Unilever PLC (ULVR) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Deutsche Bank Consumer Conference, Paris. We're delighted to host this event again this year, our 20th year. We have a fantastic array of companies attending, and I hope you have a rewarding and enjoyable 3 days. It takes a lot of hard work and commitment to put this conference together, and a big thank you to the whole Deutsche Bank team. You can be sure of that level of commitment to the consumer franchise at the firm for another 20 years and beyond. I'd like to now introduce our first speakers. Please welcome to the stage, Graeme Pitkethly, Group CEO of Unilever, and delighted that joining Graeme is Fernando Fernandez, President of the Beauty and well-being business group. Graeme and Fernando, welcome to the stage.

Thank you, Tom. Thanks very much. I appreciate the quick promotion there. I never quite made it that far. So good morning, everybody. Thanks, Tom, for the introduction. It really are super to be back in Paris and in fact, to open the conference this morning. First, I'm afraid I'd like to draw your attention to the usual disclaimer regarding forward-looking statements and non-GAAP measures, et cetera. So as Tom said, I am joined today by my colleague, Fernando Fernandez. Fernando is President of our beauty and well-being business group. I thought I would kick off by giving a brief overview of Unilever, and then talk about the building blocks that we've put in place to deliver higher levels of growth, and that includes a new organization that is making a really big difference to how the company operates and how the company performs. Fernando is then going to take you through the strategy and performance of beauty and well-being in particular. Beauty and well-being is home to big brands like Dove and Vaseline. It's also home to our Prestige Beauty and Health & Wellbeing units with brands like Dermalogica, Paula's Choice, Liquid I.V. and Nutrafol. Now while many of you know us very well already, some of you won't follow us that closely. So let me just start by giving an overview perhaps on the business of Unilever at quite a high level. Last year, we generated a turnover of EUR 60 billion with an underlying operating margin of 16.1%, and a free cash flow of over EUR 5 billion. We're now organized into 5 business groups, really important point this. Each business group is an end-to-end global business of, as you can see on the chart, anywhere between EUR 8 billion and EUR 14 billion of turnover in its own right. Our largest markets are the U.S., India, China, Brazil and Indonesia. And nearly 60% of Unilever's business comes from the emerging markets. We're a very large reaching big footprint company. Consumers use our products in 190 countries around the world and 3.4 billion people use a Unilever product every single day. Now we have 14 global brands, each of which generates over EUR 1 billion of turnover annually. And together, those 14 brands account for 54% of group turnover. We're a big investor. We invest over EUR 900 million a year in research and development, and over 50% of our innovation is now underpinned by differentiated technologies that are either patented directly or are extremely difficult to replicate. I think that's an important point. We talked the key Globescan sustainability leaders survey for every one of the last 12 years. And for the last 5 years, our supply chain has been recognized in the master's category of Gartner's supply chain top 25 report. That's alongside only 3 other global supply chains in the world. Now growth is our #1 priority, but we are clear that our track record for growth has not been where we wanted it to be. And so we have put in place a number of building blocks to step up our growth to higher levels and deliver that more consistently. So allow me to take you through these if I can. Firstly, we've made a very clear set of strategic choices. Our portfolio, brand, market and channel priorities reflect quite simply where we see the greatest growth and value potential. We have a reshaped portfolio, which I'm going to talk about in a moment with our 5 business groups bringing a much more distinct and sharpened category focus to the company. Our 5 business groups are also putting more resources and more focus behind our biggest brands, what we call the core in each business. And we're seeing that reflected in performance with the growth rates for those billion euro brands that I mentioned earlier, consistently ahead of the Unilever average growth rate. Now our 3 top priority markets are the U.S., India and China, and that's based on the scale of the growth opportunity from population growth, urbanization, increased affluence and the potential for market development. But please also remember the full emerging market footprint of Unilever, 60% of the company, as I said. That is where we are unique in scale and it's where we're at our best. Now across all the business groups, the digital commerce channel is a key priority. We've invested very significantly behind our capability here, and we are seeing the results with strong DCOM growth delivery in a channel that now makes up truly 15% of Unilever. Now the second building block of stepped-up performance comes through capital allocation, specifically the work that we've done to reshape Unilever towards higher growth spaces. Now since 2017, we've rotated 17% of our portfolio by exiting Spreads and tea by divesting some smaller nonstrategic brands and most recently, the Suave brand in North America. At the same time, we've invested to build scale businesses in Prestige Beauty and Health & Wellbeing there are combined now 20% of Fernando's business, and each has delivered 9 consecutive quarters of volume led double-digit growth. I'm sure Fernando is going to cover these in more detail, of course. Lastly, we have stepped up our operating grip and execution in a number of areas. Starting with product quality and performance. Our products need to perform and exceed consumer expectations. Yet back in 2019, only around half of our products when tested were clearly superior to our competitors' products. This key metric now sits at 70%, and we will keep driving this because consumers expect superiority, especially when they're having to pay more for their favorite brands and products. Second, innovation driven by research, science and technology. We needed to innovate better but also to simplify the innovation portfolio and to use our scale better. In the past, we've relied too much on the local-for-local mindset, and this resulted in a proliferation of smaller innovations and new SKUs, which pulled focus and investment away from our core. Each of our business groups is now prioritizing fewer but bigger innovation projects. They're also using better data and insights alongside clear accountability to drive faster action around brand and SKU rationalization. Now these aren't always easy decisions as delistings impact your top line and share in the short term, but they are the right strategic actions to make our brand and category focus sharper. We now have 40% fewer innovation projects, but the average size of each project has doubled, and this is flowing through into better innovation performance. The incremental turnover from innovation last year was up 50% versus 2021, with more differentiated technology, as I mentioned earlier. And finally, digital transformation is taking place at scale across the entire organization. You could talk a lot about this, but it ranges from understanding consumer journeys better to how we run our transactional backbone in Unilever business operations. And in our supply chain, machine learning takes our demand forecasting and supply modeling to new levels and technology is driving productivity, efficiency and agility in our factories, and that allows us to respond better to changes in consumer and customer demand, which, of course, are happening much faster. And so far this year, 2 more of our factories around the world were awarded what's known as Lighthouse status by the World Economic Forum. And we now, in fact, have at least one Lighthouse factory in every one of our business groups. So with the building blocks in place and the disruption of COVID behind us, we stepped up investment in 2022 in several important areas. First, brand and marketing investment. In constant currencies, marketing spend increased by EUR 0.5 billion to EUR 7.8 billion, and more than 80% of that investment last year went directly into media. We will increase our brand and marketing investment again this year. Secondly, R&D investment was up as well by EUR 60 million to just over EUR 900 million for the year. Our R&D organization is proving to be a stream of world-class science and technology, and is bringing that to our business groups using a suite of digital tools to bring bigger and better innovation to our business. And third, CapEx where our investment levels have been around 2.5% to 3% of turnover, if you exclude the COVID period. In 2022, we returned investment to the upper end of this range as we invested in additional capacity. Just one example of this is an $850 million investment that we're making in our North American manufacturing and logistics over the next 3 years to improve our customer service and our resiliency. And that includes a new -- one of those new Lighthouse factories in Mexico for both the Beauty & Wellbeing and the Personal Care business groups. In 2023, we expect CapEx will be above 3% of turnover. So I think it's an understatement to say that the last few years have been a volatile period. First, with the pandemic and then with unprecedented and broad-based inflation. It has no doubt been quite difficult to gauge the underlying performance of any of the companies in our sector, but we are confident that we have stepped up our performance and that we have the building blocks in place to sustain that. When inflation started, our strategy was really clear. It was the land price and so protect our brand and marketing investment, especially where we hold market-leading positions. And as a result, we grew by 9.2% in 2022, obviously, with a high component of pricing. Volumes in '22 were down by 2.1%, which was less than we had expected they might be down. And we started 2023 well with underlying sales growth of 10.5% in the first quarter. Price growth remains high at 10.7%, but it has moderated versus the fourth quarter, and volumes in the first quarter were down only 0.2%. Now we did benefit from some one-offs in that. But if I am off for these, we estimate that volumes were down only between 1% and 2% over the first quarter. The percentage of our business winning market share at Q1 was 48%, and we knew that leading on price would have some impact on this measure of competitiveness. As already mentioned, the business groups are taking decisions on brand and SKU rationalization, which has an impact on percent business winning in the short term. And as a result, we are currently below 50% business winning. And of course, as an MAT and moving annual total measure, any strategic actions that we take tend to impact percent winning for up to 12 months, because it's a 12-month measure. Percent business winning is also quite a tough measure. It's a pretty high bar. And parts of the portfolio where our strategy is very clearly to invest for growth, things like Prestige Beauty, Health & Wellbeing. And even our out-of-home ice cream business are largely not included in the business winning metric because reliable share data isn't available. So while the headline measure sits in the 40s, as the business group sharpen our strategies and our portfolios and as we land pricing, our goal is, of course, to get it back firmly into the 50s. I want to take a minute to talk about our new organization and the difference that, that's making to our operations and to our performance. It's, as I said, now based on 5 business groups, a very lean corporate center and a low-cost technology-driven foundation in Unilever business operations, that's the little blue box at the bottom there. The business groups are responsible for portfolio and brand strategy and related investments, right the way through to daily performance management and grip. So strategy and performance sit in the same place for the first time ever in Unilever. And Unilever business operations is providing all of the transactional processes, the technology and the infrastructure that can fully leverage Unilever's scale. We're seeing many benefits, whether that's in the clock speed of decision-making or sharper accountability for strategy and performance, clearer choices, more prioritization, leading to consistent investment behind strategy, which in turn delivers more consistent performance. A couple of examples. Personal Care has delisted over 5,000 SKUs and exited 60 local brands as part of its rationalization program. Home care, nutrition and ice cream have also taken very proactive actions to exit smaller unprofitable parts of their businesses, and to refocus the resources that are released to their bigger brands and bigger initiatives. Overall, we are pleased with how the organization has landed. It's been a very big change. There's more to do, but the bulk of the work is done, and that puts another building block in place to accelerate our growth and deliver it more consistently. On that note, let me hand over to Fernando, who's going to talk about, as I said, Beauty & Wellbeing business group, and get a bit deeper into how Unilever has changed under our new organization. Fernando, over to you.

Thank you, Graeme, and thanks, everyone, for being with us today. In the next few minutes, I will give you a glimpse on our Beauty & Wellbeing business group. It's a business group I have been leading since April last year. Prior to that, I was the President of Unilever in Latin America. And I will cover the spaces where we play, our value creation model and our strategy going forward. The market in which we compete is sizable, EUR 385 billion is attractive with structurally high margin, and growing consistently across time between 4% and 6% in hard currency. Our presence in beauty is mainly in 2 categories: skin care; and hair care. With a combined market value of around EUR 225 billion. We compete also in the health space in what we call Vitamins, Minerals and Supplements. It's a very significant business disproportionately important in North America, similar size to as skin care, EUR 160 billion. In beauty, we don't compete or we have a marginal presence in 2 important categories: color cosmetics; and fragrances that are around EUR 120 billion. Many people ask me why Unilever has put together Beauty & Wellbeing. And there are a few reasons for that. First of all, the industry, these 2 industries share a common element. There are categories in which consumers invest on themselves, not on their families, not on their homes on themselves, also share some important dynamics. There is hypersegmentation of demand spaces, leading to fragmentation of offering and a continued shift into premium segments. And with that, the economics of online and specialized channels are much more viable. As a result of this, the channel footprint of these categories are very different to the other business groups of Unilever. And you can see in the chart that particularly for VMS and for skin care, specialized channels, both in beauty and health and online represent close to 80% of the revenue of these categories. It is also growing in hair care, but of course, to a lesser extent. Let me go a bit into our business. We closed 2022 with a revenue of EUR 12 billion, EUR 12.2 billion to be more precise. Our business is built upon 4 pillars: core Hair, the Hair Care process we sell fundamentally in the grocery channels and in drug stores represents 55% of our revenue; core Skin, where we have a very strong presence, particularly in Asia, represents 25% of our business. So 80% of our revenue is fundamentally in the traditional channels of grocery and drug stores. Then we have 2 new pillars that we have built in the last few years through acquisitions, Prestige Beauty, fundamentally Skin Care, and Health & Wellbeing. These 2 business represents 20% of our revenue and 50% of their sales are in online. In terms of competitive position, we are contending for global leadership in Hair Care. As I mentioned before, we have very strong positions in Skin Care in Asia, and we are an insertion player in Prestige Beauty and Health & Wellbeing. When we look at geographical landscape, Asia, we call it here Asia, Pacific -- Asia, Africa and Pacific but fundamentally, Asia, represents 55% of our revenue. But I would like you to notice the significant presence that we have now in North America after the set of acquisitions we have done fundamentally in the premium segment in Prestige Beauty and health. North America now for the business group represent more than 1/3 of our revenue. Our performance in the last 3 years in terms of top line has been disappointing for us. So we have been growing close to 4%. We believe that this level of growth is below the fundamentals of what this business can deliver is definitely below our ambition. And this means that reigniting volume-led growth is by far our #1 priority. Why is this important for Unilever as a whole? Because as I mentioned before, with a structurally high margin, this business is highly accretive to Unilever as a whole. Beauty & Wellbeing represents 20% of the revenue of Unilever, but 28% of the profit, absolutely fundamental to grow volumes in this kind of business. When we look at our -- the geographical split of this business, -- we basically divide our business in 2 big building blocks, what we call developed markets plus China and D&E markets. Why this division fundamentally, due to the different stages of market development, due to the different competitive position we have, and also because the different portfolio play that we will have in these 2 different building blocks. As you can see, the business is a split 50-50 between the volume markets in China and one side and the D&E markets in the other side, will either kind of a split, it gives a balanced presence and a balanced exposure to hard currency and to high-growth markets. And as you can see in the chart also, our competitive position is very different. When you look at developed markets, we are a challenger. Our relative market share is 0.7%. So 70% the size of the leading player in this market. But when you look at our presence in D&E markets, it's very, very strong. We are 2.3x the size of our closest competitor in the D&E market. Important to call how significant for us is India. In India, our relative market share is more than 4x our closer competitor when it comes to Hair Care and Skin Care. What positions us exceptionally well in one of the key markets of the future. I'm absolutely convinced that India will be for Unilever Beauty & Wellbeing in the next 10 to 15 years, what China has been for some of our competitors in the last decade or so. I would like to highlight also the importance of investment we are doing in premiumizing our portfolio through the acquisitions we have done in Prestige and Health & Wellbeing -- Prestige Beauty and Health & Wellbeing. As you can see, they represent today 20% of our revenue, but we are allocating there more than 30% of our investment, both in terms of brand support and organizational infrastructure. As I mentioned before, structural is the high-margin category, and we have compared favorably when it comes to margin to profitability with our peers in the last decade or so. This is the kind of margin that we have achieved last year, around 19%. And that I believe is very, very attractive. When it comes to growth and you look at the business we have acquired in Prestige Beauty and in Health & Wellbeing. We have been definitely beating the market growth rates. This is a comparison at a global level. As you can see, we have been growing both in Prestige and Health & Wellbeing well above the market. But you have to take into account also that our business in Prestige Beauty and Health & Wellbeing are U.S.-centric. And when you compare our relative performance where peers in the U.S., we are growing 2.5x average market growth rate. This basically highlights what is the main issue and the main opportunity in our portfolio. Our core Hair and Skin business has not been performing. We have been growing at half the growth rate of the market, and that has to change. We have a positive geographic footprint that give us tailwinds but it's absolutely imperative for us to accelerate premiumization win in the emerging segments and formats and increase our exposure to faster-growing channels like drug stores and online, where our competitive position is below fair share. At the center of our financial growth model is the principle of growing volumes, driving positive means and shifting our portfolio into fastest-growing channels. Our aim in the long run is to deliver top line growth about 5% consistently year after year and delivering moderate margin expansion. This is the kind of performance that the best class in the industry players have done in the last 10 years or so. To do that, we have to deliver against 2 fundamental goals. In core Hair and Skin, we need to accelerate our top line while sustaining our existing high margins. In Prestige Beauty and Health & Wellbeing, we need to sustain our current delivery of double-digit growth and made these 2 pieces of our business, at least 30% of our Beauty and Wellbeing business that we expect to do by 2025. If we do that in Prestige and Health & Wellbeing, we're absolutely convinced also that we will be expanding our margins through top line leverage and the delivery of significant synergies that has been already identified. Until now I have basically told you what we will do, but I'm sure you are expecting to know how we will do it. These are the consumer trends that are fundamentally informing our strategy going forward. There is an increasing demand from consumers in terms of authenticity, transparency and science that fundamentally define 4 key trends that are reshaping the industry now. They are all linked with the unprecedented access to information that consumers have today in the digital age. Consumers are looking for more inclusive beauty for brands that talk to their personal identities and communities. They are looking for transformational results through science-backed hero products with transparent ingredients. They are prepared to pay a premium for indulgent experiences. And with these consumers basically be much more conscious about what they put on their voice. The border line between beauty and health is really blurring. We believe that Unilever is absolutely well positioned to succeed in this kind of space. Purpose authenticity inclusive brand has been in the core of what we have been doing for years. We have excellent science that we have not leveraged of the scale. The best science and technology of Unilever in Beauty and Wellbeing is only deployed in 25% of the revenue, and we are changing that at scale very, very soon. And as I mentioned before, the border line between Beauty and Health is blurring and acquisitions like Nutrafol are showing the potential of this kind of positions for a company that Unilever really growing at scale very fast. All these trends are reshaping the markets in terms of premiumization. And with that, as I mentioned before, the economics of online and specialized channels are much more viable than in the past. Where we will focus, very clear differentiated portfolio for our coherent skin business and Prestige and Beauty. In core Hair & Skin, we will disproportionately focus in our 6 strongest brands, that Vaseline, Clear, Lakme, these kind of brands, big, big brands with very, very strong image, particularly in our strongholds in D&E. And as I mentioned before, we have already shifted significant resources into our most profitable strongholds of D&E. And you could see in our results that this has accelerated growth in a significant manner in the last few quarters. India, #1 priority, disproportionately important for us. But in our core, we have many, many strong holds across Southeast Asia, South Asia, Latin America, Middle East. When it comes to Prestige and Health & Wellbeing, we have consciously decided to cement our position in the U.S. before going international. And we have done it, as I mentioned before, with the performance that is 2.5x the growth rate of our competition in the market. But now we are ready to really go international at the scale with the platforms of brands that we can expand consistently and coherently across the globe, something that we don't have now in our core business. We have brands like Dermalogica, like Paula's Choice, like Liquid I.V., like Nutrafol that will be core of our international expansion. On top of these 2 brands -- these 4 brands, Hourglass and Tatcha also we see a lot of potential in markets like Europe and China. Given the importance of increasing our exposure to premium and the importance that for this Prestige Beauty and Health & Wellbeing have in our strategy, I would like to give you a bit of color of how our acquisitions have performed in this space. We have built -- we have bought 16 companies in this space, 9 in Prestige, 7 in Health & Wellbeing, fundamentally leading positions in narrow verticals at premium territories in all these categories. Brands like Hourglass dominating color cosmetics in the cruelty-free color cosmetics space, Paula's Choice, an expert ingredient, the biggest DTC brand in Skin Care in the U.S., Liquid I.V. the leader in functional hydration in the U.S. market, et cetera, et cetera. The turnover, the revenue we have acquired is around EUR 1.5 billion. And on top of that, we have built EUR 1 billion in a portfolio that weighted for turnover by revenue is 4 years old. So we closed 2022 with a EUR 2.5 billion turnover, EUR 1.5 billion acquired, EUR 1 billion of organic growth put on top on an average of 4 years' time. On top of the role of acquisitions, disposals play a significant role in reshaping our portfolio. In February this year, we announced the disposal of Suave, a very important brand for Unilever for years, the highest penetrated brand in the U.S., but the brand that was anchored in the value segment in the context of concentrated retail and with prospects of growth that we are limited. And this kind of decisiveness in reshaping our portfolio is what I want you to remember in terms of how we will really drive our exposure to premium segment of our portfolio. The acquisitions of Prestige and Wellbeing have fundamentally transformed our position in the U.S. So more than 60% of our revenue now sits in Prestige and Health & Wellbeing. And this is the kind of split between Prestige and Health & Wellbeing and core that we like for developed markets. But as I mentioned before, it is not only that they have transformed the growth potential of our U.S. business is that they give us a platform for expansion international consistent and [indiscernible]. And these are the brands that I mentioned before. In the first few months in this role, I sit with my team and try to qualify what were the elements of success that we are common between the brands that we are growing volume at scale and premiumizing at the same time. And we fundamentally saw that there were 3 pillars that we're defining the strategy of these brands: purpose; science; desire. Purpose has been historical strength of Unilever and will not cover a lot today, but brands like SheaMoisture or have demonstrated that brands with a strong purpose with authenticity, tend to grow brand power and grow volumes consistently they are out of time. Science, as I mentioned, is a very significant strength of Unilever that has been under leveraged in our portfolio. And desire, it was defined brands in beauty to be timeless is what defined brands and consumers are real to pay a premium for. So these are the 3 pillars. This is the organizing principle that is guiding everything that we are doing in Beauty & Wellbeing today. Every innovation, every advertising, every TikTok execution, we monitor it through these kind of 3 pillars. Let me talk a bit about science. We have one of the best science ecosystems in the industry, 1,000 scientists, 200 PA-C, more than 140 patients a year and strong partnerships with the private sector with academic institutions with governments, 4 global hubs, one in U.S., one in U.K., one in China, one in India, from where we developed some of the best science in the industry. We have discovered at least. We have identified at least 10 streams of science that provide us significant superiority versus competition. I will mention here only 3 of them. Our GAP technology in the anti-oxidant space, our pro-lipids technology in the ceramides deposition space, our bond technology that allow us to deliver 8x stronger hair and reduce exposure to reduce the damage in the future of the hair. We will deploy these brands in Hero products with much higher value density in new cohorts like [indiscernible] consumers and in the development and market making of new segments and formats. I feel one important point of the acquisitions of Prestige and Health & Wellbeing is that they brought to Unilever activity systems that allow us to consume -- to compete in premium that we didn't have before, and we are driving this activity systems at a scale in our core since like premium innovation, online commerce, influencer marketing, aesthetics and sensorials. This has been deployed now in our core, and you will see in the next few quarters a significant step-up in the quality of our marketing in the core. When we put together these 3 pillars, we have several examples of success. In India in Dove hair in the last 10 years, we have moved from 43% to 55% share. Our competitor lost 10% share -- 10 points of share in the same period. Vaseline in Asia, booming on its way to EUR 1 billion brand with new technologies, much more desirable packaging, a very different Vaseline the one we will historically in the U.S. Liquid I.V., we bought this brand in 2020. The revenue has increased by 5x since acquisition, we will hit this year more than EUR 600 million. 24,000 influencers supporting the run in the U.S., a complete new activity system that we did have before. Paula's Choice, one of our 2 largest acquisitions done in June 2021, if I'm not wrong, growing more than 20%, redefining transparency in the skin care industry, transparency of ingredients in the skin care industry. Nutrafol bought in July last year and with rand rains today that are 80% above the moment of acquisition, a sizable acquisition, booming, combating the stigma of hair fall between women with premium technology, just in the intersection between Health and Prestige Beauty. So many, many examples that give us a guidance of what we want to do in our whole portfolio. With that, let me close and basically, let me highlight the most important messages here. Our absolute priority is to accelerate growth through premiumization, volume growth -- volume-led growth. Sorry, our fundamental priority to restore competitive growth in the core. We have shifted resources to our most profitable strongholds. Prestige Beauty and Health & Wellbeing be the anchor of our portfolio strategy in developed markets in China. And purpose, science, desire is organizing principle of everything we will do with our brands in the future. That's all from us. And with that, we can take some questions, Graeme.

Thanks, Fernando. I think there are microphones at the back of the room, if anyone like to ask us anything.

Could you please discuss a rough growth rates between these 2? Is it fair to say that the Skin Care moves faster than the Hair Care or the core?

No. I believe historically, in the last 5 to 6 years, our Hair Care business has been growing a bit faster than Skin Care. Our position is stronger in Hair Care when you look at the global position. So we contend for leadership. Our total global share is around 16%. Our 2 main competitors are in the 16% to 17% bracket globally. So that business has been doing very well. We have had more issues in Skin Care in Asia, in which our, I would say, premiumization efforts has been subpar. And we have been left behind in some key markets, key initiatives now are hitting the market to really restore competitiveness there.

Yes. It's Nick Byrne from Deutsche Bank. One of the main themes from our conference last year was around the inflationary pressures, and there's been a lot of commentary around that receding and certainly looking at some of your comments in the Q1 numbers, that was definitely the case around the balance between price and inflation. However, inflation has pretty quite sticky in some areas. So can you talk a little bit to the ability to continue to see price growth coming through versus some of our inflationary pressure that still exists?

Yes. Thanks, Nick. The first thing to say is I think we've been so far reasonably accurate and early in calling and communicating the sort of inflation that we were seeing across our portfolio, whether it was the EUR 4 billion plus last year or the EUR 1.5 billion in materials inflation that we see in the first half with an additional EUR 0.5 billion of production costs and conversion costs in there. So it's about EUR 2 billion for the first half. Things are starting to moderate, but it's a very different picture. I think it's an important point for everybody to grasp. It's a very different picture across our 5 business groups. If you look at the underlying materials that we're buying, we're still seeing significant inflation in agricultural commodities. And therefore, Fernando's division, Beauty & Wellbeing, this might be a generalization Fernando, but it's largely moved out of the inflation environment and pricing is starting to moderate. Next, I will be Personal Care. After that, I think it will be Home Care,but Nutrition and Ice Cream are still very much in an inflation environment, Nick. Another significant point with that is that our Nutrition and Ice Cream businesses have got big footprints in Europe, and it is hardest to land price in Europe through the retailer environment, and also because the European consumer is particularly hard pressed. So we're not calling it over yet. We still see quite a lot of uncertainty, but it's quite a different picture across the 5 business groups, as I've described.

And I would highlight also that different business groups have different inflation -- different exposure to material inflation. If you look at Beauty & Wellbeing, of course, the shape of the P&L has much more investment in elements like media and overheads. While Home Care and Nutrition much more exposed to materials.

Last one for Harold, are we in trouble Tom, on timing?

Sorry, a very quick one for Fernando, if you don't mind, Graeme.

No, of course.

Just because you're in Latin America, I mean, clearly, we just had double-digit pricing at the group level, volumes understandably a bit soft. How does that transition happen when it goes back the other way? Is there a big gap between the pricing forwarding and the volumes initially not responding? Or is the gap actually narrower than...

Well, usually, I worked in Latin America for many, many years and from Argentina. So it's inflation is my thing 100 inflation now in Argentina, by the way. Usually, when inflation starts to moderate, there is also the slope of price of inflation reduction probably is different in terms of the slope of volume. So we probably can expect that volume will move at a different rate in terms of going up versus inflation. But if you have strong brands, usually the recovery inflation is a tax on the poor. So when inflation goes down, the expansion in penetration usually is significant. So in a relatively short period of time, we see these kind of things accommodating my experience in Brazil, Argentina, countries that have gone through inflation is at in the medium term, 6 to 8 months, usually, we see these kind of 2 slopes to have the same kind of angle, I would say. But in the short term, probably there is some difference between the speed of inflation moderation and the speed of volume growth.

Okay. I don't want to hold up the home team. I see Eva looking at me. So we'll get off, but we'll see lots of you during the course of today and look forward to that. Thank you.

Thank you very much.