Hello and welcome to Unilever's Q3 2022 trading statement call. For those participating on the teleconference, you may indicate your desire to ask a question at any time during the presentation by pressing star one. If you wish to withdraw your question, please press star two. If at any time throughout the call you require assistance, please press star zero and the coordinator will be happy to support you. We would like to now hand over to Richard Williams, Unilever's Head of Investor Relations, to begin the presentation.
Thank you. Good morning and welcome to Unilever's Q 3 2022 trading statement. We expect prepared remarks to be around 30 minutes, followed by Q&A of around 30 minutes. All of today's webcast is available live, transcribed on the screen. First, I'll draw your attention to the disclaimer related to forward-looking statements and non-GAAP measures. With that said, I'll hand straight over to Alan.
Thanks, Richard, and good morning, everybody. This is the first time that we're going to present our performance through the lens of the five business groups, and so we are going to take some time to ensure that the new segmentation is clear as we go through the numbers. I'll give an overview of the quarter and the performance of each of the business groups, and then Graeme will give the details, including a geographic perspective. Before we start, let me acknowledge my own decision to retire from Unilever at the end of next year. There's going to be time enough to discuss this in more detail on other occasions. For now, it's business as usual, and my team and I are fully focused on the task at hand running this great company.
We've delivered double-digit underlying sales growth in the third quarter and we're raising our growth outlook for the year despite the obvious challenges of the macroeconomic environment. Growth is and will remain our overriding priority and the results demonstrate the resilience of consumer goods as a sector. The strength of our brands and our single-minded focus on operational execution during this period of high inflation, even as we transitioned our operating model in what is fundamental change for Unilever. Of course, the growth was price-driven and broad-based with all five business groups contributing and volumes continuing to hold up well. The billion-euro-plus brands led the way with standout performances from Hellmann's, Dove, and Knorr. We continue to invest in our brands and bring exciting product innovation across the price spectrum.
We're adding premium offerings and at the same time providing great quality value price products that serve consumers with limited budgets. The new Unilever organization is in place and is already increasing the clock speed of the company and sharpening key decisions and choices across the business. It is still early days, and we have much still to do but we're seeing strong signs of the benefits with many examples to share. Right.,c oming to the numbers, we saw underlying sales growth accelerate to 10.6% in the third quarter driven by price at 12.5%, and that's the seventh successive quarterly increase. Taking price increases is not easy, and we're very mindful of the pressure that this puts on consumers.
The inflation that we're seeing from global materials markets, higher energy costs, the impact of climate change on agriculture and rising wages means that we must take prices up simply to protect our ability to invest in our brands. This has been an explicit strategy implemented by Unilever early and with precision. We're taking price carefully, and we're driving productivity efficiencies hard and in parallel to generate savings to offset some of the cost increases. At the same time, we're investing more in product quality and brand support to ensure that they offer superior performance and great value. Volumes have held up well. In fact, better than we were expecting. Underlying volume growth was -1.6%, which was a little better than we saw in the second quarter, helped by a somewhat weaker comparator and a good summer in Europe.
That leaves the year-to-date underlying sales growth at 8.9%, with price at 10.7% and a 1.6% decline in volume. With 50% business winning share, and that's down from the high-water mark earlier in the year, as we expected. The investment behind our brands remains competitive, and around 80% of our brands are either holding or increasing their brand power. We have previously said that by taking the lead on price. We may see business a bit below 50% in the coming months. By pricing early, we continue to be able to invest in our brands and ensure that they are well-placed to come out stronger from a struggle period. We've made good progress against our strategic priorities starting with brands and innovation.
Billion-euro brands continue to represent around 50% of Unilever's turnover and are growing at 14% ahead of the Unilever average. We have a strong and healthy pipeline of product innovation, and I'll give some examples shortly. We saw further progress in our strategy to move the portfolio into higher growth spaces both organically and through M&A. Prestige Beauty and Health & Wellbeing have maintained their double-digit growth ahead of the markets and ahead of the Unilever average. At the same time, the acquisitions of Nutrafol and the disposal of the ekaterra Tea business, both completed in July, reflect our financially disciplined approach to collaboration. Growth momentum with underlying sales growth at 8.6%. Volumes held up well despite double-digit price increases and the ongoing customer service issues that we highlighted in our mid-year reporting.
While the supply situation is now improving, we continue to face some systemic issues with labor availability and that's going to continue into the fourth quarter. India reported another strong quarter of growth at 16.1%, led by price with positive volume. This reflects the strength of our portfolio with brands that cover different price points, as well as Hindustan Unilever's laser focus on operational execution and consistent marketing investment. China reported positive underlying sales growth despite the ongoing impact of the localized COVID lockdowns, which not only had a direct impact on sales, but is also contributing to weakening consumer confidence more broadly. Emerging markets growth was 13.3%. Graeme will give more details on performance through the country lens.
Moving to the channels of the future, the contribution of our turnover coming from e-commerce was stable at 14%, and we saw underlying sales growth of 20% in the channel. We remain confident in the growth potential from digital commerce and will continue to invest strategically. Our fifth strategic priority is to land our new organization and to continue to strengthen Unilever's culture. We passed a major milestone when the new organization went live at the start of July. The full transformation is ongoing. There's still more to be done to become even more agile in responding to opportunities in these fast-changing markets and to fully exploit the clarity of accountability that the new organization brings. Our business groups are taking decisions more quickly and driving sharper strategic action and related resource allocation to drive growth. I'd like to share three examples with you. First, speed of execution.
The personal care supply chain team identified it, the need for product rationalization. Now, previous initiatives had frankly gained limited traction since so much energy was required to align multiple country organizations to remove products from their portfolio. The new personal care leadership team prioritized the initiative, and the combination of strategic clarity and clear accountability meant that progress was made in weeks. We're tracking well versus the reduction target and will complete the work early next year, respecting customer planning windows and shelf space considerations. In fact, the drive to simplify is taking grip in all five business groups. The second example comes from North American Nutrition, capital expenditure proposal to provide new cross-border sourcing capacity and cost savings had been under discussion for some time without resolution.
The new team reviewed the case, concluded that the investment was important to support the growth of the business group, and the decision was made on the spot and is now being implemented. The third example, frankly, is a much more substantial one, and it comes from Unilever Business Operations, where we see the strength of one Unilever in action. Our team successfully accelerated our migration to the cloud, moving our data, applications, and network technologies to a cloud computing environment. As a result, by the end of this year, we will have 95% of our business operations in the cloud, and that unlocks new opportunities for digital technology deployment and innovation. Some examples of this are the availability of real-time Internet of Things performance data from our factory digital twins, deployment of AI to support geospatial deforestation tracking.
This program included moving one of the largest ERP ecosystems in the industry to the cloud with near zero disruption. The changes have been largely invisible to the rest of the business, and very few companies of our size and legacy can claim this level of cloud implementation. These and many other examples that I could share give us confidence that we're set on the right course, and the new organization will deliver the step change in speed and accountability that we have committed. Let's now take a look at our third quarter results through the lens of the new business groups. Beauty & Wellbeing comprises our hair and skincare businesses and our CPT health and wellbeing portfolios. Key brands include Dove, Sunsilk, Clear, Liquid I.V., and Dermalogica. Beauty & Wellbeing reported 6.7% growth, 7.3% price, and -0.6% volume.
Prestige Beauty and Health and Wellbeing delivered double-digit growth with Liquid I.V. growing particularly strongly. Sunsilk and Clear performed well and contributed to a strong performance in hair. In skincare, we saw good growth from Pond's and Vaseline. China reported a small decline impacted by the continuing COVID lockdowns that I mentioned. Let me just give three examples of the brand and innovation activities that underpinned our growth in Beauty and Wellbeing. Sunsilk has introduced Sunsilk Active Infusion, which delivers gorgeous hair through a unique blend of vitamins, oils, and proteins, deploying new Nanoplex technology, and this helped drive strong performances in India, Turkey, North Africa, and throughout the Middle East. Liquid I.V.'s rapid growth has been supported by a new multi-channel marketing campaign, which drives home the product benefit three times the electrolytes of traditional sports drinks.
The continuing growth trajectory now means that we have more than quadrupled the turnover of Liquid I.V. relative to the period immediately prior to acquisition. Finally, Living Proof has maintained very good momentum, has recently launched Living Proof Triple Bond Complex into the bond building hair care category. This product is proven to make hair eight times stronger by building the three types of molecular bonds by reducing visible signs of damage, including split ends and preventing breakage and future damage. Right to personal care, personal care includes our deodorants, skin cleansing, and oral care businesses, and the key brands in this business group include Dove, Rexona, Lux, Axe, Signal, and Lifebuoy. Personal care grew 8.9% in the quarter, with strong pricing at 13.5% and a volume decline of 4%.
I must say deodorants is a standout, with Rexona, Dove, and Axe all growing double-digit. These brands were able to support higher pricing and enable deodorants to deliver positive volume growth despite some North American customer service challenges. Skin cleansing also grew, but here the double-digit price increases, lockdown restrictions in China, and service issues in the U.S. resulted in a negative impact on volumes. The Lux brand performed particularly well. Oral care also grew well, underpinned by good performance from Pepsodent. Some brand highlights from the personal care portfolio include Dove body wash with microbiome nutrient serum. This is a blend of ingredients which helps the good bacteria on your skin microbiome to grow and support natural skin functions, and it transforms even dry skin in just one shower.
Rexona continues to benefit from its top performing 72-hour nonstop protection, using new science that offers significantly improved protection against sweat and odor. This is a multi-year investment priority behind our superior antiperspirant technology. Lux bars have been relaunched successfully in South Asia, North Africa, and the Middle East, with ingredients which offer clinically proven skin care benefits, leaving a spotless glow. Home care. Home care comprises our fabric cleaning, fabric enhancing, and household care businesses with brands like Omo, from the Dirt is Good family of brands, Sunlight, Comfort, Surf, Domestos, and Cif. Home care growth was the highest of the business groups at 13.6%, with price up 17.8% and volumes down only 3.6%. Less than we were expecting given these levels of pricing, especially in Latin America.
Fabric cleaning was the main growth driver with strong performances from Dirt is Good, Surf, and Radiant. Fabric enhancers maintained good momentum through Comfort, though household care was more muted as we lapped a prior year with elevated growth during the pandemic. Our Clean Future strategy in home care continues to inspire technical innovation that we then translate into consumer relevant product propositions. For example, the new Sunlight dishwash liquid launched in Thailand uses naturally derived bioenzymes to provide a product that is tougher than ever on grease and cooked-on food. Surf Excel delivered very strong growth in India, reflecting the ongoing strength and importance of premium propositions even in difficult markets.
Comfort delivered positive price and volume growth on the back of good progress made with our global relaunch, and that's using a product which protects clothes from damage through superior Pro-Fibre Technology, as well as improved fragrance delivery. Nutrition comprises our scratch cooking, dressings, healthy snacking, and beverage businesses, and the two main brands in this business group are Knorr and Hellmann's. Those are complemented by supporting brands, for example, Bango, Maille, Brooke Bond, and the nutrition beverage Horlicks, of course. Growth was up 11.8%, with price up 11.7% and volumes just positive. Dressings grew more than 20% with positive volumes despite double-digit price increases. The Knorr brand grew well in both retail and in Unilever Food Solutions channels.
Horlicks was flat in the quarter, putting in a very strong share performance in a market with somewhat subdued category growth due to the impact of inflation on discretionary consumption in India. We remain very confident in the prospects for the Horlicks business. Within nutrition, the highlights included dressings, where the Hellmann's Make Taste Not Waste campaign continues to drive outstanding growth. Knorr's zero salt bouillon is helping people to eat healthier diets inspired by nutrition's boldly healthier strategy. Unilever Food Solutions, our professional food service business, delivered strong growth against a baseline that included COVID restrictions. Although the business is now back to pre-COVID volumes, despite the ongoing restrictions in China, and we saw particularly good growth in North America and Europe in the quarter. Our ice cream business comprises both our in-home and out-of-home channels with brands like Magnum, Cornetto, Ben & Jerry's, and Wall's.
It is 60% in-home and 40% out-of-home. Ice cream growth was 13.2%, with 12% from price, 1% from volume. Magnum, Wall's, and Cornetto all contributed to the good performance. Both in-home and out-of-home grew strongly behind double-digit price increases in both channels. Volume was very much driven by out-of-home with a great marketing and innovation agenda but helped by a good summer in Europe and the recovery of some of the volume lost during COVID. In-home volumes were slightly down due to the impact of higher pricing and supply issues in the United States. However, in general, supply chain has responded very well to the demands of a good summer season.
Cornetto introduced successful concept-led innovation in China, tapping into the pet culture trend, which is particularly popular with younger Gen Z consumers. Magnum is a role model in Unilever for how to continue to drive growth on the core, and Magnum continued to benefit from the success of the Classic Remix, rearranged versions of our classic Magnums. Ice Cream Now, which is our main play in ice cream digital commerce, is tapping into, but also creating, demand for ice cream home delivery. Another strong quarter of growth from Ice Cream Now. Having completed that quick tour of the business groups, let me now hand over to Graeme to provide some more details on the quarter's performance. Graeme?
Thanks, Alan. Good morning, everybody. We delivered 10.6% underlying sales growth, further building on the faster growth performance that we've seen over the last year. Pricing continued to step up reaching 12.5% in the quarter, and volumes while down 1.6%. As Alan just said, were better than we'd anticipated. There was some benefit from a weaker volume comparator as markets reopened following COVID restrictions and of course targeted lockdowns remain a feature of the market in China. Let me now add a little bit of geographic detail. In our largest region, Asia-Pacific Africa, we saw underlying sales growth at 12.5%, comprising 12.1% price and 0.3% volume. India delivered strong double-digit growth despite weaker market volumes especially in rural areas.
Inflation there is running above 7% and this continues to put some pressure on discretionary spending. We are taking share in India by navigating the conditions better than most of our competitors. In Southeast Asia, we saw rapid growth in Vietnam and the Philippines against what was a low base baseline, which was impacted by COVID restrictions. Indonesian GDP remains positive, but inflation is increasing, and consumer confidence weakened somewhat in September. Our performance remained muted in Indonesia as we continued to progress a business reset, which is a significant strategic market for all five of our business groups. Now as part of this, we took the decision to reset pricing and to improve the health of our end-to-end supply chain by constraining sell-in levels below sell-out levels, particularly in the mini mart channel.
Nonetheless, Indonesia continued to grow, and the additional category focus and sharper strategies from the new organization will serve us well as we reset the competitiveness of that business back to where it should be. Now, as Alan already mentioned the market in China has been impacted by lockdown restrictions and weak consumer confidence. This is causing a slowdown in the e-commerce channels, although Pinduoduo and Douyin continue to grow, and we are seeing some evidence of downtrading and some customers reducing stock levels. In Africa, the economies are relatively weak post-COVID, and they're not helped by the strong US dollar. Consumer confidence is quite low, and purchasing power is constrained leading to smaller shopping basket sizes a trend to multipurpose products and a reduction in the purchase of discretionary items. We are navigating these difficult conditions well, and we delivered double-digit growth in the quarter, led by price.
Coming now to Latin America, here we saw underlying sales growth of 17.6%, with price at 23.2% and volume down around 4.6%, which we think is a pleasingly resilient volume performance. Now our deep experience of navigating Latin American markets with high inflation continues to serve us well. In Brazil, we saw cost-conscious consumers shopping around between physical and digital channels. For example, the cash and carry channel in Brazil is growing fast, and at the same time, we see influencers having a growing impact on consumer choices. North America reported underlying sales growth at 8.3%, driven by price at 11% and with a 2.4% decline in volume. The U.S. consumer is still relatively robust, but inflation is now his or her number one thought, and concerns about recession are growing.
The market grew in the third quarter in both bricks-and-mortar and e-commerce channels, but we saw smaller shopping basket sizes. There are also early signs of consumers eating out less often and preparing more meals at home. The service issues impacting our supply chain, which were caused mainly by labor shortages, continued in the third quarter but are on an improving trend. Finally to Europe, where we see consumers feeling the pinch of higher prices especially in Eastern Europe. Across Europe, consumers are now having to make trade-offs to respond to higher costs of groceries and utilities, and they're deploying a range of coping strategies for that. For example, we saw private label penetration grow in some categories, such as in-home ice cream and household care. At the same time, we saw e-commerce growth slow down as consumers returned to physical stores.
Europe also benefited from a good summer season, which helped our out-of-home ice cream business, albeit we are not yet back to pre-COVID levels due to some outlets not having reopened yet. Against this very backdrop in Europe, we reported underlying sales growth of 5.4%, with price at 8.9% and volumes down 3.2%. Looking at the group results overall then, turnover for the third quarter was EUR 15.8 billion. That's up 17.8% versus 2021. Underlying sales growth contributed 10.6%, and we saw a reduction from acquisitions and disposals of 2.1% with the exit from tea and the addition of Nutrafol being the main drivers of that. Currency translation had a positive impact of 8.8%, as nearly all of our basket of currencies strengthened against the euro.
Based on spot rates today, we would now expect a positive currency translation effect of around 6% of turnover and around 5% on underlying EPS. That's for the full year 2022. Changing gears, let me make a few comments on commodity costs. Now, while this is only a trading statement, we do think it's important to continue to share our perspectives with you on the extraordinary levels of cost inflation that we are working through. For 2022, we continue to expect net material inflation of around EUR 4.5 billion, of which EUR 2.5 billion will fall in the H2 . As we speak, more than 95% of our net material inflation for the H2 has been fixed, and therefore, we don't expect any major changes from here on with that.
For 2023, we do expect some further cost inflation in the H1 . This is consistent, we think, with what others have been saying around input costs staying high, and we thought it would be useful to give some indication of scale, and in particular, the main drivers. Now, the 2023 cost inflation draws on three main factors. Firstly, commodity costs. We will be comparing against the H1 of 2022, which benefited from contracts and covers which were struck before the outbreak of war. The H1 2022 baseline for us is low. Some commodities have come off their peaks but as we start to lock in costs for the H1 of 2023. We anticipate that prices will be higher than the H1 of 2022. The second point relates to higher labor and energy prices in the raw and packing materials that we purchase.
Now typically, we do not directly buy commodities such as crude oil, palm oil, and so on. What we buy are derivative products of these commodities that have been processed by our suppliers into the raw materials and packaging materials that we use at our manufacturing sites. Some examples of that are things like fatty acid blends, chocolate, processed sugar, plastic films, bottles, and so on. Now, these processes are multistep, and they all involve energy and labor costs and we are now seeing meaningful inflation in these particular components of our cost base. The third element is the transactional impact of currencies. There are significant devaluations in hyperinflationary markets. Such as, Turkey and Argentina, where we are very experienced in pricing to offset such devaluation driven on costs.
The general strength of the U.S. dollar against nearly all currencies means that the local landed cost of materials has increased in all of our main markets, apart from the United States. Now, these three factors all contribute to H1 2023 cost inflation in roughly equal amounts. We would characterize it as about a third, a third, a third. Now, the range of potential outcomes is still quite wide given obvious volatility in the commodity energy and currency markets. Our current best estimate of the H1 net material inflation, and I would stress that this is only an early estimate, is in the region of EUR 2 billion as things currently stand. For the H2 of 2023, we have little visibility and it is too early at this stage to call.
Coming to the outlook for 2022, we now expect full year underlying sales growth in 2022 to be above 8%, driven by price and with a greater level of volume decline in the fourth quarter compared with the first nine months. We will continue to navigate the inflationary pressure while investing for growth to support the long-term health of our brands by investing more in advertising, R&D, and capital expenditure. We expect underlying operating margin for full year 2022 to be 16% within our guided range of between 16% and 17%. Looking beyond 2022, we expect to improve margin in 2023 and 2024 through pricing, mix, and accelerated savings delivery. As market conditions normalize, that will also begin to have a factor on 2023 and 2024. As we've said before, we will not be setting a margin target.
With that, let me hand to Richard for Q&A.
Thank you, Graeme. As a reminder, if you want to ask a question, please press star one. Once you've pressed star one, you'll be placed in the queue. If you no longer wish to ask a question, you can press star two to exit the queue. If you're listening to the conference call on the speakerphone, please use the handset while asking your question. Finally, please keep your questions to a maximum of two. Our first question will be coming from Guillaume Delmas at UBS. Go ahead, Guillaume.
Thanks, Richard. Morning, Alan. Morning, Graeme.
Morning.
Two questions, if I may. The first one is on your billion-euro brands, because it seems the delta between your billion-euro brands and the rest of your business has further increased in Q3, when looking at underlying sales growth. I mean, I'm getting to a 300 basis points outperformance in Q3. I think it was more a 100 basis points in the H1 of this year.
Could you shed some light on this? Like, why do you think it's the case? Is it because the billion-euro brands are the one leading on pricing actions? Is it down to a different resource allocation or is it down to consumers' preferences? My second question is to go back on the inflation outlook you provided for the H1 of 2023. As you're expecting an incremental EUR 2 billion, I mean, appreciate it's an early estimate, but does it mean you will have to implement additional pricing actions over the coming months? Maybe also if you could say how much of your raw materials and packaging is covered for the H1 of 2023. Thank you.
Great. Guillaume, I'll take first question and hand over to Graeme to talk about inflation and the impact on pricing. You kind of answered the question yourself. Yes, our billionaire brands are outperforming, and frankly, it's because that's where we have the strongest brand equities. Many of our billionaire brands have found that magic spot of the intersection of superior functional product performance great value and long-standing purposeful brand campaigns that create customer resonance. The brand health measures for our billionaire brands are particularly strong. Secondly, as we focus our innovation program and have fewer bigger innovation activities, those tend to be on the billionaire brands. Thirdly, they are our priority for increased BMI investment. I have to say, it's complemented by a clear point of view on what are the next generation of billionaire brands.
There are three or four brands knocking on the door of joining that club, and those are also performing well. The third kind of element of our growth strategy is some of the brands that are smaller today but growing exponentially, and there I'm thinking about things like Liquid I.V., Nutrafol, Paula's Choice, Hourglass some of the brands in prestige beauty and functional nutrition. Yes, I think you've diagnosed quite well why the billionaire brands are doing so well. We see the potential for new members of that club. Graeme, inflation.
Hi, Guillaume. First of all, thanks for acknowledging that the sort of best estimate we gave for H1 2023 inflation was an early estimate. I do just want to emphasize that for everybody. First thing I'd say, regarding your pricing question, more generally, we believe that we have both the tools and the preparation to absorb the cost pressures that we face over time. We've got a proven pricing track record behind what are very strong brands sort of linked to your first question and Alan's response. We have led on pricing and, you know, sequentially increased over the past Q7 .
For example, our price coverage, which is really a sort of broad measure of our success in covering material inflation, was sitting at about 90% of the net material inflation on a year-to-date basis for 2022. To the specific of your point, pricing will carry forward into 2023, but our local businesses will continue to price where they need to, obviously doing that in a very responsible way. Some pricing activity from 2022 will, of course, carry into 2023. Further out, it's gonna depend on the movements that we see in net material inflation and very importantly, the competitive dynamics in the markets. We have to be responsible. We won't price to a level that jeopardizes the long-term health of the business, and we're always mindful of that.
Other than that, we're not gonna give any sort of forecast on pricing because there are too many moving parts. Now, in terms of your second part of your question on how much is covered for 2023. Right now, around about 20% of the H1 of 2023 is contracted or through physical covers or covered by paper covers. We expect that will increase between now and the end of the year but it's around about 20% at the moment, Guillaume.
Okay. Thanks, Graeme. Straight to the next question, which is from Pinar Ergun at Morgan Stanley. Go ahead, Pinar.
Hi. Good morning. One on volumes, please. Unilever's three-year volume CAGR has held up quite well despite accelerating pricing. Why is that the case? Is it resilient consumer demand? Is it something you're doing differently? And how do you see volume patterns evolving in the foreseeable future, especially given your own expectation of weaker market share trends? Then the second one's on next year's margin commentary. You're expecting 2023 EBIT margin up despite a very significant NMI in H1. I appreciate it's an early figure, but it's a pretty big one. Can you please talk about the building blocks of your expectation here? How comfortable are you in a H2 weighted margin delivery, given you also said you had very little visibility on the H2 NMI?
How will you go about balancing pricing volumes and increasing investment in the business all at the same time? Thank you.
Thanks, Pinar. We'll stick with the trend. I'll tackle your question on volumes and let Graeme take the H2 of your question. Look, we have a well-rehearsed strategy for landing pricing, which is surgical and has been practiced in our markets like Latin America, Southeast Asia, where we're used to inflationary contexts. There is an element of list price increases, but also we play with pack price architecture. We use mix carefully. We adjust consumer promotion, and we're very careful with trade spending. I think that playbook has served us well to apply what we call net revenue management which is the surgical application of pricing. Secondly, we've come into this period with our brands in good health.
We've been making the point for several quarters now that we have been gaining market share and that's a consequence of our brand health. The investments we've made not just in advertising but in product quality. Remember, versus three years ago below 50%, somewhere around 45% of our brands tested superior in head-to-head testing versus the competition. At the moment, that's running more like 70% of our brands testing superior to the competition. That's the point about it's not just price, it's value. The combination of surgical application of pricing, the health of our brand equities and the product quality that underpins them means I think we've seen this lower elasticity.
Now, it has surprised us a little bit just how low it's been, and we do expect that there will be more volume elasticity because there's more price to come and frankly, the macroeconomic environment is deteriorating. Don't be surprised if the UVG pattern into Q4 and early next year deteriorates from where it is right now.
Graham?
Pinar, on the outlook for margins, in fact, there is of course a lot of volatility, and we'll continue to monitor it closely. We do expect to grow margins in 2023, and as I said earlier, we believe we have the tools and the preparation to do that. I do want to say, first of all that delivering growth remains our absolute first priority, and we will invest in the health of the brands. As Alan's just said, it's the brand strength that allows the pricing to land and delivering growth is that first priority.
I won't repeat the comments previously made on the cost inflation and pricing carry forward, but I will just say that, you know, our savings programs are looking very strong for 2023, and we'll probably accelerate. Just a reminder that that includes the delivery of, you know, a large proportion of the EUR 600 million savings that are related to the implementation of the new operating model. Yeah, I think. That's the landscape that we face. They're the levers that we have to pull, the tools in our toolbox and, you know, while we're not gonna provide a half-yearly margin outlook, you know, we do believe that we can increase margins in 2023 and 2024.
Okay, thank you. Thanks, Pinar. Next question is from Bruno Monteyne at Bernstein. Go ahead, Bruno.
Hi, good morning. My first question is on competitiveness. It came down to 50%. It was higher previously. If we were to use the sort of infamous shorter 12-week competitiveness measure, that would suggest that it's now below 50%. While the one-year measure still looks 50%, the shorter one is below. Can you sort of confirm that? Assuming therefore you're starting to lose market share, can you just pinpoint whether that's largely to private label whether it's to cheaper brands if there's any patterns in that? The second one is, I sort of noticed that food and ice cream those two new divisions are the only ones with a positive volume growth right now.
Obviously, that's quite interesting because that was, again, the one division, food and refreshment, that was potentially going to be disposed of by GSK Consumer Health. The one you wanted to get rid of is actually doing the best in volumes. Is there any reason why, you know, the kind of a food-oriented had better volume resilience? What should we read behind that? Thank you.
Great. We'll stick with the pattern, Bruno. First of all, I know you often follow up with our IR team after these calls, and I'd encourage you to do that on the famous business winning metric and how it's calculated. It is absolutely not the case that summing up the rolling 12 weeks gets you to the moving annual total. I can tell you that our most recent measures of competitiveness are perfectly healthy. So please do not project that we're running with 12-weekly competitiveness measures. We will resist the temptation to give out numbers on that and stick with our moving annual total metric.
If you've got questions on the way that's calculated there's a video on the website, and I'd encourage you to have a chat with the IR team. More substantially, what I would say is the brands are in good shape but we're being realistic that if we follow our strategy of leading on price. Which is our strategy to protect our ability to stay in that virtuous cycle of investing in our brands, increasing brand health, and giving us a platform for taking price increases then it's inevitable that in places where competitors are slow to make similar moves, we will tolerate short-term dips in market share.
However, it's not widespread, and if it persists, then we will adjust prices back, as we've done in a couple of categories, in Indonesia, and we've previously shared that example where we moved too far ahead of the market on skin cleansing and home care, and we've adjusted back. We are prepared, as we make trade-offs, we're prepared to tolerate short-term market share depressions in order to continue to follow our strategy of pricing to protect our ability to invest in our brands. Graeme, food and ice cream.
Yeah. More, which I'm
Bristled at Bruno's question 'cause we don't want to get rid of those brands. We love those categories.
Morning, Bruno. So, I mean, sort of linked to what Alan just said, very much looking forward, actually, to our Capital Markets Day, if I can trail it a wee bit because, you know, actually looking through the lens of the five business groups, nutrition and ice cream, looking forward to sharing with everybody, you know, what the strategies are and just looking at those businesses in a more focused way under the business group structures. I'm really looking forward to that. To answer your question on the volumes, they had positive volume, both had positive volume in the third quarter in the nutrition, 0.1% and ice cream 1%. I'll take nutrition first. We had very strong growth from our dressings business. We took double-digit pricing, but we had positive volumes.
That was driven by Hellmann's. Hellmann's has put in a very, very strong brand performance. We also had good performance in Knorr, and Food Solutions was a big driver of that. The volumes in nutrition in particular were quite supported by Food Solutions, which has grown by, and this is a year-to-date number, I mean, Food Solutions is up sort of in the sort of 20%, but has double digit volume increases as that business continues to recover. You see the benefit of that principally in the Knorr brand, but it's sitting in nutrition. Then turning to ice cream, of course, what you're seeing there is the benefit of a good summer season in Europe for our out-of-home ice cream business, which is 40% of our ice cream business.
Just to give you another couple of data points at a brand level, both the Heartbrand, which is, you know, Wall's, Langnese, et cetera, Igloo, you know, that brand around the world, Magnum, Cornetto, all of them delivered double-digit price increases with positive volume growth in the quarter. Hopefully that helps you understand the performances in nutrition and ice cream.
Thank you. Let's go to next questioner, which is Celine Pannuti at JP Morgan. Go ahead, Celine.
Yes. Good morning. My first question is on the volume. You are guiding for the volume for the full year to be less than the nine-month average. I imagine in Q3, and you mentioned it yourself, you had the benefit from a strong summer and easy comparative. Am I right to think that probably excluding that the underlying volume is more in the region of down 3%-4%? And is this what carry over kind of volume we are looking at for Q4 and H1 next year? My second question is on elasticities and the overall consumer demand. I was quite surprised to see, despite some of the benefit of the summer, that Europe and U.S. volume were negative.
In terms of your reaction to that as you look into next year and competitiveness, are you expecting to increase promotion or, you know, how would you look at market share performance if effectively, as you mentioned, private label are gaining a bit more shares? Thank you.
Right. Celine, let me try and tackle both of those quickly. I think the first one, the easiest way is just to give you the facts, which is that the favorable weather in Europe this summer gave us, we think, about 30 basis points of incremental volume growth. If you wanna normalize for an average summer, knock 30 basis points off of Unilever's UVG. That hopefully give you a straightforward answer to that question. As far as elasticities are concerned, we saw very strong volume performances across. Let me give you. We've given a lot by category and business group. Let me talk a little bit about geography.
We saw strong volume performances across South Asia, not just India, but across India, and some of the surrounding countries like Pakistan, Bangladesh. We saw Southeast Asia, notably, Vietnam. Turkey, believe it or not, grew volumes in a hyperinflationary environment. We definitely saw more negative volumes in Latin America, where the magnitude of pricing that we had to land was so high that I think we weren't surprised to see 4%-5% volume declines. It is definitely true that in Europe, the consumer sentiment is deteriorating. We see that in country to country where the consumer sentiment is on a declining trend. As the Northern Hemisphere energy costs and winter heating bills land. Frankly, we're not expecting an improvement on that.
It's in that context that we think even 20% business in Europe, only 20% in North America, 60% in what are turning out to be more resilient markets in rest of world. I wanna make one totally tangential point, but it's of strategic importance. We now have five business groups in the company each of which are capable of growing ahead of Unilever's historical growth rate and that's thanks to the portfolio reshaping. We've done, jettisoning structurally low growth businesses and adding in high growth brands and categories. Thanks, Celine.
Thank you. Next question is from Jeremy Fialko at HSBC. Go ahead, Jeremy.
Hi. Morning. A couple of questions from me. First one, can you talk about mix at all? Any indication of how positive or negative that was for the group as a whole and then perhaps you can give a bit of commentary by kind of business units and geography just some high level stuff there. Secondly, can you talk a bit more in detail about performance of your VMS brand some of the recent acquisitions? Certainly commentary from some of your peers has pointed to a category that is seeing perhaps a bit of a weakening, so we'll be interested to hear how you've got on. Thanks.
Great. Well, I'm gonna take the question on VMS because it's a very attractive area for us to talk about. Graeme, why don't you talk about mix?
Yeah. Morning, Jeremy. Yeah, we've been driving mix hard. It's one of the critical components that we have when we're facing the inflation that we have. We, you know, talk a lot. We obviously look to drive up our productivity and our savings, and we look to self-help as much as possible. Driving the mix of the products that we sell has been quite important. That has helped us to some extent within the gross margin line. We've started to see, you know, it's less than 100 basis points of benefit in there, but it's sort of 40- 50- 60 is the general range of sort of mix benefit that we see within gross margin.
In terms of the top line, sometimes because we report volume and mix together, and leave pricing as it is as you move the affordability of your products into the right place, you can see it showing up in the volume line, and the price line is a pure line for us. I just wanted to use the opportunity to highlight that because it's a little bit the same with some companies, and it's a bit different for other companies, as you know. We are driving mix hard. It's a key component of what our businesses do in order to meet both the challenge of consumer affordability and also to mitigate some of the inflation pressures that we have. Yes, it's a big feature for us.
Jeremy, what we call Health & Wellbeing, because it goes much beyond vitamins, minerals and supplements, is strategically a very attractive space for us. We have carefully built a very differentiated portfolio. It is benefit-led, and it's extremely premium-priced. That's the segment that continues to do well, and that's why we're seeing double-digit growth in the latest quarter from that Health & Wellbeing business. The less differentiated sort of generalist multivitamin propositions are the areas where the market has definitely softened, but that's the bit that we're not in.
Brands, like, in particular, Liquid I.V., OLLY, and now Nutrafol are frankly booming and we're having a tug of war between the investor relations team and me on just how much we should talk up the extraordinary growth that we're seeing in Liquid I.V., which has grown multiples since we launched it. It's all about the type of portfolio that we've built in Health & Wellbeing, which is premium, differentiated and benefit led, and not in some of the segments that are softening in recent months.
All right. Thanks, Alan. Let's go to Warren Ackerman at Barclays for our next question. Go ahead, Warren.
Yeah, good morning, everybody. Warren here. Yeah, two for me as well. The first one, Graeme, just back on this raw material point, I'm still a bit surprised by the EUR 2 billion number. I know it's a big range, and it could move around, but can I just check the cutoff point? Was that at the end of the quarter, or is that now? Because obviously the last month, there's a big difference in energy, natural gas prices in terms of the movement. Maybe, Graeme, could you remind us the size of the buckets within the commodities and obviously they're moving around. It sounds like from what you're saying, there's quite a big element in there on wage inflation sort of baked in.
I was wondering whether you can maybe elaborate on what you're expecting on wage inflation. I guess most of it is in dollars you're buying. I was just trying to sort of get my head around that and some of the kind of details around how we kind of think about $2 billion in the H1. The second question is actually back on the beauty and wellbeing division overall. I think it was the only division where the pricing went down sequentially. It was 9.5% in Q3, only 6.7% in Q4. So that and volume has also worsened, so it looks like it's the division with most elasticity.
I'm wondering whether you've actually dialed back pricing, 'cause it sounds like Prestige is still growing quite well, so I'm just trying to work out what's growing less well and why did the pricing actually sequentially slow in Wellbeing when it went up a lot in all the other divisions. Is it a China view around that? Thank you.
Give a little bit more color around the EUR 2 billion, and I'll give a bit of insight on beauty and wellbeing.
Actually, let me just quickly reiterate what I went through quite quickly in the presentation. There are three factors driving EUR 2 billion as we see it right now for the H1 of 2023, each of them in roughly equal proportion. The first one is that transactional currency impact driven by US dollar strength against most currencies in the world. You know, that's the local currency devaluation that we see against the US dollar that adds to input cost. I should say that within that currency piece, there is a big proportion of it is in hyperinflationary countries or high inflation countries. Actually, Pakistan, Turkey, and Argentina account for a fair bit of it. You know, that's not a challenge for us because we are very successful at covering very high levels of currency devaluation-led price increases in those markets.
In fact, we do that and continue to deliver quite strongly positive volumes in both Turkey and in Argentina in the year to date, if you wanted an example of exactly that. The second feature, as I said, is a back-year impact. It's a base year impact because we had a higher level of beneficial covers in the half one 2022 base. Therefore, as you roll forward, it's more of a comparison point that drives it. The third point is exactly to you know where your question takes us, which is around the shape of it, because it's now processing costs driven by higher labor and energy inflation at our suppliers that shows up in our conversion costs. That's the dimensionalization.
In terms of the buckets themselves, if you go back to 2021, I'll just give you the makeup of our total cost base. This is 2021 as a reference point. With EUR 20 billion on materials that are covered by our procurement team, and there's a further EUR 2 billion, which is not dealt with directly by our procurement team, but it takes place in local markets. 22 billion of materials. We have logistics and freight is about EUR 3 billion. Production costs in our factories and other costs about another EUR 5 billion. EUR 22 billion + 8 billion is a base of about EUR 30 billion. That's in 2021. We added to that in 2022 in the materials space to the tune of about EUR 4.5 billion.
We are seeing to your latter part of your question, inflation, particularly on the production costs, logistics conversion and labor rates. Hopefully that's helpful in terms of the size of the buckets that we're talking about. In terms of wage inflation, we're just going through the process at the moment of around the world, looking at what's happening within markets, where our positioning is, you know, strategically relative to the markets. I should say that Unilever remains a really attractive and primary factor is why people join us and stay with us, et cetera. It's really too early to say on that one. We're just doing the work at the moment.
Warren, Beauty and Wellbeing, price growth in the quarter was 7.3% and actually increased sequentially over the H1, so the year-to-date is 7.2%. You're quite right that it hasn't increased by as much as, for example, Home Care or parts of the nutrition ice cream business. There is a shift happening in where in our commodities basket we're seeing the higher levels of inflation. Looking backward, it was more in petro chemicals and the likes of palm and soy. Looking forward, it is more in certain other agricultural commodities. The pressure in Beauty and Wellbeing is lower than it is in other parts of the business.
In terms of where the growth is coming from, while we've commented that prestige beauty and health and wellbeing both grew double digits, just to be a little bit more explicit, hair care grew high single digits, skin care grew low single digits. You put your finger on it, actually. Good growth in Southeast Asia and South Asia was offset by weaknesses in North Asia. In skin care, we have a particularly good skin care business in North Asia. So, maybe that helps with a little bit of decomposition of beauty and wellbeing. Still one of the strategically most important and attractive parts of our portfolio.
Okay, thanks, Alan. We're about time, so we'll just take one last question, and then we'll stop because we know it's a busy reporting day for everybody. That last question from Martin Deboo at Jefferies. Go ahead, Martin.
Yeah. Morning, everybody. I just want to finish by reasking the question I asked on margin. I think it's important. You're guiding to a percentage margin increase. 2024 is miles away. Let's talk about 2023. You're talking to a percentage increase in 2023. You and I know that getting percentage margins up in an inflationary environment is just arithmetically challenging. Despite your reluctance to add H2, the only way I can square that guidance is if you feel there is gonna be deflation in H2 2023. That's the. I'm sort of curious why, given the low visibility, you haven't chosen to guide to a constant currency EBIT increase, whereas you've actually sort of raised the stakes by guiding to a percentage margin increase. Can you just sort of comment a bit more on that?
Yeah. Thanks, Martin. Well, first thing I wanna say is that our priority remains growth healthy growth. We remain highly convinced of our ability to improve margins in 2023 and 2024 and it's by using all the tools in the bag. We believe we're not at the end of the road on landing price increases. Secondly, we'll continue to drive mix hard, but we are anticipating in 2023 an unusually productive year in our savings agenda. Our ongoing savings, the introduction of Unilever Business Operations has unlocked. We believe, EUR several hundred million of incremental savings. As Graeme mentioned, the bulk of the EUR 600 million of organization savings that we're making will fall in 2023. We do not believe that we will need a deflationary environment.
We think that the tools we have in our bag around price mix and particularly cost in 2023, will allow us to make sequential improvement in 2023 and 2024 in the context of an overall focus that's on growth.
Okay. Thank you, Martin. Thank you, Alan. Let's bring the call to a close there. If you've got any further questions, please email the IR team, and we'll set up a time to speak to you today. Enjoy the rest of the day, everybody, and thank you.