Yahoo Finance

Our digital investments are developing well and will add new actionable insights for our customers to improve their operations, enhance their experience working with us, and increase our salesforce effectiveness. We also continue to see solid underlying sales volume and pricing across all of our business segments.

We expect 2019 adjusted diluted earnings per share to rise 10% to 14% to the $5.80 to $6.00 range, as volume and price gains more than offset the impact of higher delivered product cost and business investments. First quarter adjusted diluted earnings per share are expected to be up 8% to 16% to the $0.98 to $1.06 range.

In summary, we expect continued strong topline momentum in our business over the balance of the year to more than offset higher delivered product cost and deliver operating income growth and along with cost-efficiency actions yield double-digit adjusted diluted earnings-per-share growth this year.

Importantly, despite the headwinds, we continue to make the right investments in key areas of differentiation, including product information, digital investments to develop superior growth for the future and we expect to sustain strong momentum as we exit the year.

Now, here's Doug Baker with some comments.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Thanks, Mike. Hello. I've got a couple comments. I'm going to keep it brief and maybe a bit repetitive. If we look at '19, we enter with really quite strong momentum. Q4 was solid in the positive sense of the world. We had 6% organic growth, driven in part by strong pricing, but also very solid volume. This is driven by strong new business, which we really enjoyed all year, including in the fourth quarter. We saw improving OI throughout the year and double-digit EPS in the fourth quarter and for the year as well.

So, as a consequence, we project '19 to be very good as well. We're forecasting a 10% to 14% full year adjusted EPS range, 8% to 16% Q1 range. The year is really going to be driven by this formula, continued good volume and pricing, a growing benefit from our accelerate plans and less raw material headwinds, underscore less. They aren't favorable. They're just growing slower than they were in 2018 or that's our projection.

Importantly, we'll continue to invest in systems, digital, and key growth innovations throughout the year. Our success driver really fundamentally remains the same. I would say importantly the story we bring to our customers is an important story in both good and not so good economic times.

We know when we have great teams driving our great business model, which we define as best results at lowest results and environmental impact, this is what drives great financials for our shareholders. It's exactly what we're focused on. So, if there's any shout-out that's deserved, I'm quite pleased with the moment we enter '19 and it's really a testament to our teams who have been executing very well out in the field.

So, with that, I'll turn it back to Mike for Q&A.

Michael Monahan -- Senior Vice President of External Relations

Thanks, Doug. That concludes our formal remarks. As a final note before we start Q&A, we plan to hold our annual tour of our booth at the National Restaurant Association Show in Chicago on Monday, May 20th. Looking further ahead, we also plan to hold our 2019 investor day on Thursday, September 5th. If you have any questions, please contact our office. Operator, would you please begin the question and answer period?

Questions and Answers:

Operator

Thank you. We will now conduct a question and answer session. We ask that you please limit yourself to one question and one brief follow-up question per caller so that others have a chance to participate. Our confirmation tone will indicate your line is in the question queue. You may press *1 to join. You may press *2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * key.

Our first question comes from the line of Gary Bisbee with Bank of America Merrill Lynch. Please proceed with your question.

Gary Bisbee -- Bank of America Merrill Lynch -- Managing Director

Hey, guys. Good afternoon. The first question from me -- obviously, pricing has really picked up and that's been helpful to revenue growth, but in fairness, volume also had its best year in a number of years. As you think about 2019, what does the cadence look like? I assume as you start to lap the pricing you're unlikely to get those types of gains again on top of what you've got now. Is it reasonable to think the revenue growth decelerates a bit as we move into the year or is your optimism around volume such that this recent trend is sustainable on the topline. Thank you.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

We believe contributions from volume and pricing in '19 are going to be very similar to those we saw in 2019. While you've got raw material inflation slowing, we still forecast it's going to be up year on year. I don't even think it's spot market pricing that's really driving our conversation with customers. Fundamentally, we don't try to match price and inflation in any given quarter. We want to do it at a slower pace as we've talked in the past because it's better for our customers.

So, we're still in the recoup mode, if you will, from a pricing standpoint for increases that we saw in parts of '17 and all the way through 2018 and the continued forecast that we see in '19. We would expect fairly steady, if you will, collective sales growth throughout the year. We don't think there's a big hockey stick, i.e. it's much faster in the first half versus second or vice versa.

Gary Bisbee -- Bank of America Merrill Lynch -- Managing Director

The quick follow-up -- I wanted to probe your ability to prepare for the spend. Does this have any impact on either the bolt-on M&A strategy or anything else as you divert people to focus on that or do you think that's not going to be a huge deal as we think about what the executive team is working on over the next 12-18 months? Thank you.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

It's fair. It's absolutely a large project. I think we worked hard to understand, if you will, where the shadow falls from this project. It will not preclude us from continuing our path of bolt-on M&A. We have a very good pipeline right now. What we create when we're in these situations and I think we've done it quite successfully in the past -- is we create and kind of segregate teams that are going to go focus on this. We will utilize outside services where they are equal or better than what we can do internally as well so that we don't drain capacity needlessly here.

If you recall when we had the Nalco integration, we created a stand-alone team. We gave them a charter. They executed excellently. If you also recall, we continue to drive very successfully sales growth and margin growth during that period of time in the rest of the businesses.

Operator

Our next question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.

Greg -- Barclays -- Analyst

Hi, this is actually Greg calling on for Manav. I just wanted to hit on the raw material assumptions a little bit more. Given what happened last year in terms of the third-party assumptions ending up a little bit worse, I'm wondering what level of conservatism you've put into those assumptions.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

We would follow the philosophy I think you're advocating. We'll make a new mistake this year. If you went on the indices last year, which is basically how we formulate forecasts, it would have suggested you would have had a much lower level of inflation of raw materials in '18 than we actually saw.

If you look at our forecast in indices, our forecast for raw materials is slightly above the indices at this point in time. We also understand the indices are going to be wrong one way or another. But we are certainly not being overly aggressive, we don't believe, with our raw material forecast. We'll see what actually transpires. Obviously, it ramps up, we have proven that we can ramp up pricing if we need to in that eventuality and that's exactly what we do if we needed to. Obviously, we would probably step on the accelerator too.

Greg -- Barclays -- Analyst

Okay. And then I just wanted to quickly ask about how you think about the growth trajectory for the downstream energy business. I think in the past, a lot of the secular growth drivers you've talked about for that business focused more on the upstream side. So, if you could just touch on some of the drivers that have driven the nice growth on the downstream side, that would be appreciated. Thanks.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

The downstream business, if you look at cyclicality either on growth or income is one of the steadiest businesses we have in our portfolio, not just in energy, but in total. It's a very steady mid-single-digit topline growth business. There are a number of things that drive it. We are a global player in that market. You certainly still have significant economic growth in key parts of the world that typically drives energy consumption. The other aspect of production out of the refineries in petrochemicals, obviously plastics.

While there's certainly pressure on some consumer plastics, plastics are absolutely critical to a number of the key sustainability initiatives. It's the way you lightweight materials, the way you lightweight vehicles, etc. is going to be through fundamentally plastics. There's very steady demand story, we believe, as we look at this business. If you look at the past, it would also indicate the business is quite resilient, both the end market and ours.

Operator

Thank you. Our next question comes from the line of Chip Moore with Canaccord Genuity. Please proceed with your question.

Chip Moore -- Canaccord Genuity -- Analyst

Thanks. Maybe you can talk a bit more about competitive environment by geography in institutional in particular and then where you are exiting some lower margin business. Maybe you can help to quantify that for us as a headwind in 2019.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

I don't know if the competitive environment has dramatically changed by region. Certainly, Europe remains the most competitively challenged market that we compete in from an institutional standpoint. It was and is and will be, we think, for a considerable period of time. In terms of the low margin comment, yeah, we ended up and we've been through this a number of times, where through quite aggressive bids that we determined weren't smart to match, we have exited loss, whatever word you want to use, some business, principally in the contract catering arena. This will have some topline impact, probably less impact on the bottom line, simply because it wasn't high-margin business to begin with, then we face very aggressive competitive bids.

If you go back, this isn't very different than the situation we faced in food and beverage for a considerable period of time, where in a number of instances, we decided not to match bids. The business went away for a period of time and virtually all -- I can't think of one piece of business that we have not rescued after going through that in the food and beverage market. Obviously, we will work to prove we're the right partner to these companies going forward, but we can't do business when it's going to be at a very problematic financial situation.

The reason we're in business is to do good for society and our customers, but also, by the way, make money. We do not ever see the idea of losing money as a strategic benefit. So, if we can't prove we'll get cost right and do other things, this is not going to be significant institutional this year, it's going to grow mid-single-digits again as a sector and institutional specific division will have mid-single-digit growth this year as well.

Operator

Thank you. Our next question comes from the line of Lawrence Alexander with Jefferies. Please proceed with your question.

Laurence Alexander -- Jefferies -- Analyst

Can you give a feel for particularly on the more industrial-facing parts of institutional, dairy and food and beverage and so on, what kind of dispersion you're seeing with regard to traction with the price increases? Are there any pockets, regional or otherwise, on price and gaining traction, where it's been more difficult? Second, as you think about the digitization investments, what would you need to see over the next couple of years to change the pace of investment?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Well, the first question around industrial and where we're seeing pricing, we saw a significant improvement in pricing captured throughout the year and ended over 3% in our industrial businesses in the fourth quarter. We expect that to continue as we enter 2019 as I discussed earlier.

You're right. Regionally, it's not exactly the same number everywhere. I would say China, which was a net-plus in the pricing column, is always a more challenged market, cultural, historical, etc. But we are pushing and securing price there, just not at the same rate that we're seeing in some of the other markets. We also know that ultimately that's got to change too. We feel good about the ability to capture price.

I think at the heart of it is the value we bring to customers is tangible. They understand it. They're willing to pay for it because they know that net, we are a better deal than their alternatives and we work very hard to merchandise and prove that day in, day out, and it really comes from the significant water and CO2 savings or energy savings that we help drive within their facility, which often are greater than the total bill they pay us. So, that's an important part of the equation, important reason we get price.

The second question, digital -- I would say what do we need to see? To me, this is one of the most critical things that we need to do. We have huge built-in advantages that we need to leverage and I think those advantages play really well in a digital future. We have nearly 3 million customer sites, probably 90% were collecting information today, but a very small fraction of those are connecting to cloud at the moment, connecting those dispensers, which are collecting unique information to the cloud isn't technically hard and costs have been going down.

So, we're on a real mission to go get those connected. The information streams that we have will be unique, we have unique ways of analyzing this because we have know-how and the ability to translate this into advantage for customers we think is dramatic. We've done this on fairly large scale industrial where cost of capital isn't as sensitive, simply because you may be taking out millions out of a given unit versus thousands. We have proven the concept.

One of the reasons I think you really see water moving, food and beverage moving is our ability to capture information and utilize it to the benefit of customers. We now have some very large-scale wins and tests going on and big customers in the institutional area. We're quite confident it's going to show the same kind of value creation as we go. So, obviously, we need to continue to see fruit from this investment, but I would also say I think the future without investing in digital is a scary place to be and a bad bet for any business to be making.

So, even if we have some hiccups, some stumbles or some other things, we've got to continue to invest here. I think our investors would eb wise to hold our feet to the fire on digital investments going forward because it's the safest way to guarantee a long-term successful future.

Operator

Our next question comes from the line of Tim Mulrooney with William Blair & Company. Please proceed with your question.

Timothy Mulrooney -- William Blair -- Analyst

I have two questions. Going back to the price conversation, how much were delivered product costs up year over year in 2018? What are your assumptions for 2019?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Well, they're up high-single-digit, like 8% globally, pretty significant. Our assumptions into this year are roughly half, so increase, but more at the 4% level.

Timothy Mulrooney -- William Blair -- Analyst

Perfect. Then Doug, relative to my model, the business that outperformed the most in the back half of 2018 was water. Were there any large orders or other one-time events that drove such strong performance? How are you thinking about water for 2019, particularly given the difficult comps in the back half of the year? Thank you?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

If the water team is listening, I'm hoping for 20% in 2019. For the investors, I'd probably calm that down a bit. I would say the water business is an annuity business. So, there can be occasions where we have a significant investment and/or sale, but that's quite rare and was not the driver for the acceleration in the second half of the year. It was fundamentally improved pricing certainly helped, but I would also say a big, big success in terms of driving new business, net new business.

That's always the key to driving our topline. The team in heavy and light and mining, really kind of broad -- it was a broad success story. Paper, obviously, you saw the numbers there. They've done a very good job leveraging innovation to drive new sales as they go forward.

Operator

Thank you. Our next question comes from the line of John Roberts with UBS. Please proceed with your question.

John Roberts -- UBS -- Analyst

Back on the digitization efforts, would you expect the institutional business to be able to go down into smaller customers more effectively? You're concentrated up in the larger change, but I don't know whether this allows your guys at a lower cost to be able to provide some sort of services to the smaller restaurant chains that have been harder for you to penetrate.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

I would imagine ultimately as we continue to drive utilization of the technology and technology continues to evolve and typically, the evolution to digital is lower cost, not higher cost, that yeah, I think you would -- ultimately, our focus is going to be driving superior outcomes for our customers, but I would also say I imagine that using digital will enable us to be even more targeted in how we use our very advantageous field resources more successfully and more efficiently.

As you're able to do that, you've got the best of both worlds, which is you will learn more, you can be predictive, but you can still react and have the capability of solving the problems that you uncover, which is a huge desire on our customer standpoint. So, yeah, I think it will lower cost, improve our capabilities and enable us to probably go to a broader swath of the market.

John Roberts -- UBS -- Analyst

Could you give us an update on the institutional water market? You had a relatively small business and Nalco had a relatively small business. I've kind of lost track. It's not broken out clearly.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

That would be the water right business would include the institutional market and food and beverage markets, etc. That business has been a very consistent, if you will, mid to upper-single-digit perform for quite a while. We really reprioritized that business. It was an important business for Nalco in the 90s. It got deprioritized in the 2000s and we thought incorrectly -- so did much of their management, by the way. We have resplit -- one of the early work we did, was redividing the Nalco water business into dedicated focused business units, much how Ecolab thinks about going to market.

I would also say much how Nalco used to go to market up through the 90s. This has proven to be a good investment and good work to go through. One of the reasons I believe we are seeing improved water results is we've gone through all that work and now have this redivision, if you will, done largely globally and focus drives results.

In the light business, we see it as well. We are out there working to secure. We've made some acquisitions to give us route capabilities. In the New York market in particular, we want to learn from that route model and see if we can't replicate it in other large metro areas because we think it gives us an additional means of getting after a large segment of that market.

Operator

Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Vincent Andrews -- Morgan Stanley -- Managing Director

Thank you. Could you give us some comments on the gross profit margins for the year in terms of how much improvement you think you're going to get? You talked about overall cost for the year earlier, but how does that phase in through the year? Where do we see the inflection in JPMs in which quarter?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Yeah. We would expect to start seeing daylight, if you will, or year on year improvement in gross margins second quarter for the vast majority of the businesses. And I think you'll see improvement in the first quarter versus the fourth quarter in terms of margin-fueled gross profit year on year decline. It will be much less.

So, you're going to see the line, I think, steadily improve from second half through the first quarter and second quarter, I'd be surprised if we didn't have, if you will, increased margin year on year, '19 versus '18 in Q2. For the year, given that we're going to have this -- it's going to be 30 to 50 basis points kind of improvement this year overall, but obviously, it's going to be stronger in the second half than it is in the first half, as we just discussed the first quarter situation.

Operator

Our next question comes from the line of Christopher Parkinson with Credit Suisse. Please proceed with your question.

Christopher Parkinson -- Credit Suisse -- Analyst

Thank you. Your enterprise selling has been doing pretty well, especially in the F&B and pest elimination. Can you give a quick update on these themes given the current level of customer penetration? Is it still safe to say we're in the early innings? Thank you.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Based on share, you'd have to say we're in early innings. While we've been in these businesses, we're successful in some key markets, we're number one, but we still have significant upside from a share standpoint. We think just like line of sight in front of us. We would expect the pest business to continue to perform as it has been, which is high-single-digit organic growth rates. They've been executing very well. We continue to invest in that business as we believe we need to sustain that type of growth rate.

F&B had a good 2018, ended up with 6% growth in the fourth quarter, organic growth rate. They too are working hard to secure pricing to recoup the margin that was lost as a consequence of the significant raw material run up. In terms of topline, there are significant opportunities. I would say the combination of water and F&B's food safety programs is an outstanding story that our customers have really responded to.

We had early success when we first, if you will, acquired Nalco and we talked about half a billion dollars in terms of sales synergy, which we also announced that we more than surpassed. I would say the momentum is built, if anything. It's really the team's willingness and drive to continue to refine the story and now have that translate into new innovation where there's synergistic innovations between water and F&B, shared platforms around 3D, etc. All those things bode very well and there's a reason we've seen a huge uptick in share in that space.

Christopher Parkinson -- Credit Suisse -- Analyst

A quick follow-up on healthcare -- last year or the last couple quarters, you've been shifting your sales approach a little versus your competitors. Can you comment on the status of the strategy evolution, any key differentiating offerings, how you're handling yourself in the hospital versus your appears and the overall approach to reaccelerating the growth in this business?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Yeah. Fair. We talked about healthcare last year and we had what I'll call a disappointing start to the year, where the first half was very low single-digits. We forecasted we would improve through the year and to the team's credit, we did. We exited the fourth quarter with a 4% organic growth rate in healthcare.

The team has done very good work in terms of developing programs and we believe they're the right programs, the team does, I do. They've done great work around utilizing digital technology to further enhance those programs. It's quite compelling stuff. What we need to do is sharpen the way we talked about benefits, which I mentioned in previous calls, which is reduction in healthcare-acquired infections and significant rate reductions.

We also need to do a better job translating that into economic benefit. I think the team has done a lot of work there. Our program business in healthcare, the stuff that we've been emphasizing and putting, if you will, our real sales effort behind is growing double-digit. It's just not the majority of the business yet. If you continue this path over any length of time, ultimately, it becomes a dominant piece in terms of size and more of that growth starts showing up in the overall number.

Operator

Our next question comes from the line of Dmitry Silverstein with Buckingham Research Group. Please proceed with your question.

Dmitry Silversteyn -- Buckingham Research Group -- Analyst

Thanks. I wanted to follow-up a couple of questions. Number one, can you talk about what's going on given the softer economic conditions in parts of the world outside of the US with your restaurant and quick service business? How should we think about your ability to gain share in this slower growth environment in 2019 in that space?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

I think where we're going to see the economy have any impact is probably Europe. The US is forecasted to grow slower, but we're not that GDP-sensitive. We still think it's going to be a very solid economy. Our ability to capture share and do things and offset lost business, etc. we think remains pretty robust in the US. Europe is going to be a tougher environment. Probably where you see weaker economies maybe show up. Globally, as I mentioned before, we think institutional will continue to have a good year in 2019, but Europe will probably be their soft spot.

Dmitry Silversteyn -- Buckingham Research Group -- Analyst

Then as a follow-up on your comments about Europe being the most competitive and most difficult market for you to execute the value-added strategy that you've become known for, my question is there anything on the horizon in Europe from what you guys are doing or what others are doing in terms of consolidating that space and if not, what's stopping the consolidation of an industry that can result in a better operating environment for the remaining players?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

I wouldn't say we go out to consolidate an industry. Our view is if we're going to do M&A it's because it gives us the ability to enhance our offering to customers either through technology and/or gives us access to a market that maybe we didn't have access to. I guess if you want to take the long view, which I appreciate, certainly our competitive position, in every business, most notably institutional, is dramatically better today than it was 20 years ago, 15 years ago, 10 years ago, or 5 years ago.

We have larger share. We've outgrown our competitor in terms of absolute percent on double the size I think every year or close to it. I don't have all the facts because they've been private much of the time, but I think they've had pretty good estimates because they were public for a period of time. That includes Europe.

Our Europe business improves too. It is a tougher situation. These are relative comments. I don't feel we're impaired in Europe or that we're missing any technology or critical competitive advantage to compete. It's just relative to the other markets, our competitive situation is more challenging in Europe than it is in other places, but I don't believe it's an obstacle.

Operator

Our next question comes from the line of PJ Juvekar with Citigroup. Please proceed with your question.

Scott -- Citigroup -- Analyst

Hi, this is Scott on for PJ. Doug, if I can go back to the institutional business, I think you had forecasted for 2018 topline growth to return to the mid-single-digit range and it did despite weaker restaurant foot traffic in the US. Would you mind talking about some of the drivers behind that growth this year? Do you think that level of growth is sustainable through 2019?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Yeah. We forecast mid-single-digits for '19. I don't know if the point is lower at 5 or a point faster. It's relatively the same, roughly the same type of growth rate this year. The reason we won't see acceleration is a little bit of the conversation around softness in Europe and as we overcome some of the losses through new business, which we've secured, but you've got to install it. I'm quite confident in our institutional business as we go forward.

What drove it last year is sort of old-fashioned. We've sold new business. They had a lot of very successful innovation uptake throughout both their wear wash platform as well as continued progress in their laundry platforms. Those are by far the most important factors in driving this growth. They're starting to see it more broad. China is moving quite nicely for our institutional business. It's going to be the most important market long-term for food service globally. That's a very important investment area for us and an important place for us to see traction long-term.

Operator

Thank you. Our next question comes from the line of Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum -- Stifel Nicolaus -- Managing Director

Thank you for taking my questions. Doug, are the assets you're expecting to spin out in the energy space expected to grow this year in line with corporate average, in line, or above corporate average?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

More in line -- we would say it's mid-single-digit topline growth. We would expect to see margin expansion as well in the upstream business as they recoup the significant raw material inflation they've seen as well. I wouldn't say the business was going to look dramatically different with or without it from percentage growth and percentage OI growth.

Shlomo Rosenbaum -- Stifel Nicolaus -- Managing Director

Just from an on the ground perspective, after you spin out this business, does that give you more management wherewithal to focus on other areas of the company or is there some commentary you can talk about the kind of executive focus required for that business over the last several years? Beyond changes in the end markets, does this free up some management time or bandwidth to focus on the other businesses you didn't have beforehand?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

I guess I'd answer it this way -- the basis for the spin remains the model is shifting and it's increasingly becoming less like our other businesses in terms of the discipline and expertise you need to run it, which we talked about during the spin call. That's really the reason we're doing it. I would say an additional benefit is exactly what you said. Certainly, if you will, the models we're running are more alike.

So, you get more synergy in terms of management, investment, and time. You get more synergy in terms of uptake on specific developments you probably will have in digital and/or some of the other technology as we go forward. I think a side benefit is the company becomes arguably a little easier to run, which means more bandwidth to go drive innovation improvement in what you're running.

Operator

Our next question comes from the line of Hamzah Mazari with Macquarie Group. Please proceed with your question.

Hamzah Mazari -- Macquarie Capital -- Analyst

Thank you. If you could remind us on synergies between various businesses in the portfolio -- the reason I asked is you touched on water being a significant portion of downstream. Maybe touch on how many of your corporate customers are subscribed to your entire suite of products or however you want to answer that question, I appreciate it.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Yeah. Well, it's a hard one to answer, simply because of the breadth. We have, as I mentioned, 3 million customer units around the world. I would say the best way to answer the heart of the question is this -- there's not a customer that we sell that we couldn't double or at minimum triple the business with if they ended up buying all of our offerings. That includes our most long-standing, most highly penetrated customers. So, we have significant upside in every customer.

Now, a lot of this is planned upside. We continue to invest in new technologies, water continues to build out, if you will, their capabilities around cooling tower and legionella detection and ultimately prevention practices. When they do that, they open up the scope of offerings or customers they can sell to.

As a result, the opportunity continues to increase. We've always said we want to grow every year and grow our opportunity every year so we don't end up running into walls like our share is too large and there's no more growth in front of us, which is a mistake too frequently made by too many companies. We'll make a different mistake. We're not going to make that one. I don't care if it's pest -- there's huge penetration opportunities, water, huge penetration opportunities, institutional itself has significant penetration opportunities.

They're getting water filtration in a more concentrated way in a number of other technologies. There's huge upside for them in a number of their customers. Warewash and our Kay QSR business has got significant upside potential. There's probably not one set of customers or one set of technologies that doesn't have upside from customer opportunities.

Hamzah Mazari -- Macquarie Capital -- Analyst

Does the spend of energy increase your appetite to do larger deals? I know you haven't done one in a while, but any thoughts there? Thank you.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

I think our appetite was plenty large to begin with. I think it's always going to be counterbalanced with discipline. I think the company and the team has proven that we can successfully do whatever large deals mean, deals in the billions. We would not be afraid to do that, but we aren't going to do it if we don't think the valuation is such that will enable us to have healthy returns for our shareholders. That's why shareholders invest in us. You can do a lot of deals and make them accretive, but they're lousy return deals and long-term, we think it's return that drives value.

Operator

Our next question comes from the line of Scott Schneeberger with Oppenheimer & Company. Please proceed with your question.

Scott Schneeberger -- Oppenheimer & Co. -- Analyst

Thanks. Following Hamzah's question on M&A, the last big one was two years ago. Can you give us a progress report on that one and then this conversation earlier about how Europe may be the soft area, going forward on a relative basis. What's your propensity to do M&A in that region specifically? Might there be an opportunity upcoming?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

So, Anios has been very successful and through today versus its plan is on or above plan on almost all key metrics. We feel very good about how the team integrated, onboarded, the cultural overlap. There aren't many areas where we don't feel good about how healthcare has integrated that business. I think you would chalk it up on the success side. We have fairly aggressive management cases for deals. They are higher than our investment case, if you will. So, Anios is off to a good start.

In terms of Europe, yeah, I would sort of concur that soft economic environments can create good M&A opportunities. If you recall when we bought Nalco, 2011, it was very early in M&A heating back up. For some, it was a little earlier than they thought maybe was wise, at least the first eight weeks. But as a consequence, we bought that, the print number was like 11 EBITDA and with synergies, it was high single-digits.

It's because it was following a big economic change. We'll be aggressive in looking. Our relative performance tends to do quite well in tough economic times and we're a good cash generator. Our capabilities at doing M&A don't change demonstrably in touch economic times and our advantage probably changes more significantly up in bad economic times.

Scott Schneeberger -- Oppenheimer & Co. -- Analyst

The other question was in the other segment, very strong operating margin expansion. I imagine a lot was because the departure of equipment care, but that should all anniversary now headed into '19. What's a reasonable steady state margin to expect there? What is achievable?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

You're right, a big piece of that year on year margin growth is the fact that GCS was filled partially in the base and had obviously a very low margin relative to the other businesses. So, exiting that impacted it, right? It's out. Going forward, yeah, I think you'll see steady improvement overall in that base. There will be some lumpiness, simply because CTG can be a small business, but relatively lumpy. It can have some big quarters plus and some quarters not as large, if you will. Pest over time has been a very steady performer. It's one of the higher margin businesses that we have. It's a good margin business, very commensurate with other pest businesses, if you will.

Operator

Our next question comes from the line of Rosemarie Morbelli with G. Research.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Good afternoon, everyone. Doug, I was wondering if you could talk about Bioquell and how you are planning to integrate it in your healthcare business. It sounds to me it is different from what you are offering. Can you give us a better feel for what you are doing with it?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Happily. Bioquell is a different business. It's really being integrated -- let me define that word for a minute in this case -- in to our life sciences business. There will be some application of the Bioquell technology in healthcare or acute care, specifically, which isn't unusual for us. Predominately, we view the Bioquell being targeted against the life sciences, pharma, cosmetic industries, etc.

The life science approach here and the acquisition model is fairly light-touch initially from an integration standpoint. Our mantra, we stole it from somebody else, is make sure do not harm. We've got a great business with great technology, great competency in the team that we brought on. We want to understand how we most effectively leverage, if you will, the other parts and life sciences to advantage Bioquell and vice versa. That takes time. We have a thesis going in. You need some experience to prove and learn how do you best do that.

Long-term, the Bioquell capabilities are always going to be somewhat unique. So, we're always going to need, if you will, a unique center with people who are expert and specialists in that area. We're probably going to take more of an approach than we did with Anios, which is utilize the asset, learn and understand the team, seed them with technology that can enhance them, and learn from them how you best drive that business performance over time.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

I thought their technology allowed them to totally isolate a room if there is some kind of infection you don't want to spread anywhere else. How does that apply to life science and the cosmetic industry? I thought of it as acute care and hospital, not at all in life science or cosmetics.

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Yeah. There are times in pharma and/or cosmetics or other manufacturing where you need to do a concentrated shutdown and comprehensive kill. So, that's not infrequent. It's an important part of the tool. It could be parts of a manufacturing facility. It doesn't necessarily have to be the whole thing. It can be specific clean room applications and others.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Lastly, when I look at your operations, you have reached 46% to 48% gross margin. I'm assuming the energy upstream has lowered it in addition to the inflation and so on, but is there a chance that you can return to that particular range and how quickly could you do that?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

You've got a couple factors. You're right. Our margins post-spend will be greater than they are pre-spend. The other factor are the rev-rec changes we undertook where we had to move on the P&L geography some of the service cost, which previously with SG&A was a 500-basis point change in overall gross profit, had no impact on OI, if you will. But it did have an impact on gross profit or gross margin.

With that said, certainly, I would say you can expect -- it's not hard to figure out both our OI margin post-spend as a consequence also our ROIC post-spend will both be enhanced fairly significantly by the change.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Justin Hauke with Robert W. Baird. Please proceed with your question.

Justin Hauke -- Robert W. Baird & Co. -- Analyst

That last one was kind of what I was going to be asking about, which is structural gross margin expectation that would be aspirational from here. The second part of that question would be does pricing need to be even greater than it is or is there something else that's diluting the gross margin down? 3% pricing is about as good as it's been, really, in a decade-plus.

It seems like with raw material costs only up 4% in the outlook, all else equal, I would think there would be a little bit more gross margin recovery than kind of flat to up slightly that's implied here. Is there anything else that's changed that's maybe the diluting the gross margins down from where we would otherwise expect them to go to?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

There have been fundamental changes. I would say as I mentioned earlier, last year, we had 8% raw material increase and we built pricing through the year. Pricing in total for 2018 was 2%. It was 3% in the fourth quarter. We are moving in this year with a lot more momentum, obviously, than we moved into 2018. Raw materials, while they're expected to increase, it is at a slower rate.

The most severe year on year comparison we're going to have on raw materials is in Q1, simply because they started moving really kind of Q2 on forward, if you will. So, the base becomes somewhat easier as you go throughout the year than it starts. With that said, we said we don' have really any hockey stick forecast for EPS or other things. We believe we'll be able to manage through this as we go on throughout the year. But there are no other huge structural issues.

The last point I'll make is recall, we have now had 100% of our US supply chain, the bulk of the supply chain moved on to SAP. We did that all the way through 2018 and actually put the last 15% on last week successfully. It started a year ago like mid-February and we now have 100% of that supply chain.

That costs money. It costs money in the investment in SAP systems, you turn it on, but probably most importantly, it creates hijinks in your supply system. If you need to move inventory around internally, plant productivity goes down near-term as you move them from one system to another. We said when we were going to undertake this that this would not make a quarterly call and it hasn't.

The team did a great job managing this successfully, not making this a point of distinction, and it was a big, big initiative. It certainly has cost there. We will have some continuation of higher costs this year than I would call normal in our supply chain as a consequence of that, but that will bleed off as you move and exit 2019 as well and we move into 2020.

Justin Hauke -- Robert W. Baird & Co. -- Analyst

Then the last one, this is purely a number question -- of the $325 million, just so we can track and calibrate better on the cost savings that are expected, what's expected in the 2019 guidance specifically?

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

$80 million incremental versus last year.

Operator

Thank you. Ladies and gentlemen, this concludes the question and answer session. I'll turn the floor back to Mr. Monahan for any final comments.

Michael Monahan -- Senior Vice President of External Relations

Thank you. That wraps up our fourth quarter conference call. This conference call and associated discussion slides will be available for replay on our website. Thanks for your time today and participation and best wishes for the rest of the day.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Duration: 60 minutes

Call participants:

Michael Monahan -- Senior Vice President of External Relations

Douglas M. Baker, Jr. -- Chairman and Chief Executive Officer

Gary Bisbee -- Bank of America Merrill Lynch -- Managing Director

Greg -- Barclays -- Analyst

Chip Moore -- Canaccord Genuity -- Analyst

Laurence Alexander -- Jefferies -- Analyst

Timothy Mulrooney -- William Blair -- Analyst

John Roberts -- UBS -- Analyst

Vincent Andrews -- Morgan Stanley -- Managing Director

Christopher Parkinson -- Credit Suisse -- Analyst

Dmitry Silversteyn -- Buckingham Research Group -- Analyst

Scott -- Citigroup -- Analyst

Shlomo Rosenbaum -- Stifel Nicolaus -- Managing Director

Hamzah Mazari -- Macquarie Capital -- Analyst

Scott Schneeberger -- Oppenheimer & Co. -- Analyst

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Justin Hauke -- Robert W. Baird & Co. -- Analyst

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