Innovation and brand investment driving faster volume growth

Statement from Hein Schumacher, CEO

“We are focused on driving high-quality sales growth and gross margin expansion, led by our Power Brands. Over the first half, we made progress on those ambitions.

“Underlying sales grew 4.1%, driven by a third consecutive quarter of positive, improving volume growth, while pricing continued to moderate in line with our expectations. Strong gross margin progression fuelled increased investment behind our innovations, and resulted in a step-up of our profitability.

“We continue to embed the Growth Action Plan, doing fewer things, better and with greater impact. The implementation of a comprehensive productivity programme and the separation of Ice Cream are key to delivering on that commitment and we are progressing at pace.

“There is much to do, but we remain focused on transforming Unilever into a consistently higher performing business.”

Outlook

We continue to expect underlying sales growth (USG) for 2024 to be within our multi-year range of 3% to 5%, with the majority of the growth being driven by volume.

Underlying operating margin for the full year is expected to be at least 18%, with increasing investment behind our brands. We expect the year-on-year margin progression in the second half to be smaller than in the first half.

Our very strong gross margin progression in the first half reflects positive contributions from volume leverage, mix and net productivity but also factors that will not repeat in the second half such as, a low prior year comparator affected by high input costs, and carry-over pricing from a period of higher inflation.

First Half Review: Unilever Group

Growth

Underlying sales growth in the first half was 4.1%, led by volume of 2.6% and price of 1.6%. We delivered our third consecutive quarter of positive, improving volume growth, with UVG up 2.9% in Q2, increasing from 2.2% in Q1 and 1.8% in Q4 2023. Four of our five business groups delivered positive volume growth in Q2. As expected, underlying price growth continued to moderate from 2.8% in Q4 2023 to 1.0% in Q2.

The Power Brands performed strongly with 5.7% underlying sales growth, driven by volume growth of 4.0% in H1. Our other brands also saw a sequential volume improvement to -1.1% in Q2, up from -2.0% in Q1.

As expected, our turnover-weighted market share movement^[a] , which measures our competitive performance within the footprint in which we operate, remained largely unchanged on a rolling 12 month-basis. We expect a sequential improvement of the share trend over time reflecting increasing benefit from the Growth Action Plan.

Beauty & Wellbeing grew underlying sales by 7.1%, with volume growth of 5.5% driven by continued double-digit growth from Health & Wellbeing and Prestige Beauty combined. In Q2, particularly strong growth in Health & Wellbeing more than offset softer growth in Prestige that reflected a slowdown in the US beauty market. Personal Care grew 5.6% with 2.9% from volume, led by continued strong sales growth of Deodorants. Home Care underlying sales increased 3.3%, with 4.6% volume growth more than offsetting the negative price growth linked to commodity cost deflation in some emerging markets.

Nutrition grew underlying sales by 3.2%, driven by price with flat volume for the first half. Nutrition returned to positive volumes in Q2 at 0.4%, up from -0.4% in Q1. Ice Cream continued to focus on operational improvements. Underlying sales growth was 0.6% with volume down -1.0%, driven by weak sales in China and a softer start to the summer season in Europe.

Emerging markets (59% of Group turnover) grew underlying sales 5.1%, with 3.8% from volume and 1.3% from price. India grew 1.2%, with stronger volumes partially offset by price. Lower input costs led to negative price, while volumes in India sequentially improved throughout the first half, reaching 3.8% in Q2. Latin America grew 8.8%, with continued strong volume growth across the region. Africa and Turkey delivered broad-based, double-digit growth, driven by strong volume and price.

Growth in South East Asia was adversely impacted by a sales decline of -5.7% in Indonesia, where some consumers avoided the brands of multi-national companies in response to the geopolitical situation in the Middle East. China declined mid single-digit, due to market weakness across all categories apart from food service.

Developed markets (41% of Group turnover) grew underlying sales 2.8% with 0.8% from volume and 2.0% from price. The return to positive volume growth reflected a continued resilient performance in North America and a marked volume improvement in Europe, up 2.2% in Q2. As expected, price growth continued to moderate from the peak in Q2 2023.

Turnover was €31.1 billion, up 2.3% versus the prior year, including -1.1% from currency and -0.7% from disposals net of acquisitions.

Profitability

Underlying operating profit was €6.1 billion, up 17.1% versus the prior year. Underlying operating margin increased 250bps to 19.6%.

We improved gross margin by 420bps to 45.7%. Accelerating gross margin is a key focus for the business. We started to rebuild gross margin in the second half of 2023, with an improvement of 330bps and continued that momentum into the first half of 2024. The first half improvement reflects positive contributions from volume leverage, mix and net productivity but also factors that will not repeat in the second half such as, a low prior year comparator affected by high input costs, and carry-over pricing from a period of higher inflation.

Improved gross margin supported a further step-up in brand and marketing investment behind a strong and focused innovation programme. Investment was up 180bps to 15.1% of turnover, an increase of €0.7 billion. Overheads reduced by 10bps, benefiting from a focus on tighter cost control.

Operating profit of €5.9 billion increased 7.8% against a prior year comparator that was boosted by higher profit on disposal.

Progress on productivity programme and Ice Cream separation

In March, we announced the separation of Ice Cream and the launch of a major productivity programme to strengthen the company and substantially improve our efficiency and effectiveness. Separation activity is underway and on track to complete by the end of 2025. We are working at pace on the legal entity set up, the standalone operating model and carve-out financials. In July, we communicated internally on the planned changes to simplify our business and further evolve our category-focused operating model. We have started consultations with the respective works councils.

Capital allocation

In February 2024, we announced a share buyback programme of up to €1.5 billion to be conducted during 2024. The first tranche of up to €850 million commenced in May.

As a result of the strong first half performance, the Board increased the quarterly interim dividend for Q2 by 3.0% to €0.4396, the first increase since Q4 2020.

We continued to reshape our portfolio, acquiring K18, a premium biotech hair care brand, in February, and completing the disposal of Elida Beauty in June. In July we announced agreements to sell our water purification businesses Pureit, to A.O. Smith, and stake in Qinyuan Group, to Yong Chao Venture Capital Co., Ltd. The deals are expected to complete in the second half of the year.

Beauty & Wellbeing (21% of Group turnover)

In Beauty & Wellbeing, we focus on three key priorities that will drive the unmissable superiority of our brands: elevating our core Hair Care and Skin Care brands to increase premiumisation; fuelling the growth of Prestige Beauty and Health & Wellbeing with selective international expansion; and continuing to strengthen our beauty and wellbeing capabilities.

Beauty & Wellbeing delivered another strong performance, with underlying sales up 7.1%, driven by volume up 5.5% and price up 1.5%. Power Brands led this growth with underlying sales growth of 11.3%.

Hair Care delivered mid-single digit growth with positive volume and price. Our largest hair care brand, Sunsilk grew double-digit supported by combing cream innovations across Latin America and the continued success of its 2023 relaunch. Dove grew high-single digit led by volume growth following the launch of Scalp + Hair Therapy, for improved scalp health and hair density. Clear and TRESemmé grew well with the continued expansion of our patented anti-dandruff shampoo and our new Lamellar Shine range.

Core Skin Care grew mid-single digit led by strong volume growth in our top brands. Vaseline grew strong double-digit supported by its premium ranges, including Radiant X and Gluta Hya, which continue to be rolled out to new markets. Pond’s continued to deliver high-single digit growth led by volume, following its 2023 relaunch.

Health & Wellbeing and Prestige Beauty combined delivered double-digit growth for the 14th consecutive quarter. This was led by very strong growth in Health & Wellbeing, while softer growth in Prestige Beauty reflected a slowdown in the US beauty market. Liquid IV grew strong double-digit with the continued success of its sugar-free variant, launch of new flavours supported by prominent social media campaigns, and ongoing international roll-out.

Olly and Nutrafol contributed double-digit volume growth. In H1, Nutrafol extended into skin care with a daily supplement designed to address the root causes of acne and Olly drove good growth in China supported by its focus on female health supplements. Tatcha and Hourglass grew double-digit, while Paula’s Choice was affected by the market slowdown.

Underlying operating profit was €1.3 billion, up 11% versus prior year. Underlying operating margin increased 110bps to 20.0% driven by gross margin improvement, which supported a step-up in brand and marketing investment.

Personal Care (22% of Group turnover)

In Personal Care, we focus on winning with science-led brands that deliver unmissable superiority to our consumers across Deodorants, Skin Cleansing, and Oral Care. Our priorities include developing superior technology and multi-year innovation platforms, leveraging partnerships with our customers, and expanding into premium areas and digital channels.

Personal Care delivered balanced growth with underlying sales up 5.6%, 2.9% from volume and 2.6% from price. Performance was led by the Power Brands with 7.0% underlying sales growth.

Deodorants continued to deliver double-digit growth, with high-single digit volume growth led by Europe and Latin America. Dove grew double-digit with strong volumes and expanded into the Whole Body deodorants market.

Rexona and Axe contributed strong volume growth with continued momentum from our multi-year innovation platforms and our Fine Fragrance range.

Skin Cleansing grew low-single digit with positive volume growth and price. Growth was tempered by deflation in India and market challenges in Indonesia. Dove delivered high-single digit growth with good growth in Dove Men+Care. Europe grew double-digit with mid-single digit volume supported by Dove’s Body Wash relaunch. In the United States, we launched a premium range of Dove Body Wash infused with skin care serums including hyaluronic acid, collagen and vitamin C.

Oral Care continued to grow mid-single digit with positive volume and price. Close Up grew high-single digit with positive volume.

Underlying operating profit was €1.6 billion, up 16% versus prior year. Underlying operating margin increased 300bps driven by gross margin recovery, supporting a step-up in marketing investment. This investment includes strategic sponsorships such as our official partnership with UEFA EURO 2024™ and CONMEBOL Copa América USA 2024™.

Home Care (20% of Group turnover)

In Home Care, we focus on delivering for consumers who want superior products that are sustainable and great value. We drive growth through unmissable superiority in our biggest brands, in our key markets and across channels. We have a resilient business that spans price points and grows the market by premiumising and trading consumers up to additional benefits.

Home Care delivered underlying sales growth of 3.3%, with continued good volume growth of 4.6%, partially offset by -1.3% price, driven primarily by emerging markets. Underlying sales growth of the Power Brands was up 3.7%.

Fabric Cleaning grew low-single digit with low-single digit volume and negative price. Growth was supported by the launch of Persil Wonder Wash, with our patented Pro-S technology, the first ever detergent designed for short cycle washes. This significant innovation has now been introduced in the UK, France and China and is on track to be rolled out to other key markets over the next 18 months. Europe grew double-digit with strong volumes. India and Brazil grew volume while price declined reflecting commodity deflation, notably in our powders portfolio.

Home & Hygiene grew high-single digit with mid-single digit volume and slightly positive price. Cif and Domestos grew double-digit with double-digit volume. In H1, we expanded Domestos Power Foam to new markets and extended the range to include specialist solutions with long-lasting fragrance and limescale removal. Cif was supported by strong performances across Latin America in its cream and sprays portfolio.

Fabric Enhancers grew high-single digit led by volume, slightly offset by negative price. Comfort grew high-single digit supported by the launch of our new, Botanicals and Elixir ranges, with our patented CrystalFresh technology, delivering 10 times more fragrance.

Underlying operating profit was €1.0 billion, up 35% versus prior year. Underlying operating margin increased 400bps as commodity deflation supported a strong gross margin recovery, funding an increase in brand and marketing investment.

Nutrition (22% of Group turnover)

In Nutrition, our strategy is to deliver consistent, competitive growth by offering unmissably superior products through our biggest brands. We do this by reaching more consumers and focusing on top dishes and high consumption seasons to satisfy consumer’s preferences on taste, health and sustainability; while delivering productivity and resilience in our supply chain.

Nutrition underlying sales grew 3.2% in the first half, driven by price with flat volumes. Volume growth turned positive in Q2, up 0.4%. Power Brands, including Knorr and Hellmann's, which represented nearly 65% of Nutrition turnover, grew 5.2%. This performance was partially offset by volume declines of our smaller brands.

Scratch Cooking Aids grew mid-single digit with positive volume and price, led by Knorr. Growth was supported by double-digit performance in Latin America where Knorr’s innovation and marketing focus on local top dishes continues to drive growth across the portfolio.

Dressings delivered low-single digit growth with positive volume and price. Hellmann’s grew mid-single digit with the continued strong performance of flavoured mayo that launched in additional markets and added new variants in North America and Europe. Brazil grew double-digit which was enhanced by strategic partnerships, including our second year as a sponsor of the National Basketball Association in Brazil.

Unilever Food Solutions grew high-single digit with mid-single digit volume, led by double-digit growth in China. Growth was driven by the latest edition of our Future Menu’s Trend report, sparking inspiration and sales in professional kitchens, and continued gains from our digital selling programme.

Underlying operating profit was €1.5 billion, up 23% versus prior year. Underlying operating margin increased 390bps with a strong recovery in gross margin driven by normalising commodity costs and SKU optimisation. Gross margin improvement supported an increase in brand and marketing investment.

Ice Cream (15% of Group turnover)

In Ice Cream, our immediate strategic priority is to expand operating profit and global market share. We will do this by building the unmissable superiority of our brands, accelerating market development in emerging markets, continuing to lead the industry on innovation and premiumisation, and by stepping up our performance and productivity. In March, we announced the planned separation of Ice Cream which we expect to be completed by the end of 2025. The separation will create a world-leading business, operating in a highly attractive category with five of the top 10 selling global ice cream brands.

Ice Cream had a disappointing start to its key season, with underlying sales up 0.6%. 1.6% underlying price growth was partially offset by negative volume of -1.0%.

Performance remains below our ambition, having been impacted by a soft start to the European key season and challenging market dynamics in China. In-home Ice Cream delivered flat price and volume, while out-of-home Ice Cream grew low-single digit driven by price.

Wall’s grew mid-single digit with positive volume and price, Ben & Jerry’s was slightly up, while sales of Cornetto were adversely affected by the decline in China. Magnum launched its new ‘Pleasure Express’ range with 3 variants: Euphoria, Wonder and Chill.

Ice Cream continues to focus on operational improvements, including service and optimising promotions, while continuing to drive investment behind our brands and innovations.

Underlying operating profit was €0.7 billion, flat versus prior year. Underlying operating margin declined -40bps as gross margin improvement was offset by an increase in brand and marketing investment. Cost inflation of key commodities continued, driven by cocoa and sugar.