Graphic Packaging Company - Q4 2023 & Investor Day 2024

Transcript

Melanie Skijus (VP of Investor Relations)

Good morning, everyone. It's great to see all of you here at the New York Stock Exchange, and in addition to all of you here live, we have a large number of investors joining us remotely. I think the number's now 150, but it's climbing, so thank you to everyone on the webcast. My name is Melanie Skijus. I'm the Vice President of Investor Relations. Before I kick it off today, for safety, I want you to be aware of two stairwells that you can exit if needed. Directly behind me, down the hallway, is a stairwell as well as one by the elevator bank. Before we get started, I just told you about the exits. The presentation materials you have at your desk, we welcome you to walk through those with us today.

On the webcast, you'll see it in the webcast view, as well as a PDF is available on our Investor Relations website. The presentations this morning are being recorded, so they'll be available to listen in replay probably later this afternoon. We have a great agenda for you this morning. You'll be hearing presentations from senior leadership. We're gonna kick off with two, and then we'll go into a 10-minute break. When we get back from the break, we'll have three more, and then we'll have a Q&A session. During the Q&A session, the remote participants, during all the presentations, you're welcome to go ahead and submit your questions. You should see a prompt in the lower right-hand screen of the webcast view. We'll be doing questions live from the audience here, and then we'll jump over to some of the questions from our remote audience.

Forward-looking statement: I encourage everyone to read through this. Our presentations today will contain forward-looking statements that are subject to risks and uncertainties that could cause these statements to not come into reality. So please look through the list of risks, and they're also available in our filings with the SEC. With that, I'm gonna turn it over to our first speaker today, Mike Doss, our President and CEO. I'm sure most of you are familiar and know Mike. He's been with the company since 1990, has been our CEO since 2016. With that, I'll turn it over to Mike.

Mike Doss (President and CEO)

Great. Thank you, Melanie. And I also wanna thank Alexandria, who's over in the corner here. As all of you know, it takes a lot of work to pull together one of these Investor Days. They've been working really hard to pull things, all the materials together that you see today, and we're gonna cover. So thank you guys for all that. I also wanna acknowledge Mike Ryan, one of our senior designers, who drove all the way down from Philadelphia. A lot of the samples you see here today, out in the lobby. So, Mike, I don't know where you are. Wave your hand. Thank you very much for doing that. Much appreciated. I'm gonna start with a few comments around a few announcements we made last night, and then I'll jump right into the presentation. And then, I'm gonna introduce our speakers that you'll see today.

And then, as Melanie said, we'll go through that cadence and ultimately, we'll have a few breaks in there, and then I'm sure there'll be a very robust Q&A session, which we're really looking forward to. Let's start by talking a little bit around the first announcement that went out last night, and that's the sale of the Augusta Mill to Clearwater Paper Company. Now, what you need to know is that, really, over time, Arsen Kitch and I have had a number of conversations around, you know, kind of the overall fit of some of the mills that we've got.

For them, in the vision of the future they have for their company, it became pretty clear that the Augusta Mill, which is an outstanding mill with excellent people and a very good infrastructure, is a better fit for them in what they really wanna do, over the long term than it is for Graphic Packaging. And so, as we kinda went through those dialogues, we worked through a deal. You saw it announced last night. We're happy to go into whatever level of detail you'd like to do in terms of talking about that in the Q&A. But the reality of it is, for Graphic Packaging, the Augusta Mill, the Augusta manufacturing facility, didn't offer the same strategic benefits over the long term as some of our other wood fiber manufacturing facilities or our recycled manufacturing facilities.

So it was the right thing to do for our shareholders to monetize that, which we'll do. And again, we'll talk a lot more in detail about what that means during Q&A. Second thing I wanna hit on real quickly, and there was a few questions I got in the lobby here, was the pricing declarations from RISI over the weekend. Now, many of you know, because I've expressed a fair amount of frustration on this over time, in terms of how they do it. And, I can absolutely tell you that on cupstock, they got it wrong. We're in that market every single day. It's one of our strongest markets. If you look at over the last three years what we've done with our food service business, it's grown every quarter, and it's growing here in Q1. So that made no sense to us.

It's 180 degrees out, you know, from what we're currently experiencing. And really, and you've heard Steve and I talk about this, it just strengthens our resolve to continue to move away from third-party indices that really lack any level of what we believe to be accuracy, as well as transparency. And so, you know, over time, you know, third-party indexes that, you know, really aren't, you know, accurate or, or have transparency hurt packaging companies, and they ultimately hurt the customers as well. So we are gonna strengthen our resolve to continue to march away. We've been doing it for a number of years.

It's one of the reasons why several of the analysts in the room, you guys have had difficulty trying to track our pricing because we've been moving to a more value-added pricing model, which we'll get into a lot of detail today, in terms of how we look at that, and it's gonna continue to be the case. So third-party indices will be an increasingly smaller part of our business going forward, and our resolve is very high to make that happen. So with that as a backdrop, I'm going to pivot now and talk a little bit about our overall results, which also were released last night. Look, by any measure, if you're a consumer goods company last year, food, beverage, or, or, you know, just actual goods, it was a very challenging year as consumers really pivoted in terms of their preferences in some cases.

You know, our customers had to adapt to that on a real-time basis. It really resulted in a fair amount of inventory destocking, which is well chronicled. You're all aware of that. Against that challenging backdrop, Graphic Packaging held up very, very well. You see our results here on the page. I mean, a few high levels. Our, you know, sales were actually flat on a year-over-year basis. We had $200 million of innovation sales in that number. And our value-added pricing actually more than offset the volumetric decline that I talked about, which for the year was about 4%. In the, you know, fourth quarter, third and fourth quarter most pronounced, you know, down around 5.6%. Steve will get into those numbers in a little bit more detail.

But what we're really encouraged about, you know, here going forward is the fact that as we've rolled into 2024, our volumes actually, you know, to date, you know, through today, are flat on a year-over-year basis, which is actually a very good thing because, as you recall, last year in the first quarter, we were actually up. So we've seen some stabilization. The fourth quarter was really most pronounced, you know, in the last probably three weeks of December. It was almost like many of our customers just threw in the towel. That really manifested itself in Europe in a big way. We saw volumes that were down the last three weeks pretty substantially, and they bounced back really well here to start the year off. So, that's what really gives us confidence in the year. But and a return to organic growth.

But what I would also say, and this is you're gonna hear this thematically through my conversation, is that, you know, our confidence is really more in what we do control versus what we don't. You know, and if you think about Graphic Packaging and I'll go into a lot of detail on this, we're just a fundamentally very different company than we were just a few years ago. Our innovation is wide and deep. You know, we'll spend a lot of time talking about that. Our customer relationships are strong and growing, and we're managing them different than we were before, and we're getting paid for the value that we bring. So with all that as the backdrop, I'm really pleased with the results that we generated. Our EBITDA was up almost 20% on a year-over-year basis.

You see EPS that on adjusted basis is approaching $3. Remember, in 2019, when we talked to you about this, it wasn't even $1. You know, so we've made dramatic progress in a very short period of time, and that momentum I expect to continue to move on. Look, Graphic Packaging is a leader in sustainable consumer packaging. You all know that, you know, and you really touch our products every day. So think about the cup of coffee you have in the morning or the cereal box that, you know, your cereal comes in, the snack you have at lunch, maybe a frozen dinner you eat, you know, in the late afternoon, the soft drink, you know, that you may have as an afternoon snack or hopefully a beer you have later on in the evening. All of those things are things that we do.

You literally touch our products each and every day. It's rare that, you know, a U.S. consumer of almost any diverse demographic doesn't in some way use our products within a 24- to 48-hour period of time. That's the reach that we've got, you know, at Graphic. We really do package, you know, every life's everyday moments for a renewable future. Thematically, you'll hear us talk a lot about that. And again, that's what gives us a lot of confidence in the company that we've built and that the one that we will build over the next, you know, seven years as we roll out our Vision 2030 here to you today. Look, you see our, you know, 100 facilities we've got around, you know, the globe there.

You know, we package, you know, thousands of, you know, different customers, but we also do it with some of the biggest brands in the world. In order to do that, you've gotta have scale. You've gotta make investments. Investments are much more than just physical assets. Yes, we've made those. A lot of those were done as part of our Vision 2025. Think about the investment we made in Kalamazoo. Think about the investment we're making in Waco. Think about the investment we made in A&R. All of those were foundational to kinda build the company that we have today. And what you're really gonna see and what we're gonna talk about here is just how that will be leveraged as we bring 2030 to life, our Vision 2030 to life here.

You know, the investments in people and capabilities sometimes are much harder to see than the physical assets, but they're very real, and they're very important. You'll see our speakers really bring those to life today with their comments as well. Okay. Look, that's an impressive customer portfolio by anybody's definition. You know, the depth and breadth of that is really unmatched in the paper packaging world. You take a look at, you know, really all the different segments we're in, and we've trued those up now to really reflect the overall impact of A&R Packaging at, at the year-end and what those sales are. So some of you may say some of those are slightly different. That's really what we did there. But our customer is our customer base is really as diverse as our innovation portfolio. And that's a big point to make.

It wasn't that way just, you know, a mere few years ago. I'm gonna show you that transformation from one side to the other as we transform the company over that period of time here in a few minutes. Look, you know, we've got a strong presence in the at-home markets. That's always been kind of our core. It's gotten stronger over the last few years. You see that in food, beverage, household products, health, and beauty. All those things are strong businesses for us. But we also have an increasingly strong and growing position in the food service part of the market. And really, what one of our key themes that we're gonna try to strike home today, and if I do my job right, I'll probably hit it on about five times, is just how our portfolio moves with the consumer.

That's a big part of what we've purposely built over the last seven years. All right. A little bit about our speakers today. In addition to getting Steve, who many of you, all of you know, I should say. You probably know Steve better than anybody. Steve, Steve will come up and chat, but we've got three other speakers that are actually gonna present today. The first one that's going to talk to you is Maggie Bidlingmaier. She is our Executive VP and President of our Americas business. Maggie really controls and manages those relationships with the customers that I'm talking about, and they've changed and evolved very dramatically over the last few years, a lot under Maggie's leadership. She'll talk to you about how we're building deeper relationships with customers than we've ever had before.

And that's really foundational relative to the innovation that we're driving and the sustainability benefits that we bring that are valuable to customers in ways that, you know, we couldn't even have those in conversations, you know, with them 'cause it was just kind of a bidless situation. Not anymore. So Maggie bringing that to life. She leads our global innovation effort. Ricardo works for her. Ricardo, where are you right there? Hi, hi Ricardo. Many of you know Ricardo. So she'll actually give you a lot of insight and more depth into what we're really doing there too. We have Jean-Francois Roché, also here. Wave your hand, Jean-Francois. Jean-Francois, I would challenge you to find a more knowledgeable person in terms of the breadth of experience he has in the European market than Jean-Francois. He is an expert in that market.

He's chaired the ECMA organization for the last three years, so that's the European Carton Manufacturing Association. His knowledge around regulation in the EU, as well as, you know, our large brands in Europe and, you know, the retailers, which is really important in Europe, and the intersection of the consumer are unmatched. So he'll do a town hall, and we'll bring some of that out for you, and you'll be able to ask him a lot of questions later on. Look, Europe is a great business in and of itself, but what we really love about Europe is it's the most sustainable consumer in the world. So what that really allows us to do then is to take all we learn in Europe and export it all over the rest of the globe where we compete, including North America.

The trends there is we like to say start 24-36 months before they wind up here, but almost invariably, they wind up here. We have that knowledge, and we're able to take advantage of it much faster than many of our competitors are able to do. We think that brings, you know, real strategic advantage for us. Mark Connelly's our newest member of the team, but he's not new to Graphic Packaging, certainly not to Steve and I. For the last decade, you know, Mark has, you know, followed our company as an analyst. I would also say, and I think Steve, you'd agree with me, that one of the analysts that really helped us frame some of our thought process relative to capital allocation and challenge us along the way, are you making the right decisions? Are you putting money to work to really drive ROIC?

He's the key architect of what you'll see today in terms of what we're rolling out. We're thrilled to have you on the team, Mark. Mark will facilitate that town hall discussion with Jean-Francois. We have Michelle Fitzpatrick up here in the front. Michelle leads our sustainability efforts. You'll get a presentation from her that'll talk about all the different things we have to do to make sure we're compliant in terms of sustainability and regulation that's constantly evolving and changing. The good news is she will lay a plan out that you will be able to see that we actually have between now and 2032 to achieve all of the goals that we made for our SBTi Science Based Targets initiative goals that will be out there today.

I challenge you to challenge any other packaging company to drive a proposal or to lay something like that out like we're gonna lay out to you today. We're gonna deliver on that. And it's really important because what you'll also hear from me today and talk a lot about from the speakers is, you'll hear from the speakers on this is that not only do are we gonna reduce the amount of greenhouse gases we generate, the amount of fossil fuels that we use, the amount of water that is used in our facilities, ultimately, almost every product we make helps our customers meet their sustainability goals. I'm gonna say that again. Every product we make helps our customers meet their sustainability goals. Not very many people can say that.

That's also one of the things that gives us a lot of confidence in our ability to grow our volumes over the next few years and really be a key part of, you know, the consumer packaging, you know, leadership position that we wanna have because we're at that intersection. They need us to do that. You think about the ambitions they've laid out, some of the targets they've put out there to be, you know, greenhouse gas neutral or carbon neutral by 2040 or 2050. They need people like Graphic Packaging to help them bring that to life, and we'll be able to do that.

Once, you know, we're kind of, what I'm gonna do now is actually lay out kind of the from to where we were, give you a little context on, you know, the transition we've made over the last seven years. Steve will come up later on in the presentation and bring the financial targets to life in more detail. He'll also talk about the large amounts of free cash flow that we're gonna generate and the optionality we have for value creation, you know, over the next seven years, which is pretty exciting. Okay. Let's take a little step back. Look, many of you were here in September of, you know, 2019, and thank you for that, when we rolled out our Vision 2025. It's hard to believe that's almost been five years now, and a lot has happened.

If you think about it, it's really been pressure-tested over that period of time. For us, you know, that really was an opportunity to kind of revamp our growth and our ability to actually, you know, compete and transform the company. You know, as you look at the company we have today, it's just very different than what it was in 2025. You know, as we look at some of what we're laying out with Vision 2030, some of the targets that we had for Vision 2025 are no longer ambitious enough and in some cases not as completely aligned with really the company we need to be and will be over that period of time. So we'll introduce Vision 2030 to you today, but maybe it's helpful to take a little bit of a review around this journey we've been on really since 2017.

So if you think about 2017 for Graphic Packaging, who were we? I've been CEO for, you know, one year. The reality of it is, is, we had a solid business. We had a good business in North America. We had a decent business in Europe primarily focused on, you know, beverage. In the U.S., it was more center of the store type stuff. We had a good position on, you know, recycled, you know, paperboard as well as unbleached paperboard. We had a business in Asia that was principally focused also on the beverage business. We had high customer concentration, and our markets were also pretty, pretty large. You know, if you think about beverages and examples as a percentage of our overall, you know, customer concentration, it was quite high.

There were starting to be some signs in the European market that sustainability was going to be something that could be an opportunity for us in the U.S., not so much yet. And yet, we had a very big problem. Our problem was that we weren't growing. We weren't generating any real growth. And our margins really were quite economically sensitive and really more commodity-based, you know, through a cycle. And so that impacted our ability to, you know, really drive, you know, long-term sustainable shareholder value. Think about that for a minute. So what we were doing for customers was making a highly personalized branded product, you know, with, you know, excellent printing, in many cases, coatings, specialty fitting, you know, unbelievable delivery terms.

Yet, in many cases, we were getting paid less because of the terms we had and the way the industry operated at that time than really what even a corrugated box was able to get, which is generic as it comes, right? You know, so, we had to change that. That was a key initiative for our company at that time. So we looked inward. What are the levers that we could pull? We saw this trend around sustainability. We knew we had to invest in innovation. We also looked at, you know, kind of what would we have to do to expand our customer profile so that we reduce the amount of concentration we had with some of our largest customers, as well as we had to make our, our portfolio move more with the consumer.

We didn't know exactly how we were gonna do it, but that we knew it needed to be done. Then we started doing some work as far back as then around what we thought would be a pretty interesting, you know, value creation idea for a large investment in coated recycled paperboard. So, you know, kind of that is the backdrop. You wind the clocks forward to 2018. We had the opportunity to partner with International Paper and get their consumer packaging business. That was a huge deal for us because it gave us a whole bunch of options we didn't have then. So, you know, it was a great transaction. I think IP would say it was great for them. It turned out excellent for us. Key milestone for us. 2019, we rolled out our Vision 2025.

Our Vision 2025, you know, was broad in a lot of ways and to be transformative, and it's exceeded our expectations in many ways. If you think about the financial goals, the targets we put out there, we've largely exceeded all of those, and then some. You know, I went through some of the results today. I think Steve is an example. We had $2 for EPS, which, you know, obviously, we've well since surpassed. So a lot of those targets were done. We made real good progress on the other non-financial goals as well. But again, many of those targets just aren't ambitious enough or consistent with how we wanna run the company going forward. But what I would tell you is that within Vision 2025, there were really four main objectives we laid out there.

First, we knew we had to expand our innovation capability in a big way, because we wanted to take advantage of being able to, you know, leverage the sustainability movement, which was now starting to take place here in the U.S. too. Our speakers will talk a lot more about how we're doing that on Vision 2030 today, but that was a key initiative with Vision 2025. We had to realign our portfolio to move more with the consumer, which meant that we had to make some acquisitions of different businesses that would allow us to actually do that. We had to capture a more reasonable, you know, value, you know, for the reasonable share, I should say, of the value that we were providing to our customers. And, you know, we had to invest in both our people and our assets.

So those were the big things that we laid out there. If you look at Vision 2025, I think there were 21 targets that we assigned to it. But there were really four big things, strategic steps that we took that transformed our company during Vision 2025. The first, and I mentioned it already, was the IP consumer business. That was big for us, because if you think about it, we had no exposure of any scale to the food service business, which, you know, think about Americans. They love mobility. They like being on the go. We didn't have exposure to the drive-thru window. We didn't even make a cup. So you put that all together, that created huge optionality for us and a whole new part of our business that we didn't have before. Secondly, we needed to grow our U.S. and European manufacturing capabilities.

What I mean by that was we put out a target as part of our Vision 2025 in terms of integration. Integration back when we laid out Vision 2025, kind of post the IP acquisition, was around 67%. We finished this year around 80%. We, you know, kind of grown that integration. But integration's really more was a yardstick for us in terms of how we measured. There were two things that we were really looking for in terms of building out our business and how we wanted to invest in it. First, we wanted to acquire businesses and markets that ultimately moved with the consumer different than what our core business did. The most recent example I can give you of that is Bell. You know, Maggie and her team have integrated that business now well into our business.

But Bell brought, you know, consumer mailers. That was something we didn't have before. If you look at the prior, you know, 10 different acquisitions, every one of them brought something along those lines that helped us build out our portfolio. I'll show it to you in a minute and why it's, you know, transformed the way that it has. Secondly, and importantly, any business that we could find that had innovation capabilities that we could leverage across a wider group of customers, both domestically or internationally, was prioritized. The best example I can give to you of that was AR Packaging. It was an absolute home run for us. Yes, it was a good business in its own right, and it helped us get into Eastern Europe and build out our portfolio in a way that we couldn't do on our own.

But they were excellent at driving innovation and had a lot of new products there that you're gonna see us profile today that have allowed us to really, you know, scale across the globe. That's really what we need to be able to do as a consumer packaging company. Those two things were really what we were looking for there. Our customer relationships had to change. As I mentioned earlier, you know, we bring more than just, you know, you know, basic design elements and manufacturing. That's what we were getting paid for before because that's what we were charging them for. But when you think about the security supply we bring, the sustainability benefits, the innovation benefits, our customers know, you know, that what we bring is more than just raw materials and freight.

I had a boss one time who said, "You want you don't want your product to be treated like a commodity. Stop acting like it is." That's really what we did. So we put this value-based pricing methodology in place. You guys know we've done it because the pricing has flowed through our P&L in a way you can't follow based on just movements of paperboard. Maggie, you're going into a lot more detail there. That balance is much more important for us going forward and something that is kind of core to our DNA, and you'll see us continue to, to leverage that as part of our Vision 2030. Lastly, we saw a significant opportunity to generate an unmatched cost position in the most attractive, you know, part of the paperboard packaging market. That is really the recycled packaging, CRB.

You know, when you look at what we've done with Kalamazoo, and the startup on that, it's been nothing but a home run. Cost position's unmatched. You know, the grades that we have come off that machine are, you know, fantastic, and it's integrated well into our business, and we're leveraging those opportunities with customers as we speak. So listen, all of that really transformed the business very dramatically. And what I'm excited about with Vision 2030 today is that now, as we lay this out, our ambitions will line up more with how we're running the company and give you a framework so that you can hold us accountable going forward in terms of what we're going to do. Very exciting for us. Now, I'd like to tell you that everything we did with Vision 2025 really worked out the way we thought it. We executed perfectly.

There were no mistakes. But there were some things that we learned along the way there that, you know, really have helped us. You know, of course, you know, this was September of 2019. We dealt with COVID, you know, kind of during that middle period of time. But even before that, you know, we started having conversations with customers around innovation. We had some early success. And what ended up happening is customers would say, "Look, you did this good for us. So why don't you do these two or three things too?" So we had to scramble, in many cases, to add resources back into the company, something we did. Those are resources that are now part of our business and part of our innovation engine, you know, that you'll hear Maggie talk a lot about. We also learned a lot of things during COVID.

Some of them were just hard. You know, the first one I'll point out to you was just kind of supply chain resiliency. I mentioned earlier that our customers care a lot about security of supply, more now than ever. The worst thing you can have if you're a CPG is to have a stock outage. Our system had been optimized because for years, everything just kind of flowed, you know, nice, and we were able to take costs down to the last penny when our supply chain was long and expansive. You go through COVID, and then you add Winter Storm Uri in February of 2021, and we had a lot of challenges, a lot of force majeure letters, things we had to deal with. We had to build a more robust supply chain. For a company that prides itself in execution, we took that seriously.

Those are learnings that we will not forget. And our customers know it too. And that is a part of what they buy when they buy from Graphic Packaging. Also, during COVID, we saw these massive shifts in overall demand. Casual dining went way down. And after about a month or two, you know, you saw the food service side of the business really take off. Center of the store kind of came back. And again, we had run this kind of perfect ballet taking facilities down and optimizing our footprint to the point, you know, our customers had some doing in that as well because they were pushing us for, obviously, savings and things there as well, which is to be expected.

But we learned that we got to have some flex capacity so that we can take care of customers' demands as they shift, and they will shift based on different, you know, demand pulses that they have to deal with out there. And so you'll see us not have everything on, you know, three shifts. We're gonna have some flex capacity that allows us to be able to do it. We're not gonna run everything seven days a week, because it doesn't give us the ability to you know, manage our business. We have 100 manufacturing facilities, and the balance on that will be reflected there. Sure, we'll have some that run, you know, seven days a week, 365 days a year. But there's going to be a number of them that have that flex capacity.

We also learned some things by spending $700 million in Kalamazoo and essentially making and creating a brand new mill. We went into that project thinking it was gonna be totally an economic play. That's how we introduced it. We said, "Look, we had this unique opportunity to be able to, you know, take a bunch of costs out and drive a lot of, you know, really top line, you know, product through the marketplace." And we were uniquely positioned because of the concentration we had with our Midwestern manufacturing facilities of paperboard. But what we really found, you know, we got those savings, but what we really found there was the grades and the quality coming off that, that particular manufacturing process just superior to anything else that's out there. You've heard us launch Rainier. Rainier's not even in a lot of the numbers you're gonna see today.

I think it can be bigger than many of the innovations we have out there. It'll compete with the very best paperboard out there, you know, in SBS as an example, the brightness, the coating characteristics, the smoothness. It's fantastic. And we've got some early wins there. Maggie will talk about that when she's up during her conversation. The point to make that around integration, though, and this is an important point to make, is integration for Graphic Packaging is a bit nuanced. And this is important. You know, if you think about what we're doing in Kalamazoo and you think about what we're doing in Waco, if we have the opportunity to really grow with customers and generate excellent ROIC and consistent returns for shareholders, we are all in on integration. I'm gonna say that again. We are all in on integration when it makes sense.

Consistency results in higher, higher ROIC. However, when we don't have a path to do that, you know, like I just outlined with Augusta, then we're better off putting that capital somewhere else. So you'll see us put our capital where it will get the greatest return for shareholders. Hard stop. You know, so you're not gonna hear us talk a lot about our integration rates anymore because we're really focused on our end-use markets. We're a consumer packaging company. But ultimately, that's how I want you to think about our overall integration strategy in terms of how we're building the business here going forward. And that's exciting.

The implication for that really kind of comes in, in the form of, you know, if you think about A&R Packaging and that acquisition we made for a minute, we got a lot of questions from a number of people, "Hey, are you guys gonna integrate, you know, with, AR?" And Steve and I answered it this way. At the time when we acquired that, we said, you know, we have no plans to immediately do that, but over time, it, you know, could be, you know, provide some optionality. The reality of it is as we've gotten deeper into this and we've watched our European business, which generates outstanding results and excellent ROIC, we don't need to integrate that business right now. And it doesn't make sense.

Think things would have to change very dramatically for us to see a scenario where we would have to backward integrate into Europe. And that's a big change. And I think the points I'm making on these things we've learned through, you know, some of the things that we've come through is we form our opinions based on fact and how we actually generate returns for investors and shareholders over the long term. That's really why you want to buy a company that is constantly learning in that regard, and that's Graphic Packaging. So, I want to talk a little bit now about the company that we've actually built from the inside out. I think if you look at the left-hand side, I think it's, yeah, the left-hand side, you know, that you're looking at there versus the right-hand side, back to 2017, it's a completely different company.

Look at that for a minute. Look at the different, you know, segments we have. I talked about that March we were on, you know, and why we had to build the company out the way that we did. Our market participation strategies have just changed. We went from $4.4 billion to last year $9.4 billion, and we're gonna build on that. Ultimately, you know, if you think about, you know, that growth, some of that came from acquisition, some of it came from innovation. We averaged about 2% sales growth over that period of time in our core markets. Compare that against any other packaging substrate out there, whether it's glass, aluminum, corrugated, that's on par at the very best, you know, and, and it's really all driven by the innovation we see.

What you can see there and what I'm excited about is our ability to move with the consumer. As the consumer moves, we'll be there. And that's the portfolio that's really been generated in what we have. We have the scale to take care of the very biggest customers out there. If you're a QSR operator and you have 7,000 stores in North America, you're probably gonna do business with two, maybe three packaging suppliers. That's it. You don't want to do it with 27. Why? You can't control the quality. You can't control the materials there. And we have the breadth and investment and the capabilities to take care of the very largest customers as well as take care of the regional business that we have. We're uniquely positioned in that regard. That's the company we've built over the last seven years.

It's really gonna be on display over the next few. Let's talk about what we're doing and why. You know, the bottom line is our core values have not changed, but we have, as we've transformed the business, our aspirations have grown alongside of our confidence. That's just, you know, as you look at, you know, how that all kind of comes together, I'm gonna introduce you a number of key elements of our Vision 2030 right now. And then the most important one, we start with this one here, is really all around innovation. You know, to be a global leader in consumer packaging, you, you have to be a leader in innovation. And we're gonna continue to invest in our people and our capabilities so that we're the very best. You know, our Vision 2025, you know, laid out some pretty big investments.

I've already outlined what they were. But what will really define us with our Vision 2030 is the investments we've made in innovation and the people and capabilities that we execute on the scale that customers require. We've set three targets for this one, and they're ambitious. The first one is, you know, 2% of our annual sales growth will come from innovation. You know, we've done that over the last two years. You think about 2022 and you think about 2023. Both those years, we grew over $200 million in innovation sales under very different market conditions. So we've demonstrated the ability to be able to do that. We're pushing our teams to continue to find ways and to build that funnel. And our confidence level here in 2024 to deliver the $200 million is high.

You think about the selling cycle for us, many of those things are already in the queue, and so we know exactly what they are, and they're flowing through. Maggie will talk about that in her prepared remarks a little bit as well. Look, every new product we make needs to be more circular, functional, and convenient than the existing product that it's replacing. This is nuanced too. I mean, there are certain things from a material science standpoint that obviously have to be met, but it's also pretty simple in many ways. I've yet to ever have a customer say, "Hey, thanks for making that product that's less sustainable, less convenient, or, or, functional." They just won't do it. They won't put their customers into that. So that's kind of the lens we put against. All these things are iterative.

They help us get better, you know, over time. And then the last one that I will put out there is that our multi-generational portfolio is really iterative too. And what I mean by that is if you think about things like KeelClip as an example, that product started over in Europe, you know, with, you know, carbonated soft drink. And then it moved quickly to beer. And it also went to some food applications. And each time we did one of those, we learned some things different. In that particular case, we also made the machines that went into both those applications. Our Boardio product, which you saw out there, started with infant formula, and now it's gone to confectionery, gum, you see the Mentos out there as well, as well as coffee. And again, Maggie will take you through that.

That's really important, that iterative learning that we get there and why it's so important we have a big business in Europe and in the U.S. because those trends go back and forth, and we take that knowledge, and we can do that a lot faster. And that's what a leading consumer packaging company does, and that's the company we have built. Culture. Look, to be a leader in innovation, you know, I can't overemphasize the importance of culture. You know, we've got an incredible team, and we've done some really good work. But to stay the best, you know, we're gonna have to continue to focus on our culture of safety, inclusion, and take our customer focus to a whole new level. This is among my highest priorities as the CEO. We've set four targets for this one as well.

Zero life injuries is up first. Look, I'm proud of the safety record our company has. It's by far one of the best in the industry, but we need to make it better. That really starts with me and my executive leadership team and the tone and tenor we set from the top. We invest in well-run facilities. What we do is incredibly important, but it's never important enough for someone not to go home whole at the end of the day. That's something we take real seriously. And as an investor in Graphic Packaging, you can rest assured that we do it the right way there. We also really need, you know, second bullet point here, 75% engagement score. So you say, why is that important?

You know, it really comes down to the fact that, you know, again, those 24,000 employees that we have, we have to, you know, have their very best every day. They come with ideas. We need them. We need them to get better. We need them to get better in safety. We need them to get better in terms of productivity. We need them to get better in terms of innovation. And when we harness all of that and can kind of bring that forward, they're proud of what they do. They bring that energy to work. They're part of a winning company, and it's infectious, and it really helps us drive our results. So driving that is something that Elizabeth Spence, who is right there in the purple, who leads our, you know, our HR organization, she and I work on all the time.

So the other part of that, that I'll also say is women in leadership is something that is really important for us at Graphic Packaging. Right now, our women in leadership is around 25%. We're gonna take it up over 35% over this next seven years. It's an important element for us. We get a lot of information. You think about what that's like in my staff room. You know, we have a staff meeting, and it's kind of funny, and I joke about this sometimes, is you look at women in terms of many family units out there. They're the largest, you know, population in terms of making decisions around purchasing decisions as well as provisioning for families and, you know, they're the people that are part of their family.

You know, I'll be railing on something I joke about, and they say, "Well, this is," and then I'll look over, and Elizabeth and Lauren and Maggie might be laughing, and they're like, "It really doesn't work that way." And that's important for me to know, and it's important for all of our businesses to have insight like that because it helps us get better. It helps us stay true, you know, very close to the consumer, and that's insight that helps us drive our innovation. So it's a big goal for us. Our ethnic diversity, we want to make sure that that's, you know, representative of what we see in the U.S., around 40%. We've made good progress on that over the last few years. We have more work to do. Some of our locations are harder than others, but this is an important goal.

We want a very inclusive company, and it's one that, again, when we have that level of inclusivity and that diversity, we get better insights into what is going on in the marketplace and what we can do to take advantage of it to service customers better. Last bullet point here is really enhancing the communities we operate in. This is really important. We've got 100 facilities around the globe, and what we want is that logo to mean something in each one of those towns. Of course, our employees are proud to work there. We want the community to be glad that Graphic Packaging is there, you know, that it's a it's seen and has a reputation as a safe, sustainable company that invests in its employees and in its facility.

When we have a job opening, we want many people to apply because that's a place where ultimately we want to, where they want to work. So that's a key focus for us. We've made progress in this regard. We're gonna make more as part of our Vision 2030. Transitioning a little bit here to planet. You know, consumers want more sustainable, functional, and convenient packaging. I talked a little bit about that. And our brand owners and retailers know that we can deliver it, and so they're coming to us more and more. Our commitment to you and to our customers is to and to all our stakeholders is to steadily and measurably improve our environmental footprint of our consumer packaging. And really, as I said earlier, why is this so important?

Because it's not just reductions that we're driving in our business, but ultimately what our customers need in order to hit their objectives and our goals. Our packaging helps them accomplish their goals and the commitments they've made out there. And that's what a true consumer packaging company does that's in a leadership position. It's a responsibility we take very seriously, and we've got a high level of confidence, you know, that we can hit the plans and targets we're gonna roll out to you today. We have four targets for our footprint. First one up is to hit our SBTi targets. And you're gonna see Michelle take you through a very detailed look around exactly how we're going to do that. And a big part of that for Graphic Packaging is the decarbonization effort of our wood manufacturing facilities.

It's about 75% of all the electricity that we make, as an example, comes from those operations. Right now, that particular part of the business is around 67% we make our own. We're gonna take that number up over 90%. And all that's reflected, the investment that's required to do that's all reflected in the targets you're gonna see today. We're really excited about that. Again, that helps our customers hit their objectives. And, and as all of you know, you know, the materials that we make tend to be some of the most recyclable out there. They start with trees. They go through our wood manufacturing facilities, and then we're able to recapture them anywhere between five and 10 times. So it's a circular loop that, truly does have us sitting at, the prominent spot on a circular economy, and that's exciting.

The remaining electricity that we don't, you know, generate ourselves, we're gonna find ways in which it's kind of a hedge more than anything else to, you know, buy renewable energy. There's a lot of ways you can do that. We're gonna do it in Europe. We're gonna do it in the U.S. too. But the big part of it, I want you to walk away from Michelle to walk you through this, is just how we're going to do this ourselves with our biggest spend, you know, which is at our wood fiber manufacturing mills. We're also gonna ensure that 100% of all the fiber that we use is goes through a, a sustainably sourced methodology. This one, I've got a lot of passion around. I actually sit on the Sustainable Forestry Initiative, or SFI. Some of you are familiar with that.

I've been the chair the last couple of years. Making sure that we can ensure and represent and certify to all of our customers that you can use our material, you can feel good about it, and your end-use consumer can really feel good about what they're doing is critical for our business. We're very passionate around that, and it's something that we, we're really not only for ourselves but for the entire industry take a leadership role in to make sure that they can feel good about that. Because it's a great story, we need to make sure no one tarnishes it, and that's what we're all about at Graphic. Okay. Talk a little bit about results.

What I can tell you about this is that, you know, with Vision 2030, we're gonna bring the full force of what we built here, you know, to be able to, you know, whether it's innovation capabilities or manufacturing capabilities or execution capabilities, to bear for customers and, and ultimately, the end-use consumers that use them. I believe we can actually compete with the very best consumer packaging companies in the world, for sure. You know, for our shareholders, and Steve will talk about some of these specific financial goals, what you can count on from us is that through all economic cycles, you can expect, you know, strong financial results. I think the last few years have really demonstrated our ability to be able to do that.

The moves we're making, you know, what we announced last night and we'll go forward here today, we'll further build on that. And again, our portfolio will move with the consumer, and so it will reflect that balance and that consistency of the results. So if one side of the business is down, the other side of the business is performing well. That's the balance we sought. That's the companies we've built or the company we built, and it'll be reflected in our results. That, again, is what it means to be a true consumer packaging company and a leader in that market. Finally, we're gonna prioritize our people and our investment in our people because that's how we'll stay on top. We have the company we need today to run.

It is here, you know, and we're gonna bring out some of these investments we're making in people, in our sustainability and innovation process in a way that I think will give you more confidence, you know, that we can really do all the things that we're saying and hit this, you know, ambitious, you know, set of targets that we've rolled out as part of Vision 2030. Look, I'm really proud of what we've accomplished, you know, here is, you know, through 2023. You know, I talked about the results earlier today. They were excellent, you know, against a very challenging backdrop. But our company is very different in 2024 than we could have ever imagined when we put together Vision 2025. Our innovation is stronger. It's broader, and it's deeper. Our team has delivered through exceptionally challenging circumstances, and we've been tested along the way.

When we've been tested, we have learned, and we're applying that knowledge, which is something that, you know, the very best companies always do. We've made excellent progress on our own sustainability program. We're gonna make more of it over the next seven years, you know, Michelle will walk you through. And again, we are a critical part of our customers meeting their sustainability targets. Our goal is to make Graphic Packaging the undisputed consumer packaging company in the world. And our Vision 2020, our Vision 2030, got too many visions. Our Vision 2030, really, you know, puts that stake in the ground today, and we're very excited to have you here. So with that, I'm gonna ask Maggie to come up, and she's gonna go in a little deeper, in terms of bringing some of the things that I talked about to life. Thank you.

Maggie Bidlingmaier (EVP and President of Americas Business)

Good morning, everyone. I'm very excited to be here today to share with you information about the innovation capability at Graphic Packaging. As Mike just mentioned, innovation is a core component of our Vision 2030. After my discussion today, I hope you have really three key takeaways. The first is the demand from consumers for more sustainable packaging is accelerating. Secondly, our innovation, our global innovation capability, is competitively advantaged and ready to meet that opportunity. Lastly, we see a $15 billion sales opportunity for paperboard packaging, which gives us confidence in our path to a 2% growth in innovation to achieve our vision. As Mike mentioned, our products are in the hands of millions of customers multiple times per day. Over the last several years, we've made many investments to dramatically expand our global product and our customer portfolio.

We work with the leading companies and brands around the world, and with them, we meet consumers in many of life's everyday moments. We have a great responsibility because our consumer packages are at the interface between our customer's products and the consumer. We have to deliver on a product that meets those consumer needs while also delivering value to the brand owner. Our packaging meets consumers whenever and wherever they consume while also providing convenience, freshness, safety, and a host of other functions. We understand there are many trends driving consumer decisions today: health and wellness, convenience, experience. But most importantly, consumers are increasingly concerned about the impact their decisions have on the environment. Consumers want more sustainable packaging, and 68% of them view that paperboard packaging is more sustainable than other alternatives.

They're putting a lot of care and thought into the decisions they're making around the products and the brands that they buy and how they impact the environment. This is increasingly true for the next generation of consumers. A recent First Insight shared that an astounding 73% of consumers and Gen Z shoppers are willing to pay more for sustainable products. As a result of this pressure, you're seeing that other stakeholders are driving actions. Retailers and brand owners, they're developing their own sustainability strategies to help meet those consumer expectations, to support their own environmental visions while also navigating a very changing regulatory environment. This regulatory environment in the Americas is accelerating, really being primarily led by areas like Canada as well as the coastal regions. And then there are materials like foam that are clearly gaining much broader adoption across the Americas.

Leading the way by a long shot in terms of scale and scope is Europe. Jean-Francois will be sharing more about that acceleration when he gets up here. But activity across all of these stakeholders is accelerating as consumer demand for more sustainable packaging continues to increase. The core at every package we design is really three things. Everything starts with what the consumer wants. But we are also obviously very focused on our direct customers and their needs in terms of driving their brand values, their operations, and overall value proposition. But we're doing all of that while keeping the environment front and center. We strive for every new package that we introduce to have a smaller environmental impact than what came before. And that's whether that's our package or someone else's package.

I wanna take a moment to explain how Graphic Packaging manages their innovation capability because we believe it's part of our winning, winning path here. We are very intentional with how we align our people, our structure, and our process. This is especially true since our acquisition of AR Packaging as we've become more global. While we have become a broader, more global footprint, we are still remaining centrally organized. At the same time, we clearly understand that within different geographical areas, that there are unique consumer, you know, consumer insights, regulatory environments, and other, other insights that require us to maintain a really sharp focus in terms of those regional trends.

To really drive our competitive advantage, we need to be globally connected and ensuring that as we unlock that knowledge and the insights that we get from one customer in one region, that we're sharing that to benefit all of our customers and regions across the globe. Today, we have eight innovation hubs. We have 120 fully dedicated innovation employees, and we protect what we create with nearly 8,000 active patents. We leverage these investments along with the structure and process that we drive to keep accelerating our launches of new, unique solutions that help support the customers and the markets that we're in across this global network. Next, I wanna take a couple minutes to walk you through the innovation journey that we take hand in hand with our customers to develop these solutions.

Over the past seven years, we've made significant investments in many key areas across this process in terms of people and capability, and we are delivering more value for our customers than we have in the past. Starting with market insights, we have made investments in our consumer insights capability along with marketing. We've made, you know, talent acquisitions from CPG companies like Coca-Cola and PepsiCo. And as a result, we're seeing faster consumer insights while also developing stronger relationships with our direct customers and retailers to unlock their unique needs and goals. One of the areas that I was most excited about when I joined Graphic Packaging is in the first few months when it started to unveil to me how deep our talent and our capabilities are within R&D and the creative design group. I can't express how impressive and extensive these capabilities are.

More recently, obviously going beyond that really combined competitive foundation that we have, we've been investing in things to help accelerate the front part of that funnel, things like rapid prototyping. We can be in an ideation session with one of our customers at one of our eight innovation hubs, and we can be ideating and creating new packaging concepts, and we can turn that into a tangible sample on that day, which is very powerful, and it really drives speed in our process. When I think about all the centers of excellence that we have across the company that comprise all the components of packaging, it's very extensive. Everything from our paper science capabilities, our overall paper packaging capabilities, really strong breadth across material science. Then you take our machine capabilities on top of it, and it really is unmatched.

What it allows us to do is to really drive innovation across our entire value chain that we operate in. That's really critical important when we think about the creative design process because one of the most important things that we do is when we design a new package, we are designing that with the end in mind. What I mean by that is our teams are looking at that package, and they're being able to adjust and understand how to develop that so it can apply seamlessly into our manufacturing and our supply chain as well as to our customers, which is even more critical. This is what helps us drive cost efficiency and speed to our innovation funnel. Also, we have some other fun new tools in terms of 3D visualization and also using augmented reality.

This helps us make designs come to life faster than ever before. We are leaders in the design and implementation of packaging machinery, which in some cases is a critical component of our overall solution. This is something that we've developed for many years as leaders in the beverage market, but we're finding new homes for this capability in the food segment as well. But be very clear, our number one goal when we design new packaging is to get it to work in the existing machine and equipment at our customers. That's what really drives cost effectiveness and speed to the market. In the event that we have new innovative solutions that do require machines, our team is extremely capable to help them both in the testing and the piloting phase as well as a full global rollout when it's ready.

They are very good at designing machine types that are flexible, which is important to accommodate different substrates as well as different sizes of substrates while also minimizing the footprint impact of that machinery for that precious manufacturing space at our customers. The final stage is commercialization, which is very complex, and this is where this requires a very close, working relationship with our customers to make that happen seamlessly. We have dedicated technical resources around the globe to help execute on these pilots as well as the, you know, these experiments and these pilots. And at the same time, we have unmatched scale with over 100 manufacturing facilities with discrete printing and finishing capabilities that allow us to meet our customers wherever they are. No one else can match the scale that we deliver. And our large global customers really value that about Graphic Packaging.

At the same time, we provide a lot of benefit to the small and medium-sized brands as they can benefit from the sophistication of our innovation capabilities. And we really value working with the small to medium brands as well because they are often early adopters of some of these innovations. All in all, this journey that we go on with our customers is anything but linear. But it's, I hope that you can take away a lot, so you know, obviously not able to talk about all the things that we've been doing, but I hope you take away and understand that we've made an incredible amount of investments and advancements. And again, you know, having, you know, worked for lots of other companies, I cannot tell you how impressed.

I felt like I hit the lottery when I started unveiling some of the key technical capabilities, and you pair that with the tailwinds of sustainability, and it's a really exciting place to be. Our capabilities, our team, and our collaborative process is really helping us drive to new and exciting winning solutions. So speaking of winning solutions, we have an unmatched portfolio of five global innovation platforms that are competitively advantaged and constitute an opportunity of $15 billion for paper packaging. Some of you may recall the unveiling that Mike was just talking about of our Vision 2025. At that time, we identified a $5 billion opportunity. So as part of these investments that we've accelerated as a company, we've been able to triple our addressable opportunity during that time. In addition, these platforms offer a value proposition over and above sustainability.

There are discrete value propositions related to functionality and convenience for these products. Equally important is they are leverageable across our geographies, across markets, product categories, and they are ready to be deployed at scale. In addition to packaging innovations, we've been busy innovating on paperboard with the launch of our most recent PaceSetter Rainier. Customers and consumers are asking for recycled content. As a result of our two transformational investments in recycling paperboard, this and this has enabled us to create a unique sheet that brings many of the advantages that bleached board has today. With this new sheet, it's going to allow us to access underdeveloped markets here in the Americas like oral and personal care, healthcare, and beauty. The good news is as a result of our acquisition of AR Packaging, we have strong strategic relationships with the global brand owners that support these markets.

I'm very excited about PaceSetter Rainier. While it's still relatively new, we are getting very positive feedback from our customers and the market. To be clear, we view this as an incremental opportunity that's over and above the $15 billion that I just highlighted for the consumer packaging innovation. Next, I'm gonna take a drink of water. Next, I wanna highlight how these five global innovation platforms and PaceSetter Rainier come to life in the retail and food service channels that we operate in. Traditionally, our stronghold has been packaging in the center of the store in cookies, and crackers, and cereal, and pasta. These transformational investments that we've made in recycled paperboard have secured our long-term advantage in these categories.

The expansion of our diverse capabilities and portfolio let us move with the consumer as their spending habits shift between traditional grocery store, club stores, e-commerce, and quick-service restaurants. The next slides, I'm gonna walk through each of the five platforms and give you an example of a couple of the innovations and help them become more real for you. Our products like PaperSeal and punnets are expanding paper-based paperboard packaging. We have a lot of P's in this business, I've realized. Yes. Moving those to the perimeter, another P, outside of the center of the store into areas like the deli and the bakery and the produce section and in products like fresh, you know, fresh proteins and fresh pasta. At the same time, consumers are increasingly asking for more convenience when they prepare their foods.

Our proprietary microwave and convection oven technology allow us to work with our top-branded customers to provide products that not only give you that convenience, but they do it without sacrificing quality for themselves as well as their families. One of the most exciting developments in our platform here is the work that we've been doing to drive paperboard substitution for foam both in retail as well as in our food service. We expect this opportunity to continue to grow based on foam regulation expanding. Our portfolio is well-positioned with unique solutions that offer performance characteristics that either meet or exceed foam today. Many of you have seen our Chick-fil-A Cold&Go cups. There's some great examples out there for you to take a look at.

This is an area where, obviously, it provides benefits in terms of insulation for, for beverage in the quick-service market and will continue to drive penetration of that across those markets. At the same time, we've developed a unique microwave coating that will allow our cup portfolio to move into the food section of the grocery store and other channels. We have a recent launch with Nissin Cup Noodles. That's a microwavable product, which I'll share a little bit more information about that in a bit. But this product is allowing us to move into those types of applications that support things like noodles and other ready-to-eat microwavable meals. Our Boardio canister was originally developed by AR Packaging. This gained early traction in Europe as brand owners were facing oncoming regulation.

Many of these same global brands are looking to utilize this canister in the Americas market as well. This line, as you can see here, is being used to replace other types of packaging materials like plastic, metal, and composite packaging. The original package was actually delivered, developed for infant formula, but it's finding its ways in many new segments, just a handful here highlighted. As many of you know, we have a strong position in the beverage market today. However, our new innovative offerings allow solutions for customers who are looking to replace their plastic rings and shrink film across the globe. Our comprehensive portfolio of multi-pack products and machinery is, it's equipped to accommodate all the beverage formats that are in the market today. We've since expanded these into newer markets outside of beverage into food, as you can see examples here.

We're excited about that because we know as club store volume, you know, continues to grow, we're seeing that the multi-pack, you know, configuration is gaining in popularity. You can see here examples of condiments and sauces, and it works well in other cylindrical food items. Club store, they are accelerating. And the good news is club stores themselves, with their private brands, have made some traction in adopting paperboard packaging to replace plastic. And they're encouraging their suppliers to do the same. Speaking of club stores and e-commerce, we're seeing much greater demand for more durable packaging as a result of their robust supply chains and heavy-weighted products. We have a proprietary strength packaging portfolio that ensures the right level of protection without the overuse of material, which is really key for cost optimization as well as being more friendly to the environment.

Highlighted here is the IntegraFlute. This is a package that replaces commonly used plastic bags while also delivering a ship-in-own container configuration, which is really important for e-commerce. It provides a total omni-omnichannel package for the brands that utilize this. Our unique package also provides an easy-to-open characteristic for consumers where you can either pour or scoop the product directly, you know, directly without having to transfer it to yet another you know, another container. This allows the branding on the package to remain in the home throughout its use. I really love this I love this example of a Graphic Packaging innovation because it helps solve the sustainability challenge on two different dimensions, but at the same time, it offers a benefit to the consumer as well as the brand owner.

Lastly, this is where PaceSetter Rainier will be making its debut at a retailer near you, and it'll be supporting the key markets that I just highlighted a short bit ago. To summarize, this is where we've been, and this is where we are. Through these innovation platforms, we have extended the ability for paperboard packaging to reach new areas for consumers in their quest to have a more sustainable future. It takes a lot of work and a lot of collaboration with our customers to arrive at one of these coveted retail spots. What I wanna do next is really share with you three examples of how we co-create with our customers while also strengthening and deepening our relationships. Here's the first one. Kraft Heinz came to us with a challenge.

How do you make a convenient microwave food deliver the crispness of a longtime family favorite, the grilled cheese sandwich? With our innovation team's deep knowledge in microwave science, which, yes, that's a thing, which I didn't know till I came to Graphic Packaging, but a really great team of microwave scientists along with strong capabilities in overall packaging science, we were able to develop a paper carton that allowed the sandwich the grilled cheese to be cooked in all the right places, allowing it to have the perfect bite throughout the sandwich. Our accelerated process. This is, to me, one of the more impressive things of this example. It's from the time that we got the challenge from Kraft Heinz to a commercializable product, it was nine weeks. That's the kinda speed we need to drive these innovation platforms.

This is another great example of a Boardio innovation. This was in partnership with a co-packer, Club Coffee ofi, who helps support private brands, for retailers in coffee lines. Their retail partner came to them with a challenge. They wanted to increase recyclability while maintaining a high-quality, easy-to-use coffee canister. Ultimately, we worked very closely with Club Coffee to develop a Boardio solution that gave them the recyclability, the reclosability paperboard package that also enhanced branding on the shelf. In fact, this retailer was so excited about the Boardio package that they dedicated advertising time to talk specifically about the Boardio package. Even more exciting was that was the second time that a brand owner has done that in a matter of months where they dedicated precious time and money to do nothing but highlight the Boardio package in advertising.

Lastly, I wanna highlight a product that many of you have consumed at some point in your life, the beloved Nissin Cup Noodles. This was a challenge that we got from Nissin Cup Noodles. Actually, I'll walk through four challenges that they asked us to try to solve as part of looking for a new package. One is they needed to meet the foam replacement. So for many of you who've consumed it, you know that today or historically, it's come in a foam in a foam cup. Secondly, they wanted this cup to work seamlessly in their current manufacturing filling facility, obviously, to drive cost and efficiency and time. The third thing was, is they wanted it to be microwavable. So that was something that we had to work on. And they wanted to provide, obviously, that convenience for the consumer.

And then lastly, they wanted all that work to help to ensure that they were maintaining their B Corp status as a company. Our team was able to work on all of these challenges and overcome them. Our custom-designed cup just hit retail. Beloved Nissin Cup Noodles will be microwavable for the first time in 50 years. So I've shared with you our exceptional innovation capabilities, but at the end of the day, it's our customer's vote that matters and will change the trajectory of our growth. At Graphic Packaging, we take the voice of our customer very seriously, and we consistently go out and survey our customers to understand how we can get better. So we've recently done one where we went to hundreds of contacts across our global customer base.

What you see here is an excerpt of the area where we specifically wanted to understand what they thought about our global innovation capabilities. Just to be clear, these quotes are from well-known global brands and national brands that you would know. One thing that I think is very clear with all of our customers is they have two big challenges in front of them right now. One is they need to grow. And the second is they have to respond to the consumer's demand for more sustainable packaging. We believe our innovation and our capabilities are critical to helping them solve some of their biggest challenges. In summary, demand for sustainable packaging is accelerating. We are uniquely positioned with unmatched scale and capability to take advantage of those opportunities.

With a $15 billion addressable opportunity, we are confident in our ability to deliver the 2% innovation growth to achieve our Vision 2030. We are creating more value for our customers than ever before, and we are getting paid for that value. I'm very excited about the last seven years of the journey that Graphic Packaging—that, let's see, that's the P thing again. Graphic Packaging is on, but I'm even more excited about what's ahead. And with that, we're gonna take a 10-minute break, and we'll return to have a fireside chat with Mark Connelly and Jean-Francois. Thank you.

Speaker 15

Most people underestimate the value of packaging. People tend to think about a box or a cup, but it's much more complex than that because we are really that interface between the brand owners and the consumers. When consumers pick up a package and dispense a product, if they work perfectly, they're not even noticed. But when it fails, that's when the problems arise. You don't wanna add frustration. You wanna take that away and make people's lives better.

Speaker 16

Packaging for consumers serves many different functionalities. Packaging needs to preserve the product, help with the convenience and the ease of use. What our customers are looking for is how do they combine all of these functional aspects of what a package needs to deliver with the sustainability angle. And that is where they come to us to find solutions.

Speaker 15

There's a process for design and innovation, five steps. We look at insights, we look at design, explore those solutions, we collaborate together, we work through R&D, we get through the machinery validation, and we commercialize these ideas. That's how we get to breakthrough innovation. The most important thing around our culture is the inclusion in terms of everybody feels comfortable in providing inputs on how to make things better. We are continuously feeling the pulse of that particular customer relative to that solution.

Speaker 16

Packaging is really a driver for shoppers to take decisions. It is about really discovering what consumers want and need and see how we can deliver on that.

Speaker 15

We take that inspiration that we get from consumer insights and the design work, and we bring it to life really quickly. What if we could change that package from a plastic structure into paperboard? What if we could make the package safer for children? We can do all of those things, but it has to start with what if.

Speaker 17

Well, I'm really proud about the investments that we have made as a company in understanding material science, in employing development techniques that are based on design for the environment principles. We tend to look at the world from an outside-in perspective, in understanding what is happening out there, translating those trends and insights into new product development opportunities. Innovation has no finish line, so we will never be done. We got to invent the future of sustainable packaging.

Speaker 18

We're all born to this blue planet and into the great project of life. Question is, what are we going to do with it? Are we along for the ride, or do we work to make it better? At Graphic Packaging, we choose better. We choose purpose. Ours is to package life's everyday moments for a renewable future. This commitment shapes our plans, guides our relationships, drives our actions. The packages we make touch millions of lives for the better, keeping food fresh, beverages portable, and making everyday moments easier, safer, and happier. We start with trees from sustainably managed forests. We also repurpose fiber from the recycling stream, designing packaging that can be recycled again and again to support a renewable future for generations to come. Graphic Packaging, every one of us has a role. Every day is an opportunity. Let's push the limits if possible every time.

Speaker 15

Most people underestimate the value of packaging. People tend to think about a box or a cup, but it's much more complex than that because we are really that interface between the brand owners and the consumers. When consumers pick up a package and dispense a product, if they work perfectly, they're not even noticed. But when it fails, that's when the problems arise. You don't wanna add frustration. You wanna take that away and make people's lives better.

Speaker 16

Packaging for consumers serves many different functionalities. Packaging needs to preserve the product, help with the convenience and the ease of use. What our customers are looking for is how do they combine all of these functional aspects of what a package needs to deliver with the sustainability angle. That is where they come to us to find solutions.

Speaker 15

There's a process for design and innovation, five steps. We look at insights. We look at design, explore those solutions. We collaborate together. We work through R&D. We get through the machinery validation, and we commercialize these ideas. That's how we get to breakthrough innovation. The most important thing around our culture is inclusion in terms of everybody feels comfortable in providing inputs on how to make things better. We are continuously filling the post of that particular customer relative to that solution.

Speaker 16

Packaging is really a driver for shoppers to take decisions. It is about really discovering what consumers want and need and see how we can deliver on that.

Speaker 15

We take that inspiration that we get from consumer insights and the design work, and we bring it to life really quickly. What if we could change that package from a plastic structure into paperboard? What if we could make the package safer for children? We can do all of those things, but it has to start with what if.

Speaker 17

Well, I'm really proud about the investments that we have made as a company in understanding materials science, in employing development techniques that are based on design for the environment principles. We tend to look at the world from an outside-in perspective, in understanding what is happening out there, translating those trends and insights into new product development opportunities. Innovation has no finish line, so we will never be done. We got to invent the future of sustainable packaging.

Speaker 18

We're all born to this blue planet and into the great project of life. Question is, what are we going to do with it? Are we along for the ride, or do we work to make it better? At Graphic Packaging, we choose better. We choose purpose. Ours is to package life's everyday moments for a renewable future. This commitment shapes our plans, guides our relationships, drives our actions. The packages we make touch millions of lives for the better, keeping food fresh, beverages portable, and making everyday moments easier, safer, and happier. We start with trees from sustainably managed forests. We also repurpose fiber from the recycling stream, designing packaging that can be recycled again and again to support a renewable future for generations to come. Graphic Packaging, every one of us has a role. Every day is an opportunity. Let's push the limits if possible every time.

Speaker 15

Most people underestimate the value of packaging. People tend to think about a box or a cup, but it's much more complex than that because we are really that interface between the brand owners and the consumers. When consumers pick up a package and dispense a product, if they work perfectly, they're not even noticed. But when it fails, that's when the problems arise. You don't wanna add frustration. You wanna take that away and make people's lives better.

Speaker 16

Packaging for consumers serves many different functionalities. Packaging needs to preserve the product, help with the convenience and the ease of use. What our customers are looking for is how do they combine all of these functional aspects of what a package needs to deliver with the sustainability angle. That is where they come to us to find solutions.

Speaker 15

There's a process for design and innovation, five steps. We look at insights. We look at design, explore those solutions. We collaborate together. We work through R&D. We get through the machinery validation, and we commercialize these ideas. That's how we get to breakthrough innovation. The most important thing around our culture is inclusion in terms of everybody feels comfortable in providing inputs on how to make things better. We are continuously filling the post of that particular customer relative to that solution.

Speaker 16

Packaging is really a driver for shoppers to take decisions. It is about really discovering what consumers want and need and see how we can deliver on that.

Speaker 15

We take that inspiration that we get from consumer insights and the design work, and we bring it to life really quickly. What if we could change that package from a plastic structure into paperboard? What if we could make the package safer for children? We can do all of those things, but it has to start with what if.

Speaker 17

Well, I'm really proud about the investments that we have made as a company in understanding material science, in employing development techniques that are based on design for the environment principles. We tend to look at the world from an outside-in perspective, in understanding what is happening out there, translating those trends and insights into new product development opportunities. Innovation has no finish line, so we will never be done. We got to invent the future of sustainable packaging.

Speaker 18

We're all born to this blue planet and into the great project of life. Question is, what are we going to do with it? Are we along for the ride, or do we work to make it better? At Graphic Packaging, we choose better. We choose purpose. Ours is to package life's everyday moments for a renewable future. This commitment shapes our plans, guides our relationships, drives our actions. The packages we make touch millions of lives for the better, keeping food fresh, beverages portable, and making everyday moments easier, safer, and happier. We start with trees from sustainably managed forests. We also repurpose fiber from the recycling stream, designing packaging that can be recycled again and again to support a renewable future for generations to come. Graphic Packaging, every one of us has a role. Every day is an opportunity. Let's push the limits if possible every time.

Speaker 15

Most people underestimate the value of packaging. People tend to think about a box or a cup, but it's much more complex than that because we are really that interface between the brand owners and the consumers. When consumers pick up a package and dispense a product, if they work perfectly, they're not even noticed. But when it fails, that's when the problems arise. You don't wanna add frustration. You wanna take that away and make people's lives better.

Speaker 16

Packaging for consumers serves many different functionalities. Packaging needs to preserve the product, help with the convenience and the ease of use. What our customers are looking for is how do they combine all of these functional aspects of what a package needs to deliver with the sustainability angle. That is where they come to us to find solutions.

Speaker 15

There's a process for design and innovation, five steps. We look at insights. We look at design, explore those solutions. We collaborate together. We work through R&D. We get through the machinery validation, and we commercialize these ideas. That's how we get to breakthrough innovation. The most important thing around our culture is inclusion in terms of everybody feels comfortable in providing inputs on how to make things better. We are continuously filling the post of that particular customer relative to that solution.

Speaker 16

Packaging is really a driver for shoppers to take decisions. It is about really discovering what consumers want and need and see how we can deliver on that.

Speaker 15

We take that inspiration that we get from consumer insights and the design work, and we bring it to life really quickly. What if we could change that package from a plastic structure into paperboard? What if we could make the package safer for children? We can do all of those things, but it has to start with what if.

Mark Connelly (SVP of Investor Strategy and Development)

[audio distortion] Okay. Let's get started. So I'm Mark Connelly. I'm with Jean-Francois Roché, who is our Head of International Sales at Graphic Packaging. Jean-Francois spent most of his career at AR Packaging or Graphic Packaging. He's also, as Mike said, the Chairman of the European Carton Manufacturers Association. So welcome, Jean-Francois.

Jean-Francois Roche (Head of International Sales)

Thank you, Mark. Good morning to everyone. Good morning to everybody on the webcast. [Foreign language], if there are any French-speaking persons in the audience or on the webcast.

Mark Connelly (SVP of Investor Strategy and Development)

So what I'd like to do, Jean-Francois, is start off with just give us an overview of the European business and where Graphic fits in.

Jean-Francois Roche (Head of International Sales)

Yep. Thank you, Mark. So in Europe, we are roughly a $2.2 billion business in a paperboard market, which is in the range of $15 billion. If we look at the total consumer packaging market, I think the size of the European consumer packaging market is in the range of $100 billion. So this gives us plenty of room to grow. We operate in 18 different countries, which include Indonesia, Australia, and New Zealand, where some of our market patterns and customer base are the same. And we operate as well across six segments, which are food, healthcare, beauty, beverage, food service, and what we call household. And that's quite a benefit for us because you might have some volatility and some seasonality in those segments. And that helps us to balance out a bit those market fluctuations.

Mark Connelly (SVP of Investor Strategy and Development)

So when you think about the difference between the U.S. business and Europe, we have a very well-established healthcare and beauty business in Europe, relationships with all of the major pharmaceutical companies there, and, of course, a much smaller food service component than we have here in the U.S. Jean-Francois, you show us the sales progression. It was looking pretty good up until 2022. Can you give us a sense of what the recent performance is going on there?

Jean-Francois Roche (Head of International Sales)

Yep. So if we step back a bit and look at how was the market before something called COVID happened, it was pretty much straightforward. And I know it's a European view of the things. But for the Western European part of Europe, we were looking at GDP growth. And somehow, the market was performing like a clock on the GDP growth. If we look at developing countries in Europe, which was more the eastern part, because of the way the market was getting structured, we were looking at twice the GDP growth for the market development. Then 2020 happened. COVID came on stream. Consumer behavior went all over the place. Petropolymer substitution started as well at that time. So you can see on the graph, the market went up pretty dramatically, specifically in 2022.

That was driven as well by further things because we saw finished goods stock increasing, raw material stock increasing, because people were wondering. We have seen our customers as well increasing their goods stock from six to nine months. And then the price went up a bit. And we were just wondering at the end of 2022 when the pendulum will bounce back because that's the way it works. Beginning of 2023, we saw clearly we saw some resilience in the first quarter. But then we had to unwind all what was in the pipe. So in 2023, the performance of the market was in the range of -7%, -8%. But that was compensated as well by innovation and what I will call petropolymer substitution, which is the beginning of what I will discuss later on, which is the Packaging and Packaging Waste Regulation.

That brought a bit of bonus to the market. So we end up in the range of -2%, -4% on the total market. For 2024, I think we just consider that 2023 will be the base. And we go back a bit to the basics. So I looked at the number from the European Central Bank on what is the forecast of GDP for 2024. It's roughly 0.91%. So this is how the base market will evolve. But we see a strong trend still on innovation and what I call the petropolymer substitution. And we believe, because as Mike said, we have a pipeline which is already filled, we believe that this will drive a 3%-4% growth. So we are fairly confident about 2024.

Mark Connelly (SVP of Investor Strategy and Development)

So Jean-Francois, you spent 24 years at AR Packaging. You left. Then you joined. Later, you joined Graphic Packaging. Then Graphic Packaging bought AR Packaging. So there's probably nobody out there who understands the impact of AR Packaging on Graphic better than you do. And I know that when I was sitting out here in the audience, I didn't really appreciate the impact. So can you walk us through what the real impact was?

Jean-Francois Roche (Head of International Sales)

Yep. And this was all planned, by the way, when I moved to Graphic. No. So before we went through the, we made the acquisition of A&R in 2021, we were the third operator on the market. We were operating through 14 different converting facilities. We were operating in food, in convenience, and in beverage. We were quite successful on the beverage side of the business. And we were, what I said, embracing the European channel between the U.K. and the rest of Europe and as well the Iberian Peninsula. And then we made the acquisition of a company called A&R. And that was, we were adding 30 facilities. It was what I call the game changer for us. We entered into new markets, which were healthcare, beauty, and household as well. We entered into new technology. We entered into paper canister.

We entered into barrier technology because A&R had a flexible division which was highly knowledgeable about barrier technology. Just for the history, this is where Tetra Pak was developed in 1968. They had an immense knowledge in barrier technology, which is helping quite a lot right now. As well, they had good knowledge of finishing capability because of the beauty market and as well of security device on the healthcare market. Clearly, that was a game changer. Then we supply now multinational customer, regional customer, local customer across 50 different countries. The good about that merger is that there was very little overlap on the customer base. When it comes to the footprint, it was nearly a perfect match. It was something which was really good. We became number one on the market in Europe after that acquisition.

Mark Connelly (SVP of Investor Strategy and Development)

Maggie talked quite a bit about changing customer relationships. It's been less than two years. How are relationships starting to change in Europe?

Jean-Francois Roche (Head of International Sales)

It's a very interesting point you made. So I remember right after the acquisition, so I stepped back to my shoes of A&R. And I went to meet some of the large healthcare and beauty care companies in Europe. And I had a bit of cold feet the first time I met them because they told me, "Why do you care? And what are you doing here? Where does that make sense?" And I said, "Guys, so we take time to listen to their expectations, to understand the market trends, and to set up the strategy." And we moved radically our position with those customers because for most of them, we are seen as the partner for the future. So it was a very big change in the way they were approaching us.

Mark Connelly (SVP of Investor Strategy and Development)

In a short period of time.

Jean-Francois Roche (Head of International Sales)

In a relatively short period of time as well. One thing which is a bit unique, and Mike was involved not lately. We have been chosen by Danone. We are one of five suppliers worldwide, which will help them to drive their transition and their strategy toward packaging, which is quite of an achievement. It's what we call a joint business development plan. And I just recall one thing which was said by my friend, who is the CPO of Danone. And the CEO made echo on that one. He said, "Even though you are a large multinational company, you have kept an entrepreneurial spirit, which is a bit unique. And this is what we are looking for." And that was a bit of a compliment as well for us. So we were.

Mark Connelly (SVP of Investor Strategy and Development)

You said one of five suppliers at one of five packaging companies worldwide.

Jean-Francois Roche (Head of International Sales)

No, one of five suppliers worldwide.

Mark Connelly (SVP of Investor Strategy and Development)

How many packaging companies are on that list of five?

Jean-Francois Roche (Head of International Sales)

None. We are the only one. OK? And then one thing which has changed a bit dramatically. And so we have seen the number of applications for people to join the company increasing dramatically over the last 18 months. And then you just wonder because are we becoming attractive because we are number one? Are you becoming attractive because of all the amazing innovation we are launching on the market? Or it's just because you want to be a bit selfish? Are you getting a lot attractive because of the amazing management that we are in Europe? And I suspect it's a bit all of that. And it's really something which is a very big change because it's coming not from one specific company. But the number of applications we had from the industry is clearly impressive.

We have taken on board some people because at the end, it's all about people. It's all about talent. This is what makes companies successful.

Mark Connelly (SVP of Investor Strategy and Development)

As chairman of the European Carton Manufacturers Association, you're right in the middle of all of the regulatory swirl. There's a lot going on. What is the most important thing for investors to be thinking about in terms of European regulation right now?

Jean-Francois Roche (Head of International Sales)

Yep. I think let's just talk about the Green Deal. I won't go into the detail because it's rather complex. But it's something which is made out of 11 initiatives. And you have a lot of below those initiatives, law, regulation, directive, which will be set. But the aim of the Green Deal is to aim for carbon neutrality by 2050 in Europe. By the way, some of the large food and consumer goods companies in Europe are already aiming for carbon neutrality on their Scope 1 and 2 emissions in 2035 or in 2040. But let's focus on the six, which are on the screen. No, one back. Yes. So let's focus on the six, which are there. This is what will have an impact for our industry. They are six out of the 11.

Out of the six, we will just focus on one, which is what we call the Packaging Waste Regulation. OK? That's the one which is important for you to understand. So where are we right now on the Packaging Waste Regulation? We have had several iterations about the law and what will be the implication. I think what you have to understand, there are three governing bodies in Europe. One is the Commission. The other one is the Parliament. And the third one is the Council of Europe. They have all had a sort of different appreciation of what should be the Packaging Waste Regulation. And they have entered right now into a trilogue phase because they want to issue one common text, which will be voted in April, May of this year.

And as the Parliament is due for reelection in June, and as the actual President, Ursula von der Leyen, has applied to be reelected, there is a lot of pressure to get that thing through. And we won't focus on the headwinds and on the tailwinds because it's a bit too complex. I will just ask you to focus on the green box because it's a bit more simple. So on the consumer packaging, what will be the impact on the consumer packaging? It might have a bit of headwind impact because of the reuse and the recycle, which is involved in the packaging waste regulation. When it comes to the paperboard industry, for the paperboard industry, I think it will be modest tailwinds because of the inherent I did it well. That's right benefits of fiber-based packaging compared to plastic.

As we, as a company, I think it's great tailwind because we are an innovation provider in packaging and in fiber packaging. This is what the packaging waste regulation will drive. I am extremely confident about the tailwinds.

Mark Connelly (SVP of Investor Strategy and Development)

The regulation for us is a tailwind. AR has dramatically expanded our innovation capabilities. Europe is slow right now. Is that slowing down our ability to get our customers to get products in the market?

Jean-Francois Roche (Head of International Sales)

No. No. Not at all. And as I said before, 2023 was an expected reset because we know that the market end of 2022 was a bit overspinning, if I may say it that way. And ourselves were up on the innovation by nearly 3%-4%. This is what I said for 2023. So we are still fairly confident for 2024. And as well, if we look a bit long-term objective, three to five years, we know that 70%-80% of our growth will come from innovation. And that's what gives us a bit of confidence. And there is one noticeable thing to change that we have noticed across several multinational companies. Normally, large multinational companies are slow in innovation because of who they are, because of their processes, because of what made them.

I recall a discussion I had once upon a time with the CEO of Kellogg's. He put his mobile phone on the top of the whiteboard because he said, "Any breakthrough innovation will never come to my desk because of who we are." I think the large multinational companies have understood that. There is a clear change in the way people address innovation. Top management is involved because they want to get it done. They don't want it to be a three, four, five years process. As Maggie said, they want it quick. That's a major shift in the way people are addressing innovation. Just some highlights about what we have done in terms of innovation lately. So KeelClip started at the right time in the mid just at the beginning of COVID.

We cannot hit a better date in Europe. It became extremely successful. I think the capacity we have installed today in Europe in terms of is in the range of 3 billion-3.5 billion packs. This is what the installed capacity we have on the machinery side. We have seen a very strong takeoff on KeelClip. It's something which is now developing in North America. We see great traction. This is a bit what we discussed. It was launched in Europe. Now it moves to North America. PaperSeal was developed for the retail industry in early 2020 to replace CPET trays. We got great traction. Inflation then came. We have to rework a bit. We have developed a new technology, which is called PaperSeal Shape, where we have seen an amazing demand in Europe.

We see as well a lot of traction on the North American market as well with that technology because it's CPET trays replacement. Boardio, as Mike said and as Maggie said, was developed for infant nutrition in Europe for a customer called Danone because it's public knowledge. And then it was reiterated. We developed it. And clearly, we have seen unexpected traction on the U.S. market on Boardio. You have seen Mentos. You have seen Club Coffee. I don't want to make any teaser. But you might see many new things soon, if I may say it that way, which is clearly because it's a replacement to blow molding technology. So we are getting great traction. And then we launched with Unilever this childproof solution for the pods in Europe. And because it's Unilever, it was a large launch in Europe.

But they are expecting to launch that product worldwide, which will give us the capability as well to manufacture that product because of the network we are having a bit all across the world. And we are getting traction with other customers as well in North America. What I want to say is that when I look at the pipeline of opportunity we are having, sometimes I am wondering when I see the volume. I'm just scratching a bit my head because I have never been exposed. And you have to be balanced in what you promise because the opportunities are so big that you want to be careful. But it's something where we are fairly confident.

What we try to do at the same time is to manage the resource in an appropriate manner because when it hits the ground and when the things go, you better be ready to manage the growth of the innovation. I just want to make a last comment on that slide because I have had that before. When we talk about petropolymer substitution in Europe, some people think it's a myth. I was right with that because I don't think that you understand a myth. It's different. I just want to tell you, KeelClip was shrink replacement. PaperSeal is CPET trays replacement. Boardio is blow molding technology replacement. And what we have done with Unilever is rigid plastic replacement. It's just the reality of what's happening right now, which is driving the innovation.

Mark Connelly (SVP of Investor Strategy and Development)

Jean-Francois, switching gears a little bit. Every couple of days, The Wall Street Journal has a story that says that sustainability is over. It's too expensive. It doesn't make any sense. Nobody wanted it in the first place. And lately, they're pointing to the German and French protests and saying, even Europeans have figured it out. This stuff just costs too much. So have we seen our 15 minutes of fame for sustainability? Are we on to the next thing?

Jean-Francois Roche (Head of International Sales)

Yeah. So first up, just a small adjustment. It's not the French. It's the French, the German, the Italian, the Spanish, the Czech, and the Polish. And they are not, because it has been a bit noisy in Europe. And they are not against the regulation. They might have some question around the pace of the regulation, but not because they understand that certain things have to be done. I think if you look at the demonstrations, they are more about the fairness of the regulation because what's happening today is that you can import goods from outside Europe, which are not under the same regulation. So they feel a bit disadvantaged. So that's the first point. So I don't see that as something slowing down.

When you deal with multinational companies in Europe, and I can guarantee I live with that every day, the first thing is you have to be competitive. The second thing they ask you is, what is your ESG strategy and capability? It's by order of importance. The third thing is, what are your innovation capabilities? How can you help us to match what the market is demanding? The fourth one is the market, your capability to supply the market. Those are the key elements which are in any discussion you are having in Europe. If you are not able to tick all of them, then you are a bit gone. If you look at the top 10 food multinational companies in the world, five of them are European-based. It's in their DNA.

I live with that dichotomy every day between how much we are pushed from those companies in Europe. I might see the difference as well from North America. I don't see any reason for them to slow down on that process. I will even say what I feel, especially if the packaging waste regulation is coming in as a law. It's my conviction. The large multinational companies will push because they believe that at least the European one, they want to be shown as a virtuous company. They understand that it's part of their brand equity. They further understand that it's what customers want.

Mark Connelly (SVP of Investor Strategy and Development)

So if I understand what you're saying, the European CPGs are simply giving consumers what they want. They're not backing away. We heard Maggie say that U.S. consumers want more sustainable packaging. And that's what the U.S. CPGs and our customers are doing. And that's what we're working with them to provide. So it sounds like a change in U.S. administration, if it were to happen, doesn't have a whole lot to do with what Graphic Packaging is doing today and where we're going.

Jean-Francois Roche (Head of International Sales)

Yeah. You just wrap it up in a way that I will never have been able to do so. Yes. You are spot on.

Mark Connelly (SVP of Investor Strategy and Development)

All right. Well, unfortunately, that's all we've got time for. So next up, we're going to hear from Michelle Fitzpatrick, our Chief Sustainability Officer.

Jean-Francois Roche (Head of International Sales)

Thank you, Mark.

Michelle Fitzpatrick (Chief Sustainability Officer)

Thank you. I appreciate you making sure that I don't trip over the chairs. Got it. Thanks, Mark. Good morning. I can't tell you how excited I am to be here and to be able to talk about one of my favorite subjects and be able to share with you all of the amazing things that we're doing to transform our sustainability program and approach and the goals that we've got in front of us between now and 2030. So as we think about where we want to start with updating our strategy and how we best build that strategy into our business strategy and have it become an integral part of Vision 2030, it starts with first understanding what that global landscape looks like. What are those external sustainability trends that have the potential to create both opportunities and challenges for consumer packaging?

As we look at that, we see four actually, I said three before, four major goals that are really where we see there's the potential to create impact on consumer packaging. The first is population growth. We've talked a lot about people want packaging. Well, we're going to have a lot more people on this planet in the very near future. The most recent study by the United Nations that was released in November of 2023 says that there's going to be 8.6 billion people on our planet in 2030. That's going to grow to 9.8 billion people by 2050. That's a lot of people. Not only are we going to have more people, but we're also seeing growth in socioeconomic status. So the middle class is getting bigger. Those people are moving from rural communities into cities. So what does that mean for packaging?

Well, that means they're going to want more goods. They're going to need more food. They've got more buying power. They're going to want more consumer goods. Those goods are going to have to travel further to get from where they're produced to where they're going to be consumed. That means we need more and better packaging to safely get those products to those consumers. As Maggie laid out and Jean-Francois have laid out, our stakeholders, our customers, the brands, the regulators, they're all taking action in response to these trends and thinking about how they're going to adapt. We have the solution for them. Our innovative packaging is going to provide the solutions to help them embrace the opportunities in front of them and mitigate any potential challenges that they may have. I forgot to grab a sip of water.

I forgot to bring my glass of water with me. OK. So our promise in how we think about sustainability you've heard Mike share our purpose statement, that we package life's everyday moments for a renewable future. And what we want our promise to be is that every single one of those moments is going to be better for people and for the planet. And we're doing this through taking action in our three pillars that you see up there. We're creating better packaging by innovating our packaging and our manufacturing operations to drive out waste, improve recyclability and circularity of our packaging, and really fuel a circular economy. We're doing better for people. We're creating safe and engaging workplaces that foster people's growth and development. And we're engaging our communities while we do this.

We're creating a better future for our planet by taking action to mitigate climate change and our contributions and reducing our footprint, as well as by being responsible in the way we source forest products so that we're protecting valuable forest ecosystems. And as we do this, we've got a really good plan in place to achieve all of our goals in each of those three areas. And we've laid it out so that step by step, we're going to make life's everyday moments better every day. OK. So how are we going to do that? You've already seen Mike lay out for you our Vision 2030 plans along the three impacts of better packaging, better for people, and better future.

When we think about this, not only are our goals tied to delivering against those four global sustainability trends we talked about, they're also embracing and addressing some of the broader societal aspirations for us to have a more fair and just and equitable society. They're underpinned by our commitment and our long history of operating with integrity and with responsible business practices. They're reinforced by our commitment to the United Nations Global Compact to implement the 10 principles of the compact that address human rights and protection of the environment into the way we operate, and also to help do our part to advance the goals of the United Nations, like the Sustainable Development Goals.

I hope that you can see the connections that we have to our contributions to those UN SDGs come through in how we've mapped our 2030 goals to where we can drive impact. Where we think we're going to deliver the most impact is with providing decent work and economic growth through our better for people and our better future pillars and how we're going to advance progress against responsible consumption and production, climate change, and life on land through our better packaging and better future goals. Mike, Maggie, and Jean-Francois have already really laid out a good roadmap for you for better packaging and better for people pillars. I'm going to be spending my time with you today talking about how we're going to bring our better future goals to life. OK.

But before we dive in, I want to just take a step back and say, we know that being a sustainable company is about a journey. We've been on this journey for quite a while. I just want to share a few milestones. We're really proud of the fact that in 2021, we joined as a participant to the UN Global Compact, really solidifying our commitment to embrace and act on those principles. Last year, we delivered on our commitment to have set new science-based targets and had them validated by the Science Based Targets initiative. We're very pleased that our progress has been recognized with favorable ratings by MSCI, Sustainalytics, and ISS. We are committed to continuing to assess our progress and transparently share how we're doing through participation with organizations like CDP and EcoVadis. OK.

So now let's dig in a little bit, pivot our conversation, and talk more about our Better Future platform. Through this, just spend a little more time on our climate goals in particular and help them come to life for you. We think about our Better Future pillar and our forest goals and our climate goals. The great thing about them is the way that we've structured them. They're going to touch packaging at every single point in the life cycle of packaging. It's going to start with how we source our raw materials, to find more sustainably sourced materials that are more renewable materials or recycled materials that go into the beginning to start that circularity engine from the very start.

Then we're going to look at how we optimize our manufacturing operations to make sure that we're using resources efficiently, that we're reducing emissions, we're generating less waste. You've heard a lot about our innovation team. And they are awesome in how they are thinking about designing packaging that is going to be a more sustainable alternative to non-renewable packaging formats that are out there today. And then we think about how we transport our packaging products to our customers, to the brands and the retailers that then use our packaging to ship their products to the consumer.

We look at not only how do we optimize the transportation footprint as it's moving through that cycle, but also, if we kind of get back to our forest goal, that the packaging that we purchase to ship our packaging products into has to be just as sustainable as the packaging we produce. And then lastly, we think about that end-of-life piece of it and how do we design our packaging to be more recyclable and more easily recovered or to help put the infrastructure in place to recover it and take it back so we can close that loop and drive the circularity of fiber-based consumer packaging. And the paper-based packaging is a great story. Roughly 80% of paper-based packaging in the United States and Europe are collected and recycled today. And once collected, that packaging has five to 10 lifetimes that it can be recovered and recycled.

That is just something that is just amazing. I mean, paper-based packaging has the highest recovery rate of all packaging materials, more than aluminum and metal packaging, more than glass, and far more than plastic packaging. So we are really invested in making sure that our commitments to put facilities in place like Waco to further drive the circularity, make sure that we can take back even more complicated types of packaging and reprocess them and put them back in there and just continue to close the loop and fuel the circularity of paper-based packaging. Oops. OK. So now let's talk more about climate. When we think about how our commitment to climate action is, we're looking to reduce our carbon footprint. We're going to do that in a way where we're reducing our greenhouse gas emissions and increasing our use of renewable energy.

If you look back to where we've been, we've had climate goals for quite a long time. Original goals were set in the 2016-2017 time frame. They were intensity-based goals, which were the right goals to set at that time. We achieved those goals three years early in 2022. Then we followed up with that by delivering on our commitment to set new science-based targets and have them validated by Science Based Targets initiative so that the world could see that, yes, these are the right goals. They're in line with what's needed. We're doing the right thing. Now, if we look forward, how are we going to actually achieve those goals? And what are we going to do? Well, our plan is we're going to reduce our Scope 1 and Scope 2 emissions by just a little over 50% by 2032.

I know 50.4 is a weird-looking number. That's all about the Science Based Targets initiative. They're very precise. But that is what we're going to do. We're going to reduce our Scope 3 emissions, emissions out in our value chain, not within our direct control. It's going to take a lot of collaborative effort to work with our partners to reduce those emissions by 30%. Through that process, we're going to look to increase the amount of renewable energy we use, both in the fuels that we source as well as the electricity that we purchase for our operations. OK. I heard finance people really like a waterfall chart. I decided to put it in a familiar format as I break down for you our decarbonization pathway for our Scope 1 and 2 emissions.

As we think about how do we approach that, because 50% reduction between now and 2032, that seems really daunting. That's a lot of work we have in front of us. So it all starts with understanding where you are today. And when we look at our footprint, we see that about 60% of our Scope 1 emissions come from using fossil fuels in our paperboard manufacturing facilities. I mean, we've done a lot of good work to decarbonize those operations. Don't get me wrong. I mean, they're currently at about 75% renewable fuel. But we still, 60% of our Scope 1 emissions or combined Scope 1 and 2 emissions come from burning fossil fuels. So that's a big, big target we've got to work on. We've got a lot of very talented engineers in our manufacturing division. And they went to work.

They came up with three very great projects. Those projects are going to take us from using 75% renewable fuel in our wood fiber paperboard manufacturing facilities to 90% renewable fuel between now and 2032. So that, combined with the natural grid greening that we're going to see just as the world around us gets greener between now and 2032, is going to get us 70%-75% of the way to our 2032 target. We're almost there. Where do we look next? Well, our next largest source of emissions comes from our Scope 2 category. It comes from our purchased electricity across all of our operations. That represents about 30% of our greenhouse gas emissions.

So if we look at transitioning half of that to renewable electricity and wrap that up with modest year-over-year energy efficiency improvements in our operations, that gives us a clear line of sight to hit our 2032 target and achieve that 50% reduction. So I'm sure you're saying, Michelle, that's all great. You've got a roadmap. But what is that going to look like? And how is that going to play out over time? So let me show you. Right now, we are busy completing the construction and startup of our Waco facility. You've heard a lot about it. But while we're doing that and we're laser-focused on keeping that on schedule, getting that built, and up and running, our engineers, they're working on the engineering design. They're working on the front-end loading.

They're working on taking those three projects that they've identified to get them into the queue to start executing against them once we get post-Waco. And the great thing about these projects, I mean, I think even more exciting than the fact that they're going to help reduce our emissions, is that they are already built into our capital plan. And they all deliver a positive return on invested capital. I mean, how great is that? We're not only doing good for the planet. We're doing good for our business. And ultimately, that's going to be good for our customer and the end consumer. So you can't ask for anything better than that.

Then, at the same timeline, while we've got my engineers working on the capital plan and the capital execution for our three projects, our procurement teams are actively working on trying to identify attractive renewable electricity projects. Given that it takes a lot of time, one, identify them, and then enter through the contract phase, and then the permitting phase, and then the construction phase, because we don't want to just take any old RECs off the market. We want to make sure that we're continuing to do our part to help decarbonize, which means looking for good projects that add additionality, additional renewable generation capacity so that they are truly removing emissions and not just shuffling them from one place to another.

So when you look at the lead times it takes to execute against all of that, we expect and project that we'll start to see the benefits of those projects along the same timeline as our capital projects, which shows acceleration of emissions reductions following Waco in sort of the second half of our period here. All right. So we'll move on to Scope 3. And just for your benefit, you have another waterfall chart. Same approach that we followed when we looked at our Scope 1 and Scope 2 pathway starts with understanding your current footprint. And when we look at our footprint for Scope 3 emissions, there are really four categories that really stand out as our largest sources of Scope 3 emissions. One comes from all of the purchased goods and services that we buy every day that we need to make our products.

The second one comes from transporting our packaging products to the brands and the retailers so that they can put their products into it and then ship it to the consumers. The next one comes from what happens to our packaging at the end of life when the consumer is done with it. The fourth category comes from the upstream emissions that are associated with all of the fossil fuels or grid electricity that we purchase. The nice thing is that if we execute well against all that Scope 1 and Scope 2 projects we talked about just now, that automatically will reduce that bucket of emissions for those upstream emissions, because we won't be buying those fossil fuels and that dirty grid electricity anymore.

Then to get to the other groups, our procurement team, they're actively at work working on their maps to understand where are the hot spots in our Category 1 purchased goods and services emissions so that we can then put together and engage our suppliers to work with them, if they don't have science-based targets, to get them to help set science-based targets to reduce their emissions and then help them reduce their emissions, which then benefits us. Same thing is going to happen with our transportation network.

We're going to be working with our transportation vendors to understand where do we have opportunities to maybe shift transportation modes from truck to rail, which would have a lower footprint, or to take advantage of some of the newer emerging technologies around electric trucks or hydrogen-powered trucks or biodiesel trucks that are then going to help us get our packaging, consumer packaging, shipped to the brands and the retailers with fewer emissions than what we do today. And lastly, and probably the most exciting one, is how we're going to think about that end of life. And Waco comes back here, too. There's this perception that a lot of food service packaging, and cups in particular, are not recyclable today. I don't know why this urban myth continues to persist.

But I was in a Starbucks recently, I mean, at the Starbucks R&D Center recently, not even just a Starbucks, but at their R&D Center recently, where they are developing their new reusable cups. And I said, hey, this is great. But there are just times when consumers are going to want a grab-and-go paper cup. They're not going to want the burden of a reusable cup. We can recycle them. Let's talk about partnering to recycle them. And the R&D engineer at Starbucks told me, paper cups are not recyclable. And I'm like, what? You guys are in Seattle. Seattle is one of the first cities to accept paper cups into curbside recycling. How can you tell me that it's not recyclable? So we are going to partner with many in our value chain.

We're actively working on doing this to be able to increase cup recyclability and acceptance and bring them back and be able to transform them into new packaging in our Waco facility. Where even better is that when we do that, we can create beautiful packaging that uses fewer materials, because we don't need as many coating materials on the top surface of the packaging. And that kind of gets so when we look at all of those four things together, that gets us about 70%-75% of the way to our Scope 3 30% reduction target. So we do have a little gap. And we have some ideas right now that we're working on on how to address that gap. The first is how do we think about using our raw materials more efficiently and improving the yield on that?

Because if we get more out of them, then we have less waste that we have to deal with. The second gets to the waste. We do a really great job today recovering and repurposing and recycling the paperboard waste in our manufacturing facilities. Almost 100%, I think we're at 98% right now, gets recovered and recycled either by us or by third parties. But we want to look at the rest of the waste that we send to landfills. How are we going to move that out of landfills and into beneficial reuse?

And then the last thing we can think about doing, or that we're really looking to right now, is how do we get more recycled content into our unbleached and bleached paperboard and increase the recycled content there, all getting back to that consumer need or desire to want to have more recycled content in their paperboard? And we're convinced that with all of our very smart and talented people working on this, that we're going to close that gap and hit that 30% reduction by 2032. So with my last slide, I just want to bring us back full circle. We've been talking a lot about consumers and what the consumers want in consumer packaging, how our customers are responding. Many of our customers have set very aggressive greenhouse gas reduction goals in addition to their sustainable packaging goals.

The plan that I've just laid out for you on how we're going to reduce our greenhouse gas footprint not only reduces our emissions, but it helps reduce our customers' Scope 3 emissions and helps them achieve their net-zero greenhouse gas targets that many of them have set. In addition to all of the work that we're doing to provide them packaging that is more recyclable, has more recycled content, and meets all of their expectations around what they're trying to do to make their packaging more sustainable. It's even more than just helping our customers achieve their goals. It's helping our customers meet the end consumers' desire, their desires to have more functional packaging, more convenient packaging, packaging that comes with a lower environmental footprint, and packaging with less plastic.

So as we do our part to get better every day, we help our customers also get better every day. And with that, I'd like to turn it over to Steve Scherger, Chief Financial Officer.

Steve Scherger (CFO)

Thank you. Thanks, Michelle. Great to see everybody. Thanks for taking the time to join us today. We've covered a lot, as you would expect us to, including some new things that I want to touch on here in just a moment. Mike did a phenomenal job of, of course, laying out the transformation of what we have become as a global consumer packaging company and the path forward for us to continue to execute on that with Vision 2030. I think Maggie, Jean-Francois, provided enormous confidence that we have the innovation capabilities to grow consistently, 200+ basis points a year in real, new-to-the-market growth every year. The pipeline continues to evolve and grow. Michelle, I think beautifully laid out for us that our commitment to the planet, our commitment to our customers, our commitment to the consumer is real, and it's investable.

I think that's very unique relative to who we are as Graphic Packaging. Let me touch on for a moment some of the things that we did touch on last night. Mike touched on it, Augusta. We're very pleased that we're entering into an agreement with Clearwater Paper for them to acquire our Augusta bleached paperboard facility. It's a facility, as you know, about 600,000 tons of capacity. As Clearwater Paper indicated, it's operating today at roughly 70%-80% of that. The acquired EBITDA, about $100 million. We'll work through all the regulatory environments over the next few months and would expect to close the transaction in the second quarter.

Importantly, on a pro forma basis, and this is important as you're thinking about what we're about to share on our financial model, post the Augusta sale, that's kind of the company that we are, roughly $8.8 billion, EBITDA in the $1.8 billion± range, margins in the 20%. That's the business we're going to build from here. So kind of start there, great balance sheet, 2.6x levered. This assumes we take the cash provided from the divestiture and put it against debt. And that's the business upon which we'll grow. And I'll share those financial metrics with you in just a moment. But it's important. Very important inside of that pro forma, probably the last time I'm going to use the word integration with you ever, because this is a 90% integrated business.

95% of our sales will be products that you, as a consumer, interact with, a six-pack, a 12-pack, a cup, a bowl, a canister. It's the products that we utilize, 95% of the company, post the Augusta transaction. Let me touch briefly on the results. You've seen them. I won't overdo this. Yes, it had all the challenges of a year, all the things we saw, destocking, all the activities, three quarters of down volume growth, quarters two through four. But the business performed at an exceptionally high level during that period of time. We're working with our customers to get paid for the value that we create for them. Margins increased 300 basis points. And as Mike mentioned, we're off to a good start this year.

And it's important, because pivoting back to organic sales growth in 2024, which we're confident we will do, is important for us, because that's how we'll earn on the model that we'll talk about here in a moment. But the innovation pipeline is working, $200 million of sales last year, high confidence in the next $200 million this year and beyond. And we're off to a good start. The year's off to a good start, as Mike mentioned earlier, a little flattish right now. That's good, because last year, in the first quarter, we were actually up modestly.

Most of the headwinds that we felt through destocking, inventory management, and the like, occurred in quarters two through four, which gives us confidence that we'll return to organic growth as we pivot and take advantage of the innovation pipeline, as well as return to more normalized inventory management at our customers' levels and at the consumer level. You've seen the numbers. You've seen the financials. I won't overdo these. At the end of the day, top line for the business, relatively neutral, significant execution on getting paid for the value that we create for our customers, volumetric growth down a few hundred basis points, 20% EBITDA margins. Those are margins that we aspired to several years ago, and we got to. So we're going to talk about how that pivot creates opportunity for us to grow EBITDA from here going forward.

Balance sheets in a good spot at 2.8x levered and margins very, very strong coming out of the year. So execution worked. And it worked in an environment where we were very actively matching supply and demand. So if you stand back from it, we ran our manufacturing facilities to match the demand of our customers. And that demand, in some cases, was down. And so we matched that supply and demand. And when we did it, we were able to do it cost-effectively, wisely, and still generate 20% EBITDA margins. And it's a testament to the resiliency of the model, the nature of how we're working our business every day. Let me touch on guidance. We provided guidance, adjusted EBITDA, adjusted EPS, $1.75 billion-$1.95 billion on the adjusted EBITDA. All of this, of course, assumes currently the Augusta Mill being a part of the portfolio.

And so, of course, down the road, we'll adjust that for you and lay that out dependent upon the timing of the close, adjusted EPS in the $2.50-$3 range. We provided the normal, some additional modeling stats for you. It's there. Want you to have that in hand. One of the things that we'll talk about here in a moment, and I'll just point to it, this is peak CapEx for Graphic Packaging. This is absolutely peak CapEx for Graphic Packaging. It will be driven down from here. And we'll talk a little bit about that in a moment. Just briefly on Q1, we're obviously actively continuing to manage and balance supply and demand. And if you kind of look through the first quarter, the open market paperboard sales that we have today will be down on a year-over-year basis, probably $60 million-$70 million or so.

We're managing and balancing inventory quite wisely here in the first quarter through that. As such, EBITDA on Q1 relative to last year, probably down $35 million-$45 million. That's going to be very consistent with the guidance that we're providing for you today. So just to give you a sense for kind of where Q1 is landing. We feel very good about that. We'd like the start that we're off to with our consumer packaging volumes returning to more normalized levels. That kind of sets the stage for the year that we're looking forward to have. So let me drill a little deeper on the results side. As Mike said, and he said it extremely well, results are actually quite wide.

This is about our people, our capabilities, the who we are as a company, the impact we're having on society, the impact we're having on our customers. And then, of course, underneath that are the financial results that come along with that. And you heard us talk a lot about the portfolio that we have now moving with the consumer. It's critical. Moving with the consumer is an imperative for us. And we have the portfolio to do so. And that's vital for us as we look forward, because we've got this great balance of consumer staples products. We're in your life every day, eating, drinking, enjoying the home life that you have, being on the go. We're in your life on a staples basis, on a day-to-day consumption basis, which gives us incredible stickiness on the volumes and the capabilities of the business.

Let me drill down a little bit here for you with something new, a lot of arrows here. What you're going to hear is talk a very different language as we kind of move forward with our business. We're going to be talking to you about how are things going in the food market, what's happening there, what's happening with beverage, what's going on with the consumer on food service, what's happening with our household business. This is going to be a new disclosure. It's going to be a new conversation for us with you, which is what's going on here inside of these markets. Let me give you a couple of examples. 2022, talked a fair amount about it. All the arrows are up. By the way, up is greater than 5% growth of sales. Sideways, 2%-5%.

Sideways this way, or up, up this way, 2%-5%. Diagonal, ±2%, the opposite direction on the red, pretty straightforward. 2020, 2%, every arrows up, or 2%-5%. That was the year that we just talked about. It was the realities of COVID. It was the realities of supply chain challenges, inflation, price needing to move up to deal with the realities of inflation, some of the onboarding of folks buying more than they necessarily needed. So every arrow there is just up. But in 2023, through a little bit more of a normalization, it's our ability to articulate to you as an investor, what's happening in this business? Talk about food for a moment. First part of 2023, pretty solid. Volumes are hanging in there. And then we kind of went through the destocking. And it showed up.

It showed up because volumes came down, quarters two through four, more than offset the pricing that we were working through with our customers. And you saw some downs for the year, relatively flat, pretty good outcome, actually, given everything that we worked through on food. Beverage, it's a great business. It's a business that continues to grow, grows globally, all the innovation activities that we talked about. And really, throughout this, growth up, but a little neutral in 2023, pretty well chronicled, actually, in terms of what was going on with at-home consumption, which is where we play in beverage. And so, yeah, pretty neutral. Food service, it's a franchise. It's a phenomenal business. It's on-the-go consumption. It's innovation. It's our cups. It's you driving through the drive-through, up consistently, and up again here in the first quarter of 2024.

Household, think about that, things like laundry detergent, think about filter frames, think about pet food. We don't put pet food in the food. We put it down in household. Everybody bought a pet. And in the 2022 time frame, we didn't fall out of love with our pets, but we just didn't buy them as many treats. And so we actually saw a little bit of activity on our household business. And so a little bit less growth. OK, got it. It's kind of played itself out to a draw. But we want to call those things out for you to articulate what are we seeing and what are we doing about movement in those categories. And as Jean-Francois said, we've got a great health care and beauty platform that came with AR Packaging. It's powerful. It creates opportunity for us to grow globally, particularly here in North America.

It's been very steady. Our beauty business inside of that has been outstanding. As Mike said, we saw a real step back in Q4, just overall consumption in Europe. Europe was really very, very slow in Q4, but it has returned back to more normalized levels. I gave you a lot of examples there because we're going to talk more about this. When we talk about the company, when Mike talks about the company, when we're sharing what's going on, we're going to be talking about this. This is the business we are, because when 95% of our sales are basically making products into these markets, we need to be able to inform, provide confidence that we're winning in these markets with examples.

So I wanted to take a little bit of time on something you're going to see us talk more about, the base financial model for the business. Post the sale of Augusta, we have the business we need to have in hand today to execute against this. We have the business. We've been building it through the investments we've talked about, Kalamazoo, Waco, AR, Bell, the investments in people, capabilities, talent, value-based pricing. All of those things have come together to create a business that we believe, going forward, can keep it simple, grow the top line consistently, low single digits, 200 basis points of growth inside of that, make that work year in and year out. That will drive mid-single digit EBITDA growth.

I'll talk about how we believe and why that's relevant on a go-forward basis that then can drive significant EPS growth, high single digits. We're going to talk a lot about low, mid, high single digit growth in key categories, sales, adjusted EBITDA, adjusted EPS, all in the context of CapEx migrating to 5% of sales, which allows us to invest for growth in the business, to grow at those levels. That's very important. We'll get paid for the value. So let me just walk through these a little bit with a little bit more. The low single digit top line, it's right there. It's right there. Maggie talked about it. It's a $15 billion addressable market. This isn't a TAM, that's some number that's developed off of some very pie in the sky. No, these are identifiable, real products that exist today.

They're in the market. They're in an alternative. We believe that they're the environment where we will create solutions that we already have that we will apply into these markets. If you look at this, think one of the most powerful things about this, particularly as Mike was telling our journey going back, the history going back to 2016, 2017, you really only thought about Graphic Packaging as a cereal box and a 12-pack. That's how you thought about the company. Now trays, bowls, cups, containers, canisters, that's an entirely different portfolio of packaging solutions that we're inventing, we're creating, and we're bringing to life in the marketplace, which creates confidence in the low single digit sales growth. I didn't even talk about Rainier, which Maggie did a phenomenal job of talking about. That's incremental beyond that. We're in the early days.

We couldn't be more excited about what the ability, the opportunity that exists by having the world's lowest cost, highest quality, most capable coated recycled paperboard that we can apply in places where it just hasn't been able to win in the past. That's powerful. So going back to this and the simplicity of it, 2025 is in 2025, we set an EBITDA margin target, 18%-20%. It was a target. It was important because we needed to improve upon the business. We needed to change the model, value-based pricing, getting paid for what we're creating, all the things that Mike and Maggie and Jean-Francois talked about in their comments. And we got there. We got there through value pricing, M&A, all the good work that we've been executing on. Well, now we're in that margin zip code.

So we're going to pivot because from here, it's about low single-digit sales growth, creating EBITDA growth, dollar growth in that mid-single-digit. And that speaks to the fact that we're not here about selling paperboard. This is about a consumer packaging company selling packages to our customers that result in products that we, as consumers, eventually take off the shelf. The mid-single-digit EPS or EBITDA growth nicely leverages into high single-digit EPS growth. It's just the math. It allows us to leverage a great balance sheet and to invest back in the business. And we're looking forward to the 5% CapEx because just repeating, we're at peak CapEx this year. And I'll take you through that here in a moment. It'll start to cycle down in 2025 as we bring Waco to life.

It's on the way to 5% of sales in 2026 and beyond. It allows us to grow. 5% is all that we need because for us, that ability to generate the kind of growth, 200 basis points a year, put money to work to do that, we really need, with all of the investments we've made in our infrastructure, in our facilities, we need 2% of sales to maintain them well. It gives us the ability to invest behind it and to grow. 3% of sales to invest behind growth, as well as to continue to be world-class at the manufacturing that we do, allows that to be in place. The cash flow generation that's coming, I'll share with you here in a moment. What do we do with this? How are we allocating capital? We've got the model.

The model's going to have that $8.8 billion business growing steadily. It'll have those EBITDA, the EBITDA that's there growing steadily. Cash flow generation will become very material over the next couple of years as we wind down the capital required to bring Waco to life. And so these are the priorities. The priorities, invest in who we are. First and foremost, put the money to work in us. You've seen a cross-section of the capabilities we have here today. And we've got 24,000 colleagues who are rowing in the same direction and who are committed to building the business that we've been collectively building. And so we'll continue to invest in innovation capabilities, R&D capabilities, the kind of work that's required to have a margin profile that allows us to have a good narrow band of consistent margins that allow us to grow EBITDA consistently.

So first and foremost, we'll invest in ourselves prudently. We have an incredible opportunity to grow our dividend. We've increased it a few times in the past. But as we come through this peak CapEx cycle, probably not 2024, but as we move towards 2025, we're setting our own expectation of a good, steady, consistent growing dividend. We have the cash flow to do it, smart to do it, returns appropriate capital to our investors. And it's an opportunity that we have and that we've created with the investments that we've made. And we're going to set that expectation on ourselves, obviously approved by our board. But we see absolute line of sight to a good, steady, consistent, and growing dividend as part of who we are as Graphic Packaging. Achieve investment grade. We've talked about this a fair amount. It's not an imperative.

But we have the balance sheet. We'll have the balance sheet. What achieving investment grade also basically, fundamentally says is lower debt, a clean balance sheet, driving leverage probably below the 2.5x range. It's been the low end of our range. You should expect us to apply cash flow, create that opportunity because it exists. We'll pursue investment grade at the right time and the right place, where it makes good sense, where there's value that comes from it relative to borrowing, relative to investor interest and the like. Peak CapEx, probably not the time to do that. We got to show the realities of delevering. We'll do that. But we'll do it at the right time over this Vision 2030 time horizon.

But that speaks to a very strong balance sheet and leverage that is at or below the range that we've talked about historically. Repurchasing the company, buying back shares. We've got a history of doing that where there's value to be created. Since 2018, we've bought back $900 million of Graphic Packaging. You can look that up against our market cap. That's a lot of the company. And we did it at times where it was very value creating. And we did a big chunk of it coming out of the International Paper transaction, where we created some equity as part of that transaction, as part of the partnership. And we actually ended up acquiring back the company more cost-effectively, even though it was part of that transaction.

And so we're going to hold and you should expect us to hold all of our investment decisions up against buying back the company because that's what you got to do. You got to just smart balance capital allocation approach. How does it stack up, what you're doing relative to that? We'll be thoughtful about it. We'll be smart about it. But the cash flow generation that's about to emerge for the business, it's a tool that will keep handy for us. We've been acquisitive. You've seen us be acquisitive. But the bar is pretty high right now on acquisitions. And as such, we'll be very thoughtful. And it'll end up being about capabilities. It'll be about things that accelerate growth if we choose to do so here in the certainly in the short to medium term because that's the opportunity to extend leadership.

We've got a strong business, investing capabilities. What's interesting, and I'm sure many of you understand it, and I'll say the word integration one more time just because I will, and then it'll be done. But our acquisition lens was in the lens of integration because it had to be because that's what we were driving. Post Augusta, 90% integrated, 95% of the top line, making an end product. You don't have to have that as the lens around which you look to acquire. It actually opens up the aperture quite nicely for capabilities if we choose to do so. But I'll repeat, we have the company in hand today to execute against the goals that we're aspiring to on the financial model. What's not on this page? There's not another Kalamazoo. There's not another Waco because we've made those investments.

We've made the investments necessary to create the business. As Mike said earlier, to have a business that has the capabilities to grow as a consumer packaging company and to make paperboard, raw materials where we have ROIC advantage, competitive advantage, a right to win, and an ability to do so. We've made those decisions around recycled paperboard. We've made them around some of our wood fiber paperboard in the businesses, those facilities that will be a part of our infrastructure going forward. It's important because we want them to be a part of our business where there's a reason for it, better returns, ability to grow. That's why you do it. That's why there's not another one on the list because we don't need to have another one on the list. There won't be.

Then Augusta, obviously, we took a decision with Augusta to actually exit out of the essence of making something that made it very well. It's a world-class facility, by the way, with phenomenal teams. But it's not required for us to execute on our vision going forward. An arrow with a few numbers on it. This is the next seven years. Will it play out exactly like this? Probably not. But is this where we're heading? The cash flow that we're about to generate is very substantial. We're still generating strong cash flow, by the way, even while investing at peak CapEx. But the trajectory for the business, 2024 peak CapEx, 2025 starts to narrow down. During that period of time, we'll still continue to grow at low single digits, have our innovation pipeline, have our margins continue to stay in a very narrow band, and grow them.

And then it creates an opportunity in 2026 to begin to earn on Waco, which actually has an opportunity for margin enhancement, which is great because it allows us to have confidence 2026, 2027 to bring to life the next $160 million of EBITDA and earn on it. And that business, if you stand back from it and model it, start with your 8.8, move from there, grows. EBITDA grows. Cash flows move from $800 million towards $1 billion. That's what we're focused on. And so over the next four years, we'll generate $2.5 billion of cash flow that we can put to work under the allocations that we just chatted about in the prior slide, about $8 a share in today's environment. And then we'll do it again in the following three years. So $5 billion of cash flow that we are confident we can create.

The model is there for us to grow on a very steady and consistent basis, top line, EBITDA, EPS, generate the cash flow, have exceptional returns on invested capital, and build the business and return significant value to our shareholders. And so that just gives you a little bit of a sense for the where to from here. And with that, let me turn it back over to Mike to wrap up. And then we'll move to Q&A. Mike?

Mike Doss (President and CEO)

Nice job. Get this. Well, thank you, Steve. And really, thank you all. Excuse me. I took this off. I don't like having a mic on when I'm not talking. My general counsel advises against it. There we go. Look, now is the part of the presentation where I'm usually supposed to say, boy, I hope you're as excited about our future as all of us are here at Graphic Packaging. But what I'm really hoping you took away from our presentation today is just how much stronger we've become in the last seven years and that you can begin to appreciate what it really means to have the ability to provide real lasting value for our shareholders, our customers, and our employees. Look, we aren't just a paperboard packaging company anymore. Steve kind of talked about that. 95% of everything we do is some kind of package. We don't sell paperboard.

We are a global consumer packaging company. It's a big shift from where we've been in the past and a big shift from many of the conversations that we've had with a number of you over time. I hope you've been able to see that today. We believe that paper packaging is really the most sustainable medium of packaging out there. And ultimately, we've become a partner of choice for many of the biggest brands in the world. They understand that both in the packages that they're making today and the ones that we believe will package again in the future for them. Look, we package consumer staples. We do it well.

We get paid for that, which means, as Steve just outlined, you can have confidence when we outline the types of gains and free cash flow and overall profitability, both in terms of sales growth and what you'll see on the bottom line in the years to come. It's a proud moment for me to stand up here in front of all of you today as we kind of look back over the last seven years. Look, seven years ago, I couldn't have stood up here and made the types of commitments that we're making you today. I just couldn't. We didn't have the investment in capabilities. We didn't have the investment in innovation. And certainly, we didn't have the investment in people that we bring to the party today. I can stand here and make these commitments to you today with a lot of confidence.

I'm even more excited about what the next seven years looks like for our company. Hopefully, really, as you kind of think about this and kind of put it in context, the last seven years has been an incredible period of time of heavy investment, strategic change, and transformation. What's really going to become apparent over the next couple of years is just all the results that are going to be generated from the investments that we've made with the hard work that we've put in today. Actually, you see and touch our products every day. You've got many of them in front of you right now. I love our tagline that basically says, "We package everyday moments for a renewable future." As shareholders, you've had the opportunity to benefit in that.

You'll continue to have the opportunity to benefit in that from what is truly a fantastic company that we're building here. With that, thank you for listening. I'm going to ask my team to come up here and join us on the stage. We're to that part where we get to take questions now. A couple more of these. Moving around a little bit.

Jean-Francois Roche (Head of International Sales)

I'm not sure like that through. There. This.

Melanie Skijus (VP of Investor Relations)

Come on.

Mark Connelly (SVP of Investor Strategy and Development)

Perfect.

Melanie Skijus (VP of Investor Relations)

Oh, yeah.

Michelle Fitzpatrick (Chief Sustainability Officer)

OK.

Melanie Skijus (VP of Investor Relations)

You're going to see.

Steve Scherger (CFO)

Perfect. Yeah.

Melanie Skijus (VP of Investor Relations)

OK.

Mike Doss (President and CEO)

Melanie, I think you're going to handle Q&A.

Melanie Skijus (VP of Investor Relations)

For everyone in the room, we've got Ruth and Alexandra in the blue jacket. They will be carrying around microphones. We'll start here in the room. Then we'll go to the questions coming in from the webcast.

Phil Ng (Managing Director)

Hey, guys. Phil Ng from Jefferies. Thanks for the awesome presentation. You talked about spending a lot of capital last few years. It's going to be pretty elevated still. Steve, give us a sense of how much of that drops off in 2025 and 2026, could it be more normalized in that 5% range? I guess the bigger picture question I have is, you guys have invested a lot. I think you guys should have a pretty substantial lead versus the industry and most of your competitors. Give us some perspective, what you can do as a Graphic Packaging Company with all the investments you've made that your competitors perhaps can't do. It'd be helpful. Thank you.

Steve Scherger (CFO)

Show me a start. And then you touch on that.

Mike Doss (President and CEO)

Yeah.

Steve Scherger (CFO)

I mean, I think cadence-wise, as we just talked, here in 2024, high watermark, probably into the 9s. We spent about $300 million last year, by the way, on Waco, so well along, which is great. So it's our expectation, if you kind of cut it in the middle, don't have the exact numbers, but in the 9s, probably moves into the 7% range and then back to 5%. And that'll be 5%. So think about that. If we continue to grow the company, obviously, the math there's pretty obvious for $400 million-$500 million a year. So it's a good cadence down. We'll generate good cash flow, obviously still generating cash flow here in 2024. And then in 2025, start to really see that accelerate. And then 2026 and beyond, it really drives. So that's a little bit of just the cadence piece of it.

I think capabilities-wise, do you want to touch on that?

Mike Doss (President and CEO)

Yeah. Look, our packaging manufacturing facilities are incredibly well capitalized. And if you think about our paperboard manufacturing facilities, they are as well, particularly with what we've done with Kalamazoo and with Waco. We've got a significant cost advantage, as I mentioned, in the most attractive parts of the market. And really, where our growth will come from, Phil, in terms of the gains we make, is all about innovation and driving this whole sustainability message that we have and what we talked about. You heard Maggie go through a lot of the different examples in the markets where we compete. And that's why we broke that chart out because we want to talk more about the markets and how we're actually going to win in those different verticals because where the consumer goes, we go.

We've built that business purposely to allow us to be able to do that.

Melanie Skijus (VP of Investor Relations)

OK. I'll go ahead and take one from the remote audience. The first question is from Ghansham Panjabi of Baird. When you established Vision 2025 targets back in 2019, you gave a specific threshold for EPS. Vision 2030 is more of an algorithm on EPS. Why is that? Is it basically now an acknowledgment that margins have reset higher and going forward, earnings will be more correlated towards end market growth than perhaps internal improvement initiatives?

Mike Doss (President and CEO)

Steve, why don't you go ahead and take it?

Steve Scherger (CFO)

Yeah. Yeah. I mean, thanks, Ghansham, for that. I think part of it is a little bit of what Ghansham is raising is, with Vision 2025, we were setting margin goals and targets. And EPS came along with that. I think one of the things we're very excited about is, now that we've gotten to that level of margin capability, so think ±20%, that we can actually, because of the value-based pricing, because of the organic growth, we can actually consistently operate the company in a pretty narrow band of margins. And as such, we're pivoting more towards an ability to maintain good, strong margin capability and allowing the top line growth to provide steady and consistent EBITDA growth as well as EPS growth.

And so I think it's an important pivot to the model around earning the right, if you will, having the margin profile that we can build upon and having the top line generate EBITDA growth consistently.

Mike Doss (President and CEO)

It's really true. We've got a lot of levers to pull there too with the cash flow that you outlined. I was joking with George at the break. I said, I'll know that we've really established ourselves as a consumer packaging company when we move off the paper packaging list and we move into the packagers portion of it. That's also part of how we're thinking about the goals that we laid out there today. Because you think about it, our goals and targets, our aspirations, the algorithm really lines up well with the customers that we're servicing.

Mike Roxland (Managing Director of Equity Research)

Hi. Mike Roxland, Truist Securities. I want to echo what Phil said. Thank you for the great details in the presentation. Can you help us frame some of the bigger moving pieces around your EBITDA guidance of $1.75 billion-$1.95 billion? Does it reflect organic sales growth? Does it reflect the $40 per ton decline in SBS cup stock? Does it also reflect the $50 per ton increase that you guys announced last month in CUK and CRB? Just trying to get a sense of what you're embedding within that guidance. For my first question, and then the second question is on free cash flow for 2024, can you help us frame some of the larger pieces there in terms of free cash flow conversion, working capital?

Just give us a sense of what type level of free cash flow you think you could generate this year, realizing that it is a peak CapEx next year. Thank you.

Steve Scherger (CFO)

Sure. Yeah. No, let me take that. I think, obviously, in terms of the cash flow generation, I think the modeling that we provide provides pretty good clarity that there's still positive cash flow generation, $300 million-$500 million, if you kind of just stack through the EBITDA and the like. One of the things you're going to see us do a lot more of is kind of change the dialogue too on how we respond to your first question. We're not going to talk about whether RISI's $40 up or down is in the numbers. Because at the end of the day, we're operating a value-based pricing mechanism. We have an enormous number of initiatives underway, always, with our customers in terms of the value we're getting paid for our products.

Obviously, when you manage through like the $40 you're referencing, obviously, that works through our economics. We're executing on other price initiatives that we've announced. We are executing on those. And so overall, the algorithm for the business next year is really what you said. We're going to grow organically and earn on it. We expect to have a good, strong productivity year with our manufacturing facilities in a growing environment. The innovation we're bringing, we will earn on. And as such, the overall top line growth from the packaging that we have will be good. We are, because of some of the things that we're managing through on matching, doing the right thing on supply and demand for the paperboard sales that we still have. That's a little bit of the early headwind that we conveyed to you.

Really, the model for the business, as we talk about it, we're going to talk more about sales. We're going to talk about it in a way that provides you and us the confidence that we're growing that top line through the totality of how we're investing in the business, value-based pricing, the volume that we're growing, and the like. In essence, the guidance has in it the full portfolio of what we're working on today on the pricing front, on the volume front, and our ability to earn on it. As such, the business this year, in many ways, as currently configured, which includes Augusta, has margins and top line that are quite similar to the year we just completed.

George Staphos (Managing Director)

Thanks very much. Hi, everyone. Good morning. George Staphos, B of A. Echoing everybody else, thanks for all the detail and thought you put into your Analyst Days. They're not just a bunch of slides and a bunch of goals that we forget about in three years. We come back and have new goals. I had a bunch of questions on vertical integration. I'm going to leave those to the side.

Mike Doss (President and CEO)

Thank you for that.

George Staphos (Managing Director)

Yeah. So growing low single digits is hard, right? I mean, we can do the math. On your addressable market, if I take 1% on that and I drop that into your revenue growth, you get your 2%, voilà, end of analyst day. But the reality is, there's churn, right? You're not going to win every jump ball, as you said. And so where in your markets do you feel the other substrates have the best opportunity to compete against paperboard? Where do you feel, really, through innovation, sustainability, you've got more tailwind incrementally, and you can separate? And talk to us about Rainier, which you said isn't really in the goals but could be important in terms of that next analyst day in terms of what the growth is. So if you can talk to those points, that would be great. Second question is near term.

So obviously, food service is a wonderful business for Graphic Packaging. What we've seen in recent months is the CPI on food service products generally has far outstripped what you've seen for center of store. What are your thoughts about how that might? I'm pretty sure I know what you're going to say. But what do you think that's going to mean in terms of your business this year, in terms of mix, in terms of volumes, in terms of the shifts across your five categories? Thank you very much.

Mike Doss (President and CEO)

Thank you for the question, George. Maggie, would you like to give us a little insight into some of the attractive markets that you're seeing and some of the growth we see along those verticals?

Maggie Bidlingmaier (EVP and President of Americas Business)

Yeah. I think to your question around our paper as relative to other materials, clearly, a lot of the key markets that we've highlighted here as part of these innovation platforms and some of those examples, obviously, many of those are in plastic substrates today. But obviously, the consumer demand for more sustainable and consumers looking to paper as the primary driver of that, they're really leaning in. Our customers are leaning in to paperboard as that solution. And when we look at the total cost of ownership, it's not always on the unit price. But on that total cost of ownership for some of those innovations, it becomes clearer in terms of those being a solution that they're moving forward with. So we feel good about our overall portfolio relative to other material alternatives.

George Staphos (Managing Director)

Where do you feel less good, I guess, if anything at all?

Mike Doss (President and CEO)

Well, look, might I take a piece of that? I think, George, you summed that question up perfectly. It's a competitive landscape out there. We compete every day for the right to win. And really, when you look over the last seven years, the fact we've been able to post that 2% stack average over that period of time, I think, should give investors confidence that we've got some really good momentum in being able to do it. Our confidence level that we can deliver, the $200 million of innovation growth that you heard Maggie and Jean-Francois talk about for 2024, is high. Because as Steve said, we kind of know that locked in going into the year. The conversions have happened. So it kind of flows through.

Ricardo's smiling because he always has to give that to us in advance so that we can kind of go on it. We've done that in some very different economic environments, 2022, arguably a lot easier than 2023. But we got it done in both years. So I think that's there. To your question around food service, and it's a good one. That's really why I opened up with my comments about the price declarations for RISI. We expect our food service business to be very busy this year. Again, there's less than 4% unemployment here in the U.S. market. The American consumer loves mobility. They love being on the go. They got a lot of things they're doing. And they appreciate the drive-through window a lot and the convenience that provides.

We've given you some good insights into some of the trials we've got going on with Chick-fil-A and others. And that we expect to be a flywheel for us for years to come. And that's why our Texarkana paperboard manufacturing facility is so important to us because we'll have the raw material that we're able to use all the way through that whole supply chain. And it's another great example around the differentiation we make around where we choose to be backward integrated and where we don't because we can provide good growth to our customers and ultimately higher ROICs and cash flow.

George Staphos (Managing Director)

Thank you.

Mike Doss (President and CEO)

You bet.

Melanie Skijus (VP of Investor Relations)

OK. I've got the next question here from the audience. Steve, you've talked a little bit about price. Mark Weintraub at Seaport wants to ask about different component items as we bridge EBITDA from 2023 to 2024, volume. Again, we've talked about price, labor, productivity.

Steve Scherger (CFO)

Yeah. You know this is not going to be easy. But we're just not going to go there. And what I mean by that is, we're going to grow organically. We're going to earn on it. Yes, of course, the fundamentals of what we've shared with you in the past, they're the fundamentals. And so as we look out to 2024, of course, we're going to earn on our organic sales. We're going to continue to be highly productive. We'll have labor and benefits inflation. We'll be running more than we ran this year. So we'll have the opportunity to earn and take less of the natural downtime that we take across our manufacturing facilities. Right now, that pricing environment relative to the commodities, it isn't very different than the last time we talked.

We've got a lot of activity underway as we value-based price and work with our customers and move through some of the pricing. Not much has happened on the commodity cost front. So the fundamentals of how you came in the room are still the fundamentals. And it's why our midpoint looks like it is in terms of the expectations we've set. But we're going to go down a path where that language is going to change. And I know that that will be challenging. But we're going to. And so it's just important. And the algorithm for the company, important. It's on us to earn the value for our products in environments where costs move so that our margins are able to maintain themselves at the kind of levels that we're at today.

The fundamentals of the midpoint of our guide are very similar to the last time we've talked about the company. Not much has changed. We are going to change the dialogue along the way. I'll look forward to those conversations.

Matt Roberts (VP for Packaging)

Hi. Good morning, Matt Roberts with Raymond James. I'll echo everybody else, all the hard work that went into the presentation, as well as over the past six to seven years that have really changed the business. That being said, another question on price, but really the value-added price actions that you've implemented. You've done a very good job holding on to margin over the past couple of years via price mechanisms. And then the February price increase seemed like it was due to certain raw material cost changes in certain substrates. So how exactly is the value-added price implementation different? I mean, are there ways we can quantify things like innovation or supply chain dependability or consumer insights that Maggie brought up? Or is it something your customers are now more inelastic because of more innovative products?

Mike Doss (President and CEO)

No, I wouldn't say they're inelastic. I mean, again, it's a competitive market. It's packaging. But what I would say is that there's a general appreciation, particularly by our largest customers, around the need for security of supply, the need for innovation, and the need to help them accomplish their sustainability goals. I hope when you see that waterfall up there I mean, you know Graphic's, DNA. We measure everything. And so being able to put that in the context around, no, this is real. We're actually going to reduce this down. And you saw the Scope 3. Michelle had that on there. We need our suppliers to do the same thing. Guess who we are for most of our customers? We're that bar. And so the fact we bring those things is really valuable to them. And they understand that.

Like I said, we expect them to buy well. But they're willing to compensate us for those types of things that we do. And if we do start to see input cost inflation in the market, and I know that was a question we had over here from Mark earlier, we'll take price. And our track record is really good at doing that. Look at what we did in 2022. Look at what we did in 2023. So I think we've demonstrated an ability to do that. But it also comes back to making sure we're getting paid for the value we provide our customers and have an equal sharing on that. So it's a number of things.

Matt Roberts (VP for Packaging)

Thank you, certainly. I appreciate that. My second question, Maggie, I want to ask you, in your remarks, you said that innovative products, the goal is to not have any switchover costs, correct, have them work on the exact same machinery. Is there a certain percentage where it does not work? And in those cases, I mean, how do those conversations go? I imagine it's a lot of incremental investment. Machines have a certain lifespan themselves. So what percent is that? And how are customers receptive to it? Thanks again for taking the question.

Maggie Bidlingmaier (EVP and President of Americas Business)

Yeah. No, it's a really good question. I think the percentage is evolving because I'm thinking about a lot of projects that are in queue right now. But if I were to do a range, maybe 30%-50% could go higher in certain of those innovation platforms. But I think it's obviously something we continue to try to hit the mark on our ability to do that. The Nissin Cup was a great example, our ability to commercialize that quickly. We could get onto their filling lines and do that pretty seamlessly. And so we're going to continue to focus on doing that. There's obviously different machine capabilities that we're trying to develop to help make that as efficient as possible when it is required. We also partner with co-packers who can help leverage that. So they may make an investment.

They might be supplying to multiple different customers. We're really trying to utilize that as a leverage point. We're getting creative around that. At the end of the day, if the value proposition is there and if it's regulation and there's other things that they have to drive or it's bringing better performance on shelf at retail to help drive top line performance, those can overcome a lot of those investment costs.

Jean-Francois Roche (Head of International Sales)

I may just ask one comment on that. That's one of the reasons why we are getting a lot of traction on PaperSeal Shape because somehow we are matching what a CPET trays is. And the volume on CPET trays are extremely large. And the sealing technology at the end is the same. And that's why we are getting traction because in terms of CapEx for those people, they use technologies that they are having. And we are just replacing a base CPET trays by a PaperSeal Shape, which has nearly the same capabilities in terms of sealing. And that's why on that specific, we are getting a high level of traction in Europe.

Mike Doss (President and CEO)

That's a great point.

Jean-Francois Roche (Head of International Sales)

Yeah.

Matt Roberts (VP for Packaging)

Thank you all.

Gabe Hajde (Research Analyst)

Gabe Hajde, Wells Fargo. As per usual, you guys provide good detail. A question about becoming a packaging solutions provider. And I know it's been a journey that you guys kind of initiated, let's call it, five to six, seven years ago, almost like packaging as a service, if you will. But the question is, the last three years, we're pretty conducive to maybe transition to a value-based pricing methodology or strategy versus historically how businesses have been conducted. So the question is, how would you instruct us to think about some again, I know it's tough in a format like this to give us specifics.

To think about how frequently there are openers for contracts or how long those may have run to maybe think about go forward as opposed to just sort of this simple algorithm of 2% translates to 5%-10%?

Mike Doss (President and CEO)

Yeah. So I think, look, Gabe, we've got a certain percentage of our portfolio that's up for contract renewal every year. It's almost like clockwork. Some years are a little heavier than others. But for the most part, I'd say it's 20%, 25% that is constantly rolling through. So it's not like that ever stopped during that process. But what I was trying to do in my prepared remarks is really kind of paint a picture for where we were kind of bid ask, which is really the market we were in, versus where we are now, which is a much more holistic supply position we have with our customers, deeper relationships with customers because it's needed for them to accomplish their goals as the world's gotten more enthralled with regulation. And it's been harder to reach customers. We have solutions that'll help them do that.

So it's really not so much that we're just trying to, hey, look, we're changing all the vernacular because we want to. And that's why Vision 2025 doesn't really even apply right now in many ways because some of those targets aren't ambitious enough. And it's not aligned with how we run the company. That algorithm, well simple in nature, is really hard to do. But if you can do it year in and year out, and that's what we put the stake in the ground today, it's incredible value creating. And that's what we want you to take away from. That's the commitment we're making today. And that means we have to manage a whole bunch of those little indiscrete things that you're talking about, price, cost. What did the volumes do? How did this happen over here? All of that gets encompassed in there.

We think it's a better way to talk about what we're doing. That's why we want to make that shift to talk more about the markets because that's really what will drive the overall performance of the company over the long term.

Melanie Skijus (VP of Investor Relations)

I'll go again. This is another one from Mark Weintraub. Steve, again.

Steve Scherger (CFO)

He didn't like the first answer.

Melanie Skijus (VP of Investor Relations)

Is the anticipated impact of reinvesting excess free cash flow captured in the Vision 2020, Vision 2030 base financial model growth expectations? Or is the impact potentially accretive?

Mike Doss (President and CEO)

Can you read that question again, please?

Steve Scherger (CFO)

Yeah. Say that again.

Melanie Skijus (VP of Investor Relations)

Is the anticipated impact of reinvesting excess free cash flow captured in the Vision 2030 base financial model growth expectations? Is it in the growth expectations? Or is the impact potentially accretive to what we laid out earlier?

Steve Scherger (CFO)

Well, I think the way I would talk about that, if you kind of look at how we shared it with you today, is the base model of low, mid, and high single digits results in an ability of the business to generate very substantial cash flow. And what we shared is that that actually allows us to allocate capital in such a way that potentially says put cash in to drive innovation even faster, more capabilities, and have the flywheel spin even faster if we see those opportunities or increase the dividend because we have every opportunity to do so through the cash flow or repurchase the shares where it makes sense to do because it's the best way to provide return to shareholders.

So, I think the way we'd articulate that is the base model does a great job of indicating that we believe, as Mike said, it's not an easy thing to do. But we believe that we can actually generate low, mid, and high. And if there's opportunity to invest faster back in the business, capabilities grow faster organically, we'll absolutely do that. But we'll hold it up against the other capabilities to return value to shareholders: dividend, shares, low debt. So, I think that's how you think about the model. And I guess I know Mark's not here. Ask me if that addressed his question or anything, you know.

Mike Doss (President and CEO)

No, maybe I just might add there really good response there. Steve made a couple of points in his prepared remarks that I just want to put a little emphasis on. He talked about 5% of sales as CapEx and 2% being a robust amount for kind of maintaining those assets. These are well-invested assets. You look at what we've done over the last seven years, we're proud of our package converting facilities and our paperboard manufacturing facilities. And if you think about it, Kalamazoo and Waco will be brand new. So that's a pretty long tail as you kind of wind that forward. So that difference between the two and the five is substantial in terms of the things that we can invest back in the business. So as we grow on the food service side, Maggie needs cup plants to kind of fill out that geographic piece.

That's all in that 5% that we wrote out there. What Michelle talked about, the decarbonization, those three big projects that she put out there, that's in the 5%. So the cash flow that Steve kind of outlined on the arc, I guess it was, which is pretty darn impressive. I mean, it anticipates those investments and the things that we need to do to continue to deliver on those things for our customers. And so you asked about how we're positioned against other competitors. It's not just our paperboard packaging peers. It's really all consumer packaging companies. And we love the relative competitive positioning that we're in right now.

John Dunigan (VP of Paper and Packaging Equity Research)

Thanks. Thank you guys for all the information. John Dunigan at Jefferies here. If I understood Mark's question, maybe I can just ask it a little bit differently. The CAGRs that you're expecting with the Vision 2030, maybe is it more back-end weighted given all the projects you have now where you see more of the growth coming in that 2026, 2027, 2028 time frame after Waco's already up? Or do you think that you can achieve some of these EBITDA growth with the projects still in the investment stage now? Is this growth potential of mid-single digits and high single digits here in the next couple of years with everything you have going on? Thank you.

Mike Doss (President and CEO)

Oh, sure. Yeah. So again, the way to think about it, excellent question is, look, we've got Waco that's going to come to life here end of 2025, end of 2026, and on. So there's $160 million of EBITDA we committed to that'll be there. That'll drive some additional sales growth. The Rainier piece of that's accretive on top of that. But look, we're committed to growing our volumes each and every year. And that starts in 2024. And we gave you some insight into how we're thinking about it and why our confidence is there that we'll be able to do that. And we see that as accelerating and continue to be accretive over that tighter seven-year planning horizon. And our track record, as I talked you through, is solid for being able to do that.

Steve Scherger (CFO)

Yeah. It's definitely not a back-end loaded scenario at all.

Mike Doss (President and CEO)

I think the only thing that's back-end loaded is a little bit of the cash flow because we're still in the investment phase. But if you adjust for 2025 and 2026, you kind of saw that ramp up to $1 billion of free cash flow a year in those outlying years. And that's why.

Melanie Skijus (VP of Investor Relations)

OK. I have another question from the remote audience. So from your remarks, this is from an investor. So from your remarks today, what is your approach with RISI moving forward?

Mike Doss (President and CEO)

Look, I think I characterized that in the beginning pretty sharply. I mean, it's not new for Graphic Packaging to not like third-party indexes. We've been talking about that for years. And as you can see by our value-based pricing model, we've been moving away from third-party indexes for years. So what I'm saying is that we don't agree with the assessment on food service for all the reasons that I've outlined here, food service, cupstock in particular. And it just strengthens our resolve to continue to move away from third-party indexes that are, in our opinion, historically inaccurate and very non-transparent in terms of how those things are generated and how they're scored. So I'd just say that's how I would answer that question.

Gregory Andreopoulos (Equity Research Senior Associate)

Hello, everyone. This is Gregory Andreopoulos from Citi. Thanks for the detail in the presentation today. I just had a few points of clarification around the Augusta sale and then a bigger picture question about your substrate mix going forward. So just on Augusta briefly, do you expect any dis-synergies from the sale? I know you mentioned the $1.8 billion pro forma EBITDA number. So any dis-synergies there and then any retained liabilities we should be aware of post-sale? And then just kind of bigger picture, the sale would reduce your SBS footprint by about half with my math. And you've made investments seemingly focused on CRB over the last two years with K2 and now Waco. So the question for me is, do you see an opportunity to move customers from SBS, maybe even CUK, to CRB?

What role do you see SBS playing in the long-term 2030 vision, acknowledging that there's some import competition from FBB now? The market may see some capacity coming online in 2025+.

Steve Scherger (CFO)

I'll start. Yeah. Well, I'll start. And then Mike can add on. I think to your first part of your question, we don't see any dis-synergies with the sale of the asset. What we'll have is a little bit of a transition because our internal needs, our packaging needs, we were running between two facilities. And we'll migrate those to Texarkana. So there's a little bit of transition but not anything on the dis-synergies front. And there are no retained liabilities. I think that was probably just a normal boilerplate statement. There's nothing that we're retaining that is of any substance at all. So it's actually quite clean in terms of the transaction. The paperboard facility stands on its own quite nicely. It's got an outstanding team. And that team's in place and very committed to the success of that facility.

So there's nothing there dis-synergy-wise or retained liabilities that would be impactful for us. We'll just be managing through a little bit of transition here in 2024 relative to really servicing our capabilities and our needs that we have at the Texarkana facility to create packaging.

Mike Doss (President and CEO)

Really, the way I'd answer the second part of your question, which is a really good probing question in terms of how we think about that from a strategy standpoint, is ultimately, this is consistent with our view. Our view is that recycled products, in particular, are going to be at the heart of the most attractive part of the paperboard packaging market. So the result was we made the investment in Kalamazoo. Then we couldn't even see some of the things that we've got in Waco before we made the K2 investment. As we take that as a follow-on, our ability to continue to ramp up our Rainier grade you heard Maggie talk about, which competes with the very best premium SBS grades that are out there, it puts us in a situation where we're not doing those kind of trade-offs.

That's where we're going to spend our time. We'll always convert some SBS. It's important. It's a good grade. We'll make some of it ourselves in Texarkana. Where we need more, we can always go to the open market and buy it because people are continuing to invest in that market. You've got a North American producer that's building some. There's a European producer that's discussed about bringing another mill online. We like how that positions us. What you don't want to do with a new grade of paperboard like Rainier is start to cannibalize what you're already doing. This really fits us well. It's consistent with our overall strategy around driving long-term customer investments that help them drive the innovation as well as higher ROICs and more consistent cash flow.

Steve Scherger (CFO)

I think, Mike, to the point you're making too, the Texarkana facility is a phenomenal manufacturing facility for making the cup raw materials that we need to really support what is going to be a long growth trajectory for our food service business, so cups, bowls, trays. That's the right raw material for that. Texarkana does that exceptionally well and has a long growth trajectory of the ability to make that raw material, that paperboard, to support our growth trajectory for food service.

Melanie Skijus (VP of Investor Relations)

OK. I've got one more. This is from an international investor. As you increase your focus on end markets as a driver of your top-line performance, will you be able also to get a better measurement of customer inventories for each of the end markets? And is your growth should be much more aligned with your customers? Is that a correct statement?

Mike Doss (President and CEO)

Yeah. So I'm going to hit that first. And then you can add on on that. Look, we work with our customers all the time to try to get the best insights that they've got around what their overall demand profile is going to be. But there are times that, quite frankly, they don't necessarily know. I mean, things shift kind of quickly here. And they want to be able to be responsive to their end-use consumer. And so that was that flex capacity that I talked about that we've got to make sure that we have, something we learned as we kind of came through COVID. Our customers need us to be able to do that. I love the question, though, because ultimately, the closer we get to the customer here, the deeper we have, the more integrated we are into their business.

There are some cases where our overall demand planning models are actually connected now. You'll see us do more of that in the future where we're closer to they sell one, we make one is ultimately something that we strive to achieve. You probably have a follow-on.

Maggie Bidlingmaier (EVP and President of Americas Business)

Yeah. I think you said it really well there. I think coming out of COVID, a lot of companies, just like Mike was talking about ours, are looking at how robust their supply chains are. So one of the good outcomes that we have in working even closer with our customers is that we are getting better visibility in terms of some of the aspects of their supply chain. And we would expect that to continue to evolve. I mean, that's really a goal that we have with our top customers so that we can have it much tighter. There's efficiency, obviously, for both companies in being able to do that. So we feel good about that over time.

Mike Doss (President and CEO)

There's a question in the back. Yeah.

Will Moller (Analyst)

Hey, guys. It's Will Moller, Greenlight. Going back to what Steve just mentioned on cup versus carton, any chance you could put a finer point on where your mix sits post-Augusta and maybe spend a minute on how those two markets are different? I think the intuition is that the cup side is a little more attractive. But.

Steve Scherger (CFO)

Well, yeah. I think, look, if you look at Augusta, I mean, both mills are roughly the same size. [Nile mark], $20 because I've said it twice. You notice that I have to change too. I'm not using that word anymore. We have paperboard manufacturing facilities. But they're both about the same size, roughly 600,000 tons. If you look at the Texarkana facility, it actually is indexed about 400,000 tons of cup stock and then the balance, of course, coated. So it fits us perfectly with what we're doing. And as Steve said and we've talked about publicly is our pivot is we would prefer to run more cup out of that facility. And we'll either make Rainier for the grades that need that kind of premium paperboard. And Maggie showed you the kind of end-use markets that we're really targeting for that.

Or if we need to buy some paperboard on the market, we can do that. And as we've demonstrated in Europe, we can get really good ROICs by doing that. We're one of the largest purchasers of paperboard in the world. We buy it well. We know who to source it from. And ultimately, we benefit from being able to do that. So we've got a lot of great options, I guess, is the punchline.

Mike Doss (President and CEO)

Yeah. Does that answer your question, Will?

Will Moller (Analyst)

I guess I'm more wondering about the actual market structures of the customers for cup stock versus carton. It seems the open sort of supply-demand, if it's a more attractive market to be selling into, less competitive, so on and so forth, or if it's not, if that's the wrong thought.

Mike Doss (President and CEO)

There's less people that make it for sure. It's a complicated grade because one of the things you've got to be able to do is make the brim around the top. And that requires some real knowledge of material science and the type of furnish you use in that whole process. And in the case of our business, it's a highly integrated model. Almost 95% of all that material goes through our own cup plants, which, again, gives me the ire that I talked about earlier around the third-party scoring a market like that when we know exactly where all that material is going. Most of it's coming to ourselves. So it's a very attractive market. And one that's growing is I talked about in my answer to George in terms of overall demand.

Every quarter over the last three years, we've shown growth in our food service business, including the one we're in now.

Steve Scherger (CFO)

Thanks for that, Will.

Melanie Skijus (VP of Investor Relations)

I've got one more. Then I think we're going to end with George. The last question coming in remotely is from Mark Weintraub of Seaport.

Mike Doss (President and CEO)

We need to have a follow-up on Mark. I mean, my.

Melanie Skijus (VP of Investor Relations)

He's referring to Slide 65, which is the arrow slide. This is good just for us to confirm this. He's talking about the sales performance by market is very helpful. Thank you. It seems to be dollar sales driven rather than net organic sales. First of all, is that right? Going forward, does it make sense to drive the analysis using dollar sales or net organic sales?

Steve Scherger (CFO)

Yeah. Thanks for that, Mark. It'll be dollar sales. But what we'll do is, of course, describe what's happening inside of those. We'll raise it up to dollar sales. But where it's material and appropriate, we're actually looking forward to kind of talking about what are we seeing a layer down? Or what are we seeing volumetrically? What are we seeing on value pricing? We'll talk about those things when we describe what's happening with those arrows. But it's a really important pivot. I appreciate him asking that question. It will be dollar sales. We won't lose the ability to speak about what's happening with the company organically. We will. I mean, you can count on us. We'll know exactly where we're at. We'll talk about it appropriately, particularly when it has an impact on the business.

We'll definitely be prepared to do so. We'll definitely share our innovation sales on a quarterly basis. We'll talk very specifically about how we're doing against that 2%. We track that very methodically, literally month-to-month. It'll be dollar sales. We won't lose the ability to articulate what's happening underneath that where it's appropriate and balanced in terms of sharing it.

George Staphos (Managing Director)

Thanks, George Staphos, B of A. One of my last questions was piggybacking off of Mark's question. So along with the arrows and probably percentages or at least ranges in terms of the growth by end market, will you be giving us revenue every quarter by end market or maybe every year, in other words, or percentages so that if we want to build, you want us to build a model based on revenue by end market, will you give us more tools to be able to do that on a going forward basis? So that's question number one. Question number two, again, with Rainier, what could that be in terms of an opportunity for you three years from now if you want us, again, to think about revenue and opportunity?

And lastly, our perception, perhaps incorrectly, is the plastic guys who we all love as well are talking a lot about carbon footprint. And that seems to be the narrative that comes from the plastics industry, not so much recycling rates, but carbon footprint in terms of defending their position and why they're sustainable. To Maggie or Michelle, where does paperboard stand in terms of aggregate carbon footprint versus plastics, recognizing it's dangerous to talk about an aggregate? And where does paperboard particularly stand up well versus plastics in that regard to either of you? Thank you, guys. And great presentation.

Mike Doss (President and CEO)

Thank you, George. Why don't you take the first one?

Steve Scherger (CFO)

I'll do the first one, George. Definitely, we're working through what you just asked around. What we've provided today is kind of the big buckets, so what percentage of the company falls into each of those categories. We'll be providing the arrows, what's happening inside of there. I don't know that we'll necessarily get to a spot where every quarter we're articulating the exact dollar thing because I don't know that that's probably not necessary, if you will. But what we will do is articulate to you and to all kind of what's happening inside of those categories so that you have a sense for, OK, where are we for the quarter? Where are we year to date? And you know the baseline.

Then, of course, as we work through, I'm sure we'll reconcile that in a way that provides visibility into, hey, what's going on inside of food holistically? I appreciate you raising it because this is new disclosure. It's one that we're looking forward to. We're obviously open to feedback on that as well. We're looking forward, actually, to talking about it in a way that allows you to constructively build the model for the company.

Mike Doss (President and CEO)

Yeah. And look, we've got the customer base in there. You'll look to true that up. So I get the point. It's a good one. And we'll give some thought to that and how best to do that. In terms of the other two questions, I mean, in terms of Rainier, I'm really excited about that one. As you know, I'm a printer. And when we look at kind of the surface of that particular sheet and Maggie did a really nice job going through the different markets where we think we can penetrate that, I'm hesitant to give you a tonnage figure because I want to move away from that. But it definitely all inures to our benefit in terms of package sales. And that is actually one of those substrates that we would seek to sell on the external market because it's not available from anybody else.

We make it. Others don't have it. And so it makes sense for us to actually make that available. And we'll do that kind of going forward here. So I think it's got a lot of promise. And we've already got our first commercial application. You've got a dozen or so trials underway. So we're quite encouraged with what we see. I'll hit the first part. And then, Michelle, I'd like you to kind of respond to this. George, it's a good quote. Everybody's sustainable. Every presentation you go to, they've got it out there. I want to know, do they have the detail that we laid out here? We just laid out a very good waterfall with discrete, bespoke projects that show you how we're going to get there. And we told you how we're going to pay for it within the CapEx that we laid out there.

It's one thing to say it. It's another thing to do it. And so from our standpoint, that's what you can count on us doing. Michelle laid it out really well. And we know exactly what we need to do in order to do it. And it comes with cost of capital type returns. It's not knock your socks off stuff. But the mere fact we can decarbonize the way we did and we can earn cost of capital, that's a pretty great position to be in. And so I think the best way I can answer your question, I don't know everybody else's stuff. But I know ours.

I think the more transparent other companies are in terms of the claims that they're making, actually, I think shines a light on it and will let you as analysts and ultimately the investors and our customers, the end-use customers, actually be able to make those decisions.

Maggie Bidlingmaier (EVP and President of Americas Business)

And consumers.

Mark Connelly (SVP of Investor Strategy and Development)

And consumers. Thank you. Yeah, that's a really good point, Maggie. Michelle, anything you would add over and above that?

Melanie Skijus (VP of Investor Relations)

Yeah. I think what I would say about carbon footprint and when they're really trying to get at the product carbon footprint calculations is these are models. The models are only as good as how you define the boundaries of the models and the quality of the input data that you put into the models. With life cycle assessment models in particular, you have a lot of flexibility in terms of how you define the boundary and the input conditions that you use. Like any model, even statistical models, if you want a desired outcome of your answer, there's a great way to configure the model to give you the answer that you want.

What's interesting with the plastic packaging manufacturers is not only are the virgin plastic manufacturers trying to say that their products are better than paper, they're also trying to say that their products are better than the bioplastic models. The bioplastic people are saying that their models are better and their footprint is better than the virgin plastic people. There's a lot of misinformation out there. Most of the data that gets published isn't third-party validated. They don't provide the details behind their assessment where you can reproduce their analysis and show that they've had a really good and thoughtful approach to it. You need to take life cycle assessment models with a grain of salt because there's a lot of smoke and mirrors going on right now.

That's an area that we plan to invest in, to build our capability, to be able to help bring some more clarity and transparency to a lot of the misinformation that's out there. I think.

Jean-Francois Roche (Head of International Sales)

I just wanted to add one comment because that's part of the 11th initiative we are having in Europe. One of that initiative is on greenwashing, how you provide information and how you disclose information because we have seen a bit everything. What I can just say from a customer experience, at least for the large European multinational company, they are on it. I mean, you cannot claim something they are into the detail of all the calculation. They are very advanced on the way they assess things because they don't want to be stuck in something that they are claiming, which is not the truth.

Mike Doss (President and CEO)

The other thing I'd add, George, to piggyback onto those comments too is if you think about what we're doing at our Waco paperboard manufacturing facility, we've got a vertical drum pulping system we're going to install there. We're going to be able to take up to 15 million paper cups a day. You heard Michelle talk about that. That's going to be the top wire fiber, top wire fiber, which right now today, for most people who manufacture that paperboard, it's sorted office paper, which is going the way like this from an availability standpoint, which means the price is going up like this. So if you're a consumer and you heard Michelle talk about one of our customers that manufactures that, you want to know that your stuff is actually going back and being reused again.

We're going to be able to show that within about a 200-mi radius of that mill and the mill we have in Kalamazoo, we'll have the capability to bring that stuff back, clean it up, and put it back into first-line packaging again. It's not downgraded somewhere into a park bench or planking. I'm not disparaging that. I mean, look, that's important too. The consumer, as you talked about, really cares about, hey, can I use this? Do I have a license to feel good about this paper cup I've got in my hand? If they know that that's actually happening and you talked about a very learned person who didn't have that perspective, that actually makes a big difference.

That's incumbent upon people like Graphic Packaging, leaders in consumer packaging, to make those kind of investments back in our business so that we can actually say that kind of stuff, not that we're saying someone else needs to do it or the taxpayer needs to do it. We're going to do that. We compete in those markets every day for that fiber. Our customers are really excited about that. I think ask for the details because they matter. You can't ignore the whole upstream operation because when we lay ours out, we're looking at it from beginning to end. That's pretty exciting.

Steve Scherger (CFO)

All right.

Mike Doss (President and CEO)

Well, listen, it's been fantastic to be here today at the NYSE. It never gets old for me to be here. It's our third time, Steve, I think, doing this. We had some new speakers today. I thought they did a great job. Really appreciate everybody's input. Thank you for coming. And for all of you on the web, thank you for your interest in Graphic Packaging. It's an exciting time to be a part of the company. And I'm actually more than thrilled to have the opportunity to lead such a fine group of people each and every day. So have a great rest of the day.

Steve Scherger (CFO)

Thank you.