So the growth segment is full. It’s a compelling list of opportunities within that pipeline. Then you look at the leverage segment and I feel like our teams are really winning in these leverage markets and they are really focused on driving those things that matter to our customers and that create margin uplift in our business. And again, you saw that in our results over the last year, as well as in the last quarter and HHC was a really good example of that last quarter. That’s largely more leveraged segments are in HHC than growth segments. The most leveraged segments in the company are in HHC and you see how they managed successfully to drive — really drive those businesses forward.
Ghansham Panjabi: Fantastic. Thank you.
Operator: Our next question comes from the line of Patrick Cunningham with Citi. Please go ahead.
Patrick Cunningham: Hi. Good morning. Thanks for taking my question.
Celeste Mastin: Hi, Patrick.
Patrick Cunningham: Maybe just on the portfolio construct and how you have laid it out here. How should we think about the balance of inorganic investment in the growth category versus the leverage category? I would think that there is based on some of the recent deals you have done there is maybe more of an outsized opportunity to go after these low risk consolidation plays with significant synergies versus the growth markets, which maybe have more execution risk and less tangible commercial synergies. So how are you thinking about the pipeline from an inorganic perspective relative to the construct you have laid out?
Celeste Mastin: Yeah. So I will start with the leverage category. So you nailed it there. There’s a lot of opportunities for industry consolidation in that leverage space. Our M&A strategy in the leverage segment tends to be more opportunistic and we do underwrite those deals very heavily on cost saving synergies. And you can see the success we have had in those Beardow Adams is a good example of a consolidation acquisition in a leverage segment that’s performing well for us, in fact, performing well ahead of the deal model by about 40%. So then you migrate to the growth category. And I wouldn’t say so much that there is execution risk in these inorganic opportunities in the growth category. In fact, a lot of those — a lot of the opportunities there that we are focused on are very selective.
This tends to be a place where we have the opportunity to buy smaller companies that have been very focused on a certain technology or a certain region. And typically, as we look at those technologies, they tend to fit well within our broader portfolio of technologies and fit really well with our market experience. So the growth opportunities. M&A is a really good tool in the growth category, because so many of those products are qualified or require really a long time to build from an organic perspective. By buying into those markets, you get an automatic qualified product to run with. And I will use Adhezion as in a good example for an acquisition that we did in a growth category. We were basic in cyanoacrylates. We really have great cyanoacrylate technology, but we needed an octyl-based cyanoacrylate technology.
So, we acquired Adhezion and the integration there has been very well run, and in fact, we have already — in that market, we have already leveraged our SecurePortIV product that came through Adhezion into 514 countries, sorry, hospitals in the United States and on top of that we have already also signed a GPO contract with — for our tissue bonding adhesive that came through Adhezion. That is a contract that represents 40% of the hospitals in the U.S. So I don’t see so much execution risk there. I just really see the opportunity for us to get into these niche selective high margin spaces that we can then grow better than the companies that owned them previously.
Patrick Cunningham: Got it. I appreciate that. That’s very helpful. And then, I just wanted to dig in a little bit on price. Maybe can you help quantify the portion of the portfolio that’s on index mechanism, just want to quantify how much is subject to some of these reformulation pressures that you are seeing and then, how should we think about more — like more normalized structural pricing when we get back to a flatter raw material and healthier demand environment?
Celeste Mastin: Yeah. So let me start by saying that, if you look at our pricing performance in 2023, that less than 25% of our customers received a price decrease. So that’s — and included in that number would be customers on indexes, as well as those that are not. So I’d say, when you look at kind of price decrease impact, about half of that comes from index customers. And what we do see is that, for our non-index-based customers, they get price decreases, that decrease is less than what you see with the index-based customers. So that’s kind of a snapshot of 2023 to use to think about pricing in what was an incredibly challenging market. Our volume was down 8% and that’s sort of how I describe pricing resilience. When you think about more normalized conditions, the impact of indexes, it’s just a margin preservation tool, right?
So you shouldn’t — you will see those indexes move with our raw material market, there will be a lag. And then, as far as a normalized pricing environment, I mean, typically what is occurring throughout the year, low volume year or not, is we are constantly innovating with our customers. Sometimes we are innovating to bring them fancy new technology that enables them to introduce a new design and that product is priced to that value. Sometimes we are reformulating to help them address cost needs or maybe just reformulating or tweaking to accommodate a change that happened because they shifted their line speeds or they wanted to use a new substrate. So there is a lot of new pricing that happens in any given year because of that innovation, as well as just ongoing status quo pricing resilience.
