Unilever PLC

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Earnings Call Transcript 2020-Q1

[Richard Williams, Head of Investor Relations]

Thank you. Good morning. And welcome to Unilever's First Quarter Trading Update. We hope that you're staying safe and keeping healthy in these uncertain times. Given the exceptional circumstances created by the COVID-19 outbreak, we're presenting our trading update to you from our respective homes in line with the physical distancing protocols. So please bear with us if things are not quite as smooth as you'd normally expect. Alan will begin with an overview of how we're managing the business through the impact of the COVID-19 pandemic before passing to Graeme to cover the results and performance in our divisions and regions. Alan will then wrap up with some comments on our outlook for 2020. We'll keep the prepared remarks to somewhere around 30 to 40 minutes, leaving plenty of time for Q&A. All of today's webcast is available live transcribed on the screen as part of our accessibility program. First, I draw your attention to the disclaimer to forward-looking statements and non-GAAP measures. And with that, let me hand over to you, Alan.

[Alan W. Jope, CEO & Executive Director]

Thanks, Richard. And good morning, everybody. Well, one of the unusual features of this crisis is how it feels like the world is at a complete standstill, and yet things are changing at extraordinary speed. The rate of change that we're witnessing is faster than I think any of us have ever known, and it's in that context of rapid and unpredictable change that we are sharing these results for quarter 1 and also our assessment of how things are likely to play out in the future. It's also in this context that we're discovering the true responsiveness of Unilever and the value of our closeness to consumers and markets in the many countries around the world where we do business. Go to the next slide, please. First and foremost, this is a human crisis, and we're deeply saddened by the terrible impact that the pandemic is wreaking on lives and livelihoods everywhere. And I speak on half of everyone at Unilever in extending our deepest sympathies to all those who have been affected and are struggling. Equally, we stand and on -- express our gratitude to all of those who are working heroically at the front line to slow down the spread of this COVID-19 disease. It's also a global crisis, which is manifesting very differently and at a different pace in different countries. And that's going to be a theme throughout this morning's discussion that the response to the pandemic cannot be looked at in some kind of global aggregate. In particular, the consumer reaction in different countries is varying, for example, in a lack of stocking up in the developing world to enormous panic buying in the United States. Governments are taking unprecedented action to protect lives and economies with lockdowns and curfews in most countries. And that's something of a knock-on effect on the economy. Whole industries are facing a crisis of survival, and we are starting to understand the shifts in consumer behavior that this pandemic will bring. At Unilever, our priority has, of course, been to safeguard the welfare of our people, ensure the resilience of our supply chain and to protect our communities, while we meet people's essential product needs for the type of buying hand hygiene and food brands that we make and sell. Our portfolio of trusted brands, our financial strength and the quality of our leadership teams on the ground are the things that will see us through this crisis and into the changing world that will come afterwards. In, frankly, very different difficult circumstances, we've seen the best of agility and speed of action that Unilever's capable of. Our response has been structured around these 5 work streams. And that served as the foundation for managing our business through the crisis: People, supply, demand, looking after the community and guarding our cash. We're seeing the power and agility of the flattened Unilever organization structure with its short chains of command to our markets through the 15 performance managed units that report to Nitin. And this proximity to our markets remains that we -- has meant that we can respond quickly with the right balance of good execution of global direction coupled with high-quality decisions that are being taken by experienced and qualified people on the ground close to the market. Looking at people first. Of course, the health and safety and well-being of our workforce is our top and #1 priority as we move quickly to protect lives and livelihoods. Since the initial outbreak in China, we put in place measures to help minimize the risk to our employees and their families from coronavirus and the COVID-19 disease. We acted quickly to remove uncertainty for our workforce with a blanket mandatory, indefinite work-from-home order for all of our office-based rules, and that went out very early, on March 13. We introduced new protective standard operating procedures in our manufacturing and for our field sales teams. We also guaranteed jobs and incomes for April, May and June, and made a conscious decision to include the people who work to keep our facilities secure, our premises maintained or who run our cafeterias and who are so much, a part of the Unilever team, even if they're not directly in Unilever's payroll. We're also drawing on our adaptability by quickly redeploying teams from parts of the business with low demand to help in areas that are seeing high demand, and this has been enabled by a digital internal talent marketplace called FLEX that matches employees who have capacity with opportunities to do interesting new types of work. And so far, we've redeployed over 3,000 people. For example, in our Food service operations, which have been hit hard to support the Foods' retail business. On supply, maintaining the supply and distribution of our essential food and hygiene products is, of course, critical both to the consumers, but also to the countries that we work in, and has been recognized as such by governments. Government lockdowns -- I think, we're on the wrong there. Government lock downs and the virus bring new challenges for our operations, such as physical distancing in factories, the need to wear special protective clothing and equipment, changing people's work procedures and very much increased hygiene protocols, and in many locations, even traveling to work for our factory teams has been difficult. It even requires special permits to allow people to commute. And indeed the analysis itself compounded by disciplined cell isolation has meant that we have run our factories sometimes with reduced operators available. And we've managed to do all of this effectively and at speed. In fact, our scale and reputation in many countries has enabled our leadership teams to quickly engage with government to ensure we can keep making and supplying our essential products to customers. At times, we've even had to intervene on behalf of our suppliers so that they can continue to operate. I do think our teams have done a magnificent job keeping the factories running, opening up new capacity where it's most needed. There have been times where our factories that have had to close, but none for more than a few days. And as of today, we're running at an average of around 85% of normal output across our 221 sites. Now despite these challenges, many of our factories have actually broken production records as they focus on our key SKUs, and respond to strong demand for specific products, such as in our hygiene and in-home cooking Food categories. Prior to the COVID-19 outbreak, hand sanitizer was an absolutely tiny part of our business. Yet, over the last 2 months, we have opened up more than 30 new production lines, including many third parties to make hand sanitizers. And in the U.K., we converted one of our plants in just 3 days to support this effort. Our first priority has been to serve frontline healthcare facilities with sanitizers, where we've been making extensive donations. Our procurement team have and have had to establish new sourcing routes to secure the supply of thousands of key ingredients and materials. And where it's necessary, we've secured alternative supplies for some materials to ensure resilience. Again, we've worked closely with our retail partners, and an important part of managing supply has been to prioritize production of key SKUs, and that's allowed us to increase output tonnage through long production runs, all those key SKUs. Consumer behavior change, driven by COVID-19, has led to changing short-term demand patterns, and this slide shows some of the biggest effects. But these are global macro trends and little of them micro trends, who are just as important. People are, of course, buying more hygiene products for hands and for household surfaces, and this is one of the changes we expect to see continue beyond the immediate crisis. In some markets, particularly in the U.S.A., but to a much lesser extent in the U.K. and parts of Europe, we've seen some household stocking of food and hygiene products, and of course, that's a short-term effect. We've seen out-of-home food channels effectively closed down during lockdowns, restaurants, canteens, travel hubs, leisure sites, tourist destinations. And this has had a big impact on us. It's a significant challenge for our ice cream business and our Food Solutions business, though the amount of in-home cooking has obviously increased as a partial offset. Also being big changes in the channel footprint, local stores have become the global defined -- default point of purchase. And e-commerce grocery sales have rocketed. For example, in the U.S., we've seen our e-commerce sales doubling in Q1. And as a total company, e-commerce sales increased by 36% in the first quarter. And this change to online shopping and online media consumption is another factor that we think is going to have a lasting impact as we saw with SARS and the swine flu epidemics, which really were a point of inflection for the consumption of digital media and online shopping in China and in Hong Kong. At these times, consumers do seek the reassurance of big, familiar, trusted brands and high-quality products. We always see this in the crisis. But in this case, in the aftermath, we do anticipate some trading down to more value-priced brands because we are facing an inevitable economic downturn. Unilever is generally well positioned for these changes given our strong brands, our strong category positions, our strong local businesses and a portfolio that does cover the full spectrum of price points. Many of our categories and brands have moved quickly to replan their innovation. Some we've postponed, some we've accelerated so that we adjust to consumer buying in different channels, and we rework brand communication to make sure that it remains relevant. For example, in Home and Hygiene, we accelerated the launch of Botanical Hygiene that you can see here in China. It's a new brand that combines advanced technology with a wisdom of nature. And it gives strong reassurance on germ kill. In Italy, we launched a new professionals' cleaning range of the Lysoform brand, especially targeted for professional channels. And in Brazil, we teamed up with Heineken, who were able to provide the necessary alcohol material to produce a special hand sanitizer, which was distributed to 210 favela areas around São Paulo. And of course, our responses go beyond the hygiene space. Dove is highlighting the beautiful courage of frontline health workers, importantly supporting with much needed donations. This is actually more of about brand do and not just brand say. And the Lipton stay home, stay connected message is encouraging people to have a virtual cuppa together. Early in the pandemic, we changed our monthly operational forecasting cycles to a weekly basis so that we can reflect and respond to the rapid changes in consumer demand. And we've been using our digital people data centers to pick up changing consumer sentiment early. When we tap our unique local depth of consumer insight, and frankly, a newly discovered organizational agility, we think it's a potential to permanently unlock new sources of growth for Unilever. We've been guided through these early days of the COVID-19 pandemic by Unilever's multi-stakeholder model, and that's included a commitment to use our scale as a force for good in the community. Yes, our public service messaging is a proven way of building consumer behavior change and it develops and grows our markets. And we make no apology for that, because it's what the world needs right now. These behavior change programs and the substantial product donations that we've been running at scale and in partnership with the World Health Organization, the U.K. Department for International Development and so on, they've been an important part of our community response. And as we announced last month, we're also making available EUR 500 million of short-term cash flow relief to support livelihoods across our extended value team, primarily through early payments to our most vulnerable, small- and medium-sized suppliers to help them stay in business. Of course, we can only make these moves because of the strength of our balance sheet and confidence in our cash generation capability. And it's enabled us to move quickly to take some of the actions I just described for our consumers, for our communities, for our customers, for suppliers and also to protect our wider workforce. Unilever entered this period with a robust balance sheet and a strong liquidity position. Nevertheless, we've moved at speed to review all sources and uses of cash so that we can continue to invest in our brands and reallocate funds towards the best opportunities to protect and grow the business, and Graeme's going to describe some of the actions that we're taking to proactively manage profits and cash. So these 5 work streams, they've served to guide our immediate response to the pandemic. But actually, it's our portfolio, our financial strength and above all, the quality of Unilever's people, which gives us the confidence that we're well positioned, not just to weather this immediate crisis but as we're already seeing early signals of -- to come out of that stronger. And with that, let me hand over to Graeme to talk in a bit more detail about the division and regional performance. Graeme?

[Graeme David Pitkethly, CFO & Executive Director]

Thanks, Alan. And morning, everybody. Well, in Q1, underlying sales growth was 0.0%. That was 0.2% from volume and negative 0.2% from price. The first point I want to land is that after the first 2 months of the year, we were very much on track with our plans with the 5 growth fundamentals starting to deliver, including improving brand awareness, improving household penetration and improving market share. Now it's hard to be precise about the impact of COVID-19. The virus, as it spread during March, most countries were impacted, and rapid changes in consumer behavior have caused quite significant volatility in each market.The 4 key factors that adversely impacted the quarter were: First, a decline in our global Food Solutions business as restaurants, canteens and cafes were closed; secondly, a decline in out-of-home ice cream as many of our classic out-of-home retailers like leisure sites, travel hubs, beaches and tourist destinations were closed; thirdly, a significant slowdown in the Chinese market during the lockdown period there, which lasted for much of the first quarter. And finally, a total lockdown in India at the very end of March, which actually stopped production and shipping for a number of days. Now each of these 4 factors individually added approximate 1% drag to group growth in the first quarter. And this was partially offset by household stocking at the end of the quarter, mainly across developed markets, as Alan mentioned, in the U.S.A., where we saw a pretty dramatic pantry loading, in the U.K. and in Germany, with a smaller amount in Latin America. And we estimate together, this contributed positively about 2% of growth in the first quarter at group level. Now given the impact that COVID-19 had in different countries at different times, narrowing the strong Q1 in a lot of detail, we thought it would be more helpful for you to understand the ongoing impacts by category, by channel and by country. For example, our out-of-home ice cream sales are about EUR 3 billion annually, of which nearly 70% is generated in the second and third quarters, with the second quarter the biggest. All the markets are different, but we've typically seen out-of-home ice cream sales decline by 50% or more when a country moves into lockdown and tourist and leisure destinations are closed down. We also have a EUR 2.5 billion global Food service business, which is also heavily impacted as cafes, restaurants and canteens close. And we're typically seeing sales declines of around 2/3 when a lockdown happens in our Food service channels. Looking at the impacts of the pandemic on categories and channels, we see 5 groups. First of all, household stocking in the short term. This is a pull forward in demand due to stockpiling ahead of lockdowns, for example, of dried foods and hygiene products. This is a change in buying patterns rather than a step-up in consumption. Secondly, increased consumption from consumer usage, for example, increased cooking at home and stepped-up demand for hand washing and hygiene or cleaning products. Thirdly, decreased consumer usage in some of the more discretionary areas, such as hair washing and styling, a reduction in skin care occasions and in deodorants. For example, we know that those working from home under normal circumstances typically have 11 fewer personal care occasions every week. Fourth, we see channel switching, with the best example being shoppers moving from offline to online channels. In China, for example, e-commerce grew by 34% in the quarter, whilst the offline business was in double-digit decline. And finally, measures in place to contain the pandemic have meant that some channels are mostly closed, which, as I said, impacted both out-of-home consumption of Foods & Refreshment occasions, but also retail outlets in the Health & Beauty channel, where we sell our Prestige beauty portfolio. Let's look now at the impact of the pandemic through a geography lens. We know that the impact from country lockdowns is greater than the category and channel shifts that I've just described. Impacts in various countries go through the cycle from pre-quarantine to physical distancing to shelter at home or even curfews. And finally, of course, through to recovery. And it's key to note that while there are many similarities in the impact of COVID-19 restrictions by country, the duration and severity of the cycle differs quite significantly by country or even by state or by city. And in our first quarter, Africa and parts of Latin America were only just beginning to be impacted by the outbreak of the pandemic. India went into a nationwide shutdown in the last week of March, although there were some lockdowns in some areas from mid-March. Restrictions in China began to be eased at the end of March. And although some restrictions have now been reintroduced in selected big cities, Chinese consumers are not yet going back to how things were before. There's a new normal emerging, such as the attitude of consumers to return to out-of-home dining. Although the restaurant opening rate continues to increase and is currently sitting at around about 60%, the capacity utilization is capped at somewhere between 50% and 70% to ensure that physical distancing is maintained in those restaurants. Let me turn now to the divisions. Overall, Beauty & Personal Care grew by 0.3%, with 0.7% from volume. Negative pricing of 0.5% was primarily led by India following price reductions in skin cleansing in the previous quarter. On this slide, we show which of the different product categories in the Beauty & Personal Care division have been impacted by the short-term pull forward in demand due to household stocking and also the changes in consumer usage. By this, I mean, how many times a consumer is washing their hair, using deodorants or cleaning their hands. Skin cleansing saw mid-single digit volume-led growth as we responded to the critical need for hygiene products to prevent the spread of COVID-19. From a channel perspective, travel restrictions adversely impacted the Carver portfolio within skin care. Similarly, our overall Prestige portfolio is being heavily impacted by the closure of much of the beauty channel, which normally makes up about 2/3 of our sales. Foods & Refreshment underlying sales declined by 1.7%, with negative volumes of 1.8% and pricing of 0.1%. Again, we show here the key categories within Foods & Refreshment, where we've seen both household stocking and changes in consumer usage. The 2 major impacts to call out are those I previously mentioned, the decline in out-of-home ice cream consumption and in global Food service sales. In the quarter, the largest volume decline was in ice cream, which was down 8% overall, the result of there being little seasonal sell-in for out-of-home ice cream in our key markets across Europe, in Turkey and in Mexico. Distributors have quite naturally been reluctant to commit to buying ice cream stock with an uncertain holiday and tourism season ahead. And as I said earlier, the next 6 months normally accounts for around 70% of our annual out-of-home ice cream sales. Also, as mentioned earlier, there was a sharp decline in Food service as restaurants, canteens and cafes were closed for most of the quarter in China, but also in March in the other large Food service markets, such as the U.S., Germany and the U.K. Increased in-home consumption and household stocking in some markets, particularly in the U.S.A. and Europe, contributed to volume-led growth in Savoury and in Dressings. Knorr saw low single-digit growth, whilst Hellmann's grew by double digits. Tea declined by low single digits impacted by India and out-of-home channel closures. The strategic review of our tea business is well underway, and all options to maximize value are being considered. Home Care underlying sales grew by 2.4%, with 2.6% from volume and negative price of 0.2%. Our Home & Hygiene brands, including Cif surface cleaners and Domestos bleach products benefited from increased demand for household cleaning with double-digit underlying sales growth. As an example of our brands rapidly adapting communications to ensure that they are fully relevant in today's changed world, Domestos is teaming up with Cleanfluencers to spread the message about home hygiene. In China, we accelerated the launch of the new germ killing Botanical Hygiene range, which Alan mentioned, addressing demand for natural cleaning supported by advanced and effective technology. In laundry format premiumization, in particular, liquids and capsules, continues to be a driver of volume-led growth in Fabric Solutions. Clean and green Home Care brand, Seventh Generation, grew by double digits. And let me turn now to the regions. In Asia/AMET/RUB, underlying sales declined by 3.7%, led by a volume decline of 3.4% and a price decline of 0.3%. Most of the emerging markets that we operate in, we're only at the early stages of the pandemic by the end of our first quarter. China was the exception, and it suffered a significant decline as the lockdown measures to contain COVID-19 restricted out-of-home eating and shopping trips for much of the quarter. Government restrictions were beginning to be eased at the end of the quarter, but it will take some time for consumer behaviors to normalize, if and when they do. While government measures were only put in place at a national level in the last week of March in India, there was significant disruption in the early lockdown despite our goods being classified as essential. The duration and impact of the crisis in South Asia will be key. Indonesia and Vietnam performed strongly, although the Philippines declined across divisions, following the early introduction of restrictive physical measures. And our factories were, in fact, closed for a number of days. Thailand was also negatively impacted with reduced tourism. There was limited impact from COVID-19 in the quarter in Africa. Turning to Latin America. Latin America grew by 4.9%, with 3.1% from price and 1.7% from volume. Across the region, there was relatively limited impact in the quarter from COVID-19, with a small positive impact from household stocking in late March and a negative impact from out-of-home ice cream. We believe that much of Latin America is in the early phase of the COVID-19 cycle. Conditions in the region generally remain challenging with volatile currencies, particularly the devaluation in the Brazilian real. Growth in Brazil was helped by continued strength in Deodorants and in Fabric Solutions. In Argentina, we saw a strong positive volume across Home Care and in Beauty & Personal Care, whilst also managing price in what's continued hyperinflationary situation. North America grew by 4.8%, with 5.6% from volume and a decline of 0.7% from price. This was driven by the strongest growth quarter in the U.S. since 2012, with our mainstream retail business growing at 7.2% as our supply chain responded rapidly to the dramatic increase in demand in March. Household stocking led to a substantial uplift across most categories, while Food service, ice cream and our Prestige portfolio were negatively impacted in March as physical restrictions began. Hygiene products, such as salt-based products and in-home cooking products under Knorr and Hellmann's brands, grew strongly. Both before and during the impact of COVID-19, our competitive turnaround in all 3 of our Hotspot sales in the U.S. has continued. In dressings, we've now been gaining value share for the last 3 quarters. In U.S. ice cream, although underlying sales growth declined, which is following the market, we have gained share for the last 2 quarters. And in our key U.S. Care business, we saw mid-single digit growth in the quarter, with our market share performance back to flat and a strong turnaround from the share loss earlier in 2019. Turning now to Europe. We delivered underlying sales growth of 1.4%, with volume growth of 3.1% and price down by 1.7%, reflecting a tough pricing environment. Across Europe, ice cream sales declined without the normal retail sell-in ahead of the Easter holiday, which normally marks the beginning of the European ice cream season. The U.K. and some other countries benefited from household stocking in March, although this pull forward in demand was already beginning to unwind before the end of the month. We saw increased consumer demand for Hygiene products and Foods given the significant upswing in home eating. Turnover for the quarter was EUR 12.4 billion. Underlying sales growth was flat. Acquisitions and disposals increased turnover by 0.6%, with acquisitions contributing 0.8%. On the 1st of April, Hindustan Unilever successfully completed the merger with GlaxoSmithKline Consumer Healthcare Limited. In early April, we also entered into the agreements to buy out the 30% minority share of our subsidiary in Malaysia. Net currency-related items reduced turnover by 0.4%. Currencies have been very volatile in recent weeks, but based on today's spot rates, we would expect a negative currency translation impact of around 3% on turnover and a little more on EPS in 2020. Turning to the balance sheet. Unilever, of course, has a very robust balance sheet and a strong liquidity position. We have a smooth profile of long-term debt maturities and substantial credit lines available. We do not have any material covenants in place, whether for bonds or for bank borrowings. At the end of 2019, our cash and undrawn facilities totaled EUR 11.2 billion, which is 2.8x the amount of debt maturing in 2020. We have U.S. and European commercial paper programs of around $2 billion of outstandings at the end of March, backed up by around EUR 7 million of committed facilities. These were renewed this year for a period of 1 year with a 1-year extension option. Only 2 weeks ago, we secured additional funding in the debt capital markets. This was a prudent move to take advantage of relative market stability at that time, and to bolster our headroom and our financial flexibility. We were in the market to raise EUR 1 billion, and we were very significantly oversubscribed. And so we decided in the end to issue EUR 2 billion. Our strong balance sheet is reflected in our credit ratings, which are currently A1 or single A for long-term debt and P1 A1 for short-term debt. We aim to maintain a strong balance sheet, which we consider to be equivalent of credit ratings of at least A2- or single A. Within this context, we have maintained our quarterly dividend. Even though our cash position is strong, uncertainty demands that we put rigorous focus on managing our resources and uses of cash, and that we are super disciplined in controlling operational costs. First of all, we're managed and focused on managing our receivables. We're also reevaluating all spend to ensure its relevant and appropriate in this situation, including operational costs, CapEx and restructuring investment. Some costs have declined quite naturally, such as travel and in person market research. We've introduced a worldwide hiring freeze. We have a freeze on all nonessential spending, such as things like consultancy, et cetera. Other savings are readily accessible because advertising production has stopped and media rates have declined so that we can increase our advertising reach for the same level of spend. Nevertheless, we are still reviewing all discretionary marketing spend to ensure it's both effective and appropriate, and above all, we're dynamically reallocating our BMI in response to the crisis. For example, we're shifting BMI that might have been spent on outdoor advertising and supporting out-of-home campaigns, and dialing up investment behind areas of the highest return on investment, for example, in skin cleansing, in-home and hygiene brands. We're moving at great speed to make sure our brand communications are appropriate for the times that we're in. As examples, we've switched Persil's positioning from dirt is good, which encouraged children to get out and play, to home is good and a message of thank you for staying indoors. As you know, we have a robust pipeline of savings programs, which includes our 5S savings initiatives, ZBB, Run, Power, Grow and our change programs. While these programs continue, we're modifying them to support our focus on protecting cash in times of uncertainty. And now, I'll hand back to Alan to cover our priorities for 2020.

[Alan W. Jope, CEO & Executive Director]

Okay. Thanks very much, Graeme. Now you have heard us talk a lot about the uncertain and volatile conditions that we're operating in. And there are many known unknown, things that we know we don't know, such as the progression of the virus, including second waves, the development pathways for both antigen and antibody testing, the treatments and vaccines, we don't know the scaled duration of government containment measures nor the mechanisms to unwind social lockdowns and therefore, the severity and duration of the resulting economic crisis. And so in our opinion, we've not yet seen the full impact of this virus in places that have got less well-developed health care systems, the favelas of Brazil, the townships of Africa, the slums of India and so on. But we are uniquely well placed to spot and respond to changes in local consumptions, and we're greatly reassured by our inherently strong cash and liquidity positions. Having said that, we cannot reliably assess the extent and impact of this crisis on our markets and businesses. We're, therefore, taking a decision to withdraw our growth and margin outlook for 2020. We're managing the company to ensure that essential products continue to reach our customers and consumers, whilst being fully focused on protecting cash and maintaining our financial strength. So what's important for the business now? Well, we've talked a lot about how we're organizing to manage through this pandemic in the short and medium term. But we're also thinking beyond the virus and setting ourselves up for a future where we can emerge from the crisis and strengthened positions. At the start of the year, we set out our 5 growth fundamentals as the key levers for driving growth in categories we compete. They remain very critical to building a strong long-term business with excellent execution everywhere. And prior to the pandemic, we were seeing substantial progress from the strategy of refocusing the business behind these fundamentals, with growing penetration of our brands and steadily increasing competitiveness in market share, in the Hotspots that Graeme mentioned, and more generally. These fundamentals are still very relevant for the short term, and they're helpful for keeping our business focused. For example, it's no better time to be concentrating on things like product superiority or physical availability or for brands to be demonstrating the positive contributions that they're making to society. In some instances, the 5 fundamentals that have been modified slightly, such as dialing up cash as a focus under our fuel for growth fundamentals, so that we manage both for the short term, but also navigate through the crisis in strong condition to reaccelerate when conditions permit and drive the long-term health of Unilever. Unilever is built for times like this. Many of our countries have a track record and an instinct for managing through crisis. We've learned a lot from those markets over the years, where we've shown not just our ability to manage the immediate prices, but almost always to come out of it with a strengthened competitive position. And as we look forward, we're confident in the long-term prospects of the business, confident that our portfolio, our financial stability and the quality of our leadership teams on the ground mean that we're going to emerge from this price as well-positioned for the future. The fundamental drivers of growth continue to be the key principles that will drive our execution. And we remain completely focused on delivering superior, long-term financial performance through our unique sustainable business model. So thanks for listening, and that's the end of the prepared remarks. And Richard, let me come back to you.

[Richard Williams, Head of Investor Relations]

Thanks, Alan. Right. We'll now take questions. And we have quite a lot of questioners on the line, but we'll do our best to get through as many as possible.

[Richard Williams, Head of Investor Relations]

[Operator Instructions] So let's go to our first question, which is Warren Ackerman from Barclays.

[Warren Lester Ackerman, Head of European Consumer Equity Research]

Two for me. Hopefully, you can hear me, it's not the best line in the world.

[Richard Williams, Head of Investor Relations]

Yes, we can hear you Warren.

[Warren Lester Ackerman, Head of European Consumer Equity Research]

The first one is just around the first quarter. I think we will all brace for a weak Q1, but this is still a bit weaker than I think most people expected. And when I kind of compare your commentary, say versus P&G, it does sound considerably more downbeat. I'm just trying to understand your competitiveness. You did flat in the first quarter. I appreciate it's hard, but is that below market growth? I mean, if you can give us any clues at all on Q2, I'm not expecting a number, but there's so many moving parts. I mean, would you expect the number overall to be just higher or lower than Q1? I'm just trying to understand kind of competitiveness as best as you can measure that, appreciating it's difficult. And then the second one is just on the guidance. Obviously, like every other company or most other companies, you've withdrawn your guidance on both top line and the margin. I'm just thinking about the 20% number. Is that a number that is just no longer relevant? I was just wondering whether, Graeme, you can maybe talk us through the moving parts a little bit because I can imagine on one side, input costs here with oil, very low. The promotion is well down, but then you've got mix issues. And then you've got kind of brand the marketing considerations in out-of-home to in-home. If you can maybe sort of walk us through what your sort of thinking? I'm not asking for a margin number for the full year, but just in terms of the moving parts within your kind of big cost buckets, that would be super useful.

[Alan W. Jope, CEO & Executive Director]

Thanks very much, Warren. Graeme, why don't you have a crack at the margin outlook? And then I'll come on and talk about the competitiveness of this performance as well as saying nothing about quarter 2.

[Graeme David Pitkethly, CFO & Executive Director]

Sure thing. Yes, so on the -- so I mean no surprise really. It just doesn't make sense to focus on a target that was set well before the global crisis hit. But I would point out that we were very much on track with the margin. We were mostly done, to be honest. And now, our focus shifts to managing cash, just through the period of the short-term impact of the crisis. And in that margin is just one part of cash delivery, things like working capital management are every bit as important. And in fact, no surprise, but moving to absolute management of absolute profit, and because that translates much more directly into cash. That's really been one of our focal points at this time. So in terms of moving parts within gross margin, you're right, there's -- there are many, many things moving in there. I'll give you some examples. I mean, there is some on cost from the way in which we're having to operate within the factories, physical distancing, all the other measures that we've put in place, there's some costs related to reconfiguring product formulation and sources of supply of raw material, et cetera. A little bit of mix positive and negative, but yes there -- a little bit of a mix factor with the foodservice business. We've got is a pretty profitable business, out-of-home ice cream is a pretty profitable business. And really, they are the 2 -- those 2 factors, combined with India, all 3 things being, frankly, short-term and relatively binary. They are the things that you're seeing in the results of the first quarter and that you will see in the second quarter. Some positives in gross margin, I guess, we're looking at a very low commodity environment. We've got some hedges still in place with regard to the oil price, but an overall deflated commodity environment goes in the other direction for us, of course. And I think the pricing environment will remain very muted. But as I said, focusing less on percentages through this period, focusing more on absolutes, in particular, the drop-through from absolute profit through working capital and into cash. That's our short term focus.

[Alan W. Jope, CEO & Executive Director]

Thanks, Graeme. So on the question of are we competitive? How is it looking for Q2? Do we sound down beat? Well, I think it's quite hard to read Unilever's portfolio in this moment more. The geographical dispersion and the category diversity. You have my sympathy, and that's why we've given an unusually granular level of decomposition of the performance that Graeme showed. And I do want to highlight that this is a difficult time for our Food Solutions business and in particular, the out-of-home ice cream business as we go into the summer. So I think it's likely that for those 2 businesses, in particular, things will get more difficult before they get better. On the other hand, as to competitiveness and growth versus market, actually all signs are green. Our brand penetration market shares were improving through February, actually a 3-year record high. And in China, where we're starting to see a significant recovery. There is pretty strong data that shows we are weathering. In fact, we've come out of the situation in China competitively advantaged. And obviously, India is a big deal for us right now, where the country grant a complete standstill as Graeme said in the last week of March. And we're very confident that we're back up-selling and manufacturing in India, not at full strength. But at some good strength in a content, where many are still unable to operate the business. So this is -- I know we keep seeing this over and over again, but we are unusually capable in managing through crisis in the emerging markets. And I profoundly believe that we will come out with an enhanced competitiveness. But I also believe that Q2, things are going to get more difficult before they get easier.

[Richard Williams, Head of Investor Relations]

Next question to Celine Pannuti at JP Morgan.

[Celine A.H. Pannuti]

My 2 questions. So first of all, on emerging markets, I would like -- I mean, obviously, we are starting to see the impact of lockdown in March and then now in Q2. What kind of emerging market are you preparing for once we go out of the lockdownd, i.e., in the second half of the year. In terms of as well your ability to pass on prices, I think there is a very low commodity cycle at the moment, a strong U.S. dollar. So you have a good experience on crisis. What kind of setup are you expecting in EMs because whether that weakness we see in Q1, Q2 would mean still a very challenging environment in EMs for you? The second point, coming back on the margin and all the moving parts that you have mentioned. So just to clarify, so H1, you mentioned 3 negative, the extra cost, the mix and India. Would that mean that we should expect quite a substantial margin decline in the first half? And then if I look into H2, probably India will not be there, but it depends what you said on my question one and factory cost, but what about still the negative mix of out of home and food?

[Alan W. Jope, CEO & Executive Director]

Okay, Celine. Let me -- let's order -- answer your questions in the order that you asked them. I'll take the first question. And then I think, Graeme, you can step in on the second point. So Celine, I think as unhelpful as it may be it's not good to think of emerging markets as one homogeneous group. There's enormous variation in what we expect. So China is an emerging market and seems to be coming back quite quickly. And it will depend on government response. Actually, I'm surprised how fast we're starting to see a recovery in India, in after a complete standstill in -- and here, we're not usually talking in weeks in these calls. But in the last week of March, really, there was nothing happening in India, seeing the first week of April, already, we're starting to see that come back. And in Latin America, our business there has continued to do quite well. So I believe that in, as I said, to Warren, in Q2, we'll see a substantial effect from out of home ice cream and restaurants remaining closed, and that will have an impact on Food Solutions. But to your direct question, Celine, I'm quite optimistic about emerging markets for the second half as a group, but we have to decompose it a little bit. Final point is kind of a biological point, which is we just don't know what's going to happen on this virus and the second bounce impact. If you take example, it looks very bad. But if you take other parts of East Asia, particularly China, it looks like they managed to avoid a second bounce so far. So speculating too far into the future is a risky business at this time, which is why we've withdrawn guidance. But I would say probably Q2 quite tough in the emerging markets, each to good chance of a strong recovery. Graeme?

[Graeme David Pitkethly, CFO & Executive Director]

Thanks, Alan. Celine. Yes, on the margin point, obviously, we've got less visibility than we had a month or 2 ago. There's many, many moving parts in there, as I said, in response to Warren's question. But let's just reflect that we've been on a very successful margin journey, and we've spent a lot of time talking about it, haven't we. But we've built our margin up very strategically in a very healthy way over several quarters and years now. We've done that by building our gross margin higher. By reducing our overheads and putting more money back behind our brands, building digital capabilities. So all of it's being constructed in a very, very healthy way. And as I said, we were doing well on our original margin trajectory. Now it is difficult to see what will come through in the first half. And I think in many ways, it's important to recognize that we will run this business to optimize the long-term value of the company and the health of the company. And that means that the margin, I'm afraid to say, is going to be as much an output of the actions that we take, not a specific input that we're looking for. As I said, we've got to manage to make sure that our people are healthy and safe and that our products are finding their way to the consumers, and we'll do whatever it takes to make sure we do that healthily. I don't think, Celine, that, that naturally leads to a strongly negative margin position for the first half. Now you're sort of hostage to fortune here, obviously. But I don't think that's the case. The fact that we've got such strong businesses on the front line in our emerging markets and in our developed markets, the fact that we're organized, as Alan said, with very short communication lines, means that our strong leadership in each market is absolutely empowered and able to take all of the necessary decisions we need to take in order to maximize the health of the business. And I don't think that, that necessarily means that there's substantial margin stress in the first half. But as I said, it's difficult to have the visibility that we would normally have given all the moving parts at the moment.

[Richard Williams, Head of Investor Relations]

Next question to Richard Taylor at Morgan Stanley.

[Richard Taylor, Equity Analyst]

The first one, if I may. Obviously, previously, you've talked about portfolio optimization and asset sales. I know we're in a different environment in a different world now. But maybe you could give us a little bit of color on what we should be thinking on global tea, whether or not it is even the right thing to do to still house. Divest that business given the cash flow it gives you during these times. So that's the first question. And secondly, I'm afraid I also want to press you on margins. I know that the 20% by 2020 was a pre-crisis guidance, and I heard your answers to the last few questions. But look, for the full year, should we be expecting margins flat up or down?

[Alan W. Jope, CEO & Executive Director]

Okay. I'm not sure how we're going to answer the second question with much more new information. So Graeme, I'll give you a few minutes or a few seconds to think about how to weave in something to respond to Richard's provocation. On tea and portfolio, well, it's a simple answer. We're carrying on the strategic review. The long-term trends on black tea that make up 2/3 of the business are likely to remain headwinds at a strategic level, independent of this crisis. And so the work that we needed to do carries on. I don't want to fall into the trap that it's a preconceived notion that will sell that business. There's lots of potential things we could do as outcomes of a strategic review, and it will carry on with no change to the strategy on that. Graeme?

[Graeme David Pitkethly, CFO & Executive Director]

Yes. I haven't spent that time being able to improve much on the question on margin. Look, Richard, we're simply not going to guide on margin. It's as simple as that. We're not going to say whether it's going to be flat up or down because we haven't got that visibility right now. I think we've been really clear, though, in response to Celine's question that I think the conclusion that it's matched really down. It's just hard to say. There's so many moving parts in that equation. And as I said, we're not going to manage this business. It would be the wrong thing to manage this business in the short term through a process of this nature by focusing on the percentage margin. We're going to do the right thing for the health of the company and have an output from that.

[Alan W. Jope, CEO & Executive Director]

Yes. I was going to underscore to Graeme that you'd already made one is margins an outcome. We're doing the right thing for the long-term of the business, number one. But also number 2, we've got tons of costs levers that we can deploy at this time. And whilst there might be some increased costs from the factory standard operating procedures, as Graeme talked about. Intermediate rates are plummeting. And so we can get our reach and frequency goals on the media front at significantly lower cost. So things are swinging around wildly on the cost lines. And we have many, many areas of flexibility. But all those decisions will be driven by the right long-term thinking and not zeroed in on particular short-term margin target, which, by and large, by the way, we had already more or less hit.

[Graeme David Pitkethly, CFO & Executive Director]

Alan, can I just flag one other point for everybody. And just a reminder really that the impact of commodity pricing within any of our markets is a combination both of the absolute commodity price quoted in dollars and the movement in currency. So that pricing equation, we've spoken a lot about it is about making sure that your brands are competitive. And sometimes you can take price and other times, you have to defer on price. But I think everybody is very clear, how practiced and effective we are in managing that. And you see that in the margin progress that we've steadily made over the last few years. So we know what we're doing when it comes to managing situations of volatile commodities and volatile foreign exchange, and we do the right thing for the consumer, do the right thing to make sure that our businesses are strong for the long term, not necessarily, as we said, managing things on a pinhead with a specific target.

[Richard Williams, Head of Investor Relations]

We're coming up to the hour, but we still have quite a lot of questions. We're not going to get through them all, but let's keep for a bit, let it run on a bit.

[Alan W. Jope, CEO & Executive Director]

I suggest we are pressed on it. But it's an important time to be in conversation with our investors, Richard, so let's try to create some capacity to answer as many questions as possible.

[Richard Williams, Head of Investor Relations]

Yes. So let's go to John Ennis at Goldman Sachs.

[John Mark Ennis, Equity Analyst]

And hope you can all hear me. The first is on price positioning. I guess, do you think you have an adequate value range in some of the more problematic markets like India or even Latin America, where it's still early days for the COVID impact and where there's a risk of down trading? Or do you need to make any new brand launches or price adjustments to your existing portfolio as we effectively enter a likely weaker macro period in those markets. And then the second question is on the longer duration changes you touched upon, Alan, earlier in your presentation. Can you highlight where you see the greatest structural change from this, both positive, but also negative for Unilever. I mean, does this change your view on certain channels longer-term of food service or out-of-home ice cream, et cetera?

[Alan W. Jope, CEO & Executive Director]

Okay. Graeme, I will let you have a crack at the first question there around our value ranges, and I'll talk a little bit about our long-term perspective on the business.

[Graeme David Pitkethly, CFO & Executive Director]

Sure thing. Thanks for the question, John. I really do believe that Unilever is just about the best in the business at managing value. This is absolutely in our DNA, and it's what we do in every one of our markets day-to-day. In most parts of the world, where we've got the strongest businesses, and we tend to be the strongest business in each of those markets. They've already been through a period of crisis. I'm thinking here about Indonesia, I'm thinking about Thailand years ago. I'm thinking of parts of Latin America, Brazil and Argentina just in the course of the last few years. And a critical part of that is understanding what we call the full price piano. Another way of putting it, John, is we understand very, very deeply the attractiveness of making brands affordable to consumers. And I don't mean just value brands themselves. I also mean premium brands are available at affordable price points to allow people to still buy a more premium brand, but do it at an attractive price point, at size, et cetera. That's what we're very, very good at around Unilever. And I think it's a fair bet that the global economy is going to be any -- going to be deeply challenged in the years ahead. There will be a recession, and I think we're well equipped as a business to deal with that. I'll just give you one example. Take Brazil, which has been through its own crisis over the last 3 years or so. Our business there moved very quickly to reposition the brand portfolio and introduce new brands at the Tier 3 and Tier 4, as we call it, value position, and an example was the introduction of Brilhante, which was -- is a value laundry brand below our Powerhouse brand in Brazil of Omo. Similarly, channel shift, the consumer shop in different channels when they're looking for value. And in the case of much of Latin America and the discounter channel effectively was cash and carry, and we moved our entire business system to make sure that we had more than fair share of strength in that channel. So I've got absolutely no -- nothing but confidentially about the business' ability to compete and then create value very effectively in a world where value positioning and brand pricing dynamics and affordability are increasingly important.

[Alan W. Jope, CEO & Executive Director]

I can't resist underscoring that message, the strength of our value propositions in Latin America, in actually North America and Europe, and the incredible low price that we're able to offer products at in places like India is a gigantic strength of Unilever. In terms of the longer duration changes, John. Let me break it up into 3 areas, consumer, channel and categories. From a consumer perspective, I think there's absolutely no doubt that there's going to be lasting changes on the importance of value. I think we are going to go into a tough economic times for an extended period. We know that this has a strong impact on people's hygiene behavior. We know that from things like SARS and swine flu in China. We know that it will be a permanent shift to online shopping. And we know that -- and online media consumption, that's one-way traffic, again, learning from China. And we're pretty confident that anything that's in the space of wellness, health and well-being is going to enjoy sustained strength. So those are some of the consumer bets. There are others that I don't really want to mention because we think they're a bit proprietary those insights from our extremely good proximity to consumers. There's also, in many cases, sometimes local. From a channel perspective, I've already kind of mentioned one, which is, this is one-way traffic towards online grocery shopping and online shopping in general. And it will be an accelerator of the trend towards proximity shopping, which we had already been seeing and are seeing at scale right now.In terms of categories and business models, it's not changed our thinking so far. Ice cream is a wonderful business. And we think that the impact on ice cream will be deep, but short-lived. We think that food service is a very attractive channel where we have super strong positions. It will be longer for people's return to restaurants to happen, but it will come, again, learning from history. So I would say, we're being quite agile on reorientating our innovation programs around changing consumer patterns. We're moving quite quickly on rethinking our channel programs. But we're not changing our point of view on category and business model attractiveness. Richard?

[Richard Williams, Head of Investor Relations]

Next question to Jonathan Feeney from Consumer Edge.

[Jonathan Patrick Feeney]

Thanks for your leadership in all of this. 2 questions. First is Graeme, you said a lot of useful stuff faster than I could take notes. The Prestige beauty portfolio globally. Could you give us a sense of how big that was expected to be in 2020, I know the growth was if somewhat exponential. Characterize more than just sharply, if you could, how down that and how down that is? So that's my first question, for the quarter. And secondly, P&G mentioned and even I saw in your takeaway in North America, for example, through mainstream retail, it looked like it was somewhat better. The takeaway was than 7%. I think I have 13% through the measured channels that I look at. Is there any impact in the U.S. and Western Europe going into Q2, where you were behind as far as takeaway and you have a little bit of catch-up to do that's helping you early in the second quarter.

[Alan W. Jope, CEO & Executive Director]

Graeme, the first question was directly sent your way. So please handle it, and I'll comment on the second one.

[Graeme David Pitkethly, CFO & Executive Director]

Sure. Jonathan. Yes, we me just dimensionalize the Prestige business for you. So our intention and our remaining intention is to build that business to beyond EUR 1 billion through a combination of organic growth and acquisitions. It was growing very quickly, as you said. In fact, in 2019, we continued to have double-digit growth for the prestige business. The footprint of the business is large -- the biggest part of it is in the U.S., 2/3 of it is in the U.S. and about 1/3 of it is outside the U.S. And that is distinct to some of our competitors in the Prestige beauty space who are more focused on Asia. This is a portfolio, which is still 2/3 in the U.S. It was about EUR 600 million in 2019. And I'm sure in ordinary circumstances, we would have grown through a EUR 700 million or so in 2020. But it's been impacted. It declined by low single digits in the first quarter. Because principally, the health and beauty channels in which it operates are closed, particularly in the U.S. in mid-March. Sephora, Ulta and Nordstrom closed all of their doors, and that was about a 25% of the global Prestige business turnover. What we do see is a pickup in the direct-to-consumer aspect of that -- of the Prestige business that has quite a big e-com opportunity, about 20% of the business today is sold in e-com. And I know that Sunny and Vasiliki and the team are very, very focused on how we make that switch across more into DTC, more into e-commerce and getting our plans together for doing more in China, in particular, with that portfolio. So more effort goes behind that now with the effective closure of the -- of many of the channels that it's in today in the short term, and we'll use it as an opportunity to drive that business, which we're very excited about, even harder.

[Alan W. Jope, CEO & Executive Director]

Thanks, Graeme. Now on the United States, I'm enabled in answering your question by the fact that we publish our North American numbers. And for quarter 1, we're showing 4.8% growth in North America, which is unprecedented versus recent history. And you can imagine what sort of numbers we saw in March to be able to generate that kind of number for the quarter. All evidence we have is that in our categories in North America, we are fully competitive. And I would share with you that we're seeing considerable strength in our April sales in the U.S., in particular as some of that heavy buying carries on. I really don't want to try and speculate much beyond that because some of the behavior in North America is definitely increased consumption. People are washing their hands more, people are cooking more at home versus going out to restaurants, but some is also definitely stockpiling. We've got a point of view on what split in that is today. At the moment, it's just a point of view. But yes, I think the U.S. is enjoying a boom time, and we are participating as best we can tell with our fair share. Richard?

[Richard Williams, Head of Investor Relations]

Okay. Let's go straight to David Hayes at SocGen.

[David Hayes, Equity Analyst]

Thanks for carrying on the call. So 2 for me, one on sales, one on cash flow. So on the sales front, I guess, just to check the logic that you talked about before, Graeme, minus 4 percentage points seems to be the COVID impact, negatively 2 percentage points is the estimated stockpiling effect. So underlying is around 2% is your kind of calculation. Not sure that was the right math. I guess, within that number, the question really is and then about the mix and price. Can you break out mix and price within the negative 0.2% versus last year's 1.6%, I think it was just to give us a feel of how much of it is that pricing you mentioned in India? And how much of it is the mix dilution effect of what people are buying? And then the second question on cash flow. You talked about this $500 million of supplier facility. I know you guys, like many companies, had a lot of supply chain financing over the last few years. Is that something which is capable of staying in place, the uncertainties and with the financial system changes? Is that something you're going to have to ease off, and therefore, there's going to be a cash outflow as you do their supply chain financing through the year?

[Alan W. Jope, CEO & Executive Director]

Graeme, why don't you take the second one? And I'll reiterate to David, some of the points around sales. So David, just to be blunt, your calculation is right on the money. So there's kind of 4 percentage points of down elevators, 2 percentage points up elevators. And so the underlying is around 2% growth. Exactly. Now on price/mix. In Europe, there continues to be a deflationary pricing environment. In the rest of the world, it's more or less flat. And therefore, the rest is from mix, and there's so many moving parts underneath that. I don't really want to confuse the conversation by going much further than that other than to say the long-term trend of price pressure in Europe continues. And it actually kind of goes back a bit to Celine's question, where I think we have got extremely good pricing power in emerging markets, both due to the structure of the trade and our portfolio. And Europe, we can count on probably even stepped up negative pricing pressure as the economies of Europe go a little bit into the doldrums. Graeme, supplier financing?

[Graeme David Pitkethly, CFO & Executive Director]

Sure. David, let me just take the opportunity to talk a bit more broadly, maybe about working capital because we've got 2 things happening effectively. First thing is, as we've said, and we were very quick to make sure that we were using our financial strength to help the total value chain of Unilever. And within that, offering up to $500 million of support on our balance sheet to our smaller suppliers, I think was absolutely the right thing to do, and it reflects the sort of kind of multi-stakeholder philosophy that we have about the extended ecosystem and the sort of long-term health of the company. At that facility, we need to be very directed in it. And in fact, a portion of that, we are specifically keeping -- in thinking about our ice cream business, which we've got a number of very long standing, we call them concessionaires, but ice cream distributor, partners who manage that part of the sort of last mile cold chain for us. And some of that will be definitely directed there. The other thing, of course, is we also need to make sure that as we continue to sell our products that we get paid for them. And so we've also put some very disciplined actions in place, some refreshed capability in the front line of our businesses when it comes to debtor management and receivables management. So on one side, yes, targeted support where it is the right thing to do for our business and continuing to supply. But on the other -- and making sure that we are super disciplined when it comes to credit management, et cetera.Now on the subject of supplier financing, a couple of points to make really. First of all, that's provided by our banks, not by us. And what it reflects is actually the strength of Unilever. So it's an interesting thought you raise, but if we go into a more difficult economic environment, which I think we will, I think you'll continue to see the strength of Unilever reflected. So it's not the strength of the banks or the strength of the supplier that means that a supplier can access a supplier financing program with the bank, but it's actually the strength of Unilever's balance sheet and Unilever's covenant that it reflects, and I don't think that changes at all through the crisis and beyond because we're strong as I described.

[Richard Williams, Head of Investor Relations]

Next question to James Targett at Berenberg.

[James Targett, Analyst]

Just a question actually following up really on the supply chain. And you mentioned that you expect the COVID situation to get worse rather than better. But at the moment, your supply chain generally are holding up and pretty functional. How confident are you that if the situation deteriorates if the supply chain does hold up? And where do you see the biggest potential areas for disruption? Is it more material procurement side, the manufacturing, distribution to retailers, any particular regions? Just some color on that supply chain will be really helpful.

[Alan W. Jope, CEO & Executive Director]

Yes, I'll take that. James, thank you for limiting yourself to one question and outstanding precedent, I'd encourage others to follow. So let me give you a blunt answer on the supply chain. I am very confident that we will continue to be able to produce a sense supply. Funnily enough, the thing that -- the only thing that has been a material disruptor is people to work in our supply chains either when government imposes such an extreme lockdown that people can't get to work and we have to make emergency short-term arrangements. And we've done everything you can imagine. We've recruited fleets of cars, special buses with people physically separated on them. So getting people to work is one challenge when countries go through that initial government overreaction, and then we go and tell them, look, you don't want to cut back on supplies of hygiene products and food. And then they relax the fastest example that we've had was Northern Italy, where there was a complete shutdown. And within 4 hours, we've got a relaxation order for the essential goods that we make. In India, it's taking us about 4 or 5 days to get that relaxation. And then the second is when we get community infection around a factory, and I'll give you -- I won't name the specific factory, but in the Middle East, we have community infection in a factory. And ultimately, what we ended up doing there was we had a whole range of solutions. But we ended up getting every worker from the factory tested. We -- many of the workers in the Middle East are migrant workers, and we -- who live in dorms. And actually, these infections are happening in the dormitories where people are going. The safest place there are is a Unilever factory. And in that case, what we did was we actually hired hotels, and we have run in the room in hotel in the Middle East, so that those who are showing symptoms are tested positively would isolate. And the rest of our workers could come and keep things going. And those -- the cost of that type of thing is absolutely trivial for us. So don't get excited about putting our factory workers up in hotels, relying on transport, it's absolutely trivial. And kind of -- those are a couple of illustrations. The short answer, though, is that I think the ingenuity of our people is allowing us to keep running our factories.

[Richard Williams, Head of Investor Relations]

Straight to Chris Pitcher at Redburn.

[Chris Pitcher, Partner of Beverages Research]

I'll keep it to one. In terms of the statement, I was impressed by the comment on Lifebuoy, getting it into, I think you said 43 new markets. Can I just get a bit more color around that? For those markets, planned before that? Is this accelerated rollout? Or is this you opportunistically getting the brand into help and can you give us a sense for the benefit to sales from that rollout? And whether those sales do you think will be embedded beyond? And then finally on Lifebuoy, I know there's 3 parts to 1 question. What is the health of relative pricing in India for Lifebuoy?

[Alan W. Jope, CEO & Executive Director]

Okay. Graeme, I'll take a whack at that one. So the rollout of Lifebuoy was opportunistic. It was not planned. And it used a group that we have called Unilever International, who are by far the fastest moving and most agile parts of Unilever. And they -- I've got this extraordinarily fast response mechanism to get both hand wash and sanitizers into some 40 odd new countries on Lifebuoy. And we're very happy with that agility. In truth, it will be a relatively small deal's uplift because sanitizers is actually a very small category. And the core Lifebuoy business in India is extremely competitively priced. And so this is a brand that is definitely going to do well in the coming months and quarters. And we are looking at structurally taking it to more markets beyond the kind of early work that our Unilever International teams were able to do.

[Richard Williams, Head of Investor Relations]

Next question to James Edwardes Jones at RBC.

[James Edwardes Jones, MD & Analyst]

I'm going back to 2 questions, I'm afraid. Firstly, on Home Care, you gave us various examples of products and brands were up double digits, but the whole Home Care division was only up 2.4%. So what was -- what was the lag on that? And secondly, I appreciate an entirely understand why you're not being drawn on margins for 2020. But does that mark 20% margin target? Is that still relevant for 2021 and beyond?

[Alan W. Jope, CEO & Executive Director]

Graeme, why don't you explain the geographical impact on Home Care? And I'll have a crack at the margin question this time.

[Graeme David Pitkethly, CFO & Executive Director]

Yes. James, let me just construct the whole Home Care picture for you. Let's start with the part, which is most obviously positively positioned and that's our home and hygiene business, which is strong double-digit growth, and Alan's talked about what we did with Lysoform in Italy, brands like Cif, brands like Domestos, et cetera. So you can expect that to be a category that continues to have strong demand. It's a very fast-growing part of Unilever anyway, very well managed. And that definitely is positively positioned. And what you're really seeing, the biggest part of our Home care business, of course, is fabric solutions, and that had low single-digit growth in the quarter. And what you saw there was principally the impact of the emerging market lockdown in India, where we have a very, very big Home Care business. That's really what you're seeing coming through there. That's temporary. And we would expect that as we start to get our distribution and our manufacturing moving, as Alan described there, that we'll see that coming through. But that effectively, James, is what you're seeing in the Home Care number. Underlying, very positive, big impact from India in March.

[Alan W. Jope, CEO & Executive Director]

Thanks, Graeme. And on the margins, actually, I think it's fair enough, James, that you kind of provoke us a bit on what's our position on margin. And let me try to answer the following way, which is Unilever's very model is one of steady compounding of the top and bottom line. And we would intend that as we come out of this crisis, whether that's -- I don't think there's going to be a V, whether it's U, a W, or an L. Good luck to anyone who is overly confident in predicting that. But we would hope to be back as we emerge from the crisis to creating value through competitive top line growth and steady compounding on the bottom line. Like Graeme said, we manage the business really for the long term, what's right for the health of the business, what's right for consumers, what's right for our customers. But I see that as we emerge on this, we'll get back to steady compound growth on top and bottom line.

[Richard Williams, Head of Investor Relations]

Look, I'm afraid we're going to have to stop there. Alan, actually, I think, has a TV appearance in a few minutes. So we don't want him to miss that. So thank you, everybody, for your questions. Thank you, Graeme. Thank you, Alan. I know there are more questions. So please, could you get in touch with us. This time, could you e-mail the IR team, and we'll setup a time to speak to you for obvious reasons, it's more difficult to have all calls in the office because we're not there.Thank you all for the questions. Thank you for the input. And enjoy the rest of the day. Stay safe and stay well. Thanks.

[Alan W. Jope, CEO & Executive Director]

Thanks, everyone.