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 touchpad. 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. Use the telephone handset to minimize background noise. If you experience bad quality audio, then please try redialing. We will now hand over to Graeme Pitkethly.
Good morning, a warm welcome to our third quarter results presentation. Thank you for listening to that terrible music. This title chart reminds me that Dove Men+Care is a proud rugby supporter here in the U.K. and Ireland. With all the excitement and drama of the Rugby World Cup now in full swing, I'm greatly reassured that in my old job running the U.K. and Ireland business, we hedged our bets and agreed deals with all four of the home nations, so can continue to support the three of them still in the competition going into this weekend's quarterfinals. Ahead of starting as CFO at the beginning of this month, I had the pleasure of meeting many of you at various meetings and conferences during September. This has been a very valuable opportunity to get up to speed and find out what is on your minds.
Thank you for the interaction and the welcome you've extended to me. A few of you have commented on the big boots that Jean-Marc leaves behind, and I'd like to say a personal thank you to him as both a colleague and a friend for what he achieved at Unilever. As those of you I have met will know, I worked in finance for a large part of my time in Unilever, so fairly closely with Jean-Marc on the changes that he introduced in the finance function during his tenure. We can talk a little more about my own thinking and agenda at our investor event in a few weeks' time. For now, let's get on and focus on the review of the third quarter. I'll begin with the market context and a brief review of our underlying sales growth overall and by category.
Andrew will take us through the regional performance and our turnover development, I'll then wrap up with some concluding remarks on our outlook for the remainder of the year in what continues to be a very volatile so challenging environment. 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. I'm always wary of averages and too much aggregation in looking at performance, I think it's fair to say that in aggregate, we have not yet seen any improvement in our markets. In fact, in a number of countries, the economic environment is getting worse, with the situation on the ground dominated by the effects of currency depreciation. In Europe, with the exception of ice cream, our markets have stayed flat.
There is some volume growth as a modest and slow economic improvement translates through to increased demand in our categories. This is offset by price deflation, which is, for now, the norm. In North America, market growth remains hovering at around the 1%-2% mark. In the emerging markets, we are seeing the greatest volatility, of course, and while it continues to be a very mixed picture country by country, the GDP growth trend is slowing in most of them. In India, there is a pickup in urban markets, but rural economies are under pressure. In China, you will remember that we saw a slowdown in consumer demand during 2014. Since then, market growth has stabilized but at rates stepped down from those we were used to. As yet, we haven't seen any further deterioration as a result of the recent stock market volatility, but we remain cautious.
China is, however, a major consumer of commodities and a driver of sentiment, so the relatively small devaluation there triggered much larger movements in a number of other emerging markets. These came on top of the earlier devaluations of the past couple of years in major countries like Brazil, South Africa, Indonesia, and Russia. This, in turn, has pushed up the cost of living faster than incomes have risen in those countries, and so consumers are having to economize, making a little go a long way and, in some cases, downtrading to cheaper alternatives. Against this challenging background then, we are encouraged by the improvement in our overall growth in the third quarter. Underlying sales grew 5.7%, taking the year-to-date growth to 3.8%. This improvement was driven by volume, which was up 4.1% in the quarter. A step up in our growth.
It's important to recognize that there were some specific factors in Q3 which helped that growth, each with a similar-sized impact. Firstly, a strong ice cream season with better weather in the southern half of Europe and a competitor quality-related recall in North America. Secondly, the phasing of Latin American sales between the third and fourth quarters. Now, there are a number of reasons behind this, including advanced sales before an announced price increase in Brazil and a system upgrade in Mexico. We expect these to reverse with a consequent decline of Latin American volumes in the fourth quarter. Thirdly and finally, the soft comparator from the trade destocking in China that we talked about last year. We will see a similar, though slightly smaller, positive effect in the fourth quarter. These factors help the personal care, home care, and refreshment categories, but there was no impact on foods.
By region, Latin America, Europe, and AAR were particularly affected, with a smaller impact on North America. As the chart shows, even allowing for those three specific factors, we would still have seen a steady improvement in growth momentum as we expected. Importantly, our competitiveness has improved, and after three quarters in which our growth was no more than in line with our markets, we are now gaining share once again. All four categories are growing, and the portfolio as a whole is demonstrating its resilience with the overall delivery becoming increasingly robust. Our innovation is getting stronger, incorporates more differentiated technologies, and is more and more aligned behind the category strategies. We're investing consistently behind the core of our business and behind our innovations. Let's take a look at each of the four categories in turn.
In personal care, our priority is to continue growing the core while building premium. Underlying sales grew 6.2% in the quarter, mostly from volume, and by 4.1% in the first nine months. The new dry spray aerosol deodorants launched in the U.S. at the end of last year are already approaching EUR 100 million of turnover on an annualized basis. They use the same innovative nozzle technology that we developed for the compressed deodorants in Europe to crack the problem of perceived wetness on application, which has been the major barrier to this format in the U.S. up until now. As well as helping to drive strong share gain, this innovation is accretive to margin and are growing the total category. In skin cleansing, Lux is rolling out the world's first body wash with Fragrance Touch technology from Southeast Asia to the U.S. and Japan.
The new Dove Advanced Hair Series, now in 11 countries, is up-trading a portion of the existing Dove user base to higher price points, and at the same time attracting new consumers and growing overall category value for our customers. In oral care, we've introduced the Zendium brand into five new countries this quarter, taking the total number to nine. Zendium has a strong proposition, boosting the mouth's natural defenses by harnessing the same protein and enzymes that our mouths use. In foods, our priority is to improve volume growth while maintaining the strong margins and cash flow that this category generates. In the third quarter, underlying sales grew by 1.6% and are up 1.5% in the first nine months. This is an improvement on the flat sales we have delivered over the last two years, but with still more to be done.
Savory continues to grow in mid-single digits. Knorr has just introduced the first meal makers made from 100% natural ingredients, and in a number of markets, we've launched new cooking ranges of Knorr ready-to-heat soups with home cooking recipes made entirely from sustainable ingredients. In parts of Africa where iron deficiency is a real issue, we have introduced Knorr fortified stock cubes to supplement local diets. Dressings also had a good quarter. The new Hellmann's squeeze bottle, already working well in Europe and Latin America, is now building nicely in the U.S. The bottle fits neatly in the fridge door, and the innovative new nozzle leaves it completely clean after each serving, a very appealing consumer benefit. The new baking, cooking, and spreads unit, up and running since the start of July, is now 100% focused on executing its strategy.
This includes driving down costs, better allocation of resources, and investing to reposition our portfolio more towards the faster-growing segments of a market that remains very challenged. The new blends of vegetable oils and butter, like Bertolli with butter, are on track to achieve sales of approaching EUR 80 million this year. We are gaining share within margarine in the developed markets, but the market decline has continued, made worse by low dairy prices. We've made a big change to how we operate in spreads, and 2015 will inevitably be a year of transition. The results from the new approach will need to be judged through 2016. Turning to refreshment, our priorities are to improve margins and cash flows in ice cream and to grow faster in tea by repositioning the business to the segments which are most on-trend.
Underlying sales grew 8.5% in the third quarter and are up 4.7% for the first nine months. A strong ice cream performance in the third quarter was boosted by the factors I mentioned earlier, but we are also seeing good results from our innovations. What is most encouraging is that the fastest growth in ice cream is coming from our premium brands like Magnum and Ben & Jerry's. We continue to add to the portfolio at the super premium end with the acquisition of Grom, just announced, and through Talenti, acquired at the end of last year, so not yet in our underlying sales growth, but up by more than 40% as we expand its distribution. Magnum Pink and Black has been our most successful variant of Magnum yet. So much so, that we are keeping it in the range for next year.
The new Ben & Jerry's Cores range with a central cookie core has helped sustain the double-digit growth rates that this premium brand has consistently been achieving. Tea continues to grow solidly, but not yet to the potential of this attractive category. Our portfolio remains heavily weighted to traditional mainstream black tea, while the growth lies elsewhere in the tea category. We are focused on addressing this and now have a much stronger innovation program as we build our presence in the more on-trend segments. We are launching new ranges of specialty teas under the Lipton brand in many countries. In the U.K., we have kicked off a complete relaunch of PG Tips with a new fresh look, extending the core with specialty black teas as well as herbal and green teas. We've opened more T2 stores, including six in the U.K. and one in the U.S.
These stores bring strong visibility for the brand, with consumers making repeat purchases online. We are introducing machine-compatible single-serve capsules in several European countries. In France, we have just launched our first tea-brewing machine, T.O. by Lipton. I think it's also worth remembering that the growth rates you see here don't include our successful joint venture with PepsiCo for Lipton ready-to-drink tea. This continues to go from strength to strength, with 13% growth in the first nine months underpinned by further investment in the brand. Turning to Home Care, our priority is to improve profitability in laundry and scale up household care. We will report back on the margin development with the full-year results, but you will recall that in the first half, we were on track towards our objective. Underlying sales grew 6.6% in the third quarter and 5.2% in the first nine months, mostly from volume.
Innovation is helping to drive both continued growth and margin improvement through mix. The new global range of Omo with wash boosters have an improved formulation for both better whiteness and removal of oily stains. With a renewed focus on speed and simplification, we were able to halve the time to launch the new product compared to previous global innovations. Comfort Intense takes fabric conditioners to an even more premium level with a super-concentrated formulation and double encapsulation technology. In Brazil, where we launched the new Omo specialist pretreaters and stain removers, we have achieved a 20% share in the first year. Meanwhile, in our household care brands, we have extended the Cif Power & Shine sprays for kitchens and bathrooms across Europe. We've also introduced Sunlight Dishwash into new countries in Africa and into the Philippines and launched Brilhante small surface cleaners in Brazil.
If I can summarize the category performances in Q3, there is good progress on executing the sharpened strategies and strong innovations driving growth across the portfolio. Of course, there's still more to be done, particularly to improve growth in Foods and in Tea. I'll now hand over to Andrew to talk us through the regional performances. Andrew?
Thank you, Graeme. Let's start with our largest region, Asia/AMET/RUB. Here, growth of 5.3% was largely volume driven and included some mixed performances. India showed continued solid volume growth of just over 6%, but pricing has turned slightly negative as a result of benign commodity costs, a change in excise duty benefits, and competitive price pressures in haircare. In China, the channel shift continues, with demand through the modern trade in the Tier 1 cities flat or declining. We are extending and deepening our reach through distributors to the Tier 2 and 3 cities where there is growth, and we are building in e-commerce, where we've grown more than 80% in the year to date. We expect 6% of our retail sales in China this year to be online. Southeast Asia remains subdued, with macroeconomic conditions holding back consumption in most countries in the sub-region.
Thailand has been particularly weak. Turkey grew strongly, with standout performances in ice cream, tea, and haircare. Growth in Russia accelerated, driven by price increases as we manage through the currency volatility. While in Africa, market conditions are difficult, and growth remains low. Moving across to Latin America, our businesses here continue to demonstrate their resilience, with broad-based volume growth as well as strong pricing across the region. We've been managing effectively through currency volatility and weakening economies, including a recession in Brazil. Pricing decisions are taken locally, always with a view to consumer affordability, and we benefit from strong, well-supported brands and bringing technology-led innovations to the market. Volume growth in the third quarter was particularly high for the reasons which Graeme explained. Growth in North America picked up to 3% and is now slightly positive for the year to date.
We're gaining share in the U.S. with particularly strong performance in ice cream, especially Ben & Jerry's, Magnum, and the premium Breyers gelato range. Deodorants are also growing well, helped by the dry sprays launch. Dove goes from strength to strength. As well as the Dove Advanced Hair Series, which Graeme mentioned, we've introduced a new body wash. The new formulation and design deliver superior care and a better experience, with consumers enjoying softer and smoother skin after just one shower. The Dove Men+Care range is also building well. In Europe, growth improved to 2.0%, with 4.7% volume. Here also, the year to date is now slightly positive. The strong third quarter came from both good traction for our innovations and the boost to ice cream sales. All our key countries in Europe grew in the quarter.
There was a strong contribution from the U.K., with successful laundry innovations and continued rapid growth in e-commerce. Germany and Central and Eastern Europe also grew well. Having reviewed underlying sales growth by category and by region, let's have a look at the impact of the other drivers of turnover for the third quarter. Turnover was up 9.4%. M&A has now turned positive with an impact of 0.7%. This includes Talenti, the Zest and Camay skin cleansing brands, and the more recent acquisitions in prestige skincare. Currency translation added 2.9% to turnover due to the weaker EUR compared with the third quarter of last year. Over the past few months, the EUR has strengthened, and a number of emerging market currencies have weakened.
If exchange rates were to remain as they are today for the balance of the year, we would expect a tailwind on turnover of around 5% for the year as a whole. The tailwind on core EPS would be less than on turnover at around 2%. As a reminder, there are two reasons for this. Firstly, the effect of the stronger sterling and Swiss franc on our central costs. We now expect this to have a negative impact of around 20 basis points on core operating margin for the year. Secondly, the impact of a stronger US dollar on our finance costs and average tax rate. With that, I'll hand back to Graeme to conclude.
Thanks, Andrew. The third quarter marks further steady progress in restoring growth momentum in the business. We're not expecting improvement in market conditions in the remainder of the year, and indeed, markets are likely to remain volatile and hence challenging for a while yet. However, we remain very confident in the longer-term prospects for emerging markets and in our ability to navigate through volatility to deliver consistent, competitive, profitable, and responsible growth. In the fourth quarter, we will see another soft comparator from last year's destocking in China, but we expect this to be offset by relatively weaker volumes in Latin America after an exceptionally strong third quarter.
You will remember that at the start of the year, we said we expected underlying sales growth for 2015 to be in the 2%-4% range, and we now expect it to be towards the upper end of that range for the year. We will drive a continuous improvement approach to simplification and cost savings across the business, with restructuring costs staying at around 100 basis points. Most importantly, we will consistently invest in our brands, our innovations, and in strengthening our distribution and go-to market capabilities. All of this keeps us on track to deliver against our key priorities, which remain unchanged. Volume growth ahead of our markets, steady and sustainable margin improvement, and strong cash flow. 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. Finally, please keep your questions to a maximum of two, and let us know who you are before asking your question. I see our first question is from Harold Thompson. Harold, go ahead, please.
Yes. Good morning, gentlemen. Couple of questions, please. The first one is on the one-off contributors to the strong growth results. You say that China ice cream effect, and LATAM early trade loading are all equally weighted. Can you maybe just give us an idea of what the growth rate would have been, I guess, without those three factors, if you could? The second one is on margins. Clearly, there are some mix effects going on with, if you look at Refreshments having a very strong quarter, and clearly that is a lower margin business. Is there a significant drag from maybe lower margin areas of the group, which could put into question the expected margin improvement for the year? Thank you.
Thanks, Harold. You're absolutely right in calling out the one-off contributors. You've got them spot on. I think, looking at the growth rate, taking those to one side, I think we'd say around about a range of 3.5%-4%, something like that. The mix effect on margins. Obviously, we're managing many different things as we look to close the year. There's no change really to our guidance on margins. We expect to see a steady improvement in comp for the year. That's despite the increased headwinds that we have from currency translation that Andrew called out. Of course, you know that we manage the business locally, let them take pricing on a local basis, thinking about affordability, thinking about competitive dynamics, et cetera.
That means that in terms of current comp results, including the impact of foreign exchange, we have to manage the portfolio to do that. We've got positive mix, we've got negative mix, we have more headwinds in the current rate comp from a currency perspective. Overall, we think we can manage that with no change to the guidance on margins.
Okay. If I could just add one to your first answer. Essentially what you're saying is in the fourth quarter, the LATAM effect will simply reverse boost, but the China factor will largely continue. I guess the two of them together offset each other with ice cream just no longer being a booster. Is that a right way of thinking about it?
That's absolutely right, Harold. Spot on.
All right. Okay. Thanks very much.
Thanks.
Thanks, Harold. Our next question is from Warren Ackerman. Warren, go ahead, please.
Good morning, Andrew. Good morning, Graeme. It's Warren Ackerman here at SocGen. Two questions. First one's on North America. I think I heard you say that Q3 was around 3% for Unilever in a market growing 1%-2%, so taking market share again. I was wondering whether you're able to kind of walk us through some of your key categories in the U.S. with regards to your growth rates in the subcategories versus the market. I know you call out ice cream, but I was just interested particularly in personal care, especially in areas like deodorants where you've been obviously fighting a quite intense battle with Procter. Any kind of color on the U.S. in terms of where you are versus the category would be great.
Then just secondly, on just going back to China, I appreciate the soft comp points and Andrew's color on what you're doing in e-commerce and channels. Are you able to tell us what is actually happening on the ground in China in underlying terms, what kind of category growth we're looking at year to date versus last year? Maybe some color again on market share trends in key categories, and perhaps just confirm that there's no further destocking in China. Thank you.
Thanks, Warren. Look, I'll probably take the first one on North America and let Andrew have a think about the China question. In North America, you're absolutely right, 1%-2% market growth is what we're seeing, relatively patchy and quite a variation category by category. We are seeing an awful lot of couponing and price investment in the marketplace. We've come back a little bit on that, which has meant we've seen a little bit of price growth pulling through. That delivers the result for Q3. Importantly, we're gaining share overall in North America and overall consumer sales we think are growing about 2%. It's been a strong Q3 of growth. Little bit of impact in ice cream from one of our competitors exiting the market for a period, which we called out, but that's not been a very big impact in North America.
It's one of the regions that's been least affected by any of those special factors that I mentioned. What has been happening on a category level, I'd summarize it as strong PC, strong ice cream, weaker tea, and weak spreads. Just to drill into that a little bit, with the innovations really landing well in North America, the dry spray deodorant that I mentioned, the Hellmann's squeezy bottle, and Ben & Jerry's Cores are all landing in North America very successfully. That dry spray deo has been one of our most successful launches ever in North America. As I said in the presentation, about EUR 100 million we think for the year overall. With that, I'll maybe hand to Andrew for China.
Yes. I think there's no doubt that the level of uncertainty in China has increased given the economic slowdown and the currency adjustment and stock market volatility. It is worth remembering that for our markets, we saw the big slowdown happening during 2014, so last year. In fact, in recent quarters, market growth rates stabilized at around the mid-single digit rates. That includes e-commerce. I talked about the structural channel shift on the call. What we're seeing in terms of our own growth is we're seeing mid-teens growth in the third quarter on top of a soft prior year comparator, and it's all coming from volume. E-commerce sales, we talked about, and around about 6% of our retail sales probably this year. We're seeing an improving underlying momentum in personal care and laundry.
As we pointed out, as Graeme talked about, the soft comparator will be there again, a little bit less perhaps in the fourth quarter. We're going to continue to invest for the longer term with a strong innovation pipeline, continuing to build that distribution out, and accelerating e-commerce, most recently with the strategic partnership with Alibaba.
Thanks, Andrew. Can I just come back quickly, Graeme, just on U.S. hair care. Is there any comments that you can make there?
It's been very competitive, Warren. Over the last several years, really, we brought a lot of innovation into the marketplace. We've had a lot of success in share there. We reached number one position, I think, in wash and care, which was quite a milestone for us. It continues to be extremely competitive. Now, some of the price improvement that you see in the quarter is because we've dialed back on some couponing, and that's what we think is the right strategy and healthy behind the brands. It's the same thing. It's innovation, it's bringing innovation to the marketplace, and it's investing behind that innovation. We'll stay the course with that.
Okay. Thanks, Graeme. Thanks, Andrew.
Thanks, Warren.
Cheers, Warren.
Our next question is from James Targett. James, go ahead, please. Do we have James? If not, we'll take a question from Javier Escalante.
Good morning, everyone. I would like to clarify something in China that has to do with your commentary, if I understood it correctly, that you are gaining share in detergents and hair care. Does it reflect a changing competitive strategy by Procter, which is your main competitor there, or is it something that has to do, particularly in detergent, with the local players? If you can comment on Brazil, the underlying category growth as economy continues slowing down and unemployment has increased, and whether you are gaining share, what is your underlying growth rate in Brazil? That would be very helpful. Thank you.
Thanks, Javier. I will take the question on China and then hand to Andrew for Brazil. In hair care specifically, I would not like to comment about direct competition with one single competitor. What I would like to talk about, if it is helpful to you, is around local players in laundry. I think you touched on that in your question. We still think that local competition in the laundry category in China is very significant. They are very steady and very strong, companies like Blue Moon and Nice, et cetera. Local competition, it continues to be very vibrant with a good performance in the quarter. As Andrew said, the growth rate has stabilized. It is at lower levels than we have seen historically, but still an attractive growth rate.
I think what is significant is the shift in where the growth is from the Tier 1 cities and the hypermarkets into the Tier 2 and Tier 3 cities. I would just like to highlight something that Andrew touched on, which is that our strategy is to improve our distribution and reach into those parts of the economy and the market where there is more robust growth. Things like e-commerce certainly help us to do that.
Yes, in terms of Brazil, first of all, if we just take a step out to Latin America overall, then even adjusting for the phasing issues that Graeme talked about, we would still have had double-digit underlying sales growth for Latin America with positive volumes. Specifically for Brazil, we have seen strong volume growth in the third quarter, and that was helped by the announced price increase that comes into effect on the 1st of October. Well, that should then translate into an increase in price growth in the fourth quarter as we recover devaluation-related cost increases. Our underlying business, we are actually very pleased that the volumes are holding up well given that the country is in recession and consumer demand is clearly under pressure. Our innovations are doing well. The OMO pre-treater is doing very well. We have just launched some refill packs for those.
Baby Dove is also doing very well. You remember that was only launched in October last year, but is doing very well so far.
If you could just expand on the magnitude of the price, the incremental pricing, because we see the pricing in Latin America has been double digits around. What was the incremental pricing increase that you announced in October? Just in the order of magnitude. Thank you.
Yes. It's worth bearing in mind that we've been increasing prices in Brazil necessarily to recover costs for some time now. We have more than one price increase last year, for example, and we're taking new prices, and we are lapping old prices as we go through. What we talk about in terms of price increase now won't all be incremental, because the old price increases will drop out, if you see what I mean. It'll vary category by category, but it's up to 10% depending on the category.
Good.
So.
I was just-
Yeah, Graeme.
I was just going to make a general point, Javier, about Latin American pricing. It's a window on our world in the emerging markets, because there's a number of course, there's devaluation, strong devaluation in that part of the world. We think about emerging markets, they're sort of breaking into two groups, some which where currencies have held up more strongly. For example, India, China, and Mexico would be examples. Brazil, Indonesia, Argentina, et cetera, where we're seeing devaluation. We're market leader in those markets, and it's up to us with the team on the ground, reading the impact on consumer spending power, measuring the cost increase, and very much a key capability in the leadership teams there to be able to make the right pricing decisions in the marketplace.
It's pretty much business as usual, albeit we're seeing even stronger devaluations than we have perhaps in the last seven, eight, nine years.
Thanks. Thanks, Javier.
Thanks very much.
The next question is from Jeremy Fialko. Jeremy, go ahead, please.
Hi, good morning. A couple of questions from me. First one is on H2 margins. Do you necessarily expect those to increase given these comments you made about the currency factors? Clearly your margins will be up for the full year. Do you stand by the point you made in H1 that the expansion H2 will be less than it was in H1? Do you think the margins in H2 could be fatter to slightly off? The second question is just on your innovation phasing. Has that been a factor at all? Like I said, it seems like you've had some pretty good successes across your portfolio. Would you say there was perhaps more landing in the third quarter than ordinarily, and that could have played a role in the pickup in growth? Thanks.
Hi, Jeremy. First of all, on the margins, I think there are many, many moving parts. I wouldn't, with great confidence say that we're moving forward. As I said earlier, there's a currency impact that has to be managed. We've got more momentum behind the top line, and there's mix going on behind that. We have to pull all the levers. It's one of the things that we do, is to make sure that we can just deliver that consistent uptick in the margin, steady as she goes. Your question sort of implied it's plain sailing now. I wouldn't describe it as that, but we're reiterating no change to our guidance on margins for the year, and we'll just get on with the job of making sure that we deliver that over the course of what's left now, 10 weeks or so.
Yeah. Maybe just to add one point on commodities, which is clearly a driver of pricing, and also a factor in margins. We had guided to commodity costs, including currency effects, so commodity costs in local currencies. We had said that they were slightly up in the first half. We had guided expecting them to be slightly down in the second half. Given the latest currency moves, it now looks more likely that they'll continue to be slightly up in the second half of the year.
We see a little bit.
There'll be a little bit of pressure there.
Little bit. Yeah.
That's again, one of those things that we are managing through in order to deliver the steady margin improvement for the year as a whole.
That's one of the reasons we think that we'll see continued price coming through the balance of the year.
Yeah. Exactly. Yeah.
Jeremy, on your question on innovation phasing, I think we called out at the beginning of the year that we would have a stronger second half in innovation than in the first half, and that's what we're seeing come through. There is, of course, between Q3 and Q4, we don't really view things between Q3 and Q4 as such. Innovations come in and hit markets according to the capacity of the market to absorb things like listing and getting proper investment and execution behind building distribution and penetration. These are the things that we focus on. I think viewing the two halves, yes, we expected the second half to be stronger from an innovation perspective. We're very pleased to see that those innovations, which are pretty distinctive innovations, are starting to pull through as we expect, and be a really big driver of growth.
I've got a list in front of me here, and it is impressive. What's impressive is how broad-based across the categories it is. We called a lot of them out in the presentation, but just a few more in personal care, Suave Naturals in the U.S., in my old market of the U.K., and in the U.S., Simple Micellar Cleansing Water, for example, have been there. It's strong stuff, and we'll carry on with that because innovation, we think, is a critical driver of consistent growth.
That's great. Thank you very much.
Yeah. Thanks.
Thanks, Jeremy. I think we should now have James Targett. James, are you there?
Hello, good morning.
Hi, James. Please ask your question.
Apologies for earlier. Two questions from me. Firstly, on e-commerce, I just wondered if you could give some color on the growth of e-commerce at the group level. Obviously, you mentioned that China figure, but just at the group level, and if there are any particular markets contributing to that. Secondly, just on your Food Solutions business, I wonder if, considering the pickup in the U.S. markets and some stabilization in Europe, any comments on the outlook for that division. Thank you.
Hi, James. I'll do the e-commerce one, and if you wouldn't mind, Andrew, doing Food Solutions, that'd be great. E-commerce, yeah. Globally, the channel is growing at about 20%, and across our business, we're growing at about 40%. I would call out, though, that it is very different market by market. Andrew mentioned the 80% growth rate in China that's taken that market up to 6%. I can talk for ages, really, and quite passionately about our e-commerce business in the U.K. and Ireland, which is our biggest e-commerce business. That's growing in the mid-teens and is 7% or so of the business in the U.K. Actually, the third biggest market is France.
What's interesting are the different models that are emerging for e-commerce and how they pop up and become a significant shift in the way in which consumers shop, the way in which you communicate with consumers, the way in which you fulfill, market by market. Yes, globally 20%, but much more exciting when you get into a market-by-market perspective on it. That's very much how we organize behind e-commerce. We have five different models, the way in which we think about e-commerce. There's isn't really one single e-commerce model, and we don't organize around that. In key markets such as China, such as the U.K., we have dedicated teams, and it is a big driver of growth in both of those markets now and a substantial part of our overall business.
Yes. Food Solutions is a little over EUR 2 billion business for us. It's growing solidly. We're not going to call out the specific growth rate of Food Solutions or indeed by region, but we're happy with the performance in the year to date.
Okay, thanks.
I think we next have Robert Jan Vos. Robert, please go ahead.
Yes. Hi, good morning. I have two questions. Just to be clear on Latin America, are you saying that volume growth Q4 will be lower than what you reported in Q3, or are you saying that it is likely to be negative in Q4? My second question, apologies if it has already been answered, but I missed that part. Earlier at half year results, you said to expect full year pricing to be lower than the 1.7% reported at the half year results. Concerning what you said on LatAm pricing and also on raw materials in general, is that still your view on pricing for the full year? Thank you.
Thanks, Robert Jan. First of all, on Latin America, I'll give you a response on pricing, also pass that bit of that over to Andrew to give a bit more color on it. Yes, indeed, LatAm volume growth, as we see the reversal of the volume which shifted from Q4 to Q3 because of the announced price increase in Brazil and the systems change in Mexico. That will mean that Q4 volume will be negative in Latin America, we expect. Secondly, on pricing, when we talked about pricing earlier in the year, we hadn't seen the further shift in devaluation in currencies. Of course, what impacts pricing is local decisions in the marketplace. What we were seeing there was a more benign commodity environment.
We thought that would continue for the balance of the year, we thought that pricing would start to ease. As Andrew mentioned earlier, what we're seeing now is more devaluation, in local markets, costs are going up in local currency terms, we expect that there'll be a little bit more weight behind pricing in the continuation of the year. That's the reason why we think the pricing growth that we've got will continue through the balance of the year. Andrew?
Yes. It clearly will vary by region. It's likely to remain high in Latin America and some of the other emerging markets. Elsewhere in some of the other emerging markets, it'll stay low, probably stay low in North America, it's likely to continue to be negative in Europe. Overall, unlikely to reduce from the current levels for the time being.
All right. Very helpful. Thank you.
Okay. Next, we have Rosie Edwards.
Yes. Good morning. Could you just talk a little bit more about Russia? Obviously, you said that, I think volumes were negative, potentially in response to price increases. What are you seeing in the market there? Are you seeing consumers trading down? Which kind of categories are stronger or weaker?
Hi, Rosie. First of all, just a quick refresher on Russia. We've got about a EUR 1 billion business there. It's about 2% of the company, and about half of that is in personal care following the acquisition of Kalina a couple of years ago. What we're seeing in Russia is obviously a lot of volatility. A combination of the sanctions and lower oil prices are obviously weighing heavily on the economy, and there's been an awful lot of currency volatility, the big devaluation in Q1. Partly recovered. Where that has pulled through into what's happening on the ground is a couple of things. Quite a lot of pricing was taken in the first quarter and second quarter in the marketplace in Russia. It moved very quickly. There's still a fair bit of price being taken.
It's a little bit less, and that's the reason why we've seen an uptick in Russia. Very competitive as we go category by category. I'd call out categories like tea, where we compete against local competitors, and skincare, where we're competing against more international competitors. Basically, in Q3 in Russia, we saw growth in the high single digits. That was still all driven by pricing. Volumes remain under pressure, a little bit negative. Volumes have been negative for the whole of the year so far. As we see pricing start to ease, that's the route to bring volumes back up in Russia.
Okay. We have one last question on the line, which is from Karel Zoete. Karel, please go ahead.
Yes, good morning, all. Two questions, please. The first one is with regard to pricing in Europe, that it continues to be down quite a bit and a big bulk of deflation is coming through. Can we expect pricing in Europe to decline further? The second question would be on 2016. Probably early days, but what can you say already with regard to raw materials deflation, inflation in 2016, and currency impact? Thank you.
Hi, Karel. First of all, in Europe, where I've just come from managing one of the largest and most impacted markets. First thing I'd say is that the European markets are different. It's easy to talk about Europe as one group, but one of my big learnings from the last couple of years is the differences that exist country by country in Europe. The one thing you can say about them all is that they're challenging markets, and that price deflation is very much the new norm, as I said in the presentation, and very widespread. Now, why is that? Value-conscious consumers, the continued growth of the discounters. We all love a bargain. I'm Scottish, so maybe me more than most. We've all been conditioned now to look for value, enjoy receiving value, and then sometimes treat ourselves with the money that we've saved.
Add to that very high competitive and promotional intensity, a great deal. It's not just within the supplier universe, but also within the retailer universe. Suddenly, add all that up with a benign commodity environment, and you get the sort of deflation that we're seeing just now. Overall, we don't think that the price growth, as Andrew just said, is going to tail off from its current levels. We've got good growth in Europe in the quarter, and quite encouragingly, on a year-to-date basis, we're almost flat now in our developed markets overall. As Andrew said, strong deflation continuing in Europe. Our assumption will be that that will continue, and therefore, we don't think our price growth will tail off at any time soon. With regard to your question on commodities for 2016, if only we had a crystal ball that was that accurate.
I think it would be folly to call where we'd be in 2016 commodities. Certainly if commodities are hard to call, then currencies are probably even tougher. What we've seen is that they tend to move even faster in an even more volatile way. I think we'll just rely on our model. Just to reiterate, I think it is the breadth and variety of our portfolio, the reach that we have, that's enabled us to deliver a strong set of results in an extremely volatile environment. It's very much it's who we are and how we do things. We have a broad, diverse business that understands how to act in these markets and how to manage volatility, and will manage the totality of the portfolio to deliver that consistent result, even though the markets remain very volatile.
Okay. We'll bring the call to a close there. If there are any further questions, then Ansgar, Steve, and I will be happy to take them as soon as we get back to our desks. I'll now hand back to Graeme to conclude.
Thanks, everybody. Thanks from Andrew and I for your time today. If I could sum up in just a few words. We remain on track to deliver another year of competitive top-line growth, combined with steady margin improvement. Strong innovations, our approach of sustaining investment to drive consistent top and bottom-line growth, a resilient portfolio, and sharper category strategies position us well to deliver long-term value creation into the future. That would be my closing message. Thank you, and enjoy the rest of your day.
This conference has been recorded. Details of the replay number and access codes can be found on Unilever's website. An audio webcast will also be available on Unilever's website, www.unilever.com, and on the investor relations app.