Good morning. Welcome to Unilever's Half Year Results. As of Q1, we're presenting our results to you from our respective terms, so please bear with us if things are not smooth as normal. Adam will begin with an overview of the business and performance, and we'll cover each of our 3 regions before First, I draw your attention to the disclaimer's forward looking statements and non GAAP measures. And with that, let me hand it to Adam.
Well, thanks, Richard, and good morning, everybody. The performance in the first half, particularly due to, I think, is showing the true strength of Unilever in these most marketing commissions and demonstrated the resilience of the business in our portfolio, in our continuing step up in operational excellence and in the financial position of the business. We've unlocked key levels of agility in response to these unprecedented fluctuations in demand, and we continue to strengthen the strategic future of the company. I would like to thank every member of Univert to you for the outstanding commitment and hard work that is shown in these most difficult circumstances. Now to the results themselves.
Underlying sales declined 0.1% in the first half, volumes down 0.3% and price growth of 0.2%. And essentially flat growth in aggregate masks some very big positives and negatives across our categories and geographies, and we'll explain those in the course of this call. Underlying sales growth was led by our developed markets, which grew 2.4%, while emerging markets declined by 1.9%. Graham is going to share more about what's happening at a country level. This D versus D aggregation needs the composition to understand what's really going on.
Underlying operating profit was up 5 was 5,100,000,000 which is a 3.8% increase versus the same period last year on a constant basis. And there is an underlying free cash flow of €2,900,000,000 which is up €1,300,000,000 last year, and that was led by working capital improvements as we focus on managing our receivables with Weir. I explained during our Q1 update that we are targeting the business on delivering competitive growth, absolute profit and cash. And to avoid any doubt, I'm repeating again that our margin target outlook is withdrawn both for this year and beyond. Our focus for the year will continue to be volume led competitive growth, absolute underlying operating profit and cash delivery.
Margin is simply a byproduct of this. Unallowing EPS increased by 6.4% and we are maintaining our quarterly dividend in line with the prior period. Now from the start of this COVID-nineteen crisis, we've been guided by a clear set of priorities that are very much aligned with our multi stakeholder business model to protect our people, safeguard supply, respond to new patterns of demand, obviously, supports our communities and preserve cash and balance sheet strength. The environment has provided that we move with tremendous speed. Let me just call out a few examples in each of these spaces.
We redeployed 8,300 of our people to focus on areas of high demand space. We've also unlocked 300,000 hours of people's time through our internal digital talent marketplace that we call Flex. And what that does is it matches employees who have capacity with projects and opportunities to do interesting new types of work. Data from our personal productivity suites of software shows that we have become more collaborative and productive. We've seen a 41% increase in overall productivity, a 20% increase in internal collaboration time and interestingly a 19% increase in external meeting time.
Use of our learning system has increased by 150%. We've had over 1,000 leadership town halls, including a weekly global town hall into our room. And I think as a result of all of that, we've seen record levels of employee engagement. In fact, our employee well-being score is up by 14%. Now I think there's been 2 extraordinary achievements from our supply chain in the last few months.
The first is how we've managed to keep all 2 21 of our factory sites running despite fairly radical lockdowns in many countries. And as I'll show in a minute, we've also been able to scale up to support massive surges in demand in some categories and pull back where we've seen major drops. And an important part of this responsiveness has been to reduce our overall complexity. And again, I want to thank our supply chain colleagues for their amazing work. On demand, our teams have reacted very quickly to capture the new growth opportunities that this crisis has presented.
We'll go into that in a lot more detail, but just give me I'll just give you 3 examples. We deliver $6,000,000,000 brand, so Lifebuoy, which has been launched now in over 50 new markets in 100 days. We've tapped the opportunity in foods that's been protected by ratchets to home meal consumption and you'll see those in a sec. And you know that our ice cream business has been hit hard by a sharp drop in out of home consumption, but our teams have moved at speed to drive strong in home consumption. We've unlocked the innovative ice cream now home delivery e commerce business, and we're busy activating our 100 days of summer campaign as lockdowns lift, although looking out the window here in Edinburgh, the 100 days of summer are a bit scarce.
Communities, we benefited from our product donations, and we're working through the hygiene and behavior change coalition to tackle COVID-nineteen in low income countries through hand hygiene and surface hygiene interventions with Lifeline Domestas. Listen to this, the first phase of the program will reach 330,000,000 people, including more than 100,000,000 healthcare workers in around 40 countries. And these are great examples of brand do and the clear role of purpose during a pandemic. I think our cash, the 8 pound number speaks for itself, maintain our financial strength, and I want to underscore that we have not sought COVID-nineteen related financial support from any governments. The step up in operational excellence that we're seeing is directly attributable to the 5 growth fundamentals that we set out back in January.
They're as important as ever, and they are our blueprint for excellent execution. Improving penetration has a direct positive impact on volume growth and volume market share. And we know from experience many crises over the years of protecting volumes during a recession is the key to long term competitive growth. In fact, brands which grow volume during recessions tend to grow value share over the subsequent 5 years, 1.4x faster than those that don't. And we've seen strong recent increases in our household penetration for our brands.
We're now just over 50% of our business winning market share. That is not the time for a lot of complexity in our innovation program. During this crisis, we're focusing on the innovations that bring higher incremental turnover, for example, in hygiene, in driving healthy in home eating, offering better value products and innovations that are designed for some of the fast growing channels, in particular, e commerce. We've already cut over 20% of the tail of innovations and we've reassessed all of our innovation plans in the light of COVID. Online shopping, especially online grocery shopping, will not revert to pre COVID levels once social restrictions are no longer in place.
I'll give a few more headlines on e commerce in a moment. But in a recession, the role of price, value and affordability is, of course, key and consumers are switching brands and pack sizes as people look to shop smart. It's never been more relevant for brands to demonstrate their positive contribution to society and address the issues that our consumers care about in an authentic way. So we're investing more of our marketing spend on communication, which is explicitly purposeful. I've already talked to our brands like Lifebuying Domestas, which are communicating their hygiene message, but in doing so, they're providing information that's very relevant to COVID-nineteen and we're seeing that purposeful brands matter more to consumers and perform better and we believe that's going to be the whole year end of the crisis.
At the same time, as demonstrating our resilience and agility, we've been taking actions to strengthen Unilever for the longer term and drive our strategic change agenda. We've announced the proposals to unify our joint venture to create a simpler company with greater strategic flexibility. After a comprehensive review over the last 18 months, the Board continues to believe that it is under the long term interest of Unilever and our many stakeholders to not minimize our complex legal structure, is 90 years old and is trying to put Unilever on a level playing field with other companies so that we're best positioned for future success. As part of shaping our portfolio, it was actually in the Q2 that we completed the acquisition of GSK's health food drinks portfolio in India, Bangladesh and 20 other predominantly Asian markets. We've acquired those iconic brands Horlicks and Boost and it's very much in line with our strategy of enhancing our presence in healthy nutrition.
In January, we announced as a conclusion of our overall portfolio review that we would conduct a strategic review of our global tea business It includes brands like Latourne, Bruton, Peaches and the review is very compatible. We will retain the tea business in India, Indonesia, the partnership interest in our rate to drink tea joint ventures, the balance of Unilever's tea merchant properties, all of the estates, but very exciting future. But this potential can be best achieved, we believe, as a separate entity Our process will now begin to achieve this separation, which is expected to conclude by the end of 2021. I'm just noting the tea business that will separate generics and revenues last year are €2,000,000,000 In addition, while the world continues to grapple the devastating effects of COVID-nineteen and issues of escalating inequality, it's more important now that we don't lose sight of the climate crisis and the very real and serious threats that it creates climate change, nature degradation, biodiversity decline, water scarcity, deeply interconnected problems and we're committed to trying to tackle them simultaneously. So in June, we announced wide ranging sets of commitments to help fight climate change and to protect and regenerate nature.
And these commitments will build on our target path, the greenhouse gas footprint of our products across the entire value chain by 2,030. They include achieving net 0 emissions from all our products by 2,030 9, which is 11 years ahead of the 2,050 powers agreement deadline. And to accelerate action ramps over the next 10 years, we'll collectively next €1,000,000,000 in a new dedicated climate and nature fund. And these commitments are the next step in our vision to boost sustainable COVID-nineteen is impacting the different categories in our portfolio using category groupings, which are the best way to understand our performance in the period. So this chart shows our H1 and Q2 growth rates.
And it points less focusing on Q2, but here we're getting both these points because Q2 is the 1st full quarter that's seen a complete impact of COVID-nineteen on the portfolio. And the variations in demand are Our hygiene portfolio, which is made up of home cleaning and skin cleansing, a turnover of $4,000,000,000 in the first half. It grew by 17% now and 26% in Q2. The other parts of the portfolio where we were able to deliver strong Q2 both to sizable. And in Home Foods and Refresher business, you see that at the bottom that grew by 17%.
Now the contrast on the right hand side of the chart, our Food Solutions, Ice Cream Businesses, together that claim 42%, and those are severely impacted obviously by all countries. So you can see underneath this rather flat top line and Green will give a similar flavor of the dynamics by country. Let's move to our divisional performance. Within Beauty and Personal Care, our skin cleansing business grew by 27% as we quickly responded to the demand for hand hygiene products and that being liquid hand washing and hand sanitizer. We have a very small hand sanitizer business prior to the outbreak of COVID-nineteen.
We only had 2 manufacturing sites. By the end of the first half, our hand hygiene business is already larger than that of the market leader of last year in the whole of 2019. It really is a truly remarkable example to see in the teamwork. We have over 60 sites producing hand sanitizers, which set up capacity across multiple brands by a factor of, believe it or not, 600 times in just 5 months, and we launched sanitizers in 65 new markets. Our prestige portfolio did decline by 10% in the quarter.
That was impacted by health and beauty channel closures in many markets around twothree of our sales. Our Prestige business has been pivoted to e commerce at pace, in usage in we really need to look at sub segment levels because there's such a wide range of market growth rates across categories and sub segments. So on the right, we see we break down skin cleansing into bars, white washing and hand hygiene. It's made up of the Panasonic sanitizers. We have people to go ahead of the market in all those subsegments, but just look at the incredible variation in group rates.
Similarly, in the Air Care category, we're seeing different impacts in different sub segments with particularly sharp ops in the hair styling segment where we opened next. Right. Moving to hip market depression. As anticipated, out of home food refreshment declined in about 42% that was due simply to the quarter of out of home channels during lockdown, restaurants, canteen leisure sites, travel, restaurants, destinations and so on. Our foodservice business declined by 36%, and out of home ice cream by 35%.
We'll have to stress that these remain fundamentally strong and strategically attractive businesses that we do expect will return to good levels of growth when leisure and eating habits return to normal. In contrast, I think the hidden jewel in the portfolio has been our in home food and refreshment portfolio that has grown by 17% in the quarter as consumers have eaten more soups, use more meal kits and accompany their meals with mayonnaise and a nice ice cream as dessert. Restricted ling has meant that consumer are spending more time at home, and so we saw an increase in sales of food for scratch cooking as well as in home tea and ice cream, and that's been especially true in our U. S. Business.
Reflecting the shift that I already mentioned to online shopping and media consumption, Knorr's digital recipe inspiration campaigns, recipe websites really helped drive commerce conversion and strong double digit sales growth. In fact, our Food and Refreshment, e Commerce Business to Consumer business grew by 139% in the Q2 and that was driven by our ice cream home delivery, ice cream now e commerce business. And lastly, to home care, where home and hygiene sales were up 24% in the quarter with increased consumer demand for household cleaning products such as SIP service cleaners which grew by 20%. And working with environmental health experts, Domestus Bleach is educating consumers about the targeted cleaning of high touch surfaces in the home to help prevent the spread of COVID and domestics grew by 37%. Within laundry, fabric solutions declined slightly, impacted by the geographical lockdowns in Asia, although interestingly, future formats such as capitals and liquidity continue to grow.
I have to give a shout out to our clearing segment. 7th generation saw strong double digit volume led growth. FX Sensations did decline in low single digits. So last chart before I hand over to Graham. We're also, as I mentioned, seeing significant channel shifts as consumers' behavior changes as a result of COVID-nineteen.
And I want to just give a little bit of a drill down on e commerce, which continues to accelerate. Online shopping is here to stay even after social restrictions are no longer in place. E commerce represented over 8% of the business in the first half and that's up from 6% in 2019. Sales on e commerce grew by 49% and a half, 62% in the second quarter and that includes the drag on growth from foodservice, e commerce. We've really seen strong growth across all ecommerce channels with acceleration coming in the second quarter.
So, E2B, for example, the Opera Agora business in Brazil that we've explained several times, that grew by 78% in Q2. Pure play e commerce grew by 58% and omni channel grew by remarkable 120%. Through a geography lens, we saw e commerce growing strongly in all of the key markets, particularly in the second quarter, up 48% in Brazil, 59% in China and I think 177% in North America. E commerce now represents 12% of North American sales in the first half and that's doubled from 6% in just 2018. In line with the 5 growth fundamentals that I mentioned earlier, we are ensuring that our innovation and marketing activity are well designed for e commerce.
And you can see a few examples here. Our SIT Eco Retail range does provide the value density that makes it perfect for e commerce. As I mentioned a couple of times, we're tapping into the eco meal delivery occasions with our Ice Cream Now program. And we have changed almost all of our advertising messages, both the content and the media choices. We've stopped out of home advertising, we've eased back advertising to people in severely locked down areas who are unable to shop.
By contrast, our brands are communicating digitally with messages that are relevant for lockdown living, things like stay inspired, whole barbecue seasons and the summer staycation messages that I'm sure many of you will be familiar with. So with that, let me hand over to Graeme to talk in a bit more detail about the regions and our financial results in a bit more detail. Graeme?
Thanks, Alan. Before I cover our geographies, I would like to say a few words about the current environment. The WHO has again reported a record increase in COVID-nineteen cases across the globe with confirmed daily cases per million still trending up in the world. There are now more than 12,000,000 cases globally with over 5,000 people a day losing their lives to this terrible disease. The risks presented by the pandemic have not reduced and many experts are warning of the risks of a second wave.
While the search for a vaccine goes on, we will perhaps only to be prepared for a sort of 2 steps forward, one step back dynamic in the months ahead. Now with our wide geographic breadth, we're often asked how we see the macro environment developing over the coming months years. And so let me offer a few comments on that subject. The only certainty at the moment in economic forecasting is that there's a huge range of possible outlooks, each containing different assumptions, mostly driven by the scale and duration of lockdowns, the impact of restricted living conditions on consumer spending as lockdowns are eased, as well as ultimately the timeline for a vaccine. Now Unilever's in market agility and the strength of local leadership is an important asset as we navigate through this widely varied picture of uncertainty and volatility.
We believe the talk of a quick recovery is definitely at the optimistic end of the scale. A deep global recession has already started and consumer habits are changing quite dramatically. We're seeing a rapid rise in unemployment across markets and even for those with jobs, we know some consumers will choose to save more. In a recession, the role of price, value and affordability will be paramount in driving the penetration of our brands and we know that this is frankly an area of strength and deep experience for Unilever. Currencies and commodities have been very volatile in the first half, and we've seen an acceleration of currency depreciation through the Q2.
I'll come back to the impact of currency in our first half results and our currency outlook for 2020 a little later on. The spread of COVID-nineteen combined with the lockdowns and restrictions that have been implemented in many countries has led to significant changes in the operating environment in our markets. As Alan has just said, the performance during the first half really shows the true strength of Unilever. And also very the severity with some having more acute impact on the supply and accessibility of goods, particularly those in India and in China. China was the first of our markets to be impacted by COVID-nineteen entering lockdown in January.
Sales slowed significantly during the lockdown period, but with some recovery after April as the economy in China opened back up. In most other major markets, sales patterns in January February were quite normal and COVID-nineteen didn't impact until March onwards. Brazil was impacted later than other major markets with the effects primarily being felt in the Q2, exacerbating conditions in a region where they were already very challenging. Let me turn now to the regions in a little more detail. Underlying sales declined by 2.7% in Asia AMET Rub with volume decline of 2.9% and positive pricing of 0.2%.
Volumes were impacted by lockdowns of varying severity imposed across the region. China was the 1st market to enter lockdown in the second half of January, it was eased in April and then China declined in the Q1. Following the relaxation of restrictions, China then returned to mid single digit growth in the Q2, although foodservice remained challenging. India and the Philippines declined as strict lockdowns were imposed from March onwards, disrupting the flow of goods and negatively impacting consumption of discretionary personal care categories as consumers stayed at home. Market growth in India had already been slowing prior to the spread of COVID-nineteen and the market was further impacted by the introduction of a strict national lockdown at the end of March.
This national lockdown continued until early June when it was then followed by further regional lockdowns. Thailand was particularly negatively impacted from reduced tourism. Regional lockdowns were imposed in Indonesia as COVID-nineteen spread and while growth was positive over the half year, sales declined in the second quarter. Latin America grew by 1.9% with volumes down 0.8% and pricing of 2.8%. The impact of COVID-nineteen in the region was concentrated in the second half of the period.
Brazil and Mexico grew in the Q1, but volumes declined in the 2nd quarter as COVID-nineteen spread. Mexico declined low single digits in the first half of the year following mid single digit decline in the second quarter. Brazil grew low single digits in the first half with a low single digit decline in the second quarter. Volumes grew in Argentina throughout the first half of the year, driven by in home foods consumption against a backdrop of a prolonged and quite strict lockdown. Underlying sales growth in North America was 7.3%, with 7.7% from volume and a decline of 0.4% from price.
This H1 growth includes a negative impact of around 3 percentage points from our foodservice and prestige businesses, which were impacted by channel closures. The decline in these businesses was more than offset by increased consumption of in home foods and ice cream, as well as hygiene products, consumption which was sustained throughout the Q2. Our food and refresh provision, excluding the impact of foodservice, grew by 23% in Q2. As the supply chain responded quickly, products experiencing big surges in demand. In Europe, underlying sales declined 1.8 percent with negative volumes of 1% and price down 0.8%.
Negative volumes in Europe were a result of significant declines in the out of home ice cream and foodservice channels, as well as some reduced demand for personal care products. The most severely impacted countries were Italy and Spain, where increased demand for in home heating and hygiene products only partially offset the negative impact of prolonged lockdown periods on tourism and out of home consumption, especially for ice cream. In the U. K. And Germany, however, increased demand in in home eating and hygiene products more than offset declines in negatively impacted categories.
Turnover for the first half was €26,000,000,000 decline of 1.6% versus prior year, driven by currency. Underlying sales growth declined by 0.1%. Acquisitions and disposals increased turnover by 1.1% with acquisitions contributing 1.2%. In the Q2 of the year, we completed the acquisitions of the health food drinks portfolio of GlaxoSmithKline in India, Bangladesh and around 20 other predominantly Asian markets. During the Q2, we also closed the transaction to buy out the minority shareholders of our subsidiary in Malaysia.
Net currency related items reduced turnover by 2.5% and based on spot rates, we would expect a negative currency translation impact of around 4% on turnover. Underlying operating margin increased by 50 basis points to 19.8%. Gross margin reduced by 30 basis points with some impact from volume deleverage in our out of home businesses. The major fluctuations between countries and Canada rates, which we've talked about earlier, resulted in a negative mix impact on gross margin of around 40 basis points in the half and ninety basis points in the second quarter. We've also incurred additional cost to adapt and run our supply chain safely and hygienically and ensure the continuity of our operations with new sourcing routes and increased distribution costs and additional temporary labor to cover absenteeism.
Taken together, these impacts reduced gross margin by around 40 basis points in the first half and 65 basis points in the second quarter, and we expect that they will continue at least for the balance of this year. Brand and marketing spend was down 100 basis points. We've been adapting and reallocating our BMI spend very dynamically on a weekly basis as the status of country lockdowns has changed and as consumer habits have altered. We reduced spend in channels, geographies and countries where local conditions meant that investment would have been wasted, but have diverted investment to support the many growth opportunities. For example, in Q2, we dialed back BMI Foodservice by 40% due to restaurant closures and in ice cream by 30% due to the significant declines in out of home ice cream consumption, but we protected and in some cases increased our investment in skin cleansing and open hygiene.
Taking a geographic lens, we dialed back BMI by 15% in China in Q1, but then increased spend by 16% in Q2 as the country came out of lockdown. We've been very focused on ensuring that the quality of our communication has not been compromised. For example, we've used more agile asset creation techniques, re editing existing advertising to be more relevant for the current environment. And this combined with a softening in total advertising spend across markets has increased efficiency in advertising. Let me be clear, we are in no way BMI constrained.
We've been very dynamic with our investment and have deliberately kept some of our powder dry in managing the challenges of Q2. And in the second half of the year, we plan to invest heavily as lockdowns ease, consumers learn to live with COVID and expect significant investment to support brand campaigns and product innovations tailored to this environment. Overheads increased by 20 basis points that included an adverse currency mix. Underlying earnings per share increased by 6.4% at current rates and by 10.1% at constant rates. Operational performance contributed 3.9% to EPS.
Finance costs positively impacted EPS by 2.4%, driven by lower debt, one off interest income in Brazil and India and higher interest costs in the prior year as a result of a €40,000,000 impact from the revaluation of cash balances that we held in Zimbabwe following the devaluation of the New Zimbabwe dollar. We expect the interest rate on net debt to be below 3% in 2020. Reduced tax costs contributed 5.4% to EPS with our underlying effective tax rate declining to 22.6%. This was helped by a number of tax settlements compared with 26.2% in the first half of twenty nineteen. The favorable impact was driven by a reduction in the India tax rate and the replacement of Indian distribution tax with a dividend withholding tax.
We expect that our tax rate will be around 25% for the full year in 2020. These movements were slightly reduced by an increase in net profit attributable to minority interests following the completion of the merger between Unilever's listed subsidiary in India and GlaxoSmithKline's consumer healthcare business there. Currency movements reduced EPS by 3.7% in the first half and based on spot rates, we would expect a negative currency translation impact of around 5% on EPS in 2020. Alongside competitive volume led growth, absolute profit and cash, That's our 3 simple but important KPIs, and they really are the cornerstone of how we are managing our performance during the pandemic. Free cash flow in the first half of twenty twenty was €2,900,000,000 up €1,300,000,000 from €1,600,000,000 in the first half of twenty nineteen.
The improvement was primarily led by working capital improvements, in particular a reduction in receivables year on year. To make sure that we convert absolute profit into cash, we've set up specialist teams in every market to focus on receivables. Whilst we will bring in the cash on time, we will also pay our suppliers on time and even early for small suppliers where they need it. This is part of our commitment to make available up to €500,000,000 of cash flow relief for any vulnerable small and medium sized suppliers. Cash tax paid was lower as the prior year included payments relating to the disposal of the spreads business together with other tax settlements.
Unilever has a very robust balance sheet and strong liquidity position, which is reflected in our credit ratings, which are currently A1A for long term debt. It is critical that we maintain our strong balance sheet in these uncertain and challenging times. Our net debt remains at 1 point 9 times EBITDA, in line with our long term leverage target of around 2 times. We have U. S.
And European commercial paper programs with around €1,300,000,000 of outstandings at the end of June, backed up by around €7,000,000,000 of undrawn committed facilities. In the Q1, we secured €2,000,000,000 of additional funding in the debt capital markets. This was a prudent move to take advantage of the relative market stability at that time to bolster our headroom and our financial flexibility. At the end of June, our cash and undrawn facilities totaled €11,900,000,000 which is 2.7 times the amount of debt that we have maturing over the next 12 months. Our pension deficit has increased by €200,000,000 since the 31st December of 2019 to $400,000,000 and that was a result of falling discount rates, partially offset by positive investment returns.
And with that, I'll hand back to Alan to wrap us up.
Apologies, guys. Lesson learned not to hang up when you're trying to hit unmute. So there's I think little though that the first half of twenty twenty has seen some of the absolute most testing conditions that most businesses have ever encountered. We do feel that Unilever has demonstrated the resilience of our business in our portfolio, in our continued step up in operational excellence and in the financial strength of the company. We've unlocked new levels of agility as we responded to record levels of growth and frankly record levels of decline in some countries and categories all at the same time.
Our supply chain has shown that it can switch off, switch on and adapt at pace. And to strengthen this particular, they'll help me through our innovation portfolio share increases and the volume share increases are a very indicator of lasting value share increases through and beyond recessions. Secondly, on value share, it's actually a very similar picture. So throughout most of last year, our market shares were bouncing around at around 40% of the business winning. Again, we're now over 50%.
And actually, that doesn't vary very much between the top 62 category countries that we are laser focused on the total amount of state. One mathematical anomaly that I laid down a marker for you on was skin cleansing, where believe it or not, despite dramatically growing share in each of sanitizers, handwash, bodywash and bar soaps, given our different market shares in those segments, so typically lower shares in hand hygiene, higher shares in bars and body wash, coupled with the different growth rates, we actually didn't gain share in aggregate in total skin cleansing. And if we were to look at it subcategory by subcategory rather and aggregate that rather than at a total category level, the number would be much higher than 50%, but we decided not to change the basis of measurement. We thought that would be more straightforward to keep repeating. So training in the right direction and the reason why you're not seeing an even higher number, is that some segment difference?
That will answer the question clearly or is it grim on margins? Yes.
Hi, Warren. Let me start with your question on BMI. I hope you got the message in the prepared remarks that in the second half, we expect to be investing more BMI as the lockdowns start to ease. We've certainly kept some powder dry in managing the first half challenges, and we do expect a step up there. On the question of softening in media rates, yes, there has been a softening in media rates across markets.
It's been very varied. It's ranged from nothing in some places to 40% in other places. And broadly, across the pieces being maybe in the range of 20%, 25%. And actually, if you think about our 3.5% or so of turnover that we spend on media and you apply that across it, that accounts for at least some parts of the benefit that we saw from BMI in the first half. So yes, that's the landscape on brand and marketing.
That's one other thing to say actually, we could track obviously our share of voice over the period of above 100 year to date. So that gives us some reassurance we're investing in the right place even though it was a very, very dynamic environment of dialbacks and areas of specific investment in specific places. On the question of overall margins up or down. What can I say? I'll give you a comment on gross margin in particular.
We were down 30 basis points as you saw on the first half. We expect to see we are seeing we expect to see mid single digit commodity inflation. As we called out in the presentation, there are some meaningful ongoing on costs from COVID and gross margin and some meaningful ongoing negative mix impacts from the places where we're seeing surges in demand and the places where we're seeing dialbacks in demand. And we expect that those trends will continue. That's really all I'm going to say on margin, because as Alan was very clear on the call, yes, we are not giving any margin guidance for 2020 and we are not giving any margin guidance beyond 2020.
We're managing business focused on competitive volume growth, absolute underlying operating profit delivery and converting that underlying operating profit into cash, and the margin will just be an outcome of that warrant.
Thank you, Warren. For our next question, can we go to Guillaume Delma now at UBS. Go ahead, Guillaume.
Good morning, gentlemen. I hope you can hear me okay. A couple of questions for me. The first one is on North America. You achieved, I think, one of your best quarterly or underlying sales growth there in more than a couple of decades.
So how should we think about it? Is it down to strong category growth rate in the quarter? Or is it also reflective of significant share gains? And I guess, any indications around a potential discrepancy between sell in and sell out in the first half of the year? And I guess what could be quite helpful would be also any indication around the exit rate in this region?
And the second question is on mix, which had an adverse impact on your gross margin. Are you already seeing some evidence of down trading in some part of the world and some part of your portfolio? Or at this stage, is this negative mix effect essentially the consequence of COVID-nineteen disproportionately affecting your higher gross margin distribution channels? Thank you.
Okay, Guillaume. Why don't we stick with the pattern, Graeme? I'll take the first one. You 2 second one. On North America, yes, let me try and be very simple.
The exit rate remains strong. So there was no kind of fast start in the quarter and then tailing away. North America has remained more or less constant through the quarter. Secondly, there's no discrepancy between sell in and sell out. It's neither I think we're well beyond us loading up the shelf and in anticipation of some sort of pipeline.
If anything, we're slowing slightly to top demand in North America and service levels are slightly below. I'd like them to be particularly buoyant in some subsegments. I think it's fair to say that our market shares in North America reflect a competitive performance. We've addressed the hotspots. We're doing well in ice cream.
We're doing well in dressings. And actually, we're doing well in Beauty and Personal Care Competitiveness, although that market is not growing as quickly as the other parts. The reason why we're seeing such strong growth in North America is partly also related to mix. We have a very strong in home foods business in North America, and our ice cream business in the U. S.
Is more driven by in home than out of home. So we're seeing tremendous strength in hygiene, in skin cleansing, in in home consumption of food, and that includes ice cream where it's not such a big out of home component. So short answer, I think, us participating in strong category growth with competitive market shares. No mismatch between sell in and sell out. We're certainly not selling in ahead of sell out and the exit rate was more or less the same as the ongoing rate.
On that, I'll hand over to Graeme to share some perspectives on mix.
Well, Guillaume, there are many, many ways and access through which you can look at mix, of course. You can look at it through a divisional mix, a category mix, a country mix or even at the level of SKU and PAT mix. I'll try and say at the level of category mix, though. I'll give you an example. Growth in compliance, which has been enormous versus the other parts of our BPC business.
Our skin cleansing business has a lower relative gross margin within BPC, but a very, very healthy bottom line operating margin. So you see that show up in the mix. Another example is reduction Opel nicely, which is a higher relative gross margin than in Opel nicely. So that it is driven at that fundamental level of the of where we're seeing surge in demand and where we are seeing declines in demand or indeed channel closure. On the question of consumer pricing and recessionary consumer behavior.
Of course, it seems inevitable, I think, that there's a global economic downturn. What we don't know is the depth and length of that and we don't know which countries are going to be hit hardest as yet. And of course, when we had a recession, consumers are going to look for value. It's important to distinguish that from cheapness. Consumers are looking for value and affordability.
And so the role of price, value and affordability is going to become very important. And we think we are good at reading and delivering affordability and value in Unilever. We don't tend to react by radical price slashing, but we think about the fundamental value equation in our brands, pack sizes, for example, that's an example of it. Now our value portfolio in Unilever, as you said, is less than 80 average price index is pretty well positioned. We've got about 20% of the Unilever portfolio in aggregate in the value segment, about 45% is in the mid tiers and about 35% is in premium.
That's a good start. And a lot of branded players don't play at all. So it's a pretty good start for us, but we're not done yet. We have set up a number of targeted squads around the business, working to identify and plug gaps in the value portfolio market by market, particularly in low unit price packs and lower tier brands. Of course, that value portfolio has a different P and L profile.
It typically has a lower gross margin, but it also has lower BMI requirements and it does still contribute strongly to the bottom line and typically doesn't impact bottom line margin, etcetera. So I think we're well placed. We're starting to see the effects of trade down. We're planning for it, and we're doing a lot of work within the business to make sure that we're ready for the recession ahead and we're selling a value portfolio.
Okay. Thanks, Guillaume. I'll go straight to next question, which is Alan Erskine from Credit Suisse.
Good morning. Can you hear me?
Yes. Yes, Alan.
Hello? Perfect. Okay. Perfect. Sorry.
Okay.
Most of my questions are asked. Just two quick ones. One, Graeme, can you just go through the other moving parts in the gross margin? Obviously, it's $930,000,000 but you're saying 80 bps is dying to mix in COVID and there's also some fixed cost fixed cost deleveraging within the gross margin. So what is the offsetting benefit?
Is that lower raw material prices, higher pricing, less trade promotions? Can you just give me some of the feel for that and maybe how that might play out in the second half? Then just a very quick question, just on 2 hotspots specifically, U. S. And China hair care.
How did your Sherps perform there in Q2? Thank you.
Okay. Graham, you crack on gross margin decom and I'll talk about U. S. Air Canada.
Yes. Hi there, Alan. So we had the you picked up points on negative mix and the on costs of operating our factories safely through the crisis. The other two moving parts are essentially what's happened in terms of raw material costs, improved costs, etcetera, and what happened on pricing. That was slightly positive in the gross margin.
In terms of how that one other comment, actually. Obviously, in any given year, we have a number of strong savings programs in the supply chain. They have been slightly curtailed from the normal performance we would expect to see in peacetime, so to speak, because it requires things like factory changeover, line changeover. It requires innovation change out to land some of those savings. That's obviously been curtailed through the first half of the year as we've been focusing on the A and B SKUs, softening the demand signal, concentrating on the products with the greatest level of demand.
So I think there are many, many moving parts within it. But at a fundamental level, I'd just go back, I think, to the answer to Guillaume's question. I think we will see the main movements in gross margin being driven by the mix impact as we move into more of a value position portfolio over time. That's how I would summarize that.
Thanks, Graham. So, Warren, U. S. Hair, the market share our market share there is down very slightly and it's largely because of the portfolio mix. We're over indexed in styling in the U.
S, which has seen radical reductions growing very slowly. I think it's down 30%. And so we're disproportionately hit by that. But we have a secret weapon, which is called swab. And we know that when downturns kick in, the biggest penetration using personal care and in all of the Swab, and we anticipate strong performance from that because of the great value that it offers.
So the channel and value proposition on SWAB will be great for the coming months. China is the opposite direction. I think Graeme mentioned or somewhere we mentioned that China was growing mid single digits. China Hair is up 2 to 3 times that, growing market share, benefiting a little bit from repipelining after the China lockdown, but our China Air business is extremely strong, growing share and growing volumes and growing revenues.
Okay. Thanks, Alan. Our next question is from James Targett of Berenberg. We're going to let the call run for about 10 minutes to try and get 1 or 2 more questioners in, but we can't do it for much longer than that. Over to you, James.
Hi, thank you. And really appreciate all the subcategory color. Very helpful. Two questions, just on the innovation pipeline. Alan, at the start you mentioned that you talked about the rationalized approach, maybe sort of fewer bigger launches.
Do you expect the total value of your innovation pipeline to fall or its contribution to growth?
Or is
it just about focusing efforts on bigger projects? And does that focus reduce your local competitiveness at all, of what you're trying to sort of be more agile in responses to local competitors? And then secondly, just on Foodservice and Prestige. I wonder if you could comment at all about the kind of the exit growth rates in the quarter you were seeing in those two channels? Thank you very much.
Okay. Graham, shall I have a crack at the first one? You can talk about Food Solutions and Prestige. Thanks, James. 3rd question is, we believe focusing the portfolio innovation will drive higher overall incremental turnover.
It sounds ridiculous, but it is as we try and constantly strike this balance between global and local, I do think that we got carried away on too long a tail of small innovation, trying to measure every opportunity locally. Concentrating our resources behind fewer, bigger seems to have the impact of better growth. And we've got a role model for that, which is actually, we have 2 role models for that. 1 is our home care business and the other is deodorants, which typically set the pace on the main focus innovation agendas. It definitely does not provide local relevance And in a way, I wish I could call up a few slides that I used with our Board yesterday to show how we were responding in skin cleansing, home and hygiene and retail foods with new mixes that tap the zeitgeist.
So we've got a huge array of hand wash products, not just antibacterial Lifebuoy, but skin caring in the form of Dove because everyone's hand the red rock from overwatching, great sensory hand watches from wax and so on, a huge assortment of hygiene issues in cleansing actually, so sanitizers, but also professional hygiene solutions, which is growing really quickly. Then on the home and hygiene alongside rolling out domestic for a few markets, we have natural smelters that we launched, for example, we're launching in some big emerging markets where people for chemicals, getting the money for the times that we're in right now. And I think in foods, we've been very focused on, let me describe it in 3 different ways. The first is affordable at home heating solutions, and we've got lots of interesting new products in that space. The second is the continuing macro transport plant based, which is where we've focused disproportionately.
And the third is solutions specifically designed for e commerce delivery. So it's not just chopping off the tail, that's the easy, but it's actually retooling the innovation program would be relevant for the times that we're in, and that will definitely generate more incremental turnover to West. Graeme, maybe you can cover Proportion and Interest Asia.
Yes. Hi, James. So just let me just sort of mention all that for everybody, once again the foodservice businesses. It's 5% of Unilever in total, 20% of the business is in China, 25% of the business is in the EU sorry, in Europe, I should say, and 10% of the business is in the U. S.
And it's important to give that mix because, as we said in the presentation, the growth rate very strongly impacted by the impact of lockdown or recovery, etcetera, across different geographies. Yes, there's been very strong sequential improvement month on month, James, as the lockdowns have eased down. We were down 70% in April in UFS, 60% in May, but only 38% in June. And I don't know whether you can extrapolate that trend or not, but that at least gives you a sense of the exit momentum as we came out of the Q2. Precies is similar, similar check pressures in 10% in the quarter.
Again, I think Q2 is the toughest quarter for the business there. Just to dimensionalize that, it's about a €600,000,000 business. It is quite U. S. Business actually, 2 thirds of the business is in the States, about 1 third outside the States.
And we it sells through a channel structure, which is very dependent on health and beauty channels, so Sephora, Ulta, department store sales, etcetera. That's about 2 third of the sales or it was, I should say, because there's been a tremendous shift in demand in prestige from the bricks and mortar channels, which were closed during the Q2 into online, seeing some really strong growth in e commerce sales in prestige. And a number of the brands within the portfolio actually continued to grow. One of the biggest drivers of the decline in prestige was our color cosmetics business because, of course, color cosmetics is something where the consumer typically wants to try the product, typically wants to be working with a physical experience. So our glass cosmetics was done quite significantly, but we understand the reasons for that.
And overall, I think our prestige business is on a very improving trend. As stores begin to open up again, I think we will be able to hold on to the shift that we've seen moving into e com for the brands and that is a very positive trend. And just one other thing to mention, you might have seen that the in China, the regulations regarding animal testing are now being resolved. And so we are building some exciting plans, multiyear plans to start to bring more of our beautiful prestige portfolio into the big market of China.
Okay. Thank you, James. Graham, we've just moved your next meeting by 10 minutes, so you can take a few more questions. So the next question is from Martin DePoe at Jefferies. Over to you, Martin.
Yes. Good morning, everyone. Two quick and unconnected ones from me. First of all, you didn't mention the West Africa business, I don't think, and I raised it because it was part of the sales warning in December. Where was that business, Nigeria, Ghana, trending in H1?
And can I reconfirm? I think it's got a very easy comp in H2, hasn't it? That's the first question. 2nd question, on the CED merger, I get the hold on to India and Indonesia a bit. But can you talk a little bit about why you're holding on to the JV, the rationale for that?
And what happens to the IP of the Lipton brand? Do you sell that? And it gets licensed back into the JU? Just how does all that work? That's the second question.
Okay.
Right. Thanks, Martin. I actually want to put a footnote on what Graham said about the relaxation of animal testing requirements in China. That didn't just happen. That happened because Unilever has been working with the Chinese FDA for a decade on making that amendment and persuading them that the alternative models to animal testing are more reliable and safe.
And we're very proud of that and it will open up an opportunity for us. Now Mark, to your question, West Africa is still in good shape. Just as we start to get our inventory in balance, the oil markets are classing as maybe a bit dramatic, but they're certainly not strong. And so we'll see I think we'll see year on year growth in the second half in West Africa because of the dreadful comps last year, but I still don't think it's a business that's in a good shape, and we will we've got new leadership in there. We've got an opportunity to rebase, which we've done.
We're getting our route to market systems, but it's in the most difficult circumstances. And so, yes, mathematically, there'll be a year on year comparison improvement, but I don't want to start celebrating prematurely that we're out of the woods in West Africa. Graham, tea?
Yes. I mean, the
first thing to say, Marcin, is our announcement here is that we'll take €2,000,000,000 of the business, excluding India, Indonesia and the joint venture with Pepsi, and we'll separate that. And we'll take our time to work out what happens with that business. The best way to have that business thrive in future is going to be. And as usual, we'll be highly guided by value creation in everything that we do. I just wanted to reassure everybody of that.
When it comes to the joint venture with Pepsi, interestingly, from a market perspective, the ready to drink tea market is 2 thirds of the global tea market, It's much bigger. It's nearly twice the size of the leaf tea market around the world. And it's been an extremely successful joint venture between ourselves and Pepsi. It's one of those joint ventures where each party brings unique experience to Unilever in terms of the brand and marketing capability and Pepsi in terms of their expertise in bottling and distribution and it has worked very, very well for a long period of time. And that principally is the reason why we've left that out of the conclusion of the strategic review.
You're right to point out that it does present a change going forward potentially with regard to the Lipton brand, because if there is a different owner or a more separate operation of the Lipton brand a Nauti or Leaf Tea rather, then there'll be some need for some form of split arrangement. But given the essential difference between the two categories of ready to drink tea and leaf tea, we're sure that that's very manageable. So no real concerns there.
Martin, next question from Alicia Forry at Investec. Go ahead, Alicia.
Hi, good morning, everyone. I just wanted to ask about your expectations for an India rebound in H2 that you've kind of alluded to in the past. We saw Hindustan Unilever had some pretty strong results relatively speaking and you've got easy comps there too in H2. So just curious anything you can say about India in the second half? And then secondly, you've mentioned consumers have embraced eco friendly packaging perhaps even more rapidly than before the crisis during the crisis.
I'm curious which areas of the business are seeing the greatest impact to this change? And has there been any effect on gross margins as a result of this?
Thanks very much, Alicia. Graham, would you which of these questions would you like to crack at?
I'll take India, please, Alan.
Thought you might.
Okay. Alicia, let me tackle the India question first. So just a few comments on the Indian market. As you know, the market was slowing from very strong rates of growth a couple of years ago. It was on a downward trajectory from a market growth perspective.
Even before COVID hit us, I think the marks were growing about 6% in 2019, down to about 4% in March of 2020 and below 2% into the Q1. And then the lockdown hit. And I think thinking around an Indian rebound, we don't know what's the answer because it will depend on the status of lockdown in India, by state, locality by locality. I think that's going to be the main driver on the what happens in India. But having said that, that will be what it will be.
What I can say is that our business in India is extremely competitive. We have more than 80% of the business winning market share right now, and we're seeing share gains in the last 3 months, that reads. 80% of our business in India is in the health, hygiene and nutrition space. So it's very well positioned. So I can't give you a sense of what might be because it will be determined by the progress of the virus and lockdowns.
But what I can say is that our business in India is performing very well through the crisis and as I said, is very competitive and has a well positioned portfolio going forward.
Yes. I'm going to pinch a bit more on non India and just say I'm very worried about the disease conditions in India. I think it's important that the we think of India is winning. We talk about winning in many India, and that's how we'll be managing the business. I think there'll be parts of India at any given point in time that are kind of booming, and there'll be other parts that are under lockdown, and the government shown their tremendous ability to respond at a state or city level to the disease conditions.
I think the combination of an agile government and an agile business will serve us very well from a competitive perspective, but it's anybody's guess what will be the disease will move. As regards sustainable packaging, let me just say that our sustainable living brands continue to grow much faster than the rest of the portfolio. And there are headwinds and tailwinds on consumer adoption of sustainable packaging. The headwind is that eventually low oil prices will pass through to low virgin resin pricing, and that makes the differential between virgin resin and post consumer used recycled material greater. We welcome the European legislation that starts to put cost against virgin material in order to give an advantage to recycled material, and we hope that that will accelerate the adoption of more sustainable packaging, particularly plastic packaging.
As regard to your very specific question about detailed consumer growth or decline based on sustainaging, that's so precise a data point in an environment where we're seeing gigantic swings. Now, the honest answer is, I have no idea what impact it's having on sales in the short term, but we know that over time, sustainability drives growth and packaging is a very demonstrable part of sustainability and all of our divisions have got big pieces of work going on, on moving towards less plastic, better plastic and no plastic options for the packaging.
Okay. Thanks, Alicia. Go over to David Hayes at SocGen. If you could ask your question, David.
Thanks, Richard. Good morning, gentlemen. I hope you're well. Just give me one on the U. S.
Sales, one on the margins. So the U. S. Sales, just to come back to this discussion on exit rates and obviously very impressive performance in the quarter. Is there still an element of pantry loading in that market?
Obviously, there's pockets of uncertainty and surges in COVID rates. So I'm just trying to say whether there is still kind of a dynamic that was in March April that's just gone on for longer or whether when you talk about that exit rate, you see the continuing high single digit growth into the 3rd quarter? And if not, what kind of things change that? Why would it slow given that exit rate? And then on the margin side, just restructuring costs not massively different to last year first half.
You talked about less closures and savings. So is there some COVID one off costs you're able to book restructuring because it is effectively an organizational process change? And I guess related to the cost saves side of it, should we expect to quite a step up in cost saves second half as you say kind of come out of the sort of reactionary phase and now into more controlling the situation phase? Thanks so much.
Great. Thanks, David. I'll repeat the points on the U. S. Let me try and be even more direct.
Our categories were not particularly impacted by pantry loading. You need to go talk to the paper guys about that. And we have seen sustained high levels of consumption. I think the question that we are trying to get our heads around on how quickly or how long that will carry on for, and we see no signs quite frankly of it slowing down at the moment. It comes back to 2 questions.
How long will U. S. Consumers remain preoccupied with hygiene? We think probably for quite some time. And this is how long will meals continue to be consumed at home at a differentially higher rate than normal versus consumer at home.
And again, I mean, China, at the time of the second wave of pandemics, the H1N1, the so called source. And we saw it took ages for the Chinese consumer to become comfortable going back to the level of restaurant heating that they exhibited prior to that way. And I think we're kind of seeing that actually in the rest of the world. Bad news for our Food Solutions business, where we're planning on a slower recovery, good news for our retail foods business. Given the mix that we have in the U.
S, we're really benefiting from preoccupation of on hygiene and in home eating, much more so than the unusually large size American pantries. That's not been a particular asset. So, Graham?
Hi, David. On restructuring, so you're quite right. We normally have a lower restructuring spend in the first half. Projects tend to get accelerated through the second half and usually the second half phasing is a little bit more. We spent just around about 4 $100,000,000 on restructuring in the first half, which was pretty similar, as you said, to the first half last year.
And for the full year, we think we'll come in maybe $900,000,000 to $1,000,000,000 something around that sort of range. That's less than we expected. So we have slowed down a number of restructuring projects through the first half as we focused on just managing the business going forward. So there'll be a delay there and that's reflected in that sort of outlook of maybe €900,000,000 to €1,000,000,000 On the impact of COVID, no, we haven't taken anything into restructuring from COVID. So you saw in gross margin the impacts of mix, the impacts of all the on costs in the factory, that's all in the P and L.
Even the commitments we made to support communities around the world with donations, that's sitting in the P and L as well. We've just taken that all through the P and L. To the extent though that we have to reshape some parts of our business going forward, depending on the world that we face, thinking about the channels which are most impacted out of home ice cream and foodservice are examples. If we have to reshape those businesses for the longer term to put them back in a healthy position and to reflect the reality of the sort of future, then that would be done through the normal discipline process on restructuring business proposals. And that would be taken as restructuring, but there's nothing in there in the first half.
Okay. Thank you, David. Right. We've got time for one last quick question. John Ennis at Goldman Sachs.
If you can make it one and make it very quick, we can squeeze it in.
Yes. Hello, good morning, everyone. Thanks for taking it. I'll give you to one on Latin America. The message on LatAm at the start of the year was quite cautious relative to the flat performance you delivered.
So I just wondered if you could quickly provide some color on how that region trended through the quarter to get you to that flat performance. That's it for me. Thanks.
I can see you, Alan.
I'll get a headline, and then I'll ask Graham to give a bit more of a copy. Latin America has been quite a challenging story for us. It was, pardon me for getting a bit personal on this, but Ecuador was where we saw the first unilateral fatality from COVID and Central America got absolutely smashed early on in the outbreak. I've been surprised at the resilience of Brazil and Argentina, where the business has continued to do well. We believe we're gaining competitively.
And some of the innovation that we put in place on business model like B2B route to market is helping us. It won't be Mexico, Brazil, Argentina will not be growth markets, I don't think, for the next quarter. But I'll hand over to Graeme to give a little bit more detail on that.
John, let me just size Latin America broadly by country for you. Brazil is about 40% of the region for us. Argentina is less than 50%. Now Mexico is about 50% similar size. And Chile in size is single digits, high single digits.
So that's the size of things. Really, the bit of an epicenter in of the crisis in Latin America. 4 out of the top 10 countries by number of COVID cases are actually in Latin America, Brazil, Chile, Peru and Mexico. So we you can expect, I think, the peak of cases to be not yet reached. You'd expect to maybe reach that in Q3 or even Q4.
Brazil, which in the second quarter for us was down by low single digits. We expect a very deep and prolonged recession there. Unemployment forecast is to reach 17%, GDP minus 10%. We're seeing a lot of devaluation. So a tough situation to manage on the ground there.
As Alan said, we have an unbelievably strong business in Brazil, which has actually become stronger through the economic crisis of the last 3 years. We fundamentally changed our route to market, our with tremendous work done with our EVP capabilities, Copa Agora in Brazil. And that will put as Ingo said. We've also taken a lot of activity through the economic crisis to position the portfolio with Tier 3, Tier 4 brands, etcetera. So it's value and recession ready, but it is going to be tough, particularly in Brazil, I think, over the course of the second half and beyond because they're not yet at the peak of the crisis.
Okay. Thanks, Graham. Thanks for the question, Joao, for keeping it short. Right, we must stop there. I know there's been quite a number of people haven't been able to get their questions in.
Please e mail the IR team, and we'll arrange a time to talk to you this morning. So please get in touch. Apart from that, thank you very much for listening and enjoy the rest of the day. Thanks. Bye bye.