Genomma Lab Internacional SAB de CV

BMV:LABB

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Genomma Lab Third Quarter 2021 Results Conference Call. [Operator Instructions]

I'll now turn the call over to Barbara Cano of the InspIR Group. Please go ahead.

[Barbara Cano]

Thank you, and Good morning. We'll begin today's discussion with remarks from Jorge Brake, Genomma Lab's Chief Executive Officer; followed by Antonio Zamora, Chief Financial Officer, and we'll close with a question-and-answer session.

Our call will include projections and other forward-looking statements, and it's important to note that actual results could differ materially from those projected. Genomma undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed within the company's filings with the Mexican stock Exchange.

With that, I'll now turn the call over to Mr. Jorge Brake.

[Jorge Brake Valderrama, executive]

Thank you, Barbara, and Good morning, everyone, and thanks for joining us today. Genomma's third quarter performance reflects our sustained growth momentum. We delivered record sales and EBITDA results in the third quarter of 2021 in absolute terms.

Net sales for the quarter reached almost MXN 4 billion, a 16% year-on-year increase with a more than 6% EBITDA increase to reach MXN 819 million, for the first time in the life of the company. Portfolio strengthening line extensions, new formulations and new product launches throughout Latin America again drove our success.

To call out a few specific examples. We launched our new Groomen Karboon razor with a more than 100-day cartridge life at key Mexico retailers. And we have unveiled our new environmentally sustainable, and recyclable Tio Nacho shampoo packaging. Line extensions during the quarter included our Asepxia GEN facial cleanser launch, which is Genomma's first specialized line dermatologically tested for only skin, and a new Cicatricure Vitamin C Serum. Novamil also gained further traction, while we continue to expand our Mexico retail presence during the quarter. Market share for both segments of -- both Genomma portfolio, Personal Care and OTC are, therefore, growing in all countries in Latin America where we have presence.

Our industry-leading innovation was again supported by a strong marketing sales and overall go-to-market capabilities during the quarter, which continue increasing the presence of our new or upgraded formulations and brands, which benefits from fully optimized market coverage in terms of channels and distribution. This enables Genomma to expand high-growth products through strategic and often disruptive partnerships in key countries where we are present. An example of which was our Groomen and Suerox launches in Chile during 2021.

Genomma's Latin American operation continued its prior quarter's momentum, with net sales reaching MXN 2 billion, a 27% year-on-year increase, driven by increased points of sale and expanded distribution within the traditional channel, coupled with new launches, line extensions and product restating with enhanced visibility. All of these as part of our strategy, launched initially in 2019.

In Mexico, third quarter 2021, net sales increased by just over 12% year-on-year, primarily due to the strong new category performance of products such as NovaMil and Groomen, as we have described, as well as successful new line extensions and synergies within the traditional channel through new products and presentations.

We are pleased to announce -- have announced on September 7 that Genomma received COFEPRIS GMP certification for our solid and semisolid manufacturing facility in Mexico, an important milestone related to our strategic goals. As we speak, the Sourex line will produce close to MXN 6.5 million this month, representing more bottles produced than our third-party suppliers, made on a monthly basis. We are focused on our second phase for liquids, which we expect to complete in the second half of 2022, and on receiving GMP certification in other Latin American countries, to enable export from Mexico.

Turning to our U.S. operations. While third quarter 2021 net sales decreased by approximately 12 percentage points due to abnormally elevated third quarter 2020 hand sanitizer, EBITDA margin reached nearly 13%, a year-on-year increase, reflecting improved productivity, successful cost and expense controls during the quarter. Worth to mention is that we've seen the hand sanitizer sales in the base, the growth of the U.S. sales in Q3 of this year would have been double digit.

It's important to note that we began implementing our new approach to Genomma's U.S. business during the pandemic at the end of 2020, replicating our winning Brazil strategy. An example of our success in the U.S. market has been Genomma's Suerox isotonic hydration drink, where we identified an innovative and cost-effective way to expand this product presence by leveraging Budweiser distribution to major retailers throughout California, enabling rapid brand recognition and growth. Suerox can also be found today at major retailers, not only in California, but also in Puerto Rico, where today, we are a leading brand compared to competitors like Gatorade and [indiscernible].

We attribute our progress to Genomma's strengthened new U.S. team and to our unique approach to this market by targeting first, second and also third-generation Hispanics as well as a broader U.S. consumer. Each state geography is considered now a standalone business unit with a state-specific general manager and P&L.

We are also taken a step by state approach to our U.S. expansion, beginning with California, Puerto Rico, to next move to Texas, and then to Florida. It's important to note that these 4 stage combined have economies larger than many countries in Latin America.

Additionally, other examples of this initial success of our new strategy in the U.S. are Puerto Rico double-digit growth in 2021. Behind this, new focused approach with an exclusive team dedicated to that region, and our explosive growth in e-commerce sales mainly with Amazon. Therefore, while we are seeing important signs that our U.S. market strategy and approach are gaining traction, we expect this to fully develop during the next few months, mainly in 2022.

Genomma's e-commerce presence has also increased during the quarter, approaching 5% of total third quarter 2021 sales with room to grow. We're targeting 10% of Personal Care sales for this year and between 15% and 20% on Personal Care sales in 2022, noting the general limitations that OTC product sales have through e-commerce.

The growth I have described and that over the last 3 years does not require corresponding increases to fixed costs, nor do we expect anything material in the mid-term. Genomma has instead reduced fixed costs as a percentage of sales by identifying areas to enhance efficiency and cost savings, which fuels our growth with major increases. Today, we have achieved the uniquely advantaged position with solid foundation that enables us to now fully leverage our increased scale.

In addition to our relevant and consumer-driven innovation, another element of our winning strategy is a refresh of our products packaging and formulation. We continue contemporizing and restaging our brands to better match our growing millennial consumer base, while improving our products and their overall shopability, gain leveraging Genomma's marketing and commercial power to broaden our reach.

Groomen and Novamil are interesting examples. Together, these products contributed $25 million to our Mexico sales since 2020 with no fixed cost increases. We created 2 new innovative products, piloted them in Mexico, then leverage a strong marketing and go-to-market execution to expand their presence to other countries in Latin America. As I have noted, Mexico sales this quarter were primarily driven by a strong new category performance with products like Novamil and Groomen.

While the pandemic continued to present challenges during the third quarter, I'm exceedingly proud of the new teams we put in place as part of our operational turnaround. And how our teams, particularly our frontline and supply chain teams, adapted and rallied to an exceptionally challenging environment, to maximize our products' potential in the respective market, collaborating and bringing to life what we are doing successfully in other markets.

Having said that, I would like to highlight how we have successfully turned around our Brazil business where profitability and sellout are growing double digits today. These achievements lie squarely with a new local team that began implementing a strategy of selecting the right portfolio of brands, while optimizing consumer communications strategies and expanded market coverage some 2 years ago.

On behalf of the entire Genomma leadership team, I'm deeply grateful for the dedication of our on-the-ground teams everywhere. Our company's success is a strong testament to our team's skill, experience and leadership, despite the significant headwinds we have become familiar with this reporting season.

Along these lines, I would like to say a few words about the current cost environment impact on our third quarter results. We are operating in a dynamic cost environment, and like the rest of the industry, are experiencing cost pressures with broad-based inflation across our raw and packaging materials as well as transportation costs.

However, Genomma has largely mitigated these increases through close relationships with a handful of select suppliers with whom we work closely to negotiate costs. We have also raised prices where and when appropriate. Our performance in this regard is further testament to our revitalized new teams, which were restructured in the second half of 2020, particularly Genomma's expanded supply chain team.

We are realizing the benefit of our highly experienced new team members running plant, procurement and finished products, which has enabled us to manage global supply headwinds and our COGS impact. Genomma improved service levels and fill rates during the third quarter of 2021 to reach levels which exceeded 90%, despite all of these global supply chain disruptions.

With that, let me turn the call over to Antonio to discuss in more detail our financial results. Antonio?

[Antonio Zamora Galland, executive]

Thank you, Jorge. Good morning, everyone. Once again, our third quarter results demonstrate the strength and resilience of our business and our strategic initiatives.

Genomma achieved almost MXN 4 billion in consolidated net sales for the third quarter, reaching a 16.2% year-on-year increase, driven by improved sellout in Mexico and Latin America, as well as strong execution of the company's 4 key pillar strategy, as Jorge has discussed before.

Consolidated EBITDA reached MXN 819 million for the third quarter, a year-on-year increase as compared to MXN 769 million for the same period in 2020, with an EBITDA margin which closed at 20.6%, a 180 basis point year-on-year decrease, primarily due to commodity inflation with Latin America, ForEx headwinds, as well as increased distribution expenses in line with the current growth strategy of the company.

Mexico net sales for the quarter reached MXN 1.7 billion, a 12.3% year-on-year increase. This MXN 182 million increase is primarily due to strong execution of all of our 4 pillars of our strategy, as well as certain key brands expanded reached to a broader consumer base within the country through new marketing and commercial initiatives.

Mexico Third quarter 2021 EBITDA reached MXN 335 million, with a 20.1% margin, reflecting a 270 bps decrease. This was primarily due to COGS inflation on certain and -- on certain manufacturing plant start-up expenses during the quarter, but was partially offset by productivity and pricing initiatives that continued also in October.

Our net sales in the U.S. reflect a challenging year-on-year comparison to third quarter 2020's increased hand sanitizer sales. This was partially offset by optimized digital strategy and market share gains due to stronger e-commerce sales.

Latin America net sales for the quarter increased by 26.7% year-on-year to almost MXN 2 billion, primarily due to outstanding traditional channel execution, marketing initiatives, new product launches and successful line extensions implemented across the regions where the company operates. To a lesser extent, sales increased due to an expanded presence of Genomma's products at the point of sale.

Third quarter net sales were impacted by ForEx headwinds in some key countries where Genomma operates in Latin America. Third quarter net sales also reflected a double digit increase when expressed in local currency.

Third quarter 2021 EBITDA for our Latin America operations reached MXN 442 million, with a 22.3% EBITDA margin at 230 bps year-on-year margin contraction. Consolidated gross profit grew 12.1% during the quarter to MXN 2.5 billion. Gross margin decreased by 230 bps year-on-year to close at 61.6%, primarily due to COGS inflation across all markets as well as foreign exchange impact when consolidating currencies which depreciated during the quarter.

While working capital was partially impacted by the acceleration of payment agreements, to take advantage of certain discount opportunities with some suppliers during the quarter, accounts receivable amounted to MXN 4.4 billion with 106 days, which represents a 5-day decrease when compared to September 2020. Inventories closed at MXN 2.4 billion as of September 30, 2021, with 154 days of inventories which represents a 4-day year-on-year improvement, reflecting the success of the company's focus on improved fill rates to improve the cash conversion cycle of Genomma.

The company closed the third quarter 2021 with a leverage ratio of less than 1.5x net debt-to-EBITDA, and MXN 1.8 billion in cash and equivalents at quarter's end, a 12% year-on-year increase.

Finally, during the quarter, we repurchased a total of almost 1.9 million shares during the 3 months ended September 30, 2021, an investment of approximately MXN 37 million.

In summary, our third quarter results underscore that our strategies are working, that the team is navigating today's challenges effectively, and that we are emerging from the pandemic stronger than before. We are extremely optimistic about the future, particularly to the return of the cold and flu season in the months ahead.

With that, I'll turn to our operator for your questions.

[Operator]

[Operator Instructions] Our first question is from Vanessa Quiroga with Credit Suisse.

[Vanessa Quiroga, analyst]

I would like to ask you about the current COGS inflation pressures that you are facing, especially which you mentioned for the South American operations. Just to understand what we could expect in terms of cost pressures going forward?

And the second one would be, if you think that in the U.S. as -- the fourth quarter results will have a comparable base so that in the -- in 4Q '20, I'm not sure how much sanitizer sales you still have, so that would be very helpful to get in detail.

[Jorge Brake Valderrama, executive]

I will start with the second, and then we'll leave the first one for Antonio. And in your second question relating the U.S., yes, I would say that we would see much less hand sanitizers in the base. I remember that fourth quarter was when the U.S. government started stopping shipments and sales and product going through the border. And that is when we will start seeing much less product sales of this product in the base.

Just taking advantage of this, I wanted to highlight what I said in my remarks, that the view is, in the last 2 quarters have seen a very healthy growth in its base business. And now we will be able to see more clearly, as you said, starting Q4 and in 2022, behind all the interventions that we made in 2020, including our strategy, portfolio review, team structure, renewed focus in a few states instead of trying to do everything in the whole country, and also a renewed strategy in how to communicate with consumers. So you will start -- in summary, you're seeing both clearly starting this quarter -- Q4 of 2021. Antonio, the first question?

[Antonio Zamora Galland, executive]

Thank you, Vanessa for your question. This is Antonio Zamora. COGS inflation, it's phenomenon that all -- basically, all consumer goods companies are experiencing everywhere, not only Genomma, not only in Mexico and Latin America, it's a worldwide situation. The company was able to cope with it, I would say, very effectively.

But talking specifically about the third quarter, all of the COGS inflation impacted the full third quarter. And we implemented pricing actions that started on September, and that continued all the way over to October. With that in mind, one of the policies or the philosophies that we've always had as a company is that, whenever there is COGS inflation, we need to transfer that to the consumer. Fortunately, Genomma has enough pricing power to do that.

But, as I said, this happened between September and October. So part of that benefit was recorded in Q3, and part of that will come in Q4. So not all of the inflation was able to be offset during this quarter, but things will get better in Q4. We'll get back to normal. Again, this is something that most companies are experiencing. Fortunately, our customers and clients in all regions where we operate, understand that this is -- it is what it is, and the pricing power is there. But COGS pressures will most likely continue for everybody. As I said, whenever those situations happen, we will take pricing as needed so that we don't deteriorate our gross margin.

On top of that -- on top of that, with the beginning of operation of our new manufacturing facility, there are some synergies that are expected, and that will help us cope with these situations. For example, in the case of our Suerox line, our non-carbonated isotonic drink, the cost of manufacturing that we are achieving at this moment is lower than what our third-party contractors usually quote us. So we begin to see those benefits. The -- as Jorge mentioned earlier in the call, the volume produced in September, it's almost 6 million bottles per month, which is a very, very high-efficient rate. So we expect good news to come in 2022 as the plant starts -- continues its operations.

[Jorge Brake Valderrama, executive]

Antonio, I would like to complement. One quick comment, Vanessa. Just to complement what Antonio said regarding the pricing that we are taking, whenever is needed and appropriate in our key brands behind these cost increases. I wanted to mention that we do it in a very educated way. We have internal tools that we developed in the last couple of years, which is based on artificial intelligence, that is helping us take the much better pricing decisions to optimize the value equation, meaning volume and profitability. And it is working very well, and we use it in all the countries in which we compete.

And to be able to do this, obviously, you need to have the right information at hand, which means you have to read their competition, you have to read their pricing, how they are moving, what they are doing in terms of promotions then that impact pricing, et cetera, et cetera. And this tool helps us, as I said, make the right and educated decisions when the time is -- when is needed.

[Antonio Zamora Galland, executive]

Thank you, Jorge. There's also another aspect that I think it's worth mentioning when we talk about COGS inflation or where our analysts and investors update their models, which is the following. There's also a product mix effect that we all need to take into consideration. As we said in previous quarters, the flu season basically disappeared from Planet Earth for a while because everybody was under lockdown, washing their hands, using masks, et cetera, and that impacted, in a way, our sales of the cough and cold categories of the winter season, as we sometimes call it. And as we all know, OTC has a higher profitability than Personal Care.

So the company -- regardless of this headwind, in a way, the company has been able to grow by selling other categories, especially in Personal Care. So when you do the product mix, obviously, we have a less gross margin rich mix at this moment, but this is -- we believe it's temporary.

As -- and we're beginning to see positive signs that, as people are starting to go back to work, whether it's in a hybrid model or they go actually to the office and they start to use public transportation and as the population gets vaccinated from COVID et cetera, people are beginning to move more. And as they move more, people are beginning to catch colds more often and flu and et cetera, so, hopefully -- for us, obviously -- hopefully, the flu season and the cold season will come back as it always has, and that will improve our product mix, especially in terms of how rich is the gross profit. And that would also help us lower the COGS as a percentage of sales.

Obviously, this has a lot to do with external factors that we don't control, but we see positive signs of that. And, hopefully, that will be the case for Q4 and Q1. But we are obviously crossing our fingers. Not that we want people to get sick, but we want people to get back to normal and reignite the world economy.

[Operator]

Our next question is from Ulises Argote with JPMorgan.

[Ulises Argote Bolio, analyst]

Just one quick question on my side. Antonio, you were mentioning here on the share buybacks. So I just was wondering what's going to be the strategy there going forward? Are you going to cancel those shares? Or you're going to keep in treasury? If you keep in treasury, there's obviously like that fiscal impact. So just wanted to get some thoughts there on how the rationale is going to be on that going forward?

[Antonio Zamora Galland, executive]

Thank you, Ulises for your question. This is Antonio again. It's an interesting question, especially regarding the capital allocation strategy. As we've always said, buybacks is part of that, and I'm going to add a little bit of more comment. I'll get back to your question. But also, there's a dividend payment that is spending. And I'm going to have this comment, because the company declared a dividend some time ago, we said that once the plant was almost finished or finished, we would consider that as well.

Obviously, if you ask or hear me, if we prefer buying back shares or paying a cash dividend, definitely, we prefer to buyback our shares. But there's also that dividend comment that the company made in the past. So that's going to happen sometime in the near future, I would say. So I just wanted to add that comment.

Now talking about the buybacks. We think it's a great opportunity for the company given where the current price is. We are generating cash, and as we don't have to invest in the plant as much as we did in the past, there's going to be more buybacks in the future. We see that as a good opportunity for the company and for shareholders.

Regarding what is the use of those shares? Well, there's different uses. One, obviously, some of those shares might be canceled at some point in time. There's other shares that we are also using as incentives for our people that we use as well. And eventually, that could also be used as currency for inorganic growth, if needed in the future. And as Jorge and I have been discussing in the past, we're also looking at inorganic opportunities. Not anything transformational, things that we can buy with our own resources, things that are bolt-on acquisitions, that make sense, that are accretive, that are strategic alliances, those kind of things.

But I don't know if I answer your question, Ulises.

[Ulises Argote Bolio, analyst]

Yes, that was perfect one.

[Jorge Brake Valderrama, executive]

I would like to add just a quick comment to something that Antonio mentioned, because it is connected to the future. And we just had a Board meeting couple of days ago, and we've been working with this executive team in -- thinking about the future, because we want to keep this growth rate in the near and the long term. And to be able to do that, we have to continue doing 2 things.

One, we will continue consolidating what we have done in the last 3 years, which is behind our [ current ] strategy because, as I always say, we still have many opportunities to address. We've seen our current business base, our current portfolio, meaning the initial good results of the U.S., we want to consolidate that in 2022. We want to continue consolidating the start-up of the plant. We are seeing very good initial results in terms of productivity, production, capacity and costs in the case of Suerox, as Antonio said. We need to continue to do expansion of our portfolio. We still have a lot to be done in terms of continued completing the portfolio of products that we want to have in each of the countries, et cetera, et cetera. But we will also need to do -- continue our work on exploring potential opportunities so that we can adapt to that -- to the organic growth we are enjoying now, to ensure future growth in the future. And hopefully, you will be hearing from us in the next couple of months or 3 months, very good news in terms of new things, new business opportunities that we will be addressing to ensure that the future also looks as good as the present is looking today. I think you have one more question.

[Operator]

Our next question is from Rahi Parikh with Barclays.

[Rahi Parikh, analyst]

I guess our question is for price pass through. Do you expect like single, double-digit growth in prices in different regions? And maybe just more color on how your customers are accepting the price increases?

[Jorge Brake Valderrama, executive]

A couple of overall comments. Very good question, because that's an area of pricing, given what we have been discussing -- the increased costs that are forcing everybody in the industry and in many industries, to raise prices higher than normal. As I said, we are very close to this. We work with our local teams where we have people that are always reading the market, reading our competitors really in what is going on with the retailers, and also reading their reaction to price. And as you said, that is a key area of focus for us.

We explained, I think, a couple of times in the past, that today in Genomma -- because this is -- as we always say it's a different Genomma than the Genomma that we had 3 years ago, 4 years ago, have platforms and tools to be able to measure everything. We have dashboards -- more than 70 dashboards today, that help us measure what is happening in the market, with competitors, with pricing, with consumers, and specifically in this case, with sell-out. So as we do with our advertising investment, when we put a new TV commercial or a digital commercial or a digital communication tool in any of the social media platforms, et cetera, et cetera, in a specific market with a specific brand, we always start measuring sell-out because that is the key metric for us to be able to understand the payout of any investment that we do in the market.

So when remove pricing in a specific brand or market, we go back to that tool to measure sellout. And based on that, we can understand what is the reaction in overall terms. What I can tell you is that we haven't seen major negative effects. As Antonio said, we have some pricing power in some specific brands, which are leading brands in their respective markets. But at the same time, as you know, we have been improving our products, and there is where the value equation concept comes alive.

The consumer is willing to pay more for better products, is willing to pay more for -- versus what is their perception of what they are receiving as a product or a service behind that payment. And today, the situation, the value equation, as we measure it, of our key brand is very strong. It's much stronger than 3 years ago, because we have been able to improve formula, to improve packaging, to improve messaging in the packaging, and to improve how we communicate to consumers. So it is a combination of factors that is making us being able to truly manage the potential negative impact of pricing using artificial intelligence, using the dashboards or the sell-out measurements as we use by brand and by country or market, and also behind the improvement we've made to our brands and products.

[Antonio Zamora Galland, executive]

I think to Jorge's comment, Rahi -- and I think it's an excellent question. I would like to provide additional color, which is, your question about pricing, power and passing through COGS inflation, obviously, it's relevant. But we are not only doing that. I mean, that's something that obviously needs to be done. At the same time, something that we are doing very proactively, and this is part of Jorge's vision in terms of ESG, is, we are changing our packaging materials. We are using recycled materials. We are changing in some instances polyethylene for PET that happened to be at a lower cost, and at the same time, it's more sustainable, and we are using recycled -- both consumer recycled PET, to have a lower carbon footprint, but at the same time, lower cost. We are considering a reformulation of some of our products. We are proactively launching bidding contest for some raw materials for the plant. So we are being very proactive in terms of lowering the COGS basis being -- adding productivity as much as possible. So we want to highlight that we have pricing power, fortunately, because consumers like our brands, there is that consumer preference, and we can do that. But at the same time, we believe that it's also very important to be as productive as possible to leverage our manufacturing -- our new manufacturing capabilities, and at the same time, consider new materials, new formulations that are more environmentally friendly, which is, again, part of the ESG vision, the 2025 vision that a couple months ago, Jorge published. And it's important to mention this because it's good for the environment, but it's also good for the P&L. So we are doing good for everybody.

[Operator]

[Operator Instructions] Our next question is from Ken sic [ Ben ] Wulfsohn with Lazard.

[Ben Wulfsohn, analyst]

This is Ben Wulfsohn. So glad to see that you received your GMP license for the OTC plant. So if -- one, if you could just give me an update on how that plant is ramping up, what the utilization is now? Where do you expect it to be? Two, are there any other GMP approvals? I see in your presentation that you are waiting for a liquids line approval. So just give me a little specifics on that. And thirdly, now that you have these approvals, can you give us an update on some of the promised EBITDA improvements that you expect to come?

[Jorge Brake Valderrama, executive]

I will update you on the first part of the question, and then Antonio will take also to complement whatever I say. Yes, as you know, in early September, we finally got the GMP for the solid and semisolid lines. As you know, the GMPs are granted by line of production. So in this case, we have gotten this for these 2. And this will enable the plan to start producing a few of our brands like [ Asepxia ], Goicoechea and Next, which are big volume brands in overall terms, in this case, for Mexico only for the time being.

There are 2 things that need to happen now in the next few months to follow-up on this initial GMP approval. Actually, I just wanted to mention that the GMP approval was gotten about a year later than we expected, and we can blame COVID, of course, to have been an obstacle on this because the Mexican authority basically closed down their doors during almost a year. But having said that, now there are 2 things that we have to continue doing, to complete the process.

One, is we need to obtain the GMP for the liquids and semi-liquids lines. And that is a work that is underway already, as you can imagine, and that should take us to about mid-next year, second, third quarter of next year to get that final GMPs. With that, we will have the 100% of the OTC plant with GMPs approved. And in parallel, we have started already also the work to expand this GMP to other countries in Latin America so that we can export to those countries. And in some countries, this is a very efficient, a quick process, in some countries it's not. So we are going to be doing both. We will be probably getting some initial approvals to start exporting to some countries sometime in Q2 or Q3, and exporting others a little later, so that 2022 will be a key year to not only complete the GMPs for the current plant, but also to be able to start exporting to other countries. Antonio?

[Antonio Zamora Galland, executive]

Thank you, Jorge, for the comments on the GMPs. Of these, regulatory processes in pharma are pain -- I would need to say they are pain. But on the other hand, they are also good barriers to entry, okay? So Genomma decided to invest in this manufacturing facility, obviously, to get better quality, to be able to control more of our own destiny, to lower COGS, to get a number of benefits, but at the same time, we need to deal with all these regulatory processes.

So the solids and semisolid line, GMP that we have for Mexico, needs to be harmonized with some of the regulatory bodies in South America, Colombia, Peru, Chile, those countries that have bilateral agreements with Mexico. So that's a lot easier. There's other countries that the process takes a little bit longer. As Jorge mentioned, the additional GMPs that are required will need to be managed, not only for Mexico, but also for the other countries.

And then regarding your question on updates on the EBITDA improvement, I think we need to split the question in 2: what is -- what are the benefits coming from personal care, which, it's a lot easier to say because we -- well, easier saying, obviously, there's a lot of work that needs to be done. But the Personal Care plant, it's more on our control because there's not GMPs -- I mean there's some GMPs, but that's a lot easier to get, and the productivity is more on our hands. So we will see improvements, EBITDA margin improvements driven by the personal care plant in 2022, as the lines get the full ramp up, and they are producing at full scale.

We saw that in the beverage line, and productivity and the savings are pretty much in line with our expectations. And actually, we're taking a little bit of additional measures to even improve a little bit on that. The initial results of the first batches that we are manufacturing of the shampoo line, look as promising. Obviously, we are in the beginning of that ramp-up period, but very much -- what we are seeing today is very much the same kind of issues that we experienced when we started the beverage line. So everything is going as expected.

So regarding the EBITDA improvements, I think that, we are confident that on the Personal Care plant, those savings will be achieved throughout 2022. In the OTC plant, it's probably going to take a little bit more because, I mean, the plant is ready. You've seen it, you've seen videos, et cetera, but we need the GMP harmonization with the countries. Because although we can manufacture solids or semi-solid products for Colombia, Peru, Chile, et cetera, we need that harmonization process to take place so that we can do that, as Jorge was saying, and that's a little bit out of our control.

The good news is that those regulatory bodies seem to take less time than COFEPRIS. We are also working very closely with COFEPRIS. In Mexico, they are helpful, and we need to get the GMPs for the other lines, the liquids, et cetera. So that -- there's a little bit more uncertainty there. I think it's just a matter of time, and the savings will come. I don't know if I was able to answer then your question.

[Ben Wulfsohn, analyst]

So you would say the OTC plant improvements in margins is more of a 2023 story?

[Antonio Zamora Galland, executive]

Yes. I would say there's going to be some improvement in 2022 because we already have the GMPs. We can manufacture for Mexico. So those savings will be achieved. But other improvements do require the GMP harmonization and additional GMPs. So yes, a portion of the benefits will come 2022, and the rest will need to wait, at least for the second half of 2022, I would say.

[Operator]

Our next question is from Rodrigo Alcantara with UBS.

[Rodrigo Alcantara, analyst]

Just to understand here about the growth drivers that we have seen year-to-date. I was wondering, for example, in the case of Mexico, if you would give an order, let's say, addition of new points of sale, line extensions and product and new categories, mean, if you would give an order to those drivers, I mean, what would be that order in terms of revenue growth contribution, in your view, Jorge, Antonio? And how would you see this order changing as we go through year-end and 2022 with the ramp-up? That would be my question in Mexico.

And in the case of Argentina, just curious here about how do you see volume growth in this country? If I'm not mistaken here, that your role is to be a relevant brand, right? But as you mentioned, some OTC products are still weak, right? So just curious, what has been the growth driver in the case of Argentina? So those would be my 2 questions. If you can comment on those, please?

[Jorge Brake Valderrama, executive]

Okay. We'll do the same. I will start, Antonio will complement anything that is needed. Hola Rodrigo. In the case of Mexico, I would say that, fortunately, there are several things that are happening that are positive, not only one thing, but -- I will do what you're asking for. I would try to put in some sort of a ranking. But I would say that the first one is our go-to-market strategy.

I remember, in Mexico, we already had a very comprehensive portfolio of brands. It's the market in which we've been for almost 20 years, different than other markets in which we are a newer company. So we have been able to take our brands, our key brands in the portfolio, to more points of sale, to expand their presence, and specifically, as you know, to traditional stores where they were not present a few years ago. Just to remember that the traditional channel in Mexico as well as in the Andean countries is very relevant. In some categories, it gets up to 50% of the consumption -- is done through traditional Mom & Pop stores that are in the hundreds of -- in the 500,000 or 600,000 stores in the country. And we've been able, with our traditional store program, as I said, to expand the presence of our key brands in overall terms.

This has also needed that we finetune our portfolios in terms of sizing and presentations. Because to be able to go to those channels, you have to adapt your sizing, for instance, and price points, to what is needed by the consumer in that shops in those channels, smaller sizes, higher price per meal or per gram, and lower price points. And we did that. We launched, as you know, in -- a year ago -- a couple of years ago, we have started with launching some sachets for shampoos, sachets for creams. We've done that in other countries like Peru, Colombia, et cetera, et cetera.

In Peru, our entrance in sachets -- in -- that market for shampoos is closing our sales in the category, in the country, because we are participating in the category -- in a channel that is very large in terms of the consumption of the haircare category, for instance. That's one. This expansion of our key brands within the portfolio on a distribution base. So we are reaching more consumers. So that's the key point there. And we'll continue doing that. We are not done with that. We will continue doing that in the next couple of years. We still have a lot of room to continue developing in that front, not only in Mexico, but also especially in the Andean countries and Central America.

The second, I would say, is the fact that we are growing behind new businesses. And as I have mentioned, we entered initially only in Mexico with infant formula and razors, Groomen for men. And we are just starting with our brands. Novamil 2021 -- 2020 was the first year, but with COVID, everything was not up to ideal standard. 2021 is actually the first year then that we are deploying all the weaponry we have behind the brand, and it also is growing in the 20s percent versus previous year as we speak. So it's a very good performance of a very good brand, with great technology and has a great product. So it's being recognized by the public behind our go-to-market and advertising capabilities.

And Groomen that has one year in the market in Mexico, is proving to be also a very good idea, behind, again, a very good product with the latest technology, made in the U.S., as you know, and it's gaining a lot of traction in the country. In the system segment within the razor category, already got very important share points very quickly. And that has produced the decision of expanding the line. We have introduced the disposables just a few months ago in Mexico, especially to the traditional market, and now we are going to expand it to other retailers because it's a very important part of the segmentation of the category. And we just launched it in Chile. Chile is going to be a great market for this brand because we have all the capabilities needed since day one to make it successful. And initially, it has been very well received. Today, you see it already in Walmart in Chile in the stores, and you will see it in other retailers, as we go in the next few days and weeks. A very good prospectus. So that's the second one.

And the third one, I would say that we have continued modernizing and restaging several of our brands in Mexico, including Teatrical, Cicatricure, we're growing double digit in many of the countries, and very high single digits in Mexico. Tio Nacho is growing in addition to these new businesses -- Asepxia. And in OTC, we are seeing, fortunately, a comeback of the flu season. The initial signs are very positive. All of our cold and flu brands -- cough and cold brands are back to growth rates that are normal for this time of the year, so we expect that to continue. So it's a combination of the 3 factors: expanded market presence; new businesses; and strengthening -- continued strengthening of our current portfolio behind key brands.

And in the case of Argentina, to finalize, we are seeing a very healthy growth. Argentina continues to enjoy EBITDA margin higher than the company's average. We had a great team that for the last 2 or 3 years, is doing a great job. We are gaining share in all businesses, including Personal Care and OTC. And in OTC now is growing in addition to Tafirol. We enjoy a very nice situation there because 60% of our business in Argentina is OTC, and that's why we see higher margins than average versus the total company.

So in overall terms, we will continue growing very, very strongly in OTC in Argentina that's part of our budget for 2022. Adding also a few new businesses in the case of Personal Care, but maintaining that ideal balance to keep the country growing in a very healthy way. Antonio?

[Antonio Zamora Galland, executive]

Thank you, Jorge. Let me just complement a little bit of additional comments to what Jorge mentioned. And I would say it's 2 words. One word, which is a term that Jorge brought to the company, which is, deniche the company, okay, instead of being the leader in each segment, let's go for the bigger markets. So one of the reasons why Genomma has consecutively growing quarter after quarter after quarter in countries like Mexico that has been very much flattish, is because we are gaining market shares. We are executing with excellence at the point of sale, and we're gaining share. That's very important. So I said towards one is, deniche the company, which is a term that Jorge brought to Genomma -- deniche the company -- let's go for the bigger segments.

And the other one is capacity. So I'm going to answer the growth from the economics point of view, supply and demand. The other one is capacity. All of these examples, or some of these examples that Jorge provided, for example, in resource, in infant formula, in beverages. The constraint that we have had is capacity.

So for example, let's use the Sureox line. We -- at this moment, we have all of our third-party contractors are working at full capacity we added our own line, and our own line is close to full capacity. So initially, the thesis about investing in the plant was, okay, we're going to be replacing some of our third-party contractors, and we'll do our own manufacturing because it's going to be better quality, we control our destiny, we lower COGS, et cetera, but we were not able to do that in Sureox. Why? Because demand is so large that we didn't replace a third-party contractor. Actually, we need add more capacity, and that's something that we are working on.

The resource example that Jorge provided, we could launch that -- the Groomen brand in many countries. What is the constraint? Capacity. Again, in this case, a U.S. supplier has no more capacity. At this moment they are investing in Capex. They are deploying new lines. And as we get new lines, we'll do that. In the infant nutrition, there are some specific SKUs or categories like the rice formula, there's no more capacity, so we're getting as much as we can.

So, again, it's 2 additional comments to what Jorge mentioned, which is deniching the company, which is basically what he explained. And the other one is, as we get more capacity, as we have the plant up and running, which is something that is happening, we will have more capacity. We will continue executing with excellence at the point of sale. And we hope to continue gaining market share. So if we add point of sales, wonderful. If we add new products, great. But we can also grow by executing with excellence and gaining share from the other competitors in the categories where we participate.

[Jorge Brake Valderrama, executive]

One quick one -- quick comment, Rodrigo, just to finalize my list. I mentioned 3. There is a fourth one that is e-commerce growth. We are growing very rapidly in e-commerce. That was a non-existent channel for us, to be honest with you, 2 years ago. We grew a lot in 2020 over the pandemic. But in 2021, we are doubling what we did in 2020, and we expect to double again in 2023. So as I said in my remarks, we expect to get to 10% or more of our sales in non-OTC categories in 2023. And that is another engine of growth. And that is not -- that is happening not only in Mexico, that is mainly happening in Mexico, U.S., Brazil, Argentina, Chile, those countries. So you will see more of that as we get into 2022.

[Operator]

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Jorge Brake for closing remarks.

[Jorge Brake Valderrama, executive]

Thank you, operator, and thank you, everyone, for joining us today. As you've seen, our results again prove Genomma's unique competitive advantages. Our relentless focus on innovation and disruption is embedded in our purpose today as a company.

As difficult and complex as this time has been, it has also been an extraordinary period for Genomma, and we have made clear, meaningful progress advancing our strategic plan. We have evolved into a different company, one that is stronger, more agile and with relevant brands that are better positioned for the future. We'll see more of these coming in the near and the longer term. Thank you again for your time today, and have a good week.

[Operator]

This concludes today's conference, Genomma Lab. Thank you for your participation. You may disconnect your lines at this time.