STRS.TASTRS.TATLV
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Rivka Neufeld: Hello, and thank you for joining us today. Welcome to Strauss Group's Third Quarter and First 9 Months of 2025 Results Earnings Call. On our call today, management will provide a review of the results, followed by a questions-and-answer session. [Operator Instructions] As a reminder, this online Zoom earnings call is being recorded Wednesday, November 26, 2025. A recording of this call will be available on the company's website a few hours after the call. I would like to remind everyone that this online webinar may contain projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and may change as time passes. Strauss Group does not assume any obligation to update this information. Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timely development of new products and their adoption by the market, increased competition in the industry and price reductions as well as due to risks identified in the documents filed with the company with the Israeli Securities Authority. Online with me today are Mr. Shai Babad, Strauss Group's President and CEO and Mr. Tobi Fischbein, Group CFO; and myself Rivka Neufeld, Head of Investor Relations. We will begin with a review of the quarterly results by CEO, Shai Babad; and then move on to the financial highlights of the quarter presented by CFO, Tobi Fischbein. We will then move on to a Q&A session. Shai, the floor is yours.
Shai Babad: Thank you very much, Rivka. Can you put the presentation on? Thank you very much, and welcome this afternoon to our quarterly financial reports. We are very happy to have you here. What we'll try to do in the next 25, 30 minutes is to give you just some kind of an overview of the results with our highlights and then open it up for some questions. I'll start and Tobi will continue. So if I look at the major highlights of this quarter, following all previous quarters, we are continuing a very, very solid and strong growth. Growth this quarter is approximately 16% if I take pro forma growth, taking out all the divestment activity that we departed from last year. And if we look from the beginning of the year, it's approximately 19% growth 9 months to 9 months into 2025. When we look at our EBIT and operational profit, we also see a substantial growth, and I'll touch it when we see the results and the same goes for the net income. So it was a very strong quarter for Strauss in the first 9 months. When we look at our productivity journey, we are up to track, and I'll say a few words about that later on. We are continuing to execute our strategy. There were various innovation initiatives that were launched in the third quarter that we will touch later on and also the inauguration of the plant-based factory facility in the South -- in the North, sorry. So here are the major results. You can see here growth to ILS 3.3 billion from approximately ILS 3 billion, 13% growth. If you take the full year to full year numbers, if you take pro forma activity with the divestments that were done last year, then it's 16% growth, 17% growth. When we look at EBIT margins, mostly, by the way, of the growth is from price -- from increasing prices and a very small amount of the growth comes from volume, but still there's volume growth in 3 months and also in the quarter and also 9 months since the beginning of the year. When we look at our EBIT, our EBIT summed up to ILS 312 million with 43% growth from last year, substantial growth, and we'll see later on, most of it has been driven from our international coffee activity. And when it comes to cash flow, our net profit also ILS 146 million compared to ILS 300 million in 9 months. We can see that in the quarter, we did very well, 40% more than last year. But when we look at net profit 9 months into the year, we are 50% less. But last year, we had tax incentives of approximately ILS 60 million. And also there is financial activity, financial expenses this year that were higher than last year. And therefore, if we take the tax incentives, actually, the gap is the other way around. And when we look at cash flow, we generated a very high cash flow this quarter of ILS 245 million compared to minus ILS 100 million last year. And also when we look here to -- since the beginning of the year, year-to-date, we are approximately ILS 150 million better than last year. And by the end of the year, we expect it to be on positive cash flow. Of course, 3 major commodities are affecting our results, the Robusta, the Arabica and the Cocoa. And although we see in the Robusta and in Cocoa in the last quarter, some kind of decreasing prices whereas Robusta is continuing with very high prices. Still, we don't see the impact on that -- or full impact on that on our results, taking Brazil outside of the equation in everywhere in all our other geographies, we have hedging activity, and we have a very high inventory as well. And taking that into consideration, there is time until we actually see in our results the impact of the reduction of the prices in the P&L. And I will touch later on how do we see our Cocoa and our confectionery activity. When we look at Israel, so Israel is with a 3% growth, quite a solid growth. Part of that growth is limited because of divestment activity that we've done last year with our -- in our Health & Wellness division with fresh vegetables that we divested last year. If we do apples-to-apples, also you can see in Health & Wellness, there's not actually a decrease. There's actually a slight increase in revenues. But when it comes to EBIT, you can see in total Israel, ILS 12 million reduction, 7.7% and all of it comes from Health & Wellness. You can see there's a ILS 90 million decline. Here, it's very, very important to note that we consider this as a onetime thing. We had some functional issues in our dairy factory in the north during August and some in September. It affected a little bit our business. And therefore, you can see that they did less than last year. But looking ahead, looking into October, which was already finished also in November, those onetime problems are behind us, and we will see going into -- going ahead, Health & Wellness getting back to track and back to -- on growth and on profitability. When we look at our Fun & Indulgence, you see an increase here, but the increase is a little bit misleading because last year, the ILS 9 million that you see in EBIT is actually ILS 27 million because there was an ILS 18 million loss in derivatives there. This year, the results of ILS 50 million in the Fun & Indulgence because in our confectionery business, the Cocoa is impacting our business, still very high cocoa prices. Now when we look into the future and asking ourselves when do we see the effect, we think that when we'll get into 2026 and during 2026, there will be a full turnaround of the business of our confectionery business and cocoa prices that we know today, which we hedged and the inventory that we have for 2026 and with the current cocoa prices that they are in the market now, we are very confident that our business will do a turnaround -- substantial turnaround next year, and we'll see much higher profits in this segment. Next. If we look at our innovation activities, so you can see there's a vast innovation there. There's a cross-branding collaboration between our brands in alternative milks and in our dairy. There's a new Arab coffee that we targeted for the segment. We also withdraw all our protein desserts. We've done a series of Zero Sugar. Our Cow Free innovation, our new disruptive innovation of bringing milk drinks and spreads -- cheese spreads with proteins that don't come from a cow, the same protein, the said BLG protein, it comes from either mushroom or yeast. And from that, we managed after 2.5 years of development to develop these products. And the advantages of these products are that they are very similar in the taste to cheese and milk. They have the same protein and the same health components, but they don't have the lactose. So anyone who is sensitive to lactose will not have a problem having those products and also they don't have cholesterol because they don't come from animals. And we think there's a place for them in the market and demand from consumers for these type of products. We also launched in the confectionery some Nostalgic snacks that we had. And we had the inauguration of our plant in the North, which I'll speak about later. And with our confectionery business, we did a lot of variety of different chocolate tablets and snacks. If we look at our coffee activity, the international coffee activity, so this is the main -- we think this is the main news of this quarter. We also have seen that last quarter, but this quarter, we see it even in a more influential way, in a more impactful way. Our coffee business is improving substantially. Growth has been 30% due to price increase and a little bit of volume increase. But mainly, mainly operating profit, you can see jumped to -- by 140% to ILS 163 million, reaching the double digit -- almost a double-digit margins. The reason is, of course, our activity in Brazil. Can we move to the next slide? You can see that in Brazil, again, profit more than doubled, almost tripled with 170% growth this quarter and overall from the beginning of the year, almost doubled with 27% increase in revenues in this quarter and 37% increase from the beginning of the year. What we believe looking forward is that Brazil -- the proforma that we have managed to generate in Brazil over the last 6 months is a new platform, which will also be carried out in the next year and the next quarters. That doesn't mean that we'll see the same level of profit and such high profits and margins, you can see the margins here in Brazil this quarter are reaching 11.3%. But it does mean that the new platform definitely will not stay at the 4% or 5% that they were in the past and will jump towards more like 8%, 9% and 10% and will be much more healthier business. The reason is, is that we are managing to maintain prices, high prices and maintaining the margin in roast and ground coffee, while we are continuing to grow all our non-R&G activity, which is generating a double-digit margin. So looking into the next quarters and looking into next year, we do see a jump in the profitability of our international coffee businesses with an emphasis on Brazil. And we do think this will be a new normal, maybe not as high as this quarter, maybe a little bit lower, but still a new normal to this business, unlike what we used to see in the past. In our water business, you can see there was growth in our revenues here in Israel, mainly due to 4% growth, mainly due to quantities of installed base, which grew. We launched this quarter the Shabat machine. It's basically for juice to keep the seventh day, the Shabat. Until today, our machines were not closure for the seventh day for the Shabat. And now those machines are applicable for people who keep the Shabat for ready-to-use-juice, and it's a new solution for approximately 30%, 40% of the people of Israel who keep the Shabat in some sort of way. We do think that will be a future growth engines for us. Nevertheless, we see a decrease in operating income of ILS 3 million, up 11%. It mainly comes from our operations in China. In China, there is intensive competition by Xiaomi who entered the market. And since they entered the market, we've seen -- we continue to grow double digit on growth on revenues. But on the other hand, we had to give discounts and to have -- to reduce prices in order to maintain our position in the market in order to continue to grow. And we also had to invest in new products. Unlike the onetime events that we had in the dairies in Israel, this will follow us into the next quarter or 2 and into next year. And we predict that maybe by the end of 2026, the platform will get back to what we used to see in the past. Still, it's very important to mention that we still have high -- because in China, the results are net margins and net profit and net margins, we still have high net margins in China, but much less than we had in the past. When we look at our productivity, so productivity is in line with our plan. We said that by the end of 2026, we will reach between ILS 300 million and ILS 400 million in productivity, and we do see ourselves reaching the target. We are on track with the strategic procurement with all of the streams that we opened in this productivity program with working capital, with RGM, with logistics, with manufacturing and of course, with capability building, upskilling and reskilling our people to being able to use the new tools that we are bringing into the company. A little bit about talking -- moving forward, what are the engines of growth that we developed specifically this quarter, which we think will follow us next year and will help us a lot to continue our growth. So one is, of course, our factory in the north. We build our own factory for alternative milks. Till today, everything that we've done was outsourcing from third quarter onwards, the end of third quarter onwards, everything that we're doing, we're doing in our factory. That will enable us to give much better products, much more variety, much higher variety of our products. And also not just to play until today, everybody in Israel plays in the segment of alternative milk drinks. We will bring it also into yogurts and desserts, which is -- this is our claim to fame. This is where we are #1 in the market. This is our strength here in Israel. And we'll take the very, very strong brands that we have in desserts and we have in yogurts, and we'll be able to implement them in our factory. Our factory will allow us to give much more capacity into the market in a much higher quality and tastier products than we used to have in the past. On the one hand, get into new categories like the desserts, like the yogurts with our beloved brands, local brands here of our desserts and yogurts. And also our manufacturing costs are much lower than what we used to have when we outsourced Alpro since the beginning of the year before we had the factory. Putting all those components together, we see this as a major engine of growth in the next quarters and also in the next years. Cow Free, which I've mentioned before, we -- when we look at dairy and milk industry in Israel and all over the world, we divide it into 3 segments. One segment is the traditional milk, everybody knows. The other one is the alternative milk such as soy, almond or oat. And the third one is the new segment that we brought to life. And I think we are one of the first companies, innovative companies to bring these segments into the world, which is basically like milk, but not milk because it doesn't come from a cow, but it has the same protein, it has the same components and nutritional advantages, but -- and the identical taste, the sensoric taste, but it doesn't come from a car. It doesn't have lactose, it's -- people who can't take lactose can actually consume it. For Jewish people who are religious, you can eat it after meat, people who differentiate between meat and milk and people who like the taste of milk, but don't do it for various reasons, will be able to get those products. And we believe that those 3 segments, there's a place for those 3 segments. This segment is going to start very small and it's going to grow. It's not something that we're going to see that next quarter or quarter after that is becoming substantial. It will take time to build the category as it took time to build the milk alternatives categories or plant-based category in Israel for many, many years. But we do think that this is a very profound and very unique category that there's place and that there's a consumer need and requirement from consumers for this category. And we're very, very happy that we were the first one to innovate and to launch these products. In Yotvata, where we do all our milk drinks, traditional milk drinks and protein drinks based on milk, we had capacity constraints over the past year, 1.5 years. And basically, 20%, 25% of the demand, we were not being able to meet. And we deployed the new line about 2 months ago. And by December, after all the testings are done, the new line will start being productive. So by 2026, our capacity will grow by 40% to 50% and the demand of 20%, 25%, which we don't meet today and we don't give an answer today, we'll be able to give an answer. So in our milk drink, which is part of our, of course, Health and Wellness segment, we'll see substantial growth next year with opening up capacity bottlenecks. And Shabat, which I mentioned before, which is a huge launch and the growth engines for our water business. As you remember in the strategy, we talked about taking our water company and making it a multiproduct company from a single product company. So this year, we launched under the sink, we launched the soda machine, and we also launched the Shabat. We launched an affordable machine in the U.K., and we'll continue to launch new devices from a different price tag and a different price range and also different functionality to answer consumer needs. And we do see the ongoing growth of the water business. And with those new products, especially with the Shabat, which is very, very high demand for this product, we sold thousands of those machines, and we stopped sales because we are waiting for new machines to come to us, so we can continue to sell them. We see potential for substantial growth in the next year. And just summing up, if you remember, our strategy talked about 4 pillars, Israel focusing on the core and growth and Brazil transforming the R&G and growing the non-R&G and our water business, growing our water business and growing internationally as well with productivity, CapEx and investment into the business. So looking at the parameters that we set to the strategy that we want to achieve, I think that we are in line and even way over in line, growing 5% over the years, '24, '26. We think we -- as you can see in our results in '24 and also now in '25, we are growing much more than 5%. When we talk about expanding the margin, you can see that there's a substantial improvement, and we believe that a lot of that improvement is a pro forma improvement into our margin in our coffee business which will be a new level. We do think the productivity of ILS 300 million to ILS 400 million will reach that target and even exceed it. We are investing a lot in CapEx, whether it's on productivity, whether it's on engines of growth, such as the new plant in the north that you've seen such as Cow Free that we launched Shabat that we launched and also in digitalization, in automation that we put in the company to be more productive and to assist us to grow in a more healthier way. And when we focus on our portfolio, when we started, we were around 60%, 65% core. Our portfolio was core. Core was being #1 in the market, growing more than 5% and having a double-digit margin. Today, we believe that by 2026, after we turned around Brazil, after we divested Sabra and divested other parts of our businesses, we believe that we'll be able to reach this target. The last big business that we need to do the turnaround in profitability is our confectionery business. And as I said before, looking into 2026, knowing already what we have as cost of goods when it comes to hedging cocoa and also the inventory of cocoa, we believe that we'll be able to do a substantial turnaround to the confectionery business and to bring it back to levels that we saw in the past. And by that, we'll complete fixing the -- or transforming all the big businesses and all the core businesses of Strauss having more than 85% of the business as a core business. So just to sum up before I give it to Tobi, we believe it was a very strong quarter with substantial results for the coffee business, which we believe a lot of them will come to be pro forma. We had some onetime problems in Israel, which are already fixed, and we don't see them following us in the next few quarters. And we are looking to turning around our confectionery business once we will -- our P&L will absorb the new cocoa prices, which are much lower than what we had in the past. And from here, Tobi it's yours.
Tobi Fischbein: Thank you, Shai. On Slide 19, looking at the quarter's sales more closely, we see continued growth in all segments, while the most significant contribution came from Coffee International, especially from Brazil. Excluding the appreciation of the Israeli shekel, group sales grew by 13.2%. We also see the impact of divestments in the quarter with Sabra and Obela being the most noteworthy. These businesses were consolidated in the group's 2024 non-GAAP results. Moreover, we also see the impact of the divestment of the Ultra Fresh business in Q4 of 2024 and the coffee retailer Coffee-to-Go in Israel at the end of Q2 of 2025. Without these businesses, our pro forma growth in Q3 of 2025 would have been 16.3%. On Slide 20, where we look at the sales for the first 9 months of the year, and we see similar trends as in Q3. Moving now to operating profit on the next slide. What we see here is that the group delivered significant improvement in both Q3 and the 9 months of 2025. Higher EBIT and EBIT margin can be attributed to the higher sales achieved and ongoing productivity measures and despite the impact of raw material cost inflation. In Coffee International, we see the impact of pricing, whereas in Strauss Israel, pricing did not compensate for higher raw material costs. As Shai mentioned, Strauss Water's EBIT was impacted by intense competition in China. Looking at the next slide, we can see operating profit and margins by business segments. On Slide 23, we see that net income in the third quarter increased by 42.7% following significantly higher EBIT. In the 9-month period, higher financing and tax expenses impacted net income. Higher financing expenses in Q3 and the 9-month period were attributed to the impact of the stronger shekel, which led to foreign exchange hedging expenses as well as FX differences as well as higher interest paid mainly related to financing working capital and higher interest rates in Brazil. Tax expenses were also higher, reflecting tax income received in 2024 following the release of provisions due to previous tax assessments and the profit mix in 2025. Moving to cash flow performance. On Slide 24, we see that in Q3, our operating and free cash flow improved significantly. Free cash flow amounted to ILS 245 million, an increase of ILS 343 million over the comparative period last year. This was supported by higher EBITDA, lower inventory levels in Coffee International as well as lower CapEx. On Slide 25, we look at the net debt -- net financial debt, and we see that the higher free cash flow led to a decrease in net debt as well as an improvement in the net debt-to-EBITDA ratio. Let's now take a closer look at our business segments, starting with Israel. On Slide 27, Strauss Israel, we see that sales in the third quarter of 2025 mainly reflected pricing in a number of categories, while divestments of the Ultra Fresh business in Q4 of last year and of the retail chain Coffee-to-Go at the end of Q2 of this year impacted growth. Without these divestments, sales growth would have been approximately 5.2%. On Slide 28, we see Strauss Israel sales for the first 9 months. And we see here that growth across the board stemmed both from pricing as well as higher volumes. Moving to EBIT for Strauss Israel, both in Q3 and the 9 months, we see that both the impact of higher raw materials as well as pricing were reflected on the operating profit performance. In Coffee Israel, pricing offset higher green coffee prices, whereas in Fun & Indulgence, snacks and confectionery, pricing actually did not compensate for higher cocoa costs. In Health & Wellness, we saw a one-off cost related to food safety and quality control activities as well as higher raw material costs and increased marketing expenses supporting the plant-based milk category. Moving to Coffee International on Slide 31. For the key highlight here, of course, of the quarterly results, Coffee International, we saw strong growth in sales that was driven primarily by pricing. And the sales growth offset green coffee input cost inflation, while operational efficiencies supported margins. On Slide 32, we can see that geographical breakdown of sales for Coffee International in Eastern Europe, Central and Eastern Europe. We see that sales growth was achieved across the board following pricing as well as higher total volumes. Our Brazilian JV, as explained before, grew nicely, and we also saw strong growth in Poland, both from pricing and volumes. Moving to the sales for the first 9 months of the year. On the next slide, we see a similar picture, showing the same overall market dynamics. On Slide 34, we see the Três Corações, our Brazilian JV performance on a 100% basis and on Brazilian real. And we see the increase in sales supported mainly by pricing in the roast and ground categories, but also the continued growth in non-grow R&G categories. Moving now to Slide 36 for the Strauss Water performance. During the quarter and first 9 months of the year, we saw higher installed base, higher sales, both in Israel and the U.K. as well as better sales mix. The gross profit was positively impacted by exchange rates and productivity measures, while higher Strauss Water, our JV in China with higher contributed lower equity gains. Moving to the next slide. We see higher Strauss Water yuan-based 100% results. We see there that with double-digit top line growth with lower net income due to intense competition and efforts to preserve and expand market share through promotions, marketing and R&D by diversifying the portfolio offering. It should be mentioned also that the R&G versus shekel exchange rate led to lower sales and profit when translated into shekels in the period. With that, we conclude management's presentation, and we will open the call for Q&A.
Rivka Neufeld: Thank you very much, Tobi. I'll now fetch your questions. So the first question I have is regarding Cow Free, could you please give us more color on the Cow Free dairy drink and spreadable products released this year? What are some of the early indications from retailers and consumers in Israel? And what demand and sales volumes are you experiencing?
Shai Babad: So as I mentioned before, the new category is basically a category that is there to imitate the nutritious values of milk. It has the same milk protein, the BLG protein that we have with milk that comes from a cow, and it has very similar elements. It also has almost the same test as the milk drink and also the same thing in the cheese spread. The advantages of that is that it doesn't come from a cow. It's more sustainable. It doesn't have lactose. So everybody senses that lose can actually have those products. It has very, very similar to milk and cheese whoever likes the taste of milk will find it identical -- almost identical. And it doesn't have cholesterol because it doesn't come from animals. And for Jewish people, it's also -- who differentiate between meat and milk, it also we call it power, which means you can eat it after you eat meat. So we think there's a lot of place for this because in all the milk alternatives, they don't actually have the taste of milk. And someone who actually wants the taste of milk and also wants the protein. Most -- and by the way, people don't know this, but in most milk alternatives, there's not really many nutritious values, not in oat and not in almond. There's a little bit of protein in soya, but not as much as we have in milk. And here, we actually have the advantages of milk. We have the same taste of milk for people who like getting the taste of milk, but people who doesn't want it to come from a cow, people are sensitive to lactose or any other reason, we'll be able to have this category. So for these reasons, we believe there's place for this category. Yet this category is very, very small. Right now, there's not even time to talk about revenues or demand. It's just starting. It will take time. We'll need a couple of more quarters before we can actually have some data and really understand. Right now, we know that everything we put in the market was sold, but it's very, very, very small quantities, still under test. We are -- there's also educating consumers what is this new category? What do you mean it's milk, but it's not milk? What do you mean it doesn't come from a cow? Whatever I told you now is something that really needs to be explained and really needs to be experienced by the consumers. So we really think it will take time to this category will go -- grow. Nevertheless, it took more than 10 years to grow the alternative milk category here in Israel. And today, it's more than ILS 1 billion category. It's still continuing to grow. We do believe the country can grow to being a very big category in Israel to give solution in Israel, not just in milk, drinks and spreads. You can look about it in yogurts and in desserts and in any dairy products that we have today. There's questions of the availability of those proteins that come from yeast and mushrooms and don't come from a cow how available they are going to be. Once this will come more scalable, then there'll probably be more factories that will produce this or it will be easier to make this on scale. Right now, the availability of -- or the ability actually to keep these products into the market is very, very limited because the product -- the input product of the protein is very limited in the amounts that is being produced today. So I hope I gave some kind of an answer. We can speak about this for the next 20 minutes, but I think this wasn't the session -- this wasn't the reason of the session.
Rivka Neufeld: So I actually have another follow-up question regarding Cow Free from Chris Reimer from Barclays.
Shai Babad: Yes.
Rivka Neufeld: So are these products -- are the results of these products in line with your expectations so far?
Shai Babad: Yes, very much and even more. When it comes to the sensory test, when it comes to the consumers' reaction to what we've done, very much in line, but I want to be very careful. There are still very limited amount of products that we put on sale and it's still very, very early. I think that a year from now, by the end of next year, after we have a year of launching, after we have a year of deploying them in the market after that we will be able maybe to scale a little bit up our production abilities and getting more protein and putting more products into the market, we'll be smarter to say what do we think. But we do think this is a very, very exciting category. We do believe very much in this category. And we believe there's a path to grow this category so that the milk industry will be broken down into 3 major categories: the traditional milk, the alternative milks that are not milk such as soy, almond and oat and also Cow Free, which is basically imitating milk, but it's not milk, has all the advantages of milk and the taste that just doesn't have the disadvantages of lactose, cholesterol, sustainability and others. And we do think that over the years, the space for these 3 categories and the Cow Free category can grow substantially.
Rivka Neufeld: So staying in this same sector, what do you see in terms of the plant-based milk line? How is that performing so far, especially given...?
Shai Babad: It's performing really well. We also managed to grow our market share very rapidly over the last few weeks when we launched. Our products are much higher quality, much tastier. We brought in a variety of new products into the market. And once we'll -- and so far, we've only been in the milk drinks or milk alternative drinks category. Once we'll go into desserts and to the yogurts, this is where we own the market. We have the highest market share. We are the #1 player. Once we'll take our loved brands and we put our loved brands on plant-based products in the desserts, in the dairy, we believe we can grow this category very much. And the new plant that we have designed, which is the highest technology and with our partners with Danone bringing in their highest IP into the factory, we will really be able to grow this category and also grow this category with new products.
Rivka Neufeld: So given your explanation, when looking at the global market, demand does seem to have some challenges in terms of the alternative milk market. So how does that correspond with how you see the growth opportunities here in Israel?
Shai Babad: So far, we don't see any demand. There was a hiccup in the last few years, but we do see alternative milks continue to grow in Israel, the demand is quite constant. The category has been growing. In the previous year, it has been growing double digit. Now it's growing high single digit. We don't see a problem. And this is only on the side of the milk -- alternative milk drinks or plant-based drinks category. Once -- as I mentioned before, once we'll get into the desserts and once we'll get into the yogurts, which is a very big category for us and give that in alternative milk solutions, we do believe we'll be able to grow this category much more and to gain market share in the category and also develop new products because today, there's not real products when it comes to desserts and yogurts in this category. And I think we'll be able to bring in products, which will be very, very unique, very, very tasty, very, very good and with our love brands, which are the #1 brands in the desserts and the yogurt categories.
Rivka Neufeld: Moving to the Water segment. Regarding expansion in the Water segment, how long do you think it will take to come to fruition considering the market in China and depending on the launch of the new facility? Or is that more of a 2027 story?
Shai Babad: So it's really very, very hard to know. We are -- we do want to see a -- the new facility will start -- will come in place and start in the beginning of 2026. It has nothing to do with the new facility. We don't have -- it's not a capacity constraint that is today affecting us. It's more the competition of Xiaomi and the fact that they have reduced prices and we're facing kind of a price war right now and the discounts at the beginning of machines. Still there's good margins, I must say, having a 5%, 6% net margin is not a bad margin in our business. And the growth is very solid. We've seen -- although this war with Xiaomi is putting very high pressure, we still grew 13% year-over-year, which is very high growth in the category. We're still gaining market share and still growing. Yes, this will follow us probably in the next couple of quarters. If it's 2 quarters, 1 quarter, 3 quarters, 4 quarters, yet to be seen. We'll keep you updated. We do think that -- we hope that by 2026 or maybe end of 2026, we'll be able to overcome this is [indiscernible], this [indiscernible] on the right order, but this downhill going back backfill, but it's too early to say.
Rivka Neufeld: Final question so far is, are there any more segments of the business being considered for divestiture?
Shai Babad: We always look at portfolio optimization. We always look what is the right way for us. We look at the trends, we look at consumer needs. We look at where we have our competitive advantage. We look at do we have a sustainable way to grow to meet consumer needs in the next 5 to 10 years. And we look, can we -- are we #1 player? Are we #2 player? Are we a substantial player in those categories. And then we look, is this business profitable or can we make it profitable? And if the answer to all this is yes, then it's fine. If not, then we ask ourselves can we fix one of the no answers to these questions. And if we can't fix it, then we ask, does it support the core activity, does it support our portfolio? And sometimes when the answer to that, yes, is keep it. And only when the answer is no to all the questions about then we divested. So I won't give you a specific business that we're looking at. And of course, it's an internal information once we do something, we will just announce it. But we are always looking at portfolio optimization, making our portfolio is right for us, as right for consumers as well so that we will serve our consumers in the best way where we have a competitive advantage by keeping -- or by maintaining growth and by maintaining high margins.
Rivka Neufeld: Okay. We don't seem to have any more questions. So I will now turn the call back to you, Shai, for closing remarks.
Shai Babad: Well, thank you very much, Rivka. So as I said before, this has been a very good quarter for us and also 9 months into the year. I think that one of the major things that we've managed to do over the past few quarters and also looking into the fourth quarter and hopefully into next year as well is to transform the pro forma -- the platform of our coffee business in Brazil and a little bit in the CE as well. We do believe that we can get higher margins there, be more sustainable. As I said before, I'm not sure they'll be as high as we've seen in the third quarter, but I do think that we'll be a higher performer. We do think Israel had a onetime leap, and they'll go back into growth and to higher margins and profitability as was before, especially health and wellness, as I mentioned before, those onetime problems we don't believe will continue into the future. We don't see them repeating themselves. And we do think that we are on track to growth. Today, the business is healthier than it was in the past. Most of our categories, almost all of them besides the confectionery are already there with high margins, high growth and with high adjustment to consumer needs. The only last business that we believe that in 2026, we'll see the full turnaround is our confectionery business. So overall, when we look ahead, we see continuous growth through all the growth engines and others that I didn't mention in this presentation, but all the growth engines that we set ourselves this quarter that I've shown in this presentation. And also with continuing to work on our core categories of growth and by fixing also our confectionery business, we'll continue to see in the pro forma of the new coffee business, we'll continue to see overall profitability and overall growth improving.
Rivka Neufeld: Thank you, and thank you for joining us for Strauss Group's Third Quarter and First 9 months of 2025 Results Earnings Call. And this concludes our call for today. So thank you.