Ladies and gentlemen, thank you for standing by, and welcome to the RB2-three twenty twenty trading update. At this time, all participants are in a listenal I must advise you that this conference is being recorded today. I would now like to hand the conference over to the speaker today, Mr. Jen dozen. Please go ahead, sir.
Thank you, operator, and good morning, everyone. Welcome to Rechip Enkeiser's 3rd quarter trading update. With me here today are Lakshman, our CEO and Jeff, our CFO. As a reminder, this call will be recorded and available for replay later on today. As usual, we'll go through our normal prepared remarks, and then go straight to questions and answers.
So with that, let me pass you over to Lakshman and Jeff for their opening comments.
Good morning, and welcome to our third quarter trading update conference call. We hope all of you are safe and well. It was exactly a year ago when we first met at our Q3 call in 2019. Who could have foreseen the magnitude of developments? In the last 12 months.
A year ago, I outlined some of the challenges we had to address as a business. And likened RB to a good house in a great neighborhood. 4 months later, we announced our plans to make RB a great house again. And in the 8 months that followed, we've seen our markets and growth opportunities redefined by a pandemic that will have lasting implications for us. We've achieved a great deal in that time, and it's testament to the people inside and around RB.
That we've come so far. Of those on the front line who keep us all safe and protected. Thank you to them and our thoughts and deep appreciation for their dedication as we prepare for our first full winter with COVID-nineteen. I hope you all had a chance to review our third quarter statement. We have 3 messages for you this morning.
First, Our plan to rejuvenate sustainable growth at RB is gaining momentum. Thanks to the exceptional efforts of the RB team. And the improved execution we have being built in the business. In meeting the significant challenges of COVID-nineteen, we have shown that we are stronger and more agile business than we were at the start of the year. In fact, we are well on way towards completing the 1st phase of our strategic plan to stabilize and perform We are now seeing investments and capabilities and also capacity and flexibility to drive top line growth, We are building a Our near term outlook is positive, although there were a number of headwinds to overcome.
We are on track to delivering low double digit growth for the year as a whole. Our other guidance is unchanged and we'll provide our first guidance for 2021 with our full year results in February, where we expect our full year results to be strong. Finally, our markets have been redefined by this pandemic and this is giving us both additional firepower to invest in the business and bigger markets in which to capture new growth opportunities. While there is still a great deal to do, not least to improve the performance of infant nutrition. The strong progress to date gives us further confidence that the plan we have in place will achieve our mid single digit revenue growth target a year earlier than expected and with greater certainty.
Let me take you through our progress to rejuvenate sustainable growth. Then Jeff will discuss our Q3 performance and outlook, and then I'll share some more thoughts on our medium term plans. We will then take your questions. So first on to our strategic progress to date. In February of this year, we set our strategy for rejuvenating sustainable growth at RB.
Our objective was and remains to rebuild a strong earnings model and outperform with mid single digit organic revenue growth. Mid-20s margins, and 7% to 9% earnings per share growth by the mid-2020s. We outlined in detail how we would achieve this through a temporary margin reduction and enhanced multiyear productivity program. Taken together, this allows us to invest over 1,000,000,000 in principally growth led initiatives. So how are you against that?
1st, We are generating the savings needed to reinvest in capabilities. Our enhanced 1,300,000,000 productivity program A key part of financing the reinvestment into sustainable growth continues to make good progress. Cumulative savings have now reached over 1,000,000, and we are looking at ways to further enhance our productivity. 2nd, good progress in strengthening the core capabilities essential for sustainable growth. As set out in February, we are making significant investments to build a better business.
Key areas of investment in this 1st phase of the plan focused on our supply chain and key growth enablers such as R&D, product development, e Commerce, marketing and sales excellence We have made further progress in each of these areas has been an immediate area of focus with customer service previously at unacceptable levels. Quick and effective action that we began in September of last year, improved performance has enabled us to increase capacity for our most important disinfection SKUs by over 100% year on year. This has been achieved through internal process improvements, qualification of new co packers, and the addition of new raw material supplies in record time. As a result, we are now well positioned to meet future demand for debt haul, Lysol and related products. While we have more to do to improve on shelf availability and eliminate other stocks, we have received significant recognition from our customers for a response through the early heights of the pandemic, and our internal measures show that product fill rates continue to improve.
We have continued to invest heavily in key growth enablers, including new people and ways of working. For instance, in September, Doctor. Angela Naeff joined us to lead our R and D activities and driver innovation agenda. In addition, we have now established 4 centers of excellence focused on e commerce, marketing, sales and medical sales. We have built out our teams with internal and external talent, in order to cultivate best practice, and we have already started to share learning globally with the development of commercial paybooks.
Benefits have already been seen in improved sales execution and the consistent approaches to market development. Our e commerce progress to date reflects the investments we have been making to build on and enhance the strong capabilities we already have in this area. This has been complemented by the early wins of integrating our digital marketing and e commerce development with our marketing excellence and ERB capability centers. 3rd, our revenue performance reflects fundamental improvements in how we drive growth. As we set out in February, we frame our revenue growth opportunities around 4 drivers: increasing penetration increasing market share and entering into new places and introduced spaces.
1st, on penetration. In the 1st 9 months, we have made good progress. For example, in the U. S, our hygiene products are now used in over 50% of households compared to less than 45% a year ago. In India, we have seen a continued increase in the penetration of Harpic, following behavior change campaigns and over 20,000,000 more households using the brand compared to last year.
Let's turn to market share. Overall, our positive market share performance was broad based, particularly within hygienic health and not only from Detol and Lysol. 75% of our revenue from the hygiene business was a category market unit, where we held or gained share. 80 percent of our revenue from the health business were some category market units where we held or gained share. We have gained share in all the key our Gaviscon market share was up over 400 basis points versus last year.
In the U. S, Finnish continues to take share, up over 70 basis points against strong competition. With an OTC, in addition to Gabascon, as another example, Mucinex has held share in the markets in which it operates. In sexual well-being, Durex has gained share in both China and India, key emerging markets for the business. Next, in terms of new places Meeting the global demand for Detol and Lysol has been a priority for the business.
Since the start of the year, We have taken Detall and Lysol into 19 new countries and expanded the reach of different products For example, taking Betall Hand sanitizer into 20 new markets and Betall wipes into 13 new markets. At the same time, our Global Business Solutions team continues to sign partnerships most notably with Amtrak and Airbnb in this quarter, as well as Cricket Australia and Major League Baseball. In the U S. Finally, new spaces. As an example, Airwick Essential Mist broke new ground in the animal therapy category, and it's grown over 50% in the U.
S. Over the last 12 months. Alongside Enfamil NeuroPro, Mucinex Fastmax all in 1 and Lysol Laundry sanitizer. Our Airwick Essential Mistrange was 1 of 4 RB products recognized as top 25 breakthrough innovations in this year's U. S.
Besseas Awards. In part, reflecting the strong end market performance, positive as these 4 brands essentially cut across our portfolio. Before I turn the call thermal dynamics in the infant nutrition part of the business, particularly the heightened competition in China, including changes in the regulatory environment, and market share increases by local competitors. We also highlighted our planned internal supply chain upgrade in Latin America, the impact on our sizable Hong Kong business for the social unrest and reduced travel due to COVID nineteen. And our intent to invest in our e commerce capabilities and the competitiveness of the business.
Since then, COVID has had a further impact on the overall infant nutrition business. As evidenced by reduced birth rate, both this year and next, and a slowing rate of premiumization. Against this backdrop, we have been executing our plan well. In mainland China, our in market execution year to date across offline and online channels has improved as evident in our market share where we are holding share in mainland China. Capabilities as well as live streaming to engage more effectively with consumers while continuing to improve our execution in offline channels.
Elsewhere, we feel good about the progress in the Americas, while progress at ASEAN is mixed. Our business in Hong Kong remains a challenge. Our pipeline of innovations are strong and we continue to see opportunities in broad and efficient, for example, in adults and are working hard to address some of these other challenges that I have mentioned. Overall, across all fronts, we are pleased with the progress we've made, building the underlying business and positioning it for the long term. Overall, we are starting to see the early benefits of our investments and improved execution and growth.
We will continue to invest In the fundamental capabilities that drive successful category penetration, market share gains and expansion into new places and new spaces. Current environment opens up new opportunities, and we will target any additional investments to realize them. Let me now hand over to Jeff
Thank you, Lakshman. Now let me turn to the performance in the quarter. Group revenues were 1,000,000,000 with like for like net revenue up 13 point change headwind of 6.4 percent, mainly due to weak Latin American currencies and to some degree, a weaker U. S. Dollar.
In the quarter, we saw market share gains across many of our brands, including Finnish, Lysol, Gerex, Dettol, and Gaviscon. Additionally, e commerce sales continue to grow rapidly. Year to date, we've seen growth of over 50% across all geographies in each of our main e commerce channels. Looking briefly at each of our business segments, starting now with Hygiene. At Hygiene net revenue grew by 19.5% on a like for like basis to 1,490,000,000 in the quarter.
All major LIFO markets delivered share gains With most delivering revenue growth in excess of 60% and overall, Lysol was up over 70%. Demand was particularly strong in North America where we continue to increase capacity and there is more work to be done to fully balance the demand supply equation. Air Wick and Finish continue to grow with double digit growth, but demand for Vanish has remained weak, reflecting the impact of stay at home behavior on stain removal. Other key brands performed quarter to 1,270,000,000. We continue to see strong growth for Detle, up over 50% in the quarter, with key markets, including the UK, seeing the brand more than double in revenue.
Durex delivered double digit growth in revenue, led by markets where the rate of pandemic infection has materially improved. In addition, we recently launched DUEC 1, our first polyurethane condom into the Chinese market. Year to date, our OTC portfolio has grown by 5%. However, revenues declined by 10% in the quarter due to continued pantry unloading for Mucinex and weaker demand for Neuroaffair. While earlier in the season while early in the season, we expect trading for the balance of the year to remain suppressed and for our cough and cold remedies in the flu season.
Our portfolio of personal care products grew overall. With particular good performance from beat, Shoal also grew shown an improved trend after a few weaker quarters. Finally, Nutrition, which grew 4.1 percent on a like for like basis to 1,000,000. Infant and child nutrition revenue was unchanged year on year in the quarter, an improved performance compared to the first half of the year. Growth in North America was strong in in fourth quarter.
In China, sales were down in China, sales were down because of the continued closure of the Hong Kong border. However, in mainland China, sales were stable and in line with last year. As we mentioned in our release, there's also evidence that birth rates will be lower in the coming quarters as a result of behavior changes related to the pandemic. This is expected to have an impact on market growth in some of our vitamin, mineral and supplement brands, which together represent some 15% of the nutrition portfolio. This has led to another strong performance from airborne, which more than doubled in revenue in the quarter.
Turning briefly to the outlook for the year. Following strong revenue growth in the 1st 9 months of the year, we're upgrading our full year like for like net revenue growth guidance to low double digit growth, from our previous guidance of high single digit. Other aspects of our 2020 guidance are unchanged, And as Lakshman has said, we'll provide guidance for the 2021 with our full year results in February 2021. Now before I hand back to Lexmann, let me quickly discuss our new reporting segments and the restatement of historic financial results, which are included in the appendix of today's statement. Our new structure announced in February came into effect on the 1st July, And as a result, we have segment reporting, which will feature 3 global business units: Hygiene, which is unchanged from the previous reporting, Health, which includes sexual well-being, OTC, Dental VIT Shoal, and other strong regional brands, and nutrition, which includes infant nutrition, and our vitamin, mineral and supplement brands, including airborne and Mufry amongst others.
This segmentation better reflects our new structure and management responsibilities are internal reporting and will allow more effective communication of the underlying performance of our business. While revenue has largely been previously reported, The margin breakout by segment is new, especially for health and nutrition. So let me spend a moment on these changes. Which is shown in more detail in Appendix B. The margin for the new Health segment grew in the first half of twenty twenty by 150 basis points to 28.6 percent.
And as previously reported, this was due to strong volume growth, and like for like revenue was up 17%. Excellent productivity gains, and this was offset by early investments in capability, new growth initiatives and COVID costs. The margin of nutrition in the first half of 2020 was 17.5%, down 4 ten basis points compared to the previous year. The decline in margin being attributed to significant price investments made earlier in oil processes. There has also been significant margin impact due to the reduction in the Hong Kong cross border volumes, the costs associated with the driver overhaul in Mexico in the second quarter and COVID related costs in the first half.
As Lakshman has said, infant nutrition is a major area of focus for the executive team. And while there are no easy wins, we do expect in the medium term to see revenue growth and margins, returned to previous levels.
Thank you, Jeff. As you know, RB operates in attractive growing market segments underpinned by the clear trends and tailwinds that we highlighted in February 2020. 1st, Urbanization and global warming and their impact on the spread of infection reinforces the necessity of hygiene as the foundation of health. 2nd, there's a growing demand for self care given the pressures on health systems and on governmental spending globally. 3rd, There's a growing importance of sexual health and well-being and also underscored by the rising number of sexually transmitted infections 4th, a growing and aging population with very specific nutrition needs and finally, and ever changing technology landscape, which is transforming consumer knowledge as well as purchasing habits.
COVID-nineteen is accentuating a number of these trends highlighted in our half year results. While introducing additional dynamics, which are impacting our business today. Most importantly, the pandemic has heightened the social importance of hygiene, seen increasingly as a foundation for help by all. We're seeing that 86% of consumers are reporting, that the hygiene practices have improved over the course of this period. Demand for our category leading disinfectant products has been exceptional in recent months with increased penetration and new consumers demonstrating a preference for proven heritage brands, therefore, driving growth.
As a result, we expect structurally higher levels of demand to persist longer term as new consumer habits regarding cleaning and sanitization become ingrained. Away from home, there was a growing consumer demand for reassurance over hygiene in public and shared spaces. For example, while using transport in hotels, schools, colleges and offices, providing trusted standards of hygiene represents significant management opportunity And with the portfolio leading disinfectant brands, like Dettol, Lysol, Sagotar and App san, we are well placed. With a world class portfolio of hygiene health and nutrition brands and a clear purpose to protect healing nurture, in the relentless pursuit of a cleaner and healthier world. Be uniquely placed to help tackle the challenges the world is facing.
Our plan to invest over 1,000,000 over 3 years is on track. We're also reinvesting outperformance to capitalize on the strong demand for our products, particularly with ethanol and Lysol and through e commerce and the professional channels. In meeting the significant challenges of COVID 19, we have shown that we are becoming a stronger and more agile business We are making strong progress in embedding a new culture and strengthening core capabilities. Completing the 1st phase of our strategic plan to stabilize and perform our improved execution and the investments in capability and growth, coupled with the underlying trends in our categories, and the power of our heritage brands will help us achieve our mid single digit revenue growth target a year earlier than expected. And with greater certainty.
Thank you for your attention. I would like to thank once again, all our people, our customers, our suppliers and partners and thank all those in the frontline who are keeping us safe and confident of a successful future. And with that, I'll hand you back to John Thank you. John?
Thank you, Lakshman. Thank you, Jeff. So we've got some people in the queue. Why don't we open it up? And if the first question is from Guillaume Delmar at UBS.
Guillaume, over to you.
Expected COVID-nineteen headwinds of 5% to 6% in 2021 that you mentioned at the results stage in the H1 results stage in July. I was wondering if your view has changed on this since the number of COVID-nineteen infections is on the rise again. And more importantly, you mentioned a structurally higher levels of demand to persist longer term. So any change to that view. And my second question is on IFCN.
I mean, clearly some improvement in Q3, but still a very cautious outlook for Q4 and 2021. And I guess big picture, when I look at the first 3.5 years of record ownership of these assets. Like for like sales growth has been barely in excess of 1% of consistently dilutive in the group's growth. So my question on this would be, how long would you tolerate this, continuous diluted impact And what's the time frame for turning IFCM into a accretive business at least on a like for like basis? And saying so, would would you come to the conclusion that either you might not be the best owner of this asset or the infant nutrition category might not be the right category for you given your bigger optimizations?
Hi, Guillaume. It's Geoff here. Let me address the first question. I think as we go through this crisis with the pandemic, I'm starting to feel that trying to analyze the business between underlying and COVID impact is becoming meaningless we think the COVID impact is going to be long lasting. The growth in disinfection is going to be longer lasting.
The expansion of our brands into new places. And as we mentioned today, 90 new countries that we've launched Dettol and Lysol into, Therefore, I think to some degree, it becomes a little less meaningful to start breaking out performance between underlying and headwinds. Clearly, as we get into 2021, we're going to see headwinds relative to the size of the disinfection growth becomes less meaningful. The performance that we report today is a broad based performance. Strong business performance across many of the brands, including auto dish with Finish, including Air Care, but also including VIT and, for example, Shaw where we saw improving performance.
So I think generally, yes, we'll continue to see headwinds, but I think trying to analytically break it out as 5% to 6% versus an underlying number becomes less meaningful, the longer we get into this pandemic. And we see the long term structural changes that we expect going forward. I think on the second question of IFCN, We do expect growth from this category to be returned to the 3% to 5% level. We've said that in February. And we still continue to believe that.
Undoubtedly, what you're seeing as we see the positive effects of the pandemic on disinfection, for example, we see some negative effects in IFCN, which are related to birth rates, also related to the Hong Kong border closure, which is impacting us as well as other multinational companies. And so therefore, in the short term, for sure, IFCN is not growing at the levels we'd like. But in the medium term, we do see this category growing as a 3% to 4% category. Thank
you. Let's take the next question from Richard Taylor with Morgan Stanley.
Good morning, everyone.
2 quick ones for me, and then a broader question I know there's a bit of feedback on the line, so I hope you can hear me clearly. So the first question, the big standout in this statement for me this morning was bringing forward your midterm guidance by 1 ye/ar. Can you talk about what is giving you the confidence and visibility there? And am I right to interpret this pull forward, which I think is pretty vague, proven me as a pull forward from 23, 24 to 22, 23. So that's first question.
2nd one, I think you mentioned in the statement 23 times you've gained market share across categories, regions and brands. So can I just confirm that despite doubling capacity in Lysol, you're still unable to fully meet the demand? And then my broader question, year. And most Staples companies over the last 10 years have been pretty poor at innovation. And I record is probably included in that over the last 10 years.
So what are you doing differently? And given the huge cash generation you had in the first half, and I suspect that's probably continued. How should we think about this for capital allocation? And if I can just give an example, record hasn't really participated in buying small brands and rolling them out globally for a long, long time. And as you've increased your investment, your penetration, your distribution, supply chain efficiency, all the things you talked about in your presentation, How do you think about buying small brands, sticking them in the record system and rolling them out globally?
Richard, thank you for that question. Let me first get to your question about the about the medium term outlook. As I said, we're seeing significant behavior change in our categories. 86% of consumers are adopting better hygiene practices. We see in countries where the pandemic was more advanced earlier that some of this behavior change does sustain.
We're seeing penetration increases, that are very, very strong. It gives us confidence as well given the heritage brands we have and the pulp we are seeing, including in new places and new markets, that we have more confidence in accessing these more spaces and more places. And just given the strength of the portfolio, as well as what we have seen as evidence of the trust that consumers place in our brands and with sharpening execution, which we clearly are seeing, That gives us the confidence to not only, you know, grow with the categories, but also shape these categories over time. And that gives us the confidence to suggest that we will meet our medium term growth objectives sooner. On your second question with regard to market share, Detsol and Lysol have seen, certainly in all the markets that they participate in, and increase, in share.
There are a couple of exceptions, but mostly that is, that is the case around the world. It is also true that despite the fact that we have increased capacity significantly, and there are examples of the fact that we have increased capacity in some cases by multiple We're not meeting all demand that does exist for these brands. On your third question on innovation, It's a very good question, and it's the reason why we ended up going into the 3 global business units. The hygiene business had the focus, has an innovation pipeline that is strong, and the level of leakage that we saw in the pipeline was low. What we are doing is continuing to invest behind it and maximizing the value of these investments in all the markets that we are in.
And as we've said, that's all in Life Solar now in 19 new markets through direct distribution than we were before. If you go back to your question about small brands, we bought Up Spring, a small brand in the prenatal vitamin space, a few years ago. This is a brand that we have expanded significantly. And we've also taken it to China, and it's actually done very well there. Small, but it's doing very well.
An explicit part of our strategy was the idea that we would buy or partner or take rocket brands and scale them up globally. We have a stake in several of these. We own a stake in Farmer Packs, which is a 3rd party reseller on Amazon. And through that, we actually get a chance to understand, learn which brands and which categories are growing significantly, and it gives us a basis for learning to figure out exactly how we would partner or acquire any small brands, if at all we see fit and if at all there's value to it. So our platform is open.
In fact, if you look at our models, for e commerce. We have 3 models. 1 is what we call be big, which is our omnichannel e commerce business. Which is all about how we maximize our value with a large online, offline retailers. We are being fast, which is innovations that we do, that we scale up to our e commerce business globally.
And the third is be open and be able, which really is about investing in the capabilities of e commerce, and in our distribution system and our to essentially be the platform for us to take different brands through our system around the world. So it's clearly on our list, not just for our own innovation, which we are focused on and the creation of 3 global business units, brings real focus particularly to health. But also what we're doing with the investments we're making in E Commerce is creating a system that is capable of taking even more off.
Thank you, Lakshman. Let's take the next questions from Celine Annuti at JP Morgan.
Yes, good morning, everyone. My first question, I would like to go back to Nutrition. There are several bits within that. So first of all, you mentioned the slowing, the reduced birth rate, which probably is not so new, but accelerating in China. But as well flowing the rate of premiumization.
Can you give example of that and what exactly should we expect in terms of market growth in China. 1 of your competitors was talking about 3%. Is that realistic if we have negative birth rate and premiumization slowing? The other part of my, of that question is, you've mentioned you have added VMS into IFC and to formulate Could you explain the rationale behind that? And also finally on that part, could you tell us what is the impact of the U.
S. Contract win or inventory build in Q3 that will reverse in Q4. And my second question coming back on the opportunity in Health, could you give us the growth rate of some of the other brands in, in 'nineteen, excuse me, so finish, air week, just to understand as well, how at home consumption is driving growth? And would you expect some of those benefits if there were a vaccine to a change in the way consumer approach gene, hygiene, in the so that some of the new hygiene penetration that you have seen could enroll in case of a vaccine? Thank you.
Well, Suneet, thank you for that question. Let me take it on. Your question on the, on the slowing, first rate. This has been a trend in China for a while, but what we have seen in the pandemic, particularly in the U. S, is a declining birth rate.
I know you didn't mention the U. S, but, we expect the next year there will be a slowing birth rate in the U. S. On your question on the underlying growth rate in China being 3% parts, I think it depends a little bit on what we define as China. Because if you're looking at mainland China and you're seeing a recovery in Hong Kong and reopening across border, it's a very different map versus Hong Kong being closed and cross border not being open.
So I think it's a little bit up in the air in terms of what it might be our long term expectations that we had set for this overall category was 3% growth and we expect, for it to come back. But it does depend, as Jeff said, on the pandemic and how it unfolds in that part of the world. On your question on BMS and, why it's part of the nutrition business, Overall, what we had said was we have broadened the definition of the efficient in February. And we said this was about meeting the needs of, consumers. Young and old, and we see a real tailwind in seniors, and the growth rate in there is actually not small.
What we are seeing is the science of Mead Johnson, being the ability for us to play in that space. We saw that in Uriba, which is obviously quite significantly. And you all see that with some of the new products that we'll develop, where we're leveraging the science and lead Johnson into that space. So bringing it together in for broader nutrition, is clearly what we intend to do. But as Jeff has also said, we continue to provide a verbal commentary on how the informal business is doing.
On your question on the U. S. Contract, I think on Q3 to Q4, this is purely a, I think it's saying it's timing I think it'll reverse a bit, but I don't see that as being a structural situation going forward. On your question on Hygiene, We do see good growth in the stay at home categories. We don't break out growth by every single brand, but what we do see is good growth in stay at home categories as people nest at home And I think what we all see is you do see people, cook more at home, they're washing more plates.
Some of these numbers are quite staggering in terms of the number of being washed at home versus what they were pre COVID. Now we fully expect that, as things normalize, and we can't predict exactly what the time is. I mean, people have discovered the benefits of being at home, and we expect a slow I would call it change in behavior rather than a rapid change in behavior. We do expect some of these behaviors sick. I mean, people are seeing the value of family dinners, people are seeing the value of cooking at home.
We're seeing that, by the way, with the growth of things like cooking shows and so on. Where people are engaged far more in that and culinary IQ is increasing. And so through that end, what we see is that this will obviously unfold over time But we all see greater penetration in behavior change. And by the way, the headroom on this, some of these categories are still very high, very strong.
Thank
you. Excellent. So let's take the next question from Tom Sykes, Deutsche Bank.
Good morning, everybody. Just on the productivity program, obviously, you've eluded before to that being expanded. And I just wondered whether you could give us any thoughts or inclinations on what the scale of that expansion might be and where you might be able to get extra gains from. You obviously give some details on white space expansion. You mentioned the 19 new countries for the Detle and Lysol.
Maybe if you could sort of scale out the or flesh out the scale of that ambition and the scale of that expansion and maybe related to that, is it possible to give a view on the developing markets growth ex IFCN? And maybe what the sort of price versus volume is doing there? And sorry, one final one is obviously you're generating or won't be generating a reasonable amount operational gearing in some areas. Could you maybe talk about the BEI investment and the sort of volume and intensity of that in the second half of this year, and whether that is sort of getting behind the bigger brands, pushing some of the smaller ones in the tail. Maybe just some views on BI would be great, please.
Tom, why don't it's Geoff, why don't I'll take the first part and hand back to Lexman. We're not at a point of giving a new target. What we've talked about is 1.3 1,000,000,000 of productivity gains, which will reinvest back in the business. What we reported today is that we're at 300,000,000 on a year to date basis. So we're well on track to delivering that.
Obviously, this is the 1st year of the program. I expect it to step up next year and potentially come February, we'll be able to report in more detail about it. The program is really wide based from top to bottom in terms of the P and L. Looking at everything from revenue management, cost of goods, manufacturing conversion costs, logistics, right through to including the eye and the efficiency of our marketing spend, right through obviously to our fixed costs. So each area, each line of our P and L is being touched by the program.
But at this stage, yes, we are looking to grow the program, to further develop the program, to become, but we're not at the point where we're ready to talk about expanding the program to a new target, but keep this space open and we'll discuss this in more detail in February.
Sure. Thank you.
Tom, to your second question. What has become apparent if you just look at searches online in many of these countries, that our brands are uniformly admired and loved. And we realized there was a great opportunity in many of these markets for us to go further direct into these markets and invest in order to drive growth. So that's what these 90 new countries are. They're clearly more out there, but this is clearly an area of growth and of investment.
As we look at opportunities for our brands, the heritage brands that we have, it will be a further push that we will make. Onto your question on developing markets, I'll give you a bit of a tour around them. I think our business in India continues to perform very well. And we're pleased with the progress that the team is making and the strength of some of our brands in India and the ability for them to navigate what is a complex operational environment is something that we're very good about. I think our business in Latin America, particularly with new growth, is actually looking strong.
Although there are clearly headwinds in that part of the world. I look at China and the business in China is continuing to to perform well through the areas of evidence and formula, which I've already addressed earlier. And so I think overall, what you're seeing is the fact that The ability for us to drive penetration, for us to drive market share in a lot of the emerging markets is strong. Are clearly focused as well also, by the way, and ensuring that we have the right price points in many of these markets. Our business, for example, in Africa, clearly a big focus for us brand like JIC, which is a tremendous beach brand that we have in many of our markets, also gets all in many of us markets, a clear area of focus So we're clearly concerned about it showing that we have the right price points, we have right distribution and that we're investing behind these brands in order to capture all the potential that exists out there.
The 4th question on, on the, on cash and gearing and so on and the implications for EEI, We're doing 2 things. We're clearly ensuring that what we're doing is we're spending efficiently. So we've gone through prepared work, process work, been as part of our productivity program to ensure that we're getting the most from what we spend. And that those tools, those approaches are being scaled up globally. And hopefully, you're all there yet, but they're being scaled up globally.
But beyond that, we continue to advise to invest behind our strongest brands, but we're also building capability, which you'll probably see more in the SG and A line, and you'll see in BI. Or I'm building some of the internal capabilities that we know we need in a world where e commerce, digital, brand building, all that sort of comes together. And so clearly we're going into that space and you'll see us make more announcements as we go around what we're doing in that space. But it's clearly a target area of investment for us, given the changes taking place in a way the consumer gets information the way the consumer contacts and the way we're building relationships with our brands.
You, Tom. Thank you, Lakshman. Let's take the next question from Ian Simpson at Barclays.
Thank you
very much. Firstly, could you talk a little bit about the levels at the retailer and the distributor end with Dettol and Lifestyle. Does Q3 include any restocking benefit or will we likely see that in Q4 and how much is there left to go in terms of on shelf availability improving? Secondly, could you give any color around the slowing premiumization trends you're seeing in IFCM in China? And you talk about holding share among the international players there, presumably that means you're losing it on a whole market basis.
So what does this China IFCN business actually do for you strategically? And at what point would you review it talking specifically about China IFCN And finally, if I may, how far along the road of improving key capabilities is RB now? Gaining and holding share in 75% plus of health and hygiene is very impressive, but could this number even improve in subsequent quarters given the lead times around strengthening innovation, presumably there's more to do there. Thank you very much.
Yes, let me take this on. I think as far as, the on shelf availability and implications, for Detle and Lysol. We're clearly working, to ensure that we bring on stream a lot more capacity. It certainly takes time, to do, but we've actually done a tremendous job in bringing on tens of co packers in various of our markets, in addition to investing in capacity and our lines to drive availability. It is also, though, evident that the strength of these brands and the demand that they have exceeds what we're able to keep on the shelf.
So there's work still going into this, but I think we have opportunities to further enhance on shelf availability. As we go. And I think there's more capacity coming on stream over the course of, the rest of this year and the early part of next year. Leading into Q2. So that's the first question.
On your second question on premiumization, I think what you're seeing there is, in fact, rate of intensity, in price competition across channels that, of course, manifests itself in terms of premiumization. Now on your question on share, we talked about holding share in the overall market across offline and online. It isn't just holding share, with, with multinational, just the overall market. And it is both online and offline. In terms of the China IFCN business, this is an area, obviously, a great emphasis and and, and, time the expense with the management team.
I mean, some of it course, driven by Hong Kong and what we expect will happen there in the opening up cross border. It is an area of great focus. And as we've always said, we continue to manage the portfolio for mid single digits growth over time. And, we will be back to you with the improvements that we are making in this area. In terms of key capabilities, I feel good about the progress we are making.
But there's still more to do. I think that, the business has shown an amazing ability to be agile. An amazing ability to, to meet consumer demand and needs. But I think what we all do is taking stock, particularly in innovation. I think it's particularly in health.
That we're spending time. We feel good about what we have done over the course of the last year. But there's still more to come. And I think there's more upside. In terms of, what we can realize, particularly around innovation, and that will sustain some of the share gains that we'll see.
Thank you very much.
Excellent. Let's take the next question from Alan Eskin at Credit Suisse.
Good morning, everyone. And three questions for me, one clarification and one modeling question and one bigger bigger picture question. On the, on the clarification, on in the health business, you saw pricemix improvement, 3.5%. In Q3. I would have thought that with OTC negative, you might have seen, the reverse there and what implications does that have for gross margin?
On the modeling question, I know this is a sales call, but you have given more detail on the historic margins, for the nutrition business. And I wonder if you could help us to understand was the BMS business dilutive to that division's margins in the first half? And are the U. S. Margins accretive to that first half performance.
And then my third bigger picture question is, I totally get that consumption of disinfectant products is, has elevated. I'm probably using a more disinfectant than I did last year. But I'm not sure I'm going to use any more next year. So it's almost like it's a step change in the ongoing consumption of the product, rather than transforming the growth potential of the category. Is that the way you see it?
I'd be interested in your perspective.
Maxman, let me yes, let me jump in on the first two parts of that question. We do see higher than perhaps expected price mix on health. That's predominantly due to lower trade spend and specifically against debt all relative to last year. So there's no net price no growth price adjustments really going through of any significance, but there is some significant movements on trade. Which ultimately, of course, does have a small impact as well in terms of margin for Dental.
But having said that, overall, you have to remember that Dental in health is not the highest margin business in health. So it doesn't necessarily mean the margin for the total health business is better than expected. So I think it's certainly, it's mostly related to the trade spend that we see in this quarter related to, to Dental. I think on in terms of, I didn't quite get your second question, Alan, was it in terms of the modeling of nutrition in the first half relative to VMS and the other moving parts.
Yes, it's just to help us model the business going forward. I just wanted to ask, does is VMS margins below the new divisional average does it drag it down or is it a free?
No, no. VMS is slightly higher than than the average within the within that segment. So VMS in total, as a slightly higher margin and IFCN is slightly lower.
And then geographically, would North America margins be slightly higher?
Well, we're getting into a lot of detail there, but generally, we don't really break out the margins of the individual categories by geography. But I think it's fair to say that within our IFCN mix, North America is a stronger margin than the development, while certainly China, for example.
Thank you. And to
get to your 3rd question, I'm glad to hear that your personal consumption of disinfectants is up. As I look across the overall market and we look at the headwinds, sorry, at the headroom that exists, there is significant headwind in this space. I think they've been the U. S. Study suggests that less than 20% of their people wash their hands off to go into the box of wide.
And as we look at the ability for us to drive behavior change and to get penetration and to get frequency up, we see opportunities worldwide. And we have the right portfolio for it, and we are working to make it happen.
Excellent. Let's take the next question from Bruno Montane. Bruno, over to you.
Hi, good morning. The sales are clearly much better than initially guided. The sales are great. It didn't seem to result in any higher margin expectations for the year. So is there no operating leverage that comps with this higher sales growth?
And what does it tell us potentially about next year? Are we going to have some headwinds to what extent you worry about, deleveraging. The second thing in that exhibit you are referring to about in margin for H1, the new breakout. Now you can clearly see the big margin investment in nutrition, but I can't see any margin investment in health and hygiene. Is that mainly because you're expecting more to do in the second half, or should we actually expect most of that margin investment only to be visible in the nutrition segment?
Thank you. Hi, thanks, Bruno. In terms of operating leverage, we were clear in July and let me and Lexman said this much again today, but let me just reiterate that we will continue to reinvest our operating leverage for the medium term future growth of the business. Significant opportunities to expand our disinfectant franchise. And in fact, where if you look at the household cleaning aisle, and think of that aisle in the future, disinfection will have a much bigger place in that post COVID.
And I don't think, a vaccine or a quick reversal of the pandemic is going to change that view. So we see real opportunities. And as you saw in the release, We're launching Dental and Lysol into new countries. We've taken Wipes and hand sanitizers into 2030 new markets, respectively, And so we will continue and certainly we're investing in our Global Business Services, our Professional business, So we'll continue to reinvest the sales potential in terms of the leverage into future growth opportunities. And I think that is the right place to go.
And that helps us, as we again said in the release, you're more confident about achieving our midterm targets and achieving the net revenue targets earlier than previously expected. I think in terms of the historic numbers, what we said at the half year was we do see operating leverage in health and hygiene. And that operating leverage plus the fact that we had strong productivity improvements in the first half of the year means that you do see margins increase in health and hygiene compared to last year. And at the same time, we were investing, but we were just starting the investment program in terms of capabilities and in terms of the new growth channels And what we said at the half year, and this remains the case, is that we would step up those investments in the second half of the year, and we are stepping up those investments both in terms of accelerating growth initiatives into new CMUs, these in terms of people, in terms of our centers of excellence, which we're increasing. So you will see a step up in the investments in the second half of the year And the investments are there, but obviously in the first half of the year, they're not so visible because of the leverage and because of the productivity savings that we've that we had in the first half of the year.
Excellent. Let's take the next question from Kalamazut, Kepler Cheuvreux.
Yes, good morning. Thanks for taking the questions. I am one with regards to a supply chain and then 2 on PMS. You mentioned in the press release, some multiple times that, doing better on supply chain, can you share with us the improvement in your surface level? For example, in North American business, where you today stand versus industry benchmarks compared to 12 months ago.
That would be the first question. Then on CMS, it's clear that within you're seeing very strong demand today, on hygiene, you speak about structurally higher demand also post COVID prices. What is the medium term outlook for VMS? Do you expect sustainable higher level of consumption here as well. And some of related to that, within CMS, you have a strong North American also emerging Chinese business, what's the potential for PMS to spread more widely across the globe?
Those would be the two questions. Thanks.
Well, thank you for the question. Let me take it on. I think, it's fair to say that last year, About 12 months ago, I think we were challenged. We've gone through a transition that didn't work so well. And, we were women are well placed.
I think it's also fair to say that we're not all the way there. But having said that, the degree of progress that the supply chain team has made, from then until now, has been tremendous. People have worked, their hard hats to ensure that they can meet, the demand. And at the same time, what we have done is we've brought on additional capacity and we've brought on additional co pack capability in order to meet the demand. So if you take a look at individual service levels, obviously, you don't break these down individually, but what you are seeing is you definitely have it there.
And over time, what has happened is the service levels have gone up significantly. Now demand in some of the disinfecting brands in some skews is incredibly high. And, we are bringing capacity all at levels that, frankly, we never thought possible. When you have a 5x increase in 1 SKU with Lysortler, 20x increase in another SKU in debt haul, Those are the kinds of numbers that, frankly, we never thought possibly a year ago. And, yet in some cases, we're not fully meeting the demand that's out there.
And that is clearly a focus for the team. We expect that, as we work through the rest of the year, and the early part of next year. What you will see is demand and supply in some of the SKUs, clearly, but what you are seeing is far better communications. With our customers and far better process improvements inside. We're still more to do, but I feel good about the progress.
And as you know, we've also beefed up our team, Sammy Nasak has joined us. And Sammy obviously had worked at RB years ago, and he and his leadership team, are working very hard with the businesses in order to ensure that we are well set for the future.
On VMS Lakshman?
On VMS, the thing about VMS it's a it's, it's a descriptive, category of the products. But I think below that, there's this question about what do those products really address. In a bid, cognition, be it digestion, be it immunity. And we're at that level. We're looking obviously opportunities in each one of those spaces and more.
We clearly have brands in the space that have done very well in the U. S. And in China, we have opportunities globally. The regulatory environment, in some cases, is different globally. So we have to work that.
But I think, this is an opportunity that has, that has globalized.
Excellent. Thank you. Thanks, Alex. So let's take the next question from John Ennis at Goldman Sachs.
Yes, good morning, everyone. A couple from me, please. My first is on competition within the antibacterial sector and how that's evolved over the year. We've seen some other HPC page tried to migrate towards that segment. So has it become more competitive in the second half of the year?
And has that level of competition differed by sub agree. That's my first question. And then my second is a follow-up please on IFCN. Can you detail how much of a boost you had either in pounds or percentages from the North American inventories in 3Q to try and help us factor in the potential unwinds? Into 4Q.
I think it was asked before as part of another question, but
I just wanted to follow-up on that. Let me take the first one on, and then I'll hand it over to Jeff to talk to you about the second one. There's no question that, the overall area of German killer, German faction or germ protection has attracted a,
a lot
of new competitors. We certainly welcome it because what it is doing in a lot of ways, it is expanding the category, and making more people aware of, of, what they can do in order to ensure that they can, protect themselves from, from this particular virus. This more broadly, from other viruses and bacteria. So we appreciate, and you're sort of welcome to that. Having said that, I think what I feel good about is fact that we have a portfolio of heritage brands, that have actually worked for for decades, I mean, Lysolus brand from 18.88, Tetolus brand from 1931, these are brands that are deep household brand names, and that had a huge, I'm going to call it a huge recall, and there were huge part of people's lives, a various points of life.
And what it's doing is it is playing into a sense of comfort that consumers need in these types of environments. And so we've been sure that we're available and that, we have a full portfolio of products. In some cases, we've had a narrow SKU range in order to meet the overall demand that exists. But as we begin to, open that up and we start looking at new channels, if we traditionally have not been or new places we haven't been, Or frankly, new spaces, just looking at some of the pull that we're getting from, from the business side of things. I mean, just some is some stats here, right?
If you just look at it, 91% of consumers expense expect businesses to implement additional protection measures. 60% of consumers are extremely concerned about germs out of home. 86% of people are saying that Aerocontics and hygiene practices the fact that you have heritage brands that we're investing in and that we're going to innovate around and be innovating around but also driving availability positions you in many ways to capture those opportunities. So we clearly think it's more competitive but it's also expanding the category quite significantly. And that's why I see some of the share gains we are seeing despite the added competition.
With that, let me hand over to Jeff for the second question, Jeff.
No, just to be very clear, thanks. John, the impacts from the trade that we mentioned is probably for nutrition, something in the range of 1% to 2%. So that obviously total nutrition was flat in this quarter, we had a benefit of 1% to 2%, which we will see unwind in quarter 4.
That's great. Thank you very much.
Sorry. IFCN was flat in the quarter. Nutrition in total was up obviously over 4%.
Great. Let's take the next question from Fulveo Kazzal at Berenberg.
Thank you for taking my questions. Most of them have been answered. So I'll ask 1, a high level one, if I may. Just generally you sound a lot more confident than you did at the half year, particularly on the delivery of your medium term ambitions. Can I ask what it is that has given you this increased confidence in the last 3 months?
I guess I'm asking what visibility you have today that perhaps didn't have 3 months ago please? Thank you.
I think we're spending a lot of time understanding what consumers are doing. And you obviously have different markets in the world where if you look at June, in some cases, 3 months is a lot more information than you had even June around behavior change. And what is sticking versus what is not sticking. You're also seeing the pull in terms of new places and new spaces. You're also seeing the answering that I just touched on around debt haul and Lyle now being available in over 19 countries.
With direct distribution that we're investing behind. So I think if you look at those plus you look at the the underlying strength of execution and how that's improving, and the ability for us to direct our firepower in order to deliver long term growth, which is, frankly, the single-minded focus for us, and certainly at the right margin levels. Just ensuring that we do that, but growth is really where it's at. And so the ability for us to do that and meet that is what gives us confidence.
Great. Thank you.
Excellent. Let's take the next question from Jeremy Fialco and then we've probably got time for one more, after that.
Jeremy?
Yes. Hi. Okay. Good morning, Jeremy Fialco here HSBC. So I guess two questions.
The first question is, you've talked quite a bit about using, co packers to help you meet some of the demand. Maybe you could talk a little bit more about that in a more sort of strategic context is that obviously they give you a certain amount of flexibility but then clearly there's an essence of the margin, which you're having to pay away to the co packer. So when you think about the sort of where you set your business up, especially in some of the disinfection categories. To what extent do you want to kind of keep on relying on the co packers given it gives you a bit of flexibility if demand does revert back to more normal levels? Or do you want to really sort of make sure that you're bringing the majority of the production kind of in house capture the full kind of value?
And then just a much shorter question on Shoal. So after sort of many years of difficulty, it sounds like this brand is now back to growth. Can you just give us a bit of a sense on kind of what this brand is now in terms of kind of gadgets, non gadgets, and kind of what the strategy for that brand is over the sort of periods going forward?
Let me just quickly address both questions. I think the first one, our co pack is our us. And, we work with them closely to ensure that we have the right levels of availability, wherever we are, whenever we see demand. We best balance flexibility with commitment. And we also have commitments with our co packers, which we obviously will have honor And yes, some of them do involve a higher cost because as you said, there was an added cost of having somebody else do it, but at the same time, from a risk standpoint, a risk mitigation standpoint, and these are partners of ours, and we grow with them.
And so we, we, they are clearly part of our strategy going forward. And of course, it comes to it that we find that, it's far more, competitive of the return on invested capital step going for us to make the investments ourselves, we will, obviously, on a risk adjusted basis. On the Shoal question, I think this is a brand that has had challenges. And I think that, as we look at, consumers becoming more mobile, we find that the brand is clearly getting poor. It's a brand that we are leveraging the existing innovation pipeline that we have and, ensuring that we have availability in order to meet the needs of consumers overall.
And it is part of, a set of brands and a benefiting. From some of the trends you're seeing around an increase in mobility in our consumers.
Thank you. Let's take our final question if we may from David Hayes at SocGen. David, thank you for being patient. Over to you.
No problem. Thank you, John, hello. So keep in mind, just on the nutrition margin, the second one earlier management. So you just came back to this nutrition margin disclosure today 400 basis points down. You talked about that recovering back to the prior levels over time.
Can you talk about whether there's any one off costs in that margin drop in the first of the year? And then just talk us through the journey to getting that margin back given some of the comments you've made about, less volume growth outlook and the premiumization being less prolific. Just trying to understand what brings that margin back through in the next couple of years or so. And then the secondary on portfolio management, you probably saw, I sure, some speculation articles that you'd put Clearacel show and a couple of other brands up to say. I mean, I think they went as far as saying you'd put details out to some potential buyers on those brands.
Can you comment on that at all possibly? I suspect not, but maybe And then more broadly on that, is that something that we will see Records doing more of going into next year, portfolio management, selling some of these brands and trying to focus more on core areas? Thanks so much.
Let me take the first part of that question. Nutrition margins, as you see, were down over 400 basis points, versus last year at 17 and a half percent. And yes, there are some one time costs in the first half of the year And those are mostly related to the changeover of the Mexican dryer, which we talked about and flagged in February. And those were reasonably significant costs. The other big impact, the other 2 big impacts that we've talked about is obviously the impact of the closure of the Hong Kong border, which was a, margin accretive business, And that has an impact therefore on the nutrition, not just volumes and leverage, but also on the absolute margins.
And the other impact is obviously the ongoing COVID costs. And I think it's important that we remember, we are still operating in a pandemic environment. And we are we reported in the first half of the year, just around 70,000,000 of one time COVID related costs and these have certainly continued, that's across all three business segments and these have certainly continued into the second half of the year. So what is it that we need in order to bring margins back? Obviously, we need the category to grow.
Our brands are highly leveraged based, and we need to see category growth. And we do believe the pandemic impact on birth rates is not necessarily a long term thing. And the birth rates at these levels, so falling birth rates at these levels do create a pressure on the overall market growth. What we also expect to see is that Hong Kong market will open up again. That is a matter of timing.
It's difficult to estimate that. So those are 2 of the key aspects that we need in order to return closer to the group margin level, average margin level, which is what we expect it can deliver.
If I can just take on the second question, but just one small other point, Jeff, if I could add is, we see significant productivity opportunities as well. Inside the nutrition business. To answer your second question, just on we don't comment on speculation. But to get to your question more broadly about how we think about the overall portfolio, we are completely focused on long term growth as the key enabler for us to deliver shareholder value. And we will invest in order to achieve that much like we are doing.
We see significant upside to the plan in terms of making that happen if we are focused on it. What we have to ensure is that we continue to execute on the strategy. And realize the upside potential in this business. As far as the portfolio goes, we are also, we have no back we are, we manage for shareholder value, and we'll do it in the right way. And so if we have something new to tell you, we will.
But I just want to be aware that at the end of it, we are completely focused on the long term growth and are delivering shareholder value in the right way.
Thank you very much.
Great. Well, look, I think that is a great place to bring the call to a finish. Can I just thank everybody for their participation and to Lakshman and Jeff presenting and taking us through those questions so thoroughly? Thank you all very much. We look forward to engaging with you in the weeks ahead.
And We'll speak again in February next year. Thank you.
Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may now disconnect.