Good morning, and thank you for joining us for Unilever's third quarter trading statement. I am joined today by Srini Phatak, our Chief Financial Officer. In a moment, Srini will take you through the details of the quarter, and I will come back at the end to sum up before we take your questions. Let me start by setting this quarter's performance in the context of our continued progress. I have said consistently that volume growth is a true measure of demand, a key indicator of the underlying strengths of our business. Since 2024, Unilever's volume growth has averaged 2.7%, ahead of our medium-term ambition of over 2%. Volume growth has been even stronger for our HPC business, at 3.3%, and for our Power Brands at 3.8%. Year to date, our performance is even stronger. That is not the result of one quarter, one category, or one market.
It comes from continued progress against our strategic priorities with stronger brands, superior innovation, and sharper execution, driving increasingly consistent performance. We are delivering this performance while we are transforming our portfolio. Let me summarize what I see as the key elements of this quarter's result. A strong performance continued in the third quarter in an environment that remains demanding, input costs are higher while consumer conditions remain mixed across markets. Underlying sales grew 5.2%, with volume up 2.9%. Our Power Brands continue to lead, growing 5.8% with 3.3% from volume. Ten Power Brands grew double digit in the quarter, including Dove, our largest brand, as well as Vaseline, Sunsilk, Clear, and Cif. Growth was broad based across our HPC businesses at 7%, with 4.1% from volume. Home Care, Personal Care, and Beauty & Wellbeing each grew volume about 3%. Home Care and Personal Care were particularly strong.
Home Care grew 9.1% with double-digit volume growth in India and Brazil. Personal Care grew 6.3%, and we further strengthened our deodorant leadership in the U.S. Emerging markets were again a key driver, growing 9.5% with volume up 6%. Our largest emerging market, India, stood out with growth of 15% and a strong momentum across all four business groups, and we saw continued strength in Latin America and Southeast Asia. This continues to reflect the evolution of our emerging markets portfolio towards higher growth segments, social first demand generation, and improvements we have made to our go-to-market capabilities. Developed markets were soft, and performance also reflected tougher prior year comparators. Europe remains subdued, and in North America, good growth in Personal Care and Beauty was offset by Wellbeing and Foods. In Foods, growth was flat overall.
Our emerging market business and Unilever Food Solutions continued to grow but were offset by a decline in developed market retail. In U.S. condiments, performance was below our expectations, and we need to strengthen our competitiveness. We are taking action on innovation and restoring price competitiveness state by state. It will take some time to see the full impact, but the actions are in place, and Srini will cover this in a moment. Volumes remain strong in a quarter in which we also step up pricing to 2.3%. Along with productivity initiatives, this helped to offset the impact of higher commodity costs, and we are pricing with a clear focus on staying competitive. Overall, this was another strong quarter, and with nine months of strong performance, we have upgraded our outlook for 2026.
I will hand over to Srini to take you through the quarter and our outlook in more detail.
Thank you, Fernando. Let me start with the growth profile in the quarter. Underlying sales grew 5.2%, with 2.9% from volume and 2.3% from price. On a two year basis, volume growth was 2.3%. For the first nine months, underlying sales grew 4.9% with volume up 3.8%. The three HPC business groups led delivery in the quarter with Beauty & Wellbeing, Personal Care, and Home Care, each growing volume above 3%. On a two year CAGR basis for the first nine months, our HPC growth was 4.9%, with volume growth of about 3.2%. Price growth stepped up from 0.6% in the first half as we responded to higher commodity costs and normalized promotions in Personal Care following the FIFA World Cup. Price growth was most notable where we see the largest impact from inflation, that is in emerging markets and in Home Care.
We have taken a calibrated approach, market by market and category by category, to stay competitive, and volumes have held up well. Our Power Brands continue to outperform, which reflects their equity strengthening and the value of concentrating our investment behind our biggest growth opportunities. These brands, which represent around 79% of our turnover, grew 5.8% with 3.3% from volume. Our unmissable brand superiority scores are strong, with over 60% of turnover being stable or improving. Beauty & Wellbeing grew 5.7% with 3.6% from volume and 2.1% from price. Hair care keeps accelerating and grew double digit, led by volume with Dove, Sunsilk, Clear, and K18 all growing double digit. Dove continues to benefit from the strength of its premium innovation ranges. Sunsilk and Clear are outperforming in Latin America, and K18 delivered another quarter of very strong growth. Skincare grew mid-single digit.
Vaseline delivered another quarter of double-digit growth with double-digit volumes and broad-based strength across both emerging and developed markets. Earlier this year, we extended the brand's Gluta-Hya range into lip care with the new Gluta-Hya Lip Serum, which continues to perform well. We also saw good performances from Hourglass, Paula's Choice, and Dermalogica. Wellbeing declined high single digit in the quarter, partly driven by shipment timings that benefited the second quarter. We compete in wellbeing segments in which the market is growing high single digit. Year to date, wellbeing is down 1%, reflecting conscious choices to rebalance revenues and relative pricing between direct-to-consumer, club, pure play online, and omnichannels. Across our brands, the picture is mixed. Liquid I.V. grew year to date with gains in mass retail, online, and international. Year to date, OLLY also grew mid-single digit as it lapped last year's distribution gains.
Nutrafol declined year to date as the measures to improve customer acquisition remain at an early stage. Grüns, which we acquired earlier this year, delivered very strong growth in its first full quarter with Unilever. It will enter our underlying sales growth measure next year in June. We expect sequential improvement in wellbeing's performance versus the third quarter. Personal care delivered another very strong quarter, growing 6.3%, with 3.8% from volume and 2.4% from price. Growth was broad based with high single-digit growth in emerging markets and mid-single digit growth in the U.S. Price growth stepped up in response to higher commodity costs as well as normalized promotional environment. Dove grew double digit with strong volumes in both deodorants and skin cleansing. Deodorants grew mid-single digit led by volume.
In the U.S., continued momentum was supported by strong brand equity and further strengthening of our market leadership following the FIFA World Cup. Latin America grew double digits. Dove and Dr. Squatch both grew double digits in the quarter. Skin cleansing grew high single digit with balanced volume and price. Growth was broad based with double-digit emerging markets growth and mid-single digit growth in both North America and Europe. Dove was strong as it continued to premiumize the category with skincare led body care ranges. Lux grew well supported by new botanical ranges in China. Oral care declined low single digit as growth in Southeast Asia and India was offset by a decline in Europe. Home care grew 9.1% with 5.4% from volume, another quarter of strong volume led growth. Price growth stepped up to 3.6% as planned in response to higher commodity costs.
On a two year CAGR basis, our volume growth was 3.9%. Growth was led by emerging markets with double-digit growth in both Asia Pacific Africa and Latin America, and double-digit volume growth in our largest home care markets, India and Brazil. We continue to gain share across value and volume in vast majority of our markets, given the strength of our brands, our R&D capabilities, and supply chain resilience. By category, fabric cleaning grew double digit with high single digit volume. Home and hygiene and fabric enhancers grew mid-single digit led by Comfort. We have started to build Cif in China through social commerce, as well as launching Comfort's perfume inspired fabric enhancers in the market. Our multi-year innovation platforms, Omo Wonder Wash and Cif Infinite Clean, continue to scale successfully across markets and expand with new variants.
Wonder Wash is now present in over 40 markets, and we have rolled out range extensions in Southeast Asia in the quarter. Cif Infinite Clean is now available in eight markets. Foods grew 0.1% with volume down 1.1% and price up 1.3%. Emerging markets continue to grow well across both Latin America and Asia Pacific Africa. Unilever Food Solutions grew low single digit led by its second largest market, North America, where it accelerated to mid-single digit growth on the strength of our premium customer propositions. China, its largest market, continued to grow low single digit. Growth in emerging markets and Unilever Food Solutions was offset by a decline in developed markets retail, in particular in U.S. condiments, where our performance was below our expectations. Hellmann's brand continues to be strong and leads the category.
However, as we said in July, we have seen increased competition in the fast-growing premium segments of the market, such as avocado oil mayonnaise, and with discount brands gaining distribution nationally. We are taking targeted actions to improve competitiveness, including bringing additional innovation to market and corrective pricing actions. Hellmann's 100% avocado oil mayonnaise is building distribution with more to come over the next few quarters. We are confident in the actions we are taking while recognizing that it will take some time for these to take effect. Turning to our geographies, emerging markets, which are around 60% of our turnover, grew 9.5% with 6% from volume. Developed markets declined by 0.9%. Asia Pacific Africa grew 10.1% with 5.8% from volume and 4.1% from price, with broad-based growth across the business groups and markets.
India, our largest emerging market, grew 15% with 7% from volume continuing the momentum of the first half and lapping a GST-led lower prior year comparator. Growth was broad-based. Home care and Beauty & Wellbeing grew strong double digit. Premiumization and innovation accelerated our growth with premium hair care and fabric cleaning liquids outperforming. We delivered high single digit growth in foods and personal care where market development actions in body wash continue to build penetration. Indonesia grew 7% led by volume supported by stronger execution, innovation, and digital activation. All business groups grew in the quarter, including mid-single digit growth in foods, which was led by local brands. China grew low single digit with mid-single digit volume, including volume contribution from all business groups and strong performance from social commerce.
Beauty & Wellbeing and personal care benefited from premium innovation, including new ranges in Vaseline and Lux. Home care sustained mid-single digit growth, while Unilever Food Solutions grew low single digit. Double digit volume growth in Vietnam, Pakistan, Thailand also contributed to the broad-based result for the region. Latin America grew 8.5% with 6.5% from volume. Beauty & Wellbeing and home care grew double digit, and personal care grew high single digit. In foods, low single digit growth was driven by continued strength in condiments. The largest market, Brazil, grew high single digit with double digit volume supported by market share improvement in our two largest categories, fabric cleaning and deodorants, following the corrective actions taken last year. Mexico grew low single digit led by volume, and Argentina grew double digit with positive volume. North America declined 0.7% in the third quarter while continuing to gain volume share.
Personal care grew mid-single digit led by strong performances in both deodorants and skin cleansing. In Beauty & Wellbeing, we saw double digit growth in Vaseline and our prestige brands. This was offset by declines in wellbeing and foods. On a two year CAGR basis, underlying sales growth in North America was 2.7%, with volumes of 1.5%. Europe declined 1.7%. Beauty & Wellbeing and personal care grew, supported by strong growth in Dove and strengthened competitiveness in deodorants. This was offset by declines in foods and home care. In the case of foods, the market environment remains soft. Turning now to turnover. Turnover for the quarter was EUR 13.3 billion, up 6.7%. Underlying sales growth contributed 5.2%. Acquisitions, mainly Grüns and Dr. Squatch, added 1.4%, and disposals reduced the turnover by 0.6%. As expected, the currency headwind has eased through the year.
Exchange rate movements were neutral in the quarter versus negative 5.1% in the first half. Based on the October spot rates, we now expect the full year currency impact to be around minus 2% on turnover and around minus 30 basis points on underlying operating margin. Turning to our outlook. Following strong performance in first nine months of the year, we have upgraded our outlook for 2026. We continue to expect underlying sales growth for the full year to be within our multi-year range of 4%-6%. We now expect at least 3% underlying volume growth for the full year and underlying sales growth in second half of around 5%. On earnings, we are confident of delivering growth in hard currency with modest improvement underlying operating margin versus 20% of 2025 as we navigate a tougher cost environment while continuing to invest competitively behind our brands.
The external environment is uncertain, but the strength of our brands, the momentum within our business, and the increasing consistency of our execution gives us the confidence in delivering our outlook. I will hand you back to Fernando.
Thank you, Srini. Let me sum up. We have been consistent in our conviction that to succeed in our industry, you have to perform and transform at the same time. This quarter is further evidence that we are doing both, and we are building a track record of consistent, strong performance. We are managing a more volatile cost environment with discipline, pricing where we need to, staying competitive, and continuing to invest behind our brands. Since 2024, over the last 11 quarters, our volume growth has averaged 2.7%. This comes from the continued progress we have made on our strategic priorities. Desire at Scale at work across our brands and higher quality execution across our markets. You can see it in the breadth of growth across our Power Brands this quarter and in innovation platforms like Wonder Wash and Cif Infinite Clean or the hair mask scaling across markets.
We are transforming our portfolio. The combination of our Foods business with McCormick remains on track. Separation and integration work is progressing well, and until completion, we remain fully focused on the performance of our Foods business. Next week at our investors event in New York, we will set out how greater focus, Desire at Scale, and sharp execution will unlock Unilever's full potential as a focused HPC pure play company and deliver sustained competitive performance. We look forward to seeing many of you there in person and online. For now, thank you for listening. Srini and I will be happy to take your questions.
Good morning, and many thanks for joining the call. If you would like to ask a question, please press star one on your keypad. If you no longer wish to ask a question, press star two to exit the queue. When it is your turn to ask a question, your name will be called out. Finally, please keep your questions to a maximum of two.
Thank you very much for joining today. Our first question comes from Olivier at Goldman Sachs. Go ahead, Olivier.
Thank you, Jemma. Good morning, Fernando and Srini. I have two questions, please. First of all, would you expect the developed markets to accelerate in Q4, U.S. and Europe? Could you give us the building blocks for those two regions? Secondly, going back to costs, you are stepping up the pricing in Q3, and I guess we should expect pricing to accelerate further in Q4. Considering the COGS inflation increasing and also the negative category mix and FX impact, are you able to find more cost savings? I think previously you mentioned the EUR 850 million of course, inflation that you are trying to offset. Could you essentially give us a bit more how we should think about margins over the next 12 months? Thank you.
Thank you, Olivier, and good morning, everyone. Let me start by the developed market questions, and Srini will take on the cost and pricing point. Two different pictures. I believe that in European markets, we see a subdued markets. It is probably the most challenged regions in terms of market growth. In Q3, we grew 6% in beauty, low single digits in personal care, but we saw some declines in home care and foods, where we have seen promotional intensity increasing. Also, the pressure of the buying alliance has been very high, so negative pricing has put a bit of some challenges in the European market. Overall, beauty and personal care in good shape. Also, the development of our prestige business in Europe is accelerating.
But foods, that is close to 40% of our revenue in Europe, the performance has been below expectation, particularly in Germany and Eastern Europe, and some promotional pressure in Home Care affecting pricing. Let me now move into U.S., that is more important in terms of our overall numbers. We have delivered 4% volume growth in North America in the last three years, 3.2% during the first half of 2026. So the 2.6% decline in quarter three against a tough comparator is a clear outlier, and we expect U.S. return to growth in quarter four. I will repeat this, we see our North American business back to growth in quarter four. Year to date, HPC in North America is 3.8%, with UVG at 2.4%.
In quarter three, performance was strong in Personal Care, both deodorants and skin cleansing up mid-single digits, hair care growing high single digits, and Prestige Beauty in double digits in North America. All these businesses are having great momentum, led by Dove. Dove is growing 7.5% in the U.S. in the quarter, and it has achieved number one brand position in deodorants female segment. That is a big achievement for the brand, and it is helping us to strengthen the market leadership in deodorants category that is one of the most important for us in the U.S. But Foods and Wellbeing in the quarter were weak. In Foods, we have some issues with some value players discounting and extending national distribution, and with some development of the fast-growing premium avocado oil segment. In both, we are taking corrective actions there.
In Wellbeing, the high single-digit decline is a clear outlier, but we have two short-term issues that we have to deal. In Nutrafol, that is mainly a DTC business. The brand continue having excellent levels of retention, but we have seen a much higher customer acquisition cost. We are driving significant traffic into our website, but the conversion rates have gone down, particularly with younger and less affluent consumers. So this is something which we are working, and we need to find solutions. We are working both in the website content and the value equation of Nutrafol to improve this. In Liquid I.V. and in the rest of Wellbeing portfolio, the hydration powder market in particular is growing high single digits.
We are growing share in Walmart, Amazon grocery channels, but the brand has been too exposed to the club channel, tends to operate in that channel at a significant price discount. Given the fact that the main club banner is introducing private label, we decided to rebalance our revenue and our relative pricing across channels there, and this has some short-term impact that it really was very heavy in the quarter three. So we expect quarter four in U.S. to be positive. We expect Wellbeing to get progressively better. On cost on pricing, Srini?
Yeah, thanks. Good morning, Olivier. Let's try and do this in two parts, because you had asked about a view on costs and price over the next 12 months. I'll give you a first view on how we see this year, and a bit more color on next 12 months, and we'll spend more time at Capital Markets Day next week unpacking some of that. We had called out about EUR 850 million as a midpoint estimation for inflation for the year.
You will appreciate that crude has continued to be high over the past few months. If you see months of September and October, it has been over 105, 106. More importantly, our commodity inflation is a function of many other elements, most notably kerosene, logistics cost, foreign exchange. Our current view for the full inflation for this year is about EUR 900 million. We had indicated about EUR 800 million- EUR 900 million.
We thought EUR 850 million, but the outlook is more like EUR 900 million today. We continue to drive all initiatives. Pricing is obviously one which we said that will be a calibrated and a judicious approach. You have seen that. You have seen a sequential step-up, and we will see some more pricing come through in quarter four, which will be higher than quarter three, and that's a responsible way of really managing our business. But we've always been clear that we do not use pricing to manage margins. We are driving very hard all our productivity initiatives across all lines of the P&L, whether it's mix, whether it's volumes, whether it's deployment of capital, savings. And we've also put in many measures, including control on our recruitment, our overheads costs, and therefore, this is giving us ability to really manage the full P&L.
For 2026, therefore, we said that we will deliver hard currency earnings, and we are confirming that we will drive modest margin improvement. Over the next 12 months, I'll give you a quick headline. The situation continues to be extremely volatile. If you really look at the energy fundamentals, the fundamentals are actually improving, but there is a lot of instability in the market. A good data point is if you really look at, let's say, the global crude output, it's actually back to 80 million barrels a day, which is actually back to the pre-war level.
So if you really see just from a supply perspective, supplies have been normalized. Yes, there is some stock which can be built up in China, which has been depleted, but it's not a supply challenge. What is really happening today is a very high risk premium given the potential disruption to the logistics, given potential geopolitical issues.
So that becomes actually a fairly uncertain element to call out. In our view, at least given where we are today with the information that we have from a 2027 perspective, we expect inflation to be somewhere in the range of EUR 700 million- EUR 1 billion. It has to be a bit of a wide range given the elements that we are dealing with. So I would say give or take about 2.5%-3.5% of the cost base. With one important difference, the HPC inflation next year, we expect will be lower than this year.
The foods inflation is likely to be higher given everything which is happening with soy and other elements. Again, in the Capital Markets Day, we will unpack 2027. It is important to reiterate that we are still committed on a multi-year basis to hard currency earnings, and we will drive P&L exactly on the lines we have articulated before.
Thank you. Our next question comes from Warren at Barclays. Go ahead, Warren.
Morning, everybody. It is Warren here at Barclays. The first question is back on foods, Fernando. I think you said that you would hand over the foods business to McCormick in good shape. Do you still think that given the U.S. is sort of tracking below expectations and maybe at the same time, you can give us a bit of an update? I know you will give us a bit more at the CMD, but where we are on the closing process, antitrust, et cetera. Just keen to understand those two elements, timing and your comment about handing it over in good shape. The second question really is on the emerging markets, obviously, Fernando, super strong. Can you talk about your outlook for the big four countries in EM of India, Brazil, China and Indonesia?
Perhaps you can specifically touch on Brazil in Q4, given the sales tax, but also given the massive FX decline on the presidential win, Lula. On India, you had a super easy comp this quarter. How do you see the outlook there? Just trying to understand the shape of it, and maybe you can dig a little bit into some of the key elements, particularly Brazil. Thanks.
Cool. Thank you, Warren. I will start with emerging markets and then cover foods, just to give Srini the voice on the closing process also. Emerging markets, very strong performance. We have seen a strong and broad-based performance across all our key markets and across all our key categories, including foods and food service, that in emerging markets is really doing very well. We see our strengths in emerging markets as significant long-term competitive advantage, and I feel the performance is improving dramatically there. We have seen some acceleration of market growth in emerging markets, not dramatic, but we have seen some improvement there. In India, you could see that we delivered 15% growth in the quarter, 22% in home care, double-digit growth in beauty and wellbeing, with very significant share gains in both categories.
We have improved significantly our performance in personal care and in foods that are now running at high single digits, including Horlicks. That was an issue that we had in our portfolio a couple of years ago, now growing double digit. In China, we see they're slowly getting better. We are close to 4% volume growth in China with very significant growth in what we call new online, particularly in Douyin and in Pinduoduo. Physical retail is declining, but we are compensating with the acceleration of our innovation program for this kind of new online channels. Just to give you an idea, Douyin has been growing for us in the last three years around 40% growth on an annual basis. In Indonesia, a strong performance, particularly in home care and in hair care. We have relaunched all our key brands in Indonesia.
The performance, the fundamentals of the company, much better. Really, the business did very well in this quarter and is a continuous acceleration of performance. Brazil, and I can say Latin America as a whole, accelerating. We delivered 8.5% growth in the third quarter. In Latin America, the year-to-date performance is 8% growth with 6% in volume. Year to date, Brazil is at 8%, Argentina is at 5%, and Mexico at 4% in volumes. We continue delivering competitive growth in all the other geographies like Central America and Chile there that are important for us. So in Brazil in particular, we see very strong performance in laundry, where we are gaining significant share and in deodorants, where all the actions to restore competitiveness has been put in place, and particularly we have reignited growth in the aerosol format.
That is the one that really developed market value in the market. Brazil, in the short term, a lot of political instability. The country was not in such good shape after the first round of election, and it's not in such a bad shape after the second round of the election. Of course, there has been a significant devaluation of the currency in the last few days, but it follows what has been a significant appreciation of the real during the whole year. So this has been one of the currencies that has been stronger in emerging markets. So we don't see a particularly negative impact for us in our performance in Brazil going forward. Regarding foods, yeah, we are absolutely committed to give the business to McCormick in good shape. Our food business has been flattish in the last couple of quarters.
We are disappointed with that, no doubt about it. We have a strong momentum in our food business across emerging markets. We see our food service business gaining momentum in both China and the U.S. Performance in developed market was below expectation. I feel in Europe, the markets are soft. We see negative pricing due to a combined effect of buying alliances pressure and the increased promotional intensity, particularly in countries like Germany and Poland. Probably the most important factor has been the U.S., in which we have consistently outperformed the sector in the last few years. The condiment business, Hellmann's, has been under share pressure in the last couple of quarters. Two issues there. One is the development of the premium segment in mayo. We have just launched our own avocado oil Hellmann's mayonnaise. We have another big launch expected for Q1 next year.
We have also corrected pricing. We were operating at a significant premium versus some value players at the time that we were increasing prices because soybean oil has gone up significantly. Some of our competitors has been going down and increasing promotional intensity and expanding national distribution. This has been corrected. We have set up a new price pack architecture also in the squeeze format that is very important for us, and we have materialized significant gains in total distribution points. It will not be a short-term fix, but we expect definitely that 2027 will be a better year than 2026 in foods. We are absolutely committed to deliver this business to McCormick in good shape.
Srini?
From a food separation point of view, the work is progressing extremely well and is on track. We had said that more than 200 people from our side as well as McCormick's side are working. The working has been extremely positive, extremely collaborative. If I really look at some of the important milestones, we have finished the carve-out accounts in a record period of time, and we have filed our SEC filings, round one. That's progressing quite well. When we look at some of the antitrust discussions which have been going on with antitrust authorities in multiple markets, they've been progressing quite well. In a couple of markets, we have to look at some disposal of some assets to facilitate that. That's completely on track. We've also started making good progress on TSA arrangements.
There are about 17 key TSA arrangements on which we are continuing to engage with McCormick. We are in a good space in terms of trying to identify the key work streams, the milestones, and how we manage it. All in all, where we are today, we should say that it's quite promising. It was always our intention to get this transaction done before first half of next year, and our internal ambition continues to push it prior to that date. Everything that we know right now, Warren, it's progressing well. Obviously now we will get into the last mile activities when it comes to some of the regulatory elements, which we'll have to navigate through. From a separation, integration, and setting up, it's all progressing quite well.
Thank you. Our next question comes from Celine at JP Morgan. Go ahead, Celine.
Thank you. Good morning, everyone. My first question is, as you land prices, you started in Q3, you said you have had a very diligent approach and market by market. Just want to understand, we hear competitors, and across different categories, that prices are going to land. How do you think about further price increases and elasticity and your choice between maybe a certain level of prices and keeping the volume, given that it seems that it is a KPI you really focus on? Obviously, I presume we will talk about that next week, but given that you are focusing on compounding, your level of confidence that 2027 you can keep compounding at a rhythm of above 2% volume in an environment where effectively there may be a bit more pricing.
My second question, I want to go back to the COGS inflation numbers, which, well, thank you very much, first of all, to give us for 2027 already a steer on that. I look at it, 2.5% COGS inflation. One of your major U.S. peers, I think, was talking about 5%. When I look at inflation across different commodities, oil prices, and all of that, 2.5%-3% sounds pretty low. Could you explain a bit why that is? Thank you.
Cool. Thank you, Celine. We are pleased with basically the fact that we delivered 3% volume growth in the quarter, despite pricing growth acceleration from around 0.6% in the first half to 2.3% in quarter three. I feel in previous earnings calls, we have been very clear that we are going to manage the business in a more volatile cost environment, focusing on volume growth, price competitiveness, and disciplined management of every single line of the P&L. This is what we have done, managing costs through formulation flexibility, promotional optimization, tighter management of overhead. We have been relatively cautious on pricing, until we have more clarities in terms of supply security and commodity cost environment. Now that we have more clarity about it, we are accelerating pricing.
At the same time, that also most of the price corrections we did in terms of relative pricing in categories or geographies in which we were uncompetitive are now lapping. The examples of India and Brazil laundry are probably the ones that you remember the most. We expect pricing to keep accelerating, and this should contribute growth to underlying sales growth and to sustain gross margin.
But let me be very clear, the ambition of growing at least 2% volume growth is absolutely fundamental for us, and we will ensure that we have a good balance between volume and pricing in whatever we do in the short and in the medium term. We will emphasize the drivers of demand that have the highest return, as we always do, ensure that we are competitive in both pricing and brand marketing investment in order to deliver this 2% volume growth in a context in which we expect pricing to have a higher contribution. We definitely expect pricing in 2027 to be higher than the one of the average 2026. Srini?
Yeah. Just one to two comments on first on the pricing and the inflation. It's good to remind everyone that we said that half the inflation that we see was really coming in home care, and above 70% of that was really coming through in emerging markets. That is where you have seen a very calibrated approach using the full levers of pack price architecture. If you really look at the performance of home care in the quarter, or for that example, even in India, where they have grown 15%, but with a good combination of half of it coming from volume and half coming from price, starts to give you an indication in terms of how we are navigating it. Coming back to 2027. Look, no one's really planning right now for a geopolitical blowout.
If that were to happen, because then the dynamic will be very different. We are already talking about crude at levels of give or take, today's spot is about 114. We believe that there will be some short-term pressures which will continue in crude into the near term, but into half two of next year, we should see some bit of stability coming through because, again, I go back to the point about supplies. Notwithstanding the geopolitical and warlike situation in the Middle East, today the volumes are really back to the pre-war levels. So that's an important assumption and that's an important point of view that we have, that there will be stability, but not in the short term. Again, when we look at some of the vegetable oils and key commodities such as palm, they have again been at historical highs.
Whenever there have been dips, we have been started to cover some of these commodities. But again, when you really look at the interplay between some of the oils, given where they are, there will be some more inflation. We believe in first half that could be a bit muted, but in half two, we will also have to deal with El Niño. We have done a bit of a scenario planning around those elements.
We have also looked at elements which are really coming through from the perspective of FX, logistics, and other costs. It is important to clarify here, I am not calling out a market inflation, and what I am really calling out is the inflation that we will land in the P&L, because this is also supported by a significant amount of product logic productivity initiatives, which therefore goes on to mitigate the significant inflation that you see.
Next week in the Capital Markets Day, we will give you a very good sense in terms of some of the initiatives which we have perfected over the years, but some of the new muscle that we are really building to handle, and therefore drive optimization across the value chain.
Thank you. Our next question comes from Guillaume at UBS. Go ahead, Guillaume.
Thank you, Jemma, and good morning, Fernando and Srini. Two questions for me, please. The first one is on the balance between volume growth and gross margin protection. Because we saw from Hindustan Unilever and Unilever Indonesia, a very strong volume performance in the quarter, but at the same time, we saw a marked contraction in gross margin, both sequentially and I guess even more pronounced on a year-over-year basis. So my question here is, have you made the conscious decision to prioritize volume share over input cost recovery, at least in the short term, or is this gross margin contraction more reflective of what we usually see, that lag between inflation hitting your P&L and when you can actually implement pricing?
I guess what I am getting to is, at the time of the first half results, you talked about a gross margin in the back half being relatively similar to the first half. Is it still the case? My second question is on skin cleansing, a big category for you. High single-digit growth in the quarter. I think it is your best performance since the first half of 2023 when growth was very much led by pricing. Fernando, wondering if you could shed some light on skin cleansing, what is driving this improvement, whether maybe you feel like you have turned a corner and that despite some planned pricing actions, you are still confident about future market share gains on a volume basis. Thank you very much.
Thank you, Guillaume. I will start with the skin cleansing, then we will cover the gross margin question. In skin cleansing, it is true, we are really improving performance in some of our core markets. We have a strong North America business. Just to give you an idea, Dove represents 40% of personal care revenue globally, and it has grown in the quarter 11.5%. Dove in skin cleansing is really doing very, very strongly. We also see improvements in India. Basically, we see acceleration of Lux in India, very strong performance of Dove and Pears in the premium segment. One of our problem child that we have had that has been Lifebuoy for a while, it has improved. It is now growing low single digits.
It is far from where we would like Lifebuoy to be, but it is in a much better position than it was a couple of years ago. Also, countries like Indonesia are really improving a lot. Innovation in skin cleansing has been very strong. We are coming with significant premium innovation, particularly around Dove and Lux. Lux China really accelerating. Lux China in Douyin really making significant inroads. It became the second shower gel brand in Douyin in the market. Overall, we are pleased with the innovation program in skin cleansing, and this is a very important category for us, in which probably in the past we have not innovated with the level of quality that we should.
Now we are taking some of the learnings from premium categories like beauty, hair care, skin care, and bringing much more science, much more premium offering, particularly in brands like Dove and Lux that are really resulting in significant share growth and significant acceleration of performance in the category. To your question about balance between volume growth and GM protection, there is always some lag between price and cost. Of course, we will protect the integrity of the P&L in the medium term. Our absolute priority is always to defend that floor of 2% volume growth. We are really committed to that. It could be that one quarter is below that or many quarters is above that, but overall, our midterm ambition of growing the business above 2% volume remains as one of our most fundamental metrics.
So, in the short term, we will manage, as Srini mentioned, with sensitivity using the different lines of the P&L. You want to add something on that, Srini?
So yeah, a couple of elements to this, Guillaume. You are right. I think that the two examples that you picked up, whether it is India or Indonesia, it is also important to highlight that these two businesses have a big exposure to the home care-
Yeah.
Business, and that is where they have seen material inflation. So obviously the first objective in these markets is to recover the absolute cost first, because you realize that to price for margins, you almost have to price 1.3x to 1.5 x the cost inflation. And that is where it is important to play the lag game, do it sensibly, do it periodically, use all the levers, and therefore you have a route to recovering it. Coming back to your question, yes, some elements of life have indeed changed from the time we last spoke to you. I gave you already that the inflation number, it was what we had expected to be about EUR 850 million is today EUR 900 million. There is also another important element.
The contribution from home care to our overall business is much higher than what we had originally expected, which is great from a growth perspective and serving the consumer's perspective. But if you really look at the gross margins that we have in home care, which are around the 35% mark, are lower when it comes to the group average, which is give or take around above the 46%- 47% mark. This by definition means that we do have some mix headwind that we will have to factor in. On the contra side, the BMI that we spend in home care is also lower, and therefore by the same logic, you will start to see mathematically a bit of lower BMI.
In essence, we do expect the gross margins to be a bit lower than what we had originally planned, but we are managing the totality of the P&L through all the levers. Therefore, we are committed to really looking at a modest margin expansion.
Yeah, I feel just to repeat operating margin expansion, we continue committing to a modest improvement this year. I feel the point about mix is important. Home Care is growing very, very fast. This has a mixed negative effect in gross margin, positive mix effect in BMI. Also, particularly in Home Care, we have seen local competitors particularly reducing marketing investment significantly, while we have protected a very, very strong share of voice there. So we are very, very happy with the performance in Home Care, and we will continue managing this with balance.
Thank you. Our next question comes from Nicolas at Bank of America. Go ahead, Nicolas.
Thanks, Jemma. Morning, Fernando and Srini. Two questions from me, please. First one is on the Wellbeing. It is down 1% year to date, and I was wondering whether this performance has changed your view on the M&A going forward in that category. The second one is, I think Ruby Lu resigned from the board a couple of days ago. I could not see any reason in the press release as to why that happened. Maybe if you could explain or give us a bit more background behind this. Thank you.
Yeah. In wellbeing, let me start first for a wider picture in Beauty & Wellbeing. We delivered 8.1% growth in the second quarter, and we grew the wellbeing in the third quarter 5.7%. And remember, there is EUR 30 million moving between the two quarters due to the advanced Amazon Prime shipments that benefited quarter two and had a negative impact in quarter three. We have a very strong performance in beauty. Beauty grew 7.5% in the quarter, but we grew double digit in emerging markets, we grew 6% in Europe. But of course, wellbeing has been disappointed at around high single digit decline. And in the year is minus 1%. Nothing changed in our view about wellbeing being a key trend for the future and in the attractiveness of the category. We don't see any structural issues. We are underperforming the categories this year.
We believe that the segments in which we compete are growing around high single digit. But we are paying the price of what I call growth pains. We grew the business with a significant exposure to the club channel. That would have to be rebalanced at one point of time. We have taken the decision earlier this year to rebalance that exposure to club channel and expand dramatically our business in the other channels. This has some short-term impact, and we are paying the price of that, but wellbeing will improve and will definitely improve in quarter four. But I would say that from second half next year, we will be growing ahead of the markets again, as we have done for many years to come. In the case of Ruby Lu, she has been a fantastic contributor to our board, more than five years of service.
There are some personal reasons why she decided to resign to the board, but we are very grateful for everything that she has brought into our board, and it's a pity that she cannot stay. But sometimes personal reasons prevail in this kind of situation.
Thank you. Our next question comes from Sarah at Morgan Stanley. Go ahead, Sarah.
Yes, morning. I have a couple. First one was back on Brazil. There is obviously tax changes coming, and I was just wondering if you could update us on whether you still think there could be destocking in Q4 if the political environment is going to change that. The second one was just on financing costs. Some of the staples players have been flagging cost of debt going up, which is obviously not really very surprising, but I wondered if you could give us a bit of a steer on that for next year. Thanks.
Yeah. Hi, Sarah. I will take both the questions. We had actually highlighted the potential Brazil tax change effective January 1st. So far, we have not had any update or new news on that subject. We continue to have high levels of preparedness, and in our guidance that we have now given today, or the outlook that we have given today, we have factored in some of these elements and some of the other ins and outs of the business. But again, so from a full year guide, we are in the right balanced position. At the moment, we have some further updates in terms of actual implementation. We can update the markets, because we will also have to see what happens in Brazil post the elections and whether it is still on track. But at this stage, we continue to be ready to really get that done.
On finance cost, we are not making any change to our guide that we say around 3%. In half one of the year, we were at about 2.5%. We have had some levels of refinancing, which have already happened during the course of half two, which will take up the net interest cost above half one levels, but well below the 3% that we have indicated. From a next year perspective, it is also important to give a quick update on a highlight that, look, we will also get the proceeds from the Foods transaction. One of the elements that we have to do with those proceeds is, consistent with what we have said, we will be looking to pay down debt and manage the balance sheet in a responsible and a sensible manner.
With those proceeds, there will be no requirement for us to actually get into the market to do any refinancing of the long-term debt. What we will be really focused on is managing the short-term commercial papers. Therefore, we are only likely to think about if any bond raise in 2028. For these factors, taking into account where we stand, we still say that for the next year, we should be again around the guide of 3% from a net interest cost perspective.
Cool. I feel we get to close in, Jemma. One more?
We have some more. The next question comes from David at Jefferies. Go ahead, David.
Thanks, Jemma. Morning also. Yeah, two from me as well. First on emerging markets, impressive execution, impressive performance again in that region, effectively. Just want to see, apart from the execution, because a lot of your peers seem to be doing better in emerging markets as well in the last couple of quarters. Is there certain markets where the consumer is better and what you would call out? I guess the other dynamic here, would you say that local competitors have been struggling with the supply chain disruptions and with more immediate price increases coming through into their sales prices? Is that advantage now fading as you take prices up and as maybe they adapt to some of the supply chain issues? Is that something we should be accounting for in the emerging markets moving forward? The second area of question was just on Wellbeing.
[Down south, high single digits in the third quarter. I think you said that OLLY and Liquid I.V. were both still in growth. Just trying to understand what the offsets were. Nutrafol you called out, but is that down mid 20% levels, or is there other brands within that category that are kind of offsetting some of the growth that you're still seeing in some of the brands? Thank you.
Cool. Yeah, emerging market, David, thank you for the question. Very strong performance for us. It is around 60% of our turnover, grew 9.5% with 6% of volume. We see markets getting slightly better, particularly in Southeast Asia and Latin America, including places like Mexico or Argentina that were a bit soft, and particularly an acceleration of the market growth in India. It is true also that our performance in India is boosted by significant share gains in our main categories, particularly in Hair Care and Laundry. Those are our two largest categories there. So there is a bit of help from the market, but also our performance. We are outperforming markets significantly in emerging markets.
We are doing it in Brazil, we are doing it in Indonesia, we are doing it in India, we are doing it in Vietnam, we are doing it in Pakistan, Bangladesh, and many other emerging markets that are strongholds of Unilever. China, as I mentioned before, also came a bit better. Our growth is around 4% in volume there, and the market is showing some, I would say, slight improvement there. Regarding local competitors, I feel what we have seen is some reduction in level of investments, particularly in Home Care. These are categories in which some of the competitors have been cautious in pricing. Probably that has limited their ability to invest behind the brands, and we are taking advantage of that. We have very significant share gains. As you can see, we are growing Home Care close to 9%. This is a clear outperformance versus the market.
Our gains in places like India or Brazil are very significant. The same in places like Vietnam or Turkey or Pakistan or Bangladesh. We do not see now any fundamental supply security issue in the market. We have seen the flow of oil across the Hormuz Strait to really improve. This was something that we were very concerned earlier in the year, but now we have visibility of supply, and I assume that this is the same for local competitors. Regarding Wellbeing, I feel in the quarter we have a decline that was broad-based in Wellbeing, but also you have to remember that there was some issue with the Amazon shipments there. Nutrafol is the most challenged brand, but it is also not in double-digit decline. Of course, it is a high single-digit decline, what we have seen in the quarter.
In the case of Liquid I.V. and Wellbeing, in the year, they are growing, but in the quarter, there were declines there, for the reasons that I have mentioned before. We are rebalancing our channel exposure. We expect Wellbeing to be a contributor to growth in the next few quarters, and definitely we expect Wellbeing to grow ahead of markets in the second half of next year.
Thank you. Our next question comes from Jeff at BNP. Go ahead, Jeff.
Okay. Thank you, Jemma. Just back to the topic of inflation. Ballpark, you are guiding to a similar absolute quantum of inflation in 2027 to 2026, yet you think pricing will be higher next year. If you could just explain why pricing will be higher next year when the inflation will be similar. Secondly, on inflation, you highlighted that it is going to be more foods focused next year. Should we assume from that on the HPC business, inflation levels will be below the 2.5%-3.5% that you referenced? Thank you.
Yep. So two elements, Jeff. Even this year, if you see, our pricing in first half of the year was fairly muted, right? If you really think about it, we have actually priced 0.6%, and we have now started to pick up pricing in quarter three and quarter four in a sequential improvement. We have taken benefit of some of the covers that we had, and obviously, the levels of pricing that we have are not sufficient to cover fully the inflation that we have seen this year. What you see next year is further inflation. So we will have to step up some of the pricing to cover what I would call is the existing inflation and the new inflation, which is likely to come through. I think that gives you a bit of a flavor of where we are.
Two elements, just to again clarify, because again, I am dealing with wide ranges here because the levels of market uncertainty remain quite high. We are working with a lead set of assumptions, and therefore, the EUR 700 million- EUR 1 billion, the 2.5%-3.5%. What is very clear, at least if I were to give you a bit of a color, from a Beauty & Wellbeing perspective, we believe it is going to be on similar levels of inflation. Home Care, given that we have seen already a big move up. Crude has moved up from the 70s to the over 100 and 105, 110. Year-on-year, we think there will still be inflation, but lower inflation. From a palm perspective, we are likely to see higher inflation next year, just given the El Niño and other impacts.
What we will try and do is actually at the Capital Markets Day, unpack this a bit further. That is why I said at an aggregate, when I talk about the similar numbers, I think the HPC inflation will be lower. It is inflation, but lower than this year. Foods will be higher than this year.
Let me repeat also, 50% of our inflation is related to Home Care, 70% is in emerging markets. This gives us more degrees of freedom to manage inflation than probably some of our competitors have.
Thank you. Our final question comes from Ed Lewis at Rothschild. Go ahead, Ed.
Yes, thanks very much. Just a couple from me. I guess you have changed your approach to the business over the past few years, since you came in as CFO and then CEO, Fernando. I am just wondering the approach around pricing. How much of the pricing are you looking to land now with more innovation and price pack architecture than you did before? Related to that, as we think about the Power Brands, clearly doing very well, driving a lot of the growth. How much of a regional mix are the Power Brands helping? Are they really driving a lot of the growth in emerging markets as well, which you would not necessarily have focused on to the same degree before?
Yeah. Thank you, Ed. Regarding pricing, you can only increase pricing relative to market through the strengthening of your brand equities. This is a principle that we follow with discipline. We fundamentally move pricing with the market where we see opportunities through a strengthening of our brand equities or through introduction of premium innovation. This helps to increase the net revenue realization at the unit level. This is our fundamental approach to pricing, always respecting a fundamental principle of our strategy that we want to deliver volume growth above 2% consistently across time. Regarding Power Brands, I feel we are building a sharper, simpler, more focused portfolio, and the concentration of revenue in Power Brands is a strategic path that we have chosen.
These are the brands that have the strongest equities, leading positions, ability to travel across geographies, and they are close to 80% of the revenue now. They were 70% in 2023. The growth is very strong. Year to date, we are 5.9% USG in our Power Brands with 4.7% in volume. 10 of our Power Brands are growing double digit in the third quarter and year to date. So we believe that this is the right strategy. Some work to do in the rest of the portfolio also.
They continue playing an important role because particularly in moments in which we see pricing acceleration, some of our local brands that we don't consider Power Brands, they are very important to give resilience to our portfolio and to ensure that any potential down trade, in particular in emerging market, is captured in our portfolio. With that, I believe that we can get to closing. Thank you very much for joining. We have delivered another quarter of consistent competitive growth, strong volumes, a step up in pricing. We are very pleased with how volumes have held up in a context of acceleration of pricing. Our HPC business continued to drive our performance, growing 7% in quarter three, with 4.1% from volume and 6.3% year to date with 4.9% volume growth. We have continued momentum in emerging markets.
We expect developed markets to return to growth in quarter four, and I want to be very clear, North America will be positive in quarter four. This give us confidence to raise our outlook for the year to at least 3% volume growth and confirm a modest operating margin increase. We are performing while transforming Unilever, and next week in our investor event, we hope to have you all to show you how greater focus, Desire at Scale, and sharper execution is driving sustained competitive performance. Thank you very much. See you next week.