Unilever PLC (ULVR) Earnings Call Transcript & Summary

Good morning, good afternoon, everyone. I'm Richard Williams, the Head of Investor Relations at Unilever. I'm pleased to welcome you to today's deep dive on Unilever Health & Wellbeing. I'm joined by Fernando Fernandez, the President of Beauty & Wellbeing and Jostein Solheim, the CEO of the Health & Wellbeing business. We expect remarks to be around 20 minutes, followed by Q&A. If you'd like to ask a question, then please submit it via the Q&A panel at the bottom of your screen. All of today's webcast is available live, transcribed on the screen as part of our accessibility program. Before we start, I would like to draw your attention to the disclaimer to forward-looking statements and non-GAAP measures. And with that, let me hand over to Fernando to do an introduction.

Thank you, Richard, and thanks, everyone, for being with us today. I am Fernando Fernandez, until recently, the CEO of our Latin American business and from July 1 onwards, the President of the newly formed Beauty & Wellbeing business group. As you know, moving to the next chart, Unilever has decided to reorganize itself around 5 business groups. They are Ice Cream, Nutrition, Home Care, Personal Care and Beauty & Wellbeing. With this reorganization, we will seamlessly integrate strategy and execution at the interior of each of the business groups, and we believe that this will provide us with much more category focus, greater empowerment and accountability and a much simpler, faster, more agile organization. Beauty & Wellbeing particularly, is composed by 3 very different businesses, our mainstream hair care and skin care business and 2 fast-growing global business units, Prestige Beauty and Health & Wellbeing, and Health & Wellbeing is what we call to the business that we have acquired in the vitamins, minerals and supplements space. These 2 fast-growing businesses, Prestige and Health & Wellbeing, are absolutely crucial to delivering some of the key strategic thrusts of Unilever: First, to build our portfolio into high-growth demand spaces; second, to lead in the channels of the future; and third, to transform our portfolio footprint into developed markets and China, particularly in the U.S. where we have made substantial acquisitions in the last few years. With that, I hand over to Jostein. I'm very happy to take any questions at the end of this presentation. Thank you.

Good morning from the East Coast of the United States. I'm Jostein Solheim, I took over as CEO of Health & Wellbeing just over a year ago. I really took over from Peter Ter Kulve, who's the President of our Home Care division and who really set this up on top of his day job running Home Care. I came to this job from running our Foods & Refreshment division here in North America. But I seem to always be introduced as the former CEO of Ben & Jerry's, where I spent 8 years taking that business global and really delivering a long period of sustained high performance. I've spent the last 15 years in the U.S., mainly. But through my other local jobs and global roles, I had the opportunity to operate across multiple geographies. So that's me, let me get right into it. What we thought we would try to cover very quickly today was to give you a basic introduction to our Health & Wellbeing business. We really operate within the very large vitamins, minerals and supplements category. And then I'll give you a high-level overview of our strategy and our value-creation model. Now, the 3 sort of key messages about what Health & Wellbeing at Unilever is, is that it is a portfolio of fast-growing, lifestyle-led, science-driven brands. This is not a coincidence. This is a result of our very rigorous and disciplined approach and selective approach to M&A. It's also due to our focus on this mega shift in the Health & Wellbeing business or in the VMS category, which has really moved from being a problem/solution letter vitamin category to a category driven by health as a lifestyle pursuit. And when this category gets disrupted, we are really focused on the most attractive segments, the most attractive product formats and channels within that. And that really allows us to drive growth aggressively through market development rather than just gaining share of existing segments. And then to further scale these fast-growing companies and unlock value, we are underpinning them, driven by a common tech goal, but we are really underpinning them in a leading-edge Unilever capability platforms. And I'll come back to that in the strategy and value-creation model section. So those are the 3 things I really wanted to learn, but let us ground ourselves on what this business is. So from a very humble beginning in 2018 with the acquisition of Equilibra in Italy, we are now more than EUR 1 billion of turnover. More importantly, as these companies have joined our group, we are maintaining a very high growth. We've grown 50% -- more than 50% per annum since 2019, which means that in 2021, we already contributed 35 basis points at Unilever's USG -- Unilever's global USG. Importantly also, 40% of our business is online. This allows us to really deploy leading-edge data analytics and really build a closer relationship with our users and our consumers. With the recent deal and acquisition of the majority stake in Nutrafol, this will actually go all the way back to 50% of online sales -- oops, wrong button. So here's our very short but dynamic history. This, as I said, is really the outcome of a very rigorous discipline, what we call programmatic approach to M&A, where each company that we acquire complements and add something unique to our group. They bring new capability, new skills and new talent pools that really enrich our total community. I already mentioned Nutrafol. We announced that in May. We are very excited about it. We will close that deal this week. To do this, we've built a really strong internal capability and team to execute on this M&A strategy. Just to give you a sense of the scale of this work, in the last 18 months, we have looked at more than 60 targets in detail to basically end up with 3 deals ], Onnit and Nutrafol. This selective approach really allows us to deliver on our business case and deliver on our shareholder promise. Let me introduce you to some of the key companies. So in 2019, OLLY joined our group, OLLY is the creation of Eric Ryan, who was also the co-founder of [ Method Cleaners ], if you recognize that. And OLLY is really the poster child of a brand that brought a narrative from a problem/solution sort of category to a lifestyle -- health as a lifestyle. OLLY disrupted the shelf, brought in big mid-state segments like sleep, beauty, skin, stress, very relevant recently. And OLLY has really taken already the #1 position as #1 sleep gummy in the United States. Then in 2021 -- in 2020, sorry, we brought in SmartyPants Vitamins to really complete our gummies powerhouse. Now obviously, by having these 2 businesses, we have a really powerful industrial base, where we can have potential to unlock value within gummies. But SmartyPants is really a science-based, nutrient-dense premium proposition, really focused on anchoring in kids and moms but obviously serving all adults. It's very complementary and distinct from OLLY. These are very complementary businesses. One illustration of that is, SmartyPants is really anchored in Amazon, and they're already #1 multivitamin at Amazon and the #2 overarching VMS player at Amazon. Plus OLLY really strong across food, drug and mass, strong at Target, strong at Walmart and already the overarching #2 VMS gummy brand in the food, drug and mass channel, very complementary businesses. To give you a taste of OLLY, here's a short video. [Presentation]

As you can see, this is a pack that deserves sitting on your countertop, brings a smile to your face every morning and a delightfully tasteful product. Now in 2020, Liquid I.V. joined the family. And in May of 2021, we acquired Onnit. Both of these are digitally native brands with really powerful product experiences. So Liquid I.V. plays in that huge functional hydration space. 75% of the adult U.S. population suffer from some form of dehydration. This is a massive area. And while still Liquid I.V. is already the #1 powdered hydration brand in America, and we have more than tripled the size of that business since the acquisition, the room for growth is massive. This is a business driven by high ROI performance marketing, what we call lower funnel marketing, anchored in the D2C and online presence, but with a strong partnership with Costco and a full rollout plan for the whole of the United States. Onnit, another digitally native brand, really famous for its product, which is a high impact. You feel the impact after 5, 10 minutes. And it's sort of a tropic, it's a product that really aids your memory and focus. We see huge market development opportunity in this space. is part of a larger family. Onnit has an incredibly loyal and dedicated, what we call it, the tribe of followers. And [ although ] there's a full portfolio to support their health needs and their performance needs, but [indiscernible] is the hero. Now, our latest and greatest Nutrafol. Nutrafol really brings us into a very, very large new segment, Beauty from Within. Within Beauty from Within, and I'll come back to this segment definition, hair health is the biggest subsegment, more than 114 million U.S. consumers declare that they have concerns about their hair health. And this is clearly a global phenomena. Now, Nutrafol is a 90% online business with 2/3 of their sales from nutrafol.com, and the rest from Amazon. The 10% that remains is from the professional channel. It is a #1 dermatologist-recommended hair growth supplement because it works. It's backed by 4 clinical studies, 4 patents and 10 medical papers. It has an incredible loyal following because of its efficacy. So a lot of consumers stick with this product for a long time. Obviously, when you combine Nutrafol's really unique capabilities with Unilever's [ topical ] hair science, capabilities, our retail expertise and our international reach, this gives us a great opportunity for scaling this business. Now let me pivot to the high-level strategy and our value-creation model. So the VMS market is very large. It's more than $160 billion, and it's growing healthily at about 5%. Now, about 2/3 of this market is in the U.S., China and Europe. These are our priority geographies as well. When you break down the larger VMS category, you get into 4 big subsegments, where the core vitamins and dietary supplements combined with functional , represents about 2/3 of that market. And that are the subsegments where we are focusing on. But we could still say 5% growth in this overarching market, how do you unleash this level of growth? And we really -- within this large market, we focus on the high-growth segments and the benefit spaces that are really ripe for disruption and that allows us to drive rapid market development. Functional hydration, I talked about that with Liquid I.V., massive, massive territory. Beauty from Within is a huge opportunity to grow and expand the market and the way consumers interact with these products and address their beauty needs from within, but all of them play a critical role in our growth strategy. Now, this trend is not a fact. This is a trend that's underpinned by millennials and Gen Zs, but this shift is really systemic and structural. Now there are 4 really critical underlying drivers of this shift. And I think personally, the rapid development in our scientific understanding and knowledge and our ability to translate that science into high-efficacy products with total transparency is a critical driver of the trend, and it's a sustaining and accelerating aspect of it. Two great examples, of course, Nutrafol being one, and the other one being SmartyPants, which has an incredibly dense claims framework and full transparency end to end. I talked about benefit-led and personalized OLLY as to [ post a trial ] of benefit-led and personalized. Big benefit segments like stress and sleep, simple, clear, high-efficacy products that allows the user to personalize their own machine to fit with their needs and their lifestyle. Purpose-driven and better-for-you kind of nearly goes without saying. Many of our companies had their purpose to find before they sold a single product. I believe purpose really drives our internal performance culture as well as our external impact. And then last but not least, this is a generation that is best informed in history. Gen Z research and discover everything about your product at a level that it amazes me every day I interact with this group. Their need for social proof, influence or endorsement, ratings and reviews, but also right down into looking at your clinical studies and the science behind your products. Gen Z, I think, is the most informed generation that we're going to have to date and day, are a great opportunity for companies like us. So I have a little video on the -- from SmartyPants to give you an illustration. Just noticed that in front of the pack, dense with claims. [Presentation]

So when you put all of this together, this is what makes me so optimistic and excited about this business unit and the market tailwinds that we can enjoy. What we're seeing is that the majority of the category growth will come from the Enjoy formats, gummies and powders. And 80% of our business is already in gummies and powders. The segments that we are focusing on, the disrupted high-growth segments, grow at least 2x category average, and 65% of our business is already in these segments. The majority of the projected category growth is going to come from e-comm and online. And already today, 40% of our sales are from e-comm. And then when we add Nutrafol to the family, that's already 50%. And also, really importantly, particularly around the shift in the category, by 2040, 58% of consumption in this category is projected to come from millennials and Gen Z that is overwhelming the focus of our business with 75% of our media spend going towards millennials and Gen Z consumers. So how do you organize to unlock this amazing growth opportunity? Well, the way we think about this is, we have the operating companies. The operating companies focus on day-to-day execution, they are inherently growth machines. They have the things that they need to make rapid decisions operationally in their executive hands, in a way. If you're growing a company at more than 50%, I'd have to think of it as a very practical problem to solve, and they solve that every day. But they, and I'm going to go all the way to the bottom of the slide here, they are underpinned and this is facilitated by our partnership in Microsoft and a few other of Unilever's tech partners. We are together building out, leveraging Unilever's capabilities in this space. We're building on a common tech backbone, anchored in a Microsoft ERP system, but with demand planning, supply systems and linking the back end of our business to the front end of our business. And by having this common backbone, it really allows us to deploy the best of Unilever in data and analytics, we are able to build large lookalike segments. Each company can draw from the shared data of everyone. We can tie that together with our internal data to drive really fast and rapid and correct decision making. We are building on a leading science platform that supports the companies in their innovation. We're bringing leading experts from the industry to complement our own experience. Of course, we brought together our sales at -- salesforce here in the United States, so we can really take these real strong online businesses and bring them to our retail partners with clear focus and strength. One great example is Onnit, that's nearly no retail presence, and we're launching this year with Walmart at scale. Obviously, this is a very regulated industry. So we are building out a rigorous regulatory and quality assurance platform. About 80% of regulatory is actually in post launch, and that's where we can scale and have a common platform for all of our companies to really meet Unilever's standards of integrity and quality. And of course, Unilever brings international expansion. Our capability platforms facilitate that expansion and connects these companies with their markets around the world. But that's not all because we can link now also our operations. We can unlock through our network supply chain significant margin pockets, where relevant. And we can unlock efficiencies in the system. All facilitated by the common tech backbone. And of course, the back office, I don't know, synergies in the back office. But more importantly, it's the quality of the data, the quality of the financial information, the real-time aspect of that, that can then, again, supports these growth companies. So that is our operating model in a nutshell. So we've set our ambition to reach a very, I think, realistic 3 billion turnover. Of course, we will continue our rigorous and disciplined approach to M&A. But the majority of that growth will still come from organic growth. And it's really science-led innovations. It's about big brand investments to increase awareness, penetration and availability. And of course, it's about unlocking the synergies that we get from our capability platforms, from Unilever's capabilities and cost of revenue synergies. Our geographic focus is simple, is that we have a China for China business team, and it's really unlocking China first with a cross-border e-comm, then Europe anchored in our Equilibra business. And yes, we believe that having more than 50% of our business online is another critical aspect of this ambition, and one that we will achieve relatively quickly. So what I hope you've taken away from this is that we now have a sizable business with very strong like-for-like growth since 2019 when it became something more significant. We have a portfolio of fast-growing, lifestyle-led, science-driven brands that are very, very relevant and distinct in the marketplace. We are able to unlock market development by focusing on the attractive segments, the product formats that will grow in the future and the channels of the future. This is all underpinned by the platforms of Unilever's capabilities so that we can more rapidly scale and unlock the value. And we have kind of a realistic ambition of reaching 3 billion turnover. That's what I hope you took out of this. I'm now going to hand it back to Richard to manage our Q&A.

Thanks, Jostein. [Operator Instructions] So Jostein, we've had a few come in, but maybe just to start off with the question, which I've had a few times from investors. Why is Unilever a good owner of these assets? How does Unilever add to them and create value?

It's a great question, and I hope some of that came through in the presentation. But the VMS category, in one sense, operates at the intersection between the sort of nutrition business, the food businesses and the beauty businesses. We bring unique capabilities and understanding and expertise, both from science and claims, et cetera, into this space. I think secondly, the shift to being more of a lifestyle-driven category really increases the role of branding, purposeful brands that really connect deeply and emotionally with users but backed by really strong science and efficacy, and that's an area where Unilever has incredible expertise. The one area that I do love to double-click on is data and analytics. I think as we move towards a cookieless world and as the online ecosystem scales globally, we are able to bring real expertise, knowledge, tools that can really back up these growth machines and enhance their performance. So I think those are a few other things. Last point I'd like to say is, we are obviously also bringing in a lot of complementary expertise from the marketplace, fantastic expertise in R&D, in regulatory and legal, so that we really excel in these areas where this industry is different from when we competed before.

Thanks, Jostein. A question from David Hayes from SocGen about our acquisition process. What are the criteria for deals to pursue? And without mentioning any names, can you say why you did not complete other opportunities? And then the second part to that question is, what have you learned with -- from your successes or failures over the last few years on such deals? And are you better at this process than you were 5 years ago?

Those are good -- very good questions. Thank you for the question. Yes, the process, when you come into it, it's kind of frustratingly rigorous because you feel like you get close and deep in and then you hit a red flag and you walk away. But what we have learned is, you got to go deep. You really got to go deep to really unlock the unique capabilities, the unique and distinct features of the company, and not just a superficial short-term how they show up. So our process goes deeply into a lot of companies. We then make a subset and then we go deeper, deeper, deeper again. And they really have to add something distinct to our portfolio. They have to have be in benefit spaces or segments where we see great market development opportunity. They have to have an inherent margin structure that allows us to generate and unlock value in the long term. They should have an appropriate geographic and channel footprint. They have to be digital first. They might not just be an e-comm business, but they have to be digitally native. Now -- so that's our -- some of our criteria. As I said, we looked at more than 60 companies to arrive at 3 deals, which is, I think, very anemic of how we do it. We have a significant team and capability that focus on this every day. In terms of learnings or regrets, I would say it's -- so far, we are extremely pleased both with how we are performing versus the business cases, and our selective approach allows us to really deliver on our promises. I have, of course, seen companies go to others. But I have never regretted that. I can say that hand on heart because we have looked at them, and we have a very clear point of view why they were not a good fit for us.

Thanks, Jostein. I talk to two past questions from Faham Baig at Credit Suisse. Are you willing to say what the margin is of the business? And how do you expect margins to progress over the next few years? And then the other part of the question is, what do you see as being key barriers to entry in the category?

So on the margin question, I do hope that -- we don't actually give a specific guidance at this level on margin. But I hope from the presentation that you could see that we have significant opportunities to unlock industrial value through our common tech backbone, synergies and supply chain, that we have opportunities to unlock synergies in the growth machine to grow faster and more cost efficiently. One example is right now, we've just done a deal with Tinuiti. It has become our, across all companies, media partner for Amazon and in digital, and it just really unlocks more capability at a lower cost. So I am eternally optimistic that we will make a very appropriate contribution to Unilever on margin as well as growth, but growth remains our #1 priority. In terms of barriers to entry and moats, it's very, very interesting. The old sort of scale moats that you could say that you only get access to customers if you have a certain scale, that you need a certain scale and manufacturing, they are no longer really, really true. We believe that the true competitive moats in this industry comes from the powerful brands that we have, with strong net positive promoter scores. Our strong social presence, influencers, communities, our solid ratings and reviews at Amazon and our future-facing science and insights that would allow us to drive clinically proven, high-efficacy product delivery. So it is interesting as you look at competitive moats and scale advantages in this industry. And I feel extremely blessed that we are positioned without any stranded assets and with lots of opportunity to add value.

Okay. Thank you. A question here, very relevant to today, from Eva Quiroga at Bank of America. How resilient is a category like VMS in an environment of rapidly deteriorating consumer confidence and purchasing power?

Thank you. That's a great question. And one, of course, that is very relevant right now as we are looking at some turbulent times ahead. But I will say, we've also had some turbulent times behind us over these last years. And I think the #1 point here is, people are putting their health high on their agenda. Their health and their comfort and psychological comfort in supporting their health has, if anything, shifted dramatically and in a permanent way. So I think that is the biggest aspect of -- as we enter into potential recession, that will be an important factor. So that's a first. If you look at companies like Nutrafol, which is my -- one of my favorite examples, where somebody -- one of their users called their helpline and say, "Look, I'm down to rent, food and Nutrafol." Because again, when you're going through these tough times, you do not want to let go of what is really building your confidence and you're feeling the efficacy of your hair health recovery. Nutrafol immediately shipped 3 months of free supplies so they could really support us through this. But their loyalty is high around our brand. So that gives me confidence as we go into this next phase.

Thanks, Jostein. Questions from James Targett at Berenberg, just to see if he can get some numbers out of you. What proportion of your sales are currently outside the U.S.? And the other part is, what percentage of your sales are direct to consumer versus Amazon or other online channels?

Yes. So our focus at this stage has really been to build a strong business in China. First, through cross-border e-commerce, we've launched OLLY and SmartyPants, and we are looking at the full portfolio. And we're building a really strong China for China capability and skill set. So that is the first area. Second area is Europe. We have a strong position in Italy with Equilibra. And we will continue to look at Europe as an interesting market, recognizing there are regulatory complexities, but treating those more or less competitive opportunities, their limitations. When you're growing more than 50% like-for-like in the United States, kind of tough to get your percentages up everywhere. So we are still driven a lot by the U.S., but we see enormous international potential.

Okay. There's a series of questions from John Ennis. So let me try break it down. VMS is a fragmented category. So can you better explain how you differentiate within this? Is the differentiation in the efficacy of the product? Or is it really down to branding? And does this require a higher level of marketing and R&D versus you would normally expect in Unilever?

Great question, and thank you. When you're in a problem/solution world, the market gets extremely fragmented because there are so many very small and specific problems that can be addressed. When you move into health as a lifestyle pursuit and you're moving into segments or what we call big benefit platforms, where you're offering a clear benefit to the user through a stack of ingredients that really addresses that need, you move from a very fragmented problem world to a much more powered and focused benefit world. Obviously, it still allows for a lot of personalization. So we do need a relatively broad portfolio, but it's not very different from other FMCG categories in terms of that modern VMS business. So it's fragmented, it's -- the move is towards these bigger disruptive segments. On the -- sorry, what was the second one again? I got myself all tied into it.

Does it require higher levels of marketing or R&D spend versus what you'd normally expect in something like Unilever?

It's a good point. So no, we do spend substantially, and we are stepping up our investments in marketing. And marketing in this space, it is part education, how do you really educate the user about how we can support their health journey and part building trust in the efficacy of the product. Now, it does not require a substantially higher R&D investment. We have a model where we leverage Unilever's core competence, some internal specialist knowledge and a whole host of partners that we collaborate with in a very cost efficient, but also really tapping into leading-edge science and technology. Scientists like to see that their science has an impact on humanity. So being a facilitator of that is actually quite gratifying. So no, I think, yes, we will continue to see sustained investments in marketing, in community building, in both performance and awareness building. R&D, we will step up R&D because I really believe the future is in core science and how we translate that into products, but it's not inherently much higher investment requirement, from my point of view.

Okay. And the other part to the question was, how would you break down your organic growth between that, which is growing penetration in existing markets versus launching into new geographies?

At the moment, the majority of our growth is coming from existing geographies but through market development versus gaining share of existing segments. So powdered functional hydration was not a major segment compared to the RTD equivalent. It was really an RTD market. And along comes Liquid I.V. with a product, which just has so much more efficacy and impact, you feel that impact immediately and has really revolutionized that market. So yes, we're #1 in powdered hydration. That's not how we see the market. We see the market as all hydration needs and this enormous percentage of adult population that is suffering from dehydration regularly.

Okay. Thanks, Jostein. A very succinct question from Jeff Stent at Exane. What proportion of your sales are from Amazon and Costco?

So the beauty of our portfolio and our approach to M&A is that each company brings something unique. So while SmartyPants is really, really strong on Amazon, Liquid I.V. is really, really strong and has an incredible relationship with Costco. OLLY is powerful at Target and at Walmart. Onnit, Nutrafol, a strong D2C dot-com businesses. So as a group, we are very, very balanced. However, I will say, we do have really leading edge and tight relationships with Costco, Target and Walmart, that goes without saying. But I'm also really impressed with the breadth of customer engagements that we're getting right now in the U.S. I think in the drug channel, the two main players in the drug channel have Liquid I.V. in 5 to 7 store locations, which is kind of unheard of that you're getting display in 7 locations and 1 store. And what we're seeing is, it is vastly incremental for each individual area. Sorry, if you don't...

That's fine. Thank you. Don't give away anything uncomfortable. A question from Warren Ackerman at Barclays about scaling the VMS business internationally. How quickly can you do that? And specifically, if you want to roll out, say, SmartyPants, what needs to happen from a regulatory perspective? And how long does that take?

So it varies greatly by product area, in terms of the regulatory barrier. Liquid I.V. is relatively simple from a regulatory perspective. It's, in the U.S., classified as a food. In Canada, it is a VMS. But it's a relatively simple product to manage from a regulatory and rollout perspective. Now, it can sound extremely complex, but I'm actually -- for example, SmartyPants formulations today are regulatorily approved for Continental Europe. So the barrier for us is the normal barriers of coming up with a powerful repeatable models, connecting locally with how each culture sees health and their health journey and health as a lifestyle. And these are things that we're eminently good at doing at Unilever. So it's really combining that product know-how and the power of the U.S. model with Unilever geographical reach and deep local consumer understanding. In terms of speed, I count money, not speed. So I am very focused on unlocking the big opportunities and getting scale behind us as fast as I can. I'm very wary of fragmenting myself over a very small, many small opportunities. So -- but again, this market is concentrated. It's 2/3 U.S., China and Europe. So I feel good about that. We do have some seeding markets, where we say there are some places where we might want to bet on the future. India, for example, we have a very strong presence in India, and it's a very natural place for us to look at as a seeding market for the future. But more to come on international expansion that follow the money, stay focused, execute in a locally relevant way.

Okay. A question from Chris Pitcher at Redburn. How many of the founders are still with the business? And how do you incentivize them to stay?

That's a great question. We have found in our experience that our brilliant and visionary founders do better as advisers and supporters than CEOs. So Nutrafol is really the exception, where we have a very unique situation and talent. But in the other businesses, they are now run by a CEO and our leadership team, an executive team. And the founders are active in supporting those teams and supporting and enhancing their own legacies and their own impact that they were a big part of why they wanted to sell to us, but they're not actually in leadership day-to-day positions. How do we keep them engaged? Content. They created these things. They love it. It's part of them, it's part of their identity, they wanted to succeed. And they [ completed ] in varying degrees. Eric Ryan is our brand guru for the whole group. Eric created in method, cleaners, OLLY and [ Welly ]. And he's just a phenomenal resource for us, a phenomenal partner, but he doesn't run any day-to-day businesses.

Question from Heidi Rauber of Fidelity. Is management compensation tied to the 3 billion turnover target, particularly the organic element of it? And then the other question about the new organization, how will you work with the beauty side of the new division?

Two great questions. So yes, our incentive structure very much mirrors and drives our focus on very strong organic growth within -- in a responsible profit delivery, but it's really driven by delivering on that 3 billion vision in very distinct and clear stepping stones. We do combine -- to ensure that we do that, we do combine a standard sort of Unilever system of base pay and a bonus pay with a long-term incentive plan that really ties the whole organization to that outcome. So that's one really important aspect where we sort of mirror the equity feeling and the feeling of we are really, really all in to deliver on the growth. So that was the first question. And then, of course, yes, I keep doing this. I guess so into that first question. So you had a second one? You shouldn't do this to me, Rich.

Working with the beauty side of the new division within -- Fernando saying, how you work with Prestige?

Yes. I think as Unilever has now moved with the Compass organization to a really focused organization, where everybody is kind of tied directly to a P&L and an outcome. This is really beneficial for us because we were in that model ahead of the new Compass organization. So this more focused and dedicated approach across Unilever really helps us in how we drive out our international business. In terms of the interfacing with Beauty & Wellbeing, this is a natural home for this business. We have great synergies in work across the microbiome, across branding. So a lot of these things come together. I mean, Nutrafol is probably the poster child when we're bringing our real deep clinical knowledge and science in hair topical hair, together with a deep, from inside out, Nutrafol benefit, executed in a very science-oriented way, but also with the outcomes that we know so well from the beauty industry. So that's a very natural area that brings more focus to us, and it helps us in executing on our vision.

Thanks, Jostein. And a question from another investor who's asked to be anonymous. Can you say anything about the contribution of price and mix to category growth versus volumes, either in the past or in the future? And then the second part of that question is, with SmartyPants costing about GBP 35 per pack in the U.K., is there a limit to how much consumers will pay for these products?

Great. So on the first part, we have been very fortunate, in that we've been able to drive a very aggressive efficiency program behind these companies. So that we've kept pricing -- the pricing lever relatively limited, and it's really mix and volume that's driving our growth at the moment. And that is reassuring as we might go into a more challenging economic environment. We feel we are well positioned to face that. And on the willingness to pick, it's more value for money. And SmartyPants, what is a [Technical Difficulty] as it is a [Technical Difficulty]. It's also the only [Technical Difficulty]. So you're really -- when you start breaking it down, 2 or 3 other supplements brought to 1 execution with SmartyPants. So yes, there's a limit. I think SmartyPants provides really great value when you look at the totality of what you're getting in that product. It's obviously our job to ensure that the consumer understands and appreciates that value, and that's our focus as we sharpen the marketing mix behind SmartyPants.

Thanks, Jostein. You're breaking up a little bit. Anyway, I think we've been more or less out of time, but I'll just ask you one last fairly significant question from Karel Zoete at Kepler Cheuvreux. I assume you use co-packers for much of your production, with a bigger scale allow for your own mass production at some point, insight into your production strategy.

Thank you for that, and apologies for the bad connection. I'm sure it's my kids that I'm not on. Now, in terms of the supply chain, of course, as we scale, there are [Technical Difficulty] priorities to optimize elements of the supply chain. And there are significant margin pockets there. However, we really appreciate our partners at our co-packers. I really believe that we've learned a lot about having resilient supply chain that can handle a shock about having highly skilled and focused partners and do what they do really, really well. So whilst we -- so we will always look at our supply chain as a network of partners and internal. We will bring in parts of our supply chain where there are significant margin opportunities and/or where there is significant competitive advantage. But we will not default to bring an all-in strategy, both due to the skills and -- specialty skills and capabilities of our partners and to have a resilient system that can handle another COVID hit, if that should come.

Okay. Thanks, Jostein. So I think we're going to leave it there. I'd like to thank everybody for listening and for their questions. And thank Jostein and Fernando for taking part and for the presentations. So thank you, everybody, and good afternoon, good morning.