Normally, I would extend a warm welcome to you, I have to say it's a hot welcome, isn't it? Because I haven't seen U.K. like this. Let's not complain because we always seem to be complaining about weather, and even when it's great, we still want to complain about it. Let's talk about more than the weather with the usual disclaimers. Let me get into the half one results and give you a lot of detail around how we think about what is happening and how we think about what is in front of us. I want to start again, of course, as I always do, with three key messages. The first one is that the second quarter has been a quarter of progress. I have to say, there is much more to do, as you will see as we expand that further.
The second point I wanted to make was that Mead Johnson is not only on track, I think it is a bit ahead of our expectation. Certainly, as you've seen in terms of top-line growth rates, there is more momentum in it. Equally, there is, again, more work here too, and I will hopefully talk to you about that too. The third bit, of course, is that as we look forward from RB 2.0 point of view, we believe firmly as we did before, six months ago, when we announced it first, that this is a platform for growth and value creation. Again, we were going to tell you about what the work we have done so far is and what more there needs to be. Let's talk about each of these. The first thing is on trading.
Q2, as you saw, was high single-digit growth rates on IFCN with 9% growth. The base health business was more muted, was 3% growth, and actually did have a benefit of cyber in this. Actually, these numbers do get a bit more flattered by cyber impact with +3, and HyHo also with the cyber impact, +4, which is, I think, still a good result for HyHo. In half one, just the carry forward of this, 4% in pro forma growth as if we owned Mead Johnson for the same period in the first six months, which we didn't. Actually, we owned it actually only for 15 days, with base health being 2% and 4% in HyHo, which is the same in Q1.
As a combination of all this and basically coming from the higher growth on Mead Johnson delivered already in the first six months of the year, we are raising our full-year targets from 13%-14% to 14%-15%, and I'm going to expand that to you also later in the afternoon. Let's go into the model that I've always shown you. I think each of my presentations I've done, I've actually shown you this model, and I want to call it virtuous, even though there are some pockets which require more explanation of why it looks less than perfect. The first thing is gross margin. I always said our earnings model starts with gross margin, and it continues to do so, but gross margin is what, -50 basis points.
A lot of that is driven by our gross margin and pricing in the HyHo business, where we have invested more in competitiveness, that has impacted gross margin. On the health side, the margins progression is more stable. There is a lot of input cost pressure on both business units, but clearly, a lot of pricing pressure in HyHo, although on the health side, we had pricing in the quarter and in the half. In terms of fixed cost, you see negative 40 basis points. As we said, there are increased costs from RB 2.0, but we wanted to offset those costs from the cost of synergies. In the first half, the synergies are well ahead of our in-wing assumptions in terms of run rates.
Clearly, there is also lower cost of RB 2.0 in the first half, which might even out a bit more in the second half. There is more fixed cost benefit in the first half, which I think Adrian will also explain to you. In terms of BEI, a number we carefully target and also incentivize people or disincentivize people on, we are negative 60 basis points. In absolute, actually, BEI remained flat. We had a material synergy benefit again from Mead Johnson. Therefore, all the negative comes from the Mead Johnson synergy in health. In actually the HyHo business unit, we invested more in BEI in the first half. There is also, I would say, phasing here as a lot of new people, particularly in the health side, coming into the business.
There's also a bit of phasing between half one, half two, but I think we are broadly happy with the investment that we are making behind our brands and in fact, some increases that we see in some parts of the business. As a result of this, we have 3% growth on a like-for-like basis and 4% pro forma growth in the half. That's how the numbers work. Clearly, the operating margin is a mathematical combination of gross margin, a decline of 50 basis points and improvements of 100 basis points on the other two lines. In terms of Mead Johnson, I know that a lot of people have actually talked about Mead Johnson ever since we bought it. We have owned Mead Johnson for just over a year.
I was just doing the maths actually as we were walking in terms of what has been the growth of Mead Johnson since the time we bought it, and it's broadly 4% or so. Broadly 4%. I thought when we talked about Mead Johnson, when we got it, we said the category growth trends, we expect them to be in the 3%-5% range, and you should expect us Clearly, 12 months ago, this business was in decline, right? We said that you should see a steady progression towards these 3%-5% growth targets. Hopefully at the end of it, we should be at the top end of the market. I think as I see the last 12 months, I think definitely the last 12 months has been a lot of progress. The last quarter is very good, high single digit, 9%.
I'm going to explain that, too. 7% clearly is also comping from a softer base of first half last year. That 7%. Synergies, as I already pointed out, we raised the synergy target from GBP 250 million to GBP 300 million. In the first six months, we declared GBP 75 million, which means since the time we got this, we have delivered GBP 100 million, one third of the target done. I think we have done well here. It's firmly on track. I have full confidence that we will get to our increased target of GBP 300 million as per the time we scheduled, although we are ahead from a run rate point of view in the first six months of the year. Operating margin expansion in half one, you can do the math. We haven't quite given individual sub-category of margin progression, you can do the math here.
Higher top-line growth rate, synergies achieved a bit ahead of track, I think on Op margin. I'm going to explain to you very shortly because there has been some confusion around Op margins on Mead Johnson. I'm going to explain to you actually in as much detail as I would have done inside the company. At least you should feel that I'm telling you how I would've seen this inside the company. You might remember when we bought Mead Johnson, that was in around 15th of June last year. We declared the first half results, which were largely driven by the Mead Johnson organization. When we declared the results, the margins at the end of June last year were about 500 basis points lower than what they were around at December 2016. Right? Everyone on the same page on this?
When we got Mead Johnson, the margins had declined by 500 basis points in the six-month period of December 2016 to June 2017. Just for extreme clarity here, part of this decline was assumed in our financial modeling. I'm going to give you now how much that was. That was about GBP 100 million. Delta between what we thought we would inherit in June 2017 to what we actually inherited was about GBP 100 million difference. I've tried to quantify it just to make sure we understand internally what the scale of the challenge is and what the scale of what we need to build back and bridge to is. It's about GBP 100 million. That's the delta. Where are we against that GBP 100 million? I did say, and we said every time that you should expect RB to make up the shortfall that we inherited.
We will make up the shortfall we will inherit. It might not happen on day one because we lost it on day one. It will happen during the course of the financial model. Where are we against that? It has two components, clearly. We said we will use all the levers of the earnings model to drive it. The first component is increased synergies. GBP 50 million of declared increased synergies closes half the gap. The other half of the gap, I can assure you, there are so many earning model levers that we have. Improving gross margin, improving the mix, improving more efficient ways of running that business. I have to say, a higher top-line growth rate. Higher top-line growth rate, the easiest of them all, actually, or the more difficult or the easiest to explain.
I'm not saying that you should make any projections into the future versus what has happened, but clearly, as you can see from the first seven months, we feel very comfortable that we will make up that GBP 100 million gap from all the levers that are available to us and are being fully used to get there. That's how I feel about where we are with Mead Johnson. Still only 12 months and a bit more. Bit ahead of where we thought we would be, but also every day I can see something that we are not doing enough and not right enough and some which I think is very good. That's where we are on Mead Johnson. On RB 2.0, it is very important for you to understand and get to the same page as we are on RB 2.0.
It is our platform for growth and outperformance and value creation. Inside the company, this has been understood, and actually, people are working in a rhythm and focus that I think is very difficult to understand from the outside. Why do I call it a platform for growth and outperformance? Because it achieves three things. I'm going to talk to you about each of these three things and what I said for each of these three things. The first thing is on Hygiene Home. I said to you guys that Hygiene Home, which is our history, actually. Our history is Hygiene Home. We were raised knowing how to drive category growth on Finish and how to install more dishwashers in people's homes and how to work with dishwasher manufacturers to make them better and help sell their machines so that we could actually sell more Finish.
The same thing on Vanish and beautiful brands like that. Clearly, some of that we have not performed to our potential because we showed to you in February that in the last six years or so, this group of brands grew at 1% compound annual growth. That was not good enough because we were clearly underperforming the market opportunity here. How do you actually bring back focus here when there are other shiny objects in the stable? How do you actually bring back the passion? How do you bring back the innovation focus and so on and so forth? Hygiene Home, for us, the creation of this business unit is to really understand that these are still beautiful brands. Right in this country, half the homes still don't have a dishwasher, and we need to do market creation and market development here.
We need to find ways, like we are in China, where still less than 2% of people have a dishwasher machine at their home. We are working in ways through which we are finding different innovative The products are different. The way they work in smaller dishwashers, different technical deliveries. I think that requires more focus, more innovation, more investment, and more growth. This is a simple formula for Hygiene Home, and we are unleashing this formula with the creation of RB 2.0. The second aspect of this was, of course, the big objective of the company, which is to become a leader in consumer health. That's all. We have spelt out our ambition very clearly, and we've used Mead Johnson as a catalyst to get there.
Clearly, Mead Johnson has been a significant catalyst, but the immediate nature of what needs to be done is quite significantly different in health versus Hygiene Home. In health, people can take it and run from day one. In health, we have to actually make sure that two companies, two businesses coming together, where many new people who don't understand the other half very well. I think there's a lot of work to be done here to create that global world-class company in consumer health with Mead Johnson. That is certainly what our ambition is. The second bit is to drive the outperformance of Mead Johnson. We said that clearly Mead Johnson hasn't had a good performance history. We need to get it to upper end of the category growth that I just talked about, 3%-5%.
The third thing we said, and I think everyone talks about this more and more, about the nature of digital disruption that is taking place in health and how should we be participant in this and how do we actually become a disruptor versus being on the other end of it. That was clearly the part of health that we want to do. I'm going to tell you how we're doing about this. Beyond the story of outperformance that we definitely need to create in RB2.0, both on the Hygiene Home and the health side, we also said that actually we are going to take other steps in the company to provide us more strategic flexibility. We talked about how we want to create separate legal entities and all the work around that.
That is something that is going to take place not just from day one, but will take some time. I think Adrian today will explain to you the work that is needed there, the amount of work that is being done there, and how that is on progress and what more to expect. Now taking each of these in turn, let me just talk about Hygiene Home. As I said, more focus, more innovation, more investment, more growth. How's that looking? Actually, I'm going to give you one or two examples and then move on. It is still early days, six months in. I would say more innovation. We've taken innovation, which we launched and I explained to you last time, on Air Wick.
In the short time that we've had, this innovation has now gone to more markets in six months and is tracking now two times the plan it was. There is always a subjective factor in how you feel you're doing, apart from the objective factor that you will see on the extreme right-hand side. There are some markers. There are some kind of, how can I say, input KPI leading indicators of how we are doing. I can definitely see that actually some of these innovations are being driven in market execution terms is so much more granular, so much more focused than otherwise might have got in terms of attention when there was a wider portfolio to take care of, and maybe a Mead Johnson business to also work on. More investment, I already alluded to it.
In the first 6 months, we invested more in basis points terms in our Hygiene Home brands versus the same period last year. Early phasing also here. Clearly, more growth. You are seeing that we have reversed certainly the declines that we were seeing in the last 12 months of the year with positive growth momentum. I would say I do see clear signs and evidence that RB2.0 is the right answer here. Now moving to health, I said to you that there is the intent to be a global leader in consumer health. Clearly, organic growth is the number 1 focus when we talk about leadership. The number 1 focus. Clearly, I've also said that this is a field which remains hugely fragmented, and that is not changing for the next 5, 10, 15 years, who knows?
We have materially moved our business from where it was just 6 years ago to where it is now. 6 years ago, we were one-third health in the new definition of health, and now we are two-thirds health in the new definition of health. That is quite a material change. Therefore, it has become like a consumer health company. The second thing we said was on Mead Johnson, I've already spoken about this. I think it is difficult to maybe summarize everything that is happening in Mead Johnson. Let me first and foremost say that the market on Mead Johnson is very buoyant in China. I think you would have probably seen it from other people's commentary around this subject. It is not unexpected.
As I've said to you before, we have been tracking this market, this brand, this category, this company for a number of years, and we did see all these trends that we expected to play out. Although I'm a bit surprised by the buoyancy of the growth, I'm not surprised by the turnaround of the growth in this market. Having said that, just to give you, take it 1 more stage down, the number of births after opening of the one-child policy in China did go up significantly in 2016. As soon as the shackles were removed, many families who are waiting for maybe having a second child decided to go ahead and do so, and you did see a spurt in birth rates in 2016 versus 2015. In 2017, maybe against expectation, the birth rates in China have come down versus 2016.
It begs the question, which I do not have an answer to, whether there was a one-off effect or there is a temporary change here. Clearly, when you think about the growth of the market, there are several stages of infant nutrition. I'm just giving you another step down detail. There's stage 1 products which apply to zero to 6 months old babies, stage 2 products which are six to 12 months, stage 3, one to three years, and so on and so forth. There is a staging of these. We track growth rates by segments and by stages to see how we should expect growth rates in the first stage to play out when the babies move from 1 stage to the second stage. It is very clear that this growth in the Chinese market is coming from stage 2, 3, and 4.
The stage 1 growth rate in the first 6 months is now stable. What you see in the market today in the last, I would say, 6-12 months, is nothing but the lag effect of the number of births that took place in 2016. I cannot precisely say whether some of these. Because these are social trends too. This is not just about an economic trend here. There are social trends to look at, and we watch them very carefully, how this is all going to play out in the growth rates of the market. The market in China has been growing at double digits, I would say mid-teens. Against that market, we have done well. Clearly, there is a market factor in our results.
Therefore, I want to make sure that you understand that extrapolation of growth rates, which happen quite significantly because of a large Chinese market, China contributes to 40% of the global infant nutrition market, should be carefully interrogated as we look forward. I, for one, clearly, I'm looking at the market trends. Having said that, there are a number of other operational changes we are making, and we have talked about that before. In e-commerce, Mead Johnson was underserving the e-commerce segment, and clearly there was a material opportunity to actually drive e-commerce expertise of RB, which we have talked about in the past. We have, just to give you another dimension of e-commerce, if you take the non-infant nutrition market out, RB now has more than 50% of its business in China coming from e-commerce. Maybe closer to 60.
We have been a tremendous success story on driving commerce channels across the markets. Clearly, Mead Johnson was not there. From a place where I think less than 10% of the business was in e-commerce in China, we've moved that needle materially in the last 6 months. I feel good about that. I feel good about the fact that we are working with innovative solutions here, I would say. Like, maybe you would have heard that we announced a strategic partnership with JD.com to significantly fast-track our entry into lower-tier cities, particularly in the mom and baby channel in China. I'll give you my personal experience. You might remember, I once stood here, and I said that I'm not happy with the size and our performance of our China business. This is like six years, seven years ago.
One day, I hope I will be able to talk much more positively about it. It was not even in our top 25 markets. Clearly, I said that it's our top 2 market, not only because of the Mead Johnson acquisition, but because of the tremendous transformation that our base business in China has had over the last six years. The point I'm trying to make here is that it took us in the moments of transformation, about three years or so to reach just 100 cities, or not just 100 cities, but it used to take us three years. Building distribution, finding distributors, really putting our people on the ground, and it is not an easy job. It takes time. Then, of course, creating demand.
You can't just say, "Well, I'm here, and please buy me." I believe we are going to do this and more in less than one year this year. This is the kind of speed and scale we can apply given our tremendous success in understanding the new ways of dealing with China. I think beyond tempering you very much on the market growth, which is dictated quite a lot by what is happening in China, I would say, I still think we have done quite a good job in a number of areas here, including fast-tracking innovation. I'm going to show you one example. That I think is a, in balance, progress. The last part is e-commerce and digital disruption, the one I talked about in the previous pages.
In our health business, which clearly is very important, e-commerce is about 8% of our total revenue already, and that I think is a very nice progress over the last I already gave you some examples of infant nutrition China. This is an area where we are deploying far more resources within each of these business units than we had just 12 months ago. I do believe that this could be a very interesting model in many different ways. One simple way is how do we innovate, and how do we actually change innovation for different type of channels, including on e-commerce. Also on the second part of this chart, which says that we opened up our direct-to-consumer operations in 14 different countries in the last six months.
This is quite significant, and it captures categories and brands like VMS, but it captures also sexual wellbeing and, of course, infant nutrition. I don't have to tell you that when you think about direct to consumer, there are some markets which are going to be bigger than others. This is normal. We are going to actually try and look at this more than just a revenue source. I think it's a source to understand consumers better, in my opinion. Direct relationships, direct engagement, and innovate better. Try new things and learn fast, fail fast if possible, but also then once you know it works, we can scale it up very well. I think D2C is not just a growth channel, it's a more strategic channel for us, and that's the reason why we are excited about actually doing more in this area. That's health.
We come back to RB 2.0 and the strategic flexibility. This is something that I'm sure Adrian will talk to you in greater detail. Half one is all about getting our organization in shape, putting this organization structure. I think, again, I don't want to under-emphasize Because I know that some of my own people will be watching this telecast, and I think the speed with which we have moved 40,000 people is gigantic. It is staggering, and this would not happen if people don't show the agility and the openness and willingness to move. We've created this in record time. January 1st, we started. Organization structure, operating model, and of course, customer management, because each of these two business units are going to manage their customers with intensity, and so on and so forth. That's really very much on track.
In the second half, not just second half onwards, there's also the same pipeline of work, on the infrastructure and legal entity split types. This is what actually the work is. We are very much on track. I think a lot of work has taken place. Some of the people in this room are working full-time here, actually, on this, which should result in both improved performance on the one side, structurally independent business units on the other side, to give us the value creation that we all look for in the future. Last couple of things that I want to say before I hand over to Adrian on the financial side and the details. You might remember I talked about the medium-term algorithm also in February. With putting the pieces in the right buckets, this algorithm hasn't really changed.
It's just re-piecing the pieces, moving the pieces in the right buckets. I said health rate, health growth rate in the new definition of health, which combines IFCN and so on and so forth, including, of course, our Hygiene Home business, the category growth rate is 3%-5%, and our ambition is to perform at the upper end plus of this range. That's our ambition. When we are not performing, you should absolutely take it that we are not there. There is no more than less. If we print numbers which are on the right-hand side of this, you think that's fine, this is where we want to be. When we don't, we are not. I think that's the algorithm here.
The algorithm we have for Hygiene Home, this is actually just to clarify, this is based on where we are, because the Hygiene Home business is predominantly a developed market business. We have to look at the growth rates that we have available to us, these are not the fastest-growing markets in the world at this point in time, even though our categories offer us great opportunities to grow and drive business. These are the kind of category growth rates in the medium term. You should not expect this again in one quarter to the next, sometimes not even in a year. That's the kind of algorithm we have, 2%-3%, you should expect us, certainly coming from where we were, in line to the upper end of this range.
I would be not happy if it is not in that ballpark, certainly would love to see it towards the upper end of this range. That's what RB is. This is RB Group. Where are we against this ambition? Again, this is a moment in time and not really everything. In the first half, you saw we delivered 4%, this is pro forma, therefore in total. Also 4% actually on Hygiene Home to be 4% in total. It looks a bit boring, this is where it is. How do I feel about this? I think on Hygiene Home, I see a lot of good work and a lot of energy, even if the 4% growth in the second quarter is flattered by the absence of cyber in the numbers. How do I see the health number? Again, some good things in health.
I would say the OTC growth rates still continue to be good, despite the fact that there is still a cyber benefit in those numbers, definitely so. In IFCN, already spoke about that. There are a group of brands with the starting word S that are still in the first half a drag on the business. When I look at all of this and look at the work that has to be done, in terms of getting everyone to understand the full health portfolios, making this organization become more synergistic because there's lots of things that we can take from Mead Johnson and apply to the RB side and the other way around. There's a lot of work to be done here, I don't feel that despite the print of 4%, we are where it can be and should be.
I feel there is more work to be done here and maybe everywhere. Although the print looks okay, actually, I can also see deep inside some things that need to be done to make us better in the health side. If we can keep in line with our ambition on the Hygiene Home side, I think that would be a good result. That's where we are on our medium-term algorithm. We feel very good about the medium-term growth algorithm. I think this is the ambition we should have. Although it's just one half, I think there is a bit of progress on this side, but more work definitely ahead of us. Let's get Adrian to explain the numbers, he will explain the innovation.
No, he won't. That's back to you, boss.
Well, you will keep to the script. You remember I just said something about sexual well-being and went off script.
You're going to stick to the script.
Okay.
Thank you very much. Thank you, Rakesh. Good morning, ladies and gentlemen. If we can just turn to the first of the numbered slides. Yes, here we go. These are the aggregate reported numbers for the first half in our release, together with the headline pro forma 2017 numbers, as if we had owned Mead Johnson from the start of last year. The numbers clearly include both the effects of trading performance and the effects of the MJN acquisition, the food disposal, and the RB2.0 organizational changes. In the coming slides, we will seek to distinguish trading performance through focusing on the business units in pro forma terms, and of course, clearly reconcile this back to the reported numbers.
Dealing just firstly with a couple of the more technical items on this slide, the adjusting items that you can see are principally the cost of integrating the Mead Johnson acquisition and the associated RB2.0 restructuring costs. These are in line with guidance, and we have, as usual, included an analysis in the appendices to this presentation. The increase in net finance expense to GBP 173 million reflects, of course, the borrowing taken on to finance the acquisition. We cover later the movement in net debt during the half and the composition of the debt at the period end. Also included in the net finance expense is GBP 26 million of tax-related expenditure now required to be included in this line. This item is hard to estimate and is likely to be quite volatile.
We manage this cost as part of the tax charge and have included this item within the tax charge in our adjusted numbers. Excluding this tax-related item, the cost of the net debt remains in line with our guidance of about 3%. We continue to expect a tax rate on adjusted profit of 23% for the full year, the charge in the half year. The discontinued net income row that you can see here, in 2018 is a small Forex adjustment on the Indivior provision. Excluding adjusting items, total adjusted EPS growth was 6%. We look at this 6% earnings growth as comprising, in performance terms, 4% from pro forma net revenue growth, 2% from pro forma margin growth, a 6% increase from the net combined effects of the Mead Johnson acquisition, the food disposal, and their financing, and a 6% Forex headwind.
The reduction in interest cost as debt was reduced from free cash flow and the dilution from new share issuance broadly offset. The tax rate was unchanged. Looking forward, we continue to see a tax rate including tax finance costs of about 23% and finance costs of around 3% of net debt for the year. If the exchange rates in June were to continue to end 2018, the net translational impact on currency movements will be a 5% headwind for the full year and a 4% headwind in quarter three and rather lower in quarter four. Turning to the next slide. This slide, yeah, this slide shows the pro forma group revenue, gross margin, and adjusted operating profit numbers. The pro forma numbers show performance as if we had owned MJN from the start of 2017.
The like-for-like growth numbers include the MJN numbers from the anniversary of the acquisition date. That's the 15th of June 2018. In pro forma terms, the group net revenue grew at 5% in quarter two and 4% in the half. Like-for-like growth was 4% and 3% respectively, reflecting the higher infant nutrition growth rates, which we'll see in a moment. Pro forma operating margin increased by 50 basis points. The reported operating margin declined by 30 basis points. The 80 basis points difference between the movement in the pro forma and the reported margins is the effect of consolidating the lower operating margin Mead Johnson business. We will return to the business unit operating margins and to a closer look at the drivers of margin change in total in a couple of slides' time. Turning to the next slide.
Here we show an analysis of revenue growth between volume and price mix. For Q2, you can see that the 5% group pro forma growth comprised 3% volume and 2% price mix. Volume growth was similar to Q1, price mix a little stronger. We will return to the volume price mix balance within each BU in a moment. We have also set out here in numeric form the commentary we have given orally on volume and price mix for the last four years for the base business. You will see that until 2017, and indeed until mid-2017, although we don't break it out on this chart, price mix accounted for 2%-3% of growth and volume around the same level until the effect of Korea, as Rakesh puts it, and cyber from early 2016.
We do not, as you know, see real price increases any part of our growth model. We see price mix of around 2%-3% expressed in constant currency terms, as you see it here, as broadly maintaining real price. We have, over the last few years, operating in countries with CPI increases on average about 1.5% higher than our reporting currency, sterling. From mid-2017, as discussed on many occasions, we have seen a tougher price environment in especially HyHo and in especially developed markets. This is evident in these numbers. Turning now to the next slide, an analysis of growth rates by geography for the group as a whole. We will look at a little more detail within each business unit in a moment. You can see, however, from this chart, the strong performances in the quarter in North America and DvM.
In North America, the main HyHo brands continue to perform well. We did benefit in health from some further stocking by retailers of infant nutrition as a switch to the new Enfamil NeuroPro product was implemented. In DvM, the China performance in infant nutrition and in the RB-based health brands was especially strong. Revenue here too benefited from some trade stocking in as we moved to access more outlets for our product, especially in smaller and more inland locations, as you heard Rakesh describing earlier. In Europe in particular, we had the benefit of lapping the cyber issues of last year, but also the headwinds from Scholl and Russia in health and the continuing price pressure in HyHo. Turning to the next slide and our usual analysis of group margins. In pro forma terms, as noted earlier, we delivered 50 basis points operating margin improvement in half one.
This becomes a reported reduction of 30 basis points as the lower margin MJN business is consolidated. Pro forma gross margin declined by 50 basis points. Pro forma BEI spend was lower by 60 basis points. This was in large part the result of cost efficiencies within the MJN spend as we applied an RB approach to sourcing and deployment. As Rakesh mentioned, also a little bit of phasing within the year. Other pro forma SG&A costs decreased by 40 basis points. This was mainly the result of Mead Johnson cost synergies offset by RB2.0 costs, which we'll come back to in a second. We expect some increase in SG&A costs in half two as the effect of the Indian GST ends. It was a slight margin boost from the Indian GST, as you know.
As RB2.0 staffing progresses and as we anniversary a half in which the incentive pay expense was inherently low, that's the second half of 2017, and in the second half of 2017 was reduced further by truing up accruals that we had made, that we'd provided for in the first half of 2017. Our expectations for the full year margins have not changed, and we remain happy with the consensus shown on our website. Turning to this next slide here, we have set out here a quantification for half one of each of the moving parts of margin, which we described in February as playing out through 2018 as part of our margin guidance. Firstly, the arithmetical 80 basis points effect of consolidating the lower operating margin MJN business. This will clearly be zero in half two. It will, however, slightly counterintuitively, be an 80 basis points reduction for the full year due arithmetically to the higher absolute RB margins and bigger difference with the Mead Johnson margins in half two.
Secondly, a 90 basis points gain as the Mead Johnson cost synergies are delivered in line with expectations. In fact, slightly faster than expectations. We'll return to these in the next slide. Thirdly, the 40 basis points cost of the RB2.0 changes. As is already mentioned, we expect these costs to be slightly higher in half two. Fourthly, the trading margin change from the two business units. We do expect this to be more negative in half two for the reasons mentioned with the previous slide, in particular, GST and the annualizing of an artificially low incentive pay number. We will return to this with each business unit in a second.
Turning to the next slide, here we show the progress on achieving the Mead Johnson cluster synergies. You can see the GBP 20 million that we delivered in 2017 and a further GBP 55 million that we achieved in half one. We remain firmly on track for the expected GBP 300 million of synergies, and we expect broadly 50% of the total to be in the P&L by the end of this year. Turning to the next slide. Now looking just at the health business. We're now looking within the health BU, health business unit. Here we have set out the revenue and revenue growth for the three main components of the health business. Infant nutrition, that is Enfamil, Nutramigen, and so on, which accounted for 38% of health revenue in half one.
Over-the-counter medicines, that is Mucinex, Gaviscon, Strepsils, and so on, which accounted for 24%, just under a quarter. Other consumer health products, which account for 38%. This includes hygiene products, in particular Dettol. Wellness products including Durex, K-Y, and Scholl. VMS products, Move Free, Airborne, and so on. Some products closer to personal care, Clearasil, Veet, E45. We will elaborate on these components, their dynamics, and their approach at the planned investor day in November. In headline terms, however, you can see that the health business grew by 5% pro forma in Q2. Before getting into the ins and outs of cyber-attack and Scholl impacts and so on, how do we see the progress of this business unit? Rakesh has given you a sort of CEO level view. Let me give you a slightly more numerical overview of this before we get into the ins and outs.
Firstly, the market, this business or the set of health businesses serves. We have said that we expect the markets that this business unit serves to grow at 3%-5% in the medium term. We see the market served as growing towards the top end of this level at present. This is increased by the currently very strong growth in infant nutrition in China. Without infant nutrition, we see the consumer health markets we serve as growing in the middle of the range. Secondly, our performance against that market or those markets is our medium expectation, as Rakesh mentioned, to perform at or above the top end of the market. We have built a synergistic set of consumer health business areas to which we are applying a proven but evolving operating model and the usual RB energy and drive. We are not yet outperforming.
We are losing some share, and the underlying rate of growth in this business unit is beneath our medium-term expectation and goal. Why? We've come through a testing period from the tragic Korea events, the cyber-attack, the rollercoaster Scholl ride. We have reconfigured the business with a major acquisition, a material disposal, and a reorganization to enable enhanced focus on consumer health and on our household brands at a time of material marketplace change. We frankly showed resilience in the face of external challenges we would not have wished, and the important changes we have made are fundamentally value-creating. This change has detracted from the delivery of day-to-day performance. It is taking a little time to optimize how to get the best of each parts of our consumer health business we're in while respecting their differences, and this has caused some share loss.
We are very confident that this business unit is very well-placed strategically and that the operating excellence is on its way back, but over a few quarters. We remain very confident in our medium-term algorithm that Rakesh has taken us through, again, for Consumer Health, a 3%-5% growth market, and that we will perform consistently at or above the top end. Turning from the broader picture of how this business unit is doing to the ins and outs of the numbers, the 5% pro forma growth in Q2 was clearly assisted by about 2% from the cyber challenges in the base business in the prior year. It was held back to a similar extent by the Scholl trajectory, which we will show you in more detail in a moment. Across the business unit in Q2, the 5% growth comprised 2% volume and 3% price mix.
Price mix was stronger in Infant Nutrition, but still positive in RB Base Health. Across the components of the Health growth, you can see the continued strong performance in Infant Nutrition. As expected, growth in China is the main driver here, and as Rakesh has mentioned, we are benefiting from the increase in births following the end of the one-child policy. Also from a further increase in brand quality level being sought by Chinese mothers, and from the very rapid channel change, including some stocking of those news channels. Looking forward, we see lots that is encouraging, do not expect that all factors will continue to be as favorable. In particular, as Rakesh again has mentioned, after initial rise following the end of the one-child policy, birth numbers have fallen back and growth in the Stage 1 Infant Formula market is now flat.
Within the next largest component, OTC, growth continued to be strong at 6% and broad based. Mucinex revenue, as signaled, did decline, the result of consistent availability of private label supply in the U.S., and with the impact of this consistent supply expected through half 2, we expected to see lower OTC growth in the second half. Within Hygiene, growth was held back by the weak Middle East market, where Dettol is a large brand for us. Within Wellness, revenue declined, the result of the well-known Scholl challenges. Within VMS, we saw good growth. Cross-border sales into China are a principal driver of this growth at present. The brands closer to Personal Care declined in the quarter.
This decline was principally the result of the same phenomenon that has caused Scholl revenue performance to be volatile, but on a much smaller scale, the successful introduction of Trima devices, finding it challenging to build quickly a sustainable pipeline. This chart also shows the operating margin of the Health business unit. You can see that in pro forma terms, it grew by 130 basis points. Pro forma gross margin was broadly flat, a combination of Mead Johnson cost synergies, cost pressures, and a balanced price mix picture. The Mead Johnson cost synergies were relatively modest to date. Synergies in cost of sales take longer to realize in the P&L due to the nature of the activity and the inventory cycle.
Pro forma BEI reduced, largely the result of cost synergy savings, partly the result of some delayed phasing as new country management teams are formed. Pro forma SG&A reduced the net of cost synergies and RB2.0 savings, as we noted earlier, for the group as a whole. On this next slide, you can see the geographic progress of the health revenue. The 3% growth in North America was boosted by annualizing of cyber and by some further infant nutrition stocking as NeuroPro is introduced, and was reduced by the expected advance of Mucinex in private label share as product availability increases for retailers. Again, as noted, we expect the Mucinex headwind to remain strong for the second half and the NeuroPro channel stocking to normalize. The Europe growth was boosted by lapping cyber, but held back materially, as expected, by lapping Scholl.
Russia channel inventory destocking remained a drag too. Our health portfolio in Europe has a high proportion of OTC and very little VMS and infant nutrition. Market growth in the consumer health segments we currently serve in Europe is low. Within DvM, the standout market on the upside is again, as Rakesh has mentioned, China, with strong growth in infant nutrition and in the RB-based health business. As noted earlier, we do not expect the China infant nutrition market growth to maintain its current level. We are very focused on improving access for our products to consumers. This also means that reported sales growth benefits to some extent, as we mentioned, from the channel stocking. On this next slide, you can see those Scholl run rates. This is an update of a slide we showed last quarter.
Revenue in Q2 was around GBP 80 million, about 25% lower than the prior year. Devices accounted for around 30% of the total. As signaled previously, from Q3, we are lapping much lower Scholl numbers. Turning to the next slide and the Hygiene Home business unit. As for the health business unit, we will start with a few comments on the underlying performance. We see the market served by this business unit as growing at the bottom end of the 2%-3% expected medium-term growth. We see an especially tough market in Europe at present, which is our largest geographical market. We see an improvement in our share performance over the last three quarters to a position of slight share gain, an underlying cadence of around 2%, therefore.
You can see here the reported 4% growth rate in Q2 and the growth rates for the last five quarters. Reported growth in Q2 did, as in the RB-based health benefit from lapping last year's cyber issues by about 2%. This Q2 growth rate comprised 5% in volume and a negative 1% price mix, similar to the position in quarter one. We continue to see significant price pressure in especially Europe. Growth was broad based across the brand portfolio. Nine of the top 10 brands grew, including the five largest brands, Finish, Air Wick, Lysol, Vanish, and Harpic. You will see that the operating margin in HyHo declined by 80 basis points in the half. Pressure from pricing and input cost headwinds on gross margin were the principal drivers of this. Rakesh has already mentioned there was a slight increase in BEI spend in Hygiene Home.
More qualitatively, I would reinforce what Rakesh said, it is early days, but we are pleased to be seeing much evidence of the increased attention and focus on these brands that we expected to see flowing from the RB2.0 changes. There is now a very talented organization with only this portfolio to work on. On the next slide, we have set out a geographical summary of the revenue in this business unit. You can see that 30% is in North America, 45% is in Europe, and 25% in developing markets. You will see that in particular that in Europe, despite the benefits of lapping cyber, revenue was flat in the quarter, again, principally the consequence of a challenging competitive environment, especially on price. Growth in North America was encouraging, as was growth in DvM, although this is clearly quite a small proportion of this business.
Turning to the next slide and the balance sheet. We show here the usual slide on net working capital. We continue to run the business with negative working capital slightly better than our 9% or negative 9% target, despite pressures on receivables in developed markets from retailers and on inventory from the slightly more inventory-intensive infant nutrition operating model. Turning to the next slide on free cash flow. Free cash flow remains strong. Free cash flow conversion fell slightly below 100% in the half, principally due to the timing of certain tax payments, of course, the exceptional spend on the integration. As signaled, capital expenditure is slightly higher, in line with the 3% of revenue guidance given. In half one, Okay, my screen went. Yours is still there. The capital expenditure is slightly higher, in line with the 3% of revenue guidance given.
In half one, this included significant spend on our new GBP 100 million R&D center in Hull, which is nearing completion. Turning to net debt on the next slide. Net debt was broadly flat through half one. The near $1 billion of free cash flow generation was offset by about $700 million for the final 2017 dividend and nearly $300 million of adverse currency movements. We are seeing an adverse currency movement largely because most of the group's gross debt is denominated in dollars and the stronger period end value of the dollar against sterling. We have set out an analysis of the movement in net debt in the appendices. Okay. Turning from precise numbers to the second part, brief part of what Rakesh signaled I would talk about, which is a little more granularity on the mechanics of RB2.0.
On this slide and the next couple of slides, we have a little more information on the progress, let's say, with the mechanics of RB2.0. This slide is a copy of one we showed to you in February, except for the title, obviously. It shows the 3 stages of implementation of RB2.0. Stage 1, the organization structure and appointment of people was done on the 1st of January. Stage 2, communication with customers and the alignment of sales forces was substantially complete at the end of half one. Stage 3, the infrastructure is making good progress and on track for completion in mid-2020. This next slide focuses just briefly on Stage 1. We implemented an organization to bring the two businesses units to life at country level and outside country on the 1st of January.
Within each country we had on the 31st of December, either one unit dealing with the RB base business or two units, one dealing with the RB base range and one with the Mead Johnson business. On the 1st of January, we had two units in all but the very smallest markets, each with full management teams, general managers, marketing, sales, finance heads, and their teams, each with their own budgets and priorities for the year. We also had outside country teams organized for each business unit in supply, global marketing, regulatory, R&D, and so on. A huge amount of change. Illustratively, around 400 people changed not just roles, but also countries, and/or promoted into our senior management cadre. This went well. Such change, frankly, is an unusual strength of this company, RB.
As we've said before, it takes time for so many people to settle into new roles and figure out exactly how best to work together. This featured in our thinking on guidance for the year. We expected a settling-in period, and this is what we have seen and are seeing. We are firmly on track. This next slide seeks to give a flavor of the stage 2 changes. The channels and customer types we serve across the world clearly vary hugely. The changes we have been making to align each business unit with its customers have therefore been very country specific. We have given here just the merest taste of just two markets. In India, we serve a very large number of small distributors for whom RB products are often a very large part of their business.
We have worked with them to enable them to adjust their systems and their teams to our new model, and we have worked to align our sales teams and our systems accordingly. In the U.K., large modern trade retailers account for the largest part of the business. Change here required efficient alignment of approach and processes with each one individually, and again, the corresponding changes in our sales teams and systems. As you can see, an enormous amount of change that is done or all but done in the first half of the year. Let's say this next slide illustrates at a high level the shape of the stage 3 infrastructure task.
Together with the following slide, we hope it answers a question we get from some investors on why this stage 3 will take materially longer than stages 1 and 2, often along the lines of, "You're RB, why don't you just get on with it?" We had, following the acquisition of MJN, essentially two infrastructure ecosystems, MJN and RB. The MJN infrastructure had been inherited from Bristol-Myers Squibb in 2009 and shaped into a very cohesive and tailored package for that business model in the subsequent eight years. Our RB infrastructure had grown over 18 years since the RB merger, with a number of acquisitions fully integrated along the way. The philosophy had been one of complete integration of brands outside food and the Rx business in order to minimize unnecessary costs.
There was very little distinction in the infrastructure, except in some very specialist areas within the old RB business between health and household. Country organizations function systems were completely integrated. The task under RB2.0 is, simply put, to split the infrastructure, the very integrated infrastructure of the base RB, providing HyHo with an infrastructure optimized for its consumers and customers, and providing the health business unit comprising a combined infant nutrition and base RB with an infrastructure optimized for its consumers and customers. Turning to the next and final slide and seeking to give you a sense of the elements of infrastructure that we are working on. We have set out here the seven work streams within our program.
They range from legal entity restructuring through ERP systems, shared service arrangements, detailed operating models, including the activities that happen in different parts of the world and the trading arrangements between them, financial reporting systems that sit on top of the ERP layer, and a specific project we already had underway to enhance handling of the product from R&D to production specification. This is a major undertaking involving a large number of people. The deliverable is a structurally independent and optimized infrastructures for each business unit. We have a detailed plan leading to completion in mid-2020. We have looked hard at the optimum speed and breadth of this plan, examining many options. Faster would lead to materially higher cost, materially higher risk of disruption, and materially greater distraction to the operations of the business.
We're very comfortable with this plan, and we are on track with this plan. With that, I'll hand back to the boss.
Thank you, Adrian. Right. Before I get back to targets, let me just quickly talk about innovations, and I have a lot to talk about, but my people are telling me, "Please speed up." On health, Nutramigen, I think we already referred to Nutramigen, and Nutramigen is a specialist product for children who suffer from cow milk protein allergy, and it's a brand which has really fared well. It's a specialist brand, serves through actually a healthcare professional channel as well. Now, what's new and exciting here? There are two things. First, we are rolling this brand into China for the first time. This brand, the innovation gets into China. The second is, and this is very important to remember in healthcare, clinical trials and new claims matter. This is how you grow consumer health brands.
Here we are actually relaunching this brand in 30+ countries with two new very important claims. The first one is, greater than 80% of babies reduced their cow milk protein allergy in 12 months versus the normal 3-5 years it normally takes. The second one is, people who are served with Nutramigen LGG are less likely to develop other allergies later in life, such as asthma, eczema, and allergic rhino conjunctivitis. These are really very important claims. 30 markets where this brand already exists, we are going to doctors and medical professionals with very significantly differentiated claims, very exciting. In China, we launched this for the first time. Moving on to something which has grabbed the headlines already, actually, Durex. We are launching Durex Air, a premium range in China.
As we all know, across markets and categories, premium segments are doing well. This is our most premium range. It is our thinnest range, and we have launched a new, variant, which you can't probably read, and it's called Warming, and the idea is to actually provide a warming sensation to maximize the heat of the moment. I will stick to the script and not say anymore. Also on this one, K-Y, a brand we bought a few years ago, and actually one where we've innovated quite strongly ever since we acquired it. Now, this one is a duration gel for men. I don't think it does every explanation, actually. It's a desensitizing gel that we have launched, very first launch here again. The idea is, of course, to enhance the experience and temporarily prolong the time, so that the intimacy is enjoyed for longer.
Again, sticking very much to the script and no more. Moving to Scholl, and actually, I could talk about Scholl for quite some time. Here actually what we are doing is quite simple. This is the aid range, the first aid range if you want. You have a problem, you need it to be solved. The main thing about foot care is half the people don't treat their condition, whether it's hard skin or verruca or a callus or whatever. Therefore, education and telling people what exactly the product is and what it does and explaining that as simply as possible is very important. The second thing is to tell them what it does for you.
The first thing you'll see from the range is actually, we've launched the range, the relaunch of the range, is very clear proposition to tell people what exactly this product is for and how it works and how it makes you better. The second thing is obviously the claims here, which require quite a lot of work and clinical testing, have been enhanced to make sure that the first aid range, which is the bedrock of Scholl, actually gets the due advantage. I think we are very excited about bringing this range into next stage. Actually, across all the key vectors of Scholl, ranging from aid, which I just showed you, but to hard skin, hosiery, and insole, we have innovation going into the market. This is not the product of the last 6 months but the last 12, 18 months.
You'll see the hard skin product is less than GBP 5, it's not GBP 50 anymore. It's more manual, you have to work a bit harder, but you get quite a lot of the benefit on hard skin. Similarly, on tights, we have launched a 20 den product for those of you who probably Really the advantage of compression For everyday use, not for either winter or summer, for everyday use. Available everywhere too, actually, both online as well as on normal channels, and also a range of insoles. Let me move forward to Mucinex. We all know that Mucinex private label is going to be a factor, as it has been in Q2, will be a factor in the second half too. Really, we should not lose our focus on what makes us successful in consumer health, which is innovation.
This is why, again, we have an innovation for Mucinex going across the range. Here, I think the important thing to realize is Mucinex has always been a brand which offers us a relief or a symptom. If you have a sinus, we have a Sinus Max product. You have a congestion, we have a cough, congestion product, and so on, so forth. We also know there are some people who prefer the one-and-done solution. You just want all-in-one kind of thing. I want one product which does all these things. This all-in-one proposition actually resonates quite well for those people who want everything from when you have a sore throat, a headache, a congestion, a sinus. This is the first line of Mucinex products, which actually tackles an all-in-one and done proposition.
Obviously, as you can see, available in tablets, in liquid form, and also in the day and night solution. This is going into the market in the second half of the year in the U.S. I have a number of innovations on VMS to talk about, but I will talk about really only one, which is Schiff Move Free, for two reasons. First is going into the U.S. and China at the same time. Actually, I must say that this is the first time I've seen that in VMS, we are doing actually innovation from China to U.S. All the innovations we've done so far are actually moving west to east. This is one very interesting example where the innovation has actually happened.
The innovation rates that we are now producing on VMS is about 3X as we had 3-4 years ago, and that's thanks to China. What's good about Ultra 2-in-1? Well, it's launching in both U.S. and China. In China through online channels only. It contains a patented combination of something called calcium fructoborate and improves joint comfort in as less than as seven days, rather than the normal time it takes. It's a materially better product, and I think we have good hopes on this. I have also examples on Move Free, but on the other line of Move Free as well as on MegaRed, and the only one I wanted to point out to this is the first example where we've launched an Amazon exclusive. I did say that part of RB 2.0, you should see some innovations that are more channel specific.
Something maybe only for discount channel, addressing different price points and different consumer propositions, something also for online only. This is the first one I wanted to call out and talk more about this, but you will see, maybe not called out every day here, but in RB 2.0 examples, where we will show innovation or do innovations that actually address different channel and therefore consumer propositions. On Hygiene Home, the reason I want to talk about Harpic, and actually this, is that although it looks like a small thing, actually, which it is, by the way, it's small. This is a single-serve Harpic, I think, but Indians, I think, will get two serves out of this, in my opinion. But it's supposed to be a single-serve product. It seems easy to develop because it's like a sachet. It's not. It contains an acid.
Therefore, the technology involved in developing a single serve is not just like a sachet and a sample. A shampoo and a sachet, it's more than that. We know that there's something material happening in India, and that is what is called Clean India. Those of you who are connected to this, what I'm just talking about, Swachh Bharat, it's one of the biggest programs of the government. RB, through Dettol and Harpic, has been the number one partner in this program, actually. We are very proud of the work we are doing to make sure that we can bring hygiene and sanitation and education on diarrhea and other things like this, and hand washing. The reason I want to say this is in the last four years in this program, 75 million toilets have been built in India. Think about this number.
75 million toilets have been built in India in the last four years, including 30 by my mother, 90 years of age. I think it's not laughing here because she's 90, and she went around her villages and personally supervised. I'm proud of her. Personally supervised 30. I did give her a call and said, "Please make sure you do something," which is tell these people to clean them and to use them, because the fact is building toilets does not mean people change their habits and use them. You might find this odd, but that doesn't automatically transfer. There is education required, and then there's cleaning required. Nobody wants to use an unclean toilet. I didn't find one. How to provide a solution that actually works for 75 million new toilets?
That is very important, this is why I'm very excited about this, actually, because this is a grassroots program, but technologically challenging to bring to people at INR 5 a pop. I think what we are trying to do here is not just education, but also make those toilets clean so that they can be used. Harpic is a very significant size brand growing at very high rates, but it has only a 15% penetration. We have a lot of work to do and a lot of work that can be very fruitful to us. Moving on to Finish. The reason I talk about this innovation is that we knew always that in Finish, cleaning your dishwashers, not dishes only, cleaning your dishwasher is an important thing to do.
Actually, to clean dishwashers till now has meant that you have to unload the dishwasher and use it empty. Because of one simple reason, the technology of the dishwasher cleaner, which is acidic, actually neutralizes the technology of the detergent, which is alkaline, and therefore you cannot use them together. What does that mean? People get lazy, don't use them that frequently, and secondly, you need more water and energy actually, when you use a dishwasher on empty. This has been a technology challenge for quite some time, something that we knew of because we actually, of course, are front runners in this area. This is the first product which actually works in an alkaline environment. That actually, first of all, it provides a synergistic benefit to cleaner dishes, but also has a cleaner dishwashing. You don't have to use your dishwasher empty.
You can actually put with every dishwasher cleaning detergent, you can also choose to put a dishwasher cleaner. That is very, very interesting here, and that's why I chose to actually point it out. A number of innovations that have actually been going into Air Wick. As you saw, I've been talking about innovation rates on Air Wick for the last 12 months or so that have gone up and is doing well in the market. I showed one example, some more innovations going behind Air Wick again. A highly innovative category, but I can see the innovation rate also an intensity on Air Wick improve. On SBP, a brand that we own in Brazil, actually it's the market-leading brand by a distance. This is the best product in the market in terms of personal insect repellency because it has two interesting things.
It first lasts for 12 hours, so you can actually apply it for 12 hours and therefore apply it once and works for 12 hours of mosquito-free skin, because of a new ingredient called picaridin. The second reason I say so is actually you can apply it's safe for children above one year of age. I think that is quite interesting about this innovation, and we are the first to market in SBP also. Okay, moving on from here very quickly before we take Q&A is our net revenue guidance. For the year, as you know, I already said we are raising the target, which is the total target from 13% to 14% to 14% to 15%, which implies actually if you do the maths, it implies from 2% to 3% to the upper end of 2% to 3%.
That's really where we are in terms of top line growth rate. As we want to make sure that you fully understand, we are keeping our operating margin guidance for the year, despite the elevators that actually the first chart I think Adrian has shown in my five years that he has worked with me, first ever chart of an elevator or what do you call that? Bar chart.
Bar chart.
First bar chart. As he has shown you some ups and downs that take place between first and second half, you should not expect any change to what we said, to our 2018. You should not also expect what we have said for our medium-term targets, which remain moderate margin expansion in the medium term. That's where we stand with regard to half one. With this, I think both Adrian and I would like to take your questions. Yeah, go on, Richard.
Thank you. Firstly, I just want to say that the extra disclosure in the statement and the presentation are hugely welcome. It's been a bit of an unfortunate trend in consumer staples over the last five years or so, large staples company giving less and less disclosure. I just want to say, really appreciate the extra disclosure you've given in the statement and the presentation today. My first question is on price-
Richard, that's why we started the meeting a bit late so that you can digest all the information that we gave you. Sorry. Couldn't resist it.
My first question is on price. There's been quite a bit of chatter about Reckitt pushing pricing too far, and this is the reason for maybe some of the issues that have been had. The disclosure in the statement suggests perhaps that's not the case and actually volumes have been quite steady and price mix maybe up and down a little bit from time to time, but has been steady as well. Maybe you can just talk a little bit to that, Reckitt as a volume-focused customer innovation business rather than a business that's been trying to push price.
Listen, if I was to react to every statement that comes out, I would really only do that in my life. I genuinely think that the business model of RB hasn't changed. Even in actually our Hygiene Home business, which has been under price pressure, which we have called out not just this time but also before. There are plenty of volume growth opportunities. The reason is very simple. The penetration that we expect to see growing in brands ranging from Finish to Vanish and Harpic that I just showed you, this is nothing but volume. This is volume. This is not price. It is really still an opportunity for us to drive volume growth.
What is happening, we should not and cannot ignore it, that I personally believe that the pricing, the commodity environment that had prevailed, not in the last 6 to 12 months but prior to that, was relatively in a very tough market. I think there was pricing activity that took place that RB has participated in. If you ask me what has happened in the last 12, 18, 24 months, I would say we've invested in price. I do not have the sense that we actually increased price. I quite have the opposite emotion and belief of this. We by and large remain a volume and price-driven company. I would not say volume and no price.
There is volume and pricing to match, as Adrian actually pointed out more than once, to match at least the inflation in the market because we have to cover up for that otherwise we fall behind. It's a combination. Now in the last 12, 24, 36 months, even if you take out the Scholl, Korea effect, which is all largely volume driven, actually people can work the maths out, it is volume driven impacts. If you take the look, I think our trends have not really changed. We have not really changed. Principally, we've been delivering despite terrible growth rates of the last 4, 6 quarters. We've not delivered different mixes actually, with one caveat, more intensity in pricing in Hygiene Home in developed markets. How does that play out over the next several quarters?
I think at some point in time, personal opinion, what you should not write in on a model, I personally think this price environment, which has actually been funded largely with commodities, has to, at some point in time, mirror the headwinds that we see and face actually in businesses. Exactly how that plays out, when it plays out, who will blink first, who knows? I think I personally do not buy the proposition that the business model of RB changed from a volume to a price-driven company. Neither do I see it in the numbers, by the way.
Okay. That's very clear. A quick one for Adrian, if I may. The fixed costs associated with RB2.0, the split, seem to come in a little bit lower than we were expecting. Maybe you could just talk about why that might be in terms of what the dynamics are there. Then one just back to you, Rakesh. Sort of over 12 months in now on Mead, the mom and baby specialist channel, obviously a big opportunity for you. Can you just talk about what you're doing differently there?
Let me just take that immediately.
Sure
On mom and baby, I think I might have pointed out already, there is a obviously huge focus here, not only in China but wherever this channel is evolving, particularly in Asia. In China particularly, we have actually tried to fast-track this because otherwise it take a really long time to actually get to every city. The focus is actually to reach more cities because we know that there's still a underserved market for Mead Johnson, and we have taken a very different approach with partnerships such as JD.com, but not really limited to that, to fast track our entry. I feel very confident that if we can actually realize some of the steps we've taken, we should have a reasonably good presence.
It will still not be good compared to some of the local Chinese competitors, I have to say, who have much deeper roots and sometimes are born from those kinds of markets. Clearly, I think we would have sufficiently moved the needle in the next 12 months. Six to 12 months.
Richard, on the RB2.0 cost, you're right. They've come in at the half lower than we expected and we signaled, our expectations of where they're going to get to remains the same. You will see some increase in that in the second half.
Jeremy. Okay.
Hi, Jeremy Fialko, Redburn. Two questions. The first one is, when you talked about doing RB2.0 and the different stages associated with that, you said that you didn't want to go too quickly because of the operational risks that that might entail. When would you say, do you think you've passed the moment of peak operational risk with RB2.0, or do you think there are some moments kind of still to come that you need to navigate? The second thing is on sort of basically, I guess, IFCN in general, and particularly China, what sort of visibility do you have on your sell-out trends and the kind of, let's say, the level of stock that has built in the marketplace and kind of how much visibility you've got on that given this very sort of multilayered distribution system that you have, particularly within China?
those are my two questions. Thanks.
Let me take the first one, and you take the second one. On China, we have as much visibility as you can think we can have. Visibility of our distributor stocks, we have visibility of channel. At the end of the day, we do see, as we expand our distribution, there is an inevitable consequence that you reach stores for the very first time. You reach it through a channel, and there will be a channel pipeline there. I do not get the sense that the channel pipeline is abnormal in the sense that it is very normal. As you open a new store, you first give the store an inventory to keep and sell. It is very normal. There is a one-off effect in some of that, but there is a normal trend of how do you actually do selling. Take the Mucinex All-in-One.
The Mucinex All-in-One will also have a pipeline part and a consumer offtake part for ongoing consumer offtake. I do not see any abnormal trend in our channel expansion in China, and therefore, I don't have a sense that what we are doing is artificially bubbled up.
Yeah, Jeremy, on the infrastructure change, what we have done in sort of dialogue to the investors up to now, but also when we were just talking a minute ago, was to just give a sense of just there's an awful lot to be done in this infrastructure change. In thinking about the timing of it, there's a number of factors we wanted to take into account. One of them is, clearly, if you try and do too much when it's at the scale it's at, the chances of you getting things wrong, of having SAP systems that don't work or cut it, increases. There's a continual risk of that. There's also an ongoing risk of distraction. I mean, there is distraction going on now. You can't make these sort of changes without management paying attention to them.
We're trying to manage that to minimize it. There's also cost. I mean, there's a cost of all sorts of nature of types in this change. There's costs of the programs, there's fiscal costs, there's all sorts of things embedded in it. As we've studied the program, we've tried to take all those into account. Yes, there are moments as you go through where there's bigger cutovers of systems to another. Is there a point of peak risk between now and 2020? I don't think I could identify it. We've done an awful lot already. An awful lot has happened. You're actually sitting three rows in front of one of the two guys that runs the program, and we have an excellent team working, running the program.
No, I see continual hard effort and focus in a way that minimizes distraction from getting ourselves back to peak performance. It is a latent drag until we get fully through it. We've got a fantastic team working on it.
Maybe one more. Okay, James.
Yeah, James Edwardes Jones from RBC. Sorry, it's three more, Richard, I'll try and keep it quick. First, Richard's question. I didn't think the answer on price mix was particularly clear. Just very specifically, is Q2 an aberration where you move back to positive price mix in the business, or do you think we're now back to a sustainable state where price mix will continue to improve. Secondly, this might be wrong, it's more sort of asking about the arithmetic, it looks to me that if you completely exclude Mead Johnson from last year and this year, the old Reckitt's margins fell by about 40%. Sorry, 40 basis points. If you take off 60 basis points of BEI reduction, it implies that the contribution margin was down somewhere around 100 basis points. Does that feel about right? If so, is that sustainable?
The final one, that 60 basis point reduction in A&P, can you give us some idea how that splits between the Health and HyHo divisions?
Right. Let me take the third one and the first one.
The easy one. Why?
Shall I take the second and you take the first three?
It's okay.
I can. Listen, let's do.
No, no. Go.
In public agreement. Next results, I present financials, you present innovation.
No, that's not a good agreement.
Answer. It's okay. I can take the challenge. Listen, on price mix, we don't want to give and cannot give you guidance by price mix by quarter and by year. I don't think we have a guidance for revenue, and baked in the guidance is how we think about volume and price mix. I don't want to actually delve into whether or not what we see in Q2 should be extrapolated or not. I do say that price and price mix has been a component of our growth, and in our growth algorithm, it's baked into it. I think that's what you should see. In the macro and on a medium-term basis, price mix is a component of our growth algorithm. It's not just volume and it's not just price mix. That's one. You want to take the second one?
Well, only in general terms. What we've called out quite specifically is HyHo, which is half of the previous business. We've said minus 80 basis points in there. We've said gross margin's the biggest negative. BEI is actually up a bit in Hygiene Home, which is sort of the answer to your last question. There are in fact some synergy benefits in Hygiene Home because they benefit because they take a lesser share of the shared costs. I think that's Hygiene Home. We're honestly not going to go breaking down within Health to all the nuances. I think you can see the performance in the round. We're pretty happy with it, although lots of caution I hope you're hearing around, don't extrapolate it fully to the second half. We stick with the full year guidance. Honestly, not going to go down into every bit.
James, on BEI, we remain confident that what we have invested behind is absolutely the right level. There are some nuances to this. First, we have a material synergy benefit from Mead Johnson. Second, on HyHo, as we flagged, we have invested more in basis points too. On health, there is a material synergy benefit. Let's face it, we are also actually at this point in time, when it comes to BEI, we are also in an environment where actually how we used to spend money is rapidly changing. The channels where we were spending money, how the channels make an impact. I am very broadly happy about our BEI spending. In absolute, it was flat. In basis points, it's 60 basis points. All of that comes from, and more than all of that comes from our health synergy from Mead Johnson.
There's some phasing also, but I think in the round, I don't think that's a number that worries me about how we are investing behind our brands. Okay. I think there are many more hands, but maybe we take it on the corridors, okay? Cool. Thank you very much.