Unilever PLC (ULVR) Earnings Call Transcript & Summary

Good morning and thank you for joining us for Unilever's third quarter trading statement. I am joined today by Srini Phatak, our Chief Financial Officer. In a moment, Srini will take you through the details of the quarter, and I will come back at the end to sum up before we take your questions. So let me start by setting this quarter's performance in the context of our continued progress. I have said consistently that volume growth is the true measure of demand, a key indicator of the underlying strength of our business. Since 2024, Unilever's volume growth has averaged 2.7%, ahead of our medium-term ambition of over 2%. Volume growth has been even stronger for our HPC business at 3.3%, and for our Power Brands at 3.8%. And year-to-date, our performance is even stronger. That is not the result of one quarter, one category or one market. It comes from continued progress against our strategic priorities, with stronger brands, superior innovation and sharper execution driving increasingly consistent performance. And we are delivering this performance while we are transforming our portfolio. Now let me summarize what I see as the key elements of this quarter's results. Strong performance continued in the third quarter, in an environment that remains demanding. Input costs are higher, while consumer conditions remain mixed across markets. Underlying sales grew 5.2%, with volume up 2.9%. Our Power Brands continued to lead, growing 5.8%, with 3.3% from volume. Ten Power Brands grew double-digit in the quarter, including Dove, our largest brand, as well as Vaseline, Sunsilk, Clear and Cif. Growth was broad-based across our HPC businesses at 7%, with 4.1% from volume. Home Care, Personal Care and Beauty & Wellbeing each grew volume above 3%. Home Care and Personal Care were particularly strong. Home Care grew 9.1%, with double-digit volume growth in India and Brazil. Personal Care grew 6.3%, and we further strengthened our deodorants leadership in the U.S. Emerging markets were again a key driver, growing 9.5%, with volume up 6%. Our largest emerging market, India, stood out with growth of 15% and strong momentum across all four business groups, and we saw continued strength in Latin America and Southeast Asia. This continues to reflect the evolution of our emerging markets portfolio towards higher-growth segments, social-first demand generation and improvements we have made to our go-to-market capabilities. Developed markets were soft and performance also reflected tougher prior year comparators. Europe remained subdued. And in North America, good growth in Personal Care and Beauty was offset by Wellbeing and Foods. In Foods, growth was flat overall. Our emerging market business and Unilever Food Solutions continued to grow, but were offset by a decline in developed markets retail. In U.S. Condiments, performance was below our expectations, and we need to strengthen our competitiveness. We are taking action on innovation and restoring price competitiveness, state by state. It will take some time to see the full impact, but the actions are in place and Srini will cover this in a moment. Volumes remained strong in a quarter in which we also stepped up pricing to 2.3%. Along with productivity initiatives, this helped to offset the impact of higher commodity costs. And we are pricing with a clear focus on staying competitive. Overall, this was another strong quarter, and with 9 months of strong performance, we have upgraded our outlook for 2026. And now, I will hand over to Srini to take you through the quarter and our outlook in more detail.

Thank you, Fernando. Let me start with the growth profile in the quarter. Underlying sales grew 5.2%, with 2.9% from volume and 2.3% from price. On a two-year basis, volume growth was 2.3%. And for the first 9 months, underlying sales grew 4.9% with volume up 3.8%. The three HPC Business Groups led delivery in the quarter, with Beauty & Wellbeing, Personal Care and Home Care each growing volume above 3%. On a 2-year CAGR basis, for the first 9 months, our HPC growth was 4.9% with volume growth of about 3.2%. Price growth stepped up from 0.6% in the first half, as we responded to higher commodity costs and normalized promotions in Personal Care following the FIFA World Cup. Price growth was most notable where we see the largest impact from inflation, that is in emerging markets and in Home Care. We have taken a calibrated approach, market by market and category by category, to stay competitive, and volumes have held up well. Our Power Brands continue to outperform, which reflects their equities strengthening and the value of concentrating our investment behind our biggest growth opportunities. These brands, which represent around 79% of our turnover, grew 5.8%, with 3.3% from volume. Our Unmissable Brand Superiority scores are strong, with over 60% of turnover being stable or improving. Beauty & Wellbeing grew 5.7% with 3.6% from volume and 2.1% from price. Hair Care keeps accelerating and grew double-digit, led by volume, with Dove, Sunsilk, Clear and K18 all growing double digit. Dove continues to benefit from the strength of its premium innovation ranges, Sunsilk and Clear are outperforming in Latin America, and K18 delivered another quarter of very strong growth. Skin Care grew mid-single digit. Vaseline delivered another quarter of double-digit growth, with double-digit volumes and broad-based strength across both emerging and developed markets. Earlier this year, we extended the brand's Gluta-Hya range into lip care with a new Gluta-Hya lip serum, which continues to perform well. We also saw good performances from Hourglass, Paula's Choice and Dermalogica. Wellbeing declined high-single digit in the quarter partly driven by shipment timings that benefited the second quarter. We compete in wellbeing segments in which the market is growing high-single digit. Year-to-date Wellbeing is down 1%, reflecting conscious choices to rebalance revenues and relative pricing between direct-to-consumer, club, pure-play online and omnichannels. Across our brands, the picture is mixed. Liquid I.V. grew year-to-date, with gains in mass retail, online and international. Year-to-date, OLLY also grew mid-single digit as it lapped last year's distribution gains. Nutrafol declined year-to-date as the measures to improve customer acquisition remain at an early stage. Grüns, which we acquired earlier this year, delivered very strong growth in its first full quarter with Unilever. It'll enter our underlying sales growth measure next year in June. We expect sequential improvement in Wellbeing's performance versus the third quarter. Personal Care delivered another very strong quarter, growing 6.3% with 3.8% from volume and 2.4% from price. Growth was broad-based, with high-single digit growth in Emerging Markets and mid-single digit growth in the U.S. Price growth stepped up in response to higher commodity costs as well as a normalized promotional environment. Dove grew double-digit with strong volumes in both Deodorants and Skin Cleansing. Deodorants grew mid-single digit, led by volume. In the U.S., continued momentum was supported by strong brand equity and further strengthening of our market leadership following the FIFA World Cup, while Latin America grew double-digit. Dove and Dr. Squatch both grew double-digit in the quarter. Skin Cleansing grew high-single digit, with balanced volume and price. Growth was broad-based, with double-digit emerging markets growth and mid-single digit growth in both North America and Europe. Dove was strong as it continued to premiumize the category with skincare-led body care ranges, while Lux grew well, supported by new botanicals ranges in China. Oral Care declined low-single digit, as growth in South East Asia and India was offset by a decline in Europe. Home Care grew 9.1%, with 5.4% from volume, another quarter of strong volume-led growth. Price growth stepped up to 3.6% as planned, in response to higher commodity costs. On a 2-year CAGR basis, our volume growth was 3.9%. Growth was led by emerging markets, with double-digit growth in both Asia Pacific Africa and Latin America, and double-digit volume growth in our largest Home Care markets, India and Brazil. We continued to gain share across value and volume in the vast majority of our markets, given the strength of our brands, our R&D capabilities and supply chain resilience. By category, Fabric Cleaning grew double-digit, with high-single digit volume. Home & Hygiene and Fabric Enhancers grew mid-single digit, led by Comfort. We have started to build Cif in China through social commerce as well as launching Comfort's perfume-inspired fabric enhancers in the market. Our multi-year innovation platforms Omo Wonder Wash and Cif Infinite Clean continue to scale successfully across markets and expand with new variants. Wonder Wash is now present in over 40 markets, and we have rolled out range extensions in Southeast Asia in the quarter. Cif Infinite Clean is now available in eight markets. Foods grew 0.1%, with volume down 1.1% and price up 1.3%. Emerging markets continue to grow well across both Latin America and Asia Pacific Africa. Unilever Food Solutions grew low-single digit, led by its second-largest market North America, where it accelerated to mid-single digit growth on the strength of our premium customer propositions. China, its largest market, continued to grow low-single digit. Growth in emerging markets and Unilever Food Solutions was offset by a decline in developed markets retail, in particular in U.S. Condiments, where our performance was below our expectations. Hellmann's brand continues to be strong and leads the category. However, as we said in July, we have seen increased competition in the fast-growing premium segments of the market, such as avocado oil mayonnaise, and with discount brands gaining distribution nationally. We are taking targeted actions to improve competitiveness including bringing additional innovation to market and corrective pricing actions. Hellmann's 100% avocado oil mayonnaise is building distribution, with more to come over the next few quarters. We are confident in the actions we are taking, while recognizing that it will take some time for these to take effect. Turning to our geographies. Emerging markets, which are around 60% of our turnover, grew 9.5%, with 6.0% from volume. Developed markets declined by 0.9%. Asia Pacific Africa grew 10.1% with 5.8% from volume and 4.1% from price, with broad-based growth across the Business Groups and markets. India, our largest emerging market, grew 15% with 7% from volume, continuing the momentum of the first half and lapping a GST-led lower prior year comparator. Growth was broad-based. Home Care and Beauty & Wellbeing grew strong double-digit. Premiumization and innovation accelerated our growth, with premium Hair Care and Fabric Cleaning liquids outperforming. We delivered high-single digit growth in Foods and Personal Care, where market development actions in body wash continued to build penetration. Indonesia grew 7%, led by volume, supported by stronger execution, innovation and digital activation. All Business Groups grew in the quarter, including mid-single digit growth in Foods which was led by local brands. China grew low-single digit, with mid-single digit volume, including volume contribution from all Business Groups and strong performance from social commerce. Beauty & Wellbeing and Personal Care benefited from premium innovation, including new ranges in Vaseline and Lux, and Home Care sustained mid-single digit growth, while Unilever Food Solutions grew low-single digit. Double-digit volume growth in Vietnam, Pakistan and Thailand also contributed to the broad-based result for the region. Latin America grew 8.5%, with 6.5% from volume. Beauty & Wellbeing and Home Care grew double-digit, and Personal Care grew high-single digit. In Foods, low-single digit growth was driven by continued strength in Condiments. The largest market Brazil grew high single digit with double-digit volume, supported by market share improvement in our two largest categories, Fabric Cleaning and Deodorants, following the corrective actions taken last year. Mexico grew low-single digit, led by volume, and Argentina grew double-digit, with positive volume. North America declined 0.7% in the third quarter, while continuing to gain volume share. Personal Care grew mid-single digit, led by strong performances in both Deodorants and Skin Cleansing. In Beauty and Wellbeing, we saw double-digit growth in Vaseline and our Prestige brands. This was offset by declines in Wellbeing and Foods. On a 2-year CAGR basis, underlying sales growth in North America was 2.7%, with volumes of 1.5%. Europe declined 1.7%. Beauty & Wellbeing and Personal Care grew, supported by strong growth in Dove and strengthened competitiveness in Deodorants. This was offset by declines in Foods and Home Care. In the case of Foods, the market environment remains soft. Turning now to turnover. Turnover for the quarter was EUR 13.3 billion, up 6.7%. Underlying sales growth contributed 5.2%. Acquisitions, mainly Grüns and Dr. Squatch added 1.4% and disposals reduced the turnover by 0.6%. As expected, the currency headwind has eased through the year. Exchange rate movements were neutral in the quarter versus negative 5.1% in the first half. Based on the October spot rates, we now expect the full year currency impact to be around minus 2% on turnover and around minus 30 basis points on underlying operating margin. Turning to our outlook. Following strong performance in the first 9 months of the year, we have upgraded our outlook for 2026. We continue to expect underlying sales growth for the full year to be within our multiyear range of 4% to 6%. We now expect at least 3% underlying volume growth for the full year. And underlying sales growth in the second half of around 5%. On earnings, we're confident of delivering growth in hard currency, with modest improvement in underlying operating margin versus 20% of 2025 as we navigate a tougher cost environment, while continuing to invest competitively behind our brands. The external environment is uncertain. But the strength of our brands, the momentum within our business, and the increasing consistency of our execution gives us the confidence in delivering our outlook. And now I will hand you back to Fernando.

Thank you, Srini. Let me sum up. We have been consistent in our conviction that to succeed in our industry, you have to perform and transform at the same time. This quarter is further evidence that we are doing both and we are building a track record of consistent strong performance. We are managing a more volatile cost environment with discipline, pricing where we need to, staying competitive, and continuing to invest behind our brands. Since 2024, over the last 11 quarters, our volume growth has averaged 2.7%. This comes from the continued progress we have made on our strategic priorities. Desire at Scale at work across our brands and higher quality execution across our markets. You can see it in the breadth of growth across our Power Brands this quarter, and in innovation platforms like Wonder Wash, and Cif Infinite Clean or Dove Hair Mask scaling across markets. And we are transforming our portfolio. The combination of our Foods business with McCormick remains on track. Separation and integration work is progressing well and until completion, we remain fully focused on the performance of our Foods business. Next week, at our Investor Event in New York, we will set out how greater focus, Desire at Scale and sharp execution will unlock Unilever's full potential as a focused HPC pure-play company, and deliver sustained competitive performance. We look forward to seeing many of you there in person and online. For now, thank you for listening. Srini and I will be happy to take your questions.

[Operator Instructions]

Our first question comes from Olivier at Goldman Sachs.

Thank you, Jemma. I've got two questions, please. First of all, would you expect the developed markets to accelerate in Q4, U.S. and Europe? And could you give us the building blocks for those two regions? And secondly, going back to costs, you're stepping up the pricing in Q3, and I guess we should expect pricing to accelerate further in Q4. Considering the COGS inflation increasing and also the negative category mix and FX impact, are you able to find more cost savings? I think previously you mentioned the EUR 850 million of course, inflation that you are trying to offset. Could you essentially give us a bit more how we should think about margins over the next 12 months?

Thank you, Olivier, and good morning, everyone. Let me start by the developed market questions, and Srini will take on the cost and pricing point. Two different pictures. I believe that in European markets, we see subdued markets. It is probably the most challenged regions in terms of market growth. In quarter 3, we grew 6% in Beauty, low single digits in Personal Care, but we saw some declines in Home Care and Foods, where we have seen promotional intensity increasing. Also, the pressure of the buying alliance has been very high, so negative pricing has put a bit of some challenges in the European market. Overall, Beauty and Personal Care in good shape. Also, the development of our prestige business in Europe is accelerating. But Foods, that is close to 40% of our revenue in Europe, the performance has been below expectation, particularly in Germany and Eastern Europe, and some promotional pressure in Home Care affecting pricing. Let me now move into U.S., that is more important in terms of our overall numbers. We have delivered 4% volume growth in North America in the last three years, 3.2% during the first half of 2026. So the 2.6% decline in quarter 3 against a tough comparator is a clear outlier, and we expect U.S. return to growth in quarter 4. I will repeat this, we see our North American business back to growth in quarter 4. Year-to-date HPC in North America is 3.8%, with UVG at 2.4%. In quarter 3, performance was strong in Personal Care, both Deodorants and Skin Cleansing up mid-single digits, Hair Care growing high single digits, and Prestige Beauty in double digits in North America. All these businesses are having great momentum, led by Dove. Dove is growing 7.5% in the U.S. in the quarter, and it has achieved #1 brand position in Deodorants female segment. That is a big, big achievement for the brand, and it is helping us to strengthen the market leadership in deodorants category, that is one of the most important for us in the U.S. But Foods and Wellbeing in the quarter were weak. In Foods, we have some issues with some value players discounting and extending national distribution, and with some development of the fast-growing premium avocado oil segment. In both, we are taking corrective actions there. And in Wellbeing, the high single-digit decline is a clear outlier, but we have two short-term issues that we have to deal. In Nutrafol, that is mainly a DTC business, the brand continues having excellent levels of retention, but we have seen a much higher customer acquisition cost. We are driving significant traffic into our website, but the conversion rates have gone down, particularly with younger and less affluent consumers. So this is something which we are working, and we need to find solutions. We are working both in the website content and the value equation of Nutrafol to improve this. In Liquid I.V. and in the rest of Wellbeing portfolio, the hydration powder market in particular is growing high single digits. We are growing share in Walmart, Amazon grocery channels, but the brand has been too exposed to the club channel, tends to operate in that channel at a significant price discount. And given the fact that the main club banner is introducing private label, we decided to rebalance our revenue and our relative pricing across channels there, and this has some short-term impact that it really was very, very heavy in the quarter 3. So we expect quarter 4 in U.S. to be positive. We expect Wellbeing to get progressively better. On cost, on pricing, Srini?

Olivier, let's try and do this in two parts, because you had asked about a view on costs and price over the next 12 months. I'll give you a first view on how we see this year, and a bit more color on next 12 months, and we'll spend more time at Capital Markets Day next week unpacking some of that. We had called out about EUR 850 million as a midpoint estimation for inflation for the year. You will appreciate that crude has continued to be high over the past few months. If you see months of September and October, it has been over $105, $106. More importantly, our commodity inflation is a function of many other elements, most notably kerosene, logistics cost, foreign exchange. Our current view for the full inflation for this year is about EUR 900 million. We had indicated about EUR 800 million to EUR 900 million. We thought EUR 850 million, but the outlook is more like EUR 900 million today. We continue to drive all initiatives. Pricing is obviously one which we said there will be a calibrated and a judicious approach. You have seen that. You have seen a sequential step-up, and we will see some more pricing come through in quarter 4, which will be higher than quarter 3, and that's a responsible way of really managing our business. But we've always been clear that we do not use pricing to manage margins. We are driving very hard all our productivity initiatives across all lines of the P&L, whether it's mix, whether it's volumes, whether it's deployment of capital, savings. And we've also put in many measures, including control on our recruitment, our overheads costs, and therefore, this is giving us ability to really manage the full P&L. For 2026, therefore, we said that we will deliver hard currency earnings, and we are confirming that we will drive modest margin improvement. Over the next 12 months, I'll give you a quick headline. The situation continues to be extremely volatile. If you really look at the energy fundamentals, the fundamentals are actually improving, but there is a lot of instability in the market. A good data point is if you really look at, let's say, the global crude output, it's actually back to 80 million barrels a day, which is actually back to the pre-war level. So if you really see just from a supply perspective, supplies have been normalized. Yes, there is some stock which can be built up in China, which has been depleted, but it's not a supply challenge. What is really happening today is a very high risk premium, given the potential disruption to the logistics, given potential geopolitical issues. So that becomes actually a fairly uncertain element to call out. In our view, at least given where we are today with the information that we have, from a 2027 perspective, we expect inflation to be somewhere in the range of EUR 700 million to EUR 1 billion. It has to be a bit of a wide range given the elements that we are dealing with. So I would say give or take about 2.5% to 3.5% of the cost base, with one important difference, the HPC inflation next year, we expect will be lower than this year. The foods inflation is likely to be higher given everything which is happening with soy and other elements. Again, in the Capital Markets Day, we will unpack 2027. But it's important to reiterate that we are still committed on a multi-year basis to hard currency earnings, and we'll drive P&L exactly on the lines we have articulated below -- before.

Thank you. Our next question comes from Warren at Barclays.

Warren here at Barclays. The first question is back on Foods, Fernando. I think you said that you'd hand over the Foods business to McCormick in good shape. Do you still think that, given the U.S. is sort of tracking below expectations and maybe at the same time, you can give us a bit of an update? I know you will give us a bit more at the CMD, but where we are on the closing process, antitrust, et cetera. Just keen to understand those two elements, the timing and your comment about handing it over in good shape. And then the second question really is on the emerging markets, obviously, Fernando, super strong. Can you talk about your outlook for the big 4 countries in EM of India, Brazil, China and Indonesia? And perhaps you can specifically touch on Brazil in Q4, given the sales tax, but also given the massive FX decline on the presidential win, Lula. And then on India, you had a super easy comp this quarter. How do you see the outlook there? Just trying to understand the shape of it, and maybe you can dig a little bit into some of the key elements, particularly Brazil.

Warren, I will start with emerging markets and then cover Foods, just to give Srini the voice on the closing process also. Emerging markets, very, very strong performance. We have seen a strong and broad-based performance across all our key markets and across all our key categories, including Foods and foodservice that in emerging markets is really doing very well. We see our strengths in emerging markets as significant long-term competitive advantage, and I feel the performance is improving dramatically there. We have seen some acceleration of market growth in emerging markets, not dramatic, but we have seen some improvement there. In India, you could see that we delivered 15% growth in the quarter, 22% in Home Care, double-digit growth in Beauty and Wellbeing, with very significant share gains in both categories. We have improved significantly our performance in Personal Care and in Foods that are now running at high single digits, including Horlicks that was an issue that we had in our portfolio a couple of years ago, now growing double digit. In China, we see they're slowly getting better. We are close to 4% volume growth in China with very significant growth in, what we call, new online, particularly in Douyin and in Pinduoduo. Physical retail is declining, but we are compensating with the acceleration of our innovation program for this kind of new online channels. Just to give you an idea, Douyin has been growing for us in the last 3 years around 40% growth on an annual basis. In Indonesia, a strong performance, particularly in Home Care and in Hair Care. We have relaunched all our key brands in Indonesia. The performance, the fundamentals of the company, much better. And really, the business did very well in this quarter and it's a continuous acceleration of performance. Brazil and, I can say, Latin America, as a whole, accelerating. We delivered 8.5% growth in the third quarter. In Latin America, the year-to-date performance is 8% growth with 6% in volume. Year-to-date Brazil is at 8%, Argentina is at 5%, and Mexico at 4% in volumes. And we continue delivering competitive growth in all the other geographies like Central America and Chile there that are important for us. So in Brazil in particular, we see very strong performance in Laundry, where we are gaining significant share and in Deodorants, where all the actions to restore competitiveness has been put in place, and particularly we have reignited growth in the aerosol format. That is the one that really developed market value in the market. Brazil, in the short term, a lot of political instability. The country was not in such good shape after the first round of election, and it's not in such a bad shape after the second round of the election. Of course, there has been a significant devaluation of the currency in the last few days, but it follows what has been a significant appreciation of the real during the whole year. So this has been one of the currencies that has been stronger in emerging markets. So we don't see a particularly negative impact for us in our performance in Brazil going forward. Regarding Foods, yes, we are absolutely committed to give the business to McCormick in good shape. Our Foods business has been flattish in the last couple of quarters. We are disappointed with that, no doubt about it. We have a strong momentum in our Foods business across emerging markets. We see our Foodservice business gaining momentum in both China and the U.S. But performance in developed market was below expectation. I feel in Europe, the markets are soft. We see negative pricing due to a combined effect of buying alliances pressure and the increased promotional intensity, particularly in countries like Germany and Poland. But probably the most important factor has been the U.S., in which we have consistently outperformed the sector in the last few years. The condiment business, Hellmann's, has been under share pressure in the last couple of quarters. Two issues there. One is the development of the premium segment in mayo. We have just launched our own avocado oil Hellmann's mayonnaise. We have another big launch expected for quarter 1 next year. And we have also corrected pricing. We were operating at a significant premium versus some value players at the time that we were increasing prices because soybean oil has gone up significantly. Some of our competitors has been going down and increasing promotional intensity and expanding national distribution. This has been corrected. We have set up a new price pack architecture also in the squeeze format that is very important for us, and we have materialized significant gains in total distribution points. So it will not be a short-term fix, but we expect definitely that 2027 will be a better year than 2026 in Foods. We are absolutely committed to deliver this business to McCormick in good shape. Srini?

From a food separation point of view, the work is progressing extremely well and is on track. We had said that more than 200 people from our side as well as McCormick's side are working. The working has been extremely positive, extremely collaborative. If I really look at some of the important milestones, we have finished the carve-out accounts in a record period of time, and we have filed our SEC filings round one. That's progressing quite well. When we look at some of the antitrust discussions, which have been going on with antitrust authorities in multiple markets, they've been progressing quite well. In a couple of markets, we have to look at some disposal of some assets to facilitate that. That's completely on track. We've also started making good progress on TSA arrangements. There are about 17 key TSA arrangements on which we are continuing to engage with McCormick, and we are in a good space in terms of trying to identify the key work streams, the milestones, and how we manage it. So all in all, where we are today, we should say that it's quite promising. It was always our intention to get this transaction done before first half of next year, and our internal ambition continues to push it prior to that date. So everything that we know right now, Warren, is progressing well. But obviously, now we will get into the last mile activities when it comes to some of the regulatory elements, which we'll have to navigate through. But from a separation, integration, and setting up, it's all progressing quite well.

Thank you. Our next question comes from Celine at JPMorgan.

My first question is, as you land prices, and you started in Q3, you said you have had a very like diligent approach and market by market. Just want to understand, we hear as well competitors and across different categories that prices are going to land. So how do you think about further price increases and elasticity and your choice between maybe a certain level of prices and keeping the volume, given that it seems that it's a KPI you really focus on? Obviously, I presume we'll talk about that next week, but given that you are focusing on compounding, your level of confidence that '27 you can keep compounding at a rhythm of above 2% volume in an environment where effectively, there may be a bit more pricing. And then my second question, I want to go back to the COGS inflation numbers, which, well, thank you very much, first of all, to give us for '27 already, a steer on that. But I look at it, 2.5% COGS inflation. One of your major U.S. peers, I think, was talking about 5%. And when I look at inflation across different commodities, oil prices, and all of that, 2.5% to 3% sounds pretty low. So could you explain a bit why that is?

Celine, we are pleased with basically the fact that we delivered 3% volume growth in the quarter, despite pricing growth acceleration from around 0.5 -- 0.6% in the first half to 2.3% in quarter 3. I feel in previous earnings calls, we have been very clear that we are going to manage the business in a more volatile cost environment, focusing on volume growth, price competitiveness and disciplined management of every single line of the P&L. This is what we have done, managing costs through formulation flexibility, promotional optimization, tighter management of overhead. So we have been relatively cautious on pricing, until we have more clarities in terms of supply security and commodity cost environment. Now that we have more clarity about it, we are accelerating pricing. At the same time, that also most of the price corrections we did in terms of relative pricing in categories or geographies in which we were uncompetitive are now lapping. The examples of India and Brazil laundry are probably the ones that you remember the most. So we expect pricing to keep accelerating, and this should contribute growth to underlying sales growth and to sustain gross margin. But let me be very clear, the ambition of growing at least 2% volume growth is absolutely fundamental for us, and we will ensure that we have a good balance between volume and pricing in whatever we do in the short and in the medium term. We will emphasize the drivers of demand that have the highest return, as we always do, and ensure that we are competitive in both pricing and brand marketing investment in order to deliver this 2% volume growth in a context in which we expect pricing to have a higher contribution. We definitely expect pricing in 2027 to be higher than the one of the average 2026. Srini?

Just one to two comments first on the pricing and the inflation. It's good to remind everyone that we said that half the inflation that we see was really coming in Home Care, and above 70% of that was really coming through in emerging markets. And that is where you've seen a very calibrated approach, using the full levers of pack price architecture. If you really look at the performance of Home Care in the quarter, or for that example, even in India, where they have grown 15%, but with a good combination of half of it coming from volume and half coming from price, starts to give you an indication in terms of how we are navigating it. Coming back to 2027, look, no one's really planning right now for a blowout -- a geopolitical blowout. If that were to happen, because then the dynamic will be very different. We are already talking about crude at levels of give or take, today's spot is about $114. We believe that there will be some short-term pressures which will continue in crude into the near term, but into half two of next year, we should see some bit of stability coming through because, again, I go back to the point about supplies. Notwithstanding the geopolitical and warlike situation in the Middle East, today the volumes are really back to the pre-war levels. So that's an important assumption and that's an important point of view that we have, that there will be stability, but not in the short term. Again, when we look at some of the vegetable oils and key commodities such as palm, they have again been at historical highs. Whenever there have been dips, we have been started to cover some of these commodities. But again, when you really look at the interplay between some of the oils, given where they are, there will be some more inflation. We believe in first half that could be a bit muted, but in half two, we'll also have to deal with El Niño. So we have done a bit of a scenario planning around those elements. We've also looked at elements which are really coming through from the perspective of Forex, logistics and other costs. It's important to clarify here, I am not calling out a market inflation, and what I am really calling out is the inflation that we will land in the P&L because this is also supported by a significant amount of product logic productivity initiatives, which therefore goes on to mitigate the significant inflation that you see. Next week in the Capital Markets Day, we will give you a very good sense in terms of some of the initiatives which we have perfected over the years, but some of the new muscle that we are really building to handle, and therefore drive optimization across the value chain.

Thank you. Our next question comes from Guillaume at UBS.

Two questions for me, please. The first one is on the balance between volume growth and gross margin protection. Because we saw from Hindustan Unilever and Unilever Indonesia, I mean, a very strong volume performance in the quarter, but at the same time, we saw a marked contraction in gross margin, both sequentially and I guess, even more pronounced on a year-over-year basis. So my question here is, have you made the conscious decision to prioritize volume share over input cost recovery, at least in the short term, or is this gross margin contraction more reflective of what we usually see, that lag between inflation hitting your P&L and when you can actually implement pricing? And I guess what I am getting to is, at the time of the first half results, you've talked about a gross margin in the back half being relatively similar to the first half. Is it still the case? And then my second question is on skin cleansing, a big category for you. High single-digit growth in the quarter. I think it's your best performance since the first half of 2023 when growth was very much led by pricing. So Fernando, wondering if you could shed some light on skin cleansing, what's driving this improvement? Whether maybe you feel like you've turned a corner and that despite some planned pricing actions, you are still confident about future market share gains on a volume basis?

Guillaume, I will start with the skin cleansing, then we will cover the gross margin question. In skin cleansing, it's true, we are really improving performance in some of our core markets. We have a strong North America business. Just to give you an idea, Dove represents 40% of Personal Care revenue globally, and it has grown in the quarter 11.5%. So Dove in skin cleansing is really doing very, very strongly. We also see improvements in India. Basically, we see acceleration of Lux in India, very strong performance of Dove and Pears in the premium segment. One of our problem child that we have had that has been Lifebuoy for a while, it has improved. It's now growing low single digits. It's far from where we would like Lifebuoy to be, but it is in a much better position than it was a couple of years ago. Also, countries like Indonesia are really improving a lot. Innovation in skin cleansing has been very strong. We are coming with significant premium innovation, particularly around Dove and Lux. Lux China really accelerating. Lux China in Douyin really making significant inroads. It became the second shower gel brand in Douyin in the market. So overall, we are pleased with the innovation program in skin cleansing, and this is a very important category for us, in which probably in the past we have not innovated with the level of quality that we should. And now we are taking some of the learnings from premium categories like beauty, hair care, skin care, and bringing much more science, much more premium offering, particularly in brands like Dove and Lux that are really resulting in significant share growth and significant acceleration of performance in the category. To your question about balance between volume growth and GM protection, there is always some lag between price and cost. Of course, we will protect the integrity of the P&L in the medium term. Our absolute priority is always to defend that floor of 2% volume growth. We are really committed to that. It could be that one quarter is below that or many quarters is above that, but overall, our midterm ambition of growing the business above 2% volume remains as one of our most fundamental metrics. So in the short term, we will manage, as Srini mentioned, with sensitivity using the different lines of the P&L. Do you want to add something on that, Srini?