Let me just test our chart just to see if it works or not. Doesn't work. Oh, it does work. Okay. I had a moment of panic there because I got up on stage and the dance music was still going. I thought, "Oh, no, we're..." You know, Alan reminded me that I have a strict no dancing policy. Especially not in front of you guys, to be honest. Look, good afternoon, everybody. It's nice to see everybody face to face. Welcome if you're welcome back, in fact, if you're watching the live stream. Welcome to the last presentation of today's event. This is the one where I try to pull a few threads together for you, and frankly, maybe if I may try and motivate you to add a little Unilever to your Christmas stockings this year.
I hope you enjoyed the day so far, in particular, we've been able to bring the essence and the feel and the personalities of the new operating model to life for you a little bit. That's really been our main objective today. As usual, and for the 10th time today, I draw your attention to the safe harbor statement. Now, what you've heard from all of us today, is that our focus is firmly on growth, and I am going to stick with that theme. Here's what we're gonna cover in the final session. First of all, our priority is growth, and everything that we've been working on in Unilever over the course of the last three years has been focused on unlocking the full growth potential of this business.
Secondly, the building blocks we believe are now in place, and we're now far better positioned to drive sustained higher growth. Thirdly, we have a clear capital allocation strategy that we've implemented in a disciplined and a consistent manner. Finally, frankly, we have a lot of confidence in our ability to drive higher levels of value creation through our multi-year financial framework, regardless of what the market backdrop might be. That market backdrop, the macro environment, if you like, has of course been very complex for the past three years, and we expect it to remain so for some time to come. This really is nothing new to Unilever. The incredible global footprint that we have means that pretty much every single year, we face the levels of volatility in a few Unilever markets that are now being experienced on a more global scale.
As a result of that experience, we really do have deep institutional knowledge about how to navigate through that volatility and how to take advantage of it to drive the long-term success of our brands. You can see that expertise and experience demonstrated during this year, where we've delivered strong results against a backdrop of, frankly, once in a generation cost inflation. We've been able to deliver these results while at the same time changing our operating model quite fundamentally. This is a testament to the resilience and the capability of our business and the people behind it. Our guidance for this year, as we said this morning, actually, if you watched the stock exchange announcement, guidance for this year is unchanged, and it remains as we presented with our Q3 results.
Today is most obviously not about the short term, but we are confident that we can continue to tap out the sort of consistent delivery that we have over the last several quarters. Everybody in the company, is really singly focused on that. We see significant headroom for growth, and there are several reasons for confidence about our ability to deliver higher growth. Not least of these is our ability to grow the size of the markets where we are already in a leading position. That's what we call market development, and it's an area where we frankly have been pioneers. Our portfolio is without doubt strongest where we offer compelling products at different price points, and this has served us really well through various economic cycles. Premiumization remains the key secular trend as consumers demand functionally superior aspirational products.
To address this, we've continued to increase our share in the premium segment with lots of innovations, but for example, the technology behind innovations like Vaseline Gluta-Hya, which is on the tables mostly, and you saw it in Fernando's presentation. But that has set record market shares for the Vaseline brand, a very old brand, but record shares for Vaseline in Thailand, and it plays at a price index which is well into the premium segment. Importantly, as you know, 60% of our business is in the emerging markets, where we know the long-term demographic and consumption trends will be tailwinds for us.
That's not only because global population growth comes from the emerging markets, but also because per capita consumption of our categories in those markets is still well below global averages, and that was probably most clearly seen today, I think, in Peter's Home Care session, but it applies equally across all of our business groups. Emerging markets, whilst I'm on the theme, were for sure hit harder by the global pandemic, but we should and do expect to return to more normalized historical growth rates there going forwards. We already saw a marked acceleration in 2002 with our turnover, helped by price of course, but our turnover in emerging markets was up by almost 20% over the first nine months of this year. As you know, we tend to report just one single emerging market growth number every quarter.
I hope you recognize that really is an oversimplification because these markets frankly never behave as one. In fact, all of them show some really quite different individual characteristics. The core strength that we have as a company is deep local expertise that we have in each emerging market, and that frankly has been sharpened over very many years. As you've seen from the many market development examples shared by the business groups today, we are experts at growing markets, and our brands and products, as it says on the chart here, serve an amazing 3.4 billion people in the world every single day.
Another example from Home Care and Peter of this was just describing how we shifted our China Home Care portfolio from bars to powders to liquids and capsules within just a decade and drove fabulous growth of that business. Another example is in our powerhouse of India, where again, format upgrades from premium powders and liquids have been the key to more than doubling our Indian turnover in 10 years. Market development, frankly, ladies and gentlemen, it is core to what we do. We are particularly good at it in the emerging markets where we are uniquely strong. We see a lot of headroom for growth. Oh. Yeah. We see headroom for growth. Clear headroom for growth. We've made it our absolute priority to deliver a higher level of sustained high quality growth.
You might ask, what are the parameters that we're using for that? The extensive work that we've done on improving our execution, on improving our portfolio, and on sharpening our strategy means that we're confident that you will continue to see higher growth delivery. We think that USG will go towards the upper end of our 3%-5% range. It'll be helped by a step-up in the contribution from volume once we're through this period of incredible inflation, and we will continue to deliver that growth with strong competitiveness. Let me turn to the building blocks that set the foundations for that priority of sustained high-quality growth. Just a reminder, with these building blocks in place, we believe that we're now investment ready.
You heard from Alan and the team during today's presentations, Unilever has really changed significantly over the course of the last three years. First of all, we are operationally much stronger business. We execute the fundamentals of FMCG at a much higher level and certainly higher than at any point during my time in Unilever. Secondly, our portfolio has been significantly refreshed with a stronger growth orientation and with market positions and brands that we know can deliver to our higher expectations. Third, as you've heard many times today, we have made fundamental changes to Unilever's operating model. Now you've heard many references today to the benefits of that new operating model and the speed and the agility that it brings.
We are still in the early stages of the new organization, and those benefits will continue to accrue as we bed the model down and we continue to iterate and continue to improve it over time. Taken together, these three building blocks make us investment ready, and we are now investing more behind sharper business group strategies to take advantage of the many growth opportunities for our brands. Alan talked already this morning about execution and portfolio. I'm gonna share some thoughts now about how we actually operationalize the model in running the business day to day, and how we're stepping up our investment and how we will fund that investment. One of the most powerful features of the new operating model is that the business groups are fully accountable for both end-to-end strategy and performance delivery.
For the first time in Unilever, these sit fully in the same place with the same leadership teams. This ensures that investment can be more targeted, it can be more consistent, and it's fully aligned to our business group strategies. I actually strongly believe that our old model tended to spread our resources too thinly. It was too easy for investment to become inconsistent because we were optimizing performance at the single country unit level rather than at category level across multiple countries. This is the key change and advantage, I think, in the new operating model. Greater speed and accountability have also been unlocked, and this is resonating really quickly across the business. You probably heard it several times during the course of today, but right through the organization, that tick-up in speed and accountability is having an impact and being felt.
We are making decisions far faster and with greater impact than we ever have before. Now, incentives drive behavior and hence performance, and we have changed our approach to targeting and incentives quite significantly under the new operating model. Our reward is now primarily business group-focused. Internally, what we've been talking about is giving greater line of sight to our people, as we significantly tighten the link between team delivery and the team reward for that delivery. Our leaders are now in large part compensated directly from the results of their decisions and in their units, not impacted by the performance of other units for which they are not responsible.
We've reflected this principle as much as possible, even at the highest levels of the company, with the variable compensation of our five business group presidents linked directly to the delivery of their respective business groups for 75% of their annual incentive. The teams below each business group in the business units are 100% linked to the performance of their specific businesses, not other businesses and not Unilever overall. This is a big change in how we approach targets and incentives, reflecting our focus on business groups and their business units as the building blocks of performance and accountability in the company. Alongside that principle of line of sight for performance-linked incentives, we've also recognized our growth priority by upweighting growth within the targets.
We're moving from a position where growth, margin, and cash were equally weighted to one which is 50% weighted on growth, 25% for margin, and cash respectively. This is quite an important slide. You saw Alan share a version of it this morning. We clearly have sharper, more distinctive strategies for each business group. This chart shows how our five business groups are positioned and what we expect them to deliver. I won't repeat what Alan covered, but when all business groups are firing with differentiated strategies, stepped up execution, more investment, and sharper resource allocation decisions, you can see why we expect to deliver higher levels of value creation from Unilever. Across the board, you've heard the business groups and how they're going to deliver.
These are each sizable businesses focused on their strategies and on seizing their own growth opportunities. They will continue to leverage the benefits of One Unilever in areas like Unilever Business Operations headed by Reggie, and Digital Commerce headed by Conny. They will be inherently more focused and incentivized on driving results. In summary, the building blocks are in place. We are operationally stronger. Our portfolio has a higher growth profile, and the new operating model creates many advantages. I now want to just click down one further level into how we actually operate the business. As Alan explained, we spent a lot of time designing the right structure for the company, and the two of us are deeply involved as part of our regular planning cycle in managing the way forward for each business group and in allocating resources across business groups.
Capital allocation is shaped by the respective business group strategies and is focused either to drive organic growth or to improve infrastructure through capital and restructuring investment. Resources are allocated based on strategic fit, size of the prize, and the strength of execution. Thoughtful target setting is always the basis for successful performance management. This has become both simpler and more powerful than it was in the previous matrix organization, which required extensive alignment between divisional and geographical units. What happens now is that Alan and I set annual business group targets which are consistent with the shape of our rolling three-year strategic plan, which the board is very actively involved in.
Business groups have full authority to set the targets for their respective business units without the need for further geography alignment, are then end-to-end responsible for their results, held accountable, of course, by Alan and myself for their delivery. We have already established a very data-rich and action-oriented monthly performance review for Alan and me with each business group and with Unilever Business Operations. These are focused mostly on the delivery progress, the opportunities, and challenges that exist within each business group. There are some limited examples of cross-business group topics. An example would be a decision that we made to reduce trade stocks in Indonesia, which is, of course, a really important growth market for all five of the business groups. These performance re-reviews are ultimately about maximizing the performance for Unilever.
They're not about short-term gap closing, as all of the business groups have got the scale and the breadth to manage that on their own watch and are fully expected to do so. If required, however, we will optimize resources in year across business groups, but this we expect to be an infrequent occurrence, perhaps a couple of times a year as market conditions dictate. Because we're now investment ready, we are stepping up investment to fuel our growth. We've increased absolute brand and marketing investment in the first half of 2022, and we'll do so again in the second half and again for the next three years. Our focus is on more working media, more digital media, further increasing the brand messaging that our consumers actually see, while continuing to drive efficiencies in both how we produce our ads and in our product promotions.
You heard a fair bit of that from Conny earlier. Our brand equities, the ultimate test, our brand equities have been really strong, with around 80% of our turnover holding or gaining brand power, which is a very, very objective measure of relative brand strength. Ali referred to it and gave us a little bit of a tutorial on it in the Dove presentation. If you get the chance, take him up on his offer of going deeper on brand power and how it works. It has been critically important, the strength of our brands and our brand power, for managing the volume impact and competitiveness when landing the significant price increases that we've been doing for the last six or seven quarters. R&D is the second area where we will increase investment.
We have a very efficient, digitally enabled expert R&D organization that provides a stream of world-class science and technology to the business groups. You see this increasingly reflected in our innovation funnel and its performance, which Alan touched on this morning. We have stepped up the level of technology in our innovations and substantially increased their individual size. R&D is a critical enabler for superior innovation. You heard Fernando talk specifically about purpose, science, and desire in Beauty and Wellbeing, but it is a focus area for all five of the business groups, and we will increase investment in R&D over the next three years. The third area is overheads. We've been making targeted investments to set up, rather, world-class capabilities for channels, for digital commerce, and for different business models.
We'll continue to do so, and while this will increase overheads in some areas, we will focus on efficiency in other areas, and we'll steadfastly remain a citizen of the top quartile in any form of overheads benchmarking. Now, investment requires fuel, and that comes from the hard work of pricing, mix optimization, SKU reduction, all of it alongside relentless savings delivery. Now, you've seen us price quickly and responsibly through this period of high inflation. Pricing isn't easy. It requires a combination of strong brands, of local expertise, and it requires a surgical approach. Our businesses across the world have learned from the expertise that we have in dealing with high inflation in Latin America, for example. Our price coverage, which is just how much of the cost step-up we've recovered through pricing, has increased steadily, and we will have pricing carry over into 2023.
As you know, we've managed pricing well so far, but we do need to remain on our toes and take further pricing action where needed. Complexity reduction is always a good thing, and this year we have reduced more than 10% of our SKUs globally compared to just last year. This is the start of the journey, however, and as Reggie explained, we have plans to reduce a further 20% of our SKUs by the end of 2025. Importantly, that is a net reduction. It's after accounting for the new SKUs that we have to introduce, and we must introduce, each year to innovate behind our brands to create category value for our customers and to support market shares. SKU reduction removes complexity, it frees up resources, and it enables much better customer service.
Removing small SKUs or those with low gross margin also strengthens our P&L, and we are prepared to make tough calls. As Hanneke explained, we are prepared to take some short-term market share losses if it makes our growth and our business more sustainable and better in the long term. Finally, we are productivity experts, having delivered savings of around EUR 2 billion annually in each of the last few years. We take pride in our savings delivery, but we're never, ever complacent about it, and we always apply a very, very rigorous approach to measurement and delivery of our savings. We in fact, we've strengthened our savings definitions and governance over the years to exclude things like cost avoidance savings or buying savings because these are generally harder to grip, reinvest, or indeed track back to the P&L.
Unilever Business Operations, led by Reggie, is key to delivering these scale and productivity benefits, and we expect business operations to increase their savings delivery, as Reggie explained earlier, by around EUR 300 million in each of the next three years. In addition, of course, in 2023, we will deliver the bulk of the EUR 600 million of savings from the new operating model. Overall, we would expect to generate annual savings of between EUR 2 billion and EUR 2.5 billion for the next three years. All of these programs are really well defined. They're underway, and you can take confidence from our track record of consistent delivery, both on pricing and on savings. Let me spend a few moments now on capital allocation.
You'll not be surprised by it, because we've reviewed it together many times before, but at these events, I think it always deserves our focus. For a business that generates as much cash as we do, with very high conversion of profits into cash, our focus is on investing capital back in the right areas to ensure that our virtuous circle of growth through our brands is healthy and can sustain. That is the beauty of the CPG model done well, as we all know. We have a clear and consistent strategy for capital allocation, making three broad choices about how to deploy our capital. The first is what we call operational investment. We will always first invest in our business, creating and preserving the platform for profitable growth into the future. Operational investment includes investing in our products, for example, through brand support and R&D.
It also includes capital expenditure and restructuring where we spend today to create the right future foundations in our manufacturing, in our distribution, in our technology assets, and in having the right organization to deliver. The second set of choices is about reshaping our portfolio through bolt-on acquisitions and selective portfolio pruning. That can either be a use of capital or a source of capital in any given year. Acquisitions will continue under our bolt-on strategy, focused in specific high-growth segments. We will continue to harvest parts of our portfolio that are less strategically attractive. The third set of choices, of course, is about returning capital and returns to our shareholders, either through dividends or through share buybacks. I'll talk a little bit about those in a second. We are very disciplined on cash, and that will not change.
Our free cash flow performance has consistently improved through decisive execution. Annual free cash flow has increased by about EUR 3 billion over the last six years, from an average of EUR 3.9 billion in the period 2013 to 2015, to an average of EUR 6.7 billion over the last three years. We placed extra emphasis on our free cash flow performance when we told you that we wanted to run the business at around 100% cash conversion, and that's exactly what we've delivered. A strong source of cash performance has been improvement in our working capital. That, in fact, released around EUR 2 billion of cash over the last eight years. This was achieved despite starting from an already quite good relative position back in 2013.
We believe that consistent negative working capital is a healthy sign of discipline and operating capability, and we're happy to have been able to improve this further to - 7% of turnover. I wanna bring our capital allocation to life with some numbers. You can see that we've maintained strong discipline in all three areas of capital allocation. Starting with our operational investment, our CapEx levels have been between 2.5% and 3% of turnover in the last five years, apart from the pandemic-related drop below 2% in 2020 when we couldn't get to our factories and our distribution centers to make the investments. We expect 2022 to return to the upper end of this range as we invest in additional capacity for growth, some of which Reggie previewed to you downstairs on the seventh floor.
We term restructuring spend an investment, as we always treat it that way when we look at the economic returns from making that investment. As I said, this investment is about putting the right organization and the right infrastructure in place to deliver benefits in the future. Restructuring investment has been elevated in the last few years, as we said it would be. Including 2022, we expect to have invested around EUR 5 billion in restructuring since 2017. Going forward from 2023, restructuring will return to the more normalized level of around 1% of group turnover. The second area of capital allocation is portfolio reshaping. We've been very active in this area, as you know, rotating 17% of our portfolio since 2017.
We've invested EUR 17 billion of capital in growth-enhancing acquisitions, with 2/3 of that invested in Prestige Beauty, Health and Wellbeing, and Functional Nutrition. You've heard Fernando and Hanneke speak today about the strategic importance of these high-quality assets for the growth profile and strategy of their business groups. While our acquisitions were focused, our disposals were large and significant as we exited spreads and most of tea to less strategically attractive and slower growth businesses. We will continue to set demanding criteria for both acquisitions and disposals. Every transaction goes through a totally consistent, robust process where, after assessing the strategic attractiveness, we make a rigorous assessment of financial returns and risks for every single opportunity. We don't get it right every time. We make no secret, for example, of the fact that Dollar Shave Club has not gone as we expected.
The majority of our acquisitions meet or beat their business case and generate value for our shareholders. Moving to capital returns, we've always paid an attractive dividend with a payout ratio between 60% and 70% of our earnings. We've done this reliably and consistently, irrespective of single-year currency impacts on our earnings. Historically, our share buybacks, if you go back in time, were somewhat episodic. In recent years, we've used share buybacks as part of our regular suite of tools within our capital allocation framework. Over the period 2017 to 2021, we've returned EUR 14 billion of capital to shareholders. We will have added a further EUR 1.5 billion by the end of this year as part of the ongoing share buyback program of up to EUR 3 billion.
We've done all of that whilst maintaining a very solid balance sheet. Our leverage has been around 2 x net debt to underlying EBITDA in the last five years. That's in line with our targeted levels. We maintain a healthy single A credit rating, helping us to ensure low absolute cost of financing this business. With interest rates now rising around the world, we expect net finance costs of around 2% in 2022. The interest rate is fixed on approximately 70% of our financial liabilities for 2023, and we have a debt maturity profile that is pretty conservatively built on periodic refinancing. Put in some of the financial metrics that I've just spoken about. Together, we will remain a responsible allocator of capital, investing for growth and maintaining that strong balance sheet.
Starting with investment, we will continue to invest in capacity, ensuring strong resilience and readiness for growth. We'll also step up investment in priority markets, as Reggie talked about. As a result, we expect CapEx as a percentage of turnover to be above 3% in the coming years. We're aiming for sustained consistent investment year in and year out. Restructuring, as I said earlier, will drop to normalized levels of around 1% of group turnover, which is where it used to be before the period of elevated restructuring from 2017 onwards. I've talked about our approach to M&A since 2017, and that gives us confidence that we're making value-creating acquisition and divestment decisions, and you should expect us to continue to do that. Return on invested capital is an important indicator of this approach to M&A capital in particular.
We will sustain an attractive ROIC well above our cost of capital, irrespective of inflation-driven margin headwinds and portfolio reshaping. We expect ROIC to be in the mid-teens. Our guidance for the underlying tax rate remains at 25%. Individual years might be higher or lower than that, but over the midterm, that's the level that we expect. We'll continue to aim for a leverage ratio of around 2x net debt to underlying EBITDA, with net finance cost expected to be in the range of 2.5%-3% on average net debt going forwards. Rising interest rates across the euro, the dollar and sterling have some impact on the cost of our floating rate debt and the refinancing costs of maturing bonds.
That's partially offset by a bigger interest credit in 2023 from our pension plans, which have a very strong surplus position. To close, let me bring all that together in our growth model. The model represents what we know is achievable based on the work we've done and the initiatives that we have in flight. We're confident that you'll see an improvement in our delivery, with USG towards the upper end of our 3%-5% range, helped by a step up in volume and with continued strong competitiveness. Our aim is to deliver this consistently over the years, reflecting our global leadership positions within the staples sector. We expect modest margin expansion on the back of that growth profile.
This will be growth margin-led. We will continue to reinvest, as I said, in brand support and in R&D to fuel that virtuous flywheel of growth. As I've mentioned, we've built a business that's a very strong cash generator. The sum of all that is that we're poised to deliver long-term value creation by driving sustained constant currently, constant currency earnings growth with high cash conversion alongside an attractive dividend that I mentioned. Last chart, just to revisit some key messages. Our priority is sustained higher growth. We have an organization which is better positioned to deliver that. We are investment ready. We are investing more behind sharper business group strategies. Our value creation model is crystal clear. You can expect disciplined capital allocation as you've become accustomed to over the years.
The value creation will be anchored in higher growth, modest margin expansion, and high cash conversion. That's it. I'd now like to invite Alan and Nils up onto the stage. I think Alan's got some comments, and then I think Alan, myself, and Nils are gonna do some Q&A.
Yeah. Have a seat.
Okay.
Right. Well, I hope you feel we haven't talked at you all day. I was quite pleased, actually, that in the breakout sessions, the presenters did manage to leave time for some questions and interaction, and I got the sense that most of the questions there were answered. That's us at the end of the presentations. Now, we're gonna move to a wrap-up Q&A. Before I do, I wanted to reflect on one element of the transformation of Unilever that we haven't spent too much on, time on today, which is that of culture. You've seen the presentations from the business groups and from Reggie's Unilever Business Operations that shows how our company is focused on faster growth, and Graeme has just explained the financial model through which that growth converts into value creation.
The changes to the organization and the creation of the business groups are part of an overall cultural change. It's a cultural change that's got three dimensions. First, speed. We are increasing the clock speed of Unilever. Faster decision-making. Decision rights are crystal clear, fewer people are involved. The elapsed time from decision to execution has collapsed. We've made good progress on building this muscle in Unilever. We're gonna keep pushing further on speed. Secondly, domain expertise. Rather than generalists operating across 14 categories, we've created businesses with real domain expertise. Expertise in categories, in channels, in customers, and in consumers. We will still move our best talent between business groups. We expect many people to spend longer periods of their career in a single business group, so that they can master their brief and bring real domain expertise to their roles.
Finally, the dimension of accountability. The new organization unlocks much higher levels of accountability by basically eliminating the matrix. I have been heard in the past, of, as describing it being nice to have five throats to choke. But actually I expect it to be five backs to pat. We have great leaders. You've seen them today, and I think they're at the top of their game, and they're all absolutely crystal clear where the buck stops in the business groups. I was having a little chuckle to myself there as once again, Graeme was using the moment at the podium to remind each of our business group presidents that they're running EUR 8, EUR 10, EUR 12, EUR 13 billion businesses, and he doesn't expect to have their short-term problems brought to his and my table. Thank you for that reminder, Graeme.
This culture of speed, of domain expertise and of accountability is starting to unlock the energy of our people to deliver the consistent, competitive, profitable and responsible growth, which is well within Unilever's reach and which we're beginning to see. I hope you've seen the evidence of that as you've spoken to our leaders throughout the day. I think with that, we'll now move into questions. If I may invite my boss, the Chairman, to come up and join us on the stage. Come on up, Nils. I think I'll donate the stool to you. Richard, are you gonna moderate a little bit?
Yes, yeah.
Yeah. Yeah.
Okay.
Slightly awkward.
Yeah. Take a seat.
Somewhere between a firing squad and a line-up.
Okay, Q&A. Who would like to ask the first question? Go ahead, Warren.
Time-honored tradition.
Can you use the microphone so the people on the-
Yeah.
Yeah, sorry, if you could say who you are before you ask the question, that would be great. Thank you.
Warren Ackerman at Barclays. I've only got one question for you, not the usual two, and it's on brand and marketing investments. You said it's gonna go up in the second half of this year. You said it's gonna go up next year, and you said it's gonna go up the year after. Previously you said that you were not underinvested. I'm just trying to square that. Are you now saying that you were underinvested and that you're now needing to reverse that? Related, can you talk a bit about the benchmarking you've done on brand and marketing investment? Because obviously it's one number, but it's a hybrid company. How much of an uplift are we talking about on brand and marketing? Is it 50 basis points, 100 basis points, 200 basis points?
You know, can it be funded through gross margin recovery, or does it need a margin reset? Just interested to understand what work you've done on the actual benchmarking on the BMI. Thank you.
Take that, Graeme.
I'll take it, yeah. First of all, we continue to believe we were not underinvested in our brands. The biggest test of that, Warren, is the brand power store. When you hear us talk about brand power all the time, you heard Alessandro say it is an objective Kantar measure anchored in hard market-marketing science. It is the best relative measure of the strength of your brand. With the brand power that we've had, we've been able to, frankly navigate this business, you know, very strongly over the course of the last six, seven quarters, taking price. I think if there was any doubt that we were underinvesting in our brands, and our brands were weak, that has been debunked by the performance of the company in the face of unbelievable inflation.
As to where the funding will come from, the reason why we want to invest now is because we have a new organization, we have a better portfolio, we've done lots and lots of work on the fundamentals of our business, and we're now investment ready. We believe that if we invest more now, we will get that acceleration of the top line of the company, and that will give rise to an unlock of value creation, which is what we're solely focused on. It's not a question of, you know, fixing something that wasn't there. It's a question of capitalizing on the hard work that's been put in place over the last three years, plus the new organization, plus the portfolio changes. We can go forward from here.
As you heard me say, we're gonna fund that through savings delivery and gross margin uplift. We're not gonna find it from any other point of the P&L.
Thanks, Graeme. Next question. James?
James Edwardes-Jones from RBC. Alan, I'll ask you a question I asked Nils earlier, which is what qualities do you think your successor as CEO is going to need most? One for Graeme, if I may. You're saying mid-teens return on capital, 17% at the moment. You're assuming that return on capital needs to go down from here?
Right.
You go first, Alan.
Sure. What did you say? Yeah.
Just a copy of you.
James, I, you know, I think the first and foremost characteristic is somebody who has got a ruthless focus on performance. Second is somebody who understands how to convert a commitment to sustainable business into strong financial outcomes. Third is someone who's gonna carry the values of Unilever, the long-term values of Unilever forward, and that includes being a committed member of the global business community and understanding the opportunities that lie in many, many markets around the world. I think we'll be looking for a global citizen. We'll be looking for someone who understands how to convert sustainable business into better outcomes. First and foremost, somebody who's absolutely focused on performance.
Graeme, ROIC?
Yeah, James, on ROIC, the first thing to register for everybody is that our ROIC is top end of the tree vis-à-vis peers in the sector. We enjoy very high ROIC.
The reality though is that the combination of the margin decline we saw through the pandemic, which wasn't easy for Unilever when the global pandemic meets the world's most global business, you know, we didn't have the tailwinds that some others had. We've come straight into this period of high inflation, as you know, where we're pricing responsibly, but there's a catch-up lag effect, which means we'll finish the year with a 16% margin or thereabouts. That does have a step impact on ROIC. I think most important thing about ROIC is it causes you to think about M&A and divestment and portfolio change in a responsible way. That's really why it's there.
I mean, we can all say that ourselves and companies in our sector have got tremendous P&L shapes around them, and we generate lots of cash. That's the sort of short term. I think it's there to think about capital responsibility when it comes to acquisition and divestments, and we're not signaling any change with that either, James. It's more a feature of just the step down in profitability.
Thank you. Okay, next question. Over there. I can't quite see you. Yeah.
Hi. It's James Targett here from Berenberg.
Yeah.
Two questions for me. Firstly, we've heard a lot today about the success of, well, the benefits from the new organizational structure, and how it's faster decision-making, et cetera. Are there any examples of where it hasn't been successful? Any kind of pinch points in the implementation of it which have caused any issues? Secondly, just a clarification on, I guess, the margin outlook. Graeme, you're talking about modest margin expansion in bold letters on the modest. Is that from the 16% base this year? If so, are we no longer expecting to get back to the, you know, re-recover a lot of the cost inflation, or are all the investments gonna be offsetting that? Thanks.
Do you want me to take that first?
Yeah. Go on.
It is from the 16 base. It doesn't signal any change to what we said about 2023 and 2024. We expected margin recovery over 2023 and 2024. I mean, we've never said at what point will we go back to whatever point people have in mind. I have some ideas in my head, but, you know, having, sort of been burdened somewhat with a, you know, very clear margin target for several years, I don't expect that we'll go back to that same situation. You'll have to keep guessing, I'm afraid.
Organization?
I'll kind of back into your question by reinforcing what Graeme said. On the theme of difficulties, I've certainly made many mistakes in my career, including as CEO, but definitely a mistake I made was not to abandon our 20% margin target when I came into the job. It didn't really shape our behavior, but it made everyone think that we were chasing a margin target, so we are studiously avoiding putting one back in place just to underscore what Graeme said. As far as challenges in the new operating model, I think I pick out two.
The first is anything that is easiest landed into Unilever at a country level, so kind of a training program that you wanna do at a country level, is made more difficult by the fact that we're resolute that the organizational access is through the business groups and business units. There are some parts of the business that are saying, "Well, it's more complicated now to land an initiative at a country level." The more substantial one is the sales organization at the moment, we really have two types of salesperson in Unilever now. We have an organization called Customer Planning & Strategy. Sorry, Customer Strategy & Planning. Sorry, Conny, I keep getting that wrong.
Always gets it wrong.
Customer Strategy & Planning. Those individuals are organized by business group. In a country, they control the customer strategy, the promotional investment, the customer priorities, and they are completely synced up with the business groups and business units. There's another half of sales, which is Customer Business Development. Rather unkindly, those are the order takers who actually go visit and spend time with the customers. We thought it would be more of a problem than it is, but that's the new gearbox where there could be complexity. We're watching that very, very closely to make sure we haven't introduced complexity at the customer interface.
Far so good, but conceptually that's an area where we're just watching very carefully and I'd catch Conny over dinner to hear a bit more of a color on that particular point.
Thanks. Okay, next, question. Over, I think it's David.
Hi. It's David Hayes from Soc Gen. Two from me. Just on the SKU rationalization, it's quite significant tidying up and simplification that each of the units talked about, and it seems like that's still ongoing. Some of your peers are doing a similar exercise and kind of saying that you're gonna see some impact of this certainly in 2023, maybe 2024. Is that what we should be taking from that, or is that manageable within the volume numbers? The second question on the cost saves. Restructuring coming down, but cost saves, I think you were saying, kind of running up slightly more than we've seen in the past. You'd have thought that relationship would be correlated. Are they different cost savings than you've done in the past?
Why is that relationship sort of decoupling effectively? Thanks.
I'll deal with the first one, you deal with the second one, Graeme.
Okay.
Could someone please ask my chairman a question? You've got one of the world's foremost business leaders here.
I'm doing a good job.
Yeah, I know. On complexity reduction, do expect to see a very aggressive reduction of SKUs. It's now enabled by two things. It's enabled by the decision-making authority that is vested in the business units and the Business Group Presidents, where they don't have to navigate a matrix of countries and categories. Very clear who makes the decisions on that. Secondly, we've built a digital system that allows us to, in real-time, measure that complexity, but more importantly, measure the cost of that complexity. You can eliminate complexity with eyes wide open on the benefit that eliminating that complexity will build. The accountability and the digital system will allow us to be more aggressive on reducing SKUs. We will not expect to see a compromise on performance, turnover growth from SKU reduction.
We may choose to walk away from some structurally bad businesses in parts of the world, and we'll give you a heads-up if we choose to do that. Some of it may not be through acquisition, it may just be we're gonna wind down a bad business. That's because it's a bad business, not because we're eliminating complexity. Graeme?
Yeah. David, you're definitely right in a sense. If I think about the personality of our EUR 2 billion of savings that we've delivered pretty consistently for the last few years, it has changed quite a lot. You know, it had a pretty heavy element from 2018 of ZBB savings. We ran some very, very active programs on all lines of the P&L. That got us to, you know, top quartile world-class benchmarks in almost every. I can think of two, but I'll not name them, where we're not quite in the top quartile yet. Every other function of the company sits in that top quartile benchmark, and that's good. Of course, that means you've done the job, those savings are in place. Where do you get new savings from?
You have to continue to backfill it. What we did was we built up our Net Revenue Management program quite substantially, and that delivered, that backfilled quite a bit of savings. Quite a bit of the restructuring that went in, of course, was to deal with things like the unsheddable cost challenge of the divestment of Tea and of Spreads, et cetera. That's done as well. The new personality to it is that some of the investments we've made, I'll just link it back to the SKU point for a second. Unilever Business Operations and the new organization allows us to drive new sources of savings from structural changes in the business. Most of the things that Reggie's got in his EUR 300 million a year are to do with reducing waste, to do with simplification, to do with driving efficiency in our production network.
Also it's linked into that SKU reduction, which you're right, is significant. I think it was mentioned once or twice, it maybe was Hanneke's presentation. I mean, we made an investment in D&A technology, data lake technology, and as you heard earlier, we've just done the biggest cloud migration that we can think of. All of which puts us in good stead. As a result of having that access to data, we've created a tool called Polaris. Polaris isn't just getting a spreadsheet out and saying, "Hey guys, you've got 71,000 SKUs. You know, do a Pareto analysis and let's cut the bottom 1% because, you know, or 20% because that's only 1% of your turnover." It's much more sophisticated than that. It's driving things like that that will get us there.
Yes, there's a different personality to it. We do believe it will step up. I mean, what I would take from it is that as that sources of savings changes over time, as you do the programs and seize the opportunities you've identified, we're very good for at least the next three years in terms of carrying on that productivity journey.
Thank you. Okay, next question for the Chairman.
Martin.
I have two, but, and I do have one for Nils.
Please.
Sorry. Yeah. Nils, Unilever had its second near-death experience, if I might use that phrase, in five years with what happened with GSK. The other near-death experience using Paul Polman's words being the Kraft bid. What lessons do you take from the events of January, how has that influenced the conduct, behavior, culture, processes of the board? I have another one to start, it's a completely different subject.
Well, that's pretty good ones to start with, let's take them one at a time. I mean, we clearly realized that our move for GSK wasn't welcomed by the market. I'll not discuss the price levels in these things because we made it very clear that we were never on the price of that GSK were pushing in the price. It was actually well discussed and well analyzed, and we had long discussions on the board. I think the process leading up to it was absolutely okay and responsible. We were taken a little bit by surprise by the ferocity of the reaction.
I think having thought about it a couple of days, I do think that we fully accepted that Unilever's was not accepted, or we didn't have the trust of the market to do such a big move at that point in time. We learned from that. We didn't really change what we were doing inside the company because I've been chairman now for three years, and during that time we've been very strongly focused on the operations. It's been a focus to get the sales development turnaround, and it's also been the focus on actually improving profitability of the business, not just in underlying constant currency sales growth, but also in hard currency.
I think we have delivered to a large extent on that, and that has been the focus. What we did, you know, I'm basically telling what you already know. What we did in January, and the start of February was we took some intensive board discussions to formalize exactly what we wanted to do for the next couple of years and make it absolutely clear in a two paper statement, or two page, paper statement to the investors. We've stuck to that ever since, which is not a long time. I mean, it's only It feels like a long time, but it's only nine months ago. That's also what is going to happen in the next year. I've had Alan and Graeme, of course, as well.
I've had a huge number of contacts with our investors over the last year and even some before. What has become very clear to us is that this idea that we should have a margin target was actually not a must-have from the investors. I think that was a bit of a relief for being a businessman. I've been in business now for, well, 35 years. it really isn't about having the margin as a target. The margin is an outcome. You find where you wanna go with your brands, with your organization, and you define the measures you have to take to get there, and then you deliver, hopefully, an exciting results, and you build the business.
That is what we would like to see happening at Unilever.
Thanks, Nils. Martin, your second question.
It's a completely different question. I don't wanna hog it. Can I?
No.
Well, thank you, Nils. Thank you very much for that. I know you want us to think about categories today, but I'm gonna be contrary and bring it back to geographies. If you took a poll of investors at the moment about what macro regions will they consider attractive, I have a feeling people would have Europe at the bottom, emerging markets in the middle, and North America at the top for all the reasons we understand around strong macro pricing pass-through, you name it, and that's evident in evaluations of North American staples companies. Relative to Danone, Reckitt, Nestlé, you're overweight emerging markets, sort of equal weight Europe, but underweight North America. The marginal decisions you've taken, the exit from laundry in America, spreads, maybe even tea, if anything of worse than that situation.
How is management and the board thinking about North America as a region? Is there a desire to increase weight there? You know, what is the thinking on that? I know it's a bit contrary to the category flavor of the day, but I think it's important.
Do you wanna start with that one?
Yeah.
Nils, if you want to add.
Martin, I'm not sure I would use such a simplistic grouping of the world's geographies. It is definitely not a flat earth at the moment. I would say the most attractive part of the world that we're seeing is Asia, and particularly South Asia, not just India, by the way. You saw some numbers earlier today on what we're seeing coming out of Pakistan and Bangladesh, despite what's happening there. South Asia booming. Southeast Asia also bouncing back very strongly. China's just a function of the lockdowns. I mean, we can see very clearly that as lockdowns ease, the business comes back. I would say Asia is the most attractive part of the world. You take some of the kinda more volatile places like Africa, Latin America, the Middle East.
Middle East is doing very well, thanks to the kind of enrichment from oil money. Africa has posted double-digit growth for Unilever in 11 out of the last 12 quarters. That was still quite small. The U.S. or North America has been an attractive market for the last couple of years. What we've done is we've traded out some very low growth, and in some cases, low profitability businesses in North America. You'll have noticed very much the focus of our acquisition activity has been to buy into attractive higher growth spaces in North America. We've been crystal clear that our first priority for growth will be U.S., India, and China.
We've also been very clear that our deployment of capital into bolt-on M&A has primarily been in Prestige Beauty and VMS, and that's also happening in North America. Yes, U.S. is extremely strategically important for us. You saw Fernando's presentation, how much of Beauty and Wellbeing is now in the U.S. Please don't discount the opportunity in parts of the emerging markets, notably Asia.
Nils, anything you want to add on the macro?
I think for the board, we do want to step up in emerging markets. I do agree with you that Europe at the moment is a complicated place. Could be a good time to invest, maybe, but it's complicated. U.S. is, at the moment, a super attractive place, and part of the reasons why we've underperformed in the last years is that we've had a weak footprint in the U.S. The whole organizational change we're doing now is actually, in a way, moving our focus into the bigger, more competitive markets, away from our traditional, smaller developing markets. That is a choice that we're taking because we want to grow faster in the bigger geographies, essentially, and for many other reasons. That is, that should help us strengthen us there.
Having said that, I mean, we are up against tremendous competition in the U.S., just as the Americans are up against tremendous competition if they wanna enter in India or other places where we're strong. We're born a little bit with a given geographic footprint. We can be sad and sorry about that, or we can see potential in it, and I think the board sees quite significant potential in it.
Thanks, Nils. Okay, Celine. Microphone.
Thank you. Celine Pannuti, J.P. Morgan. I'm gonna start one for Nils. Two things really. One on the long-term growth targets. While there is no growth effectively in the four KPIs that are there. When you think about it, do you think it's rightly reflecting what you want to achieve on a tip? The second one, reflecting on what you said, the board had come to a matured decision to go for a transformative strategy phase for Unilever. You were surprised by the veracity of the reaction of the market, but is that thought completely gone away since, you know, you probably have gone through a lot of due diligence on that decision? That's my first question. I have a second one, shall I go now or?
No. Let's go that one. That's a long one.
Well, I think we can talk a lot about GSK, I'm happy to talk about it. Really, I think we revisited our strategy and re-evaluated where we were on our journey, we decided to focus on organic growth. We haven't spent a lot of time on it afterwards. It's not like I wake up at night dreaming about doing a big transaction. Just to make that clear. Don't think that this is something that we're going to bring forward. Well, maybe, it's not being discussed in the board. The weighting of the different measures you talk about in the LTI, we discussed before, total shareholder return or ROIC, I think these are, you know, it's a matter of taste.
As I said, you can have, you can have both. What was one suggestion, and many have suggested that, but basically if you ask in Europe, they tell you ROIC. If you ask in the U.S., They tell you TSR. I think it's a matter of taste. We have chosen ROIC and I think that will serve the purpose of the investors in the sense that it will keep us disciplined when it comes to acquisitions. In terms of how we weigh the long term, the long-term development of the company, I think it's great that the management is super clear that growth is a priority. I don't think we will create a great Unilever without growth.
Of course, life is not that simple. We've had to take some really tough decisions this year, as Graeme alluded to it a little bit earlier, where we had to weigh off price increases versus growth. We clearly took the decision to go for aggressive pricing. You have to see it in the two reasons for it. One is that we are much more exposed to price increases of raw materials than our competitors. That's one reason, but the other reason is also that we feel that the brands can take higher pricing, especially when we lift the quality and we invest in real core and interesting research and development. That is the strategy we're pursuing the company. I'm saying that because we...
Of course, we cannot just go for growth. We also need to build a much more profitable company in order to pursue the virtuous circle or cycle as like Graeme said, for fast-moving consumer goods. It is that you get prices up, you get room for better advertising, more R&D and more quality, and then you create over a long time, but it's a long time game. You create a better company.
I set a bad precedent by allowing Alan do two, but Celine, it's a very quick one, and then we'll go back to one question each.
Yeah, it was in fact a follow-up, and maybe it's on the premiumization. In the past we had this idea of maxing the mix, and we saw premiumization being a key focus, and you allude to higher gross margin in your presentation. I just want to understand what do you think is different that will allow you to achieve more premiumization versus the maxing the mix?
Do you want to take that?
Yeah, I mean, each of the business groups when they developed their strategies independently concluded that the highest growth is coming from the premium segments of their markets. Five out of five business groups made that observation. By the way, it's true in the latest 12 weeks. Every time we're downtrading, there's higher growth in the premium segment in the latest 12 weeks, but this is a strategic point. We now have in place an organization that allows asset allocation and resource allocation to follow strategy more clearly. Not only has each business group identified the premium segment as higher growth, they've identified an activity system, an R&D program, a brand prioritization program, an innovation-focused program that will allow us to build in the premium segment. Mix is a critical element of managing margin.
You know, there are only really three ways to drive margin: price, mix, and cost. We talk a lot about what we're doing on price, we talk a lot about what we're doing on cost, but one of our critical elements of managing our margin is maxing the mix. We see maxing the mix as much more part of margin management than it is of premiumizing the portfolio. Premiumizing the portfolio is from strategy and resource allocation.
Thank you. Right. Next question, Bruno. Single question please from now.
Bruno Monteyne from Bernstein. One for Nils as well. I mean, Alan said that one of the mistakes he regrets is the 20% margin target, which was clearly an objective set by Paul Polman before. Now, given that today we have a strategy session, targets being established and the search for a new CEO, how do you avoid the risk that the next CEO is equally hamstrung potentially by the things we're saying and doing today? How do you keep that flexibility open for our own success?
First of all, let's make it clear, Alan is here for a long time still. There's plenty of runway to do to show you all the things that we will do next year. The any new CEO that comes obviously steps into something that's already established, and he will not be hamstrung, but there'll be certain things that we do not like to see change. The organization is one of them. There are plenty of you have asked me today what will a new CEO, can he come in and change the organization? He could come in and improve it, of course. And should do that. I mean, that's the job of every CEO.
He can change a lot of operational strategies, but for the time being, the board would like to stick to what we've put in place. By the way, which I have to say, I'm incredibly proud of the work that has been done in Unilever in getting this organization up running with as few problems as we've seen. I'll talk about a little bit about over dinner, or before dinner about that. It's an incredible job to disentangle the different organization and move from a country or matrix organization over to a product-focused organization.
The how smooth that is done and how we managed to get the organization through it being still engaged, even if we had to take out people in the process, I think it's an incredible job, and I think should not be underestimating the complexity and difficulty of that. The team has done a tremendous job. I think that's important. We don't want that change next year, or 2024 or 2025. But of course, it should be developed. It's there are many more things that needs to be done in an organization. It's not something that stands still. There's a lot of strategic work that goes on every day in a company with five business units and 150 markets.
I would be really surprised if a new CEO wouldn't see other things of doing some things and have a very open dialogue with the board and the five business unit CEOs on it.
Okay. Do you wanna comment?[crosstalk]
Sorry about that.
John, next question. Doesn't have to be for Nils now.
Hello. Yeah, John Ennis from Goldman. I wanted to come back on the topic of premiumization, because I guess to follow up on some of your remarks, it's almost the middle brands that tend to be squeezed. You see a polarization. Premium does well, value does well. In the breakout sessions, the focus has been very much growing the premium, which I appreciate is the most logical strategy longer term. As we head into a recession, why is there not more of a focus on growing value and premium and shrinking the middle rather than just growing premium? Does that make sense?
Yeah. Alan, do you wanna start? If any of the BGPs want to add. Do you wanna start, Alan?
Yeah, I mean, let me give you the latest 12 weeks data from Nielsen's measurement of Unilever's global footprint, Nielsen and whatever other retail share services we use. Unilever's sales break up into 30% in, 35% in price index over 120, 50% of our sales in the middle, and 15% at the value end. The growth rates in the latest 12 weeks are 9%, 3%, 3%. In that regard, it's emboldening us to continue the journey of investing in product quality, charging more for it, up-trading our core brands, and launching premium innovation. You'll notice that our acquisition activity is in markedly premium spaces.
I mean, we don't talk much about the price premium in the Health and wellbeing brands, our acquisition activity is taking us there. We like having a good, better, best offering in our portfolio. In most categories that we offer in, not all, but most categories we operate in, it's very important to be able to straddle that pyramid, to bring that scale, and to manage up-trading and down-trading, and frankly, to, you know, keep your competitors at bay and not have one brand try and do everything. At the margin, our incremental euro is going into driving our premium business.
Any business groups want to add any color to that? No, they've said enough. Okay, next question. Go ahead.
It's, Guillaume Delmas from, UBS.
Hi, Guillaume.
Question for you, Alan, on your decision to leave the company. I think one of the main messages from today, it's all the drastic transformation gone through by Unilever portfolio, organization, savings, even culture. It seems the next two to three years will be very much about execution, about getting the benefits from everything that has been implemented in recent years. Why not staying a bit more to see all that happening and getting the full credit for all of that before riding off into the sunset?
Oh, there's many, many strands to the answer to that question. It starts with the fact, Guillaume, I'm older than I look. look, when the board invited me to take this role, which is truly the privilege of a lifetime, you can imagine leading a company like Unilever is an extraordinary honor. I did discuss with it was then Marijn, but then Nils, that I was not a 10-year CEO. Secondly, come and stand in these shoes for a while. It's an exhausting role. It's 24/7, round the clock, all day, every day. Thirdly, you don't know me well enough to know this, but credit-seeking is very low on my value system. The credit belongs not with the CEO, the credit belongs with the company and the leaders in the company.
Last but not least, by the second half of next year, either Unilever will continue to accelerate its performance and in good shape, and that's a perfect time to hand it over, or it will not be doing very well, and it will slow down, and that'll be a perfect time to hand things over. [So, despite seing, it is] , a perfect each way bet. But there's kind of a few of the strands to the thinking, and I would like to reintroduce myself to my wife, who's been a widow for the last four years.
Guille, might keep kicking his ass on the golf course. He'll have to improve his game.
Thanks, Guille. Any other questions? Oh, one more from David. Go ahead, David.
I'm gonna mention that this new board member that joins, Nelson something or other. This is gonna be for Nils, really. Has the dynamic changed on the board since this big personality has arrived, whatever you wanna call it? Yeah, you know, in terms of the, what he brings to the board, is there anything you would flag that, you know, has improved or otherwise since his arrival earlier this year? Thanks.
Thank you. I was expecting that question actually a bit sooner. I was... Now I'm just speaking as me. I was actually personally really happy to welcome him on the board. I have not been disappointed, and I think neither have the rest of the board. He's constructive, he is very insightful, and of course, he brings a lot of analytical firepower, which you as a normal board member have difficulties to find. Sometimes you can have a, let's say, a different discussion with management. Having said that, he's also not come with sort of a magical wand or anything. I think he's very confident in what we're doing on the organization, and he wants to continue to develop along those lines.
He's very positive towards increasing marketing and R&D spend, which I think is super positive and actually put some pressure on the organization to find the money somewhere because we just can't, you know. We need to make sure that we also make a bit of money so we can pay dividends and buy back shares and what else we wanna do with it. So far so good. I mean, I'm not naive. There could be a day where you ask me and I say, "Jesus Christ, I should never have said that from the stage." I think actually it's been positive and, you know, he does bring a lot of experience from the sector. A lot of respect for his points of view.
It's not the first time I work with an activist on my board, so.
Thank you. Okay. Okay, one last question then.
Thank you. I think it'll be brief. Tom Sykes from Deutsche. You mentioned product superiority right at the beginning of the presentation. Could you say something about the quality of the R&D organization? Obviously, you're talking about you want to increase the expenditure on R&D. Where, where would you know, where would your priorities lie for the increase in expenditure on R&D? Do you think maybe just say something about the execution on the innovation that you mentioned earlier?
I am so utterly delighted that you asked that question because you've really got the full Unilever leadership team here, except for Sanjiv, who we decided to let him continue to drive value in Hindustan Unilever, and Nitin, who's pulled a sickie today. He's got the flu and decided not to come and give everyone else the flu. Most of my team over the speaking role, but one person who's not at a speaking role is our still fairly new global head of R&D, Richard. Richard, why don't you talk about as we increase the investment in R&D, where do you see that going?
Yeah, 100%. Thanks for the question as well. You saw earlier from Alan, we have stepped up superiority and innovation and savings in the last two, three years. We've been able to do that with the current level of investment in the organization. Because of the scale of Unilever, we've got a large overall investment in R&D. We are efficient when you look as a percentage of sales, as you probably see. We have that balance to play.
What we've been looking at is, are we investing enough in the mid to long-term breakthroughs that we're gonna need to, for example, transform to bioscience in Home Care that you heard from Peter earlier, or decarbonize our materials, our footprint, get new sources of ingredients, and also to do the next generation of pioneering formats that Unilever's been proudly doing through history as well. That's where we wanna put the investment. It's not gonna be a fire hose into all parts of R&D. It's gonna be into select science and technology programs that are really defined by the business group strategies. That's how we're aiming at it, and it's gonna be a focused step up in the next few years, not one big bang. Thanks.
Thanks, Richard. Let's draw Q&A to an end and give you a round of applause and thank Nils, Alan, and Guille. That ends the webcast, I hope, and the formal part of the day.