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, please 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 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 Andrew Stephen.
Good morning. Welcome to Unilever's half year results, which will be presented in the usual way by Paul and Graeme. Paul will give the headlines of the first half performance and talk about how we're building agility and resilience into our business in a volatile and challenging environment. Graeme will cover the results in a bit more detail, and Paul will wrap up, and there'll be plenty of time for Q&A. As usual, I draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures. With that, I'll hand over to Paul.
Well, thank you, Andrew, and good morning, everybody, or good afternoon. As you have seen, the first half results again demonstrate the progress we're making in transforming Unilever into a more resilient company and a more agile company, able to generate the competitive and profitable growth that we aspire to and deliver this in a consistent and responsible way. Undoubtedly, reading the newspapers, you would agree with me that this is a challenging trading environment that frankly is not getting easier. Within that context, providing a consistent growth, in this case, again, a top line growth of 4.7% is well within our guidance of 3%-5% top line growth. It is also competitive with all of our four categories growing ahead of their markets and building overall market share as a company.
It is also profitable with our core operating margins up by a whopping 50 basis points to 15%, including the 80 basis points improvement in gross margin that we have flagged to you before. Last but not least, it is responsible growth. In fact, our Sustainable Living Plan brands, which now represent more than a third of our turnover, grew a full one percentage point faster than the rest of our business. We're increasingly seeing that the Unilever Sustainable Living Plan is a positive driver for growth as well as a positive driver to reduce costs, reduce risks, and build the needed trust that is needed in today and tomorrow as well. There can be no doubt that this is a fast-changing and challenging environment.
The IMF has again down dated the projections for global growth for this year, which now seems to be a weekly occurrence coming from their offices. It's now down nearly a full percentage point over the last year and is estimated to grow at best 3% on a global basis, and others actually put it closer to 2%. Political uncertainty is acute and widespread, be it in the U.S. elections, the fallout of the Brexit referendum, the presidential impeachment in Brazil, or the regrettable events in Turkey. The list goes on. With political processes and economic conditions being more difficult almost everywhere you look, it is not surprising that consumer demand in all of the markets that we operate continues to be sluggish. In emerging markets, consumer demand is flat in volume terms.
In Brazil and Argentina in particular, market volumes are contracting following the sharp reduction that we are seeing there in disposable income. Of course, there is local currency market growth from pricing in Latin America, but this is offset, as you well know, by currency devaluations. Market conditions here are likely to get worse before they get better. We believe that we have obviously the depth of management there and company presence, we have the portfolio, then all the other things needed to come out of this recession stronger than any of our competitors. In fact, in Argentina, where I just recently visited, market shares are actually up despite this challenging environment by over 200 basis points. In the developed world, consumer demand is down. In the European market, where we already had a fragile situation even before the U.K. referendum, we decided to make it worse.
They are now likely to deteriorate further, and uncertainty will remain high for some time to come. When there is uncertainty, you undoubtedly will see less investment from business. In the U.S., market growth remains subdued in the 1%-2% range. Meanwhile, new trends and technologies are shaping the future, disrupting the traditional models on a global scale, while at the same time encouraging fragmentation on a granular or local level. This goes well beyond the rise of nationalism in individual countries. It applies to consumer groups, media choices, competition, and route to market channels. We call it hyper-segmentation. Whilst this makes for a challenging environment to operate in, it is also a very stimulating one and one that I believe Unilever is well-placed to win in. We have the global scale, but we also have the deep roots in the local culture.
Our portfolio spans price points to meet the needs of different income levels and includes a mix of both strong global brands as well as very strong and attractive local jewels. In fact, in our total portfolio, 80% of our business finds itself now in number 1 or number 2 positions. In these environments that we operate in, the strategic changes we are making to continue to build our business are obviously very important, and they focus on driving agility and resilience. To get the same results or the great results that we are announcing today, you clearly need to work twice as hard as probably five or 10 years ago. What are we doing? First, and most importantly, we're stepping up our innovations.
Secondly, we continue to evolve our portfolio, including the adoption of more flexible models for some parts of our business that operate on the edges of our traditional model, and the Dollar Shave Club acquisition we announced yesterday is a good example of that. Thirdly, by implementing the three key initiatives which we've discussed with you and set out at the beginning of this year or at the end of last year. They focus on strengthening the organization as well as driving the efficiencies. These initiatives are the rolling out of Net Revenue Management, finding the next wave of cost efficiencies through a Zero-Based Budgeting, and implementing the organizational changes, which we have proficiently labeled new functional models, which we now call Connected for Growth.
Let me say a little on each of these strategic planks, starting with innovation, which, as you would agree, is the lifeblood of pretty much any business and where we've spent an enormous amount of time over the last few years to step up our scale and pace of innovations. Probably it's the key driver of these underlying strong top-line growth. We've made a lot of progress over the years to step up our innovations to be bigger, better, and faster. Needless to say, this will continue. At the forefront are our big global brands with clear, differentiated brand propositions, and they're getting even stronger. More and more of them are building social purpose in their essence, and more and more are building brand equity. As a result, we are overall growing share.
This is what we've often explained to you as the focus of our core of the core, and in this environment, getting this even stronger is more important than ever. Dove is a great example of this. It has had a clear purpose for many years: to raise the self-esteem of women. This is truly a global issue, and Dove is able to address it powerfully with communication that really engages people and builds tremendous brand loyalty. Dove grew actually 6% over the first half of the year, exemplifying the faster growth across our portfolio of brands with purpose. We will continue to increase the differentiation of our innovations with proprietary global technologies that give distinctive consumer benefits. Take ice cream, for example.
The reason that you're able to enjoy such high quality and delicious treats wherever you are in the world is because of our unique ice structuring proteins or the double-dipping technology which we use in Magnum, which actually, by the way, a brand despite lousy weather, may I say, also grew again by 6% over the first half of this year. We're speeding up the rollout of our innovations as well. Our new antibacterial deodorants with MotionSense active technology, which started in Latin America, has now been introduced in 36 countries over the first half of this year alone. The laundry pre-treaters and stain removers, that's a new segment for us. We spent a year thoroughly establishing them in Brazil and obviously learning from that, and are now rolling it out rapidly to the rest of Latin America, Southeast Asia, and China.
In all, and very roughly, about 70% of our portfolio is truly global, and we plan to cut the rollout times for these initiatives from first to last market by up to one third. The other 30% of our portfolio is what I would call more local. I believe a competitive advantage to have that balance between global 70% and local 30%. Roughly 20% is in local variants of our global brands. The global brand propositions and some of the core global technologies are obviously deployed, we need local adaptations driven out of deep local consumer insights. Take a brand like Sunsilk that does it particularly well, using local insights to meet the particular needs of the Muslim women wearing a hijab, or the Filipinos who have spent much of their day on motorbikes wearing helmets.
It is no coincidence that Sunsilk is our fastest growing hair care brand. The remaining 10% of our portfolio or so is truly local brands meeting specific local needs, yes, managed locally. You can see just a few examples on the charts here. A new special gum care toothpaste, Forest Balm, under the Pure Line brand, Bango in Indonesia, Lakmé in India, for the ones who love it, Marmite in the U.K. We expect that the changes we are making under the Connected for Growth initiative will enable us, in this case, to halve the lead time on many of our local launches as well. The final aspect of innovation I want to cover is how we are addressing the high-growth segments, which can be with either global or local initiatives. You will have heard many people talk about the trends towards naturals.
There are many facets to this trend. The Russian example I just mentioned of Forest Balm is just one example of one segment which you could call inspired by nature. Others in this segment would include TRESemmé Botanique, recently launched in our three largest markets, Radox, which is charged by nature in the shower gel segment. We have a very strong presence in naturals across most of our brands, that probably is driving part of the growth. In food and refreshment, it is more about the authenticity or the origins of the ingredients themselves, as we now see with Natural Meal Makers, for example, the range from Knorr Pure Leaf teas that we've just launched. In fact, taking Pure Leaf, with sales of around EUR 500 million already in the Pepsi Lipton joint venture, we grew nearly 30% in the first half of this year alone.
Building on this success, we also will be introducing Pure Leaf and Hot Tea brands in our mainstream business over the balance of this year. Another segment, just to tick on, is the free-from segment, like our non-dairy Ben & Jerry's, our Lux Silicone-Free shampoos, our anti-allergenic products under the Neutral brand and [inaudible] . We see rapid growth in the Ayurvedic products that have their roots in Indian herbal medicine. We've launched these products on Fair & Lovely, we're introducing also some of our old brands, one of the old brands being Ayush. Not surprisingly, we've acquired a haircare oil brand Indulekha, which is also benefiting from this trend. Our innovation program is guided by our four category strategies, increasingly differentiated as you know.
Be it driving premium in personal care and refreshments, or the focus on more added value formats in home care, or getting into more attractive segments in food. The category strategies are also building more resilience into our portfolios. For example, increasing the margins in home care, which you see in these results once more. Or driving up the return on invested capital in ice cream, again, as promised and as delivered. This makes us less dependent on personal care and foods alone for our cash generation. We continue to evolve our portfolio through M&A. I know something that is of high interest to many of you. Over the last seven years, we've built our personal care business from just 28% of sales to now nearly 40%, making it a business of some EUR 20 billion in the process. Probably the fastest growing personal care business.
I recall myself that it was about EUR 12 billion when I started into this job. Our foods portfolio is now much more focused on the attractive segments. The largest of these is cooking ingredients, two-thirds of this is now in emerging markets where we are growing double digits. Of course, there is still a drag from spreads, but even with this, the total food category is accelerating its rate of growth. We're also increasing flexibility in the way we approach our business models by setting up, for example, the baking, cooking, and spreads as a separate unit. We've given ourselves the flexibility to manage this part of the business to best preserve the value of the strong cash flow it generates. Flexibility in our business model also helps us capture incremental opportunities and build capabilities by experimenting at the edges of our traditional structures.
This is what has enabled, for example, Ben & Jerry's to continue to grow at double-digit rates or our Unilever Food Solutions business to grow at over 6%. It's also how we are expanding businesses like T2, Grom, and the newly acquired Prestige brands. Yesterday by coincidence, we announced the acquisition of the Dollar Shave Club. I'm very excited about this move, as you can imagine. Let me explain why. First and foremost, it takes us further in the male grooming category, where Unilever, if you exclude the shaving segment, is the outright number one. This is much more than just a razor company. Their portfolio and their dialogue with consumers extend across male grooming into hair styling, skincare, and skin cleansing. Male grooming, as you probably know, is a EUR 40 billion market growing faster than the personal care efforts. We see this as a huge opportunity.
We're buying an innovative and disruptive brand with a cult-like following of diverse and highly engaged consumers. It will be beautifully complementing our existing core male grooming brands, like Dove Men+Care or Axe or some of the other brands. We see the rapid growth in Ayurvedic products that have their roots in-- No, sorry. What we're buying with this also obviously is the category leader in the direct-to-consumer channel, which is very attractive and successful. People call it the subscription model. The model involves upfront investment in acquiring subscribers during the rapid growth phase as this business is in now. Thereafter, it is inherently profitable with a loyal base of consumers regularly buying a range of products across value, mid-tier, and premium brands. Finally, the acquisition brings expertise and technology in direct-to-consumer sales that we can use internationally and in other parts of our business.
We believe that is a great acquisition that goes well beyond either shaving or e-commerce, and we look forward to welcoming the business into our portfolio and scaling it further and working obviously, needless to say, with Michael Dubin and his wonderful team that have built this business. Now before I hand over to Graeme, let me give you a brief update on the three key initiatives that we set out at the end of last year. The first one is Net Revenue Management. As we have explained before, this is a rigorous approach to optimize pricing and grow volume by unlocking new purchase occasions that we would have otherwise missed. So far, it has been rolled out to about a third of our turnover, and we expect to have about 50% covered by the end of the year.
The second is the organizational change, which we have labeled as new functional models and is now called Connected for Growth. It will make the organization faster, simpler, more consumer and customer centric, and future-proof for the connected world. It will help us unlock the trapped capacity to do more with fewer people. We are creating a single marketing team with distinct and clearly defined global and local roles. We will better leverage what we do globally with scale, whilst at the same time we will be dialing up in each country with what is best done locally. The new organization will have fewer layers. There will be only one layer between a category leader in a country and their category president, for example.
If I may bring this to life, Hai Van, who runs our personal care business in Vietnam outstandingly, will only be one click away from let's say, in this case, Alan Jope. More of our resources will be deployed in strong global brand communities as well as local operations and less in staff roles. There will be fewer touchpoints. And by redesigning our processes, we aim to reduce the time we spend on activities like managing the innovation funnel by up to 50%. This means more time spent with consumers and customers and a more market-facing organization. In a nutshell, Connected for Growth will help to make us more agile, lower costs, and more efficient. And finally, the third initiative is Zero-Based Budgeting, which actually is an integral part of the 4G Growth Model and also an integral part of the Connected for Growth organizational changes.
It will actually help us enable to identify the next wave of efficiencies, eliminate the costs that don't add consumer value, and change processes where needed. This is essential to both fuel investment behind growth and underpin the steady margin improvement. A few weeks ago, we completed the feasibility phase and we're close to finalizing the value targeting phase to unlock the savings into our plans. Now we are rapidly moving to implementation. The feasibility phase gave us a more detailed and comparable view of our costs than we've ever had before, and we've used this to benchmark both internally and externally vigorously. It has confirmed that overall, and in many of the individual areas, our spend is already below the median of our peers. But even so, there are plenty of opportunities to redirect spending for higher impact or to eliminate waste.
To give you just one example, market research is fundamental to our growth models, but we can reduce the amount we spend on continuous research and leverage increasingly digital methods to focus more on deep consumer insights. The work already done has confirmed to us that the ZBB program, together with the organizational changes under the Connected for Growth, should deliver the expected savings of at least EUR 1 billion in overheads and marketing alone by 2018. We will continue to absorb the associated restructuring costs within our core operating margin, so you get what you see. With that, let me hand over to Graeme to take us through the results in more detail for the first half of the year. Graeme?
Thank you, Paul. Good morning, everyone. Good afternoon if you're listening in from Asia. The first half year results demonstrate continued delivery against the priorities that we set out for each of our four categories. In personal care, growth of 5.7% was led by volume, which was up in all of the subcategories. Our premium brands, those with a price index more than 20% above the average in the market, grew by 8.4%, and core operating margin increased by 10 basis points. In foods, growth has continued to accelerate and was 2.3% for the half year. Cooking products and dressings again grew strongly. We've slowed the rate of decline in spreads in North America, but not yet in Europe.
Margins in foods remain well above the Unilever average, though slightly down on last year due to the relatively high exposure to Europe, where we're lapping some one-off pension gains and a higher restructuring cost this year. Home care margins improved by a further 250 basis points to 9.8%, and we are now very close to our medium-term target of double digits. Growth remains strong at 6.5%, with very good uptake for our margin-accretive innovations. Refreshment grew 4.1%, with core operating margin up by 90 basis points. Our return on invested capital in ice cream has increased by more than three percentage points over the last two years and now sits at a much more attractive 15%. In tea, we have a good growth in premium segments, more than offsetting a decline in the more commoditized parts.
As more of our portfolio shifts towards higher growth areas, we can expect the growth in tea to accelerate further. Now, looking at our Underlying Sales Growth for the first half year by region, it continues to be driven by emerging markets, up 8% with nearly 3% from volume. Volume growth was strongest in South Asia and Southeast Asia, regions where price growth has recently been subdued compared with the historic norms. By contrast, in Latin America, growth is all from pricing. Argentina alone contributed around 100 basis points to total Unilever price growth. As expected, consumption in South Latin America is now contracting, and our volumes were down in the second quarter, though by less than the market, as Paul touched on earlier. In North America, we saw growth of just under 1%, mostly from volume and close to the level of market growth.
In Europe, we've sustained solid volume growth of close to 2%. This is again offset by price deflation to leave underlying sales virtually flat. Overall, underlying sales growth of 4.7% for the first half included 2.2% from volume and 2.5% from price. The pickup in pricing in the second quarter to 2.8% comes from a little less deflation in Europe and some improvement in pricing in Asia from the historically low levels of the first quarter. M&A increased turnover by 0.7%, largely through the acquisitions of the Prestige skin brands. Currency translation reduced turnover by 7.6%. If exchange rates were to stay as they are today, we would have less drag from emerging markets in the second half of the year. Of course, a new headwind from the weaker British pound.
For the year as a whole, the total currency headwind would be around 5% on turnover and a little bit less than that on EPS. Core operating margin increased by 50 basis points. Gross margin was up by 80 basis points. The main drivers were supply chain savings and improved mix from margin-accretive innovations. Commodity costs continue to be benign in hard currency terms. With aggregate inflation in local currencies driven by devaluation relative to the U.S. dollar, which is particularly acute in Latin America. Brand and marketing investment has increased by more than €2 billion over the last seven years. This is supporting our market share gains across all of our four categories. In the first half of 2016, we sustained the absolute in-market investment at last year's level.
As a percentage of sales, brand and marketing investment was 50 basis points lower against a relatively high comparator last year when it was up by 50 basis points. Overheads increased by 80 basis points. There are three reasons for this. Firstly, in both 2014 and 2015, we had gains from changes to pension plans. This year, we have a much lower gain from the pension plan changes. Secondly, the newly acquired Prestige brands have very different cost structures to a traditional model. They operate with a higher level of overhead costs for running therapist education centers, beauty salons, and so on. These help to build brand equity and so fulfill some of the role that brand and marketing investment plays in the traditional model. There's an offsetting benefit in gross margin and so no material impact on core operating margin overall.
Thirdly, as we began to implement the Connected for Growth changes, we incurred a slightly higher level of restructuring charges than last year. This will step up further in the second half of the year. Core earnings per share increased by 7.5% at constant rates of exchange. At current exchange rates, the increase was 1.3%. Operational performance, which is the combination of growth and margins, contributed 8.2%. The impact of minority interests increased as we generated higher profits in countries like India, Arabia, and Egypt, resulting in a drag of 1.6% on EPS. Strong growth in ready-to-drink tea is producing increased profits from the Pepsi Lipton joint venture. This, together with the revaluation of one of our non-current investments, offset higher finance costs. The core tax rate was 26.1%, in line with last year. Within the range of our medium-term guidance of 26%-27%.
Currency movements had an adverse impact of 6.2%. Free cash flow was EUR 0.8 billion, including the effect of the usual seasonal increase in stocks and debtors. It was EUR 0.3 billion lower than the first half of 2015, following the exceptionally low working capital position when we exited last year. As we said before, rather than looking at working capital at a single point in time, a much better gauge of progress at the half year is the moving annual average, and this improved again from -6.1% of turnover at the end of last year to -6.6%. Capital expenditure was slightly lower in the first half. For the year as a whole, we continue to expect it to be well within our medium-term guidance of 3.5%-4% of sales.
Net debt at the mid-year was EUR 4.6 billion, an increase of EUR 0.8 billion compared with the same time last year following the acquisitions of the Prestige brands. Over the last six years, net debt has increased by EUR 5 billion. This mainly reflects an investment of EUR 11.5 billion in acquisitions, be it businesses, minorities, or the Leverhulme family rights, compared with net proceeds of disposals of EUR 3.8 billion. Paul summarized earlier the strategic rationale for the acquisition of Dollar Shave Club, which we announced yesterday. The deal is expected to complete during the third quarter. The net pensions deficit has increased by EUR 1.5 billion to EUR 3.8 billion. This is a result of a further reduction in bond yields used to discount liabilities, including the initial impact of the Brexit vote. Bond yields are likely to remain low or even lower for some time to come.
With that, let me hand back to Paul for his concluding remarks.
Thanks, Graeme. Let me wrap up briefly. Our priorities and outlook for the year remain unchanged. We continue to expect Underlying Sales Growth in the 3%-5% range. USG in the second half, however, will likely be lower than in the first half. The comparisons are getting tougher, particularly in the third quarter, which we left last year's strong ice cream sales. In Latin America, we actually expect market conditions to get tougher before they improve. There's also no change to our guidance on core operating margins, which is for another year of steady improvement similar to the improvements we have delivered in each of the last few years. We expect it to be somewhat front-half weighted this year for two reasons once more. Firstly, because brand and management investment is likely to be up in the second half of the year.
Secondly, whilst we start to realize savings from our Zero-Based Budgeting and Connected for Growth programs, we will also have to deal with higher restructuring charges that will be absorbed in the margin. In summary, over the last eight years, Unilever has become a much more robust and resilient company. The first half results, despite challenging market conditions, again demonstrate this. The consistent delivery has underpinned a 64% increase in dividends over the last seven years, and it's the consistency of performance over the long run that is increasingly valued in what is becoming, unfortunately, an increasingly volatile and uncertain world. We are taking the next steps to ensure we continue to create long-term value for our shareholders in the years to come. We continue to roll out Net Revenue Management to optimize pricing and realize new purchase occasions.
We continue to eliminate costs with the Zero-Based Budgeting to generate fuel for profitable growth. We will act and vigorously implement Connected for Growth. This will be another important step in building resilience into our business model. It will increase our agility, unlock the trapped capacity, and help us better adapt to a changing world by becoming both more global and more local. With that, let's move quickly to taking your questions. Thank you very much.
Thank you, Paul.
As a reminder, if you want to ask a question, please press star one. If you wish to cancel, 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. I see the first question is from Celine Pannuti from J.P. Morgan. Celine, please go ahead.
Yes. Good morning, gentlemen. My first question is on pricing. It seems that there was less price deflation in Europe, and you mentioned as well a pickup in Asia. What is the outlook for you see these two regions? I would presume that we will start to see a fading of pricing that was implemented in Latin America in H2 last year. If you're still comfortable with around 2% pricing for the year, I think that you had alluded to that previous calls. My second question regards to your commentaries on the savings initiative. Having done all the groundwork over the first half, what is your comfort level of when you say at least EUR 1 billion, around or above that number? Also the step-up in restructuring charge, is there a way you can quantify that step-up and as well how long that step-up will last?
I would presume that would probably be kind of a one-off step up for the coming half. After we save that, we should come back to a normalized level. Thank you.
Thanks, Celine. I will ask Graeme to give you a little bit more granularity on the savings, because obviously he is a key engine of helping us deliver that with the intensity that we have become accustomed to from Graeme. Absolutely key. On the pricing, as you've seen, just looking at the numbers, it actually picked up a little bit from 2% in Q1 to 2.8% in Q2. Frankly, I wouldn't really be that granular on a quarter-to-quarter basis. We think what we will see is slightly less deflation in Europe, more pricing in Asia, no change in Latin America. The outlook that we have on pricing is cautious on pricing for the rest of the year. In weak markets that we see in many of these emerging markets, price increases will still be difficult.
Where we see costs going up, take, for example, the U.K., we're seeing enormous currency devaluation we've seen in the British pound, we will look at pricing. Elsewhere, our price growth is likely to drop, if you want my best estimate, as we lap last year's increases. Don't expect too much from our price components moving forward. Your estimate of what was our previous guidance, I imagine of around the 2%, sounds still more or less right to us. What will get tougher is the volume comparison over the second half. As I alluded to in my introductory remarks, especially Q3, where we had an enormous ice cream sales. This was a record way beyond what we've done. I don't expect Latin America to get easier either, where we have a weaker second half.
That's why we want to guide you to a little bit more reasonable growth over the second half than the first half, bringing our run rate probably for the year, if I may estimate, to about the 4% level is something that we would feel more comfortable with. With that, let me bring it to Graeme for giving you a little bit more insight into our wonderful Connected for Growth program and ZBB.
Yeah. Hi, Celine. On the level of confidence around savings delivery from ZBB and Connected for Growth, now that we have done the detailed data exercises and really interrogated where we spend our money, why we spend our money, I think we have high confidence now in the EUR 1 billion that we indicated in the second half of last year will be delivered by both of those programs through 2018. As you know, it's a very data-driven exercise, and we've had some very senior leaders from around the business looking horizontally, if you like, around cost segments. We call them cost segment owners. These are big jobs, and having that data and the insight that the ZBB work has brought to us has been very insightful. Within that, the critical question, of course, because as we've indicated, we won't expect everything to fall through to the bottom line.
Part of this will be a reprioritization and a reinvestment of where we spend our money. Of course, it covers both overheads, BMI, and supply chain costs. Really, we are looking at all facets of the P&L. We have high confidence that both Connected 4 Growth and ZBB will deliver the EUR 1 billion that we indicated. Over what timeframe? As you'd expect, it's a couple of years program. If we look at it over the course of this year and next, in terms of the restructuring investment to get there, we want to manage this and accommodate it within our normal delivery of profitability at the sort of levels we've been delivering over the last couple of years. We will continue to manage things that way and accommodate that.
Our normal average restructuring of about 100 basis points maybe will now be ±20 basis points around that range. That's how we would look to the position of restructuring investment.
Two quick comments. You need to do these things because it's a tougher environment and to continue to deliver the same results is, I think, a message that Graeme gives, and I would certainly agree with that. It's part of working harder to be able to do the same. The other thing I wanted to point out is the two biggest spending buckets that we have is the whole pricing investment bucket that we are attacking with Net Revenue Management. The other biggest bucket we have is BMI. From the Zero-Based Budgeting, we expect most of the savings actually to come out of indirect partly, but out of BMI. You will see in the future more BMI efficiencies into our model.
The next question is from.
Thank you.
Thanks, Celine. The next question is from Eileen Ku from Morgan Stanley.
Morning, gentlemen. I was wondering if you could talk a little bit more about your ambitions medium-term for the Dollar Shave Club. You talked just now, Paul, about increasing scale. Would you therefore consider acquiring more assets, including manufacturing facilities in the shave category in due course? Are you thinking more about using this business as a platform to push growth in other categories? What do you think is the risk of pressure to the profit pool, given that one of the attractions for consumers of this business is the low pricing?
Yeah. Thank you, Eileen, and obviously, I had guessed with Graeme that the question would come on the Dollar Shave Club, I won my bet for some reason. Let me just say it again very clearly. The male grooming market, you have to see this first and foremost on male grooming. When you make an acquisition like this, you have to say, is this a segment you want to be in? The segment is male grooming. That's a $40 billion segment and growing quite nicely. We have twice our share there than our competitor, a direct competitor, if you take shaving out of it. We are very well placed, and it is more than a shaving model itself. We feel very good.
The second reason that we like this is because the fast emergence of these subscription models, big companies like us, like we've seen also with our competitors, have a hard time establishing those things because of the culture, the knowledge, it's just simply not there. Not a good thing, not a bad thing, as long as you recognize that. We're able to acquire the knowledge that they have built very quickly, and undoubtedly, we'll apply it also on other brands. Lastly, this is a very attractive proposition that has been growing very fast, with a very loyal following amongst millennials, which is equally attractive to us. There are many elements that are good in this acquisition, and that's probably why the market overall reacted positively.
Now, what we need to do is look at further building this in the U.S., because that's obviously the core of the business we've acquired and where we have a chance the most. We'll also look at other expansion opportunities beyond that, leveraging the knowledge that we have acquired here across some of our other businesses. I can just think of our tea business, I can think of our coffees business and other things. I think overall, this is one acquisition that will be seen favorably in a few years time, at least I sincerely hope. Now, we've also, over the last eight years, had a consistent acquisition strategy of looking at these bolt-on acquisitions, getting to the $2 billion-$3 billion in total. That has transformed our portfolio, Personal Care being a great example of that.
The main transformation, I will honestly point out again once more, has come from consistent above-market organic growth. The best way that we can still build value on our books, also for our shareholders, is by growing ourselves. That will continue to be our priority, whilst we will look at perhaps some smaller bolt-on acquisitions like you've seen with the Dollar Shave Club. What we are going to bring in in terms of efficiencies and what we do in-house and outside is a little bit of a scope of our studies now, we also see that we can certainly help bring some efficiencies and product and quality and optionality to this model that will help us as well.
We think it's a key addition to a strategy that we've carefully laid out in front of you and that we're carefully implementing, and obviously we feel good about. The razor market itself is obviously a part of that. We don't deny that. This is a good way to get in without having head-on competition. I do want to point out that market is about GBP 4.5 billion in retail sales, we currently don't have any of that. For us, it's all incremental, and there's a lot more to go for.
Thanks.
Thank you. Yeah, thanks, Polman.
The next question is from Alain Oberhuber of MainFirst.
Good morning, gentlemen. A question regarding emerging market, more specifically Latin America. You mentioned, Paul, that things are getting worse before they get better. Do we see already a bottom out in some of these smaller countries, or should we expect a difficult H2 as well as difficult H1 next year?
Well, Alain, first of all, greetings, and also thanks for issuing your report. I have to compliment you. You're always the first one to issue, and you had your three questions in there, and this is probably one of the three questions. I appreciate the Swiss efficiency with which you work. We definitely see in the second half a worse trading environment in Latin America than the first half. We want to be only brutally clear about that. Brazil is in recession. I'm actually going there in a few weeks' time. It has high devaluation of a currency, an incredible drop-off of consumer demand. The market is negative. It's more negative than people think, unfortunately. We have a very big business. We continue to drive our innovations there. Baby Dove, our activities of Omo are great examples, also what we're doing on Sunsilk or on deodorant.
We are actually growing in Brazil. It requires disproportionate effort from our organization. The trading environment is actually getting worse. We see pressure on some of the retailers, financial pressure, and other things. We have to be very careful. Argentina, I was there two months ago and had extensive discussions with Macri, the new president, and many others there. Here again, we've seen a significant step devaluation of the peso. We are obviously having more currency. It's at a significantly reduced level. The country has to really go through a significant economic adjustment. Again, we see the market being negative for the first time since I'm here at least. We are growing share, a testimony to our organization once more and our enormous presence there. In Mexico, the economy is slowly gaining traction.
I think that's probably a little bit of the brighter light. Disproportionately smaller for us in terms of the business that we have there. It's not really to write home about yet. Consumer demand is contracting in the major markets. Consumers are done trading in these major markets. Volume growth definitely has turned negative there. In fact, the first half, we have zero volume growth in the numbers from Latin America by memory. I'm looking at Graeme who shakes his head. That is true. We think that you will see low to mid-single digit decline in the second half. That's what we have to deal with. We have our plans, we have our innovations, we have to do some pricing still. It will be tougher over the second half than the first half. After that, 2017 is difficult to predict.
I always think we hit the bottom, then somehow the politicians are able to go a little deeper. I hope that in Latin America that we start to see, again, more positiveness as of 2017.
Thank you very much.
Yeah. Thank you, Alan.
Next question comes from James Targett of Berenberg.
Good morning, gentlemen. Two questions from me. Firstly on North America, had a sort of pick up in sales growth in the second quarter. I just wonder if you'd talk some color on the sell-in versus sell out there, because I know you were flagging some de-stocking over the last couple of quarters, and wonder if that situation has improved. Secondly, just on the margin, for Graeme, maybe if you could give some color on the impact of the pensions you mentioned on the overhead costs and also the food and Europe margins. Thank you.
Yeah, I don't want to go into de-stocking or not because frankly, it's hard to read. When the numbers are poor, we say it's de-stocking. When it's better, we say we have a great business and initiatives. I'm personally not very keen to go into that discussion. The reality is that the economy is growing, and the market is growing in the 1%-2% range. We are currently putting in a performance of 0.7% over the first half. We are slightly disappointed by that. I don't want to call it differently. We are still in the transformation of the U.S. We have to completely recapitalize our industrial base. What we see is some very strong things emerging in the areas that we focus on. Ice cream, we are now outright market leader. We have very good strategy.
It's out-of-home impulse there as well now, in line with the global strategy, and it's starting to pay off. We also launched the deodorant sprays, the dry sprays, which are working extremely well. Brands like Hellmann's have a very strong growth rate. There are areas that we feel comfortable about. Our haircare business has obviously propelled from a number 3 position 7, 8 years ago to the number 1 position now. We think there are a lot of things in the U.S. that we are doing right to put the basics back in place for continued long-term growth. We have some downforces. Our spreads business is sizable, and that's a downforce. Our tea business, which had been grossly under-invested for years and was commoditized, is obviously pulling us down.
With the Pure Leaf launch now and the other actions we've taken, we're starting to see that trend being reduced. As you have seen from Graeme's talk, the rate of decline in spreads has also slowed down. We think we're on the right track, but we should see the U.S. performing more closer to the 1%-2% range than the current 0.7%. There undoubtedly will be continued efficiency drives by retailers in their stock levels. I would find that quite normal in this low growth environment, and so would we. Graeme has separately talked about working capital, how from being second best in class in the industry, the way I look at it, we are still able to put the price up higher and deliver more on our own working capital. It's fair to say that our retailers should be doing the same thing.
The answer to stronger growth in the U.S. is in our own hands. We had three other things.
Yeah. James, your question on the margin and the impact of pensions, et cetera. Just going into that, 80 basis point increase in reported overheads. If you dig into that, the last thing of the gains on the pension plan changes in Europe in 2015 is roughly half of that. About the other half comes from the impact of the different shape in the P&L shape balance between overheads and BMI, if you like, in the Prestige businesses, which we called out in the presentation, and a slightly higher level of restructuring charges. About half, or just over half, in fact, of the 80 basis point movement in overheads comes from the European changes. As you would think, you said rightly in your question, you do see that disproportionately in two parts of the segmental results.
First of all, you see it in Europe, where the column reported profit was down 70 basis points. You also see it in foods down 70 basis points because of the higher exposure of the foods business, the bigger footprint that it has within Europe. The thing I would say that if you take the impact of that out from foods in particular, then the core operating margin in Europe, sorry, for foods, would have been flat in the first half, which is bang on where we want to be strategically with the acceleration in growth rate, which we talked about in the presentation. Great. Thank you very much.
Thanks, James.
We have the next question. It's from Warren Ackerman of Société Générale.
Good morning, Paul. Good morning, Graeme. It's Warren here at Soc Gen. Two questions. First one is, can I go back to market growth? At the Q1 stage, you said, I think, Paul, no category growth in either developed or emerging markets. Today you're saying that market volumes have slowed further in the quarter. Should I take it then that aggregate category volume growth is now negative? Specifically, can you talk about what you're seeing in personal care subsegments in Europe and North America? Secondly, just back on the question on spreads. Paul, you said that North America is getting a bit better, which is encouraging, but Europe is still challenging. I was wondering if you can kind of quantify the decline rates and are you disappointed that the initiatives in Europe are not making much impact?
I think, Paul, you said that this is the year of reckoning for the business. We are at the midpoint of the year. Just interested to hear what your overall assessment of the progress in spreads is. Thanks.
Thanks, Warren. Appreciate that. In terms of the market growth, we talked about the softening that we've seen in the different parts of the world, especially Latin America. In Europe, if you want to go, because on market, you have to go a little bit more granular. We measure the markets that we are in, by the way. There are undoubtedly other markets that might do differently. If you take Europe, the market decline now is close to 2%, and that's driven broad-based by price deflation. You see that in most of the markets in Europe. A little bit better in the northern parts of Europe than in the southern parts. It's there, and market volumes are certainly now negative.
In North America, we guesstimate that the range of growth is between 1% and 2%, with volumes actually slightly down, but driven by price growth. If you look at that price growth, it probably comes from what you identified, which is the premiumization of personal care. Latin America, we talked about. In Asia, we just published our Indian results. They had a terrible rural performance because of the absence. Again, climate change is hitting there as well, and the monsoons stayed out, and when they come, they're too heavy. We see the urban parts doing well, but the rural parts staying behind. There we've also seen volume growth going down. China is a story in itself. It's very hard to read the Chinese market.
I think you'll be hearing a lot of our other colleagues when they publish their results to talk about the Chinese market. The rapid shift to e-commerce is confusing, and the rapid move away from the tier 1 cities to the tier 2 and tier 3 cities. You can go to China now and really see empty stores when you go into hypermarkets and supermarkets that we've not seen before. We think that growth has significantly slowed down. Again, everybody has to draw his conclusions from that. The only bright spot I would say within the total is Southeast Asia, where we do see mid-single digit growth. Countries like the Philippines or Indonesia actually are stronger than I would have thought. That is the positive bright spot. If you translate that on a global level, it's hard to make this average work.
We certainly would say at best there is a flat volume growth if not slightly negative in my readings for the markets that we are in. In the PC subcategories, you actually see a premiumization happen and our Prestige businesses are doing well. Our deodorant business is doing well. In fact, our hand and body business is coming back quite nicely. We just had a review yesterday with the board on our haircare business with Laurent, our President, and Alan Jope, and that is a star performer for us. We think our personal care business is doing well and actually are growing share. We see in these results as well that we just published after home care once more, our personal care unit is our second fastest growing unit, again, above the company rate.
If you come to the tougher issue of spreads, I'm glad you brought that up, please. North America, we're starting to see some of the positive signs because we have the broader implementation now of our product improvements there and we have built some new capacity, and we are able to supply the markets. We were not able to fully supply the markets in that transition, and that is helping us undoubtedly. In Europe, there are actually good signs. Although Europe is a challenging market in total, our shares have flat to up over the last period. It's one indicator that what we are doing is actually good. In the U.S. also, our shares are starting to move up there as well. One of the good indicators is Flora in the U.K., where plant-based. Obviously, all of our margarine is plant-based.
Consumers are getting more interested into plant-based nutrition. We have been slow to put that word out there. We have had a major relaunch now with Flora in the U.K. on the plant-based relaunch, the initial indications are positive. At the same time, obviously, we are trying to manage this business very rigorously for cash flow. Not to go into too granular details, but by running it separately, like we're doing now, not only are making the decisions faster as I have predicted, but we are also running it with a far leaner organization. I think we've taken out about, and this is a rough guess because I have to go through the detailed updates, but we've taken out EUR 70 million, EUR 80 million that allows us to continue to take that cash flow and run this business funded without having the shareholders pay for this.
We continue to stay the course. We think that the actions that we're now taking are the best we can take in the interest of our shareholders at this moment, but we continue to look at all options.
Thanks, Paul. Very helpful.
Thanks, Warren.
Thanks. Our next question from Jonathan Feeney of Consumer Edge, please.
Thanks very much, Paul. You mentioned the growth in Chinese e-commerce, I guess it's fascinating what's gone on in that market. It's almost as if the Chinese consumer maybe is skipping a step in the evolution, at least the way we think about purchasing goes on in Western developed markets. Can you talk about how your approach is different to managing that e-commerce growth and maybe transition in some of those markets than some of your competitors? Secondly, when you look at the Dollar Shave Club purchase, is there any thought of that maybe you're getting ahead of some of those changes maybe that are happening in the Chinese consumer, maybe happening over the next 5 to 10 years in other markets, emerging and developed? Thank you.
Yeah, Jonathan, that's a very good question, and very much on our minds as well. I wish I could give you obviously the right answer because it's moving so fast that first of all, we spent a disproportionate amount of time on educating ourselves. It's frightening the speed at which it is changing. Just like they leapfrogged the landline and moved to mobile phones, you now see the millennials, and it's interesting, if you go to China one day, just let them show you all the things they can do on WeChat. You take Amazon and YouTube and Twitter and Google all together in one app and PayPal and whatever. It's incredibly frightening. None of the millennials go to a store anymore. The speed with which this is changing is mind-boggling, and I think not many people predicted it.
The first thing you have to do as a company is to be sure that you are educating yourself and the people, and we are spending a disproportionate amount of time on that. One of our main rollout things with our marketing community is what we call Digital 2.0, and Hugh Wieck is obviously leading this, and he's on the advisory board of many of the leading companies. We prefer to have partners to work with Alibaba and Tencent in China as well. We're trying to keep up with it. I think the same thing is for our competitors. 13% of the retail sales is now already in e-commerce, and our estimate is that it might be growing with about 20%. We are outgrowing this. We've put in a significant organization. Globally, we are 600, 700 people now, just totally focused on e-commerce.
We are continuing to ramp that up. We are getting people in from the outside as well to help us accelerate that. We think that our approach that we're taking in China is right, adapting our products, making them e-commerce ready, introducing new products on e-commerce only, strengthening our own resources and capabilities to be able to do that, and as a result, we have a significant market outperforming growth rate. Sometimes you feel that what you can gain there right now in China is not compensated with the decline in other channels. I am thinking about this, and we're diving deeply into this.
I think because of the phenomena of the e-commerce, the rest of the retailer is struggling, and although there's still 80% of the people buying in the rest of the retail, if you look at these statistics, they are drastically adjusting their stocks, and they're drastically looking at their business models and their financial exposures because it's the gearing that they're missing. It's those incremental sales that was giving them the profitability that is disappearing. The dynamics will be interesting, and we need to closely follow them, but they will rapidly change in the Chinese market. You need to work much harder to fish where the fish is, and as I've mentioned before, you need to take different fishing rods.
One of the reasons the Dollar Shave Club is attractive and why Michael has done such a great job creating this company Is indeed the knowledge of the subscription models, and we will be certainly looking at that as well for the Chinese market. If we would have done that internally by re-educating ourselves, I'm not sure we would have succeeded. What I'm sure about it is it would have taken us too long, and the market would have moved somewhere else again already. We have to get used to buying in that knowledge and dealing with a higher level of ambiguity, perhaps, than that we've seen before. Now, the good thing on this whole thing is the flip side of this equation, that our Chinese business is still relatively small compared to some of our bigger competitors. We are able to manage the business.
We still have a lot of other brands to introduce and grow. I expect China to continue to be a contributor, although we are going through a little bit of a flat period right now. I'm not reading that as an indicator to be worried about. I think in China, we should be able to grow mid-single digits in this environment, and we will continue to work on that. I hope that answers a little bit the question there, Jonathan.
Very much. Thank you.
Thank you.
Thank you. There's a few more questions on the line. First is from Charles Pick of Numis.
Good morning, gentlemen. Thanks so much. Just two questions, please. At the group level, I think you said exiting Q1, you were growing almost 60% in terms of market share growth for the group's various operations. I wonder if you can update that percentage, please. At the Q1 stage, you were indicating that the FX debit was about 50% via the Brazilian real and the Argentinian peso. Was it a similar percentage, please, for Q2?
Charles, the first one I can say it's about the same. It's not up or down. It's about the same. We have about 60% of our business building share and overall building share.
On the foreign exchange, Charles, you're pretty much spot on, about 50% from Brazil and Argentina. In fact, if you widen it out a bit and go, the biggest impacts are Brazil, Argentina, South Africa, and India. All in, they sum up to about 4.5% of the 7.6% that we saw on the top line.
Good. Okay, thanks very much.
Thank you.
Thanks, Charles. Final question is from Alex Smith of Investec.
Oh, hi. Good morning, Charles. Actually saw my question on market share. I was wondering if you could say a little bit on that 60% number, how that might vary across geographies and categories, just to give us a rough idea where you are, I guess, relatively outperforming and relatively underperforming. Then maybe just a follow-up on India. It's clearly a big market for you. I guess the market growth rate there has continued to slow down, and I think you pointed to it being rural-led weather impacts. I guess you got some commodity deflation there as well. I was just wondering, are you seeing some unhelpful competitive behavior in your categories? I guess I'm just surprised that the category growth rate continues to track below GDP growth rates, and I guess some other categories, FMCG categories, are doing a little bit better at the moment. Thanks.
Yeah. Let me go first to the market shares once more, then add a little bit more granularity. If you look at the overall market shares, it's mainly driven by the emerging markets. The developed markets are about flat in market share. Both the U.S. and Europe are about flat. I would see that as the bigger picture. We are obviously gaining share in more businesses than we're losing. The main drivers of that is personal care outgrowing the market. That is a key thing. If you want to go even more granularly, it's deals again where we are doing well with hair, but actually also skin cleansing is back. It was a category that was on the edge of that, is now positive. We feel good about that.
Home care, we continue to drive competitive share gains, actually, interestingly, in both laundry and home care. Whilst we have promised you a 10% margin on that business by 2020, we're actually reporting already now a 9.8 margin. Our strategy is also working there at the same time as we're growing share. On refreshments, we have a good story on ice cream, as I've mentioned before globally. We're down a little bit still on teas. Although we're growing share in the premium segment, we have a drag on the commodity segment. In foods, we actually gained share overall in savory and dressings. As I mentioned before, spreads, I would call it flattish. There's a little bit positive news, as I said before, on spreads, but it's overall flattish.
More categories growing with one or two of the spots that you can imagine where you have to work on. That's on the granularity on shares, if you want to. I'm actually less enthusiastic to spend too much time on global shares because they are calculations of a coverage of news and as well as we're seeing the emerging markets that sometimes might be hard to read. I always look more at the overall growth of these categories versus what these overall markets are doing. I think it will pretty much follow the picture I just laid out in front of you. If you look at India itself, the macro environment is mixed. I was there not long ago again. I'll be there with the board, actually. We have our board strategy meeting this year in India. The GDP growth is about at 7% officially.
Some people think it's less. Inflation definitely is under control. There is a subdued consumer sentiment, especially in the rural areas where we have seen actually depression now for three quarters already, which is obviously a big part of our business and a competitive advantage with our enormous distribution reach and with our products. You have to take the upsides and the downsides a little bit. Volume growth is still a good 3.5% there, but pricing is flat, and you've alluded to that already. Personal care, we actually have a modest growth. We have negative pricing. A very good performance on hair care, good performance on skin care by memory. Oral care, we have a competitive battle going on. We have initiatives entering the market there. Home care is very robust. On laundry, we have no price growth.
We have competitive activity that is perhaps a little bit driving that pricing thing. Our premium segment, Surf, is doing well. Our fabric conditioner, Comfort, is doing well. On refreshment, as you know, we have a good refreshment business there. It's tea being the bigger one. We have strong growth on tea. We have in foods now a business that is significant. This was a home care and personal care business. It's increasingly also becoming a good food business with growth in dressings and savories. Our share price performs well there. I know the announcement they made was probably a little less on the growth than what people expected. That's a quarter that I'm not getting too excited about. It is a market that is probably not as buoyant as it was a year ago if we would have had the same discussion.
I hope that gives you a little bit. We answered your questions, right? I think that was it, no? Did I forget anything, Alex? No.
No. We're good. Thanks.
Thanks.
Thanks.
Let me just thank you guys because I think we're coming to the end of it, I just wanted to wrap up. The first thing I want to do is thank you again for your interest. I know that is really appreciated by us, and your questions also help us. I also like to thank you for your support. I hope you will have some time off for the holidays with your dear ones and recharge the batteries. We have a very full agenda. I think the change agenda happening right now in Unilever is bigger than I can imagine it has been for a long time over the last few decades. Implementing the Connected for Growth, at the same time, Net Revenue Management, Zero-Based Budgeting keeps us incredibly busy.
We will not drop the ball, and it is absolutely needed to be able to continue to give you this 4G performance in an increasingly challenging environment. Without any doubt, in my opinion, and my modest 35 years or so in the consumer goods industry, which I'm sure you will beat that collectively, is one of the toughest environments that we're operating in. Despite that, I think we can continue to promise you that we will be at the 3%-5% range with a little bit lower top-line growth over the second half, and we will continue to be in the 20%-40% range on our core operating margin. Where consensus is right now, we are fine.
If you run too far ahead of yourselves and you think that we could do better on core operating margin, we actually don't disagree with you, don't get excited. We will have to use that money to invest in restructuring to accelerate the implementation on the Connected for Growth program. Long term is our mantra, and long term it will be. Despite, again, once more, the challenging environment, we will make this another year of delivery. Thanks. Enjoy the summer holidays, and hopefully talk to you soon. Thank you.
This conference has been recorded. Details of the replay can be found on Unilever's website and will be available shortly. Thank you.