Unilever PLC (ULVR) Earnings Call Transcript & Summary

Hello. Good afternoon, everyone, and thank you for joining us at the Annual Deutsche Bank Consumer Conference. My name is Tom Sykes. I head up the European consumer research here at Deutsche Bank. And thank you for joining us for this Unilever presentation. I'm delighted this afternoon to welcome Alan Jope, Unilever, Group Chief Executive; and also Sanjiv Mehta, President, Unilever South Asia. Alan and Sanjiv will now give a presentation, which will be followed by a short Q&A session. [Operator Instructions] We shall endeavor to ask your questions at the end of the presentation. So Alan and Sanjiv, a very warm welcome to you to the conference, and over to you.

Great. Well, thanks very much, Tom. Good morning, good afternoon, good evening, everyone, depending where you find yourself. As Tom mentioned, I'm joined today by Sanjiv Mehta who run -- heads up our South Asia business. South Asia, of course, includes our largest emerging market business, India. Before we get started, I'd like to draw your attention to the disclaimer to forward-looking statements and non-GAAP measures. Let me briefly share what we're going to cover today. I'll start with a quick overview of Unilever before talking about our ongoing portfolio evolution. I'll go into a little bit of depth on 2 important and high-growth parts of Unilever's business. That's Prestige Beauty and Functional Nutrition. Then I'll hand over to Sanjiv, who will talk about India, in particular, I've asked Sanjiv to share the leading work that he and his team are doing on digitalizing our Indian business and how that's helping us to build even stronger competitive advantage in that key market. So let's get started. I assume not everyone on the call is a student of our company. So just a quick moment to share some key data points on Unilever. We generate over EUR 50 billion turnover a year, 60% of that coming from our emerging markets, where we have 4 of our 5 biggest businesses: that's India, Brazil, China and Indonesia. Our portfolio is split into 3 divisions: Beauty & Personal Care, Foods & Refreshment and Home Care. And we are proud to have so many top global consumer brands under the Unilever umbrella. Now we'd like to say that Unilever's 3 particularly standout differentiating strengths. The first is our powerful portfolio of leading category and brand positions. And that's the reason why around 2.5 billion people use a Unilever product every day across the world. We have strong leadership positions in our markets with 81% of our brands sitting in category country sells where we have a #1 or #2 market position. 50% of our turnover comes from our EUR 1 billion brands, of which we have 13, including the likes of Dove, Kantar, Magnum, Omo and the latest one to join the EUR 1 billion club, which is Lifebuoy. We have an unrivaled presence in the growth markets of the future. That includes leading positions in the 10 markets that have got the highest projected absolute GDP growth through to 2030. In fact, we've got 12 markets where we have turnover of more than EUR 1 billion and 7 of those are emerging markets. And we are proud to be seen as the global leader in sustainable business, having led the Dow Jones Sustainability Index in our sector since 2014 and being voted as the leading sustainable business in GlobeScan Survey of Experts for now the tenth year in a row. Now this is not a results update, but I will briefly touch on our performance because we are increasingly match fit. Our disciplined focus on operational excellence is at the heart of how we're running the company. Operational excellence is codified in our 5 growth fundamentals. It's how we're driving strengthened competitiveness with now 57% of our turnover winning market share on a moving annual total basis. Of course, competitiveness needs to translate into absolute growth, and that was the case for the first quarter with underlying sales growth of 5.7%: 4.7% from volume and 1% from price. For the full year, we expect growth to be within our guided range of 3% to 5%, and we've confirmed the guidance for a slight improvement in margin on a full year basis. Earlier this year, we introduced the 5 strategic choices that we've made for future growth. We're making good progress on this agenda. And today, we'll look more closely at 2 of these strategic choices. I'll talk about how we're developing our portfolio, in particular, into the high-growth spaces of Prestige Beauty and Functional Nutrition. And then Sanjiv will talk about one of our priority markets, India, and how we're accelerating digitalization in that business. But let's start with the portfolio. Now while Unilever organizationally is run as 3 divisions, from a strategy and investment point of view, it's much more a continuum in a series of categories. And here, you can see in the dotted boxes the categories which we see as the main opportunities as we develop our portfolio into high-growth spaces. It's here that we will continue to focus our investment both for organic growth and through M&A. In fact, of the EUR 16 billion of capital deployed in acquisitions between 2015 and 2020, over 70% has gone into our priority focus areas of skincare, Prestige Beauty and Functional Nutrition and look for that to continue. And I should say on the other side of the ledger, in parallel with this acquisition activity, we continue to reshape our portfolio by looking for alternative value-creation models for lower growth and nonstrategic segments. We did this when we exited the spreads business, and we're making very good progress with the separation of our tea and beauty businesses. And interestingly, together these 3 segments used to make up around 10% of group turnover. Today, I'm going to focus on Prestige Beauty and Functional Nutrition. They're both very attractive categories. And the businesses that we've acquired are performing well, both the Prestige Beauty market and the VMS, vitamins, minerals and supplements market, are around $150 billion in retail sales globally. We are growing at around 7% -- sorry, the categories are growing around 7%. And the VMS market remains highly fragmented with the top 3 players in the U.S. only holding a joint market share of around 10%. Both these 2 categories meet the criteria at the bottom of the chart that we set out to explain what guides our M&A capital deployment. They're big. They have intrinsically high growth. They have potential in the growth countries that we've called out. We can see a route to leadership positions and both are very sensitive to Unilever's marketing and technology know-how. First, Prestige Beauty. Our Prestige Beauty business today is around EUR 700 million of turnover, which we've built up in the last 5 years through a series of targeted and synergistic brand acquisitions. Over the last few years, this portfolio has been a top performer in the global luxury beauty segment. In Q1 of this year, Unilever Prestige grew 20%. Our Prestige business has a highly attractive e-commerce footprint with now over 50% of total turnover coming from online channels, and we are particularly focused on building best-in-class direct-to-consumer experience in this business. Most of it is currently in North America, and so there's clearly a big potential for expanding into Asia and especially China. Prestige Beauty will remain a focused category for us. We've got the ambition to grow to at least EUR 3 billion over time through a combination of organic growth and further value-creating M&A. And this is the portfolio of Prestige Beauty brands that we've built up since 2015. Dermalogica, our biggest brand, has annual turnover now of over 200 million. It's a derma cosmetics brand, the #1 professional skincare brand in the world and 1 of the top 3 skin care brands at Ulta in the U.S. We also acquired 3 other brands in 2015: Murad, a skin care brand founded by Dr. Murad, which is focused on holistic wellness and beauty from the inside out; Kate Somerville, Hollywood glamor derma cosmetic skin care brand with a purpose on healing skin healing lives; and REN, a clean skincare brand with a focus on clean to skin, clean to planet. And as you already see, these brands are very much aligned with the DNA of Unilever uniquely bridging purpose with luxury beauty. We added to this portfolio with 2 more acquisitions in 2017 that broadened our prestige category exposure beyond skin care. Firstly, Living Proof, the leading U.S. prestige haircare brand, which offers products based on patented MIT bioengineering technology; and Hourglass, the world's first luxury cruelty-free color cosmetics brand, which is famous roots disruptive modern luxury innovations. Then more recently, we've added Garancia, a French pharmacy brand that leverages the parasites and nature. And Tatcha, a particularly attractive luxury skincare brand inspired by the beauty rituals of Japanese geishas. It's one of the top 2 skincare brands in Sephora in the U.S. and now one of the top 3 brands in our prestige portfolio with around EUR 100 million of turnover. I'd like to share a little bit more detail on how we run our Prestige business and what is our framework for growth. We operate what we call a string-of-pearls model under the leadership of Vasiliki Petrou. Vasiliki has been leading our Prestige unit since its beginning. And string of pearls means simply that our acquired brands are managed with quite a high degree of autonomy and they're led by a dedicated brand CEO who drives agility, entrepreneurial culture and experimentation. And we are very focused on sustaining and nurturing the unique brand DNA and the founder mission of each of these beautiful Prestige brands. We're proud that many -- all the founders remain actively involved, continuing as CEOs of the brands or advising on innovation, brand equity, community management and so on. We built quite a strong reputation in the market for the thoughtful and highly successful acquisitions that we've had in the Prestige market. And that protects the unique purpose of each brand. So at the same time, we're also benefiting from Unilever's scale and marketing expertise. For example, in the newly forming China hub, brands will share back office and go-to-market infrastructure. But again, we'll have dedicated sales and marketing teams in China to ensure brand focus. Unilever Prestige over-indexes in e-commerce. It's increased from 28% of our sales pre-COVID to now over 50%. This includes a strong DTC component. DTC is now over 20% of Unilever Prestige turnover and grew very strongly in 2020. We have very low exposure to department stores in North America, and we still have a nascent travel retail business. This is a big opportunity for us in the future. I already talked about these brands combine luxury beauty with purpose, and I'm proud to see the portfolio taking bold actions to make a positive impact on the planet and on people. For example, REN products are all made from 100% plant- and mineral-derived ingredients, and our REN operations are set to be zero-waste this year. While Hourglass, as I mentioned, became the first vegan luxury consumer color cosmetics brand last December. Prestige Beauty is all about digital, not just on the marketing front, but also how we use digital technologies and the product offerings. Dermalogica is a good example. It uses advanced AI in its base-mapping technology that selects the right skin care treatment regimen for our consumers based on those AI algorithms. And each brand has a strong pipeline of impactful innovation that will continue to drive this growth. And that often leverages the best of our global Unilever R&D capability. And one good example would be this Hourglass Red Zero lipstick. Replacing carmine sourced from crushed female beetles is something that has alluded the beauty industry for years. About 3 years of work by Unilever R&D has finally delivered a saturated true red hue that does have the right vibrancy in depth: luxury, cruelty-free beauty. It's a great example of the work that our R&D team do. And on that note, quickly wanted to plug an online event that we're running with our Chief R&D Officer, Richard Slater, later this month. It's all about innovation at Unilever. You can find all the details on our investor website. Please come and listen in, a lot happening in our R&D teams. Right. Let's move on to functional nutrition mix. This is a space we entered more recently, but one that's building scale even more rapidly. This business generated turnover on an annualized basis of well over $1 billion in 2020. And again, we have the ambition to grow it significantly to at least EUR 3 billion in the next few years. USG was strong in quarter 1 at 54%. I'll talk about the individual brands in a moment. But again, their future-fit, purpose-led brands with strong positions on platforms like Amazon or Target and many with a disproportionate share of their sales on e-commerce. So as with Prestige Beauty, we've built the business through targeted acquisitions, our brands that we have in the portfolio are outlined here. Equilibra, an Italian wellness brand was the first acquired in 2018. And since then, we've added 4 brands in the vitamins, minerals and supplement space. Always the largest of our VMS brands, has a mission to make nutrition delightfully easy through its gummy vitamins and supplements. Liquid I.V., is an electrolyte drink mixes can provide up to 2 to 3x the hydration of water alone. And SmartyPants is a range of premium supplements completely free of synthetic colors, artificial flavors, sweeteners, preservatives. And finally, Onnit, where the acquisition closed just at the end of May. Onnit offers a 360-degree philosophy to achieve optimal health and well-being through mental performance, emotional wellness and physical fitness. And then, of course, we have Horlicks, which is the biggest brand in the functional nutrition portfolio, with turnover of around EUR 600 million across the brands that we acquired from GSK in mainly India and Bangladesh. These functional nutrition brands supplement consumers' diets by providing essential nutrients needed for bone and muscle development as well as concentration. They're especially focused on the well-being of children. Now let me give a little bit more details as I did for Prestige on the framework for growth and how we run our functional nutrition business. Most of the VMS brands like OLLY are very similar and set up to Prestige. Each brand runs a largely independent operations supported by a set of portfolio-wide functional capabilities in areas like R&D, procurement and back-office support functions. Horlicks, on the other hand, is being fully integrated into our Hindustan Unilever operations because the route-to-market in India is very similar to our existing portfolio, and there are sizable opportunities from simply leveraging our HUL reach and distribution for the benefit of the Horlicks portfolio. Our acquisitions in this functional and nutrition space have been largely focused on our biggest future growth markets, India for Horlicks and the U.S. for VMS. So we are carefully evaluating what we see as good potential to expand these brands into other growth markets, especially in Asia. An increasing focus on health and well-being is a global megatrend, which has only been accelerated by COVID. Our VMS brands target similar segments, they're millennials and they're Gen Z consumers who, as new VMS consumers, are driving this shift towards health as a lifestyle pursuit. And how consumers purchase VMS is rapidly shifting as younger generations are moving away from the more traditional multilevel marketing and offline retail channels, moving instead to social and digital commerce, including, by the way, direct-to-consumer. And our VMS portfolio is uniquely positioned to capture this channel shift with a very strong e-commerce footprint. In fact, more than 80% of Onnit sales are via e-commerce, and we have strong positions on key platforms. SmartyPants is the #1 selling multivitamin on Amazon. In the U.S. the brands are very much digitally driven, and we combine that with a select targeted offline presence. Like Prestige, our VMS brands follow a digital-first model, Many have a strong direct-to-consumer business, and that will enable us to lead the market on developing new social commerce platforms and the rising demand for personalization. Direct-to-consumer is a great innovation channel in this category and it's where we frequently test new concepts. So in summary, we're reaching a tipping point and building scale businesses in these faster-growing categories. Their contribution is becoming material to Unilever's growth. Prestige and Functional Nutrition together contributed more than 50 basis points of our growth in Q1. We've built 2 sizable categories over the last 5 years that are benefiting from Unilever's scale, benefiting from back-office operations support, benefiting from our marketing expertise while keeping the brand's unique DNA and expertise intact. So to end this section, operational excellence on Unilever's core business that's driving stepped-up competitiveness with on-top continued portfolio evolution into higher-growth categories, that's our formula to deliver higher growth in our guided range, higher than we saw between 2017 and 2020. And with that, now let me hand over to Sanjiv, who will talk about our second largest business in the company, India, and how we're deepening our competitive advantage through digitalization. Sanjiv?

Thank you. Thank you, Alan, and greetings, everyone, from India. Hindustan Unilever, or HUL, is India's largest FMCG company. We reached 9 out of 10 households in the country. and our market leaders and are in approximately 90% of our turnover. In the last decade, despite several challenges arising out of demonetization, rural slowdown and the pandemic, we added EUR 3 billion to a turnover with an organic CAGR of 8% and have improved our operating margins by an average of 100 bps per annum. HUL is the second-largest Unilever business with Unilever holding 62% in HUL's equity. HUL is India's fifth most valuable company with market cap of EUR 66 billion. We are strengthening our portfolio by creating markets of the future, what we call market development as well as through acquisitions, the biggest being the merger of GSK Consumer Health with HUL. Being the employer of choice, we attract the best talent in the country. We improved the gender quotient in a managerial base by 22% in the last decade. As India is a water-stressed country, we have been working in thousands of villages and have created water conservation potential of 1.3 trillion liters, which is equivalent to the drinking water need of India's entire adult population for a year. We have provided livelihood-enhancing opportunities to 136,000 Shakti women microentrepreneurs in rural India. And this year, we will collect more plastic from the streets of India than we use in the packaging of our finished products. India provides fabulous opportunities for a company like Unilever. Several structural reforms have been undertaken and the ease of doing business has also improved significantly. There is huge headroom to grow because of low penetration and low per capita consumption. The demographics are stacked in our favor with 1 billion strong working population, large pool of millennials and increasingly nuclear households. The income pyramid is moving towards a diamond shaped one. I'm now going to talk about each of the 3 divisions and pick one large category in each division to bring to light how we have executed Unilever strategy in the market. These 3 categories contribute almost half of our business in India. First is Beauty & Personal Care, where I would like to talk about hair care, which is EUR 1 billion category. Shampoo is now universally penetrated largely due to our market development efforts over the years. The conditioner market, however, is still very nascent with single-digit category penetration. Driven by our purpose-led brands, HUL haircare has grown at a CAGR of 11% over the last decade. We are the market leader with a relative market share of 3x our nearest competitor. You will see on the slide an example of one of our largest brands, Clinic Plus, which talks about not only strengthening the hair, but also about mothers making daughters strong. We have a portfolio that straddles the price benefit pyramid, starting from EUR 0.01 going up to EUR 5 occupying all the benefit spaces and price points. We are transforming our portfolio by bringing in global brands and through market development. We've also acquired Indulekha, a premium aromatic brand, which has grown 6x since the acquisition in the last 5 years. In India, fabric wash is a EUR 3.5 billion category. HUL has a relative market share of 2x our nearest competitor and has had a massive transformation in the last decade with profits improving by a factor of 8. I'm sharing an example of Surf Excel, one of our purpose-driven brands with a platform of dirt is good. This has been brought to light over the years through purposeful communication of how dirt and experiences are gateway to inculcating good values in churn. Here, we have been on a journey of upgrading consumers to higher order benefits through value-enhancing propositions. The mass market is still almost 70% of the category in volumes, providing massive opportunity for upgradation into super products and for creating markets into new segments such as adjuncts and liquids. We innovate keeping both purpose and functional superiority and perspective. Here are examples of REN with water saving, nature protect with the power of nature and specialist products at the top of the pyramid such as Surf Excel smart spray. Now let me talk about Foods & Refreshment. In team, it is 40% of our F&R business. We not only regain market leadership a couple of years back, but we continue to further strengthen our competitiveness on the back of a purpose-driven brand such as Brooke Bond Red Label with a proposition of breaking barriers and bringing people together over a great cup of tea. This has helped us grow at a target of 12% over the last decade. As you would recall, from the tea strategic review, we decided to retain our tea businesses in India and Indonesia. A few years back, we created the Winning in Many Indias' framework, which recognizing the heterogeneity of India has de-averaged the country into 15 clusters to craft distinct strategy, portfolio and execution. Here is an example of how we create different blends for different parts of the country. The packaged branded tea market is about EUR 2 billion in size. In addition, we still have 30% of the total tea volumes which are sold in loose or unpackaged form. As part of market development, we are upgrading people into branded tea and developing new segments such as natural care with herbs and green tea. This is based on insights, access packs and on-the-ground activation. As part of our market development efforts, we reach over 100 million consumers every year educating them and making them experience our brands. Now let me talk about India's digital evolution. Talking about capabilities, India's ecosystem is fast evolving. At 761 million, the current base of Internet users in India is as much as the population of European countries. Our data cost is amongst the lowest in the world. And we have seen the average monthly data consumption growth significantly. This has had a profound impact in the way consumers engage with brands and in the way they shop, hence, giving us an immense opportunity to create new capabilities across our business. Over the last few years, under our reimagine HUL agenda, we have been building disruptive digital capabilities to make our business future fit. We are moving the business from a linear value chain of yesteryears to an intelligent enterprise built on a connected ecosystem of consumer, customer and operations with data tech and analytics at the center. I will now briefly elaborate on each of the ecosystems that we are building in our journey to build an intelligent enterprise. Let me first start with the consumer ecosystem. As the Indian consumer gets more digital-savvy, we are building capabilities that are helping us get better insight, pick up consumer trends and leverage technology to enhance the speed of launching innovations. Let me illustrate with one example from skincare. Through our agile innovation hub, we identified the trend of all-season light moisturizing and use our digital tools to determine the right formats and trending ingredients. Our teams then conducted digital simulations and rapid iterative prototyping to fast track it to launch in half the time. Similarly, artificial intelligence-led data and analytics capabilities help us bring greater attribution of dollars spent in media to growth. This is both in the traditional media like television as well as in digital. We have built digital capabilities that span the consumer journey from consideration to purchase. Our content hubs like be beautiful and Cleanipedia craft personalized content and recommendations that are fit for the multiscreen and multi-platform generation. As mentioned earlier, market development is a pre-growth pillar for HUL. And every year, we do education and experiential marketing, reaching millions of consumers. We are transforming the experience by tick powered sampling with smart picture, a digital interface that enables customized sampling solution to generate trial. A corporate D2C capabilities like USHOP are helping us close the purchase loop. Let me now talk about the customer ecosystem. In customer ecosystem, we are creating moats, which entails demand generation through e-commerce and DTC. Demand capture through a Shikar eB2B app and demand fulfillment at the back end. To give you an example, let me talk about the eB2B app, Shikar. HUL has the strongest foothold in the traditional grocer channel. And with Shikar, we aim to wire this large channel. Shikar has been a real game-changer for us proving a competitive advantage. The 2 main problems for the retailer in the grocery channel are capital and space. Shikar helps to solve these 2 problems by giving retailers the flexibility to order at any point of time without waiting for the salesman to visit the store, provides recommendation for the right assortment and ensure a reliable service to the retailer. We've also partnered with India largest bank, State Bank of India to provide paperless and affordable credit to the retail. Shikar now reaches more than 0.5 million traditional grocers at the back of a rapid expansion drive where we achieved our 2 years plan in just 6 months. It is now playing a critical role in servicing outlets during the pandemic as we were able to leverage contactless order-taking. We're also building next-generation analytics and algorithms to drive coverage by identifying uncovered and underserviced markets within traditional trade while building service efficiency. Our supply chain is undergoing a massive transformation across the verticals of plan, source, make and deliver to build a new age operations ecosystem. We are digitizing upstream sourcing network, which allows us to optimize our cost and significantly improve agility, resilience and traceability of materials. Artificial intelligence and machine learning are being leveraged for better forecasting and planning. We're also redesigning our manufacturing and distribution network for agility and flexibility. This is allowing us to create future-fit master plan around multi-category nodes that will increase formats produce per site, move production closer to demand and fulfill demand faster. On delivery and service, we are extreme extensively using automation to drive more reliable fulfillment with the reduced lead times. All this collectively will result in improved customer service, better efficiencies and reduce the cost. We used to say that the 2 biggest assets of ours are people and brands. We've now added data to this list. We manage data as an enterprise asset across 3 ecosystems. This is anchored through the HUL data strategy with focus on maximizing leverage across the business while ensuring continued consumer trust and compliance. To democratize data, we have built capabilities like LiveWire, which combines disparate sets of data from trade, consumer, media and financial and helps analyze across multiple business levers. We've also built a search-enabled capability for culling out granular data in the form of Chanakya. Advanced analytics and decision-making tools enable us to augment deep category knowledge and tools. Many of these tools are now implemented across Unilever. The capabilities that we are creating across these 4 ecosystems are helping us build an intelligent tech-powered, purpose-led FMCG company. To conclude, I want to leave behind the following messages. While the pandemic has bruised India, it does not change the mid- to long-term consumption and growth story. HUL has an enviable history and footprint with a track record of high performance. We have the talent, the portfolio and the capabilities to harness the opportunities that India offers. I therefore believe that our best is ahead of us. And on that note, let me hand it back to Alan for a summary.

Thanks very much, Sanjiv. Well, let me quickly summarize. Unilever has a good start to the year with our continued focus on operational excellence, driving competitiveness, and strong top line growth. Our strategic choices are clear. We continue to evolve our portfolio with newer businesses such as Prestige Beauty and functional nutrition performing well. And I think Sanjiv's presentation has given you a glimpse on the strength of our existing India business, but also an illustration of how we're building competitive advantage through digitalization across our operations. Our vision remains to be the global leader in sustainable business, but we will demonstrate how our purpose-led future-fit business model drives superior financial performance. Consistent, competitive, profitable and responsible growth is how we scorecard Unilever's performance. And with that, Sanjiv and I will be happy to answer some questions. Thank you very much.

Great. Thank you very much, Alan and Sanjiv, for that presentation. [Operator Instructions] But maybe if I could ask an opening question, Alan, that you mentioned the over-indexation of e-commerce in Prestige Beauty and also the high proportion of D2C. What level of investment do you need to put in to drive the growth out of the e-commerce business within Prestige Beauty? Or is that something that can leverage off the infrastructure that you currently have, please?

Yes. Well, first of all, if you take a look at Unilever or any of our peers, The proportion of our business that comes from e-commerce is most often just a direct function of the category mix. And certainly, for us, we find that luxury beauty is an area where e-commerce is overrepresented. It's partly driven by consumer dynamics, but it's also driven by economics. It's a lot more efficient to the value density of luxury beauty makes it an attractive category for e-commerce. And when you put all of that together, what it means is that whether it's omnichannel, retailer.com or direct-to-consumer or pure-play, e-commerce on luxury beauty is actually value-accretive for us. So there's no margin dilution as this business grows within e-commerce, although we have -- it has its own distinct fulfillment mechanisms, which do vary according to the subchannels of the e-commerce. But the short answer is it's very margin attractive for us to build our position in e-commerce with prestige beauty.

Okay. And Sanjiv, I believe I read that HUL being voted the most innovative company in India by Forbes Magazine. I wondered just how you maybe arrange your R&D, the investment that you've put into R&D and perhaps how some of that data stack that you outlined is filtering into the innovation process there as you've clearly had a lot of innovation-led growth?

Yes. Thank you. Thank you for that question. India, HUL and Unilever, we have a symbiotic relationship. So we depend a lot on Unilever for access to global R&D, and one of the global R&D centers is situated in Bangalore in India. On top of that, we also innovate tremendously with business models, new business models. Yes, whether it is the micro entrepreneurs in rural India, deep rural India, or using Shikar eB2B app, our entire focus has been how do we build capabilities which are distinctive and hard to replicate. With a great set of talent that we are able to attract being the employer of choice in the country and then giving them the freedom to experiment create a potent mix of generating great ideas, and that's how we fuel innovation. So we look at innovation from different lens, not just product but also business models, and that's what has been making a difference. To HUL, I'll also give you this idea about organization. Looking at it from a winning in many India, I think, has been a great innovation, which has also been picked up by Harvard Business Review, and this is looking at India not being an homogenous entity. And so we looked at the challenge that India poses but from a lens that opportunities are offered to us. And that's how we reached the entire -- we rewired the entire system so that we couldn't cash this opportunity. So that's how we look at innovation at HUL. And of course, we have such a wonderful stream of innovation which come from global Unilever, which we always tap into. And if they are relevant for Indian consumers, we pick it up and run with it.

Okay. Perfect. So we've had a question in. HUL's growth is impressive. Could you please comment on long-term growth in other emerging markets? Additionally, what is the strategy to improve large low-growth product categories. Although the categories aren't given, but maybe I'll pass that over anyway and let you decide which ones you'd like to pick.

Thanks. Thanks, Tom. I think that's coming my way. Well, there are really 2 separate questions there. First of all, we are very bullish on the long-term prospects of the emerging markets. It's an increasingly unhelpful term to group everything outside of Europe, North America and Japan as emerging markets because the China landscape, the Africa landscape, the Latin American landscape and the South Asian subcontinent are so different from each other. But they all share one thing, which is the per capita consumption of our categories is low and is growing more quickly than it is in the so-called developed markets. So we see continued prospects for double-digit growth in China, solid growth in India, as Sanjiv has outlined, high single-digit growth in places like Africa and amazing resilience in Latin America that the hardest conditions. Southeast Asia has very good long-term prospects, but I must say at the moment is suffering both from a public health perspective and lack of tourism. So we do see depressed markets in important places for Unilever like Indonesia, Vietnam, Philippines, Thailand. But the long-term evidence that we have is that we get better volume growth in developing markets, and we managed to hang on to some of the price growth that has not all given back in currency devaluation. Now as far as structurally low-growth categories are concerned, the short answer is we want to get out of them. So that's why you see us exiting spreads, managing tea for separation. But if you talk about the kind of core businesses of Unilever, things like hair care, deodorants, our fabric cleaning business, our core foods business, that's where the 5 growth fundamentals come into play. And in truth, we were losing market share in those markets for several years. And it's only over the last 18 months that we've started to see competitiveness improve by attending to things like a ruthless focus on penetration, fewer, bigger, better innovations, generating the fuel for growth, a determined effort to win in the growth channels of the future and putting purpose at the heart of our biggest brands. That's how we're reigniting competitiveness in those big core categories. But things that are structurally low growth with little prospect of that improving, those will come out of our portfolio.

Okay. And then you've obviously given guidance on profitability this year. Are you in a position to give an update on how quickly you're seeing some of the COVID costs or mix effects reversed this year under a more reopening scenario or maybe as well just to talk us through some of the productivity savings initiatives that you're really pushing in 2021, please?

Sure. Well, the first thing I should say is not a trading update. But I will use the opportunity to say what we said at the end of Q1, which is to confirm our guidance for the year, top and bottom line coming in line with what we said. Now as far as margin is concerned, I think the critical dynamic right now is as follows. First of all, we built the muscle to deliver about EUR 2 billion of savings a year. That is a critical element of how we redeploy resource inside the company. And that is in good shape for this year, and we'll be raising expectations probably looking into 2022. So efficiencies and productivity is a start point for our business model. Then as far as commodity costs and pricing are concerned, yes, you're quite right. We're in a period of unprecedented commodity inflation over the last decade, and you will see a step-up through the year in the extent which Unilever improves price growth into the market. But maybe if I could just spend one second on when we talk about pricing, I imagine many people on the call imagine list price increases, but that's only one of 5 different levers that we've got on pricing. Of course, we do take less price increases, but we also look to use something called pack price architecture. Smaller price sizes at the same price or bigger price sizes at a bigger price are packed specifically for certain channels. Then margin mix is very important. We're using innovation as a strong lever to take pricing. That's the third lever that we pull. Then of course, we take a look at price promotion, consumer promotion, and can we get by with lower depth or lower frequency of promotion. And then the fifth is looking at our trade terms. So in times like these, we are really exercising the muscle that we've built over the last few years on net revenue management using all 5 of those pricing levers given the magnitude of commodity inflation that we're dealing with. And the net effect is that we are in a position to reiterate our guidance on margin for the year.

Okay. That's fantastic. Thank you very much indeed, Alan and Sanjiv. We've come to the end of our time on the session. Thank you both very much for attending this conference and your time and insights today. And for everybody online, thank you very much indeed for joining, but that will be the end of the session now. Thank you.