischbein, the Group CFO; and myself, Avshalom Shimi, Head of Investor Relations. I would like to remind everyone that this online webinar may contain projections or other forward-looking statements regarding [indiscernible] an the future performance of the company. These statements are only predictions and may change as time passes. Strauss Group does not assume any obligation to update these information and actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timely development of our new products and their adoption by the market, increased competition in the industry and price reductions as well as due to risks identified in the documents filed by the company with the Israeli Securities Authority. Shai, the floor is yours.

Thank you very, very much, Avshi. We are very, very excited to be here today and to talk to you about our strategy for the years 2027 and 2030. And here we go. And we'll will start. The strategy is called winning with love local brands. And I think that during this presentation, I understand why we chose the theme of Love Local Brands as the path for our strategy for 2027 and 2030. But before we go into the strategy itself, just a short reminder of who we are and where we came to so far. So we are a purpose-led company. Our purpose is nourishing a better tomorrow because we understand that for us, food is much more than just nutritious or just food. It's the experiences, it's the taste, it's the memories, it's the family. It represents the day-to-day of our consumers in so many ways. And if we will be able to improve it and we're able to give them better choices, better taste, better quality, better experiences, then we really will be able to build a sustainable future and to build a better tomorrow. And as a purpose-led company, we started our journey to build our vision for the next 10 years. When we looked at what differentiates us from other food and beverage companies is that we have very, very strong holding in 3 major local geographies, Brazil, Central Eastern Europe and Israel. And in those geographies, we have strong Love Local brands. And we ask ourselves, what should we do in the next 10 years is how are we going to scale up those Love Local brands in the geographies and in the places in which we operate. Now scaling up Love Local brands is -- will be done through co-creation and delivery of bond nourishment. Co-creation is who we are. We do everything through partnerships. We partner up to deliver. We partner up with partners such as PepsiCo and Hire and Danone, and we've been partners with them for more than 20 years. And this is how we create. We also partner with that. We also partner up with our suppliers, with our investors. And everything we do is we do together. But co-creating and creating is not enough. You needed to make a delivery, you needed to make an impact. So we want everything that we'll do and we co-create together that will have an impact. And what we want to deliver is board nourishment. When we look at the next 10 years trends and we look at where food and beverage industry is going to, we will need to be more bold on innovation. We will need to follow trends. We will need to keep better choices to our consumers. We will need to have better synergies to supply the categories and the products that we want to our consumers. And through that [indiscernible] and that bold innovation, we will be able to scale up Love Local brands. And I think also this is what differentiates us from global food and beverage companies, which sometimes have global brands, which they support over the different geographies in which they play. With us, the local connection to the consumer, the understanding of the local heritage, the local history, the local culture, with the local consumers and getting engaged so that there is an emotion involved and those local brands will become loved is our way for growth is our path for growth, it is our path to scale up. And we want to do that because we want to impact as much as people as we can in the geographies in which we play in order to nourish their better tomorrow. And then if this is our vision for the next 10 years, we understood that there are 5 major pillars that will help us implement our vision. First, we will need to continue and expand in the international markets in which we play and even beyond them. Second, we will need to shape a consumer-inspired portfolio. We will need to make sure that our portfolio and the products that we manufacture are really in line with the trends and with consumer needs and wants. Third, we'll need to elevate our culture to fit our strategy, to fit the changing world, to fit the revolution, the digital revolution and the AR evolution that we are experiencing today. Fourth, we will need to drive innovation bringing bold nourishment. We will need to drive innovation that matters. When we do the innovation, we'll need to have an improving innovation that we will improve the products that we offer that will give distinctive and disruptive innovation that will help us follow the trends and consumer needs. And fifth, we'll have to do everything we do with operational excellence, understanding that having a full supply chain from procurement to manufacturing, to supplying, being fully productive and fully done in a fully effective way so that we'll have a better offering for our consumers in cost and in quality. And those 5 pillars with the vision are where we started it and what led us to the following strategy, which I'll get to in a few minutes. Also, we had a look at what is one of the strong foundation that we set in place in the [indiscernible] strategy. So we started to build Love Local brands in the places in which we play, and we have Love Local rates in Israel. We have Love Local brands in Brazil with Tesco sources the biggest coffee company. We have Love Local brands in Central Eastern Europe. And we also play in many multi-categories. We are experts in confectionery, in dairies, in salty snacks, in coffee and those categories and expertise in those categories what helps us grow and scale up Love Local brands. We also have demonstrated in the past 3 years very high level of innovation. Looking at the past 3 years, 10% of our sales is done through innovation, which is a very high percentage of innovation, and we will need to continue, but we will need to focus and direct our innovation into the trends and into being more bold to answer consumer needs. Fourth, everything we do is we lead with trust. We lead with trust with our suppliers, with our consumers, with our employees and also with our investors and with everyone that we are working with. Next, we are -- we have the right partners, and we know how to partner. Partnership is one of our strengths. We've been partners with with PepsiCo, with Danon, with Hire, with the Lima Brother for more than 20 years. We have some partnerships also in Israel. And partners is part of our identity, working with partnership in order to have mutual benefits. And in order to scale up growth is part of what we've done part of our journey for the past 20 years. Next, we also know how to serve communities. The company has put a lot of effort into serving people who are vegan, people, lactulose intolerant societies or power of our societies, which are ultraorthodox or the air communities in Israel, we really want to answer consumer needs and specific needs. And last but not least, we are a company of people. We are a company of values and people. our people, our employees, it's what makes everything takes and works in our company. And we put a lot of effort in upskilling them improving their -- bringing them skills, bringing them talent and improving their well-being in the company, but not only the people in our company, also people outside the company, whether it's our partners, whether it's our suppliers, whether it's our consumers, we are very, very, very much oriented on how we make people move their potential or exercise their potential to full. We play in 3 major geographies, Israel, Brazil and Central Eastern Europe. In each of those geographies, we are very strong. We are either #1 or #2. But we still believe there's a lot of potential in each of those geographies. You can see 50% of our revenues have come from Israel, 35% from Brazil, another 9% from Central Eastern Europe and the rest is from others and for our other business that we obtain. We believe that in those 3 geographies, we have managed to really get a very, very strong foundations of growing Love Local brands, but there's still yet a lot of work that we can do. Also, when you look at our portfolio that we have built so far, 85% of our portfolio is in Health & Wellness and better-for-you segments in which is our coffee, dairies, fresh sell, et cetera. in those categories, we see today, even though with GLP-1 and with corn trying some of the categories are shrinking, we see a lot of categories that are actually in the health, in the functional food that are growing rapidly, and we are already set the way we operate today that we play very much in those categories. And we have very strong local brands, which some of them are loved and some of them are not, but very, very strong local brands in Israel and outside Israel, which are the basis for the next strategy. When we look at the core strategy, so the core strategy talked about 3 major pillars. One, was very strong home base seen as well. We said we're going to double down the core in Israel. We said we're going to turn around to the confectionery, that we're going to close SKUs, and we're going to focus on the core in Israel, and that's what we've done. Confectionery as to the second quarter of 2026, results has done a turnover. We reduced the number of SKUs from around 1,200 to around 780 SKUs that we use today. And we really pushed down on the core in Israel, and we started to plant the seeds for snacking, which is part of how consumers today eat. In Brazil, we looked at Brazil, and we said we need to do a turnaround to our platform of profitability from our coffee business there and also grow beyond coffee. And what we've done in Brazil, we've managed to obtain a new platform of profit in Brazil for R&G, but also started to grow outside coffee -- outside R&G, not just coffee, but outside [indiscernible] by increasing mixes, increasing instead increasing our capsule machine business and also growing outside coffee, especially now with the Yoki deal, but even before with ready-to-drink, with Positive, which is a vegan brand that we have in Brazil, with our cocoa brand in Brazil, cocoa powder brand in Brazil, and we started to grow in order to hedge green coffee prices, but also to start to grow as a dry food company in Brazil. And last but not least, we played in water trying to turn the company from a single product company to a multiproduct company, growing our markets in China and Israel and the U.K. And all that was set on 2 major infrastructure pillars. One was the performance. We took upon ourselves productivity as a way of life already in the last cycle. We'll continue it as a way of life in this cycle in order to improve our performance, to optimize our processes and to really cut down costs, but also to bring the right processes in place on the 1 hand. And on the other hand, we said we need to deal with the culture, with the health of the organization to upskill and reskill our people, to train, to build a new leadership model in order to make sure that we are set to implement the strategy. And both of those things we have done. So looking at the strategy today and towards the end of 2026, we believe we achieved the targets that we set ourselves to do in this current strategy. And also to that strategy, we set financial parameters in which we issued to the market. We said we're going to grow more than 5% CAGR between the years 2024, 2026. By looking at the results that were published in 2026 second quarter, we see that we have reached that we said what we're going to expand our margins to 10% to 12% EBIT margin when we started with 7% margins. We are already second quarter of 2026 on 10.6% margin. We said we're going to have productivity, the layer beneath from the last slide, talking about productivity in the process that we want to cut down cost. We said we're going to have productivity that will help us to get between ILS 300 million to ILS 400 million of savings, platform attic, and we achieved more than ILS 400 million. We said we're going to invest 5% to 7% in OpEx in upgrading our infrastructure, upgrading our facilities, and we actually invested 5%. And last but not least, we said we're going to have 85% of our portfolio score. The strategy, talked about double down on core. How do you take the noncore categories, which are not growing 5%, which do not have high margins and which we are not #1 and 2, and how do you either fix them, divest them or turn them around. And basically, we started with 67% of our portfolio as core. And by second quarter of 2026, we also reached our target. And 85% of our portfolio today is core. So looking at the strategy, not just the pillars of Essence, but also the financial KPIs, we can see that back in '24, this is what we said. And actually, we managed to deliver. And this is the starting point for our 2030 strategy. So now we'll deepen into 2033, you after have seen our purpose, our visionary goals and the starting point. So what we are going to do is we're going to continue in scaling up Loved Local brands winning with Love Local brands. And winning with Love Local will have to define what is a Loved Local brand, what does it mean to be Love Local, which are the live local brands? How do you get to be a Love Local brand and as the major engine for our growth in the next 4 years. If the last strategy talked a lot about fixing the core, upgrading the core and setting the right infrastructure so that we will be able to get a good momentum of growth, but also fixing our profitability and margin levels and deciding which businesses and which we keep and which businesses we live and how do we optimize our portfolio. This core strategy is not about double down on the core. This strategy is about how do now. We have a growth strategy of taking the foundations that we set in the strategy between 2024 and 2026 and building on those infrastructure the engines of growth for the next 4 years. Where we're going to do it is in first, in very 3 strong areas and geographies in which we play today, in Israel, in Peru and Brazil. In all these 3, we either play with multi-category or will grow into playing into multi-category with Love Local brands, and those will be our anchored global local areas in which we would put most of our engines of growth in the next coming years. Also setting up the stage for the next 4 years that will come after 2030 till the end of 2035, we will also look into growing in LatAm and setting seeds in LATAM through our [indiscernible] sauce partnership. There's already small sales that we set there, but we will look to expand that and setting up seeds in Central Eastern Europe, additional countries beside Ukraine, Russia, Poland and Romania that we have today. So those will be the focused geographies. The reason we chose those geographies is because; a, we have already strong presence in those geographies; b, we still have a lot of potential to grow in those geographies especially with our knowledge with Love Local brands and then how do we scale them up in these different geographies with the current local Love Local brands, but also with new Love Local brands. And how are we going to do it? So there's external pillars of what we have to do and how we're going to do in order to achieve this growth and 2 internal pillars. The external piece is; one, we will need to know how to get closer to consumer, understanding better consumer insights, understanding the trends, understanding what kind what kind of needs consumers have today, understanding what make consumers love a certain brand? And how do you get an emotional connection of a consumer to a certain brand? Those are things we will need to deepen up. And in the next few minutes, I'll also elaborate why is it important and why do Love Local brands have an advantage over just local brands or other brands. So one pillar is to really, really master getting closer to consumers and turning local brands into Love Local brands. The other pillar is Innovate bolder. We -- with the trends that we have today in order to scale up love local brands, we need to bring innovation, we need to bring bold innovation. And we'll show you the 4 different segments in which we'll bring innovation to in order to grow those Love Local brands by bringing bolder innovation. And now to the 2 internal segments or pillars that we'll need to work in order to implement the strategy. One is operate smaller. Everything we do in our operation, we'll need to upgrade. We'll need to push additional productivity. And our plan for productivity for the next 4 years is even bigger than the plan we had for productivity for the last 3 and 4 years of this current strategy. We will need to really have operational excellence through the whole supply chain from manufacturing to -- from procurement to manufacturing to supply. And we all need to bring digitization. We will need to take into consideration the AI revolution that we have today and to decide in which parts we bring AI into the company, to which processes and where we can really, really optimize the way we operate in order for us to do things in a much more efficient way to get better quality for our products and also to have better offering for our consumers. And last, we will need -- go back. And last, we will need to run faster. We will need to be a much more agile company, taking a decision much, much faster than we do today and really to elevate our organization with a future-fit business. That means we'll need to map our skills and to ask us of which skills we need to bring to the company, how do we bring the real passion to win into the company and how do we make the company agile to take decision and to move much faster in the way we move today? So now let's dig in and look at Israel as the first geography in which we'll play. The major focuses that we'll have in Israel are presented here. One is we will continue to double down on Health & Wellness with a very specific focus on dairy. We see today with GLP-1 and with trends that dairy -- everything that has to do with proteins and everything that has to do with functional health is growing. We will put a real big emphasis on this. We already have the infrastructure in Israel for this. We will do a double down on that in order to scale up the Love Local brands in the functional in the Health & Wellness. Second, we will need to expand our capacity in Israel. Today, in some of our factories, in some other places, our capacity have reached its limit. We have demand today that we are not answering by our consumers. We will need to continue to unlock some of our production facilities and to unlock capacity constraints in order to provide demand. Third, we will need to push even more into serving different communities and different needs of consumers in different sectors. And in a second, I'll get and I'll show some examples. And fourth, we will look -- we will continue to double down on snacking. We understand today, people do not consume their food in an ordinary way as they did in the past. People are snacking. And snacking is not just traditional snacking as confectionery on salty snacks. It can be a yogurt. It can be a dessert. It can be minimal bottle. It can be a functional drink, it can be a functional dessert. People eat during the day, and they want to consume their food in [indiscernible] meal, in a fast way, but also in a nutritious way. And I think -- when we think the biggest snacking company in Israel, we have a huge potential here to grow those different segments and categories to continue to push on growth. And last but not least, in our water business, with the multi product that we have, we believe we'll be able to grow and to penetrate the market even better with the multi products that we have built. For that, in Israel, in the next 2 years -- in the next 4 years, we will invest ILS 2 billion in order to set up long-term infrastructure for production and supply chain capacity in order to unlock all those capacity constraints and also to push down and to build the right infrastructure and the operational excellence for growth. This is a huge amount that we believe will help us continue our path for growth in Israel even in a more focused and healthier, even profitable, healthier way. And when we look about different segments and different communities, so we know that the segments of functional nutrition is really growing. We will try to give better answers to protein, to fiber and GLP-1 with solutions that will have with our core products and also with future products that we will develop in order to answer consumer trends when it comes to functional nutrition. We will also look into personal choices, whether it's allergens, whether it's vegans and again, extend and improve the solutions that we give to consumers there. We will also look at communities such as the Heretic community in Israel, [indiscernible] community in Israel and the Arab community in Israel also give answers there. And the next growth space is vacant for a reason. We want to always keep us thinking what will be in the next thing. If I would have been presenting here 2, 3 years ago, then the protein drink you have on the left with 40 grams of protein or the calf free the fragmented protein that we have on the right-hand side with the metering that doesn't come from the calf, we'll not have been on this slide. But now they are because those are the trends, and this is what is growing. This is the innovation that we've done, and we will look what will be the next innovation that we'll need to do next. And in our water business, for the first time, the product that I show you here is the products that we already launched and that we already have in our portfolio in our order company, from affordable to soda to the Shabad machine, functional machines, but also in different range of prices and different machines for different function or different different time in the life cycle of our consumers in order to give them full solutions and better solutions when they consume our water when they want to consume purified water. So this is Israel and really giving the major highlights. When we talk about Brazil, here also 6 major focuses in Brazil. One, we want to maintain our position as the leader in coffee in Brazil. Everything we do in Brazil starts with coffee, and we want to maintain our position as number one. Two, we want to increase our share of non-R&G, which means not non-coffee but non R&G. We started growing with mixes and instant and capsular and beans. And also we grew also in categories which are not coffee such as cocoa powder, the Yoki deal, which is a major, major change, and I'll talk about that in a second and to continue to grow non-R&D in coffee, but also in non-coffee. Third, part of that growth in order also to become 1 of the biggest 5 largest coffee -- sorry, beverage -- food and beverage companies in Brazil is to do it through M&As. We will not do it in the first 2 years from 2027, 2028, we'll probably do the interrogation of Yaki, but looking at 2029, 2030, this is where we will look to continue our M&A journey and continue to grow to become 1 of the biggest, 1 of the largest food and beverage company in Brazil. Next, integration of Yoki. Yoki brings new categories from the culinary world of side dishes of herbs, of spices that we will need to integrate into our business. We believe there's an amazing potential of this integration, but we will need to work to see that this integration is working and that the turnaround we decided and also conveyed to the market, we will actually achieve. And we will also need to maintain the profitability platform that we set ourselves and that we've managed to get in the last 3 quarters in Brazil. We've managed to get healthier as we promised. We have managed to get a healthier profitability platform and maintaining this profitability platform in Brazil through the hedging of the non-R&G products, through also maintaining our profits from the R&G segment is really, really crucial and important for our continuous healthy growth. And last but not least, we will start to implement and to look at planting seeds in LatAm with [indiscernible], mainly in Argentina and Chile. So maintaining #1 position. Part of it will be done through extending and reaching beyond 4,000 points of cells that we have today. our connection with our customers, our go-to-market strategy, our connection to all those sale points is part of what helps us grow and also maintain our position as the largest coffee company, but also have add additional products and additional segments to the distribution chain, which is not only coffee. Next. Expanding our non-coffee portfolio. Yoki was part of it, but we'll also look at what we're going to do next in order to continue to expand our non-coffee, to continue to have nonorganic growth in order to become 1 of the largest 5 companies in Brazil. And the Yoki integration is -- and the success of the Yoki integration is crucial to build the muscle of really knowing and mastering non-coffee segments. And improve in Central Eastern Europe. PRU is the initials for Poland, Romania and Ukraine. We will continue to hold #2 position in coffee we will continue to increase our share of non-R&G and also accelerate growth through M&A, and I'll go a little bit to that in the next slide. So when we look -- next. So when we look at our strategy, 1 thing we need to do is to continue to push very hard on the existing coffee categories in which we play today in Poland, Ukraine and Romania, which is the R&G, which is the instant and which is the beans that we have already today. But pillar 2 is we'll need to go into next phase of non-R&G coffee product, such as capsular, such as mixes, such as ready-to-drink. And here, we'll have to push very hard because we believe that through our love local brands, again, we can grow into additional coffee categories. And third, we will start our growth of non-coffee category through M&As and to expand our holdings in Poland, Ukraine and Romania. We believe we have very good infrastructure, very good people. They're very good Love Local brands, and we will look to the extension into new categories and also into new Love Local brands in those geographies in order to push our growth and to have similar portfolio or similar holdings as we have in Brazil or as we have in Israel. Next. So, so far, those are the 3 geographies, Israel, Brazil and Central and Eastern Europe, and this is how we planned them. Now we're going to talk about how we're going to do it. So when we talked about getting closer to the consumer, how do you really get closer? It's really working with Love Local brands. First, why Love Local brands. As we've seen, Love Local brands tend to outperform their peers, tend to get better results with growth and profitability with their peers from the fact that they are loved by consumers and consumers are willing to get to pay sometimes extra for them and also a repetitive by pattern that they have. Second, they are a platform for expansion. You can take a Love Local brand in a category of dairy and also extend it to other categories, such as we've done with our pro loved brand that we took it from dairy drinks, we also did dairy yogurts and now we did dairy confectioner and also -- sorry, confectionery bars with pro and also use the same brand for salty snacks. So the expansion is very -- is something that you can use and the platform that you can use for your expansion when you have Love Local brands. And third, it has a deep connection to the consumer and the deep connection to the consumer helps you to promote growth. So this is why we want to be in Love Local brands. As today, you can see we have many Love Local brands, but we also have brands which are not loved, which are strong brands, but are not loved. We'll have to ask ourselves which brands do we support, which brands do we keep, which brands do we let go and which brands do we do a double down because we believe that in those Love Local brands, the potential for growth and the potential for scale-up is very big. Our ambition is to try to see how do we leverage those Love Local brands and scale them up? How do we acquire or buy through M&As Love Local brains and scale them up either through innovations or either through synergies that we believe we can bring to those Love Local brands. And the tools that we'll develop, the insight tools we're developing the company for that, we will have a central of excellence for consumer insights for understanding trends for writing the playbook for Love Local brands for the methodology of Love Local brands, also use AI tools in order to push Love Local brands. Next. When it comes to innovation, and we understand we need to do both innovation and to innovate bolder, there are 4 areas in which we'll push our innovation. One is functional nutrition. We understand the functional nutrition is the trend today is the way of growth, especially with GLP-1, but not only people want to consume food that is healthier for them, that is better for them and they are more conscious to what they put into their mouth. And we will want to put a lot of innovation and divert a lot of innovation into functional nutrition. Second, personal choices. We -- the consumers are more and more picky about what they want and more and more personalize their needs. We will have answered to vegans, to lactose tolerant, to GLP-1, and we will try to reach consumer personal choices, but also communities, as I said before, about the [indiscernible] community. And do innovation that is right for those segments and for those personalized choices in order to give -- to answer consumer needs. And third, since we don't only play in health and wellness and functional food, we also play in indulgence, we want to make it permissible indulgence. We will want to make sure that our innovation makes our indulgence better, whether it's with less sugar, whether it's smaller portion, whether it's with protein or in any way that we can -- or fiber anyway that we came to make it permissible and to make that indulgent moment healthier for our consumer. And last, but not least, we understand the texture and flavor exploration is something that consumers are seeking, is something that is actually pushing -- or pulling, sorry, pooling consumers into products. And what we'll try to do is to direct our innovation also there to give different taste, to give different flavors and different experiences to our consumers. We will do that in 3 ways: one, in-house innovation that we'll do in the company itself. Second, we will buy some of the innovation that needs -- that we need in order to make sure that we can produce our products, such as we did our coffee launch that we actually invested in a company that develops the fragmented proteins that don't come from the cow and then we build the mill drink. And last but not least, we'll also outsource. Some of the full innovation, the full products we'll outsource from the outside, and this is how we want to become more agile and more fast with go-to-market in bringing innovation into the market. Next. And those were the 2 external pillars that we need to deal with in order to achieve our strategy. Now we'll go into the 2 internal one. First one, as we showed before, is the operational excellence. And for operational excellence, we'll have to do with manufacturing and automation and upgrading our infecting and automation in our processes there. We'll have to deal with supply chain and the resilience of our supply chain and the effectiveness of our supply chain. And for each of those ones, we have plans in investment and in processes and in productivity, how to make them better. Third, quality and compliance, understanding that end-to-end quality is what really, really, really matters to consumers. And fourth, productivity is a way of life. We understand that we really need to push even further of productivity and the productivity is becoming a way of life and even extend and increase our productivity targets that we put all across our supply chain and our operational processes. And last but not least, we understand that all this lies on technology and specifically on AI. We will decide in which processes we've already started this journey. We will use AI. We will put AI in place and in which -- and where we'll have the quick wins with AI and where we'll have the big bits with AI, which will take us more time, but we'll really upgrade our processes and the way we operate today. The technology and the AI will be embedded into those 4 major pillars. And of course, we don't do any of this when we talk about operational excellence, and we talk about the way we operate without sustainability. Sustainability is not separate from our business. It's what strengthened our business, it's actually create value for us. And the 4 major KPIs that we set ourselves and targets that we set ourselves in sustainability are pillars that are supposed to support and help us even increase our growth and to do it in a more value way. First, nutrition and health. We will push to reduce sugar and reduce net rent from our product. And we have red stickers on our products that are sold here in Israel, which have ingredients, which are considered to be not healthy for you. How to reduce those stickers, how do you reduce those elements and components in the products? Second, we will be very much involved in how we improve climate and environment through reducing the amount of energy that we use, through renewable energy that we'll use and through food waste that we will try to reduce. In all of those, we have specific KPIs of how we're going to do it and how it's going to improve the business. Third, with sustainable agriculture. We go -- we are already working, and we'll continue even to enhance our work with our agricultures with our farmers, helping them be more sustainable, but also increasing the connection [indiscernible] in order to give better quality. Also when it comes to procurement, we will look that we will have a very valuable procurement that will stand with human rights and with all regulation and needs. And also when it comes to deforesting, we will make sure that we meet all regulations so our products will be in the highest -- on the 1 hand in the highest quality, but on the other hand, we'll serve our business the best way. And last but not least, we will continue to push on people and communities, helping our people, upgrading our people, helping our people change to the new era of AI into the new skills that will be needed, but also helping communities and investing in communities, as I've shown before, outside the company, serving communities and consumers. Next. And last but not least, we'll need to elevate our culture and we'll need to run faster. We'll need to make the organization much more agile to take decision, to ratch faster and to serve the strategy. And in order to do that, we'll design ourselves with better processes, with more agile processes to run much faster. We'll do -- we'll go through a skill-based organization building and asking ourselves what are the right skills that we need in order to build the organization in the right way, which skills do we need for the next 4 years and net organization with those skills. We will push very much on the culture of passion to win, understanding that every time we go and every time we either do innovation or sell a product, want to be there. We want to do the best for our consumers. And we have to have a passion for me from the last manager to the first employee in the company. And last but not least, we will empower our people and leaders. We will continue to build leadership. We will continue to empower our people, understanding that our people, our major asset in building our company and implementing our strategy. So to wrap this all up, we are really excited to go ahead with scaling up Love Local brands in the 3 major geographies that I mentioned before, with Israel, with Peru and Brazil by doing bold innovation, by getting closer to the consumer by having operational excellence and by building the right team and the right people, the right leadership and the right patient to do it. And with that, we'll transfer to Robi.

Thank you, Shai. Today, you've heard where Strauss wants to go, how we intend to grow and the strategic choices that will shape our future. Now I will connect the strategy you have just heard to value creation. The good news is that we are starting this journey from a position of strength. Over the past few years, we have restored profitability, strengthen our platforms, particularly in Brazil, Central and Eastern Europe and confectionery, improved cash flow and maintained a solid balance sheet. That is the foundation of our next strategic chapter. In the next few minutes, I will answer 3 questions; what have we already achieved, what gives us confidence in the road ahead and how will we create value towards 2030? On Slide 30, let's look at our financial performance since 2020. Strauss has grown considerably. More importantly, we have improved the quality of our earnings. After challenging years, both within the company and across our industry, our operating margin has returned to double digits, and this has flowed through to net profit and cash flow. These results show that Strauss Group knows how to navigate turbulence, adapt recovered and emerged stronger. There is still a lot of work ahead of us, but we are entering this strategic cycle significantly stronger. On Slide 31, let's look at Tres Coracoes, our 50% owned JV in Brazil. Brazil is 1 of the clearest examples of this transformation. What started as a successful coffee business has become a powerful growth platform we have scaled up significantly while improving profitability. Today, Tres Coracoes is not only a profit engine. It is a platform that allows us to expand into adjacent categories in a huge market build new capabilities and accelerate future growth. This gives us confidence that growth and profitability do not have to come at each other's expense. We can deliver both. On Slide 32, let's look at our financial profit. For a growth strategy to be credible, it must rest on financial discipline. This slide shows exactly that. We have improved returns. We are maintaining healthy leverage. We continue to invest while preserving balance sheet flexibility, and we have demonstrated our commitment to shareholder returns. Our capital allocation philosophy is simple. We will invest where we see attractive returns. We will pursue mergers and acquisitions where the strategic rationale and financial discipline aligned. And we will protect the resilience of our balance sheet. Growth matters, but discipline, value-creating growth matters more. On Slide 33, we can see the shareholders' distribution track record. We have demonstrated steady dividends and solid payout over the years. with 1 exception in 2023. As further support to shareholder returns yesterday, the Board of Directors has approved a new multiyear share buyback program of up to ILS 200 million through 2030. On Slide 34, let's talk about M&A. M&A supports our strategy. It does not replace organic performance. We aim to expand inorganically through Love Local brands in existing or adjacent categories and in markets where we already have meaningful capabilities and competitive advantages. Yoki is a good example of the M&A playbook we are developing. Market-leading brands, strategic fit, revenue and cost synergies, platform expansion in Brazil through our JV, Tres Coracoes, and a more balanced portfolio between R&G coffee and non-R&G. These are the principles that will guide our future transactions. Everything I have described so far explains why we believe we are ready for the next stage of growth. Now I will explain where we want to go. On Slide 35, let's talk about our financial ambitions. But before we talk about these ambitions themselves, I would like to pause for a moment on the picture in the backlog. It is not a stock for. I took it on my phone -- sorry, my wife talking with my phone during a family trip to Argentina on the way to [indiscernible], the tracking capital of Patagonia. In the background, you can see Mount [indiscernible]. Anyone who has done this trail knows that the path to Fitzroy does not begin with beautiful views. The trail opens with a steep demanding climb. The first few kilometers are relentless. And before you see the breathtaking view, before you reach the most spectacular part of the journey, you have to do the hard work. That reflects where Strauss is today. Over the past few years, we have completed a large part of that steep climb. We faced significant challenges to restore profitability and strengthen our balance sheet. We improved cash flow and expanded our platform and capabilities. We have completed most of the first hardest ascent. And now like Hikers, looking up at [indiscernible] can see clearly where we want to go. The destinations the destination is in sight, the direction is clear, but the path will always be straight. Markets will evolve, commodity prices and exchange rates will be volatile, competition will not be easy, but our direction will remain clear on the horizon. The ambitions on this slide are milestones on our journey. We are targeting average annual volume growth of 3% to 5%. This matters because we want to grow driven by rising demand for our brands and products, not by pricing. We are targeting average annual net profit growth of 7% to 9% alongside double-digit growth in free cash flow. Capital expenditure will average 5% to 7% of sales over the strategic period. And this reflects the investment needed to expand production capacity, modernize our operations and supply chain and support future growth in the core areas where we have already today leading brands and market shares. That is why the return on these investments look attractive. We are targeting a return on invested capital at a solid mid-teens level. This is the discipline that sits alongside our investment plan. Growth must generate attractive returns. Together, these metrics define how we will measure financial success through 2030. They reflect our belief that growth is not measured by size alone, it is measured by value creation, returns, cash generation and the long-term strength and resilience of the business. These are ambitions, not a promise of a perfectly straight line. What we are committing to is a clear direction, disciplined execution and accountability against these metrics. What gives me confidence is not that the mountain ahead of us is easy to climb, but that we have already proven that we know how to climb even in challenging conditions. The steepest part of the ascent is behind us, and we are entering with the next stage from a stronger position with stronger capabilities, much-loved local brands, great people and a stronger financial foundation. On the last slide of the presentation, I would like to quote Michael Strauss from that said, "I don't want to be the biggest, I want to be the best at what we do." To me, this quote captures the essence of our business and financial strategy that we are launching today. The goal is not growth for its own sake, the goal is to build a company that grows in real terms in the value it brings to consumers and, of course, in profits and cash flow generation, a company that can invest in its future with confidence, a company that gets stronger with every cycle. In short, our ambition is not just to make Strauss bigger, but to make it better, and we believe this is a sustainable way to create long-term value for all our stakeholders. Shai, back to you to sum up questions.

What I believe we should do is now because we said everything is that maybe open it up for questions for everybody and to answer the question as best as we can.

So we will now move to the -- thank you, Shai. We will now move to the questions you have sent us. I will start with the first question. So Strauss is targeting 3% to 5% volume CAGR, 7% to 9% net income CAGR, double-digit free cash flow CAGR and ROIC in the solid mid-teens through 2030. What are the key assumptions behind achieving this combination of growth, elevated investment and ROIC discipline? And where do you see the greatest execution risk?

So I think the key assumption for this is a strategy that we just presented. I mean if we'll scale up Love Local brands in the geographies in which we sell, if we do the operational excellence, if we manage to get closer to consumer, and productivity, as we mentioned in the strategy and implement our strategy, those are the keys. We will decide in which brands and which Love Local brands we're going to push through and scale them up and which not. We were going to be way more productive than what we were in the past. We will try and follow the trends of consumers with functional health, with permissible indulgence, with personalized choices in order to generate the growth in the different geographies in which we play. And I think that -- I hope that the strategy that I've just mentioned is the way of how we are going to achieve it. It's many, many things. As Robi mentioned in the climb to the [indiscernible], I recommend everybody do it. It's an amazing track. I've done it as well. It's very, very hard work of going up the cliff very, very slowly step by step and ease and is at the end of the day, leads you to this amazing, most beautiful lake that you can ever see on the top with the most amazing colors. So the way to lead us to the strategy is those many -- the way to lead to those financial parameters is the path that we have mentioned in the strategy.

I will add that, of course, when we make our business plan into the next few years according to that strategy that Shai mentioned, we use several financial assumptions built on how we assess the macro environment affecting us in the geographies where we play. And we have taken, of course, different estimates and assumptions that we use in a normal course of business. But I would say that there is nothing materially different from what everyone can see in the macro environment in these categories. We haven't assumed, and of course, we are not allowed to discuss any kind of pricing assumptions that we are making. So we are actually just continuing the momentum we have in the track record of the past 12 months. And we think that we can build forward based on our existing capabilities, on the cash we are generating on the financial leverage, which is quite moderate that we have. And of course, in our, not just need, but eagerness to invest capital in the areas we have commanding market share and brands, especially in Israel.