We are about to hand over to you, Unilever, to begin the conference call. For those participating on the teleconference, you may indicate your desire to ask a question at any time during the presentation by pressing star one on your telephone touchpad. Should you wish to cancel your question, simply press star two. If you need to speak to me, it's star one. To ensure all participants receive a high-quality audio experience, please ensure you are calling from a landline telephone and not a mobile phone. Please avoid using a speakerphone to ask your question. Use the telephone handset to minimize background noise. If you experience bad quality audio, please try redialing. We will now hand over to Graeme Pitkethly. Please go ahead.
Good morning, everybody, and a warm welcome to this third quarter trading update. I'd like to start with some of the highlights of the quarter and what we're going to do to deliver growth in what remains, for now at least, a stubbornly low growth environment. Andrew will then cover the category and regional performances, and I'll wrap up with the outlook for the year as a whole and a brief update of our progress on the actions taken to accelerate shareholder value creation, which we set out for you back in April. First, let me, as usual, draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures. Let's kick off with the market context. Overall market volume growth remains around flat, as it has been, in fact, for the past two years.
The overall number masks some divergent trends within, we need to unpack this a little bit. Let me begin with the emerging markets, where we continue to expect a return to robust growth in the medium term and, of course, where we remain very optimistic about the prospects for the longer term. There are already signs of improvement in some of these countries. India has been managing its way through the disruptions from demonetization and the new goods and services tax. While it's not yet back to historic levels of growth, we are cautiously optimistic for the near term and very positive for the medium and longer terms. In China, market growth has picked up, and in Brazil, consumer demand is still well down on last year, but it is flattening out.
While these are all encouraging signs, it remains a mixed picture with weaker market conditions in South Africa, for example, and in Indonesia, where wages are not keeping pace with inflation. Turning to Developed Markets, overall demand in Europe remains flat, as it has been for the past few years. In North America, market growth slowed at the start of this year and has not yet improved. It is important to point out that this does not mean that there is no growth in these markets. Across all of our markets, there are opportunities to grow with brands that appeal through a clearly articulated purpose that resonates with consumers' values, with innovations that bring relevant new benefits, and by growing in new channels. It is clear that many of the more traditional segments and channels are slowing.
This is why continuing to evolve our portfolio and our channels under Connected for Growth is so vitally important and why we will keep returning to this during our discussions. Overall, underlying sales growth was 2.6% in the third quarter, with volumes up by only 0.2%. As we'd expected, price growth is moderating. Unpacking this, there was a markedly different picture across our different markets and a strong contrast between the regions. In the emerging markets, growth accelerated to 6.3% in the quarter, and we've seen a notable pickup in momentum in volume growth, which was 1.8%. This is very encouraging, and we expect the trend to continue. In Developed Markets, however, underlying sales declined by 2.3% in the third quarter, having been around flat in the first half of the year.
There were some specific factors that impacted the third quarter in the Developed Markets of North America and Europe in particular. This isn't an ifs and buts presentation, but you will not see us excluding any of these items in our reporting. I do want to give you some relevant context and deeper background for the quarterly performance by both region and category. The first of these factors was the series of natural disasters in the Americas, namely the hurricanes that hit the Caribbean, Texas, and Florida, and to a smaller extent, the earthquakes in Mexico. These disrupted both retailer demand and transportation, leading to canceled orders and unfulfilled shipments left on the dock. Secondly, our sales of ice cream in Europe were down as a result of poorer weather in the latter part of the quarter after two consecutive very good summers.
Both of these factors were unforeseen and, compared with our ambitions at the start of the quarter, led to a growth shortfall of around 80 basis points at a global level for Q3. A third and partly offsetting factor was expected by us. We called out last quarter that the timing of Ramadan in Indonesia and destocking ahead of the implementation of GST in India held back sales in Q2. These effects partly reversed in the third quarter. The net effect of all three of these factors was to reduce underlying sales growth and specifically underlying volume growth by around 40 basis points in the third quarter. We are encouraged by the improving volume momentum in emerging markets, this does not mean that we are satisfied with our overall performance this quarter.
The first two factors I just described to help explain the markedly weaker performance in Developed Markets in the third quarter. Together, they reduced sales by about EUR 100 million, split roughly equally between North America and Europe. We also lost share in ice cream in North America to Halo Top, a new competitor. Overall, in the third quarter, we came up about EUR 150 million or around one day's sales short of where Paul and I would have wanted us to be, and we're not happy with that in aggregate. In fact, we feel we left some runs on the field of play this quarter, while our overall growth is in line with our markets, we know that we can and will grow faster.
The changes we've been making to our organization, including the setting up of the country category business teams, which are now fully established, put us in a much stronger position to win in this fast-changing and more competitive marketplace. We will progressively reap the full benefits of these changes, but it's reassuring that we're already seeing some good examples of a more focused global innovation funnel, together with greater local agility and speed to market. We are reducing the number of global innovation projects while increasing their average size, and we're speeding up the rollout time from the first to last market by up to 30%. For example, innovations like Magnum Pints, launched less than a year ago, are now in 19 markets, and we expect them to deliver more than EUR 30 million of turnover in 2017.
Baby Dove, which we've taken to more than 20 markets in the last 12 months alone, most recently South Africa and the Middle American countries. Simple, which plays in the fast-growing natural space in the U.S. and the U.K. and is now rolling out globally through the second half. At the same time, we are landing more local innovations than ever before. In fact, so far this year, we've increased the number of local launches in Unilever by more than 50%. We showed you plenty of examples with the first half results, like Hijab Fresh, which is a new brand launched in Indonesia for Muslim consumers, or Lux Botanifique, a premium silicone-free shampoo in Japan. Here are a few more recent ones. A premium Omo Naturals range in China, starting with an online launch in Tmall in September.
Bärenmarke in Germany, like many of us on this call, I suspect, this is an old classic brought back to market in a matter of weeks. Knorr Fresh Meal Kits, an experimental launch in the Netherlands with online retailer Picnic. As it's a test, it's being developed under licensing and a co-packer. If it fails, it won't have cost us much, but if it succeeds, it opened up a new opportunity for Knorr in chilled foods. As we've said before, we're seeing a rapid change in our channel footprint. It goes without saying that we need to be where our consumers are, we're becoming increasingly channel-centric, bringing our marketing and customer development teams closer together and innovating specifically for our channels. Let me share a few examples, including three completely new brands that we've launched.
Keju by Lux, specifically for e-commerce, co-created with a Korean designer to meet the K-beauty trend with urban millennials in China. In the health and beauty channel in Asia, we've extended Dove into face care with a proposition that puts back moisture and nutrients with every wash. In the U.K., we've launched four Amazon laundry bundles, a brilliant example of understanding the algorithm to win in search and tailoring our offerings. Leveraging the learnings from Dollar Shave Club, we've launched two completely new direct-to-consumer brands, Skinsei in the U.S., which provides a personalized skincare regime based on skin type and local environment, and Verve in the U.K., a monthly subscription of products that protects clothes from damage wash after wash.
Finally, taking learnings from our retail operations group and the 1,300 stores that we now operate worldwide, we've recently opened a St. Ives mixing bar in New York where consumers can mix a product that is uniquely their own. It's safe to say you see a lot more channel innovation from us in the years to come. Alongside innovation, we've been developing our portfolio through M&A with a faster pace of change and a clear strategy to position our portfolio for future trends and higher growth. Each of our acquisitions has a rationale that has a strong fit to our strategy. Acquisitions like Carver Korea and Quala build on our strength in personal care. Dermalogica, Living Proof, and the other prestige brands we have acquired extend our personal care presence into much higher growth points with an attractive growth profile.
Sir Kensington's and Grom are examples of premium brands that can work well through mass channels. Blueair and Dollar Shave Club take us into entirely new channels. Seventh Generation and Pukka are examples of meeting the growing demand for more natural products. Since the start of 2015, we've been much more active. Taking all of the 18 acquisitions that we've completed or announced since 2015, we see that the total consideration is EUR 8.2 billion, the acquired turnover is EUR 2.1 billion, and they collectively grew by 16% in the first nine months. As a reminder, most of this is not yet in our underlying sales growth, but will increasingly contribute to USG over the coming quarters. As well as moving into higher growth segments, we also continue to actively manage the portfolio, moving to dispose of lower growth brands or brands that no longer fit with our long-term strategy.
We expect that the combined impact of the acquisitions we've made since 2015, once they've anniversaried, and the disposals, including spreads, will add one percentage point to our ongoing underlying sales growth. I'd now like to hand over to Andrew to take us through the development of turnover and the category and regional performances. Andrew?
Thank you, Graeme. Underlying sales grew 2.6% in the third quarter. Acquisitions added 1.5% to turnover, which was partly offset by the disposal of AdeS to give a net M&A impact of 1.1%. The acquisitions impact includes part of Dollar Shave Club, which was completed halfway through the third quarter of last year, as well as the eight other acquisitions we've completed during the last 12 months across all four categories. Currency translation reduced turnover by 5%, a marked change from the first half year when it was a tailwind. This is a result of the sharp appreciation of the euro between April and August this year. It's worth noting that most emerging market currencies have been stable or stronger against the US dollar this year. This remains encouraging for day-to-day affordability in these markets.
If exchange rates were to remain as they are today for the balance of the year, we would expect currency headwinds of about 2% on turnover for the full year and less than 1% on EPS. Turning to the performance by category, in three of our four categories, that is Personal Care, Home Care, and Foods, we've seen a clear pickup in volume performance compared with the first half year. Personal Care grew 1.8% in the third quarter, with 1.0% coming from volume. Price growth has moderated with the easing commodity pressures and the effect of GST in India, which I will come back to in a moment. The strongest growing brands have been Dove, including the extension into baby, and Sunsilk, with more natural variants. However, Rexona and Axe have been weaker.
These are brands which are strongly exposed to some of the markets where consumers have been downtrading, like Brazil and South Africa. Our Personal Care portfolio is still heavily weighted to the mid-tier of price points, which is where this downtrading has had the biggest effect. Our deodorants brands were also weaker in Europe, where competitor promotional intensity increased. Home Care growth improved to 4.6%, with 1.3% from volume. This has been led by new product launches such as Persil Powergems in the U.K. and the continued strength of Comfort fabric conditioners. In Latin America, Brilhante, which is our whiteness brand in a value propositioning, proper positioning, has benefited from downtrading at the expense of Omo. Foods, excluding spreads, grew by 2.7% in the quarter, with volume turning positive, driven by a pickup in emerging markets. Knorr grew by 5% with a good balance of volume and price.
The trajectory for spreads continued to improve, with a decline of just 2% in the third quarter and improving volume. Refreshment is the only category where volumes weakened in the third quarter. Underlying sales grew 3.1%, but this was all from commodity-driven pricing. Volumes were down by 2.4%. In ice cream, we've grown strongly over the past two years, helped by our innovations behind brands like Magnum and Ben & Jerry's and two good summers in Europe. This year, we had poorer weather in August and September, leading to lower sales. Despite this, Magnum continued to show double-digit growth globally with almost half from volume. Tea continued to grow in mid-single digits, and we have taken share leadership in India, the largest tea market in the world. Turning to the performance by region, starting with our largest region, Asia, AMET, RUB.
Underlying sales were up 6%, with a healthy pickup in volume growth to 2.7%. China delivered double-digit volume growth led by e-commerce. In India, we saw an improvement in volume following the implementation of the new goods and service tax. Our business was able to start invoicing immediately without any problems. While some of our customers coped well with the change, others have had more difficulty and only recently returned to a more normal buying pattern. As a result, we've only recovered part of the shortfall from the second quarter. Price growth in India was lower as we passed on the benefits of the tax change to consumers as expected. Latin America grew by 6.6%, all through pricing. Volumes are still marginally down, but by less so than in recent quarters.
The volume decline in Brazil has slowed through the year and was only -1% in the third quarter. Volume growth in Mexico, which had been strong in the first half, stalled in the third quarter. This was the combined effect of prolonged rains from Hurricane Harvey on ice cream sales in August and the disruption from the earthquakes in September. We expect volume growth in Latin America to turn positive next quarter and beyond. In North America, underlying sales were down 2.9% in the quarter. The hurricanes in Florida and Texas, our second and third largest markets, disrupted transport, and we lost on average about one week of sales in these states. We expect part of this to be recovered in the fourth quarter. Our Personal Care and Foods businesses in the U.S. continued to gain share.
In ice cream, as Graeme said, we have lost sales to Halo Top's low-calorie, high-protein proposition, which has taken off rapidly. We've responded with our entry into this segment in June, launching Breyers Delights, and have followed up with further variants added in September. We expect to be back in growth in U.S. ice cream next year. In Europe, underlying sales declined by 1.6%. We've continued to grow well in Central and Eastern Europe and return to growth in the U.K. However, lower ice cream sales led to declines in Germany, France, and Spain. With that, I'll hand back to Graeme.
Thanks, Andrew. Let me just try to summarize that regional picture. We're encouraged by the improving volume growth in the emerging markets, and we expect to see this trend continuing now in both Asia/AMET/RUB and in Latin America. In North America and in Europe, however, we've had a particularly difficult third quarter, and we're not happy with our performance in the aggregate. While we don't expect that to repeat, market conditions are likely to remain challenging for the time being. We're fully focused on getting back to growing ahead of our markets. Our share of voice to share of market is competitive, and we'll be bringing more firepower to bear here. Changing trends and channels put a premium on agility, and Connected for Growth, our organizational change, truly delivers that. We continue to expect to deliver against our full year objectives.
These are underlying sales growth within the range of 3%-5%, a step up in underlying operating margin of at least 100 basis points, and another year of strong cash flow. Let me finish up with a quick progress update on the actions we set out in April to step up value creation in Unilever with the accelerated Connected for Growth program. The first of these was a simpler and faster organization. All of the country category business teams are fully in place, and the integration of foods and refreshment is on track. The second was accelerated margin improvement, driven by an amplified savings program. As we explained at the half year, we're making good progress here, with our savings programs delivering a little faster than we'd planned.
We're progressively stepping up the level of reinvestment of savings through the course of the second half year, expect to see the benefits of this over the coming quarters. The third was an accelerated evolution of our portfolio. I showed earlier the increased pace of change through acquisition. In the last 12 months, we've announced nine acquisitions compared with five in the preceding 12 months. The exit from spreads through sale or demerger is on track, and the board's review of our legal structure to enable future strategic flexibility is progressing well. The acquisition of the preference shares is an important step to simplify our capital structure and improve our corporate governance. Finally, we targeted an increased leverage and return to shareholders. We've completed EUR 4 billion of our EUR 5 billion share buyback program, and you'll remember that in April, we raised our dividend by 12%.
With that, let's move on to take your questions.
Thank you, Graeme. As a reminder, if you want to ask a question, please press star one. If you wish to cancel your question, press star two. If you're listening to the conference call on a speakerphone, please use the handset while asking your question. Finally, please keep your questions to a maximum of two. Our first question comes from Warren Ackerman of Societe Generale. Warren, please go ahead.
Good morning, Graeme. Good morning, Andrew. It's Warren Ackerman here at Soc Gen. Two questions, please. The first one, Graeme, you said that you and Paul were disappointed, you left some runs on the field. A nice saying, you got the share price down 3%-4% today. Can I just go back to your expectations on the shortfall? You said 80 basis points, but 40 basis points net of Ramadan GST. If I add 40 basis points back to the 2.6%, you still would have only been at 3% USG for the quarter, compared to consensus, which was much closer to 4%. I'm just trying to understand the gap, maybe you can outline the moving parts for Q4 and what USG you expect for Q4, given the difference between what you delivered and what consensus thought you would deliver.
Secondly, can I just go back to personal care, specifically in the quarter? Maybe you can talk a bit more about deodorants. I think it is one of your better businesses, and I think we saw some pressure in deodorants this quarter. I think you talked about some markets like South Africa. Is that a concern, and what is the outlook for that specific subsector within your PC division? Thank you.
Hi, Warren. Morning. Thanks for the questions. If I take the first one and our feeling of a bit of dissatisfaction with the Q3 performance, you have sort of done which I don't think we should do here, which is sort of pro forma add back 40 basis points and come back to a number. I don't want to do that because in aggregate, we just want to describe the factors that made us come up a little bit short and not sort of pro forma it.
I will give you an example, two examples of where we are not disappointed with hurricanes and there is not much we can do to control the weather. Where we are, we feel we left some runs on the table. Our competitiveness has dropped off a little. We are now growing share in about 50% of our business, as opposed to the last couple of years when we have been up around the 60% mark. We are growing at market. Our markets are growing in aggregate between 2% and 3%. We are growing about 2.6% in the third quarter. That is not good enough for us. We need that 1% outperformance versus market growth, and we will get that back. The second thing, I said in the talk there that relative to our own internal expectations, we were about a day's sale short on a 90-day quarter. That is roughly where it came up.
Other than the factors I called out, for example, Andrew mentioned the battle with Halo Top in North America, that proposition has built a 5% share provision position very, very quickly. It has taken one and a half share points from us. We have responded very quickly with Breyers. We have gone in 6 months it has taken us to get Breyers Delights into the marketplace. That is very quick compared to where we were. That is the benefit of the new organization. It is not quick enough because that proposition has been built. Hence, us not being totally satisfied in aggregate with the performance, Warren. That is where I would say. Turning to DEOs, we have had a slowdown in our DEOs performance. Some of our biggest brands, Rexona, for example, is growing a little bit, quite a bit more slowly than it was last year.
Obviously, there were one or two marketplaces which are more impacted by that than others. Brazil is a large DEO market for us. The Latin American performance gets taken there. Similarly, in Europe, we're seeing an awful lot of price competitiveness in DEOs, a lot of price promotion, which we're having to respond to, but that makes it a very competitive environment there as well. Taken in totality, though, across the whole of our DEOs business, our market shares are still up. That's driven by North America, where Looking at Andrew here, I think we've established about 1,000 basis point differential in leadership of the DEO market in North America. I might use the example because I know the North American results will be a focus for everybody. Across the totality of our North American portfolio, we are very competitive in every category apart from ice cream.
In ice cream, the loss was due to the new entrant of Halo Top. Although our North American results have been subdued, it is a competitive performance.
Okay. Thank you.
Thanks, Warren.
Our next question comes from Alain Oberhuber of MainFirst. Alain, go ahead, please. If Alain's not there, then we have Celine Pannuti, and we'll take Alain after Celine. Celine, if you're there, please go ahead. It sounds like Alain.
Hello, everybody.
Hi, Alain.
Alain with MainFirst. Thank you much. Good morning, Graeme. Good morning, Andrew.
Good morning.
Question regarding coming back to the ice cream business. Could you give us a little bit more insight when you expect to recuperate the market share losses in the U.S. and when we could expect again a stronger growth rate in that business? The second question is regarding home care. Great performance there. Congratulations. Do you think that will be sustainable in the next one or two quarters?
Morning, Alain. Thanks for the questions. Ice cream in the North American market, we do think we will recover quickly to a winning position and growth again in North America in particular. Overall, ice cream is growing year-to-date at 6%, but volumes are slightly down. The relatively poor Q3 in ice cream, which is a combination of the hurricanes, because of course, Texas and Florida are our big ice cream markets for us in North America, the competitive share losses to Halo Top, but also the very poor European weather in September. That poor Q3 mask what has actually been a pretty good performance, I think, in many markets. Our fastest-growing brand in the whole portfolio at the moment is Magnum, which is close to 15% growth. We've had some great innovation performance. I talked about Magnum Pints going into 20 markets really quickly.
Magnum Double, Ben & Jerry's, all of our big bet innovations, the big assets that we brought to the marketplace in ice cream this year have gone on very successfully. We're feeling confident in ice cream. We did have, as a consequence of the weather in September, a high single-digit volume decline in Europe in the third quarter. I think we've got our hands around the issues. They're quite specific, overall, we're feeling good about ice cream performance this year. Thanks for mentioning home care, because I really think it's the steady performer from both our overall balance of performance perspective, but also importantly, also achieving its strategic objective, which is proving its margins, balancing growth and margin effectively.
If you remember, the operating margin was up 110 basis points in the first half, and we really do think that we're on track to deliver its contribution to the 2020 targets, which would be about a 16% margin, we think, for home care. What's been driving it? It's been high-quality growth. It's driven by market development. You remember our home care business really is an emerging markets business. Market development is as important as winning share, et cetera, and particularly strong innovations. The thing I'd call out is fabric conditioners. Our fabric conditioners business is growing very, very healthily. We've seen a little bit of a slowdown actually in the momentum that was in fabric cleaning, That's a balance between delivering quality growth and delivering the right shape of margin. Andrew mentioned it on the call that Brilhante in Brazil is winning big.
It's also winning at the expense of our other big brand, which is Omo. That's another example where the portfolio and introducing tier 2 and tier 3 brands for a hard-pressed consumer works. It costs us a little in aggregate in the short term, We're fairly confident that by managing that in the way that we are, we will pull things through and be better positioned in the longer term. There are some really exciting innovations sitting in ice cream and some white space expansion. We've put Surf into Central and Eastern Europe. We've had a lot of success rolling out Domestos toilet blocks in the European space, and you're now starting to see Seventh Generation, the Naturals brand we acquired coming into the U.K. I think a lot of excitement in home care.
Good.
Thank you.
We'll take the next question from Celine Pannuti of JPMorgan.
Yes. Thank you. Good morning. My first question on the market outlook into 2018, you mentioned the market is growing at 2%-3%. Do you still see that continuing into 2018? What do you make of the pricing outlook? I think yesterday, one of your competitors was talking about negative pricing. Yours remains quite positive. If you could comment on that. I presume as well, should we therefore expect, given what you said of your ability to grow faster than the category, that maybe you will be at the low end of the 3%-5% into 2018? The second question is really repeating the question that Warren asked on personal care. If you can give us a bit more background on the moving parts. I see that the volume accelerated 1%.
At the same time, the comparative base was 300 basis points easier, it has been a rather weak performer. If you can comment on the category and different subcategories, please.
Okay, thanks, Celine. Good morning. Let me take the second one first about personal care. Then I'll comment a bit on markets and give Andrew a bit of time to come back on pricing outlook, which is a little bit more complicated with exchange rates, et cetera. On personal care, yeah, personal care performance was a relatively low rate of growth as we've seen in the quarter, 1.8%. Thank you for calling out that it's the sequential acceleration in volumes in personal care, which we're encouraged by in this quarterly performance. In fact, we've seen a volume step up sequentially in three of our four categories. The only one that isn't is refreshment. We've spoken a lot on this call already about the specific factors that cause volumes to be negative in ice cream in particular.
Yes, it's a low rate of growth in personal care, we are encouraged by that step up in volume for sure. The performance has been a little bit mixed. Dove and Sunsilk are growing strongly. As I said earlier, we've had very good share gains in North America in deodorants and in hair and in skin cleansing. The overall market remains quite soft. In Latin America and South Africa, where we've got quite significant downtrading, our portfolio is largely mid-tier. As the consumer moves down to tier 2 and tier 3 brands, we suffer a little bit of a loss of volume in those situations. Our performance has been a little bit weaker in Southeast Asia. That's where we find the impact of new local competitors who are agile, who are faster to react to local trends and spot local consumer opportunities.
That is, I think, the sort of premier league of where that's happening in Southeast Asia. It's no surprise that you see a lot of the local innovations that our new organization is bringing in are focused on Southeast Asia, where those trends are there. Our personal care performance in Southeast Asia has been a little bit uncompetitive. It's that shift to the locals. It's that dynamism and pace that's needed through the new organizational design where we expect to see the benefits land hardest, if you like. I mentioned it earlier, the deo business in Europe is pretty price competitive with a particular competitor. We are doing a lot of the new innovation and the reshape of the portfolio through M&A, of course, is focused on personal care. I mentioned the three new organic brands that we've launched this year in personal care.
Long time since the last brand we brought to the market was Regenerate, I think, perhaps before that, Dove Men+Care. Lots of new activity with truly new organic brands focused on personal care. You know what we're doing in naturals behind Simple, St. Ives, the launch of Ayush in India, which is our biggest number of SKUs we've ever launched in the Indian marketplace. You know what we're doing through M&A, repositioning the portfolio in prestige, new channels with Dollar Shave Club, getting into very strategically significant new spaces like skin care in North Asia. Lots of action in personal care. All the right things happening for the future, a relatively low growth month, one where we do see the volume sticking up nicely. Overall market growth, as I said, is 2%-3%.
Just to give you the context of that in the 3%-5% long-term outlook that we have given you, I'm really looking to 2018. If market growth doesn't pick up from where it is today, we pretty much expect to be in the 3%-4% range, so the bottom half of that 3%-5%. That's going back to that expectation we have of always being competitive and growing 1% ahead of the market growth. If the market does pick up, however, to say 3%-4%, that would get us into the top half of that range, and we would expect to grow between 4% and 5%. On pricing, let me hand over to Andrew.
Yeah. Thanks. Yes, you'll remember that in the first half year, price growth was 3%. We said then at the mid-year that we expected that to moderate and come down a bit in the second half. The first most important thing is to put it in the context of commodity costs. Commodity cost increases were up mid to high single digits in the first half. We said we expected them to be up by low to mid single digits in the second half. Some easing of the commodity cost pressures, which is what we're seeing. In terms of a few countries, we are seeing price now positive in Germany and Central and Eastern Europe and flat in Italy, Spain, and the Netherlands. That's better than where we were. In Brazil, we've got pricing now virtually flat, which is clearly by historic context, unusual.
Finally, India. India, we talked a bit about on the half year call. In India, we get a benefit from GST through both lower taxes on the goods and services we buy in and getting full tax credits on those goods and services, as well as changes in tax rates on output. The net of all that is a benefit from a tax point of view, which we pass on to our consumers. Hence, we said at the half year that we expected that to be around 20 to 30 basis points lower pricing on Unilever in total. Just for clarification, in case anyone was wondering, there is no impact on our Unilever reported results from the accounting treatment for excise duty because in Unilever's group accounts, group reporting, we were already netting those off from turnover.
In terms of next year, I think, Celine, you were looking for some kind of outlook and guidance, and I think we'll wait till the full year to look and see what commodity costs are doing in particular before we guide on pricing for next year.
Yeah. Thanks, Celine.
You don't have a specific issue on pricing pressure in DMs?
There are always price pressure points, Celine. We've commented on, for example, personal care, particularly deodorants in Europe, but equally, there are other places where we're coming out of some price pressures, which we're easing. Everywhere around the world, we always see some pressure points, but nothing I would say at a macro level different to what we had had.
I think, Celine, that you can always expect that the Developed Markets are going to be highly promotionally intense. A lot of volume goes out on deal in a number of our European markets. Levels of couponing remain very, very high in North America. Looking through that to net pricing at the end of the day, it's all about managing your pack price architecture, making sure that you're available in the right channels, making sure you're there at the right price for the consumer, and that's really the focus of what we talked about in calls past, is net revenue management. We're building our capability up there. I think it's an essential market, essential muscle rather, for all consumer companies. Some are better at it than others.
I think we need to continue to build our capability there because you touch on a key point, which is the pricing environment in the Developed Markets is not going to get any easier. Sure, there's going to be a little bit of inflation, perhaps coming back in intense markets like the U.K., but overall it's a highly price intense marketplace.
Thank you.
Thanks, Celine. Could we have our next question, please, from Martin Deboo of Jefferies?
Yeah, morning, everybody. Martin Deboo at Jefferies. Two questions. One is a question that Warren asked right at the start, I'm not sure if it was answered, which is how should we think about Q4 in the light of the Q3 and the 9M? To make full year consensus, you'd need to grow about 6% in Q4, which looks like a big ask, but how should we think about Q4 structurally relative to Q3? The second question, Graeme, I guess is a more structural one, which is, one could characterize Q3 as a quarter of little local difficulties, or one could characterize it as a quarter where there's some tectonic plate shifting.
Your comment about only gaining share in 50% of sales, that has an echo with a conference call I was on with a large company in Slough yesterday, commenting that they feel the ability of big brands to take share is being questioned. I'm sure the answer to the second question is it's complicated, but are you seeing any systematic pattern for local competitors to take share from you? Or is it little local difficulties? Those are the two questions.
Morning, Martin. A couple of good questions there. How do we think about Q4? We obviously think about Q4 a lot less than you guys do, to be honest. You've heard us state it before, but we really do not manage the business by reference to a series of quarters. Obviously, there's a Q4 consensus, that will adjust following the results that we announced this morning, then we'll see where we are. Our Q4, all we're prepared to say is, in the long run, we think we will get into that 3%-5% range for this year, and we think that 3%-5% range is the right level of expectation to set for the years to come. As I said to Celine, that will largely be driven by market growth rates. Recovering will be the big determinant of where we sit within that range.
To take that and sort of extend it into your second point about, is it little difficulties or more structural? The hurricanes and the weather just are what they are. That's more there just to give you a little bit of color on what isn't underlying, if you like, in what we've seen. Back to that point around where we are unhappy with the aggregate performance in Q3, it is exactly that drop down in competitiveness, that 1% outperformance, that 60% winning share in argument has dropped to 50%. I could speculate about why and what that might be, but I do think to build on your conversations from yesterday, that there are some challenges, and there are challenges in our industry. There are fast moving changes. There are new competitors, and there are consumers moving to new channels.
In order to do that, we have to change our businesses. We believe that what we're doing with our organizational change to make us more local and more faster, but also do the global innovations faster and bigger with higher impact, is exactly the right move. You have to shift your organization in order to do that. We're augmenting that with the strategic use of M&A, that's why we talked about it specifically in the presentation. I think in combination with how you change your capability, you innovate in a more channel-centric way. You empower your businesses on the front line more. Frankly, you make sure that your global, whatever you're doing globally, has to add value globally. Otherwise, there's no point in doing it.
It cannot get in the way of the front line of the operations and the ability of people in our marketplace to be close to the consumer and to react to that in a very, very competitive way. That's what we're trying to do, is to get out the way of the front line of our business and empower them with the organizational changes. The M&A point is around giving them, longer term, the assets that they need in order to connect with the consumer where the consumer is shifting to. In every one of our M&A transactions over the course of the last couple of years, I think you're starting to see a pattern where there's a strategic objective to it in the form of an ability to reach the consumer in a different way or address a new trend.
I think it is dealing more, to come back to the specifics of your question, I think it is dealing more with tectonics. I think that it's quite possible to have the benefit of scale whilst making sure that you're able to compete highly competitively against those tectonic shifts. Sometimes you won't be able to line the pace of those two things up perfectly, and that's, I think, what we've seen in the third quarter, where we're a little bit less competitive than we'd expected to be.
Okay, thank you.
Thanks, Warren. The next question is from Alex Smith at Barclays. Alex, go ahead, please.
Hi, good morning. I guess just coming back to those comments about leaving runs on the pitch or your competitiveness having dropped off a little. I guess you've clearly made very good progress with your margin in H1 and are on track to make good progress again in H2, but I'm just wondering how much of that revenue shortfall is perhaps being overly focused on delivering on that margin target. I guess how do you get that balance right? Historically, it's been something that's very difficult to achieve across the consumer staples space. The second question is on market shares, again, the 50% versus the 60% where you were before. Presumably those are value shares, I think. Would you be able to share with us the similar sort of statistic on a volume perspective?
I guess, maybe if you could give us a bit more color as to where you are doing very well gaining share, where you're not gaining share, and where you are underperforming. Is that to a certain extent an element of by choice, where again, you're prioritizing cash and margin? Thanks.
Thanks, Alex. Good morning. On the fundamental question of investment levels, let me step back a little bit and just reconfirm that this is a balance point to be worked at all times in consumer companies. We're very clear that we're a growth model, and it's not about growth or margin. It's about both growth and margin, as you've said us say many, many times. If we weren't able and we found ourselves over a long period of time structurally not getting the growth we think we should because of a margin target, then we would prioritize the growth every single time. First thing is we continue to invest BMI at a very high level, and you've heard me say before, we've increased it by EUR 12 billion over the last eight years. We're now doing about EUR 7.5 billion a year.
We think that that is enough, and we basically said in the strategic review, over the next four years, we thought we'd have about EUR 30 billion of firepower in investment levels. That basically means we anticipate that we've got around about the current levels. It's just fine to fuel the growth in our business. We're very clear on the third quarter and year to date, in fact, that our spend is very competitive. Now the whole market has recalibrated and is spending a little less. Against that, and this is never a very good measure, but it works in aggregate, if you like. Our share of spend to share of market is over 100, well over 100, and it's stable versus last year.
Our brand health measures, which are the most important trailing measure of where that investment goes, because a lot of it doesn't result in share gain or growth, but in fact, it invests in the long-term equity of the brand. Our brand health measures remain very strong. There is a changing approach here, because when we're spending as competitively in terms of the share of spend, share of market level as we were last year, I'm absolutely certain that we're doing so in a much more effective way because ZBB allows us to put more of our reinvestment back and cut waste out and invest in a more effective way. We've got much more consumer-facing media and promotional point of sale investment as part of that mix, and less on non-working media.
Less money spent creating advertising, more money spent showing that advertising in a more effective way to our consumers. Of course, the way in which you show that advertising is shifting. We've got a third vector here, which causes some of the correlations of the last 10 years maybe not to be quite as relevant for the next 10 years. That's something we're all going to have to work through. We could talk for ages about what we're doing in terms of digital and social and video and search capability and those sorts of things. Clearly, the mix of advertising has changed a lot. No, we don't think that there is a correlation between our investment, our margin delivery, which you expect to be over 100 for the year, and overall growth and that step down in growth.
We think that step down in growth competitiveness, which was in the third quarter, was quite focused in a few areas. As I've said, when you deconstruct it and take most of our markets, North America, for example, very competitive across all categories apart from ice cream. Europe, a little less so. Southeast Asia, a little less so. We'll be focused on bringing that back.
Sorry, quickly. My question was in part how much of the margin priority has been a distraction for the organization in terms of trying to balance that growth and margin, not so much the A&P spend.
We've always delivered margin. We've delivered a steady increase in margin consistently for the last seven or eight years. It's not like the organization isn't used to balancing a P&L and managing the shape of a P&L. The big disruption is that levels of market growth are lower than they've been in many years, and the specific challenges around some markets where we have big businesses are particularly intense. What I think is terrific is that in aggregate, when we balance out the diversity of our portfolio, our exposure to the emerging markets, it means that we're able still to deliver a competitive growth number through those challenges. As those markets recover, as we're convinced they will, we'll seek to benefit. When we do that with a higher rate of margin accretion, then the value creation is substantial.
I'll take the point on the market shares and the.
Of course.
Yeah, exactly. The 50% applies to both value and volume. Just to give some color around by category. In personal care, we're gaining in skin cleansing, Baby Dove, and deodorants in the U.S. as well. Deodorants in Brazil, South Africa, we mentioned, affected by down trading, and in Europe, down in deodorants due to the competitor promotional activity. In home care, good gains overall, particularly emerging markets, up in laundry. Household cleaning is flat, particularly given competition in Europe, but holding share in household cleaning. Within foods, we're up in savory. We've actually gained share in U.S. mayonnaise as well, although the whole market is down in value terms in U.S. mayonnaise because of competitor pricing. Margarine, we're almost back to flat, almost back to maintaining share.
In refreshment, we're down in ice cream, entirely for the reason that Graeme mentioned, through Halo Top, what we mentioned, but also actually one other factor, which is that in Europe, we've been prepared to cede some share in low-margin bulk in-home ice cream business as we evolve our portfolio. Hopefully, that gave you some extra color around the wins and losses.
It does. Thank you.
Just one overall point maybe, Alex, that we're around about 50% in value share business winning at the moment. Our volume share performance is a winning performance. We're about 5% higher than that in terms of volume share winning. Leads back into the thrust of your question before about our willingness to invest in price and win at a volume level is still there and robust. These are the things which our businesses are managing on the front line day to day. You can see there that there's no sort of desire to chase after a profit number at the expense of competitiveness at a fundamental volume level.
Got it, thanks.
Thanks. We have two more questions. We'll take those two and then close the call. Firstly from James Targett of Berenberg. James? Okay. In that case, we'll take, we have James Edwardes Jones of RBC.
Yeah. Morning, guys. Two questions, if I may. The winning share, the 50% winning share, you used to, I think, define winning or gaining, sorry, winning or holding share, and the figure used to be around 60%. Can I just confirm that that's 50% absolutely winning share and not just winning and holding? The second one, I'm not really sure how to ask this, but you're saying spend is competitive and brand health measures are strong, but by your own admission, sales and market share performance is disappointing. I'm thinking of P&G's comments that to some extent, digital marketing isn't working. How well are you coping with developments in marketing, and is that spend as effective as it used to be?
Let me take the first one, James. No, I'm afraid you're wrong on that one. You were getting us mixed up with someone else. We've always done a binary, it's either winning or it's losing. When we said 60%, it was 60% winning, 40% losing. We don't have a maintain category in that. We've been very consistent when we say that at the moment, it's around 50% winning and 50% losing. Nothing in the maintain. Plus one basis point is a win, minus one basis point is a lose.
James, I'll take your second question there. Yeah, our spend is competitive. We're clear on that. We have more spend coming in in Q4, and we always said that we would be a little bit backward-weighted in terms of innovation and spending. We have a very high-spend quarter coming up from an investment perspective. When we said we're a little bit disappointed with the Q3 performance, really that's from the perspective of one quarter and expectations in one quarter. I think overall, what we're very reassured by is we're making the right changes within our business, the organizational changes, and reshaping the portfolio. All of that we think are the right things, because that, in many ways, is the more strategic response to the changes that are taking place within the consumer communication landscape.
Don't need to tell you, there's an awful lot of change and flux here. Very exciting, in fact. If you get it right, you get it very right, and if you get it wrong, you get it very wrong. The ROIs on traditional media, TV advertising are what they are. There's quite a narrow band that's quite predictable. The ROIs on today's landscape of search investment, social investment, video, et cetera, it's much, much more wide. Display advertising, for example, or social, in fact, has a very, very strong range of ROIs for individual types of investment. All we can do there is continue to invest very heavily in building capability in that new marketing space.
About a third of our investment is, and this is probably the wrong distinction here, but quote-unquote "digital." Unilever Studios, which our in-house studio digital content capability is now in over 20 countries. We're doing our own digital advertising and content creation in-house for that. People data centers, which we think are pretty market-leading ability to secure consumer insights from social listening and scraping of data from around the sort of digital landscape, that's now in 20 markets and cover 40 languages. We think we've got a world-class programmatic capability in our Ultra platform.
As you've seen, Keith Weed, our Chief Marketing Officer, alongside other Chief Marketing Officers, I think are doing a lot to shape the industry in terms of proper stewardship and leadership role in terms of basics like viewability, verification, combating ad fraud, and making sure that advertising shows up in appropriate and safe places in this new world. You'd never say you're entirely satisfied, but for sure, we recognize the significance of the changes, and we want to lead in those changes, invest behind them, and make sure that we are as capable as anybody in this new landscape. Thank you very much, Graeme.
Thanks, James. The final question comes from Toby McCullagh of Macquarie.
Hi there. Thanks for letting me squeeze in at the end. Just a couple. First, on acquisitions. You say that the aggregate of the acquisitions that you've made over the last couple of years will add 100 basis points or so to run rate underlying sales growth, once they all annualize. Can you say how much they added to 3Q, given that some of those have already annualized? The second one is a point about A&P, and you said that you're spending less money creating, more money showing. I just wonder, can you remind me what the rough split between creating and showing is?
Hi, Toby. How are you doing? On that breakdown of the acquisition 1%, by the way, it's from acquisition and disposals. There's an impact there from the divestment of spreads, which we're assuming we're successful with. All indications are that it's going well so far. Its biggest complex, and it's very, very high profile. We've assumed that in that number of 1%. Yeah, in the third quarter, it was a very small number. Basically, to get that 1%, you'd have to look through until the anniversary of closing transactions, and then it feeding into our underlying metric are on anniversary day. That is a momentum rate enhancement that you would see in mid-2019 relative to the end of 2015 before we started doing any of those acquisitions, if that makes sense. Obviously, there'll be lots of other portfolio change in the meantime, I would assume.
Right now, we think we've got a 1% tailwind from that. In terms of Q3, it was only around 10 basis points. That's all out there in the future for us as we go forward.
On the spend on advertising, first point is to make about 30% of our spend on advertising is digital. Really, that question of how much is production, how much is showing, really isn't relevant in that space. In the other 70% that is traditional, it's roughly 75/25 between showing and producing.
That's great. Thanks a lot.
Thanks, Toby.
Thanks very much, and we'll bring the call to a close there. If there are any further questions, then, of course, Hans Skeie and I will be happy to take them as soon as we get back to our desks. Enjoy the rest of the day.
Thanks, everybody. Have a good day.
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