Unilever PLC

LSE:ULVR

Earnings Call Transcript 2019-Q1

[Operator]

We're about to hand over to Unilever to begin our conference call. [Operator Instructions] We will now hand over to Richard Williams.

[Richard Williams, Investor Relations Officer]

Thank you. Good morning, and welcome to Unilever's First Quarter Trading Update. Graeme will begin with an overview of the results and performance in each of our 3 divisions, and I will then cover the regions in more detail before Graeme rounds up with the outlook for the year. We expect the prepared remarks to last for around 20 minutes leaving plenty of time for Q&A. First, I draw your attention to the disclaimer to forward-looking statements and non-GAAP measures. And with that, I hand over to Graeme.

[Graeme David Pitkethly, CFO & Executive Director]

Thanks, Richard. Good morning, everyone, and welcome to our Q1 trading update. It's been a busy quarter, not least for Alan, our CEO, who's been out and about meeting many of our stakeholders, and I'm delighted to say that Alan is with Richard and me this morning to lend a hand with the Q&A after we finish the formal bit of the presentation. But let's start by looking at the headlines for the quarter. We've had a solid start to the year delivering 3.1% underlying sales growth in the first quarter. The delivery was well balanced with price making up 1.9% and volume 1.2%. We continued to have momentum in emerging markets growing 5% against the prior year comparator that was 5.1%. 3.2% of our emerging market growth came from pricing. Growth in developed markets was slower at 0.3% as we lapped a strong start in North America in the same quarter in 2018. Argentina's hyperinflation status continues to impact our reported growth as it has for the past 2 quarters. The removal of all Argentina pricing in Q1 reduced our reported growth for the quarter by 80 basis points, and Richard is going to come back to that with a little bit more detail later on.Looking now at the quarterly time trend, you can see a steady improvement against the fourth quarter with more volume and similar levels of price, which began to pick up, as you know, in the second half of 2018. Growth was broad based across the divisions. Beauty & Personal Care grew by 3.1%, Home Care grew by 6% and Food & Refreshment grew by 1.5%. We're pleased with a solid start to the year, and we're focused on accelerating growth in the months ahead to keep us on track for our 2019 guidance of 3% to 4%.Let me give some more detail now on our emerging markets. We grew by 5% with volume growing faster than in Q4. This volume acceleration is encouraging with price at the same level as last quarter. China's performance remained strong, and Indonesia continues to see mid-single-digit growth driven by Beauty & Personal Care. Brazil had another good quarter with balanced price and volume growth as it continues to navigate a slowly recovering economy. There are, of course, some challenging markets with high inflation and tricky economics such as Turkey and Argentina where we are seeing an impact on volumes. And we are pleased with the consistent performance in India even in slightly slower markets. I can't make any further detailed comments on India performance until Hindustan Unilever issues its own results next month. But overall, this is a high-quality growth performance from emerging markets, especially when you consider the volatility and the wide spread of market conditions.We are operating in unusually uncertain markets with looming questions around the strength of global trade, issues in the eurozone and moderating growth in the United States. After 2 years of GDP growth of 3%, Oxford Economics is now forecasting 2019 GDP growth at 2.5%, picking back up to 2.7% in 2020. We consider that our markets are growing at around 3%, but it is a mixed picture. We've seen some slowdown in developed markets mainly the U.S., which started to slow in Q4. There has, however, been some offsetting pickup in the emerging markets. We see some acceleration in Southeast Asia and a small improvement in Brazil, although, overall, Latin American market growth remains fairly lackluster. The market continues to grow well in India although the pace of growth has slowed a little compared with last quarter. As expected, more of the growth in emerging markets continues to come from price. This market growth is in the context of continued geopolitical uncertainty around trade wars, some key elections in many countries and a rise in popular protests. Though these factors impact currencies, inflation and consumer demand, our local businesses are experienced in responding rapidly and effectively, and I think you can see this in our solid delivery. Let me turn now to the divisions. Beauty & Personal Care grew by 3.1% with 1.9% delivered through volume growth. Growth was again broad-based with skin care and deodorants delivering strongly. Growth in hair was more modest in the context of strong competition in some of our key markets. Big global brands such as Dove, Sunsilk and Pond's delivered strong growth as did the relatively new and much smaller brand, Schmidt's Naturals. Carver Korea was less impacted by the change in the daigou legislation in China than in the fourth quarter and saw good growth overall driven by the mainstream China retail and e-commerce channels. Innovation in Beauty & Personal Care is strong. In the high-growth segment of clinical deodorants, we have launched a full range of formats through the use of a breakthrough technology better serving consumer needs. Equilibra, which is our nutritional supplements brand, positions us well to further explore the growth trend that sits on the boundaries between natural health, beauty and well-being. In our growth channels, Prestige grew by double digits with continued strong growth from Hourglass and our biggest Prestige brand, which is Dermalogica through innovation such as BioLumin Vitamin C. And the Dollar Shave Club continues to do well. Southeast Asia is one of our growth geographies where innovations such as Pond's clay cleansers are addressing a growing trend space. Our drive to build strong purpose in all of our brands is very evident in Beauty & Personal Care with campaigns such as the recent Lux #SmashTheLabel campaign in China, which encourages women to defy judgments and express their femininity unapologetically. It has begun well and is contributing to double-digit growth for Lux in China. Moving to Home Care. Home Care grew by 6% with 4.8% from price and 1.1% from volume. Increasing commodity costs led to pricing being landed across most of the large countries. The growth was broad-based across the 3 categories of fabric solutions, fabric sensations and home and hygiene. Naturals and sustainability are key growth drivers in Home Care, and Love Home & Planet in the U.S. is a good example of an innovation using natural ingredients and recycled plastics. Seventh Generation has been a pioneer in the growth channel of e-commerce. Its ultra-concentrated laundry detergent was designed specifically for online by being smaller, lighter to transport and more convenient to handle and use and yet still offering great bio-based stain-fighting power in a natural and clean detergent. In China, one of the big Home Care growth markets, we've extended over laundry brand, Omo, into the new category of dishwash and have made a strong start. Still on dishwash, our big global brand, Sunlight, grew strongly in the quarter introducing 100% recycled bottles into South Africa where it's the #1 selling dishwash liquid with over 75% market share. The introduction of the new bottles is a significant step forward for our South African business on its journey to improve its plastic footprint. Blueair grew, although this was against an easier comparator. We expect to continue to see growth in air purification throughout 2019. Turning to Foods & Refreshment. Food & Refreshment grew by 1.5% with 0.5% coming from volume. Ice cream had a strong quarter at 7% with growth across all regions. Foods had a weak quarter with retail pressure in Europe and heavy competitive pressure in our North American Dressings business impacting the overall Foods delivery. Transformation of our Foods business is key, and growth trends such as vegan and naturals are important elements of our innovation funnel for both new and core brands. In January, Knorr launch the Future 50 Foods campaign in conjunction with the World Wide Fund for Nature. The report focuses on 50 foods that we should eat more of in order to have a lower environmental impact. Looking at the channels for Foods & Refreshment. Growth in out-of-home and e-commerce is a key focus area, and Magnum is an important brand in these channels. Magnum has seen per annum growth of 7% over the last 3 years led by both the core and new innovations. In Southeast Asia, the Unicornetto leverages the global trend of unicorns, and before you ask, I didn't know about this global trend either. But from a good start in Thailand, the Unicornetto is now rolling out to more countries. Tea was flat in the quarter with growth in emerging markets, but offsetting challenges in developed markets where our large black tea portfolio anchors us in an area of market weakness. Our U.K.-founded tea brand, Pukka, is helping to offset this weakness and is now selling across Europe, North America and Australia and is growing in strong double digits. Before looking at the regions, I want to share how our acquisitions are performing. Bolt-on acquisitions are quite fundamental to transforming our portfolio more quickly into faster-growth spaces. And now we're in 2019, most of these acquisitions are included in our underlying reported sales growth. As you know, we use bolt-on acquisitions in order to enter high-growth segments and channels and to accelerate our growth in priority geographies. We've completed 29 acquisitions since 2015, some of which are shown on the chart here. Most of these businesses have been integrated and some operate on a more stand-alone basis. I'm not going to go through the detail of each acquisition's performance, but it is helpful to share some overall numbers. We've acquired EUR 2.6 billion of turnover, including building a new Prestige business of over EUR 0.5 billion. We've also disposed of EUR 4 billion of turnover. The net consideration for all of that has been EUR 2.4 billion. In aggregate, our acquisitions are growing at double digits so they're accelerating our growth. In fact, when we take both acquisitions and disposals into account, we estimate that this portfolio change has added over 70 basis points to our growth in the quarter. And if things continue on a steady-state, we expect that this will be the same for the full year.Our strong savings programs and innovation drive our margin improvement. And that margin improvement, in turn, supports a continued high return on invested capital and that allows us to use bolt-on acquisitions to accelerate the growth profile of our overall portfolio. And in this way, we've been able to deploy quite an active M&A program whilst maintaining high returns overall. And with that, let me hand back over to Richard to cover the regional performance.

[Richard Williams, Investor Relations Officer]

Thanks, Graeme. Asia/AMET/RUB grew 6% in Q1 balanced between volume and price. China grew 8% with strong growth in Home Care, Foods & Refreshment and e-commerce. Southeast Asia and particularly Indonesia continued to pick up with all countries in the region delivering mid-single-digit growth. Turkey had a solid Q1 of over 20% growth and saw positive volume despite uncertainty in the market and high inflation from continued devaluation. Africa declined driven by trade and economic disruption as a result of the elections in Nigeria and the introduction of a new currency in Zimbabwe.Latin America grew 0.4% with nearly 5% price and negative volume of 4%. Based on our measures and estimates of market growth, we are growing ahead of the market in Brazil and Argentina. Sales in Central America have declined, whilst in Mexico, growth has slowed a little as a result of some retailer destocking. Brazil had a promising quarter as we landed price increases, and we expect the momentum we have seen in Brazil to continue even though the market remains muted. Argentina continues to be hyperinflationary with high pricing effect in consumer demand. As a reminder, in Q3 2018, we removed all Argentinian price from our headline USG number. We committed to give the detail of the Argentinian numbers on their impact on reported Unilever growth each quarter. In Q1, volume was minus 11% as consumers experienced even higher inflation than in Q4. By comparison, we estimate that the overall market is seeing volume declines of around 20%, so we are ahead of the market on volumes, protecting our strong position. The impact of negative volume on group UVG is about 10 basis points in the quarter. The impact in 2019 is smaller than in 2018 because Argentina is now a smaller part of total Unilever as a result of the heavy devaluation. The removal of pricing has reduced Unilever's quarter 1 USG by 80 basis points. We continue to price as necessary. And whilst the environment will remain difficult for some time, we are confident that, as usual, when one of our key emerging markets goes through an economic crisis, we will come out stronger.In North America, we grew 0.4% for both price and volume. This result is in the context of a tough volume comparator and a slowing market, which saw growth for the quarter about half that of 2018. We had a strong performance from skin cleansing, ice cream and deodorants where Dove and Schmidt's Naturals led the growth. There were some shifts in promotional sales from March to April as a result of the later Easter, which mainly impacted the Foods business. Our Dressings business in North America continues to be engaged in heavy price competition. From a channel perspective, e-commerce is growing around 60%, both from omnichannel and pure plays. We delivered in Europe around 0.7% of underlying sales growth with 0.8% volume. Both Western and Central Eastern Europe delivered volume growth. Ice cream had a strong start to the year with innovation such as Kinder and Magnum continuing to grow well. And in Home Care, we saw good growth in Italy and France through home and hygiene. Despite a solid start, the market in Europe continues to be challenging with a slowdown in the last 12 weeks across several categories.Turnover for the quarter was EUR 12.4 billion. Underlying sales growth added 3.1%. And acquisitions and disposals decreased turnover by 5.3% following the disposal spreads in July 2018. Currency translation increased turnover by 0.7%. Based on the latest spot rates, we expect a positive currency impact of around 1% on both of turnover and EPS in 2019, which is a welcome return to more benign currencies after a particularly strong impact in 2018. This is important because we plan the business using long-term average currency rate rather than short-term fluctuations. And now, I'll hand back to Graeme to wrap up.

[Graeme David Pitkethly, CFO & Executive Director]

Thanks, Richard. Just before I finish with our priorities for the year and our outlook, I would like to just spend a moment on our Sustainable Living Plan and draw your attention to that because this month, we issued our Annual Sustainable Living Report and you'll be able to find that on our website. Now since 2010, we have hit many important milestones in making sustainable living more commonplace in the world while at the same time we've delivered attractive returns to shareholders. And these are connected. Just to paraphrase Alan who said this publicly a few times now, "It is not purpose ahead of profit. It is purpose driving better profits."Looking at just a few of the numbers. We've now reached over 650 million people through our programs on handwashing, on safe drinking water, on sanitation, on oral health and on self-esteem. We've delivered a 31% reduction in waste, and we've reduced our CO2 emissions by 52% from better energy efficiency in our factory network. And our company continues to be more diverse and inclusive. Women now make up 49% of our 15,000 managers. Many of our brands such as Dove, Lifebuoy and Vaseline already play an integral role in our sustainability agenda, and you can expect us to drive purpose much more explicitly across all of our brands in the months and the years ahead.This is just one example, but those of you who might have traveled through London by train this morning might have seen our Simple brand on the cover of the Stylus Commuter magazine. It advertising our launch of Simple's new biodegradable cleansing wipes. Let me turn now to our 2019 priorities. We want quality growth and that's growth that is consistent, competitive, profitable and responsible and Q1 is an example of good quality growth. For consistent growth, we will continue to invest behind our brands appropriately as we have been doing. We will be competitive, driving growth ahead of our markets. We need to be profitable, which means strong efficiency and savings programs and the right level of both price and volume. And finally, growth must be responsible, which as I've just explained, means having purpose in our brands and the Unilever Sustainable Living Plan at the heart of everything that we do. We must be future-fit, accelerating our speed and our digital capabilities. We will continue to drive efficiency and effectiveness through our ZBB, 5-S and Net Revenue Management programs to allow for reinvestment in the brands, products and channels of the future. And this is the efficiency that delivers the 2020 underlying operating margin of 20%. So let me confirm the guidance for 2019. We expect underlying sales growth to be in the lower half of our multiyear 3% to 5% range. We will continue to progress on the underlying operating margin through a focus on savings programs and continued restructuring as we take out costs. We will continue to invest competitively behind our brands both in media spend, in building new capabilities and in people such as in our digital hubs. We will target another year of strong cash flow and maintain our leverage level. And as you'll note from today's trading statement, we're pleased to announce a further increase in our dividend for 2019 by 6%. Our outlook on all other items remains the same as it was in January with tax around 26% and an interest rate on net debt of around 3%. That's the end of our prepared remarks. But before we move on to take questions, Alan, is there anything you'd like to add?

[Alan W. Jope, Chief Executive Officer]

Yes. Well, thanks, Graeme and Richard, and good morning, everyone. I must admit it's certainly been a busy quarter with many highlights. Probably the highlight of all the highlights was listening to Graeme talking about the Unicornetto and the global unicorn trend. One thing I've spent a lot of time on since January 1 is carefully listening to lots and lots of Unilever's shareholders and other stakeholders. I must admit, it's been a very helpful exercise. It's confirmed a lot of the views and the feedback that I expected to hear. And frankly, I want to stay in listening mode by joining this morning's session. I'm very keen to know what's on our investors' minds. I also want to get a sense of the role that these quarterly trading statements play in helping our stakeholders to understand our business. For the half year and full year results, of course, Graeme and I will continue to do a double act. And certainly, this has been a solid start to 2019 with a good quarter 1 puts us on track for the guidance that we've given for the full year. And yes, we will be focusing on accelerating growth as our #1 priority. And actually, I think, with that, it would be best to use the time that we've got left in more of a dialogue with our friends who have chosen to dial in and join us this morning. So Richard, I'm going to flip it right back to you.

[Richard Williams, Investor Relations Officer]

Thanks, Alan. We'll now take questions. [Operator Instructions].So I see that our first question is from Richard Taylor at Morgan Stanley.

[Richard Taylor, Equity Analyst]

Rich Taylor from Morgan Stanley. Three questions from me. The first one, I think you commented in your statement that you're gaining share in 60% of markets. Is that -- and that's after growing in line pretty much for the last 4 quarters. Maybe you could give us a bit of color on what's changed, what you've done differently that's enabled that change? That's the first one. Secondly, perhaps a longer-term question, in order to consistently hit the top end of your medium-term guidance, is the most important factor a further pickup in emerging market growth? Or is it further changes to the portfolio? And then, finally, I know you've made a number of leadership changes so far this year, particularly recreating the COO role. So can you give us a little bit of color behind that, please?

[Graeme David Pitkethly, CFO & Executive Director]

Richard, let me take the first two of your questions and then let Alan pick up the third one. So on the business winning share, we think we're growing about the level of our markets right now and that equates to around about half of our business winning share from a turnover perspective. However, as we click down a level below that, we're quite encouraged to see that 60% of our business is winning volume share, so high-quality share, in 3 important constituents that we measure. First of all, 60% of our business is winning volume share in Beauty & Personal Care. 60% of our business is winning volume share in the emerging markets. And 60% of our business is winning volume share in Home Care. So very good lead indicators that we're getting that extra bit of outperformance from a competitive perspective back and that correlates to that acceleration of growth. That links to your why is that and what are the key things behind that, I think you said. Fundamentally, being close to the consumer. Having the right messages for the consumer, having the right innovations for the consumer. Of course, there's many ways that we're doing that now: traditional, more linear innovation, we're doing it through launching new brands and we're doing it by taking brands that we have, that we know around on trend, moving into the faster consumer growth spaces and rolling those out more quickly across our networks. So we're seeing the uptick in the speed with which we're able to react around our business. That, of course, it comes from our Connected 4 Growth organization. And I think the single biggest reason why we're getting that spark of competitiveness firing again is because the changes with Connected 4 Growth are working and they're bedding down across our organization globally. The question on what would it take to get into the top end of the medium-term guidance, is it a step-up in emerging market growth or a change in our portfolio. I think the biggest determinant would be a step-up in category growth and the growth that we see across our footprint. And of course, with 60% of our business in the emerging markets, that's what we would look to. If I were to call out a more specific area because actually our emerging market growth at 5% I think has been a very good performance with almost 2% from volume. And when you consider that, that has almost 0 contribution from Latin America, which has historically been a big engine for us, then I think you see that in the AAR or sort of Asia part of our emerging markets businesses, we've got some good growth there. I think the big trigger would be a return to growth in Latin America. We're not really calling that yet, but we are seeing good signs, particularly in Brazil that we're starting to navigate through that very difficult economic period that we've had there. Alan, do you want to take Richard's third point?

[Alan W. Jope, Chief Executive Officer]

Yes. Richard, straight -- as soon as Richard Williams had said a maximum of 2 questions, you dived in with 3, but we'll give you your head and address the third one. On leadership changes, we announced several moves in the Unilever exec, but there were really 2 elements that were structural. The first was to appoint a Chief Operating Officer and we really have just the man for the job, Nitin. He's perfectly cast for that role. But there was a second and more subtle element, which is that we've removed any dedicated regional layers. The last place where we had dedicated regional layers in Unilever was Europe and Southeast Asia. And now we've moved to an organization where we have 14 or 15 big markets that will report directly to Nitin and those will take care of any surrounding markets. So for example, India will report to Nitin and supervise Pakistan, Bangladesh, Nepal and Sri Lanka. And that model is now replicated, which means that we now have a faster, more agile organization directly connecting global to the big markets. Secondly, Nitin will bring a high level, I think, of in-year operational grip on the business, driving the in-year performance and P&L delivery. And thirdly, there are initiatives that we need to land across the company at scale quickly. That's increasingly a characteristic of our business and Nitin and his team's perfect venue for landing those big capability-driving initiatives. I'm quite optimistic this is one of the highest-leverage, short-term moves that we'll get to accelerate the growth of the business.

[Richard Williams, Investor Relations Officer]

Okay. Thank you, Alan. Our next question is from Jonathan Feeney at Consumer Edge.

[Jonathan Patrick Feeney]

First question would be, Graeme, you gave us the net -- I think you've chosen net EUR 4 billion for recent acquisitions net of divestitures added 70 basis points to sales. If you could give us a sense what profit -- I don't know if you want to call it accretion, dilution on a net basis, but what was the cost or your total impact on profit roughly, if you have that number handy? And secondly, Richard, you cited an e-commerce growth number of 60%. I wasn't sure if that was in a regional discussion or if that's a 60% global number. And if it's in fact the latter, could you give me a sense of how much contribution that was to underlying sales growth globally?

[Graeme David Pitkethly, CFO & Executive Director]

Jonathan, let me pick up the first one while Richard thinks about the second. It's a really difficult question you've asked actually. I mean the net M&A expenditure we've had is EUR 2.4 billion as I said on the -- in the prepared slides there. And I think it is really important to think about why we do that. We're doing M&A, a bolt-on strategy, to accelerate the movement of our portfolio into the higher-growth spaces and that can take place through 2 lenses basically. You can look at it through what I call this kind of big P portfolio or macro lens, which is movements between our divisions. So what you see there is more Beauty & Personal Care, less Foods & Refreshment would be the sort of macro shifts there at a divisional level. But of course, within each of these businesses, we have to have a relevant consumer portfolio. So that what I call the micro lens of that or the small P portfolio is the way in which we use M&A to accelerate into high-growth spaces, be that more premium, be it therapeutics, be it naturals, et cetera, or be it something like Dollar Shave Club, which takes us into entirely new channels. And there's a range of profitability, of course, across all of that. And of course, you would expect that when we look at M&A proposals, we have a very detailed process for that. And we expect to -- if something is dilutive to our profitability in the short term, we look at the period over which it recovers and gets back to being accretive to profitability and earnings and value creation. So in aggregate, I can't answer as an up or a down. What I would like to pick up on is something that we mentioned kind of obliquely in the presentation that, that is the fact that all acquisitions will short term dilute your return on invested capital. And one of the features I think of our bolt-on strategy, which has become increasingly popular I think across the sector, is that you have more people chasing fewer assets, and therefore, there's been inflation on pricing and that means that the time to value creation, and we measure that by ROIC-WACC crossover or payback period I guess in our acquisition proposals, that has definitely stretched out. And that's why I think it's very important that the margin improvement we can deliver in Unilever from our productivity programs is highly strategic. It's not just margin for margin's sake. It's margin because that allows us to maintain that high return on invested capital. It backfills the ROIC because acquisitions in the short term will dilute your ROIC. And of course, we've got ROIC in our management long-term performance metrics for all of our managers. So there's a nice tightness there around how we use M&A and that bolt-on strategy.

[Richard Williams, Investor Relations Officer]

And Jonathan, your e-comm question, the 60% was North America and that was just a Q1 number. So just in that period, it grew about that. Just to help you size it, e-comm is around 2% of our North American business. So you could probably size it using that.Okay. We've got a lot questions lined up, so better move to the next one. Next question is from Celine Pannuti at JPMorgan.

[Celine A.H. Pannuti]

So I'll try to make only 2 questions here. So my first one is in terms of the full year, the growth, how do you see that balancing out? I think Q2 last year you had this issue in Brazil, are we right to expect that there should be an acceleration? And in general, was there anything specifically that you would call out in the first quarter that was unusual? And then on the same topic because I think, Alan, you said that -- so your focus was to accelerate growth. What's, I think from a previous question, the answer in terms of what worked? You talked about C4G, you talked about how the organization is growing together. But I just wanted to understand from your perspective, what else you think you need to add for this acceleration to happen? And then my second question is on Europe. Could you -- I mean you talked about a more challenging environment. Can you give us a bit more color on that? I think there were some retail disputes -- news of retail dispute in the quarter. Has this impacted Q1? Or shall we expect maybe pricing to decelerate as we go into the rest of the year?

[Alan W. Jope, Chief Executive Officer]

Thanks, Celine. Look, we are guiding to 3% to 4% for the full year and we're not going to pin ourselves down on a quarterly-by-quarterly number against that. However, mathematically, if we start at 3.1% in Q1 and if you hear me talking about accelerating through the year, obviously, we'd expect some higher numbers to show up. Q2 has got a couple of things helping us. Last year, we had the Brazil trucker strike in Q2 and we had Easter. We have an Easter effect that will get in the way. On the other hand, we had a very strong ice cream season in Q2 last year. And so, yes, I do think we'll see a stronger top line in Q2. But beyond that, I don't want to comment on exactly the phasing quarter-by-quarter. Graeme already hinted at what it's going to take to get our growth rate to continue to accelerate. We have to keep working really on 3 axes. We've got to keep working on evolving our portfolio. We've got to keep working on the full channel shifts that are happening, making sure that we take advantage of the higher-growth opportunities in places like out-of-home consumption, e-commerce, beauty stores and a few funny pockets like, for instance, cash-and-carries Brazil happens to be a very high-growth space right now. So there's a channel dimension. The third is geographically to make sure that we keep our emerging markets in momentum and take advantage of our strong footprint there. If we can do all of that and keep working on our speed, agility and nimbleness, then that's what it'll take to keep accelerating through the year, and to Richard's question earlier, move up into the top half of that range in successive periods. Graeme, maybe you could talk about some of the specific questions around Europe?

[Graeme David Pitkethly, CFO & Executive Director]

Yes, I will. On the specifics of the European pricing landscape, I think the best way to describe that is I think is mixed. There are markets in Europe such as The Netherlands, such as Greece and -- where we've been able to get ahead on a little bit of pricing. But by and large, I think when you look at the marketplace in Europe, it's one of high promotional intensity and that continues to put pressure on pricing. It's particularly strong in the food space. That's where we feel it most, and of course, we've got a big Foods business component in Europe. Tough market impacted by specific retail pressures, which have been quite centered on Germany and in France. And despite the declines in the market in Germany and France, we are winning share in Savoury in Germany. So -- and we continue to evolve and modernize that Foods portfolio. The strategy, which we've shared a few times on Foods to fundamentally modernize the portfolio is probably most acute in our developed markets and in Europe in particular.We have been impacted by -- you sort of alluded to it slightly there, Celine, some retailer disputes in Germany and France, one or 2 of those you might have read about. We're not going to comment. We never would on a specific retailer discussion. But what I would say is that these things happen and we tend to manage them well. It's important that we shift our business into a healthy state. And sometimes, that means we have to take a bit of a short-term pain in order to improve the overall longer-term outlook, and that's exactly what we're doing here.

[Alan W. Jope, Chief Executive Officer]

I just want to underscore your points, Graeme, that shifting our portfolio in Europe into higher-growth spaces is a big job to be done. And dealing with a retailer dispute that breaks out here or there is a very small thing that we can easily take in our stride, just to put some sense of proportionality around the subpoints to your question, Celine.

[Richard Williams, Investor Relations Officer]

Okay. Thanks, Celine. We still got a lot of questions actually to get through. So the next one is from Martin Deboo at Jefferies. Martin, do you want to go ahead?

[Martin John Deboo, Equity Analyst]

Yes, Richard. There's a short one and a long one, I'll ask the short one first or I will forget it, which is was there anything unusual in Home Care in Q1 that drove the strong result? The longer one is an attempt to try and get away from the courses in the sort of spirit of what Alan said at the start and the emphasis on quality growth. And if you sort of take a step back from all this, the good news in Q1 is it looks to me like the underlying trends have continued to improve and emerging markets are improving. But the problem, if there is one, is the interrelated one of slow growth in developed markets and slow growth in Foods & Refreshment, which I'm sure, as you know, are closely intertwined. So my sort of strategic question is, first of all, is that a diagnosis you would recognize for the business. And secondly, if it is, is the answer to shift resource growth investment into developed market and Food & Refreshment? Or is the analysis more that the situation is relatively hopeless and the real answer is just to keep withdrawing capital from those parts of the business as you did sort of in the 2013 period? I suppose what lies behind it is a sort of feeling I've always had with the Unilever that because the glamour in the business is in HPC and emerging market, the sort of resource and the good people are get sent there and somehow developed market and Food gets left behind and that's hurting you. So just value comments on that really. So those are the two.

[Alan W. Jope, Chief Executive Officer]

Martin, the, as usual, very perceptive questions. On Home Care, it's pretty straightforward. Our Home Care portfolio is the one that's most exposed to currency moves and so the urgency on taking price becomes more important on Home Care when commodities are moving in an upward direction compounded by the fact that Home Care's a strong emerging markets footprint where, quite frankly, it's easier to land price increases so that's why you see the strong price leverage. We're delighted that, so far, we haven't seen volume elasticity there and we've been able to show volume growth alongside that strong price contribution. So I think that's the only special characteristic of the quarter for Home Care. To the bigger point, and it is a bigger point, is about the slower growth in developed markets and Foods & Refreshment. I would sort of say see previous answer. It is a -- it is a structural challenge that we need to address by getting our Food footprint more into healthy spaces and that's why you see us shifting the portfolio into things like vegetarian food, healthy snacking, children's nutrition and moving out of things like spreads and sausages, not to put too fine a point on it. So we've got to do work on the portfolio. We've got to do on our channel footprint in Europe. The only thing I would totally disagree with is that somehow or other we kind of prioritize our good people into the emerging markets and into HPC. That's not true at all. We have fantastic team of people working in Europe and on Foods and on Foods in Europe. In fact, one of the things we deliberately do is try to put some of our best people on to our most difficult challenges and reward them accordingly when they turn it around. But grappling with a structurally lower growth in Foods in Europe, yes, that's a high-quality problem that we're dealing with.

[Richard Williams, Investor Relations Officer]

All right. Thanks, Alan. Thanks Martin. Next question from Karel Zoete from Kepler. Go ahead, Karel.

[Karel Zoete, Equity Research Analyst]

I have two. First one is quite an easy one on the timing of Easter and the impact on the phasing on your Foods business. The second one is on your oral care, your toothpaste business. That was down again in 2019, the first quarter despite the pickup we see in several emerging markets where you play. And also, in 2018, it was flat. What is needed in your oral care business to do better because global growth is quite good, but you're not very big on a global scale. Those are the 2 questions.

[Alan W. Jope, Chief Executive Officer]

Graeme, do you want to have a crack at the Easter timing?

[Graeme David Pitkethly, CFO & Executive Director]

Sure. Karel, we haven't really gone into the detail of calculating a specific impact on it. There's definitely an impact there. It's probably a relatively small. I can tell you where you see it most is on our Foods business, obviously, both in Europe and in North America. And thinking about our Foods business and Savoury business in North America, it was flat and the continued pressures in our Dressings business in North America, you're definitely seeing an impact there, which is compounded by the timing of Easter this time around, but we haven't called that out specifically at all.

[Alan W. Jope, Chief Executive Officer]

As far as oral care is concerned, Karel, first of all, it has been one of the slower growing Beauty & Personal Care markets that we've observed. Secondly, our oral care business is a very unusual business for Unilever inasmuch as it's not truly a global business. There's half a dozen or 8 countries where we are very strong and have high shares. And we have got a competitive situation now where in almost all those markets, the local players have been faster on to some of the trends and it seems like an obvious point to make, but things like naturals. And some of the channels that are growing very quickly in the modern -- in the developed world are channels we are not strong in. And so all I would say is watch this space. We intend on continuing to be a strong player in oral care, leveraging the massive leadership positions that we have in important markets for the future like Indonesia, Vietnam, Indonesia, Brazil, parts of Africa, Nigeria and our leadership position that we have in France. So kind of watch this space. We announced couple of weeks ago the acquisition of 2 oral care brands to compete in the pharmacy channel in Europe. That'll be an important play and we've got lots of naturals brands in our portfolio that lend themselves perfectly well to extension into oral care. And those are the types of moves in the portfolio and channel dimensions that I was referring to earlier.

[Richard Williams, Investor Relations Officer]

All right. Thank you. Moving quickly to our next question because we still have quite a number to get through, Alan Erskine from Crédit Suisse. Do you want to go ahead, Alan?

[Alan Erskine, Research Analyst]

Yes. Just 2 questions from me. The first one is on Latin America. If I've done my math correct, I think ex Argentina, your volumes were down something like 3% in Q1, which was a deterioration on Q4 without any tougher comparisons. So I just want to understand better why that performance deteriorated sequentially.And my second question is on Carver. I think if I heard you correctly, you said Carver grew year-on-year, which, given it was down I think 30% in Q4, implies quite a big sequential improvement and I think probably better than you were expecting. So can you just give us more granularity exactly as to why Carver dipped so dramatically in Q4 and seems to perform so much better in Q1.

[Alan W. Jope, Chief Executive Officer]

Graeme, do you want to have a crack at Latin America, that seems the harder of the 2 questions and I'll deal with Carver?

[Graeme David Pitkethly, CFO & Executive Director]

Thanks, Alan. Yes, thanks. So first thing, I mean, Latin America, if I may digress just for a second. We all seem to be dealing with Argentina pricing differently and it's a bit of a bugbear of mine and had a go at one of the big 4 about it the other day. It must be very frustrating for you guys, it certainly is for me to see everybody accounting for Argentina pricing in a different way. I think we've been very prudent in how we've done it. And sorry for the lecture, the slide we have to put on every one of these calls. We do think it's important to give you all the detail on it. Now you won't take that nicely because, yes, volume performance in Latin America was down a little bit. In Brazil, in particular, we weren't down by 3%. We were down about half of that, but we took quite a lot of price across the business in Brazil because of inflation, et cetera, and we've seen that elasticity there. I think we're calling a steady recovery in Brazil coming out of really a historical period of very significant economic turmoil. There's very substantial channel shift. We've been building a very -- we're performing well in cash and carry, which isn't a measured channel and I know we're being competitive across things in Brazil. We've got share recovery in the big categories of deos, in hair and fabric solution and we're putting a lot of innovation into the marketplace. The ice cream market in Brazil is becoming a little bit less focused price and I think we'll see a volume pickup start to pull through there.The other thing to mention, to your point about flat volumes in Latin America -- negative volumes in Latin America is Middle Americas, which has been highly competitive. And again, we're seeing price go in but the consequent reaction in volumes. So as I said earlier, I think our emerging markets performance is very high quality at the moment because you're not seeing much of a contribution for Latin America there, and historically, you would have seen quite a lot of Latin American pricing sitting in emerging market's performance, but the 5% that we've delivered in the first quarter with 2% from volume is consequently very high quality.

[Alan W. Jope, Chief Executive Officer]

Let me -- instead of hinting about the Carver business, let me open up a little bit and share what's going on there. Carver is, to slightly simplify, a business of thirds. 1/3 of the business is sold in Korea to Koreans. 1/3 of the business is sold in China to Chinese. And 1/3 of the business is sold in Korea to Chinese who carry it back to China and sell it online. And those informal importers are what's called the daigou trade. In the fourth quarter last year, the Chinese government started to clamp down using taxation on online sales on that 1/3 part of the business, the bit that's bought in Korea by Chinese people and taken back and sold informally online. That bit, we were quite pessimistic about the rate that, that would come back and it has come back much stronger than we expected, although still our growth is coming from us taking control of managed channels in China. And the result of all those moving parts is that Carver Korea grew high single digits in Q1, which is a little bit of a beat on -- versus our expectations. But hopefully, that gives you a little bit of a sense of the dynamics on what is an important and bang-on trend business for us.

[Richard Williams, Investor Relations Officer]

Right. We now have a next question from Eddy Hargreaves at Investec.

[Edward John Hargreaves, Analyst]

Just wonder whether you could dig a bit further into North America. I believe you said that market growth had halved. Forgive me if I'm wrong there, but I think you said that it's halved. And if so, was that relative to the comparative period or relative to the Q4 or the last full year? I just wasn't sure about that. And just on the reasons for that, you've obviously called out Dressings. Are there any more specifics within that, gas prices, government shutdown or whatever or within the categories? Could you just sort of put a bit more flesh on what you think is happening in North America and what the outlook for the rest of the year is there, please?

[Alan W. Jope, Chief Executive Officer]

Let me take that one, Eddy. This is Alan. The North American markets have slowed down to about 1% growth in Q4. That's the blended average across our categories, and that's carried on into Q1. So what we're seeing in Q1 is really a continuation of how we exited last year and that is down -- actually, it is about half of what it was growing -- the markets were growing at a year ago. The biggest challenge that we have is in our Foods business, I'm going to call out 2 pockets. One, we already mentioned, which is a Dressings battle that we intend to prosecute through to victory; and secondly, a significant slow growth from our low-priced ice cream portfolio. All the growth that we're getting in North America is coming from HPC, which, in turn, ends up being mostly Beauty & Personal Care because we have a very small Home Care business. Is there anything else I wanted to share that just kind of gives you a bit more color? Maybe just that interesting channel dynamic in North America where, of course, e-commerce continues to grow. But really, the bigger story is probably that the core mass merchant operators, Walmart, Target, are doing well. And where we are seeing growth is from some of those bigger customers. And that's against the global trend of big-box retailers struggling. So, in fact, it's good news for us to see Walmart and Target having some mojo and showing growth.

[Graeme David Pitkethly, CFO & Executive Director]

Even within the e-commerce channel, I think in the U.S., it's very easy to focus very much on Amazon. But I think we've got as big a business or even a larger business in e-commerce with our omnichannel retailers so the Walmarts, the Targets, the Krogers as we have with the sort of single-item Pure Play Amazon model. So I think that's interesting to go.

[Richard Williams, Investor Relations Officer]

Okay. Thanks, Eddy. Let's move now to David Hayes at SocGen. David, do you want to go ahead?

[David Hayes, Equity Analyst]

Yes. Two for me. Just on the market share comment you were making earlier about 50% taking share, 60% I think you said in the HPC areas, which sort of I guess would buy roughly for -- I mean in Food you're taking around 40% share. So obviously, it's lower in that area. I just wondered maybe you could talk about whether that lower market share performance in Foods is partly because the local competitors are taking more share? And is that partly because your scale advantage is less -- is diminished in the Food relative to the HPC? And I guess, also related to that, is there a risk that you need to price lower through the year to try and get that 40% number back up towards the -- to be in the group average? And then a second question, in the past, you talked at times over the quarter about differing levels of brand support and different levels of innovation. So just wonder whether you can talk about the first quarter whether that was a big brand support like innovation period or whether we should expect that back to come through in the other quarters or later in the year?

[Graeme David Pitkethly, CFO & Executive Director]

David, let me kick off with your first one and then hand to Alan. I think he wants to comment on the first point because it's really -- it's a great area to dig into. So yes, we're winning 60% volume share in Home Care and Beauty & Personal Care, so what's happening within Food. On your question as it alludes to locals, not really, no. It's -- we're engaged in a couple of very competitive environments, a couple of which are in North America. So the North American mass ice cream markets, the first thing I would talk about, that's about 2% of Unilever. It's a highly volume-driven game, extremely price competitive, extremely low margin. We're pleased -- very pleased, in fact, with the performance of our premium ice cream brands in North America. So Magnum and Ben & Jerry's are winning share and performing well. But in that bulk mass business, it's much tougher to win only beyond pricing. So that's the first one to call out. The second one I've talked about before a little bit is the Dressings business in North America. That is also between 1% and 2% of total business there. And in that, the market overall is declining by about 2.5% because of the very strong pricing action in that particular sector from competition and from private label. So we're in a bit of a battle of strategic value destruction of a category there. And the final one I'd call out in Foods again is developed markets tea, and there it's a portfolio challenge for us because we've got such a big black tea business and the growth in developed markets is in fruit tea, herbal tea and green tea. We're doing the right thing in premiumizing our portfolio. For example, I mentioned Pukka. Pukka is growing over 20% and we're rolling it out very quickly from a U.K. base into all the countries in Europe into North America, into Australasia, et cetera. So we're doing the right thing. It just takes time to turn, so not really a battle. Of course, there's locals in Foods, but really, it is in the big sales with the big players. And when it comes to the developed markets tea business, it's much question of portfolio structure.

[Alan W. Jope, Chief Executive Officer]

Let me take the point on brand support and innovation. We watch this like a hawk. And the first thing I would comment on is that our efficiencies programs are on track to drive the EUR 2 billion of savings that we need in perpetuity. Actually, every year, we'll need that level of efficiency. That may seem like a strange place to start, but I want to underscore that our financial model begins with those efficiencies creating the funds that we can choose where we redeploy them and how much we turn to the bottom line. As I said, we watch our competitiveness of our spend like a hawk. And in Q1, we have not seen a material increase in media intensity nor even in the latter stages of Q1. And in fact, our share of spend to share of market is up year-on-year and is over 100 now. It's a little bit opaque in our P&L the exact movements that are happening because we aggregate at quite a high level. Within our brand and marketing investment, you should be aware that over the last 2 years, we've spent EUR 300 million more in working media and point of sale, which has been funded by reduction in things like advertising, production and agency fees, things that the consumer doesn't see. And so we're reasonably confident that we continue to support our brands at competitive levels. As far as innovation is concerned, I think the short answer to your question is that the aggregate amount of innovation in Q1 I would describe as normative, neither particularly low nor particularly high. And the big change that we've seen over the last, call it, 18 months is an acceleration in our ability to develop and roll out innovation, the C4G organization model, with much less of a regional layer, going straight from global to local is accelerating the rate at which we can develop our new products and roll them out. Thanks, David.

[Richard Williams, Investor Relations Officer]

Okay. Thanks. I'm conscious that we are out of time, so I think we've still got a couple of questions we haven't covered. But to remind everybody that you can give Laura, Becky or myself a call. We'll be on the phones all morning. So, at that point, I will bring the call to a close. Thank you, Alan. Thank you, Graeme. And thank you, everybody. Thanks very much.

[Graeme David Pitkethly, CFO & Executive Director]

Thanks a lot, everybody.

[Alan W. Jope, Chief Executive Officer]

Cheers.

[Graeme David Pitkethly, CFO & Executive Director]

Cheers. Bye-bye.

[Operator]

This conference has been recorded. Details of the replay can be found on Unilever's website and will be available shortly. Thank you.