Good day, and thank you for standing by. Welcome to the 2021 annual results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mathilde Rodier, Head of Investor Relations. Please go ahead.
Good morning, everyone. Mathilde Rodier, Head of Investor Relations at Danone. Thank you for being with us this morning for Danone's full year 2021 results presentation. I'm here with our CEO, Antoine de Saint-Affrique, and our CFO, Juergen Esser. They will go through some prepared remarks before taking your question in a second step. Before we start, I draw your attention on the disclaimer on page 2 related to forward-looking statements and definition of financial indicators that we will refer to during the presentation. With that, let me hand it over to Antoine.
Thank you, Mathilde. Good morning, everyone, and welcome to our full year 2021 call. I'm delighted to be back with a number of you and certainly looking forward to meeting many of you in person in not too long. Before we turn to the presentation, let me flag two things. Firstly, we will be focusing today purely on our reported results for 2021. We will be speaking to you again in less than two weeks about our future strategy and our guidance at our CMD, which I hope most of you will be attending either virtually or in person. Secondly, you will see that we have changed the format of our presentation. It is simpler and hopefully easier to read and understand, giving more room to our brands, our innovations, and our products.
It is still work in progress, and we will keep improving on it, but I'm sure you get a sense of what I am saying. This is obviously my first set of results as Danone CEO, and I want to be clear from the start that I will always aim to be upfront, transparent, and clear. Those of you who know me will know that I'm someone who wants to gather a team, set a plan, and then focus endlessly on execution and delivery. We will celebrate the wins, but we won't hide also from outlining where we need to perform better. Since September, we have done a lot of listening as a company, and we have done lots of internal assessments. We've also completed assembling a strong leadership team that will ensure that the right capabilities and conversation can happen at COMEX level.
We have been spending time together to then work through what the plan for the company should be for the next cycle. All of this is for when we meet again at our CMD on March 8. Now back to the results. As you will have seen from the press release this morning, Danone delivered in 2021 what is a good set of results in a context that could hardly have been more challenging. Challenging externally with the COVID-19 crisis continuing to impact people's lives, mobility, but also supply chain in almost all geographies. Challenging internally with a very public governance crisis in the first half of the year and with a significant reorganization, Local First, touching almost all quarters of our organization. Against this backdrop, we saw true leadership and dedication from our management team.
There, I want to start thanking three people in particular, Véronique, Shane, and Juergen, for the way they led the company through the storm and together with the team, managed to deliver a year in line with what we had promised. This is, if anything, a proof of the resilience of Danone and of the quality of talents we have within the company. Now moving to page 4. We delivered a solid top-line performance in 2021 at +3.4%, and we closed the year with a very strong fourth quarter, up 6.7% on a like-for-like basis. Beyond the number itself, I am particularly pleased with the composition of this quarter four performance, with volumes back to growth at +0.4%, while mix remained the main contributor and pricing stepped up to +2.5%.
I'm also happy that all categories are contributing to the full year solid performance. EDP delivered broad-based growth and sustained solid momentum in Europe and NOAM, resulting in a +3.7% like-for-like sales growth in 2021. SN produced a 1% like-for-like growth with a sequential improvement quarter after quarter to end at +6.4% in quarter four. This reflects notably the progressive recovery of our Chinese business. As for waters, we saw an acceleration at the end of the year to reach a total of +7.2% like-for-like for the year. This confirms our continued recovery in Europe and LatAm, in addition to a return to positive growth in China and Southeast Asia in the last quarter. Now moving to page five.
Over the last five months since I've joined, I've been digging into what works and what needs to change, and I will give my unfiltered view on both at the upcoming CMD. I can already tell you that there are a few things we can be proud of in 2021. Juergen will come back later in more details on the performance by category. Let me say that I'm very pleased with the performance of our dairy business. It delivered sequential improvement quarter after quarter in 2021, led notably by a strong performance in Noram. This clearly demonstrates the potential of the category. What is also pleasing with this performance is that it comes with a mix of factors. Firstly, we have been developing our core brands equities like Actimel, which maintain a strong leadership position and delivered low double-digit growth in 2021.
Secondly, we have been catching up where we were late, and there I'm pleased with the very strong performance of our Greek platform in the US. We successfully restaged the Oikos brand. We drove real innovation at scale with protein brands. YoPRO and HiPRO delivered another great year of performance. Thirdly, another source of pride is the continued strength of our IMF brand, Aptamil, globally. This is especially true in China, where Aptamil market shares remained resilient in both domestic and international labels, and where the brand ranked number one in the IMF category during the 11.11 online sales. The brand's recognition and strengths, its ability to renovate and innovate based on our distinctive research and development capabilities in that field is one of our major assets on the Chinese market.
Last but not least, Waters as well delivered a strong year of recovery, especially in Europe, where Q4 was ahead of 2019 levels, and where all countries registered another year of market share gains. Evian/Volvic delivered a strong performance in 2021, driven by small formats recovery, but also by a strong pipeline of renovation and innovation. There is more to come. I'm now on slide 6. As I mentioned in my opening remarks, 2021 was also for us a year of major transformation with the rollout of our Local First program. Let me start with something I said to the teams the day I joined the company, something which has been a guiding principle as we execute our transformation with discipline, but also with pragmatism. Local First doesn't mean local only.
As we deploy Local First, we have been looking for the right balance between local centricity, which gives us agility and speed of execution, but also cost efficiency and global scale and expertise where leverage gives us a benefit. Social consultations now have been closed and Local First is in place. North America was the first region to switch in April 2021, and we are already seeing the benefits of it. The new organization enabled us to put in place a consumer and customer-focused culture and allowed the team there, under Shane's leadership, to deploy a cross-category growth strategy, which is starting to deliver. Our North America platform grew +4.7% in 2021. We switched Europe progressively over quarter four to end with France at the very beginning of this year.
In parallel to what is happening in the countries, we have also started strengthening functional expertise on some core capabilities such as HR, research and innovation, and operations, where you have seen new COMEX appointments over the last 5 months. Things are moving, and there are a number of things Danone should be proud of, starting with a solid set of numbers in an especially challenging context. It doesn't end there, and there is also a lot we must still improve on. Moving to slide 7. While we delivered a solid growth with a good mix contribution, our growth model remains somewhat unbalanced as our volume were down again this year at -0.6%. While short-term market shares are looking better, we continue to lose market shares in too many places.
In other words, we do not fully capture the potentials of our markets. As for quality of execution, we are not yet where we should be. In a context where global supply chain are disrupted, we ensured overall business continuity, but we have suffered from service level issues that prevented us from serving customers and consumer demand in key geographies and categories, translating in revenue loss and sometimes market share erosion. With higher inflation, we've shown pricing power, and we managed to progressively step up productivity during 2021 to reach more than 5% in H2. And Juergen will delve into it in a few minutes, our operating margins is down 81 basis points in 2021. Finally, when it comes to A&P, we maintain our absolute level of spending. We were more selective in our allocation.
We put on air some really good campaigns. As a percentage of sales, we were down 22 basis points versus last year, which means that even if we stopped the bleeding, we kept underfunding our brand. We are not spending what we should, we keep not supporting our brands at the level needed, and there are growth opportunities we are not seizing. All in all, a solid set of numbers and plenty to be proud of. Movement and progress on a number of fronts, but still a lot of improvement opportunities. As I said, I will updating you on our plans to address these gaps, also the opportunities at the upcoming CMD in a few weeks' time. For now, let me hand it over to Juergen for the 2021 financial review. Juergen, over to you.
Thank you, Antoine, and good morning to all of you. I hope you are all safe and well. Let me start the financial review with our net sales bridge on slide number 9. As Antoine was saying, we are very pleased with the strong finish of the year 2021. Very pleased with the +6.7% like-for-like net sales growth in Q4. Looking at the building blocks of this Q4, volumes have been contributing positively with 0.4%, notably led by positive volumes for EDP in Europe and North America, by the continued volume recovery in Waters, as well as by positive volume dynamics for specialized nutrition in China.
Having said that, value was obviously the main contributor to growth with +6.3%, reflecting a step up of our pricing initiatives to around 2.5% in this Q4, where we were benefiting from a continuously solid geographic end product mix, something I will come back to later on. Outside of the like-for-like, currency and others had a positive impact of +4.2%, mostly driven by a +2.6% tailwind from currency effects, reflecting the appreciation of several currencies with the euro, including the U.S. dollar and the British pound. Hyperinflation geographies also had a positive organic contribution to growth of 1% in this quarter.
All in all, reported growth stood at +10.9% for the quarter, bringing our quarterly net sales to roughly EUR 6.2 billion, up from EUR 5.6 billion last year. On next page ten gives a bit more perspective on the quarterly sequence, which is resulting into our +3.4% full year net sales growth. Reminding that we are indeed back to solid growth since Q2 of last year. Being back to growth is obviously important for us, especially the fact that we have been back to like-for-like growth also with the pre-COVID year 2019 base for each of the last three quarters. Looking at the drivers of our full year performance, we want to recognize that our growth was driven by important mix effects of +2.4%.
The majority coming from product mix that was benefiting from our premium innovations in specialized nutrition, but also from the recovery of small formats in the water division, as well as from our premium, more functional dairy ranges. On the other side, the geographical mix, especially driven by the relative outperformance of our China business in this Q4. Pricing contributed by adding +1.6% to the full year numbers with a shift for the year from rather selective to more broad-based pricing actions, with price increases and revenue growth management initiatives across all geographies, notably to manage the impact of an accelerated COGS inflation in the second semester. Finally, and despite the recovery in the fourth quarter, we need to recognize that our volumes were negative for another year. In year 2021, it was -0.6%.
They have been down, especially in more developing markets in the rest of the world, while volumes were overall positive in Europe as well as North America. Let's go a bit deeper into the performance by division, and I will start on the next page 11, with Essential Dairy and Plant-based. Our EDP business closed the year with revenues up +3.7% on a like-for-like basis, with recovering operating margin slightly down at 9.8% in a very challenging supply and cost environment. Zooming into the fourth quarter, EDP maintained its solid momentum, growing at +4.3% with a similar growth composition as in the previous quarter. First, the dairy part of our portfolio, which has delivered sustained solid growth led by probiotics, protein, and indulgent platforms.
Even if there is still a lot to do, it demonstrates the rejuvenated attractivity of this category, the relevance of our brand and platforms also in a post-COVID context. Secondly, plant-based that registered solid mid-single-digit growth like in Q3. We are operating here in a continuously dynamic, even though momentarily slower category context that is recycling the consumption peaks of year 2020. This segment is fairly exposed to a strongly challenged supply chain, particularly in North America, but recently also in Europe, which has prevented us, in some instances, from servicing customer and consumer demands. Looking at geographies, Europe and North America posted another quarter of solid sales growth with positive volumes.
In Europe, let me highlight particularly the performance of Actimel that delivered another quarter of double-digit growth. Translating into market share gains, while Activia pursued its good momentum in the U.K. and Germany with resilient market shares. Also to mention the high protein part of our portfolio with YoPRO and HiPRO that posted both, again, a stellar performance, thanks to an impactful rollout across geographies and channels. Finally, Alpro, that posted high single-digit growth in Q4, protecting its leading market share position in Europe. In North America, we delivered another record quarter of net sales, sustaining mid-single-digit top line growth momentum and accelerating competitiveness. Sales were driven by a stellar performance of yogurt led by our Oikos range, Antoine was mentioning it before, but also by Activia and Two Good, leveraging their winning positions in the protein and probiotic segments.
Our coffee creamers brand, International Delight, posted another quarter of very solid growth and share gains. Plant-based sales have started to sequentially recover from previous quarter. This recovery was enabled by a conscious prioritization of core SKUs, meaning that we still have some catching up to do before fully recovering from supply and logistic disruptions. Platforms in the rest of the world posted strong sales growth led by price mix, while volumes were down. The CIS region grew low single digit, entirely driven by price and mix in a macroeconomic context that continued to be challenging, while Latin America and Africa continued to show further sales recovery. Moving to Specialized Nutrition on page 12. Specialized Nutrition closed the year with organic growth of 1% on a like-for-like basis, while recurring operating margin decreased by 105 basis points to 23.5%.
While you will remember that H1 was strongly penalized by negative country mix and lower volumes, H2 margin sequentially improved, notably led by strong product and geo mix, as well as volume recovery in the last quarter. Looking at the fourth quarter, sales sequentially improved over the previous quarter, reaching +6.4% on a like-for-like basis, with slightly positive volumes. Going through the segments, the infant nutrition posted very strong growth this quarter, driven by China and the rest of the world. China delivered mid-teens growth with resilient market shares. Our domestic and international labels, which are sold through controlled cross-border platforms, maintained their growth and market share momentum. Here I would like to emphasize again the outstanding performance of our Aptamil brand during the 11.11 Chinese online event, where we were ranking again the number one brand in both leading e-commerce platforms.
Our sales of international labels sold through indirect non-controlled cross-border platforms were slightly negative against the low base of last year, with travel as well as trade activities still very limited with mainland China. In Europe, growth was slightly negative in a category still penalized by decreasing birth rates and working from home, where however, we saw recently some first encouraging signs of a stabilization. Finally, in the rest of the world, you remember that Q3 was negatively impacted by some phasing effects. As expected, growth was back to strong mid-single digits in Q4, led by both volume and value, as well as global market share gains. Moving to Adult Nutrition, sales were weak in the fourth quarter due to some inventory management amid supply challenges, while demand and sell out dynamics remained very solid.
We will be back to the usual growth dynamics as soon as from the first quarter of this year. Finally, on page thirteen, our Waters division. Sales increased here by +7.2% in the full year 2021, while the current operating margin was up +194 basis points to 8.9%. This margin recovery was driven by the operating leverage as well as a strong product mix improvement combined with record high productivities. Looking at the fourth quarter, more specifically, sales were up +17.3% on the like-for-like basis. This great performance was led by the sequential recovery of small formats as well as a good continued momentum of large formats for in-home consumption. It's also worth noting that all geographies contributed to this growth.
In Europe, sales reached mid-teens% growth on a like-for-like basis, closing the quarter above 2019 levels. In addition to the sequential recovery of mobility, we are very happy to report that we are consistently winning market share across all key markets, including France, the U.K., Germany, Spain, and Poland. Moving to the rest of the world, Latin America registered another quarter of recovery led by plain bottled water, as well as our home and office delivery business. In China, Mizone was back to positive growth with stable market shares. Finally, Southeast Asia that posted low single-digit% growth, sequentially improving compared to Q3, with mobility showing first signs of recovery. Before delving into our margin bridge, let me quickly come back on slide 14 on the current supply and cost environment. 2021 has been clearly a year of strong inflationary pressure for our sector.
We experienced in the second half of 2021 an acceleration which was exactly in line with the expectations we shared with you a few months ago. We mentioned back in October that we expected input cost inflation to sequentially accelerate. From 7% in H1 to 9% in H2. The second half of 2021 confirmed indeed those assumptions with a further increase of raw materials, logistics and transportation costs, as well as an increasing challenge to some parts of our supply chain, especially in North America, but also in Europe. This finally led our input cost inflation to reach around 8% on a full year basis. In that very challenging context, we put a greater focus in the second half of the year on the delivery of additional productivity and pricing.
On productivity, we accelerated the already initiated cost category synergy programs, delivering another record of more than 5% productivity in H2. On pricing, we sequentially moved from a rather selective pricing in H1 into a much more broad-based pricing and revenue growth management, leading to a full year impact of +1.6%, while we posted, as mentioned earlier, a price increase in Q4 of as much as +2.5%. Let's now move on to the margin bridge on slide 15. We closed the year 2021 with a recurring operating margin at 13.7% in 2021. Looking at the building blocks of the year, it was mostly impacted by the decrease in margin from operations, down -81 basis points, and I will come back to the drivers of this decrease in the next slide.
This decline in margin from operations was partially offset by a positive contribution from investment and overhead, while we also benefited from a reversal of some of the COVID-related costs which we incurred last year. The plus 31 basis points from overhead are reflecting both a strong discipline in fixed cost management as well as the first benefits from the Local First implementation, a program which is fully on track in delivering the expected savings over the next two years. The plus 22 basis points from investment reflect the fact that we spent in 2021 the same absolute A&M as in previous year, translating into a positive relative contribution. We were more selective in our allocations, increased support behind our winning brands and segments, which indeed translated into market share expansions in those areas.
While this means that we stopped the bleeding, we kept underfunding our brands, something we can't be happy about. Let me now zoom a little further on the building blocks on our margin from operations on page 16. As you saw in the previous chart, it decreased by -81 basis points in 2021. The top-line acceleration in 2021 had a significantly positive impact of +120 basis points led by mix and price. However, despite the very agile management by our teams around the world, this could not totally offset the incremental net inflation, which we had to face on raw materials, manufacturing, and logistics throughout the year. Gross inflation had a negative impact of as much as -480 basis points on our margin, representing a gross negative impact of around -EUR 1.2 billion on our P&L.
This was partially offset by a new record in COGS productivities, which had a positive impact of around +280 basis points, representing around EUR 700 million. Now, looking forward to 2022, we see another year of challenge and disruptions, and expect input cost inflation to sequentially accelerate in the low to mid-teens range compared to the 8% we experienced in 2021. To navigate these headwinds, we will further step up our productivity and we will leverage broad-based pricing. Moving now on to the EPS bridge on slide 17. Recurrent EPS reached EUR 3.31, slightly down by 1.1% versus last year. The improvement of our operational performance had a positive impact of +4.3% on EPS.
This was notably offset by a negative effect of -3.1% from scope, mainly due to the disposal of our stakes in Mengniu and Yakult and the negative impact of -4.1% from currencies. It's worth noting here the positive contribution of the financing box with +0.7%, reflecting the continued decrease of our net debt position. Finally, reported EPS that decreased by -1.7% to EUR 2.94. Let's move to the next page 18, to dive into the key explanation factors. The evolution of our reported EPS has been impacted by two important non-recurring events. On one hand, the one-off costs related to the implementation of Local First, which impacted our earnings with -EUR 0.7 billion in 2021.
As Antoine was already sharing, this project is on track, and the metrics in terms of costs and savings are confirmed, while some of the cost bookings and cash outs moved from Q4 2021 into early this year. The reported EPS was, on the other side, positively impacted by the capital gain of around EUR 0.6 billion arising from the disposal of our stake in China Mengniu Dairy, finalized in Q2 last year. Those two elements are almost offsetting each other, which leads to a reported EPS of EUR 2.94, relatively close to the recurring EPS of EUR 3.31. Let's now move on to the next page, slide 19. Free cash flow reached EUR 2.5 billion in 2021, reflecting a disciplined capital allocation, as well as our reinforced focus on cash generation.
As mentioned before, Local First did finally impact our free cash flow 2021 to a lesser extent than initially foreseen, moving some of the cash outs into early this year without changing the phasing of the P&L savings. Working capital stood at -4.8% of net sales, showing great progress in the context of sequential normalization of channel mix and payment terms. While CapEx stood at EUR 1 billion, representing around 4.3% of net sales. Moving to the next page, it's worth noting that our net closed at EUR 10.5 billion, down one point four billion from the end of 2020. Thanks to our strong cash flow generation. This translates into a healthy 3x the debt on EBITDA ratio.
At the same moment, we are reporting our ROIC at 8.7%, a slight improvement with the 8.5% reported end of year 2020. Certainly not the level where we want it to be. Finally, we will propose a dividend of EUR 1.94 per share in cash at the next AGM in April 2022, which means a stable dividend compared to last year in absolute value. Before handing the mic back to Antoine, let me remind some of the highlights of our ESG achievements in the year 2021.
Here, let me start with our health and nutrition ambition, as we are ranking 1 in the product profile assessment according to ATNI, rewarding that 90% of our volumes are sold in healthy categories, and this for the 3rd year in a row, and with 83% of our volumes sold without any added sugar. On environment, we are proud to have been awarded for the 3rd year in a row also, the triple A scoring by the CDP, highlighting our continued progress on the fight against climate change, preserving our forests and driving water security. We reduced our full scope carbon emissions by around 3% in 2021, down 0.8 million tons of CO2 equivalent on a like-for-like basis, which results into our carbon-adjusted EPS growing by 2% versus the year ago.
On our social ambition, Danone has been recognized for the fourth time in a row by the Bloomberg Gender-Equality Index, which distinguishes companies committed to transparency in gender reporting and advancing women's equality. We are also very proud of having fully deployed our Future Skills program, which aims to better prepare our employees who require new skills for the jobs of tomorrow. Last but not least, we are making great progress on our B Corp journey, with now 62% of our revenues covered by the B Corp certification, fully on track towards our 2025 ambition to become a global B Corp. This is concluding the financial section of our full year presentation, and I'm now handing it back to Antoine for the conclusion.
Thank you, Juergen. Before we open the line to questions, let me conclude with a few key messages. The first one, and I hope you share our views, is that there is a lot to be happy with, this 2021 performance. We delivered better growth dynamic, we reached our productivity targets and delivered a good level of cash. The second, and we are clear about this, is that there is still plenty we can improve, from our growth model to the quality of our execution and investment model. This will require greater discipline on the basics, greater focus on execution, strengthening step by step some of our capabilities, and driving what Danone was known for, a consumer-centric and a brand and innovation-driven model. I look forward to developing more on the topic during our CMD in a few days' time.
Moving to the next chart and on chart 23. Having said that, I'm sure all of you have noticed, we have not been standing still in the last months and have already moved into action. I have been with the executive committee hitting the ground, visiting many countries despite COVID, and meeting with hundreds of Danoners, with customers, and with consumers. We intend to keep this rhythm with an executive committee that will spend much more time on the ground, close to the markets and the teams, and less in the headquarters. As I told you earlier, we closed the social consultation process and implemented Local First. The new organization is now in place. At our board level, you will have seen the appointment of Valérie Chapoulaud-Floquet, who brings with her extended and undisputed FMCG and CEO expertise.
There is obviously more to come, and Gilles will address the topic at the CMD. At our company level, we have been focusing at strengthening core capabilities, bringing to the team a number of internationally recognized leaders. Late last year, we split the roles of General Secretary and Chief HR Officer and recruited Roberto Di Bernardini, a top-class professional, to become our new Chief Human Resources Officer. Another top-class professional, Vikram Agarwal, joined Danone in January as Chief Operations Officer and will help us raise the performance of Danone's operation and make it future-ready. As I said, Danone is about brand and innovation. We decided to bring innovation back at the core of what we do, creating a position of Chief Research, Innovation, Quality, and Food Safety Officer that Isabelle Esser will assume starting from April.
We also entrusted the sustainability functions to a business person with strong experience in Danone. Henri Bruxelles has become our new Chief Sustainability and Strategic Business Development Officer, with the objective to bring sustainability back to the heart of Danone's daily business delivery and performance. You see from this and from the results, we are moving forward with pace, and we do intend to keep doing so. With that, let me hand over back to Mathilde, who will introduce our Q&A. Mathilde, over to you.
Thank you, Antoine. Thank you, everyone. We're now opening the floor for your questions.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To cancel your request, please press the pound or hash key. Once again, please press star one if you wish to ask a question.
Thank you. The first question comes from Guillaume Delmas from UBS.
Thank you, Mathilde, and good morning, Antoine and Juergen. Two questions from me, please. The first one is on your volumes in EDP in the fourth quarter. It seems the volume decline was entirely driven by emerging markets. Probably, I'm guessing volumes down mid-single digits in the quarter for emerging markets. My question on this is, was the price elasticity there higher than you anticipated in the quarter or not? And how should we think, I guess more importantly, about volume development going forward as you will probably have to implement additional pricing action over the coming months there. My second question is on the plant-based. Second consecutive quarter of mid-single digit like-for-like sales growth seems to imply flat to low single digit like for like in North America.
Now, at the time of your Q3 trending update, you sounded relatively upbeat about the supply chain issues being resolved. Wondering, wasn't it the case? Are these issues lingering? Are these issues also affecting your shelf space, market shares? If so, how long do you think it will take before you can get back all your shelf space there? Thank you.
Thank you, Guillaume. We'll do a duet with Juergen on that. On volumes in EDP in Q4, it is in some ways a tale of two cities. I mean, as we said, we are very happy with our premium ranges that are growing pretty fast. On the more commoditized ranges, we went for price and making clear trade-offs between profitability and volumes. So, this is partly what you're seeing. Moving forward, obviously, we will have to go for a broader pricing. I mean, given what Juergen said about the inflation. And the elasticity will depend also on what everybody around us is doing. Juergen, maybe you want to comment on that.
Yeah, good morning. Good morning, Guillaume. As we were saying, we have been doing broad-based pricing across all geographies. What we have been observing in 2021, including in the last quarter, is that, for example, North America, where the vast majority of our portfolio has seen pricing, our volumes were holding very well. To the point of Antoine, in other more emerging geographies, we had a more mixed picture. Russia, I was describing, where in Russia we have been growing in Q4 in itself, where volumes were down. This is the effect of two realities, where our modern dairy portfolio has been holding very varied volumes, but where our more low price, traditional dairy portfolio has seen short-term volume impact, which has not been a surprise to us.
Moving forward, as Antoine was saying, as we are moving to more broad-based pricing also in Europe, we can see here and there also some volume elasticities in the short term.
On plant-based, we see a number of things at work. We've seen our markets slowing down and probably a bit of balancing between plant-based and dairy-based. This is where, by the way, playing on two legs is good news because we offer the choice to the consumer. That's one dimension. We kept having service issues. I think we will keep seeing some of it in the coming quarters. Not totally out of the woods. If you talk of service in general and not only on plant-based, what you see is a number of dynamics at work.
I mean, you see a novel perturbation that remains on everything that has to do with ship transportation, with issues obviously in the Chinese harbors, with issues in particular in North American harbors where there are not enough dockers. You have people that are queuing to unload the containers. You see a huge pressure on trucking in the U.S., in the U.K. and to some extent in Europe. You see as a result of that and as a result of increased demand, quite a bit of pressure on the supply chain.
I was in the U.S. a couple of weeks ago. You see holes in the shelves from about everybody as there is pressure on transportation and availability of materials.
Many thanks.
Thank you very much. The next question comes from Warren Ackerman from Barclays.
Good morning, Antoine, Juergen, Mathilde. It's Warren here at Barclays. Also got two questions. The first one is can we perhaps dig into the strong performance of China infant formula and market share of Aptamil? I'm particularly interested in the Q4 growth by channel. If you were able to give it to us between direct, indirect and cross-border, that would be useful. Was there any kind of stocking benefits or one-off distribution gains that benefited the quarter? I'm just trying to get a sense of what you think the Chinese infant formula growth could do when you're budgeting for 2022. That's the first question. The second one is just on this topic of inflation versus productivity.
I know you'll give us more at the CMD, but I think, Juergen, you said that you expect low- to mid-teens inflation for 2022, if I heard that correctly. I was wondering whether you can give some of the components of that, maybe between dairy and packaging, and what visibility do you have on that in terms of hedging cover? Related, on the productivity side, it does seem like the productivity did actually slow a little bit in the second half versus the first half. I'm just trying to understand the phasing of design for delivery, maybe rolling off and Local First savings coming in. That would be helpful. Thank you.
Morning, Warren. Juergen will,
Morning.
Juergen will check the bulk of the answer there. I mean, just to start with, I mean, there was no stocking benefit in China, to be honest. We are actually seeing good performance overall in China. I mean, we saw it with consumer offtake on 11.11. We see it with the distinctiveness of our brands. We'll talk a little bit about it at the CMD. The China team is actually at the forefront of good practices when it comes to direct-to-consumer digital marketing and those kind of things. There is a real pocket of excellence that we've discovered in the last couple of months. Really impressive. Juergen, go for it.
Yeah, good morning, Warren.
Morning.
Look, you are right. I think a stellar performance of our China business in IF during mid-teens in Q4. Of course important to remember that last year Q4 was significantly down, so we are running on a relatively low base. When you step back and look more at the fundamentals, there's probably a few dimensions. Dimension number one, yes, the category in the moment is slow, as we all know, impacted by birth rates and the baby pool decrease. However, that's the good news within an overall difficult context is that we see continuous deep per capita consumption and premiumization continuing, which is not totally offsetting the birth rate pressure, but still, helping a little bit to mitigate part of it. You were talking about China performance, Warren, you're absolutely right.
What we are calling our controlled channels, which is for China label as much as for international label, is now making up for slightly more than 80%. Here we are seeing very good competitive growth. We are winning share on the China label part, we are winning share on the international label part. Antoine was mentioning the outstanding performance of Aptamil during the 11.11 e-commerce event. I think we are well set from a competitive stance. Our uncontrolled channels now represent below 20% of our Chinese IMF business, so it's getting smaller and smaller.
It has been declining also in Q4, and as we have been discussing at several moments already, we believe that this is a structurally declining channel, and so we are putting all our emphasis on the controlled channel where we are seeing very good progress. Last but not least, to mention that we saw in Q4 a good momentum of our core milks, but an even greater momentum of our special pediatrics, which has been outperforming. When we talk product mix in specialized nutrition, it's not only about the premium ranges, but it's really also about these special pediatrics on allergy, but also increasingly on challenged growth. So overall, I would say a good set of results, but let's remember that Q4 was also on a low base. On the second point on inflation.
Yes, I confirm we expect inflation to be in the low- to mid-teens %, so quite up vis-à-vis the average 8% which we saw in 2021. We do expect broad-based inflation on various dimensions. First, we see a high level of inflation in all geographies, a little bit more in emerging markets, but still also there's a very strong impact in developed markets in North America and Europe. We see inflation also broad-based when we talk materials, logistics or manufacturing. Having said that, we have the strongest impact coming from materials, and here, especially from packaging, including plastics and paper, but also milk and milk ingredients.
We have still also strong inflation, which we are seeing on logistics for all the reasons Antoine was describing on sea and land transport, capacity shortages and on manufacturing with energy prices continuing to increase. Really a broad-based set. Now, visibility is low, and this is why we are today discussing that range of low to mid-teens. Probably the actual inflation will be a function of the duration of global supply chain disruptions, especially on before-mentioned land and sea transport, as well as on the evolution of the cost of the barrel of oil, which has been recently very, very volatile.
Okay.
Maybe not, I guess in the talk and maybe Warren, you were saying on hedging. Yes, we have been hedging in 2021 part of our packaging exposure. We are continuing to do hedging, but obviously it will have a lesser impact, lesser protection than in 2021. Finally, on productivity, I want to confirm that productivity in the second half of the year 2021 has been higher than in the first half of the year. We are targeting to increase our level of productivity also in year 2022, going for a new record. Basically leveraging all the good works which the team has started in 2021. Leveraging the cost category synergies, taking benefit of the carryover of the SKU rationalization program.
We were saying that we want to cut 20% of our SKUs, and this is where we are today, also maximizing all the other synergies we see on cost category procurement of services and goods, as much as driving our digital supply chain programs to the max.
Okay, thank you.
We will double down on productivity. We will do what it takes on pricing, but also within reason because we will have to manage the balance between competitiveness and pricing. We intend to keep supporting our brands, so not at the expense of investing behind our brands, which is important.
I mean, quickly, the reason for the question was productivity was 320 basis points in H1, but only 280 for the full year. It looked like in the second half, the productivity was lower in basis points compared to H1. That was why I was asking the question.
No, that's the correct reading, where I talk productivities on cost of goods sold is indeed that we had almost 5% in H1 and more than 5% in H2. We saw a sequential acceleration going.
Okay.
We do expect a good step up in 2022. Of course, not at the amplitude of the step up we are seeing in the level of inflation, which goes from 8%, well into the teens.
Okay, thank you.
Thank you, Warren. The next question from Celine Pannuti from JP Morgan.
Yes, thank you. Good morning, Antoine, Juergen, and Mathilde. First of all, I wanted to thank you for the added disclosure on volume mix and pricing, and I do hope that this will be a recurring disclosure. My first question is on your point about understanding of your brands. I presume that may be a topic of the CMD, but I just wanted to know where you see that you are understanding maybe by divisions or brands, if you can say that. Why is it that you have not yet started to correct that in 2021? My second question is on waters. I was a bit surprised that Southeast Asia did not rebound more in H2. I saw that Mizone had flattish volume.
Can you talk about what do you expect or what is the situation as we look into 2022? Would it be fair to say that, you know, you have an easy comparable in the first half, I mean, the first quarter? Anything that you can tell us about how the quarter has started for the group as a whole? Thank you.
Thank you, Celine. Juergen will take the question on waters. I'll take the one on brands. Just a reminder. I've been there three and a half months or four and a half months in 2021, so I'm trying to move as fast as possible. You don't change the brand plans in the last minute or in the last moment. The reality is, to the heart of your question, the reality is if you look at our share of voice versus share of market. I know you've done the exercise. We are structurally underfunding our brands.
The work that we are currently doing is of two natures, I mean. First thing that was done actually this year in 2021 was to make choices and to invest where we thought we had strong assets from a brand standpoint, strong assets from a communication standpoint, and therefore stoking the fire. You've seen that in a number of instances in Europe. You've seen that on waters. You've seen that on, in some instances, on Actimel, for instance. I mean, we started making some selective choices and making sure we invest where we think we have the assets and the dynamics and putting fuel to the fire.
The second thing is obviously making sure that we have the quality of assets on which to invest, be it on advertising, be it on innovation. There we will work in a very disciplined way, and we'll share a bit more of it in 10 days' time. We work in a very disciplined way, and you don't invest in the same way when you are trying to push your winners, when you are trying to protect your core, and we need to do more on the core, by the way. While there are things that needs to be fixed, and the fix is not necessarily or doesn't start necessarily with advertising. It can start with the mix, it can start with the distribution, it can start with a number of things.
Underinvested structurally, choices made in the short term, also choices in the long term.
Keeping the good discipline between working, not working, but also focus on the places we're gonna invest.
Good morning, Celine. First, thank you for your comment on disclosure. It's true that for us, being vocal also about the mix component we see and the product mix component we see is important to share with you guys because you have seen that product mix has been delivering very well in Q4. This is not only Q4, it has been consistently over the four quarters. Looking forward, obviously, that's also an important element of our toolbox in front of the very important inflationary pressure we see. When it comes to waters, maybe first on Mizone. What I was saying on Mizone, in fact, is that we have seen a good growth in Mizone in Q4. In fact, a pretty strong growth in Mizone in Q4.
You also know that, and this is true for volume and value, with market shares which continue to be stabilized, which is very good news. Knowing that Q4 is a smaller quarter, but still I think it's a reassuring component here, which confirms what we have seen over the last two quarters. When it comes to Southeast Asia, the reality is that the teams are just, as we speak, coming back to office. So many of the lockdowns implemented, especially in Indonesia, are just about to be released. In that sense, only over the last weeks we saw a rebound in terms of mobility.
As we have seen quite a bit of stop and go over the last couple of months, we are careful with the outlook. I think what is important, Celine, is that as soon as mobility is coming back, and I think that Europe is a very good example of that, you see also that consumption of small format is coming back. All the rest, the visibility is remaining low.
Thank you, Celine. Next question is from Bruno Monteyne from Bernstein.
Hi, good morning. My question is sort of coming back to your low to mid-teens cost inflation and sort of what's offsetting that. I mean, already in 2021 you had 31 basis points of the Local First benefit. Could you just quantify in basis points how much more Local First you would expect in 2022? Is the first part. The second one is coming back on the productivity. I remember from H1 you made it clear that the productivity seems to have gone faster than expected. You know, the SKU reduction went faster. You have an impressive 5% productivity gain this year. And I hear you saying you're gonna do more. But clearly, given these sort of early quick wins, you'd expect the additional rate of productivity to slow down.
I mean, if you did continue that rate, you would have 10% productivities by 2022. Am I right to expect that the additional level of productivity gains won't be of the order of another 5%, possibly still an impressive 2%-3%? Thank you.
Thank you, Bruno. I would wish that our teams had the capability to double the level of productivity. I confirm your reading that we did 5% of productivity in 2021, which was a record in our company. We will continue to post a record also in 2022, we'll make the next step in the journey. I think doubling it will not be possible, unfortunately. What do we put in front of this, I would say, unprecedented inflationary context we see in 2022 is not only the COGS productivity, but it's also all what we have been describing in terms of price. Where we want to be ambitious, but at the same moment also be pragmatic.
Which means, yes, we will go for important list price increases, but we will be extremely careful to make sure it doesn't hurt our level of competitiveness. That we maintain the necessary flexibility to promote back whenever we see that our competitiveness is at risk, or when we see that inflation should plateau at a certain moment as we go through the year 2022. Beyond price and productivity, we have mix, and I was talking about it. We want to continue the journey on product mix momentum, and this across all our categories and geographies. Local First will be a contributor in 2022, definitely. I confirm what we have said consistently since the launch of the program, is that the majority of these savings will come into the P&L of 2022.
We have also said that we want to use part of those savings to reinvest into our brands. This will be, as you can imagine, exactly the topic of the CMD discussions and the midterm guidance and outlook, and the way we want to set the strategy for the next years to come. I think that's probably the main components of the way we're gonna treat the inflationary context.
Thank you.
Thank you, Bruno. The next question comes from Pascal Boll from Stifel.
Yes. Good morning, Antoine de Saint-Affrique and Juergen Esser. My first question touches on Russia. In 2020, Danone generated roughly 6% in the country, and it's important for the EDP business. What risks do you see there? Do you more or less produce locally and sell locally, or do you also export/import? What are the risks there? My second question's on market shares. You mentioned some of the products that won market shares. What are products or categories where you have seen declining market shares, and what percentage of total portfolio saw market shares gains in 2021? Thank you.
Hey, Pascal. Let me start with Russia. On Russia, as you said, Russia is likely about 5% of our sales. The vast majority of the business is local for local. It's dairy business. We source locally, we make locally, we sell locally. We will be on the vast majority of our business impacted as any other Russian company. There are no things that are going across borders. We have been obviously managing the thing for quite a while, taking care of our teams, making sure that the people are safe, making sure that the
I mean, all the measures are in place so that we can navigate the crisis. Once again, it's very much for the majority of the business local for local in a local setup. On market shares, we have seen a number of good news. I mean, certainly good news in waters where we are gaining shares in Europe where we have stabilized our shares in China with Mizone. A dynamic there that is overall positive. We saw certainly also in the last quarter a good dynamic in SN. I think our shares in dairy are fine.
I think one of the sore points is plant-based, where we have been losing shares. You remember that we were late on the ball on oat. We are regaining, but our mix is playing against us. If you look at the last three months all together, the share picture is heading in the right direction. Is it where I would like it to be? No. Will we be looking internally at the market shares? Yes, permanently, and obviously you look at it externally, so I'll leave it to you.
Okay, thank you, Pascal. The next question from Martin Deboo from Jefferies.
Yeah, good morning, everybody. Martin Deboo from Jefferies. I wanna come back to specialized nutrition, complementing some of Warren's questions, but this time more from a bottom line point of view. You know, you've delivered 23.5% margins for the year, I think 24% in H2, big improvement in H2. Obviously, you don't need me to tell you that there was extremely bearish sentiment playing out in the market in the second half about your ability to sustain these margins, which are the cornerstone of the profit of the whole company. I'd just like to take a step back and maybe ask, maybe Juergen, just are you confident you can sustain, you know, well into 20% margins in specialized nutrition as a division? Secondly, why do you have that confidence?
What sets you apart from a Reckitt, who are earning mid-teens margins in their residual infant formula business? Just a very specific one, can you just explain to me why the reported margin change is a lot bigger than the like-for-like? I assume it's something to do with FX in China versus everywhere else, but if you could just clarify that, Juergen, that would be helpful. Thank you.
Yeah. Good morning. Good morning, Martin. You are absolutely right. Our margins were holding well in SN throughout the year, down a bit more than 100 bps. In like-for-like, 25 bps, and you're absolutely right that the gap is explained by currency, so the teams are doing a stellar job. You have also seen that S1 and S2 were at very different dynamics. We were significantly down in S1, which was a consequence of the volumes which were down in S1, but also the geographical mix. We now have seen exactly as expected, a reverse of this. We were up by around 250 bps in H2 to come to what you were describing, which is a quite solid margin story.
When it comes to the margin situation, including of our China business, I can just repeat what I said over the last couple of months, which is that we are continuously managing our prices in China across the channels with a very high level of discipline. This is extremely important in a context where probably some of our competitors see some cross-channel price disruptions, especially with very strong shifts quarter by quarter between e-commerce and offline, especially mom and baby stores in lower tier cities. I think the fact that we have our proprietary B2B platform in China accessing directly to a mom and baby store in lower tier cities for us is really an asset to make sure that we control prices in the past but also in the future.
This for us is a big asset moving forward. The second asset, and this is not neutral as you can imagine, is the fact that we are growing. Defending our margins obviously is easier in the context where we are doing a very solid job in the competitive setting. This is also what we will discuss in the CMD on how we can make sure that also in 2022 and beyond, we defend and expand our competitive setting in China.
Thank you for that, Juergen. Thanks.
You're welcome.
Okay. The next question is coming from Jeremy Fialko from HSBC.
Hi. Morning, Jeremy Fialko, HSBC here. A couple of questions from my side. Could you just elaborate on the adult nutrition business? Give a bit more detail.
On some of the supply challenges there, is that something that's quite temporary to this quarter? What was the hit on sales and what might come back in the early part of next year? Just one other part on the P&L. You mentioned in the bridge that some of the COVID costs came back in 2021. What are the remaining COVID costs that might also come back during the course of 2022? Thanks.
COVID-related cost. Jeremy, good morning. Yes. You saw that we had a rebound of something like 18 days, if I remember well, in 2021 from a COVID-related cost. Look, I mean, as we are continuing to implement very important hygiene measures, especially in everything which is our supply chain, I would not expect a big improvement nor big extra cost in 2022. I think we are now operating in this new context, but this is probably a new reality we need to accept. On the second question on the dairy, you are still right. I mean, we have been posting quarter by quarter very decent performance of our dairy business. You know that our dairy business, we speak mainly about our Chinese and our European business.
In Q4, we have been basically managing our inventory and to make sure that we are maintaining a healthy inventory set amidst, yes, some supply chain disruptions. Because you can imagine that whenever you have a delay in the material sourcing or transportation in a fast-growing segment, and diet is a very fast-growing segment for us, as much as plant-based, it creates disruption in the supply chain. Yes, Q4, we are impacted by it. You will see that as soon as Q1, we're back to the usual growth pattern, because what we are seeing is that the underlying demand from consumers is extremely strong. We are so confident that we have been resolving by this moment the supply chain challenges.
Okay, thank you.
Thank you, Jeremy. Next question from John Ennis, Goldman Sachs.
Yeah, good morning, everyone. My first question is on infant formula. There have been reports from the World Health Organization talking about potential clampdown on marketing practices for these products. I guess my question is, what do you make of these reports? Do you see that as a risk or an opportunity if the marketing efforts become more level between international and local players? My second question comes back to the supply chain disruption point. I think you said a few times that this resulted in some market share erosion, which implies that you've been, I guess, more heavily impacted than peers in certain places. I mean, why do you think that is the case?
Antoine, as you look at the supply chain at Danone, what are your key learnings so far when you compare and contrast with some of the best practices you implemented at Barry Callebaut? I appreciate they are very different businesses, but I'm interested in your thoughts. Thank you.
Yeah, I'll go for the first and the last. I'm sure Juergen will manage the middle. On IMF, as you may recall, as part of what we do in sustainability, we have been actually at the forefront of taking commitments. We are supporting breastfeeding as the most important option, and we were extremely clear about that. We have a strict policy where we do not advertise or promote for children aged 0 to 6 months, and we extend the restriction to 12 months in countries with high rates of acute malnutrition.
Making sure—I mean, legislation that would align everybody to the good practices that we have would be rather good news than bad news, if I may say. This is, by the way, one of the places where you see that if you leverage sustainability in the proper way, it becomes a competitive advantage because we are better prepared than other people on that one. To be followed, we feel quite comfortable with that, and we'd be happy to see a level playing field across all geographies. On your last question, I'll leave it to Juergen on supply chain.
I think one of the things I've learned all over my career, not only in Barry Callebaut, but especially in Barry Callebaut, is you need to be absolutely obsessive with a few things. One is the quality of your products day in, day out. We're not bad at all at quality, but competitive quality. So making sure that you drive repeat purchase because you're better than competition and have it, I mean, literally, in your genes is something we will put more focus on. The second thing is customer service. If you don't deliver day in, day out to your customers, you are simply not competitive. You miss an opportunity, you let down customers, and you get into unproductive discussion.
There, to be honest, we are not where we should be. It's a game of permanent improvement, factory after factory. It's not only a matter of network, but it's also what you do from the start, so from the planning to the source, to the make, to the deliver. Which is why I brought in Vikram Agarwal, and which is why we are gonna have a significant drive for our capabilities in this part of the business as if we are not bad, we are not either the best in town by a distance.
Antoine was already describing the action plan moving forward when it comes to the situation of the last two quarters. It's true that on the plant-based segment, and especially in North America, in some instances, we have been losing some sales and here and there, also a bit of shares as a result of that. The reality is that we have a very large portfolio of plant-based, especially in the U.S. You know that we are not only having milk, but also yogurt, ice cream, and other.
What we have been doing in order to mitigate the situation we're having is really to prioritize our what we call hero SKUs, so the largest product SKUs which are rotating the most on the shelves in order to make sure that we are limiting the disruption factor in our supply chain and at the shelf. That starts to show the first good signs, we will continue to do so. I would also expect that it will take us another couple of weeks before we are back to a business as usual situation, because we still see supply chain disruptions on both, on some of the material availability, and here we speak really about packaging and particularly paper, but also especially in U.S. on some of the trucking capacity availability.
We are not yet out of the woods.
Okay, thank you.
Thank you, John. Next question from Pinar Ergun from Morgan Stanley.
Good morning. Thank you. Are you seeing any signs of down trading as your pricing accelerates? What are some of the actions you're taking to preserve volume momentum in the quarters to come, given the relatively high private label presence in some of your categories, like yogurt? Thank you.
Hey, Pinar. I mean, the answer to that is I mean, it depends. Knowing a number of categories, we don't see down trading. We've seen actually a relatively little impact in places like North America. It goes back to our differentiation of product. It goes back to uniqueness of the product. It goes back to the strengths of the brand. On some things that are more commoditized, we go much stronger on our price to preserve as much as possible of our margin. There you see a volume impact and in some cases a down trading. Once again, so far what we've seen in America is no down trading, and America was a bit ahead of the curve.
We do see volume impact on things that are more commoditized, but it is also a choice that we are making.
Thanks.
Okay, thank you, Pinar. The next question from Jeff Stent from Exane.
Good morning. Just a question for Juergen. I realize that you're not giving guidance for 2022 at this juncture, but can I assume that if your year-end profits was materially ahead of the consensus, you would have a sort of regulatory duty to come to the market at this moment? Thank you.
It's true. Good morning. It's true that today we are not giving a guidance 2022 for, as we said, the simple reason, which is that we will be together in two weeks from now, and I hope physically in two weeks from now, we will share with you the midterm strategy. Of course, 2022 is the first year within this mid-term strategy. This is why today we are refraining from giving a clear outlook. I think what is very clear is that in the end, when we talk 2022 and you look at the key variables, these are the elements we have been discussing, which is input cost inflation low to mid-teens.
This is productivity, which is going to step up versus 2021, which is about pricing, where we will continue to accelerate on the base of the 2.5% we did in Q4. Finally, volumes, as Antoine was discussing it. There's the big topic of how we are going to drive the portfolio and the reinvestment thanks to the savings of Local First. All of this basically will be the discussion point in two weeks from now. I would ask you a little bit of patience on that one.
Okay. Thank you.
Okay, thank you very much. I think this comes to the end of the Q&A.
Thanks, everyone. Thanks for a good set of questions and from all your interaction. Very much looking forward to seeing you, hopefully as many as possible in Évian in less than two weeks' time. Looking forward to, well, to fruitful discussion. Also, looking forward to you meeting a large chunk of the management team, because I think it's very important that you as analysts get a sense of the people that are around the table and will drive the business to the next stage. On that, be safe. Very good day to everyone, and we'll talk soon.
See you soon, guys. Bye.
That does conclude our conference for today. Thank you for participating. You may all disconnect.