管理層發言
Good morning, and thank you for joining us for Unilever's Second Quarter and Half Year Results. In a moment, Srini will take you through the details of the results. But first, let me highlight the key elements of our performance over the first half as I see them and how "desire at scale" is fundamental to our strong delivery. I have said consistently that volume growth is our overriding priority. It is a true measure of demand and an even more important signal of progress during times like this of heightened volatility. It is particularly encouraging, therefore, to be able to present today a strong volume-led half for Unilever. And not just a strong performance, but an accelerating one, with underlying sales growth in the second quarter of 5.8%, with volume up 5.5%. This is Unilever's best quarterly volume performance since 2010. Our underlying volume growth over the last four quarters averaged 3%, a testament to the strength of our brands and our disciplined execution. This strong first half results reflect progress against our key strategic priorities, including most notably the performance of our Power Brands, now sitting at 78% of our turnover. These brands continue to outperform, delivering underlying sales growth in the second quarter of 6.9%, with 6.8% coming from volume. A strong innovation program meant there were particularly great performances from Dove, Dirt Is Good, Comfort, Sunsilk and Vaseline. Prioritizing these brands means focusing resources and investing competitively, which is why our brand and marketing investment is concentrated on our Power Brands. Significantly, today's results also reflect broad strength across our Home & Personal Care business with underlying sales growth in the second quarter of 7.6% and with volume up 7.4%. It was also a good half for our emerging market businesses, which maintained the good momentum with 8.3% growth in the second quarter, with 7.4% coming from volume. India led the way with quarter 2 underlying sales up 10% and volume up 5%. This was a strong broad-based performance. It reflects the evolution of our emerging market portfolio to increasingly focus on high-growth segments, social-first demand generation and go-to-market transformation alongside the benefits from corrective actions in fundamentals that we have taken over recent times in key markets. Our developed market business delivered a robust performance with volume growth in the second quarter of 2.8%. North America continues to outperform, led by Personal Care, Beauty and Prestige, while markets in Europe remain subdued. And in terms of profitability, we delivered 10 basis points of margin expansion and continue to invest competitively behind our brands while generating earnings growth of 2.4% in hard currency. This strong first half results are a direct consequence of bringing our mantra of "desire at scale" to life across the business. "Desire at scale" is a growth operating system, shaping how we build brands, how we innovate, how we activate them in markets and how we convert demand into sales, whether in elevating the quality, reach and relevance of our brands through the SASSY framework combining Science, Standout aesthetics, Superior product experience, Social proof and contemporary execution, or through embedding the concept of a frontline sales machine by taking our activation programs and the quality of our execution to new and better levels in every market. SASSY brands and frontline machine are two sides of the same coin and at the heart of each is a focus on making our brands and our activations culturally relevant. Our progress on this was recently recognized at the annual Cannes Festival of Creativity where we were the most awarded advertiser of any company present. Our brands received 35 awards, a demonstration of Unilever's ability to rethink how we create demand in this world of infinite content and distribution through algorithms. Local teams competed for the chance to play the final in the Emirates Stadium. Our five power video series has over 130 million views and 180,000 hours of watch time, deepening cultural relevance in our second largest home care market with double-digit fabric cleaning growth in the second quarter. Dove won six Cannes Lions for its partnership during the launch of the Intensive Repair 101 Serum Hair Mask — publish and amplify customer reviews, whether positive or negative, real consumers, real feedback, real beauty. The campaign created more than EUR 1 billion impressions and helped make our product the #1 hair mask in the U.S. during the campaign. Or take Liquid I.V., with its role in a hit Amazon Prime Video series that was one of the most popular shows this year, reaching 56 million viewers worldwide over the first 12 days of release. Liquid I.V. is integrated into the series with the main character becoming a Liquid I.V. brand ambassador within the show. These are creative executions, designed to travel, earn attention, strengthen brand equity and convert to growth. We know the bar for leadership continues to rise and we will ensure we stay at a different tier of demand generation. Being a frontline machine means activating our brands within these big cultural moments and across the biggest cultural events. And they don't come much bigger than the FIFA World Cup, where Unilever Personal Care was an official sponsor. We have not approached the World Cup as a conventional corporate sponsorship or a one-off event. We have activated 35 runs across more than 120 markets by bringing creator content, social media production, retail distribution and local store conversion together on an unprecedented scale, involving more than 50,000 content creators with a combined audience of more than 600 million people and 180 limited edition products. We have leveraged the event to further strengthen our creator-first operating model, including through the House of Fresh with in-person creator hubs in Mexico City, New York and Miami, enabling creators to build dedicated content from live events and boost the storytelling to a wider audience. We also developed our capabilities around AI-enabled content at scale using our AI studios. And we will continue capturing the learnings and deploying them in future sports marketing events that will continue to play a key role in building demand and brand equity. The FIFA World Cup has been a pivotal moment for Unilever, showing our ability to turn a global cultural moment into coordinated execution across creators, content, retail and shopper conversion at a scale few companies can match. Before Srini takes you to the results in more detail, let's roll the video.
Thank you, Fernando. Let me start with our growth. The first half was characterized by strong, high-quality growth. Underlying sales grew 4.8% with 4.2% from volume and 0.6% from price. Growth strengthened further in the second quarter with underlying sales growth of 5.8% and volume growth of 5.5%. Importantly, growth was broad-based and supported by stronger execution across the business. On a two-year basis, volume growth averaged 2.7% in the first half, providing further evidence that the improvement we are seeing is becoming more consistent and sustainable. The three Home & Personal Care business groups led delivery: Beauty & Wellbeing, Personal Care and Home Care all accelerated in the second quarter supported by strong Power Brand performance, premium innovations and improved execution, particularly in emerging markets and North America. Pricing in the second quarter was 0.2% and 0.6% for the half. Lower price in quarter two was largely due to timing and some deliberate choices. For example, in Home Care, we continue to lap the corrective pricing actions in Brazil. And in Personal Care, we deliberately elevated promotional support behind FIFA World Cup activations. These actions enabled us to drive quality volume growth. As commodity-related pricing lands in the market and we normalize promotional spend post-FIFA, we expect pricing to lead growth during the second half of the year. Our Power Brands continue to demonstrate the strength of the strategy and the quality of execution behind it. In the first half, Power Brands grew at 6% with 5.4% coming from volume. Momentum strengthened further in the second quarter with growth of 6.9% and volume of 6.8%. On a two-year basis, Power Brand volume growth averaged 3.5%, underlining the consistency of their outperformance. In the second quarter, 15 of our 30 Power Brands grew in double digits. Dove, Vaseline, K18, Hourglass and Comfort were particularly supported by innovation, premiumization and stronger execution. Non-power brands returned to positive growth in the second quarter. We continue to optimize our tail brands and related investments while strongly supporting local jewels. Beauty & Wellbeing delivered a high-quality first half with underlying sales growth of 5.9%, including 4.5% from volume. Performance accelerated in the second quarter with growth increasing to 8.1% and volume growth to 6.9%. Growth was broad-based across categories and geographies with emerging markets maintaining strong momentum and developed markets improving. Hair Care led performance with 9% underlying sales growth in the first half. Dove, Sunsilk and K18 all delivered double-digit growth supported by innovation and premiumization. K18 continued to benefit from its biotechnology-led innovations, while Dove was supported by premium innovations, including the Fiber Repair range. Skin Care grew low single digits led by volume. Vaseline continued to deliver double-digit growth, supported by premium innovations across Gluta-Hya and Proderma. We're also seeing the benefit of strong cultural relevance, including K-pop star Jennie being appointed as a global brand ambassador. In the second quarter, our prestige beauty portfolio accelerated further with Paula's Choice, Hourglass and Tatcha all delivering double-digit growth. Overall skin growth was partially offset by the softer delivery of local brands in Asia Pacific and Africa. Wellbeing grew low single digit in the first half with an improved second quarter. Liquid I.V. grew high single digit in the first half supported by stronger activation, international expansion and the timing of shipments for Amazon Prime Day. We continue to focus on innovations and activations to drive market development; the category opportunity and the unit economics remain very attractive. Olly delivered double-digit growth driven by distribution gains, growth in the digital channels and emerging markets performance. Beauty & Wellbeing underlying operating profit increased by 1% to EUR 1.3 billion. Underlying operating margin increased by 10 basis points to 19.5% as improved overhead efficiency more than offset gross margin headwinds and the increased investment behind Power Brands and premium innovations. Personal Care delivered a strong first half with underlying sales growth of 4.8%, including 4.1% from volume. Growth strengthened in the second quarter with USG increasing to 5.9% and UVG of 6.8%. This reflected broad-based momentum across deodorants and skin cleansing. Deodorants grew across both developed and emerging markets. In the U.S., we regained market leadership. In Latin America, Rexona supported a strong return to growth in Brazil following the actions taken to improve format mix and reset shelf space. In cleansing, we grew mid-single digit led by volume. Dove delivered high single-digit growth, supported by premium innovations, while Lux grew mid-single digit behind fragrance-led innovation in China. Growth in the U.S. and emerging markets was partially offset by a flat performance in Europe. Oral Care grew low single digit, with growth in Asia Pacific & Africa offset by softer market conditions in Europe. The FIFA program amplified the Personal Care momentum in the second quarter. It brought together media, creators, customers and in-store execution behind brands including Rexona and Dove. It supported strong volume growth and helped us build new capabilities in creative-led content, AI-enabled asset creation and stronger perfect store execution. The activation also had some impact on price in the quarter, reflecting higher promotional support alongside strong prior year comparators. We expect pricing to build in the second half as higher commodity costs are reflected in the market. Underlying operating profit increased by 4.8% to EUR 1.5 billion, while underlying operating margin improved by 10 basis points to 22.2% as productivity and overhead efficiencies offset gross margin pressure. Home Care delivered an outstanding first half and was our fastest-growing business group. Underlying sales grew 7.6% with almost all of the growth coming from volume. It accelerated further in the second quarter to 9.1% with volume growth of 8.6%. Performance was broad-based across categories, brands and markets, with share gains across the three Home Care categories. These gains reflected stronger execution, investment behind our Power Brands and improved competitiveness in key markets. Fabric Cleaning led the performance with strong growth delivery in India, Brazil and Indonesia. India delivered its strongest Home Care growth in three years, supported by innovations and continued share gains. Brazil delivered high single-digit growth as the corrective actions taken last year helped restore competitiveness. Fabric Enhancers maintained strong momentum, led by Comfort and supported by premium formats and fragrance-led innovation. Home and Hygiene also performed well with Cif delivering double-digit growth and Domestos growing in high single digit. Home Care remains our business group with the highest exposure to commodity inflation and emerging market footprint. In the first half, we've executed our playbook well with calibrated pricing combined with formulation flexibility and channel-appropriate pack price offerings. In half two, we expect the growth profile to shift more towards pricing. Underlying operating margin increased by 30 basis points to 15.8%, reflecting strong overhead discipline and productivity delivery despite commodity and currency headwinds. Underlying operating profit increased by 3.2% to EUR 0.9 billion. Foods grew 1.2% in the first half driven by volume. Growth slowed in the second quarter to 2% as continued strength in the emerging markets was offset by weaker performance in North America and Europe. Condiments grew low single digit, led by volume with good performance from Hellmann's in emerging markets. In the U.S., condiments performance was below our expectations arising from increased competition in the faster-growing premium segments such as avocado oil mayonnaise. This issue is well understood and we have targeted innovation and execution plans in place to strengthen our competitiveness and improve the performance during the second half. Emerging markets remained resilient with strong performances from Hellmann's across Brazil and Asia Pacific & Africa. Cooking Aids was flat, Knorr low single digit with good performance across emerging markets, offset by category softness in developed markets. Unilever Food Solutions also continued to grow, supported by good momentum in China and in the U.S. alongside strong performances across Middle East, Latin America and Southeast Asia. Underlying operating profit was EUR 1.5 billion, down 4.3%. Underlying operating margin was unchanged at 23.3% as lower gross margin from commodity inflation and increased investments in the value propositions were offset by overhead efficiencies and continued cost discipline. Turning to regions. Emerging markets continue to be a strong growth engine with strong volume-led growth in the first half. In North America, we continued our volume outperformance while Europe was subdued. Asia Pacific & Africa delivered 7.3% underlying sales growth with 6.1% from volume. In the second quarter, India led the performance with growth accelerating to 10%. Delivery was balanced between volume and price. We had double-digit growth in Beauty & Wellbeing and Home Care, with Hair Care and Home Care both reaching record share levels. China grew mid-single digit, led by Beauty & Wellbeing with all the business groups contributing. Our growing presence in the faster growing digital and e-commerce channels supported the improvement despite a soft market. Indonesia grew 7%. Performance was broad-based across business groups, and led by double-digit growth in Home Care and Beauty & Wellbeing. This was also supported by a sharper focus on high-growth segments, social-first demand generation and the ongoing transformation of our go-to-market model. Africa also grew mid-single digit, led by volume. Latin America delivered 7.6% growth with 5.7% volume, accelerating in the second quarter to strong growth and 8.8% volume. Brazil returned to strong volume-led growth as the corrective actions taken last year restored competitiveness led by Fabric Cleaning and improving momentum in deodorants. Looking ahead, Brazil tax reforms are expected to bring lower prices from the start of next year, which may lead to some temporary retail stock reductions in the fourth quarter. In the second quarter, Argentina delivered high single-digit volume growth, while Mexico delivered mid-single-digit volume growth led by Personal Care. North America grew 2.7% with 3.2% from volume and continued to outperform the market. Growth strengthened in the second quarter to 3.6% with 4.4% volume led by deodorants, skin cleansing and our prestige beauty brands. Europe declined by 0.5% in the first half in a softer market environment with the shortfall concentrated in Food, Beauty & Wellbeing and Personal Care, while Home Care continued to gain share. Turning now to turnover. First half turnover was EUR 25.6 billion, up 0.5% on last year. This reflected strong operational delivery. Underlying sales growth was 4.8%, including 4.2% from volume. Acquisitions net of disposals added a further 0.7%. The acquisition contribution was led by Dr. Squatch, Minimalist and Wild and with one month contribution from Gruns following the completion in June. These businesses are all aligned to our strategy of increasing exposure to premium and higher growth spaces. The disposal impact reflected the continued reshaping of the portfolio as we concentrate investments behind fewer, bigger and more scalable brands. Currency reduced our first half turnover by 4.9%. Importantly, that impact eased materially to 2.4% in the quarter as the movements in the U.S. dollar and in most of the emerging market currencies became less adverse. Based on July spot rates, we expect the full year impact to be around 3%, implying a meaningfully lower headwind in the second half. Underlying operating margins increased by 10 basis points to 20.3% in a materially tougher cost environment while we maintain competitive investments behind our brands. Our gross margins improved sequentially related to second half of 2025. However, on a year-on-year basis, gross margins declined by 70 basis points, given inflation headwinds arising from Middle East conflict and a calibrated approach to pricing. We responded decisively in the areas which are within our control through productivity, sourcing flexibility, reformulation, pricing architecture and better cross-functional execution across procurement, supply chain, R&D and the business groups. For the second half, we expect gross margins to remain at similar levels to the first half on an absolute basis despite higher inflationary impact. We will see benefits of higher pricing landing in the P&L. Brand and marketing investments remained competitive at 16.1% of turnover with incremental investment focused on our Power Brands. Overheads improved by approximately 70 basis points, reflecting the completion of our EUR 800 million productivity program ahead of schedule together with continued simplification and cost discipline. Underlying operating profit was EUR 5.2 billion, up 0.9% versus the prior year with strong operational performance offset by currency headwinds. Underlying earnings per share increased 2.4% to EUR 1.61. Operational performance contributed more than seven percentage points of growth, reflecting strong volume-led sales growth, modest margin improvement and continued productivity delivery. Finance costs increased as a result of higher cost of debt, although they remain well controlled at 2.5% of average net debt. We continue to expect the full year finance cost to remain below 3%. Excluding the currency impact, tax was a modest positive contributor. The underlying effective tax rate increased slightly to around 26% from 25.6% in the prior year, reflecting fewer benefits from tax settlements and other one-off items. Our full year expectation remains around 26%. Share buybacks contributed 0.7 percentage points to the EPS growth following the completion of the EUR 1.5 billion program in June. Minorities and other items added 1.3 percentage points. Currency reduced underlying EPS growth by around six percentage points in the first half. We expect this headwind to moderate in the second half, consistent with improving currency impact on turnover and profits. Overall, this is a strong earnings performance delivered despite a significant currency headwind, while we continue to maintain competitive investments behind our brands. Free cash flow was EUR 1.5 billion, an increase of EUR 0.5 billion versus the prior year. Improvement was driven primarily by operating profit and a strong working capital performance. Capital allocation remains disciplined and unchanged. We increased the second quarter dividend by 3% and completed the EUR 1.5 billion share buyback program. As announced alongside the Foods transaction, we expect operational performance and transaction proceeds to support EUR 6 billion of share buybacks between 2026 and 2029. This reflects the strength of our cash generation and a disciplined approach to returning surplus capital to shareholders. On portfolio development, we completed the acquisition of Gruns in June. Gruns is a fast-growing U.S. super-green supplements brand. It's highly complementary to our existing Wellbeing portfolio and increases our exposure to premium, high-growth and digitally led consumer spaces. Turning to the outlook. Based on the momentum we have built in the first half, we have upgraded our full year outlook. We expect underlying sales growth to be within a multi-year range of 4% to 6% and with around 3% UVG for the full year. Inflationary pressures are expected to continue in half two with heightened volatility. We are confident of managing this while maintaining supply resilience. As we land pricing, we do expect some volume sensitivities. For the second half, we expect growth of 4% to 5%, led by pricing. As shared earlier, currency in half two is expected to improve versus the first half of 2026. We continue to expect a modest improvement in underlying operating margin versus 2025. While the external environment remains uncertain, we enter the second half with stronger fundamentals, improved pricing, disciplined cost management and healthy brand investments. Taken together, this gives us the confidence in delivering another year of competitive growth, modest margin improvement and strong cash generation. And with that, back to you, Fernando.
Thank you, Srini. Let me sum up after what has been a very successful first half of the year. We have been consistent in our conviction that to truly succeed in this fast-changing environment, you have to simultaneously perform and transform. Our delivery in the second quarter and in the first half as a whole is further evidence that we are doing that. The transformation of our portfolio remains on track with the acquisition of Gruns in June and our progress on combining Foods with McCormick. At the same time, we have delivered a strong volume-led first half with broad-based strength. Our strategy built on "desire at scale" is working. We are creating marketing and sales machines with brands that are embedded in culture and with innovation driving the outperformance of our Power Brands. This gives us confidence in our full year delivery, including volume growth of around 3% for the year with growth in the second half led by pricing. Thank you for listening. And with that, Srini and I will now take your questions.
Our first question comes from Celine at JPM. Go ahead, Celine.
分析師問答
Yes. So my first question, obviously, a very strong volume-led performance this morning. I wanted to understand, first of all, if you can talk about sell-in versus sell-out, if you've seen any difference. But more importantly, I want to understand the resilience of the performance. You seem to imply that you have gained market share. But how resilient are you seeing the performance to be going forward when you raise prices? You are giving us guidance for the second half, which is reassuring. But can you talk about your confidence and the visibility you may have that the volume will effectively sustain and won't drop significantly when you raise prices? My second question is for the full year: you now raised the guidance on volume to 3% versus 2% prior. Can you talk about how the markets you are facing in terms of market growth have developed? It seems effectively that the emerging markets are doing very well. How confident are you about the emerging market performance? And do you think that is where you gained market share specifically that brought you to 3% for the full year?
Thank you, Celine. Well, we are really pleased with the first half performance: strong volume growth, strong support with our brands, disciplined management of our overheads and expansion of operating margin in the context of significant cost volatility and the return of commodity inflation. This has been the best quarter in terms of volume growth in more than 15 years. At company level, power brands at 6% and Dove, our largest brand, at 9%, with a strong acceleration in emerging markets, while the U.S. continues outperforming in a relatively soft market there. But it's not a strong quarter in isolation. We have delivered 2.7% underlying volume growth across the last 10 quarters, and we have accelerated in the last year to 3.1%. We believe this is a result of stronger brands: 60% of our revenue is now in what we call "Power Brands," which score superior brand metrics. And we continue investing strongly behind our innovation. So we believe this performance is resilient and broad-based. Of course, Emerging Markets is a highlight. We have a portfolio that is diversified in terms of category segments, price points and this gives us resilience against volatility. India, as you know, is our second largest market and has accelerated strongly. We have achieved record market share in both laundry and hair, which are our two biggest categories there. In the case of laundry, we are growing more than 5% above the average of the market. China is getting slowly better. We grew mid-single digit there with good acceleration in foodservice and our beauty business is really doing very well. In Indonesia, we are happy with the improvement in fundamentals that we have seen there. We are operating there with probably the lowest level of stockouts that we have had in history. Other Southeast Asian regions, Vietnam and the Philippines, also South Asia, Pakistan and Bangladesh, are showing good growth. Of course, we have a strong contribution from LATAM. I've mentioned this previously: I have never seen two consecutive bad years in LATAM. The business is coming back strongly. We grew laundry double digit. The recovery is coming back. The FIFA activation in LATAM has been excellent and our Beauty and Food base continues strong there. So we see resilience. We see the turnover-weighted market volume growth at around 1.5%, the growth at which Unilever is exposed. So if you look at our volume growth being significantly above that, it means that we are gaining share in many categories. Of course, we have some issues, particularly condiments in the U.S. which has been a red flag for us. We have been losing some share there, particularly in the premium segment, but we are addressing that in the short term. So we are confident. The markets remain relatively soft, as I mentioned, around 1.5% volume growth, but our performance has been consistent. This is not a strong quarter in isolation.
Our next question comes from Nicolai at Bank of America. Go ahead, Nicolai.
I have two questions, please. The first one is on destocking from retailers in the U.S. You haven't mentioned that at all, and we hear many of your peers talk about it. Maybe could you tell us why you think that happens to your peers and not to you? It would be quite useful to understand. And the second question is on your Oral Care business. Performance is probably a bit weaker than the rest of the business. And I haven't heard you talk a lot about your Oral Care business overall in recent quarters. We can see from some of your peers there's huge growth in the category potentially. But if I look at the performance over the last few years, you seem to be losing share overall. So do you think there's enough focus from the organization on this business?
Thank you, Nicolas. Regarding destocking in the U.S., we have seen some activity, but it's not material at company level. We have seen a bit more destocking in Foods than in Home & Personal Care. We didn't call it out because it's not material, and these kinds of things can go one way or the other. But we have not seen a significant difference between sell-in and sell-out. There is a bit of destocking, particularly in Foods, but as I mentioned, not really material. On Oral Care: we have been growing low single digits in Oral Care in the first half. We are not happy with the performance in that category. We came from a couple of years in which we were very strong, particularly with Pepsodent and Close Up in Asia, where our franchises have historically been strong. We are focused on addressing the performance issues and ensuring we have the right innovations and go-to-market plans in place.
Please go ahead, Warren.
Warren here at Barclays. I've got two questions on the housekeeping. Fernando, is there any update on where we are at on the McCormick deal? Anything to say on timing or any other comments about savings would be great. Then my two questions are, firstly, on the U.S., can you maybe dive a little bit deeper into what's happening category-by-category? It looks Liquid I.V. has reaccelerated, and U.S. Hair is also accelerating, of course, doing well. I often hear it's mainly Liquid I.V., but it does look quite broad based. So I'd love to hear your view on subcategory and outlook for the U.S. business specifically, how are shares trending and how you're thinking about the U.S. consumer? And then the second one is on margins with Srini. Can you talk a little bit about the H2 moving parts? I heard you saying the absolute gross margin will be the same in H2. But what do you expect for brand and marketing investment and overheads in H2? And any updated view on NMI given the Middle East conflict?
Thank you, Warren, and I will take the U.S. question and Srini will talk about margins and the McCormick progress. In the U.S., as you know, we have delivered 4% volume growth in North America in the last three years and during the first half of 2026, despite some softening in Wellbeing. I believe the outperformance in the U.S.—which has been very consistent—reflects the profound transformation we have done to our portfolio and the huge focus that we have put on strengthening relations with our key retailers, showing them our ability to grow the market. During the first half, the growth was broad-based. We have strong growth in deodorants and in skin cleansing, in hair and in prestige. Particularly in prestige, we delivered close to double-digit growth in the first half. In Hair Care, more than 8% with Hair Care at global level more than 9%. So it has been a strong performance. Of course, the FIFA event had some impact on Personal Care and skin cleansing performance. I would like to highlight that we have regained market leadership in the U.S. after two years. We had some issues in the premium segment in prior years, but we are sorting that out and are very pleased with regaining market leadership in that very important category in the largest market globally. Liquid I.V. returned to double-digit growth in quarter 2 after lapping a very strong comparator in quarter 1. There were some benefits from shipment phasing given that Amazon Prime Day this year materialized in quarter 2 and last year was in quarter 3. But we continue to see solid market growth in the powdered hydration category. We are back to competitive share gains on Amazon, Walmart and in the grocery channel when it comes to powdered hydration. We have some issues in the club channel that is around 30% of our revenue where we have lost some space to private label. The disappointing element of our performance in quarter 2 has been in Foods, where our Condiments business has suffered some share losses, particularly due to the development of the mayonnaise premium segment around alternative oil formulations, and also some poorer returns from our promotional program during the quarter. There is a clear action plan in place, including the launch of Hellmann's avocado line. It is hitting the market now. We are gaining significant points of distribution in the U.S. at key retailers and we're investing in new price architecture, particularly in the squeeze format that has been under pressure. So we see the quarter 2 performance in Foods as an outlier in what has been a consistent outperformance in the sector, but we are very confident in the corrective actions that we have put in place, and we expect the second half to be better. So in summary: very good performance in Care, strong performance in Prestige, improving in Wellbeing even if we expect some near-term pressure, and in Foods, a disappointing performance that we are addressing and expect to improve in the second half. Srini?
Yes, Warren. On the McCormick side, we continue to make good progress. As we have said, more than 100 people are actually working from either side towards integration. You've already seen that last week we announced that the secondary listing is going to be based in the U.K. You would have also seen the leadership announcements, which is important for us because we have four members from the Unilever side who are going to be on the top table of the combined company, both from the point of view of running the P&L and from key functional areas with a strong presence in the Netherlands. Obviously, there are some good milestones coming up in terms of SEC filings, carve-out accounts. All of that is progressing on track. We're also pleased that we're making good progress when it comes to some of the tax-related discussions and regulatory matters. Overall, things are broadly on track and that gives us the confidence to say that we are on course to get this merger finalized. Coming to commodity pricing and margins. I think good to start by anchoring to what we said at the end of the first quarter. At that stage, we had indicated commodity inflation for the year was likely to be in the range of about EUR 750 million to EUR 900 million, which was about EUR 350 million to EUR 500 million above our earlier assumptions. At that stage, we also said that pricing in half two is likely to be higher than half one. As we sit here today, the outlook remains broadly unchanged. In the first half, we had an inflation impact of about EUR 100 million which has landed into the P&L. Looking ahead, we expect about EUR 550 million impact in the second half. This gives a full year outcome of approximately EUR 850 million. As you would appreciate, there's been a lot of movement in some commodities in the last few days; the ranges we are working with are somewhere between EUR 800 million to EUR 900 million, with a center point around EUR 850 million. Importantly, a lot of the inflation is concentrated in Home Care, and 70% of it is in emerging markets. The basket includes crude oil, vegetable oils (palm, SBO), packaging materials and parts of LAB and also parts of energy costs. Our approach has been balanced and disciplined. In half one, we also had some benefit from hedges. We have taken calibrated pricing, leveraging pack price architecture, formulation flexibility, productivity programs and tight cost control. India is a good example with a large Home Care footprint where we've started to see a good balance between price and volume in the half. From a gross margin perspective, on a sequential basis, our gross margins have improved, while on a year-on-year basis they are lower. If you compare half two of last year to half one of this year, we have made progress. We also benefited from volume leverage, which is a gross margin source for us. However, we had adverse mix because of higher contribution from Home Care. While Home Care is strong on a margin percentage basis, at a gross margin level there are differentials between categories. In half one, the highest inflation impact was in Home Care, pricing was calibrated, and therefore the gross margin drag also came from Home Care. Pricing is now landing; it started to land in quarter two and you'll see more of that landing in the second half. Along with that, we will pull all the drivers in the value chain. The combination of these measures gives us the confidence to say that we'll have gross margins at similar levels to first half, around the 46.8% level. Our commitment to investing behind brands remains unchanged and we've said this multiple times: the days of underinvesting in the business are over for us. The normative level we've called out for brand and marketing investment is 15% to 16%. In the half it was slightly higher at about 16.1% driven by innovations and pre-field activations. On overheads, you see a fundamental shift in philosophy. We have seen a big step-up in productivity and we completely landed the EUR 800 million productivity program in the first half. We'll continue to maintain discipline. So the combination of pricing, volumes, mix and healthy levels of investment gives us the confidence to guide for a modest margin expansion for the full year.
The next question comes from Olivier at Goldman Sachs.
Just two questions, please. First, in the U.S., Dove and Vaseline are both growing very strongly. You mentioned premium innovation. I was just wondering how much room you think you have to further premiumize those two brands, which historically have been operating in the mainstream segment. And secondly, you mentioned in the press release some tax reform in Brazil which could—first of all, thanks for flagging this ahead. Could you tell us if it will affect a specific category? And what's the magnitude of it? Is it a bit like GST in India and could it affect Q4 initially?
Srini will take the tax question in Brazil, Olivier. Let me talk a bit about Vaseline in the U.S. and globally. I feel the development of search and LLM-driven discovery plays in favor of big brands. We are now activating LLM rankings in more than 20 markets for more than 20 brands. This is something we are putting a lot of focus on to ensure that we are at the forefront of how people discover brands in the future. Not significant changes in the cost of media at this stage, but this is changing very fast. We have not seen significant Chinese exports into Home Care impacting our core categories, though some Chinese players are emerging through new channels such as TikTok Shop, particularly in Southeast Asia. In Skin Care, we have seen a couple of brands making inroads in Southeast Asian markets like Indonesia, but not in our core categories. Srini?
The Brazil tax reform is reshaping the tax system and not changing the fundamental economics of the market. Brazil is moving from several existing taxes to a dual VAT system. It starts with federal taxes becoming common under something called CBS, which removes some of the elements such as certain excise treatments. The reform is designed around the principle of revenue neutrality. Therefore, over a period of time, there should not be a fundamental change to the economics of the business. What could this mean in practice? Higher VAT rates will mean reported revenue realizations could be lower, but we will get benefit of input tax credits which earlier were not ratable, effectively reducing costs. As a consequence, reported revenue will be lower, cost will be lower, which means an adverse impact on reported revenue growth but a positive impact on margins. Overall profitability should remain unchanged, subject to final tax rates being notified by the Brazilian authorities in the next few months. A point to highlight is that while these changes will be effective from January, they could lead to some market disruption in Q4. Customers may reduce stocking patterns due to lack of clarity over transitional rules and whether they will get input credits on stock. So we expect some potential destocking in Q4, though we have factored some of that into our full year guide. This is not like GST in India which reduced overall tax incidence and put more money in consumers' hands; this is a revenue-neutral simplification. Foods is relatively not impacted by these changes; the likely impact is more concentrated in Home & Personal Care.
Next question comes from David Hayes at Jefferies. Go ahead, David.
Two from me. Firstly on Latin America: pricing was obviously flat in the quarter despite hyperinflationary conditions in the region. So clearly some sort of price reset has been going on there, which I know you called out was going on since the beginning of the year. So the question is, is that done now? Should we expect pricing to step up quite notably in the second half? And where you have reset prices, have you seen competition following down? Or is that something you're now watching as you go into the second half? And then secondly, just in terms of the second half volumes, I'm trying to get a gauge between Q3 and Q4. If volumes are running at about 3% over a long period, should we think Q3 is relatively flat and Q4 similar? How should we think about pre-buy effects, benefit of the World Cup, etc., on volumes in Q2?
Thank you, David. On the second question first: we don't see any significant difference between sell-in and sell-out, so there is no evidence of a meaningful pre-buy effect. Why would we allow retailers to prebuy at a lower price? That would not make sense. So you should not consider there is any significant one-off in the results we have reported. What is important is long-term trends: we have grown 2.7% UVG over the last ten quarters and around 3% over the last year. We will not give quarter-by-quarter guidance, but Srini can give more color on the split. On Latin America, performance is really accelerating. We delivered close to 9% growth in the second quarter, taking the first half to around 8% growth with 6% volume. LATAM is now one of our strongest regions. We corrected some of the own goals we scored last year and are pleased with the turnaround. In Brazil, decisive actions in laundry and deodorants restored competitiveness. Laundry delivered double-digit volume growth in Brazil due to a successful introduction of liquid innovations and the pricing corrections we took earlier to restore competitiveness. We expect a real acceleration of pricing in laundry in the second half. In deodorants, we've seen month-on-month recovery of the aerosol format which is key to boost market growth. The actions we put in place—rebalancing investment and increasing aerosol support—are working, and FIFA activations have helped as well. So we expect deodorants to gain further momentum in Latin America in the second half. Performance in the rest of LATAM is strong: Argentina delivered high single-digit volume growth despite a tough market, and markets like Chile and Central America are showing strong momentum in our personal care and hair businesses. Srini?
A couple of elements to add. On first half performance, Fernando has been clear most of it is underlying momentum rather than one-offs. Having said that, we did have a phasing benefit from an Amazon Prime event which we quantify at between EUR 25 million to EUR 30 million—that's about 20 basis points at group level for the quarter. On volumes, we always anchor the business looking at multi-year trends and two-year CAGRs as indicators of underlying strength. The base effects do change in half two versus half one; last year half two had about 1% volume which can affect comparators. Pricing is starting to land—it's already started in quarter two—so we should expect some volume sensitivities which are healthy and part of running the business. The geography of growth will also shift: you'll see a stronger base in markets like the U.S. and Indonesia, while India and Brazil will have different dynamics. The best way to think about our guidance is on a running basis: the full year volume guide of around 3% is reflective of the performance and the drivers we have in hand.
The next question comes from Jeff Stent at BNP Paribas.
Just one question. I think you said earlier there was no significant one-offs in the results. This is with FIFA, the biggest activation program in the history of the company. I'm wondering if you could maybe give us a sense of what you think the FIFA activation added in terms of growth. I'm thinking forward to next year when at some point we're going to talk about cycling this event. So any color or any quantification you can give on the FIFA activation in aggregate would be great.
Thank you, Jeff. We are very pleased with our FIFA activation execution. We activated more than 35 runs across 120 markets, more than 50,000 creators producing content for Unilever brands simultaneously. This demonstrates a new social-first model of reach and engagement at a scale few can match. We also had extraordinary in-store execution across nearly all Unilever geographies. This should have some impact on sell-out—of course, the FIFA World Cup finished on 19 July so we are still collecting the post-event data to fully validate the effects. For example, regaining market leadership in deodorants in the U.S. gives a sense that the activation worked. But we do not run events like FIFA for two months—we run them to increase awareness and differentiation and to immerse brands in massive cultural moments. We expect a residual and lasting effect from the activity on brand strengthening and competitiveness, particularly in Personal Care.
To add two points: when you look at two-year and three-year CAGRs, the momentum in Personal Care—deodorants and skin cleansing—is clearly visible and is reflected in market share gains and the regained leadership in the U.S. Our supply resilience and financial strength allowed us to serve demand where some regional and local competitors may have been constrained. That genuine demand capture is important because when you acquire consumers in this way, it tends to lead to sustained market development and retention over time. Distinguishing between phasing impacts and fundamental demand capture is important, and much of what you see is the latter.
Our next question comes from Jeremy at HSBC. Go ahead, Jeremy.
A couple from me. First, would you be able to give us a bit more color on the volume performance, in particular, if you took the different divisions, how you distinguish between absolute unit volume and mix that you're getting across the different divisions? And secondly, perhaps you could elaborate on the point about some local competition being supply constrained: to what extent do you see that persisting over the balance of the year? Or do you think those constraints are now lifting and some of those peers are coming back into the market a little more?
Let me take the local competition point and Srini will give more color on volume and mix. We have a very resilient supply chain. Our absolute priority has been supply security, given developments in the Middle East, and we have delivered that in the first half. That likely created some competitive advantage versus local players who suffered in terms of service, particularly in parts of Asia. I have no full clarity on supply security for the next four to six months, particularly in categories more affected by energy and raw material volatility such as laundry. There has been an advantage we've benefited from, but consumer propensity to stay with great brands like ours is high, and we believe that a significant portion of the gains are sustainable. Srini?
From an external perspective, Jeremy, we report UVG which is a combination of volume and mix. We don't split it in the headline messaging, but qualitatively, in the first half, volumes have been ahead of mix. Normally UVG benefits are more than volumes, but given the strong performance from Home Care across many markets, in this half volumes outpaced UVG. Volumes and UVG were strong and consistent across HPC categories. Volumes were lower in Foods, which is visible in the results. Geographically, volumes were strong in emerging markets and remained above market in North America, while Europe was more tepid.
Our next question comes from Guillaume at UBS.
First question on price elasticity: it seems when you push promotional activities and price corrective measures, it really pays off—we saw strong evidence of that in the second quarter. Looking at your guidance for the second half, it suggests volumes could normalize as you raise prices. Are elasticities increasing at the moment across your categories—are consumers more price-conscious and less brand loyal—or are you being conservative in your guide for volumes in the back half? Related to that, as you further premiumize your portfolio, should we see declining elasticities in your business? Second, could you unpack performance in Skin Care because the business grew low single digits in the first half despite strong baseline brands and acceleration in Prestige? What is weighing on Skin Care growth and can you address that in coming quarters?
Thank you, Guillaume. On Skin Care, we have very strong performance in Vaseline and in the prestige segment. The issues in Skin Care relate to some legacy local brands in Asia—such as those that historically targeted fairness positioning—that are less future-fit in a market that is premiumizing rapidly. We are working to build a new portfolio that is more future-fit through prestige and new innovations. Some legacy brands like Fair & Lovely and Ponds need repositioning or portfolio decisions. On pricing and elasticity: in prior calls we've been clear we would manage the business in a volatile environment, focusing on volume growth while being disciplined with pricing and costs. Pricing was slightly soft in the first half at 0.6% as a result of lapping prior corrective pricing in places like India laundry, Brazil power categories, and elevated promotional spend for FIFA. In Foods, we took longer to negotiate pricing with European retailers due to Middle East conflict impacts. Regarding elasticity, we've moved a lot of our revenue towards strategic price points—around 90% of our revenue is now at the relative pricing we want to maintain, compared to 50–60% two years ago. That helps stabilize outcomes. It's difficult to predict exact elasticity ahead given cumulative inflation since COVID, but where we've adjusted pricing back to strategic price positioning, we've seen robust consumer response and continued volumes in many cases. As we premiumize more of the portfolio, we do expect lower elasticity in the premium segments. For the second half, we've been cautious and included the likelihood of some volume slowdown when pricing increases. Given the sequential inflation we expect in the second half—around EUR 500 million—that implies the level of pricing required to maintain margin momentum into the second half, and you can model the volume impact accordingly.
Our next question comes from Tom Sykes at Deutsche Bank. Go ahead, Tom.
Firstly on India, is there at all a risk that margins need to be adjusted downwards a bit in order to stimulate longer-term higher growth in India? Are you seeing competition from Chinese producers in emerging markets? And finally on gross margin and A&P: have you seen any benefit on search costs from the switch to LLMs? Is that likely to continue, and might we see that shift into higher trade spend rather than through the A&P line?
On LLMs and search, I mentioned earlier we see developments in search and LLMs playing in favor of big brands. We are activating brand ranking strategies in more than 20 markets which helps how people discover brands. At this stage we have not seen significant changes in absolute media cost, but the channel dynamics are changing fast and we are investing and experimenting. On Chinese competition in emerging markets: we have not seen significant Chinese exports impacting Home Care in our core categories. Some Chinese brands are emerging via new channels like TikTok Shop in Southeast Asia, and in face care there are a few that make inroads, but not in our core segments. Srini will cover India and margins in more detail.
On India, the model is focused on growth, volume and premiumization which drives profit expansion. Hindustan Unilever Limited has indicated they want to keep EBITDA margins at current levels while growing top line—this is the right approach. India benefits from a portfolio that spans the price pyramid and channels, giving levers to manage pricing, mix and premiumization. From our perspective, we want India to be a high single-digit growth market with bottom-line growth slightly ahead of the top line—a virtuous circle. We will invest to protect our leadership position: we see the next decade as a decade of India and we intend to be a leading participant. On margins and A&P, the move to LLMs is supportive of brand discoverability and could optimize search spend structurally, but at this stage we haven't seen a material reduction in total media costs. Any shifts will be evaluated across trade-off between A&P and trade investments and channel-level spend. We will continue to invest behind brands at normative levels of 15–16% of turnover.
Our final question comes from Ed Lewis at Rothschild. Go ahead, Ed.
A couple from me. How much has the Unilever markets reorganization helped you navigate the volatile environment and deliver this performance? And related to that, are you now more relevant in the right channels compared to before, and is that helping explain some of the improvement in Asia and China in Beauty?
Thank you, Ed. The Unilever Markets reorganization has been an important part of our strategy: we have simplified the portfolio, focused strongly on Beauty & Personal Care, and rebalanced where there were dilutive exposures. That has allowed us to run the business with greater discipline, focus more investment behind scalable global and regional brands, and improve overhead efficiency. This part of the business has moved from being dilutive to accretive. On channels: there has been a significant change in our portfolio with growth in Wellbeing and Prestige and increased premiumization. That gives us greater exposure to premium channels like e-commerce. We had mid-teens growth in e-commerce last year in our most important markets and continue to see strong performance online. There are channel-specific issues—for example, the club channel in the U.S. is a challenge for Wellbeing—but overall our portfolio is increasingly present in the right channels and that is contributing to better performance in markets such as India and China in Beauty. That concludes the Q&A. Let me close with a couple of thoughts. We have delivered a strong volume-led first half and an accelerating one with the best volume quarter at Unilever in over 15 years. Importantly, this performance is not a one-off. It reflects sustained improvement with average volume growth of around 3% over recent quarters. As we move into the second half, price growth will accelerate. We will continue to manage the business with discipline, protect competitiveness across pricing and brand investments, and emphasize demand drivers. Alongside strong performance, we continue to transform our portfolio with the combination of Foods and McCormick progressing well, and we are on track to deliver a focused pure-play Home & Personal Care company. The environment remains uncertain, but the strength of the first half gives us confidence in our updated outlook: underlying sales growth of 4% to 6% for the year with around 3% volume, second half growth of 4% to 5% led by pricing and modest improvement in underlying operating margin versus 2025. Thank you for your time.