We are about to hand over to 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 then one on your telephone keypad. Should you wish to cancel your question, simply press star then two. If you need to speak to an operator, press star then zero. 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. Please use the telephone handset to minimize any background noise. If you experience bad quality audio, then please try redialing. We will now hand over to Graeme Pitkethly.
Good morning, all, and a very warm welcome to our third quarter trading update. I'd like to begin with the market context, then cover a brief review of our underlying sales growth overall and the drivers of that growth by category. Andrew will take us through the regional performance and our turnover development, and I'll then wrap up with a brief update on the three key initiatives that we are pursuing and some concluding remarks on our outlook for the remainder of the year. Before we go further, though, let me draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. Let's get going with the market context. Overall, it is fair to say that the economic fundamentals remain weak and volatile.
Since the start of the year, we've been flagging that we expected market conditions in Latin America to worsen, and that's what we've been seeing. Just as in past cycles, when currencies weaken, the cost of living goes up faster than incomes, and people either cut back on purchases or they downtrade. Latin American markets are growing in local currencies through pricing. Consumer demand measured by market volume contracted by 10% in Brazil last quarter and fell by 7% in Argentina. In Asia, we've had a few quarters of very low price growth as commodity costs have been benign. This is now turning. Palm oil is up almost 70 percentage points over the last nine months, and Brent Crude is back over $50 per barrel.
In categories like skin cleansing and laundry, this means a rebalancing of the growth mix, with more pricing and less volume as the increases are put through. All this means that for the moment, aggregate market volumes in emerging countries are now slightly down on the same period last year. We take some encouragement from the fact that for the most part, currencies in emerging markets have been more stable against the U.S. dollar in recent months, and some, like Brazil and India, have strengthened. Over time, wages can be expected to catch up with cost inflation, and these markets will return to volume growth. Our experience is there is usually a lag of several quarters before this works through to our categories. Turning to Europe, there is still price deflation across most of the region.
In the U.K., which is about 5% of our global turnover, prices should start to increase to recover higher costs of imported materials from the weaker sterling. Finally, in North America, the economic fundamentals are much better, and our markets there are showing modest growth. Overall, it's a very mixed picture and with much more variation in price and volume by region than we would usually expect to see. Despite this challenging background, we remain on track against our 3 to 5 percentage point growth target. In the first nine months, underlying sales grew by 4.2%, with volume up 1.3%. You'll remember that last year we had a very strong third quarter when we grew 5.7%, with volumes up 4.1%. This included unusually strong performances in refreshments and in Latin America, particularly benefiting personal care and home care.
As we lap that, growth in the third quarter this year dipped to 3.2%. Price growth picked up in the third quarter to 3.6%, while volumes were slightly down by 0.4%. This rebalancing reflects, firstly, a continuation of the pricing in Latin America to recover devaluation-led cost increases, which have been running consistently at 15% for each of the last four quarters. Our volumes in the region were down 5%. This is less than the market decline, so we are gaining share. Looking ahead, we would expect price growth in Latin America to moderate and volumes to turn positive again during the course of next year. Elsewhere, pricing has been low or negative for the past few years as a result of the benign commodity cost environment in hard currencies.
As commodities have stabilized and start to turn up, we're seeing a return to more normal price inflation, or in the case of Europe, reduced deflation in some markets. However, the price increases are landing against the background of weak consumer demand, dampening volumes in categories like skin cleansing and laundry in Asia. Andrew will return to the growth in the quarter by region in a moment. For now, I'd like to step up a level and look at our overall competitiveness and how we are developing our portfolio. In the first nine months of the year, all four of our categories have grown ahead of their markets, and growth is now more balanced across them. Personal care growth at 4.8% remains very competitive and increasingly driven by more premium price positions.
Foods is still below the average at 2.1%, it's worth remembering that only two years ago, this was a category that rarely showed any growth at all. Growth is driven by savory and dressings, which are both up between 5 and 6% this year. Home care is still the fastest growing of our categories at 5.6%, but now closer to the average as the focus has returned to margin. Refreshment grew 4.2%, building on a very strong performance last year. Let's have a look at some of the innovation and M&A activity that supports each of the four category strategies and will help to make sure that our portfolio continues to evolve to remain fit for the future. We will explore this further at our annual investor event next month, so for now, I'll just give you a few headlines.
In personal care, our priority is to continue growing the core of the business while building premium positions into the portfolio. Innovation on the core includes the rollout of global ranges like Rexona antibacterial deodorants, which are now in 40 countries, or the new TRESemmé Reverse Conditioning System hair products, which are showing strong early results across both North America and Europe. It also includes more local brands, many of which are well-suited to pick up on local trends. Brands like Forest Balsam in Russia, Hamam in India, or Alberto Balsam in the U.K., to pick just a few very specific examples. More and more of our innovations are addressing higher growth segments. The chart picks out three of these. Firstly, the natural segment with innovations such as TRESemmé Botanique, Simple Micellar Cleansing Water, or LUX Luminique Silicone-Free. Secondly, addressing the specific needs and wants of Muslim consumers.
Sunsilk, Vaseline, and Lifebuoy are all making good progress in this important area. The third segment, which we expect to continue to grow above the personal care average for many years to come, is male grooming. Dove Men+Care now has annual sales of more than half a billion euros and continues to grow at double-digit rates. The acquisition of Dollar Shave Club adds a new male grooming brand and business system to our portfolio, with a very distinctive appeal to a growing number of largely millennial men. As well as addressing these high-growth segments, we're extending into more premium price positions. This includes innovations like Dove DermaSpa in skin or Dove Advanced Care in deodorants, more premium, but still sold through our mass channels. At the same time, we're also building a base through acquisition in prestige skincare.
These brands go through very different channels but share consumer understanding and science with our mass personal care business. It's still early days, but growth in prestige is in line with our plans. In foods, our biggest opportunity is to develop the emerging markets. Already a EUR 5 billion business for us that has been growing at more than 7%. Demand for our categories will only continue to increase as populations become more urban, with more kitchens, and with more women moving into paid employment. We're particularly well-placed to meet this demand with the broad distribution reach we can command with our portfolio. In Africa, as elsewhere, a growing number of consumers are looking for naturalness.
We've upgraded our Royco range, introducing naturally sun-dried ingredients with a richer flavor, and we're getting good results from products fortified with iron under both our global Knorr brand and Robertsons, a local brand in South Africa. We're also modernizing our portfolio in the developed markets. Knorr Meal Makers, made from 100% natural ingredients, are driving growth in Europe, and we've now introduced a range of meal kits with transparent packaging to showcase the ingredients. Hellmann's retains its strong heritage of real mayonnaise, but has been successfully extending with an organic variant and a wider range of dressings like barbecue and grilling sauces. The baking, cooking, and spreads, or BCS unit, set up in July last year, has been driving down costs and reallocating resources as we seek to preserve the value of the very strong cash flows that this business generates.
The operating margin of the unit, already well above the Unilever average, has improved further. The rate of sales decline has slowed in North America, but not yet in Europe. Turning to refreshment, our priorities are to improve margins and cash flows in ice cream and to grow faster in tea. Our innovation program fully supports this. We are building in more premium segments, particularly with Magnum and Ben & Jerry's. Magnum Double, supported by the Release the Beast campaign, is doing very well in Europe, and the brand continues to innovate to meet current trends with ranges like Magnum Crème Brûlée and Petit Gâteaux, inspired by French patisserie. At the same time, we are building on the acquisitions we've made, rapidly expanding their distribution.
We've grown Talenti in the super premium gelato segment by 60% in the two years since we bought it, and we've doubled the sales of T2 since we acquired it three years ago. In both ice cream and tea, we're also addressing emerging high-growth segments. We've just launched Pure Leaf, already successful in ready to drink, as a natural leaf tea in the U.S. Ben & Jerry's now has a non-dairy variant, and we're offering smaller, lower-calorie options like Magnum Minis. In home care, our priority is to improve profitability in laundry and scale up household care. Innovation is helping to drive both continued growth and margin improvement through mix. We're bringing new benefits in new product formats that add value, like Comfort Intense with its super concentrated double encapsulation technology, or Omo stain removers and pre-treaters, now rolled out from Latin America to Southeast Asia and China.
Our new Vim bars, with a better formulation for faster and more effective degreasing of household surfaces in India. We're also evolving our portfolio to address the challenges of an increasingly stressed planet. In India and South Africa, both water-scarce countries, we've launched laundry detergents that cut down on the need for water in rinsing. We recently introduced two acquisitions. Seventh Generation, with its proposition of using natural ingredients that protect future generations, and Blueair, addressing the growing demand for clean air to breathe in cities. 70% of sales are currently in China, but the opportunity is undoubtedly much broader. Adding this to our existing EUR 300 million turnover in water purifiers gives us synergies and the ability to scale both businesses further. If I can summarize the categories, we have a full innovation program.
This is helping us to sustain consistent growth ahead of our markets against the challenges and opportunities presented by a volatile environment and rapid changes in consumer preferences and needs. We expect the pace of change and emergence of disruptive new brands and models to continue. The bolt-on acquisitions we've been making will help to future-proof our business with brands that meet emerging needs. We will run most of these largely separately to our core business while realizing synergies in those specific areas that are most relevant in each case. With that, I'd like to hand over to Andrew to talk us through the regional performances.
Thank you, Graeme. Let's start, as usual, with our largest region, Asia-AMET-RUB. Underlying sales have grown by 5% in the first nine months, with nearly 3% from volume. In the third quarter, growth slowed to just under 4%. We continue to grow well in Southeast Asia, mainly from volume, and in Africa and Turkey from price. Other market conditions have softened in India, and as Graeme mentioned earlier, volumes in skin cleansing have suffered from price increases to recover rising commodity costs there. In China, sales were flat in the first half-year but were slightly down in the third quarter. The market channel structure is shifting rapidly to e-commerce. Two years ago, this was just 3% of our sales. Today, it's over 10%.
By cutting out intermediaries like wholesalers, this shift results in a structural reduction in trade stock levels, this is likely to continue for some time to come. On top of this, laundry sales in China are down in the face of aggressive, and we believe unsustainable, price competition between two local brands. Moving across to Latin America. Here, underlying sales grew nearly 13% in the first nine months, with pricing up 15% and volume down 2%. It's worth noting that price growth in Argentina continues to contribute around 100 basis points to total Unilever pricing. In the third quarter, volumes in Latin America were down by 5%. This reflects both the very difficult market conditions that we'd expected and the strong comparator from selling ahead of price increases that led to nearly 5% volume growth in the third quarter last year.
We have no doubt that the long-term potential of the region remains as strong as ever. We continue to invest accordingly, in fact, in the third quarter, it marked our re-entry into Cuba. With a population of 11 million, this is an exciting new market for our brands. North America grew by 1.2% in the first nine months, picking up to 2.1% in the third quarter. This includes a good balance of volume and price. Deodorants, dressings, and ice creams are growing particularly well. In recent years, we've invested heavily in this business, reshaping the portfolio, strengthening our brands, and modernizing our manufacturing base. We're now starting to see the returns in both improved growth and a lower cost base. In Europe, underlying sales are slightly down by 0.3% in the first nine months in declining markets. Within this, volumes are up by 1.2%.
In the third quarter, underlying sales were down 1.1% with volumes flat. Volumes continued to grow in the third quarter in most countries, including Germany, the Netherlands, Italy, Spain, and in Central and Eastern Europe. In the U.K., volumes were down in the third quarter in the face of strong price competition in tea and laundry, as well as the continued market decline in spreads. Price deflation continues in a number of countries, although the actions we've been taking under our net revenue management program are helping to mitigate this. Having reviewed underlying sales growth, let's have a look at the impact of the other drivers of turnover for the third quarter. Turnover was maintained at EUR 13.4 billion. As we've seen, underlying sales grew 3.2%. M&A contributed 0.2% in the quarter.
This includes the final contributions from the prestige acquisitions before they anniversaried during the quarter and three weeks of sales of Dollar Shave Club. These were partly offset by several disposals of small local brands. Currency translation reduced turnover by 3.4%. Around two-thirds of this came from Argentina and the U.K. The currency effect from Brazil turned positive in the quarter. If exchange rates were to remain as they are today for the balance of the year, we would expect a headwind on turnover of a little over 5% for the year as a whole, while the headwind on core EPS would be between 3% and 4%. With that, I'll hand back to Graeme.
Thank you, Andrew. Let me give you just a brief update on each of the three key initiatives we are pursuing this year and next. These are designed to build agility and resilience into our business to underpin our 4G model of consistent, competitive, profitable, and responsible growth. The first of these is net revenue management. In essence, this is a very detailed program of capability build to optimize pricing, including promotional spend across individual SKUs and channels. So far, it has been rolled out to about 40% of our turnover, and we expect to have covered 50% by the end of the year. As Andrew mentioned, it's a key capability build in mitigating the effects of price deflation in Europe, and it's helping us get the most out of our portfolio elsewhere. The second program is the organizational change, which we call Connected 4 Growth.
As a reminder, this is designed to keep us one step ahead in a world which is becoming, at the same time, both more global and more local. It will make the organization faster, simpler, more consumer and customer centric, and future-proofed for the connected world. It would help us unlock trapped capacity and reduce the wasted time and energy spent on managing interfaces within our marketing organization. The new organization will have fewer layers. More of our resource will be deployed in global brand communities and local operations, and less in staff roles. We completed the design phase in the third quarter and have now begun to implement the new organization and processes. We'll aim to have as much as we can done by the end of the year and to have it completed by the middle of next year. The third program is zero-based budgeting.
In the first half of the year, we focused on data gathering and comparisons with benchmarks, visibility, in other words. This has shown that overall, and in many individual areas like travel, for example, our spend is already below the median of our peers. In R&D and market research, we invest above the benchmarks, and will continue to do so because they are key to our 4G growth model. Then there are areas where we see significant opportunities to improve. In consultancy, for example, or in the cost of repacking products for promotions, to name just two of many areas. During the third quarter, we completed the second stage of the process, which is value targeting. In that stage, we identified the specific savings so that we can lock these into our plans. The targeting phase is now complete, and we've just started the implementation stage.
We'll start to realize savings in the fourth quarter and through next year. The value targeting phase of ZBB, together with the organizational design of Connected 4 Growth, has confirmed to us that we should deliver the expected savings of at least EUR 1 billion in overheads and marketing by 2018. In aggregate, we expect the savings to underpin continued competitive top-line growth ahead of our markets and steady year-on-year margin improvement after absorbing additional restructuring costs and reinvesting in building capabilities and ongoing competitiveness. To conclude, all this leaves us on track to deliver our objectives for the year, which are volume growth ahead of our markets, steady improvement in core operating margin, and strong cash flow. We are not expecting an improvement in market conditions in the fourth quarter, and indeed, markets are likely to remain volatile and hence challenging for a while yet.
However, we remain confident in the longer-term prospects for emerging markets and in our ability to navigate effectively and deliver steady performance through volatility. For the year as a whole, we continue to expect underlying sales growth to be around the middle of our 3%-5% target range. We're now starting to realize savings from ZBB and Connected 4 Growth, and as a consequence, restructuring costs are likely to be around the upper end of our usual 80-120 basis point range, both this year and next. This means that we expect an increase in core operating margin similar to the 30-40 basis points that we've delivered in each of the last three years. With that, let's open the line to 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, and finally, please keep your questions to a maximum of two. Our first question is from Celine Pannuti of JPMorgan. Celine, go ahead, please.
Yes, good morning. Well, my first question is rebounding on what you just talked about in terms of the market growth that has become more volatile. We've seen that volume under pressure in LATAM and Asia weakening from here. Could you give us a broader number for what is the market growth at the moment and whether we should be assuming that this kind of slower growth continues as well into 2017? That's my first question. My second question is on the margin performance and the overall. Thanks for giving us some number on that. I was wondering, in an environment where there is less growth, whether the investment as well are less, and how you manage that, the balance of investment versus return in terms of the growth performance.
Morning, Celine. Thanks for the questions. Taking the market growth question first, I won't give you an aggregate view of market growth because I think it's one of the least useful measures. What I'd like to do is drill into a few specific markets. I think that's probably a more helpful way of thinking about it. Overall, as we said on the charts there, some places have softened as expected. Latin America very much, the markets are evolving in the way that we expected. Volume growth in aggregate across our markets is flat. There's basically no volume growth out there in our markets in aggregate right now. In the developed markets, just to talk about Europe for a minute, markets continue to decline. It's now close to a 2% decline, and that, as we know, is driven by price deflation in many countries.
Volumes are slightly positive in the market there. In North America, it's a different story. Market growth picked up in the last 12 weeks, driven by refreshment, and it's now over 2% with both price growth and mixed growth, and volumes there are slightly down. Latin America, as we indicated, we expected volumes to get worse before they get better, and that's very much what's happening. Pricing remains relatively strong in Latin America. Brazil Deteriorating consumer demand, high single-digit volume decline in Argentina with a 50% price inflation in our categories. There's a lag, of course, in both places to salary corrections which will catch up over time and will cause volume to come back over time, as we said in the charts there. Right now it drives down trading, destocking and reduced consumption, which is what we're seeing.
Elsewhere in Latin America, things are holding up a bit better. Turning to Asia, Indian markets remain quite subdued, and rural remains under pressure. We've talked about that a fair bit. Volume growth is slowing, et cetera. SEA, however, we've got good mid-single digit volume growth, and that slowed slightly, but it's been offset by a pickup in pricing. Indonesia and the Philippines are particularly strong. Our message, consistent one really on market growth is volatility. The extremes that we see from one market to another are probably as much as we've ever seen before, and we're just happy to be able to navigate that with doing the right things from a pricing perspective, having innovations and having a portfolio that allows us to catch down trading consumers and be as relevant as we can be for consumers that are going through difficult times in these markets.
On margins, what we're doing is we are structuring our portfolio so that we continue to drive margin improvement in a very high-quality way, and that means it's grounded in gross margin improvement, which is driven principally by mix and innovations that are margin accretive. By savings, we continue to have about EUR 1 billion per year of supply chain savings, which as you know, we reinvest largely to remain competitive. With Project Half and our non-working media efforts, and now we have a combination of ZBB and Connected 4 Growth refilling that hopper. That gives us the flexibility and the firepower we need to invest in the business, and we think we'll have to continue to do that. The consumer demand's going to remain weak for some time. Global and local competition is increasing.
It's a challenging retail environment in Europe and increasingly so in the U.S., there are many disruptive models emerging, including e-commerce, which offers greater price comparison. We have to have the capability to invest. We have to invest in the right areas. That balance between bottom-line growth and top-line growth, we need to have initiatives that allow us to do that. We need to be dynamic, that's what the three programs I talked about earlier allow us to do. More fundamentally, we have to innovate well, we have to be managing pricing in a way that reflects the realities of the consumer landscape.
Just one question. Would you remind us, you always told us the percentage of business where you hold and gain share?
Yeah. Again, that's another of those metrics we look at, generally speaking, to think about competitiveness. It remains over 50%. Many ways of looking at competitiveness, the chart we put up showed that in each of the four categories, we're growing ahead of market growth, which is a great way to say that we're winning share and be competitive. In aggregate, more than 50% of our business is winning share. Yeah.
Thank you.
Okay, thanks Celine.
Our next question comes from Alain Oberhuber of MainFirst.
Good morning, Graeme, Céline.
Good morning, Alain.
Alain Oberhuber, MainFirst. I have one question regarding the spreads business. Could you give us a little bit more insight when you expect the situation in Europe to improve? The second is in North America, is it that the category is improving or did you gain more share in spreads than expected?
Thanks, Alain. Good morning. Just to take the opportunity, actually, just to reiterate how we think about spreads. The market, of course, remains challenging. We've got continued high single-digit market declines in Europe and indeed in North America. We know what drives that, reduced consumption, historically low butter prices driven by things like embargoes, et cetera. It's a tough set of circumstances. Now, against that, the spreads performance overall continues to be a mid-single digit decline. It's mainly volume driven. As we called out in the presentation, the rate of decline in spreads has started to slow in North America. You have to be cautious talking about categories and shares because we're a large part of the category, of course, in North America. There's a bit of improved execution on the ground.
Some of the investments that we made in our infrastructure in North America have started to pull through that it's fundamentally driven by improvements in our executional performance there in that marketplace. As you said in the call, we haven't yet seen the turnaround in Europe, I can only reiterate that I think the way in which we're running the business now is a better way to run this business. We're focused very much on preserving the value of the cash that the BCS business provides to us. As you know, it's got very strong margins. As we said in the call, those margins have increased as a consequence of the activities we've taken since we set the business up at the end of 2000 or mid-2015 to run it differently.
It is a core operating margin that's well above the Unilever average, as I said, that continues to improve. We think we're doing the right things. There's many options for the future of the business, we won't speculate on that. We're very happy with the way in which the different way of operating has gone. We've started to see improvements executionally in North America, but not yet in Europe. I wouldn't like to say when we would see that turnaround in Europe. The market circumstances remain very challenging, although there is a little bit of a price differential opening up again with butter, which it would be good to see because that would remove what is a historically extreme situation in terms of the value proposition of spreads as it exists today.
Thank you.
Great.
Thanks, Alain.
The next question comes from Warren Ackerman of Société Générale.
Good morning, Graeme. Good morning, Andrew. It's Warren Ackerman here at SocGen. Two questions also. The first one's on Home Care. I mean, Home Care has been your star category, Graeme, but volume somewhat concerning in Q3, down 1.2%. I think you called out price skirmishes in the U.K. laundry and China, I think China, you said unsustainable. Can you elaborate a bit on that? Would it be fair to say that your market shares are under pressure in Home Care? What's your outlook for that category? The second one on commodity costs. Obviously, you showed the chart that costs are going up, palm oil, Brent crude, butter prices. You've obviously got FX challenges as well, such as sterling. I mean, do you think you will be able to take pricing?
I mean, we've seen what's happened in the U.K. with Tesco when you've tried to take pricing. It's not really a U.K. question, it's more a question of outside of Latin America as commodity prices go up and currencies, some markets remain challenging. Do you think this portfolio has pricing power? I mean, I get the point around mix, but at some point pricing will need to go up and the pushback is clearly quite aggressive at the moment. Thank you.
Morning, Warren. If I may, I'm going to pass the Home Care question to Andrew because he did such a brilliant job running finance for Home Care for all those years, so he's actually better placed. I'll have a think about the commodities one while he does that.
Thank you.
Sure. I mean, Warren, as you know that in Home Care, our priority that we set out a couple of years ago was clearly to make a step change improvement over time in margins. As you know, at the half year, we were getting close towards our target of reaching double digits core operating margin in Home Care. We've always said that as we go through that, the very strong growth well ahead of the Unilever average that we had been achieving, we would expect that to moderate. Still looking to grow ahead of the markets, and indeed, we are still growing ahead of our markets. Growth has come down a little bit. That's the big picture, and we're not that surprised by that. For the year to date, 5.6% underlying sales growth in Home Care with volume up 1.5%.
As you say, volumes weaker than that in the third quarter. There are three key factors within that, apart from the overall general softness in consumer demand around the world. In Latin America, we are gaining share, but we have faced the same issues we do in other categories, and this is big if for us in Latin America, is the contraction in consumer demand, given the factors that Graeme described. Of course, the tough comparator that we also talked about last year. In the U.K., we mentioned aggressive price competition that happens from time to time. It's been relatively less of that in the last few years, but we've had a new revised debate of increased promotions from competition there.
Good innovation in the U.K. I mean, it's been a very innovative market actually in laundry.
Yes, indeed. Products like Comfort Intense, a good range of innovations that have helped drive over the years both margin improvement and growth. In China, the two locals are actually the number one and the number two player in China and have been for many, many years, this isn't something new, have been going through some very aggressive price promotion. As I said, we think that is unsustainable based on costs and margins, et cetera. We'll have to see how that plays out over time. Overall, satisfied that we're growing ahead of the market, backed by a lot of good innovations.
Warren, if I can pick up your question on commodity cycles and pricing in general, I've got a few points that I'd like to make here which are general, and then one or two which are a little bit more specific. The first thing is just to reiterate, for everybody that commodity cycles will come and go, of course, but it really is the combination of commodity and currency that give rise to the cost landscape in an individual market. As you know, we are very focused on managing pricing close to our markets. The pricing decisions are taken by our local teams in our frontline operations.
We're frontline focused in that regard because we think that the critical view of consumer affordability and making sure that we are being sensible when prices go up or prices go down is best done by the people who are in our teams in the frontline of the business. To give you a sense of the scale of that combination of currency and underlying commodity prices for this year. There's been about EUR 600 million of foreign exchange impact on our commodity base during the course of this year so far, 75% in five countries alone, Argentina, Brazil, South Africa, Mexico, and India. That's point one really. Second point is, the changes in commodity cycle are common, of course, to everybody in the industry. How do we think about pricing in that context? I just want to reiterate our philosophy on that.
We manage at a local level, as I said, based on consumer affordability. Now, where costs are lower, that means we might reduce pricing or we might choose to invest in our brands. Where costs are higher, we will look to recover that in pricing, but we do it subject to affordability. We can't rush in. We keep very careful eye on volume and a down-trading consumer. It's that investment that we make in our brands that allows us to take price in times where we need to. It's not a question. We may invest back, but we invest back in the brand. That speaks to your point of does our portfolio have pricing power? Yes, very much our portfolio has pricing power.
In many ways around our portfolio, particularly in emerging markets, it is that pricing power of the portfolio, which is the reason we invest in the brands to keep the pricing power, and then we look to our local teams and their experience on the ground to allow us to execute that really, really well. Because it's probably pertinent that I say something about it. I don't want to, and you wouldn't expect me to talk about pricing in an individual market. It's important to point out that we, of course, don't set prices for consumers at the end of the day. We are taking price increases in the U.K., and that is a normal devaluation-led cycle, such as I've just described for any of our markets.
As I just said, we care deeply about the customer affordability of our brands, and as a consequence, the increases we're taking are substantially less than we would need to cover the impact on our own profitability. We are investing in the way I just described with our pricing philosophy. I should say the price increases have landed with most of our customers, and in the particular situation that's been covered so much in the press this morning, we're confident that this situation will be resolved pretty quickly.
Okay. Very helpful. Thank you.
Good. Thanks, Warren.
Our next question comes from Eileen Khoo of Morgan Stanley. Eileen, go ahead, please.
Morning, gentlemen. Eileen Khoo here from Morgan Stanley. Two quick questions. The first one is on Refreshment. I thought the performance was pretty impressive here on top of the comp that you had last year. Would you be able to break that down further for us in terms of ice cream versus tea growth? You talked a bit about the strong performance of the acquisitions you've done, Talenti and T2. Would you be able to talk about Grom as well? Along with that, if you have more plans to go into the out-of-home channel. What do you think is a sustainable sort of medium-term run rate for Refreshment? The second question is just on your strategy to premiumize Personal Care.
Would you be able to just remind us what percentage of the sales here are actually in premium now as opposed to mass or low price? Bigger picture, do you see a risk for your portfolio with the trend of market fragmentation and consumers somewhat perhaps moving away from mass brands? Thanks very much.
Morning, Eileen. Thanks for the questions. I'll take the one on Refreshment and yeah, thanks for saying it's impressive. We're very pleased with the Refreshment performance this quarter. It was 4.5%, despite that very strong comparator of 8.5 percentage points last year. There's no doubt about it that the very nice weather conditions in Europe through September and that extended summer certainly helped us against a very strong performance in particularly ice cream last year. Yes, we're very happy with it. Just to break things down a little bit and perhaps split out between ice cream and tea. The ice cream business, particularly in Europe, as you'd expect, continues to gain share and is doing well.
Tea is growing at about 3% in the year to date, less than the average of Refreshment, and we've talked a lot about the challenges we have there from a portfolio perspective, be it in the formats which are growing more quickly, such as specialty teas, green teas, and the more premium formats. Rest assured, all of our effort there is in shifting our portfolio into the parts of the marketplace that are growing faster. There are pockets in the black tea marketplace, the U.K. is one I'd call out, where there's an awful lot of promotional intensity and a very difficult market at the moment. That is weighing quite heavily on tea performance overall. Through the rest of the business in the Middle East, for example, we're seeing our strategy in tea starting to pull through nicely. Andrew, would you like to comment on Grom?
Yes, first of all, on Talenti and T2, which are both growing, as we said, in sweet very well. Those we've owned for three and two years, we're able to see the benefits of expanding distribution in both of those. In the case of Talenti, it's very much on the back of the existing distribution base we have that we're able to leverage. In the case of T2, it's much more organic, it's much more opening new stores. Grom is much more recent, although I didn't mention it in the turnover reconciliation, Grom is the other contributor to the M&A. It's been with us for less than two years. Very recent. In general, our retail operations are part of both building our brands and also taking us into more premium spaces. Grom, again, is very much a gelato business.
Too early to actually start reporting against growth. It's not in our underlying sales growth numbers yet. It's still in our M&A number. Turnover is around EUR 25 million in Grom, just to give you an idea of the size of the business.
Eileen, just to finish off your question there on the premiumization of Personal Care. About a third of our portfolio sits above 120 price index, meaning if the average of the market is 100, we've got about a third of our portfolio at 120 plus. That is growing faster. That is a great way of training consumers up and creating value in the category to the benefit of ourselves and to our customers, and also to the benefit of our consumers. It's very, very important and a real core part of our strategy and some of the innovations that we touched on in the charts. You saw us talking about Dove DermaSpa with dermatological claims. That sits at 180 price premium. Dove Advanced Hair Series sits at a price premium as well.
That sort of gentle premiumization by bringing in brands, using our innovation and our technology that allows us to ladder up is the way to do it. As I said, good for us, good for our customers, and good for our consumers. There are others, though. I mean, Zendium toothpaste, we've now got that out in 16 countries. That's a premium example in Personal Care. Then, of course, moving further up to a different channel structure and a much more premium position, we made the investments last year in prestige. Now they're all growing in line with the business cases, as we said in the presentation.
Just to reiterate, the overall size of that marketplace, just in the categories in which we play, excluding color cosmetics and fragrances, et cetera. In skincare and haircare, that's about a EUR 40 billion market globally, and it's growing somewhere between 5%-6%, growing faster than the average of Personal Care. That's why we're attracted to it. Different channel structure, very strong brands, in an attractive marketplace, one that is frankly quite fragmented in terms of the brands in the marketplace. There's the opportunity to build scale to the portfolio and build scale to that business through further acquisition. Is actually quite concentrated from a market perspective. I think the top five or six markets are about 70% of that overall market. There are particular market dynamics and prestiges that make it attractive to us.
Thank you.
Okay.
I'm sorry. Can we have the next question, please, from Mitch Collett of Goldman Sachs?
Hi there. Staying on personal care, you said that part of the slower growth in the third quarter was due to intense competition. Can you give us a bit of color on where that is in terms of category, geography, and maybe even channel? Secondly, North American spreads has improved, but the growth of the foods business has got, if anything, fractionally worse. What is offsetting the improvement in North American spreads? Is it savory? Thank you.
Morning, Mitch. Thanks for the questions. I'll take the second one first, if you like. It's quite a nice one to platform off. Yes, our dressings business and our savory business within foods are both continuing to grow at north of 5%. Some very strong brand performances. Hellmann's in particular is doing very well as a brand. In North America in particular, the launch of organic Hellmann's, the move to squeezy packs, et cetera, the cage-free eggs, and focusing on the sort of authenticity of the real mayonnaise ingredients, it continues to do well. Yes, the answer is, we've had some uptick in the spreads business in North America, but the strong performance of foods in North America has been benefited by dressings. It's worth calling out because sometimes you look at sort of 2.1% growth in foods, that includes spreads.
We should say that we're having very good performance across the globe in our savory business and in our dressings business. Taking your question about personal care competition. Overall, and again, I'll reiterate, overall, we're growing in personal care ahead of our markets, as it said on the charts that we put up. I want to talk a little bit about who's gaining and who's winning. We're winning, but we're not winning as much as local players are winning, and within that, other global players and private labels are losing a little bit. I just want to give you a couple of examples of local competition. Andrew touched on it in discussing China laundry in response to Warren's question. The competition there with Nice and Liby, local laundry brands competing very aggressively with each other.
Another couple of great examples, in India, we do Patanjali, which everybody's been following with a lot of interest. Incredible brand being created there. Himalaya sitting in the natural segment in India personal care. What we're doing there, incidentally, is launching several brands. We bought Indulekha, which is a naturals positioning in hair oils. Ayush, which is a brand we've had for a long time, but very strong in naturals and Ayurvedic. Fair & Lovely's got Ayurvedic offerings in the portfolio now. I think it's a question of the big global battles continue. U.S. haircare, for example, continues to be very promotionally intense and a battle between the global players.
Let's think about local competition when you think about the reach of our personal care portfolio, and we're trying, one of the reasons we're Connected 4 Growth, to make sure that as an organization, we can compete and continue to win on both fronts against global competition, but also against these very sharp, agile, and on-trend local competitors.
Thank you.
Good. The next question comes from Charles Pick of Numis.
Good morning. Thanks very much. Two questions, please. On the underlying volume growth, the minus 0.4% overall and the minus 5% for Latin America, is there any sense whereby you can give an indication of what you think the underlying position was, allowing for the one-offs that featured in Q3 of last year? Secondly, just a point of clarification, when is the Seventh Generation expected to be secured, and is there much scope for its products outside North America?
Hi, Charles. On the volume performance, yeah, you've called out the two component parts, minus 0.4% for the quarter. We don't like attributing all of that to Latin America, but there was an impact of that 5% came through. We called out Latin America as one of the features in the strong performance that we had in Q3 of last year. I don't really have an underlying number because we don't view it that way, which is probably the right thing because we don't run the business with a view to the one-offs and other things. We certainly, as I said, aren't really looking at the volume in an individual quarter as something that's of a particular indicator for us. We thought that we would see a volume reaction in Latin America. We were expecting that. It's been strong.
I should say that we do expect, over time, that there'll be rising wage growth catching up with inflation. That should happen. That'll put a bit more spending power back into consumers. We will see volume growth returning to positive territory during the course of 2017 in Latin America. That's certainly something we would expect to see. Seventh Generation is going to close in Q4, most likely sometime during October. You won't see, of course, through our underlying sales growth measure, any impact of that for another year thereafter. We're looking forward to having it in the portfolio. It's been growing at 10% for the last 10 years, and it's a 20-year-old brand, so we're very much looking forward to working there. It's based in Vermont, actually, so right next door to our own place at Ben & Jerry's.
There are quite a lot of physical and emotional parallels between our businesses. I know Nitin and the team are really looking forward to working with the folks at Seventh Generation to really bring them in as part of the Unilever family.
Right. Can you expand it outside North America?
Yes. The indication when we were looking at the business was that they have eminent credentials to go outside North America. That's obviously one of the things that we can bring. We bring our international footprint. We're, generally speaking, relatively conservative in how we think about that, and international rollout isn't a trivial thing, even where you've got the infrastructure, et cetera. There's the potential also to extend the category footprint of Seventh Generation. The particular naturals positioning, the fundamental strength of the brand based around this looking after the generations to come. It's very appealing. It's a very strong brand, and we think we'll be able to take it into both new geographies, but also into one or two additional categories.
Thanks very much.
Okay, good.
Thanks, Charles. We'll take two last questions, first from Chris Wickham of Whitman Howard.
Yeah, thank you. I just wanted to get onto the ZBB side of things. I was just wondering if you could give us a bit more flesh in terms of when you're benchmarking your approaches to ZBB compared with others. Also to get a sense whether, even though we talk in very strong terms about costs, whether or not there are any sacred cows or anything there which might be considered in terms of something that might inhibit your ability to recruit people. Then I was just wondering whether there does inevitably become a shift in thinking in terms of M&A, that you've been very much driven about bolt-on acquisitions, very much looking at businesses which give you revenue synergies.
Whether you get to a point where you think, "Well, actually, because we're so strong on the cost side, we can actually start acquiring businesses which are in related areas, but where the real value out of that acquisition would be cost extraction rather than portfolio fit.
Hi, Chris. First on ZBB, a few things to say about it, really. We think it's been very interesting to go through the various phases that I described in the presentation of visibility, value targeting, and then implementation. What we found is that the whole philosophy of ZBB actually fits Unilever pretty well. It's a very fact-based exercise. First of all, the things we found out through this process about what we spend and where we spend it, and then challenging ourselves on why we spend it. It gives you an axis of visibility that is very insightful and very useful and will have a lot of use, I should say, going forward as well as we maintain that level of granularity and transparency about where we spend our money. The other thing that's been good for us is it's driven by experienced business leadership.
This idea that instead of looking vertically down through your business as a business leader, you take one of our senior, as we call them, cost segment owners, a senior leader in the business, and give them responsibility for a cost horizontally across the entire company. That creates a very constructive tension of challenge about where we spend and why we spend it. In terms of fitting in Unilever, having some of our big leaders take on that leadership challenge and the ability to manage a cost horizontally across the entire business has been very powerful as well. The final thing I'd say is we tend to run all of these businesses, consumer businesses are growth businesses, therefore you run growth models that tend to be incrementals or based on incrementals and relatives.
We talk in percentage points and basis points, et cetera, and we get very fixed on that. What ZBB does, it allows you to have a look at absolutes. You move from looking at incrementals to absolutes. I don't think there's ever been a better time for that because our industry is changing so much, our consumers are changing so much, our channels are changing so much, and our competitor set is changing so much. You have to challenge old paradigms and assumptions. When we've done that, we certainly didn't have any sacred cows. No sacred cows at all. We've looked at EUR 13 billion of our cost base in looking at this. We're looking at not just overheads, but also at our brand and marketing investment, our point-of-sale materials, our promotional materials, all of the things that are in there. No sacred cows at all.
One slight aim off to that is that we know, by reference to the benchmarks, that we spend a little bit more than the average on consumer insight. We spend a little bit more on R&D, and we think that's the right place to be for us strategically, because we still think that rather than go an all-out war on cost and squeeze every EUR 0.01 through to the bottom line, we know that we need to have fuel to reinvest in what really drives our business, which is growth of the top line. That's why we call it that sort of 4G approach to ZBB. In terms of shift in M&A, you call out the right thing.
Some of the acquisitions we've done recently, yeah, in terms of the value opportunity and the economic case to clear our hurdle rate, et cetera, there is a greater proportion, so we say, of the overall value creation within the transaction attributed to revenue synergies or perhaps revenue expansion. We talked about category expansion and geographic expansion in the last question. What that reflects, I think, is we're buying businesses which have new models, are in different segments. So the opportunity for cost synergy is maybe a little bit less. Of course, whenever I look at an acquisition case, I tend to attribute a little bit more probability to our ability to deliver a cost synergy than perhaps around a revenue synergy. It's definitely the case there's a higher degree of risk and variability around securing a revenue synergy.
The way that we deal with that in our acquisition philosophy is to make sure that our hurdle rate and the amount by which we clear the hurdle rate reflects the different risk profile of the components of synergies that make up the overall valuation that we're looking at.
Thank you.
Okay, our last question is from.
Thanks, Chris
Fernand de Boer from Petercam.
Yes, good morning. It's Fernand de Boer with Degroof Petercam. One question. I think there is also quite a positive impact on the margin side for the overhead cost. Could you quantify that a little bit for the second half? I know it's a trading call, but give some idea.
Sure. We'll step out from our normal practice not to talk about elements of the P&L and just give you that number. We think overall we've got about 10 basis points or so of positive impact from the net of all the things that are happening with currencies around our universe for the full year. Last year, obviously, we had a tailwind from the strength of the British pound. Sorry, with a headwind from the strength of the British pound. This year, as you expect, that reverses into a little bit of a tailwind. Overall, that's only a very, very small proportion of the moving parts of currencies that we have.
I'd reiterate that we expect the top line to be impacted by about 5% for the full year, a little bit less on earnings, maybe 4% or so on EPS, and overall that'll mean that there'll be a very small benefit from currencies in the round, Fernand. It's much, much more actually than the impact of one particular currency. The impact, as I said earlier, of a particular currency is actually on our business in that particular market, not the aggregate of where our costs sit overall as a group.
We'll bring to a close to the call there. I'll just hand back to Graeme for some closing remarks.
Thanks first of all for your questions. They were terrific. Let me just summarize the messages that Andrew and I wanted to get across today in a few headlines. First one is that our third quarter performance very much leaves us on track for our growth target for the year. Second one is that the category strategies are definitely working. We're delivering growth that's ahead of the markets in all of our categories and is more balanced than it has been in the past. Those category strategies are guiding the innovation and also the M&A activity that keeps our portfolios evolving, and getting better and better and better fit for the future.
We're now in the implementation phase of the change programs, the three change programs, that'll make us both more agile and underpin our objectives of consistent, competitive, profitable, and responsible growth, what we call the 4G growth. That's it. I'd like to thank you for joining us and for your questions, I hope you enjoy the rest of the day.
This conference has been recorded. Details of the replay can be found on Unilever's website and will be made available shortly. Thank you.