And we don’t want to focus the company from some other opportunities which we’re pursuing, which, in our view, are more sustainable and offer the good start for the margins and the underlying profitability But when we enter with this product, Italy, Czech, a few other markets, I mean our products despite the fact that we’re relatively late into the — from a category history perspective, and then we have gained double-digit shares in this market in the speed of — span of less than 12 months or so. So it also tells you there is a lot of lack of loyalties in place. There’s a lot of yes, I know that we see the volumes, but there’s a lot of trial. I should not ban category and the pouches judge by performance in the U.S. And then by definition, the consumer is more loyal, more focused, more discipline in how they navigate it also.
Callum Elliott: Okay. And I have a follow-up that is related but maybe a slightly more philosophical question. In a number of markets and especially the U.S. related to some of these disposable vaping products, we’ve been seeing this formation of — I would describe it as like a dual-tiered market that’s been forming with big legacy players such as yourselves who are forced to play by the rules and hold themselves to a certain set of standards, marketing only to existing nicotine users and all of us will have seen your video on ZYN last week, I would imagine. But at the same time, we also have a secondary set of smaller new businesses who seem to be doing basically whatever they want and often illegally, but having great success within the marketplace and attracting lots of consumers.
And so I guess my question is, do you think that this dual-tiered structure that seems to be forming in a number of markets, structurally impairs the attractiveness of your business and your brands when it seems like you’re just being forced to play on a playing field which is not level?
Jacek Olczak: Well, look, obviously, companies like ours is not even thinking about doing something which would be against or crossing the line of regulations or even, I would say, societal expectations. So obviously, I mean, our ability to come to you, these are — it isn’t what you’re asking, grossly different than some other operators or participants in the market, especially people who don’t have a view of 10 years or 15 years outlook, but it’s essentially hit and run almost type of operation. And I think we know what has happened or what is happening in the U.S. There is, I understand, some discipline in the market is now underway. But frankly speaking, it’s a long overdue because there is a lot of — pardon my language, but a mess created in the market by the fact that regulators, law enforcements and other design for this designated for these agencies were a bit slow.
And I think it’s, frankly speaking, a replica, which we have for many years, and still in some places, kind of on a cigarette market, and it forms of an illicit type of a participation in the market. It’s not only marketing practices, but also products, product standards, all of these things creates completely around distortions in the market at the expense of the legitimate category manufacturers and also diverts the conversation from how further we can progress and have reductions and divert them into the things which relatively easily should be fixed.
Callum Elliott: Okay, thanks, Jacek.
Jacek Olczak: Thank you.
Operator: Our final question will come from Matt Smith with Stifel.
Matthew Smith: I think you asked second, Emmanuel, wanted to ask a follow-up question about investment levels embedded in the 2024 outlook. If we consider the expectation for gross and operating profit margin expansion on an organic basis, can you talk about the areas where you’re seeing a step up meaningfully in incremental investment? Last year, you called out $150 million of explicit investments, including $75 million or so in the U.S. It would seem like the growth in ZYN would allow you to step that investment level up while still being able to achieve your double-digit profit expectations in the market.
Jacek Olczak: Yes. So a lot depends, obviously, we target adjusted the live growth above on the revenue growth. So obviously, we are assuming some improvement in the margins. But on the other hand, I think we will have enough of the resources to support that revenue growth. So it is — if we were to completely stop investing, obviously, the expansions on a wide growth would be much more significant, margin expansions will be much more significant, but we are — it is not what we see in our strategy. So I think once we operate it at scale and we build, like the consumer has there, so the scale in the U.S., the revenue is very substantial over there, at least by the market standard. And the revenue, which we generate from a small crew, but also combustibles on international with that sort of a revenue growth rate, I think we have a room to provide for the investments to support today’s and tomorrow’s growth while also allowing for driving the margin expansion.
We also have provided here some inflationary pressure. And I think, especially on the combustible, I — we assume that the 2024 is sort of the last year of this extra ordinary life of inflation under pressure. And as of 2025, in other words, we should start seeing easing when the COGS pressures, and this is about delivering some other materials. And I think every incremental IQOS and every incremental ZYN is obviously requires proportionally less of the investment with the first IQOS and the first ZYN. So, I mean, the scale offer is going forward, there’s opportunity for supporting the margin.
Matthew Smith: Thank you, Jacek. I can leave it there and pass it on.
Jacek Olczak: Thank you, Matt.
Operator: That concludes today’s question…
End of Q&A:
