Genomma Lab Internacional SAB de CV

BMV:LABB

Earnings Call Transcript 2020-Q4

[Operator]

Greetings, ladies and gentlemen, and thank you for standing by. Welcome to the Genomma Lab's Fourth Quarter and Full Year 2020 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. I'll now turn the call over to Enrique González, IRO of Genomma Lab. Please go ahead, sir.

[Enrique González, executive]

Thank you, Jen. Good morning, and welcome to Genomma Lab Fourth Quarter and Full Year 2020 Earnings Call. With us today are Jorge Brake, Genomma Lab's CEO; and Antonio Zamora, our CFO. Jorge will open the call with a review of our progress throughout 2020 and comments on our priorities for 2021. Antonio will then provide more deep on the quarter end and full year results. As always, we will choose -- we will close the call with your questions.

In addition, as a reminder, today's discussion contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publically any forward-looking statements whether because of new information, future events or other factors. It is important to note these statements include expectations and assumptions, which will be shared related to the impact of COVID-19 pandemic. Please refer to our earnings release and other reports filed with the Mexican Stock Exchange by Genomma Lab for information on risk factors, including the impacts of COVID-19 that could affect our financial results.

It is now my pleasure to turn the discussion over to Jorge Brake. Jorge, please go ahead.

[Jorge Brake Valderrama, executive]

Good morning, everyone, and welcome to Genomma's earnings call. Fourth quarter results completed a year of strong operational performance, with meaningful progress on all 4 pillars of our growth strategy, enabling us to close the fourth quarter of 2020 with MXN 3.5 billion in net sales, a nearly 8% year-on-year increase and a 9% increase in net sales for the full year to close at MXN 13.9 billion.

It was an extremely challenging year, yet we delivered exciting product innovation, line extensions and new category entries, providing the -- proving the strength of our business model. The value of our products, our capabilities as a company as well as the successful execution of our strategies, I directly attribute our success to this extraordinary year to the strength of Genomma's team, who demonstrated outstanding commitment and engagement, adapting with agility to meet the new normal for our customers and consumers, ensuring no major interruptions to our business. Our people really made the difference. I, therefore, am incredibly proud of the way Genomma has performed in this unprecedented operating environment.

We drove outstanding operating performance by protecting our employees, making important manufacturer and supply chain investments and brand building to fill future growth, while supporting our communities through relief efforts. As a team, we are accelerating key initiatives as we move to the next level that will drive Genomma's continued transformation.

This morning, I will begin our discussion by reflecting on our 2020 achievements and then share with you some of our 2021 business momentum. The first pillar of our strategy is to deliver transformational products through innovation and portfolio optimization, and 2020 was the year we elevated this to the next level, building on our 2019 success. Innovation was a considerable factor that reflected in our 2020 results, with 16% of our total sales from new products launched within all categories. Two products were particularly citing success stories during the year. Genomma's exclusive Novamil brand infant formula product licensing agreement with UPI [indiscernible] all our initial expectations for this important new category. We are, therefore, planning to double the brand presence within Mexico over the next 2 years and expand into the Andean region this -- later this year.

We also launched Groomen, Genomma's first male category segment brand in June 2020. We began by targeting the razor segment within a few key supermarket chains and with a selected number of SKUs. We then recalibrated our marketing strategy and relaunched this brand within the disposable razor focused on the traditional channel. We are seeing a strong response to this new product along with a solid trend in an important higher-margin category, where we are already gaining share.

Additionally, we reinforced Genomma's 1 mission model to change the way we analyze and assess initiatives. Throughout the year, Genomma's integration team met frequently to assess, analyze and take decisions, which clearly contributed to our innovation success. Today, we are very -- assessing what is working well to accelerate new product rollouts and successfully expand our geographic presence.

Innovation will be integral to our sales growth for 2021 as new product innovation differentiates our brands and strengthens our relevance with consumers. Our success in this regard was driven by a strengthened best-in-class go-to-market execution. Genomma's Novamil and Groomen success stories, again, reflect truly understanding execution by our sales and marketing teams. Our direct distribution partnership program to the small mom-and-pop traditional channel meaningfully increased our points of sale during the year, which proved invaluable during the pandemic to provide the scale and broad access to our products. We strengthened and within -- our traditional channel presence in Mexico as well as within the Andean market, tailoring our innovation and product portfolio to this specific format to ensure we are able to address increased demand.

Today, Genomma reaches more than 400,000 points of sales weekly throughout Mexico, the Andean region and Central America, through more than 2,000 person sales force and have gained initial traction in Peru, Colombia, Ecuador and Central America. In the fourth quarter, we also increased our presence in Brazil through new wholesalers agreements.

We are also seeing continued strong demand and a very favorable response to our Suerox isotonic sports drink in the U.S. Our rollout will continue in 2021, expanding last year initiatives with an increased focus on Suerox and on consolidating a new commercial strategy launch in January and a strengthened e-commerce presence. We continue to build long-term brand equity through our market investments across all markets, which will continue to underpin strong growth momentum into 2021. Today, more than 3.5% of our business is derived from -- through e-commerce channels, such as Amazon Rappi, Walmart, Mercado Libre, another key market retail platforms as an important part of our go-to-market success.

Through our high level of effective brand marketing investments, and our initiatives to deepen our digital engagement with consumers, we are capitalizing on the opportunity to build long-term brand equity and increased usage by existing consumers. Regarding our world-class manufacturing and supply chain success, third pillar. We made excellent progress during the year on several fronts. Importantly, we focused our attention on [indiscernible] particularly on the second half of the year. I'm pleased to share that Genomma's personal care manufacturing plant has started operations. We are in the process of ramping up Suerox production for expected market sales in the next few days, and we will then move up to shampoos, in line with our plans.

We're commissioning other 4 manufacturing lines at our personal care facility, with operations expected during the first half of 2021. With the start-up of our personal care production plant, and the new central warehouse in operation, 60,000 out of the 70,000 square meters are ready to start or starting operations. Yesterday, we posted a video to our web, which I encourage you to watch to better understand the magnitude of this project, and of our company's first industrial cluster.

Note that we have hired a highly seasoned new plant management team at both our personal care and OTC manufacturing operations, in addition to our new quality control director with multinational experience to help us through this new manufacturing area.

During the year, we continued working with our selected suppliers and on the transition between suppliers and plants to optimize efficiency. As part of the process we began in late 2019 to select those suppliers, which will remain with Genomma through our new phase. We have, therefore, been getting select active suppliers down to roughly 20 from the dozens of suppliers Genomma worked with previously. Only a few will remain as active suppliers, and the remaining will fulfill a specific niche production on an as-needed basis.

Finally, as previously mentioned, in January, we successfully transitioned to our new constructed central warehouse, while simultaneously fulfilling 795 customer orders with no major disruptions. The transition entails the heroic efforts of our Genomma team of over 150 people, more than 14,400 work hours and over 850 trucks to move more than 15,000 pallets and installed 16,000 racks. The new, lean, ultramodern central warehouse is a smaller, yet more efficient by design. This state-of-the-art central warehouse, together with the new supply chain system, will further drive down Genomma's future distribution costs and minimize customer order fulfilling lead time and service. We, therefore, achieved our goal for 2020, ensuring all related functions have now been integrated within the same site, while improving and streamlining operational costs with improved transport cost efficiency.

With these important developments, 2 of the 3 major components of the Genomma industrial complex are now fully operational. Considering this progress, it's important to note that today Genomma manufacturing plant is essentially 2/3 up and running. Reviewing progress towards a strengthened corporate culture, we were, again, recognized for our efforts for doing what's right for our employees and communities. Genomma's team performance was nothing short of extraordinary during the year, ensuring no major disruptions to our business. We were able to maintain close connection and communication with all Genomma employees with the best practice sharing of ideas and information supported by an organizational model, which, today, combines the agility, adaptability and position of a small team with the power and resources of a larger international organization.

Our highly motivated team mainly pivoted to turn challenges into opportunities, enabling outstanding results. We also supported our communities during this difficult time through our virtual volunteering GEN Contigo or GEN Review program where Genomma's amazing employees donated their time to promote online education and support nearly 17,000 -- to nearly 17,000 children and adults. Our company also donated more than 1.5 million hygiene and personal care products to vulnerable medical dispensaries, nursing homes and communities in 7 different countries. Additionally, we have laid foundations for the sustainability that Genomma will follow in the future ahead. And I'm especially excited to share more about organization-wide commitment to sustainability and to our future next week with release of Genomma's 2025 sustainability agenda.

Finally, on November of 2020, we informed the market that Genomma became a constituent of the Dow Jones Sustainability MILA Pacific Alliance Index. We are very pleased to be part of this exceptional list of companies recognized for excellence in corporate practices, and for our significant economic, social and environmental contributions to our planet.

Looking ahead to 2021. We believe the consumer behavior and sentiment driving an increased and sustained preference for health, hygiene and self care will continue beyond the pandemic, further supporting consumer demand for our products. The action plans we have in place will build from where we are today to continue consolidating relevant aspects of our 4 strategic pillars to evolve to the next level. This includes product innovation and further enhancing our overall product innovation model and process. Genomma's go-to-market execution in 2021 is underpinned by an expanded unbeaten e-commerce presence. While we understandably believe -- with our progress in 2020, we believe considerably opportunity remains in this area.

We expect our brand marketing investments, combined with our valuable brand equities and a strong digital consumer engagement, will continue to drive growth with the millions of consumers gained in 2020. We also expect to further expand Genomma's product presence within the traditional channels, fine-tuning our product portfolio and SKUs for this channel in Mexico and expand in Andean market. Looking at supply chain capabilities, 2020 is the year of the supply chain for Genomma, and we intend to continue to elevate this area. Our manufacturing plants, new distribution center, fully consolidated suppliers and new talent hires will be fully aligned and synchronized with our outstanding supply chain team. We, therefore, expect to end 2020 with inventory levels and costs fully reconciled.

Finally, Genomma employees strive for momentum and success. I would like to thank them for their dedicated efforts and engagement while adapting to this new environment. Our November employee survey enabled us to identify further areas of opportunity to optimize our employee communications and strengthen Genomma's performance assessment, training and development programs. This will be key focus areas in 2021 to further strengthen our corporate culture and ensure we have the right talent throughout our organization.

Our company fundamentals momentum and growth outlook are, therefore, stronger than ever. Genomma's achievements in 2020, our effective strategies and robust operating momentum reinforce our confidence in delivering another strong year of growth and performance in 2021. Our top-tier long-term growth objectives remain unchanged, and we are positioned for continued success.

Heading into 2021, I'm confident our operation momentum will continue. Our 2021 outlook reflects another year of differentiated growth and performance, while also making investments for the future. I would like now to turn over to Antonio for a discussion on key financial highlights before we move to your questions. Thank you.

[Antonio Zamora Galland, executive]

Thank you, Jorge. Good morning, everyone. Thank you for joining us. Let me now provide some additional comments on our fourth quarter performance and full year results. As Jorge noted, Genomma's successful 4-pillar strategy implementation throughout the regions, drove a 9.1% year-on-year increase, and consolidated net sales reach MXN 13.9 billion for the full year 2020. Fourth quarter net sales increased by 7.7% year-on-year to reach MXN 3.5 billion due to strong innovation execution within high potential category entries and a deepened presence within the traditional e-commerce and digital channels, which partially offset restrained demand due to continued pandemic effects.

Full year EBITDA reached MXN 2.9 billion, with a 21.1% margin, a 170 basis points year-on-year increase attributable to cost-cutting and expense control efficiencies in different areas of spending as we retain and rationalize our overall cost and expense structure during the year. An example of Genomma's marketing spend, where we have become more effective reaching consumers, especially at the point of sale. This was also true in relation to logistics costs as we optimize our overall go-to-market spend.

Fourth quarter 2020 EBITDA increased MXN 166.4 million as compared to the same period of 2019 to MXN 729.4 million. In Mexico, we closed 2020 with fourth quarter net sales of MXN 1.5 billion, an 11.6% year-on-year increase. This MXN 153 million increase was driven by the net impact of the factors discussed related to strong shopping execution, improved fee rate levels, additional points of sale serve across the different product channels within the market, and Genomma's increased presence within Mexico's key e-commerce platforms. All of these contributed favorably to Mexico's fourth quarter net sales.

Mexico EBITDA for the fourth quarter 2020 reached MXN 320 million, with a 21.8% margin, reflecting a 200 basis point year-on-year improvement. This was, again, due to higher operating leverage, successful cost and expense control as well as strong marketing efficiencies. Note that growing expenses relating to Genomma's new central warehouse migration and to the personal Care manufacturing facility commission investments offset the results for the quarter.

In the U.S., fourth quarter 2020 net sales increased by 4.4% to reach MXN 321.9 million. This was due to favorable ForEx tailwinds as well as, to a lesser extent, new product launches and innovation and a strengthened e-commerce presence in the market. Partially offsetting this net sales increase was reduced demand and increased in-store -- and decreased in-store foot traffic due to ongoing COVID restrictions as well as the unusually mild flu season in the U.S.

Latin America net sales for the quarter grew 5.1% year-on-year. 5.1% year-on-year to MXN 1.7 billion, but increased to double digits when we express this in local currency. This growth was a result of product innovation, new line extensions across the region and additional points of sale during the quarter. ForEx headwinds, primarily in Argentina and Brazil, impacted sales in these markets.

Turning to the balance sheet. Working capital was adjusted during the fourth quarter of 2020, with a 95 day cash conversion cycle, reflecting a 14-day improvement in the end of September 2020.

This reflected a 6-day decrease in accounts receivables when compared to the end of September 2020 to 105 days. And a 21-day decrease in inventories from the end of September 2020 to close at 137 days. This positive effect in working capital are part of the ongoing efforts to improve the overall operations at Genomma, supported by new technology and systems on our internal controls.

During the quarter, Genomma successfully completed an MXN 800 million issuance throughout for unsecured short-term Mexican local bonds. The offerings were more than 2.5x oversubscribed, with interest levels similar to the ones we had prior to the pandemic. These successful issuances reflect the interest on Genomma's story and our growth strategy from our -- obviously, from our fixed income investors. Thank you all for your continuous trust on Genomma and your -- especially on the new management team.

In November, HR Ratings, we attained Mexico's corporate rating at AA. We have an upgraded outlook to positive from stable. Again, we have upgraded outlook to positive from stable. HR Ratings also upgraded our short-term dual program bond issuance rating to HR plus 1, which is the agency's highest attainable rating for these type of products. More recently, during the first quarter, on February 23, Fitch ratings ratified Genomma's long and short-term local bonds ratings to AA Mexico and F1 plus Mexico, respectively, with a stable long-term outlook. Once again, we thank you all for your continuous trust on Genomma and especially on the management team.

Genomma's balance sheet, therefore, is strong, ending 2020 with cash and equivalents of MXN 2.1 billion as of December 31, 2020, a 128% increase as compared to December 31, 2019. Net financial debt amounted to MXN 4.3 billion as of December 31, 2020, with a net leverage ratio of 1.5x, affirming Genomma's strong and healthy financial position.

And as we look ahead, I will establish pandemic priorities remain consistent. First, ensuring the health and safety of our employees, and our supply chain partners; second, maintaining business continuity and financial strength and stability; and third, serving our customers to provide essential products which strengthened their health and well-being.

Finally, yesterday, we released a relevant event of -- about a voluntary tax payment made to the Mexican Tax Administration Service. The amount paid was for MXN 750 million, and it was related to discrepancies associated with judgments made by the large taxpayer unit of the Mexican Tax Authorities. And by that, we endorse our commitment to Mexico and the environment where we are operating. This payment has been fully reflected in 2020 financial results. Let me repeat this again to avoid any confusion. This statement has been fully reflected within the 2020 financial results that you all have.

Therefore, Genomma has successfully mitigated the need for any legal proceedings and corresponding time on expenses, while underscoring the company's strong commitment to supporting Mexico's continued recovery efforts during this pandemic. The above payment has been fully completed -- have been fully completed and all discrepancies in judgment and audits done by the SAT from the 2013 fiscal year-to-date have been thereby deemed resolved. We will continue to exercise financial discipline on expenses and reap the benefits of strict cost controls.

The pandemic is not over yet. We are maintaining our focus and not letting our guard down as we enter the next phase and continue to manage with agility and resiliency in this period. These priorities have helped us ensure a strong balance sheet, while we keep our employees as safe and secure as possible, ensuring we operate continuously to serve our customers and to support our communities during this challenging period.

Let's now turn to your questions. Operator, I'll turn over to you to open the line.

[Operator]

[Operator Instructions] Our first question comes from the line of Álvaro García with BTG.

[Alvaro Garcia, analyst]

I have 2 questions. One bigger picture, one sort of a little bit more on the [indiscernible] sort of your outlook on leverage and CapEx into 2021, you've obviously finished the big CapEx cycle with the plant. And I'm not sure -- I didn't catch if you actually gave some guidance or not there on 2021. But if you could just clarify what your expected CapEx levels are for 2021? And then my second question is a bigger picture question on sort of cough and cold, the cough and cold category generally. You had -- appreciate the great charts you put from the CDC on how flu season has come down materially given we're all wearing masks and using hand sanitizer. But I'm curious, Jorge, as to your thoughts on how structural this might be for the cough and cold category in the sense that now some of us might be wearing masks for a prolonged period of time for the next couple of years at least and maybe sort of into perpetuity. So how you're thinking of that category in that context?

[Jorge Brake Valderrama, executive]

Yes. Antonio, you take the first one. I'll take the second.

[Antonio Zamora Galland, executive]

Thank you, Álvaro, for your question. This is Antonio. Regarding the outlook on financial leverage, as we all know, Genomma wants to be very prudent, financially speaking. So we believe that a leverage between 1.5 and 2x net debt to EBITDA, that's where we're going to be oscillating. Right now, we are at 1.5x. But as we all know, there's still some investments that need to be executed in the new plant. We are having a number of manufacturing lines, 3 lines in the personal care plant and a number of adjustments to make some efficiency. So there's still some CapEx. Nothing that relevant. I mean, nothing to worry about. But I'd say, we'll be between 1.5 and 2x net debt to EBITDA. There's, of course, opportunities in terms of the capital allocation strategy.

We will be looking at selective opportunities in terms of inorganic growth, if they exist, and if they are accretive, nothing transformational. We will keep on investing. And I would say this, this is very important. There's a number of projects, internal projects, to continue fueling our organic growth in the category that we are developing. You know that we recently launched -- [ laying foundation for ] business in Mexico. That's only Mexico. There's a lot of opportunities to expand that to other countries. The infant nutrition business will also require investments in working capital as well as some of the very successful brands that we have in some markets. And so there's going to be an expansion of our organic business. There's a lot of growth that we envision, and that means some investments. So that's why I'm saying, between 1.5 and 2x for 2020.

We also need to make sure that the ramp-up of the plant takes place. So we want to be very prudent this year. So I'd say that's where the target leverage is going to be. I don't know, Álvaro, I answered your question or you want me to expand on this...

[Alvaro Garcia, analyst]

I think that's a fair outlook that you'll continue to invest in the marketplace and in the plant and in production generally. That's very fair. No, that's a fair answer.

[Jorge Brake Valderrama, executive]

Álvaro, I will take your second question. Obviously, as everybody knows, the pandemic has produced some major changes in how the consumer behaves and how needs change. And in this case, we've seen this clearly in the behavior of the cough and cold category and related to respiratory and cough and cold, in the U.S. in a more important level, a little less in Mexico during this winter time has gone down -- the category has gone down significantly in both countries, especially during Q4. Remember, Q4 is the quarter in which a lot of inventory is needed to satisfy the needs of customers and consumers during the winter time, the flu time. And in this case, that was impacted by that definitely. We were able to manage the situation and is a very, very positive quarter, Q4, in U.S. and Mexico because we are not as dependent on those products anymore. We have, as you know, been expanding our portfolio of products in the categories in which we compete, making sure that we diversify what we offer in the different markets. So we have been able, from a business standpoint, to offset that impact, as I said, because we kept growing in personal care and in other health care categories. So that's from one angle.

Another angle is the angle of what is next. And we think, as you also said, Álvaro, that there is concern about health and hygiene that the consumers now have will continue, and they will continue being very careful in terms of using masks and not going to crowded placed or whatever, and that's probably going to continue for some additional time. From that standpoint, we will continue, as we have been doing for the last year at least, looking for new opportunities, looking to continue diversifying our portfolios, and we are going to go with the trends.

As I said in my closing remarks a few minutes ago, in 2021, we will continue doing that work actively, searching for new opportunities in the areas of health, health care, personal care, even in nutrition for Genomma, in line with the trends. The trends, we believe, will continue in the same sense, which are hygiene, health, immune systems, healthy products, healthy food, healthy beverages, and that we will follow that goal.

[Operator]

Our next question comes from the line of Joaquín Ley with Itau.

[Joaquín Ley, analyst]

Congrats on the results. Two questions here. First, could you elaborate please a bit more on your digital consumer engagement initiatives, what are you doing there? How relevant this channel is becoming? What is the potential going forward? And the second question relates to the development of the traditional channel. What are we in terms of potential in Mexico? And what are the opportunities in other countries? I'm particularly interested in Colombia, Peru and Central America.

[Jorge Brake Valderrama, executive]

Joaquín, nice to "see you." I will answer your 2 questions. So I think the first one, e-commerce, as I said, has become a major driver of growth for the company. And just to put some perspective into this comment is that, in 2020, this "channel" became almost, I would say, 4% of our total business, while in 2019 or '18, it was almost 0. Although we have this strategy in our plan, we decided to accelerate it when the pandemic started in March of 2020, and we did it very well. Our teams in the different countries embraced the priority, started working with our key retailers to work through their platforms. We enhanced everything we do with our brands in terms of content, in terms of design, in terms of communication to the consumers in the different online platforms, optimize the supply chain that is related to all of these things. And as I said, we basically tripled the sales we had in this channel in 2020. And this year, as part of our one mission model that I explained a little bit a few minutes ago, which is an innovation tool that we use, which is very dynamic and efficient. We also have an e-commerce one mission group that is now working in how to go to the next level in 2021 and '22.

As I have said before, we want to get to 10% of our sales through the e-commerce channel sometime in the next couple of years. I would say that we'll probably get very close to that this year and achieve that target also next year. So if it will become -- it is already, but will become a stronger driver for growth in the company, totally in line with the trends. We're taking advantage of that and maximizing our potential in this channel.

In terms of the traditional channel, as you also know, Joaquín, this is a project that started a couple of years ago, 3 years ago, through a pilot in Mexico City -- in Guadalajara, I'm sorry, in Mexico through a program that we call partners. This is a program through which we have independent contractors working exclusively for Genomma and our brands, covering specific market areas on a weekly basis. And today, we have more than 400,000 of those small mom-and-pop stores being covered weekly by our program that has been expanded to the Andean region and Central America. It is being expanded to the Andean region and Central America. So it is a total success. This is something that we decided 2 years ago that it was to become high priority for the company. It was almost a white space for us because we didn't have the real -- the right portfolio of many of products or SKUs.

So in addition to the geographic expansion of the model, we also started intervening, optimizing our portfolio of products and SKUs to be more in line with the needs of the shoppers that go to these small mom-and-pop stores. And the combination of that with the right price points, and remember, this is a more profitable business for us because the price points are higher -- the prices are higher, we are growing very rapidly. Just to give you an example, you asked about Colombia, but just to give you an example, for Peru and Colombia, this channel, based on the results of 2020, already represent 1/3 or more of their business, while 2 years ago was 0. And that has enabled these countries, without going to specifics, to grow much more than double-digit in 2020 behind this type of project.

[Operator]

Our next question comes from the line of Rodrigo Alcantara with UBS.

[Rodrigo Alcantara, analyst]

Two quick ones, if I may here. And the first one of product innovation, Jorge, you mentioned, if I'm not mistaken, in your initial remarks about this 16% coming from product innovation. How do you see evolving this number as we walk through 2021? If you could comment about this market share gains that you experienced -- that you observed in some of your products. What would you attribute this market share? Is it pricing, a better value proposition, marketing, advertising, what would you -- what would -- how would you explain these market share gains?

And the other one, would be a bit about portfolio optimization. I mean, where do you think that Genomma is right now? I mean, do you think that, perhaps, you already have too much brands? Or are you missing some brands? Or how do you see Genomma's portfolio as of today? That would be my 2 questions.

[Jorge Brake Valderrama, executive]

Okay. Thank you, Rodrigo. Nice to hear you. The first question related to innovation, and how we are impacting the business through innovation. As I said, in 2021, about 16% of our sales came from new products or new line extensions or products that were restaged or expansion of portfolio in different countries, all of those type of concepts that are part of our innovation model. And that comes from almost 0 in 2018, a little more in 2019, but now 16% in 2020. And we have a vision to get to above 20%, probably 25% of our sales coming from innovation. If we can get to that range of 20%, 25%, and if you can see the history of many companies in the past many years, we will be ensuring the future of the company. We will be making sure that this company will continue growing on a continuous systemic basis. And that's our goal. That's our goal that we established a couple of years ago when we launched our innovation model with our innovation committee, our Board, and we're making very good progress. Still a lot of things to be improved, a lot of learning that is coming in, that is allowing us to, on a continuous basis, improve the model, but we feel very satisfied for the progress as of now.

We will continue focusing innovation also, as I said before, looking for new business, new opportunities. Our main focus will continue to be in organic growth. We will be open for some inorganic growth that makes sense, and that's something that Antonio and I ensure happens, and it happens in the right way.

In terms of market shares, you mentioned market share are behind innovation. And this is -- to be honest, it is not coming from one thing that we're doing. The market share -- if you could see the market share, we are gaining from our competitors in all the Andean countries, in Argentina, in Brazil, even in Mexico, et cetera, et cetera, is coming from a combination of factors. It is the 360 approach that we take when we go into a market with one of these brands, or restages or line extensions, which includes the right consumer understanding because we have to make sure that we understand what are the needs so that what we offer as a new thing makes sense for the consumer. The right communication plan using different platforms, optimizing how we do it and how we invest it and the outstanding go-to-market execution that we have in all countries.

As I said before, our go-to-market is world class. It doesn't have anything behind any of the big multinationals with whom we compete. And that's a major strength, a major competitive advantage that we have. So it's a combination of everything. And as I said, you will see that we are gaining market shares in several countries in hair care, in skin care, in some categories in OTC and health care. Now in isotonic beverage in the U.S. that is going very well in the first 6 months of having been launched in 3 or 4 states, et cetera, et cetera. So it's a very strong model. Based on my many years of experience, I can tell you that this is a very strong model in how to go-to-market on a 360 basis.

And finally, on your point on portfolio optimization, that is a permanent work that we do. And that was implemented in 2020. We decided that as part of our S&OP program, which is the sales and operation program, that is the start of the supply -- the whole supply chain, as you know, we implemented also a task force that, on a permanent basis, formed by people from the commercial front, from the marketing front and from finance, that on a permanent basis are we reviewing our SKU lineup and providing recommendations on how to optimize it.

We've been, and I don't recall the number exactly, but I can tell you that we have delineated more than 50 SKUs in 2020. And probably it's a lot more than that. But -- and that will be a continued process. That is something that is already in the system, it's part of the business model, and we will continue making sure that our SKU portfolio is as optimum as possible always.

[Operator]

Our next question comes from the line of Nicolas Larrain with JPMorgan.

[Nicolas Larrain, analyst]

I wanted to understand qualitatively maybe how you're seeing whether there's top line growth in 2021, considering that last year the Mexican peso was weaker, right? And also, it's likely that peso will continue to devalue given what's happening in the country. So I just wanted to understand as much color as you can give on how you're seeing top line trends throughout this year?

[Jorge Brake Valderrama, executive]

I will mention one thing, and then I will leave with you, Antonio. Just one thing, as an overall comment, our 2021 projection based on all the exercises we did, as you can imagine, at the end of 2020 in our budget -- 2021 budget process with all countries and all categories and all brands, basically forecasts a very positive 2021 in terms of volume, okay? In terms of volume or units, it's looking good because we will continue gaining share, we will continue innovating with new things, and we will continue consolidating the things -- the new things that we did in '19 and '20. So from an overall perspective, from a market consumer share and unit standpoint, looking good. Antonio?

[Antonio Zamora Galland, executive]

Thank you, Jorge. Thank you for your question, Nicolas. This is Antonio. Yes, it's a great question. Obviously, nobody has a crystal ball to assess -- to try to identify what the ForEx rates are going to be in 2021. There has been a lot of volatility even with the Mexican peso that has been strengthening for quite a while, but there's always volatility. As we saw in Q4 in Brazil, the Brazilian real devaluated 19% in Q4 against the Mexican peso or the Argentinian peso of 20%. But the good news in the case -- specifically, in the case of Genomma, it's [indiscernible] diversification.

As we all know, we are present in 18 markets, 18 different countries, with 18 different outlooks for ForEx. So sometimes we get hit in one particular market, sometimes there are tailwinds in another market. And fortunately, because we are highly diversified, the balance is most of the time positive in that regard. 2021 is going to be a challenging year. Because if you look at the projections or the outlook that some analysts have for the decent ForEx rates in some markets, it looks like the Mexican peso could strengthen for a while, but then nobody knows what's going to happen after the midterm elections in Mexico.

What I can tell you, Nicolas, and it's a great question, it's a great question, that Genomma's management has a commitment to create value to shareholders. If, for whatever reason, an exchange rate in any specific market happens to create a headwind, what usually we end up doing is try to compensate that to offset that with better performance in the other markets basically to offset that gap. And that has been the case in the last couple of years. We were having major devaluations in Argentina and Genomma has been able to cope with that. So even in this highly volatile environment, that's what we plan to do.

Now there's always -- let me address the elephant in the room, which is Argentina. We all know that the current official exchange rate is different from what the free market exchange rate is in that particular market. That's the elephant in the room. Usually, what has happened in other countries, in other times is that initially those governments increase the daily devaluation rate at some point in time so eventually the official rate catches up with the free market rate, let's put it this way.

But again, as I mentioned before, there has been major devaluations in Argentina and Genomma has been able to cope with those situations in the past. Obviously, what that entails is that the rest of the market need to over-deliver so that we offset that situation.

So it was a long answer. Your question is very good. I wish I had a crystal ball in terms of what's going to happen with the different exchange rates for the future, but again, the beauty of diversification in terms of having 18 markets, the beauty of having many what we call routes to success, that is products, plant, innovation that we've already launched in some markets that are still not present in other, gives us the opportunity to compensate any major disruption. And that's what we plan to do. So we don't want to use ForEx or any specific situation in any specific market as an excuse of not delivering the consolidated figures. And that's our commitment, obviously, to the investor community. It was a long answer. I don't know, Nicolas, if this was the answer you were looking for, or if you want to expand a little bit on this?

[Operator]

Our next question comes from the line of Rafael Romero with GBM.

[Rafael Romero, analyst]

I have 2 quick questions. The first one is regarding categories, particularly over-the-counter in Lat Am. This year, it delivered 16.4% and 31.6% growth on a quarterly and yearly basis. So I wanted to know what will continue going forward this year? And my second question is regarding ESG and sustainability. Congratulations on being included in the index. And I just wanted to know what kind of initiatives on the matter are on the pipeline this year?

[Jorge Brake Valderrama, executive]

Thank you, Rafael. On your first question, categories OTC Lat Am. That's an area with huge potential of growth for the company. As we've discussed in the past couple of years in our several meetings, we have included in the innovation model that we have a very high priority for OTC. Although OTC and Personal Care are more or less close to 50-50 in overall numbers, we continue believing that the OTC categories in all Latin America represent a huge opportunity for us, as I said. You know that our market shares in several countries are still low. We are a big player in OTC in the categories in which we compete in Argentina and Mexico, for instance. But in the other countries like Brazil, Chile, Peru, Colombia, Central America, the U.S., we're still small in terms of market share. And we are growing fast because we have been able to implement the first initiatives selected for the short term.

You also know that OTC represents a major challenge because you need product registrations or authorizations from health authorities in the different countries, and that takes much longer than when you're thinking about launching a personal care product. And because of that, we have designed a long-term innovation plan for OTC so that you know what they're going to launch in 2023, for instance, in X countries so that all our teams are going to start working on getting all the necessary variables ready to be able to launch in 2 or 3 years. That's the way pharma and OTC works, but I can say and reinforce that, today, the company is much better prepared for innovation planning midterm as it is required by a category like this than ever before. So you will see an acceleration in the results coming from innovation in OTC in different countries in the next 2 or 3 years. That's for sure.

And your second question on sustainability and the index, et cetera, et cetera. That's, as I said at the end, this is a major priority for the company. Although Genomma has been working on this sustainability front for several years, and we've been providing information on our progress to the different institutions for several years, I would say that in the last couple of years we've taken this to a totally new level of commitment, becoming a high priority for the company. And now it's part of our culture, it's part of our day to day, it's part of our business model. And I think you will be pleased next week when we are going to publish for the first time in the company's history, our 2025 commitments in terms of sustainability. And we will issue a document that will be public, in which we have some detail in terms of the goals, objectives we have in 10 different areas of sustainability, including society, including suppliers, including transportation, including packaging, that we are going to commit to for the next 5 years. And I think that is -- that will be a real proof of our commitment in this area. Thank you for your question.

[Rafael Romero, analyst]

And congratulations on the results.

[Jorge Brake Valderrama, executive]

Thank you.

[Operator]

Ladies and gentlemen, I would now like to turn the call back to Mr. Brake for closing comments.

[Jorge Brake Valderrama, executive]

I would like now to thank everyone for your questions and for participating on today's call. In closing, I'm extremely proud of our company's performance during 2020. We delivered robust underlying operating performance during unprecedented times, while prioritizing the safety and health of our employees and supporting the communities in which we operate, to raise consumer habits and focus on excellent health and when well-being will [indiscernible]. And Genomma is well positioned to leverage our unique business model and innovation excellence to respond to changing consumers' behaviors. Thank you all, and have a good day.

[Operator]

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.