I'm 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. Please use the telephone handsets to minimize background noise. If you experience bad quality audio, please try redialing. We will now hand over to Andrew Stephen.
Good morning and welcome to Unilever's half year results presentation. This time last year, we noted that we were reporting earlier than Unilever had ever done before. Today we're earlier still. I think that points to the improvements made over the last five years to our financial systems and processes. In the usual way, the presentation this morning will be given by Paul and Jean-Marc. Paul is going to share his perspectives on the first half year. Jean-Marc will cover the financial highlights, Paul will wrap up. We'll leave 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.
Thank you, Andrew, and good morning, everybody. During this holiday period, thanks for joining us on what I call a good ice cream day here in the U.K. The first half results again demonstrate the progress we're making to transform Unilever into a more resilient company, one that is able to deliver the consistent, competitive, profitable, and responsible growth that you are now getting accustomed to, hopefully. This is now the seventh year in a row that we're actually delivering that. This remains a challenging trading environment. Despite that, turnover is up by 12%, helped by currency tailwinds and a 2.9% underlying sales growth. Core operating margin is up by 50 basis points, with the quality of improvements actually showing that we have a sustainable growth model. Gross margins are up behind mix and innovation.
Overheads are down with rigorous cost control. We've invested significantly again in brand and marketing to ensure future growth. That's what we call the virtuous circle of growth in action. Core EPS is also up 16%, with just over 8% growth at constant exchange rate. Cash flow, an area we told you we would be focused on as well, is up more than €300 million in the first half of the year. All in all, a good performance in a difficult market, which illustrates the benefit of our consistent long-term focus coming through. It also reflects that we're definitely now a different Unilever. However, I would be the first to acknowledge that the underlying sales growth today, despite obviously the portfolio mix that we have, is still below the levels that Unilever is capable of.
There's certainly more to do, and I will come back to that in my concluding remarks. As I said before, the market conditions in the first half remained challenging. There are some tailwinds, as we discussed at the first quarter update. In parts of the world, the macroeconomic environment shows some signs of improvement. Commodity costs are more benign than in recent years, and currencies, for once at least, are helping rather than holding back our reported results. There are still many reasons for us to remain cautious as well. Overall, consumer demand is still weak, and it is no surprise that the IMF recently once more lowered its global forecast. Emerging market growth continues to be below historic levels. As predicted, disposable incomes are being squeezed by the rising cost of living following the devaluations of the last two years.
Structural reforms, frankly, are not yet happening at the pace that is needed. In India, there is some improvement at macroeconomic level, although rural markets have slowed, as you saw in our last HUL results. In China, GDP growth seems to be stabilizing, albeit at lower levels than in the past. Brazil, I believe, is in the worst recession since 1990. The Russian economy continues to be soft, and Indonesia is in somewhat of a perfect storm of lower investments, lower export, and a depreciating currency. To ensure future growth also here, more structural reforms will be needed. In developed markets, it's also a mixed picture. There has been a slight improvement in consumer demand in Europe. Markets which were declining are now just flat. In North America, it feels as though every step that we make forward, there is one step back.
After a better first quarter, market growth has slowed again. Competitive price pressure is high, and there certainly has been some destocking. The developed markets still show some deflationary tendencies, more so than inflationary. Looking forward, I'm still cautiously optimistic, but there are always daily reminders of the increased volatility and uncertainty of today's world, be it the very challenging situation in Greece, the fuel crisis in Nigeria, where I was just a couple of weeks ago, or the huge swings in the Chinese stock market as we saw recently. Against this background, we continue to execute against our sharpened strategy. We have a clear direction for the business, clear objectives for each of our categories, and a heightened focus on driving down costs and driving up agility. Before we look at the first half performance, let me briefly remind you of what our individual category objectives are.
In personal care, we have now established a good historic track record of competitive growth and margin improvement, that remains our objective. Priority is to keep growing the core and extended it into more premium segments where we still have a relatively low presence. We're also entering the new prestige segment, which I will talk about in a moment. In food, which has been a significant cash contributor to the company, our priority now is to get the business growing whilst sustaining the strong levels of profitability and cash flow. We're doing this by investing in the areas where there is most opportunity for growth, like expansion in emerging markets with our cooking ingredients, the move towards more natural products, and simplifying our portfolio. At the same time, we're taking the actions needed to stabilize spreads, including the setting up of the new dedicated business unit.
In refreshments, our priorities are to step up cash flow and ice cream and move to more added value premium segments. We're upgrading the mix in ice cream with premium brands like Magnum and Ben & Jerry's, the Breyers Gelato Indulgences brands in the U.S., and the recently acquired Talenti acquisition. We're improving cost of capital efficiency in manufacturing, distribution, and cabinets. In tea, we are building rapidly our presence in the faster-growing segments like green tea, ready-to-drink, and super premium with T2. In home care, it simply is profitability. There's a better balance between market share gain and margins. We're up-trading consumers to higher-margin segments like machine specialist products, pre-treaters, as well as fabric conditioners. We're extending the geographic footprint of household cleaning, which has above-average margins. We're driving simplification, harmonization, and low-cost business models.
We set a clear objective of getting to double-digit core operating margins in home care over the next few years. These category objectives have never been clearer, they guide us in the allocation of resources and help us to optimize the return on investments as our numbers show. They're complementary to each other, they give a balanced top and bottom-line growth, delivering more reliable results for Unilever and its shareholders. The portfolio continues to be stronger than the sum of the parts. Next to these consistent results, it gives us distribution strength, particularly important in emerging markets. It gives us scale we can leverage to get these efficiencies, it gives us resilience by covering a range of consumer needs.
All of this translates in the ability to continue to pay steady dividends with an 8% dividend growth over the last 35 years, Jean-Marc reminds me, year to year cumulative. That's quite a performance. The first half results show how all our categories are contributing to the overall performance as well as the sharpened strategy. Personal care grew by 3%, an improvement on the second half of last year with a clear acceleration over the last few quarters. We have a strong innovation pipeline and expect a further acceleration of growth in the second half of the year. Core operating margin was slightly lower in the first half as we increased brand and marketing investments behind these initiatives. Foods grew by 1.4% and all from volume, with a 30 basis point improvement in core operating margin. Savory is outperforming the competitive set with good growth.
Cooking products in emerging markets grew in high single digits and represent an increasingly important part of our foods portfolio. Overall, foods progress against a small decline last year, which is encouraging, especially as spreads still pulls the total down. Margins, which are relatively attractive already, improved further. The new standalone unit, which is now called Baking, Cooking and Spreads, was up and running as of the 1st of July as planned. Not an easy feat. It's been a major transformation with new processes, reporting systems, legal structures, all delivered on time. It's too early after only three weeks to see any impact of the change yet, but I'm certain that it will bring a lot more focus to our strategy of repositioning that part of the business to a more attractive segment.
Refreshment grew solidly at 2.7%, despite lapping the strong comparator in the first half of last year. The fastest growth is coming from our premium brands like Talenti, our recent acquisition, does not yet get counted in underlying sales, but it grew more than 50% in the first half as we increased distribution. Tea continues to grow as well, but still not to its full potential of what I believe is a very attractive category, as the move to premium is actually offset by the losses on the more commoditized value end. Core operating margin in refreshments was up 60 basis points, and cash flow, as we promised you, also improved. In home care, top and bottom line growth was again very much in line with strategy.
Core operating margins improved by a whopping 220 basis points from a combination of improved mix and cost savings, as well as pure and sheer discipline. While growing has slowed a bit from the very high levels that we achieved in recent years, it remains a market outperforming 4.5%. All four categories are making progress against their objectives, and in combination, once more, delivering a well-balanced top and bottom-line growth for Unilever as a whole. While the specific objectives of each category are different, the need for competitive top-line growth is common to all. Key to this is a further step up in our innovation capabilities. We've done a lot to step up our innovation capabilities. We changed our R&D organization to increase its effectiveness by embedding it within the categories.
This has allowed each category to allocate resources across discover, design, and deploy to meet its specific needs. For example, in both home care and personal care, we have shifted significant resources upstream to the discover and the design programs and see that coming through in bigger, more effective innovations. We've also created a science group, which we call the Strategic Science Group, which looks out for emerging science and technology so that we can stay in touch with, and sometimes ahead of many developments, particularly in the biological and physical science. We're also increasingly leveraging our partnership with external research bodies and key suppliers. These now drive 70% of our open innovations. Finally, we're introducing new ways of working, enabled by IT tools to drive for speed and efficiency.
Our new product lifecycle management system enables us to launch, for example, in the U.S., the new dry spray deodorants in half the time that it would have taken before. The new approach is already delivering results. Our innovation pipeline continues to get stronger every year and is well aligned to our growth ambitions. The projects in the funnel will deliver 20% more turnover than they did at the end of 2013. Our innovations are bigger. Since 2013, the average project size has increased again by 30%, and they have more and clearer benefits. In fact, the proportion of innovations that uses new technologies that we have developed is up from 35%- 45%. This is helping us achieve our target of 75% of our innovations being accretive to the margin of each of our categories. That's why you see gross margin go up.
The other 25% allows us to support our value brands, many of which are local. These also play a very important role in the portfolio, particularly against an increasingly strong local competition. Let's have a look at some of the innovation examples, starting with innovation that grows the core of our brand. The dry spray aerosols in the U.S. that I just mentioned. These are already well ahead of expectations, with a 75% share of the segment in the U.S. in just 12 weeks, and importantly, helping us to grow the category and switch consumers to a new format, which is margin accretive. The new Lifebuoy with Activ Naturol Shield technology, which is proving to kill the 10 strongest germs. At recent rates of growth, Lifebuoy is well on its way to become a EUR 1 billion brand within the next few years.
Take our Knorr fortified stock cubes. Iron deficiency is still a huge problem in Africa. Our new product addresses this. It's helping to sustain our strong track record of growth for cooking products in emerging markets, which is up by more than 50% in the last five years alone. Innovation is also driving growth in the premium segments. The Dove Advanced Hair Series is a range of products tailored to specific hair needs. They sell at a premium of up to 100% on the base range. We have some now in 11 countries, and sales are already about EUR 40 million annually and rising rapidly. In ice cream, Magnum new pink and black range in 20 countries helped to drive mid-single-digit growth of the brand in Europe despite its strong competitor. In laundry, we've launched a new, more premium fabric conditioner, which is called Comfort Intense.
It has a super concentrated formula with dual encapsulation fragrance technology and novel packaging. This really is maxing the mix. Gross margins are some 10% higher than the existing range. We're also entering adjacent segments in new countries. Take an established brand like Dove, for example. It has care at the heart of its brand essence. For most of its history, we have focused on women. A few years ago, we successfully entered the male grooming segment of skin deodorant and hair with Dove Men+Care. It's now in more than 60 countries and turnover more than EUR 400 million. Dove's appeal goes further. Strong early results from the launch of Baby Dove in Brazil suggest that the baby segment also has great potential for the brand.
The new range of Omo pre-treaters and wash boosters, also in Brazil, as it happened, are running ahead of our expectations and already have a 10% share nationally. Our household care, a huge opportunity to take our brands to emerging markets where increasing urbanization means that there are more and more work surfaces and toilets to clean. We have made 26 country entrances for our brands in the last five years alone. This has helped household care to grow to close to a EUR 2 billion business. The TRESemmé story illustrates the results of sustained innovations across all of these elements. First, growing the core. We have steadily gained share since acquisition in both the U.S., where the brand is on its way to take leadership in daily haircare, as well as in the U.K. We entered new territories.
We've launched in Brazil, India, Indonesia, Thailand, the Philippines, Vietnam, and various smaller countries. This has added nearly EUR 200 million of turnover. There are plenty more opportunities for later. For now, we're consolidating and building where we have entered. More recently, we've been developing more premium segments. For example, the TRESemmé Expert Selection Keratin Smooth and styling variants, which are off to a great start. As a result, we have doubled sales of TRESemmé since its acquisition in 2011, from EUR 350 million to more than EUR 700 million. Again, one of the other brands that is well on its way to becoming a billion-euro brand. This, I believe, is a good demonstration of what can be done by taking a relatively small and largely local business and scaling it up.
This is a good lead-in for me to talk about our recent moves to build the foundation of a prestige business. We entered the market, first and foremost, because it's attractive. It's a large market, EUR 33 billion alone in premium skin and hair. It's expected to grow at around 6% per year. It's relatively unconsolidated, so giving opportunities for share gain for us in what is still called "white space." We are learning from experience and taking the right actions to ensure its success. Over the last few months, we've made four acquisitions: Ren Clean Skincare, Kate Somerville, Dermalogica, and Murad. These are all strong brands in their own markets with very well-differentiated positionings. We're putting these brands into separate business units with our personal care category, along with our existing brands like Ioma, Illuminage, and Regenerate.
We have recruited people with deep prestige experience to run this new global unit, led by Vasiliki Petrou. We're retaining key people from the acquisitions. The individual brands are at the heart of everything the unit does. We're developing the dedicated routes to market that this business needs. We're focused particularly on our existing categories of skin and hair, where we can maximize synergies in R&D and consumer insights and by capitalizing on our local infrastructure as we extend to new countries. We expect our presence in prestige to stimulate our innovations in the mass segment of these categories as well. The business now has a combined turnover of close to EUR 400 million, which gives us the initial scale from which to expand as a key player in this market. The acquisitions will be accretive to growth, accretive to margin, and accretive to EPS.
There's also another step in the evolution of our portfolio, with increasingly weighted to personal care, now 37% of total sales, and heading towards 50%. This portfolio change was underlined last month, with Unilever reclassified from food to personal care in all the main market indices. With that, let me hand over to Jean-Marc to take us through the financial results for the first half of the year in more detail. Jean-Marc?
Thank you very much, Paul, and good morning to everybody. I have often talked about the importance of applying all the levers, namely revenue, margin, and cash, that lead to competitive earnings per share growth, and this particularly in the low-growth environment in which we find ourselves today. This, I can say, has been evident again in our first half year results of 2015. Let's have a look at each of the levers in turn. The first one being top-line growth. Sales increased by 12% to EUR 27 billion. Underlying sales growth of 2.9% for the first half includes 1.1% from volume and 1.7% from price. Importantly, emerging markets grew at 6%, with volumes up 1.9% and pricing at 4%. Very briefly turning to developed markets, they declined by 1.3%.
Volumes slightly positive at 0.1%, but pricing was negative with deflation in all of our main European countries to date. In North America, our total market share is up, but our sales are down by just under 1%, and this due primarily to changes in customer stock levels. M&A has reduced turnover by 1.1%, and this mainly through the effect of the disposals that took place last year of the U.S. pasta sauces, Slim-Fast, Bifi, and Peperami as we were reorienting our North American business. In the second half of this year, there will be a net positive impact from M&A, I'm happy to say. Currency translation added 10.1% to turnover. Nearly all the key currencies stronger against the EUR during this period in time. Only exceptions were the BRL and the RUB. Turning to core operating margin.
Core operating margin increased by 50 basis points at current rates. The drivers of the improvement do demonstrate the virtuous circle of growth and our financial model in action. Particularly pleasing is the gross margin, and this improved by 40 basis points. Where does this come from? Well, simply, it's continued discipline in driving our savings and maxing the mix programs, and with a particularly strong contribution that came from the home care business, as we discussed at the investor conference last year. We've increased investments behind our brands and marketing by around 50 basis points. All four categories increased their spend as a percentage of sales. Within the total bucket, digital advertising was up 17% in the first six months of the year, and it now constitutes 20% of our total advertising spend.
We reduced overheads by a further 60 basis points in the first half, and this driven by the Project Half simplification and cost reduction program, which has actually exceeded our original savings target of EUR 500 million. This now takes the total reduction in overheads over the last five and a half years to 350 basis points, around a third of this coming from lower restructuring charges. Core EPS increased by 16% at current exchange rates, and at constant exchange rates, i.e. excluding FX, this increase was 8%. Operational performance, which is the combination of growth and margin, contributed 7%. The purchase of the Leverhulme family rights in May last year added another 2.1% through the reduction in the diluted share count. Lower minority share of profits added 1.4% to core EPS.
The core tax rate was 26%. This was higher than a particularly lower comparator in the first half of last year, remains within our area in which we expect our tax rate to be. Currency movements had a favorable impact of just shy of 8%. Outside core EPS, we have taken a charge of EUR 84 million, which is related to the exchange rate used to consolidate our business in Venezuela, which as you know, is quite a small business for us in absolute as well as relative terms. In any case, this was remeasured at VEF 208 to the USD, which is more reflective of the rate at which we expect to remit dividends in the future. Importantly, turning to free cash flow, this was at EUR 1.1 billion compared with EUR 0.8 billion last year.
The improvement was driven by the increase in core operating profit and a lower seasonal outflow of working capital. If you take the average working capital over 12 months, this continued to improve to negative 5.4%. This continuous improvement, sustained over many years, is a tribute to the work of many, many people across the business under the leadership of Pierluigi, as well as others leading the supply chain. The reduction in stock levels, taking out 12 days over the last five years, is particularly impressive. He has promised more to come. Capital expenditure in the first half was broadly in line with last year's level. Turning to the balance sheet. Net debt at the mid-year level was at EUR 11.8 billion. That is up EUR 1.9 billion from the year-end position December 2014.
Of this EUR 1.9, EUR 1.1 billion is due to currency translation on the essentially two-thirds of our debt which is denominated in US dollars. On the other hand, the net pensions deficit reduced from EUR 3.6 very quickly down to EUR 2.5 billion. This through a combination of one, higher discount rates, two, a strong investment performance over that period of time, and three, the cash contributions that we, Unilever, have made. The quarterly dividend is unchanged, EUR 0.302 following the increase of 6% last quarter. I will just remind you, as Paul said, over the last 35 years, we have had an average increase of around 8% per year. This constant increase over time is perhaps one of the most important measures of long-term value creation. Let me just turn to the 2015 outlook and just provide a few words on the outlook for the full year 2015.
The first point, currencies, which have been so volatile. As they stand today, we roughly expect a translation tailwind on turnover of around 6%-8%. As you can appreciate, this does change every week. The currency translation effect on EPS would be just a slightly less than 6%, so a little less than the impact on top line. Two reasons for this. One, it is partly because of the effect of the stronger sterling and Swiss franc on some of our central costs. Two, partly because of the impact of the stronger dollar on our finance costs and average tax rate. We expect our volumes to further improve in the second half of 2015. On the other hand, price growth will continue to ease.
As a result of this, underlying sales growth for the year is likely to be slightly ahead of the 2.9%, which we achieved in the first six months of this year.
If I then turn to core operating margin, we have a tougher comparator in the second half. We will further step our investments, as we discussed when it comes to personal care and others, where we will see more momentum. Nonetheless, we continue to expect a steady improvement in margin for the year as a whole. Turning to our tax rate, this is likely to be slightly above 26%. This because of the impact of the stronger dollar, which has a higher tax rate, as I just mentioned. With CapEx likely to be below last year's level at just under 4% of sales, cash contributions to pensions around $700 million, we do expect another year of strong cash flow delivery. With that, let me hand back to Paul for his concluding remarks.
Well, thank you, Jean-Marc. Just let me use the last few minutes to wrap up. Over the last six years, Unilever has become a more robust and resilient company. In a VUCA world, we're taking the next steps to ensure we continue to create long-term value. The first half results demonstrate again that we're doing what we said we would do for a seventh year in a row. Gross momentum is improving, with volumes picking up. Our innovation pipeline, although back-half weighted, is stronger than ever and gaining good traction, and many of you have commented on that. China has returned to growth. We're implementing a sharpened strategy. All four categories are making progress against those objectives we've set and communicated to you. All of our categories are growing. Investments are up in each of them. Home care margins are improving strongly while keeping top-line momentum.
Ice cream margins and cash flow are up without compromising growth, driven by innovation, including the move to premium. We've put in place the new standalone Baking, Cooking and Spreads unit, a major undertaking, but again, completed on time. We also continue to drive cost savings to create the fuel to invest behind growth. The Project Half simplifications have already delivered more than EUR 500 million in saving and are now being extended as an integral part of our business model. This is taking us even closer to benchmark levels of overheads without the major disruptions that come with so-called Big Bang restructurings. We're further strengthening our go-to-market capabilities with investments in extending distribution and growing new channels like e-commerce.
For example, this week alone, we announced a strategic partnership with the Alibaba Group to expand our online sales in China and give consumers in rural areas better access to our products. Our organization is fitter, with a simpler, flatter structure and a strong talent pipeline. I'm delighted that we've been able to promote both Graeme Pitkethly and Amanda Sourry to the leadership team, two great internal talents who will bring both a lot to the team. Of course, there are areas where progress has not been as fast as I would like. In tea, for example, where our investments in the Lipton brand and our extensions into faster-growing segments has not yet lifted growth to the levels that we would be capable of. We're market leaders in an attractive category and need to translate this in superior growth.
In spreads, we've been doing a lot to improve consumer perception of margarine, and the new launches are doing well. Market share overall is growing, but this hasn't yet been enough to stem the overall decline. The new unit which we put now in place will make a real difference here. Whilst the business is increasingly agile, as you know, this is another area where I'm never satisfied. I still believe that we can do more. All these initiatives keep us on track to deliver against our objective for the year, which once more are unchanged. Volume growth ahead of our markets, steady improvement in core operating margins, and a strong cash flow. Finally, this is the last result call that I will be sharing with my good friend, Jean-Marc, who steps down at the end of September.
We certainly had good times together and a great run for the company. He's played an important role in the transformation of Unilever to be able to deliver these consistent growth and margin improvements as well as cash flow. This, in fact, is his 50th result call as CFO, so I want to use this opportunity to congratulate Jean-Marc with this enormous jubilee that he's celebrating today. Jean-Marc has also simplified our reporting and communication, and many of you have told me personally how much you appreciated that. The fact that we've been able to announce not only great consistent results over his tenure, but also a strong internal successor, reflects the way he has developed the finance talent in this great company, and we're certainly grateful to Jean-Marc for all of that.
Some of you already know Graeme from the Investor Roadshow meetings a few years ago, and I'm sure we'll find the opportunities in the near future to introduce him to you again so that he can get to know you before he officially takes over as of October 1. Let me take this opportunity as well to warmly welcome Graeme. With this, let me open it up for questions and answers.
Thank you, Paul. 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 believe the first question is from Harold.
Yeah. Good morning, everyone.
Hi, Harold.
You can hear me, yeah? Well, first of all, I'd just like to echo what Paul said on Jean-Marc from all of us. It's been a great few years for you here at Unilever, and definitely the improvements you've made in the reporting has made our life as analysts a lot easier to do as well. Thank you. A couple of questions on the business. You mentioned China is back to modest growth. You also mentioned the e-commerce helping in that, and you've also, as you said, signed a deal with Alibaba there. Could you just maybe give us a bit more insight as to exactly what's going on in the online shift from a channel perspective, but also from a Unilever perspective in China? Just some insights would be great. My second question is on LATAM.
Volumes have actually accelerated quite significantly, up 3.3%, and that's despite pricing accelerating further in Q2. How come your volumes are doing so well, despite the pricing keeping pushing upwards? Thank you.
Thanks, Harold, and I'm sure Jean-Marc appreciates your comment. I saw him smiling on his face. He's too modest to say anything, but he appreciates it, Harold. The China shift is important, quite rapid, actually. In China, if you look at the total market, the Chinese economy is growing 7%, despite what people say, the ups and downs. There's obviously an enormous potential in total China still. What you really see is a rapid shift away from traditional retail, which is more or less stable in its markets, at least for the markets that we operate in, and moving rapidly to online, where we see the bulk of our growth. You saw the agreement that we signed with Alibaba, which gives us a good cooperation with them and allows us to extend our products into the rural areas, which is definitely our next frontier.
Also at the same time, work with them to attack the continuous issue that we have there with counterfeit products. I think it's a major breakthrough for us. Our total business is doing well, which we had said. We took the tough decision quicker than others, may I say, to really adjust our inventory levels. We said that would take until now. It has literally been done until now. We are now able to pull our innovation through much faster than we would have been able to do before. We will actually see our growth in China accelerate over the second half, and we definitely will be in solid positive numbers ahead of the overall growth of the Chinese economy.
I feel that although it has been tough for that part of the world, although we had to explain it to you guys, once more, we're making the right decisions for the long term for this company, and I think the numbers increasingly start to show that. What happened to the recent stock market, where you saw a 30% adjustment and 10 trillion was wiped off at one point in time, there's a lot of institutional investors who have come in at the end of this enormous run in the market, probably taking a little hit. I think it will show up a little bit in consumer confidence in the months to come, and we should be mindful of that, and we are building that into our plans. In LATAM, you're kind to give us credit for the 3.3% volume and say, why are we doing so well.
I would actually bounce that back to you and say, why didn't we do that before? We come off a lower base, and the numbers obviously are better, but we should be growing in that region, our volumes a little bit stronger. The reason we're doing that is we have great innovations on Knorr. We are launching the fortified cubes. We have the cooking products are doing extremely well. We see continued momentum behind Brazil, despite the Brazilian economy. We've launched our ice cream business there with new variants. We have launched, as you well know, the Omo auxiliary products or the other innovations around Baby Dove, and we continue to invest in that region for growth. I think that what you see now is something that we, over the longer period of time, should continue to see.
Paul, does that mean your Brazilian volumes and organic growth are both in positive territory?
The volumes and organic growths are both in positive territory. That's exactly right.
Okay. Brilliant.
Yeah.
Thanks very much.
Yeah.
I think the next question is from Celine.
Yes, good morning. Celine Pannuti from JPMorgan. I have two questions. My first one on top line, and the outlook you have given, where you are talking about slightly ahead of H1 for the year. At Q1 stage, you were talking about that you were seeing more tailwinds than headwinds. Could you update us of what you see the market growth as we go into the second half of the year? It seems that you mentioned U.S. is not as good as you thought. If you could pinpoint any other market where maybe those tailwinds didn't continue into the second quarter or may not continue into H2. That's my first question. My second question from Jean-Marc, and he'd be pleased to hear it's maybe the last then. I would like to understand the moving part into the H2 margin, you say it was a bit more difficult comp.
I think on overhead, that's the case, but you had a strong benefit from overhead in H1. I think there was an impact from lower restructuring cost and the pension that you mentioned in the European margin performance. If you can quantify how much of that helped the overhead and whether this as well will recur in the second half or whether they were one-off parts in the first half. Thank you.
Thanks, Celine. Given the fact that you've always been a strong supporter with a strong buy recommendation on Unilever, despite our market outperforming results, I'll give the first question to Jean-Marc first to give his last answer to you.
Celine, I will miss your questions, but let me try and answer the last one. There are absolutely moving parts to our margins. Overall, for the year, we estimate our margins to be up, but not to the same extent that they were for the first half. We will be investing in the second half. We will continue behind our brands. There are difficult comparators within overheads. Let's see all the work that we can do in maxing the mix and supply chain. I think that most important for you is that for the core operating margin for the year, it will definitely be up, it will definitely be consistent with our financial growth model and aspirations, but not at the level that we achieved in the first half of the year.
On market growth, we have roughly how we measure this is average weighted Nielsen market share that we can get, and obviously difficult in the emerging markets to do that accurately. I always take them a little bit with a warning sign. The market growth, Celine, is about 2.5%. Here, again, we are growing 2.9% over the first half. On a global basis, we have a little bit more than half of our brands growing market share, and that's how we read it. I think that will slightly improve upon over the second half, as we've mentioned to you. In terms of the U.S. and Europe, what you basically see is there is a volume component in Europe that is positive, and our volumes actually are up in Europe.
It is offset by a price decrease with the general deflation that we see, especially around A brands, which are being used by the retailers, obviously, in this stable environment to attract consumers. Slight volume growth we're pleased about with a little bit of deflation. In the U.S., it's more or less flat. We don't have any significant ups and downs to report. The reason the volumes are slightly down in the U.S. doesn't bother me too much because we really have seen some reasonable destocking in some of our customers. Our overall shares in the U.S., we actually have 60%+ of our business building share. We feel fairly comfortable that we will start to show positive numbers there.
The rest of the emerging markets, whilst I am positive for Unilever, and I think the numbers that we're just producing shows why I made that comment last time we all talked together, I still remain moderately optimistic that where we are currently, that we can maintain that performance over the second half, so that we anywhere come out for the year between the 3% and the 3.5% top line growth in these markets that we're currently operating in. Which actually requires the acceleration over the second half as you can calculate yourself.
Thank you.
Yeah. Thanks, Celine.
Thank you. Next question is from Martin. Martin Deboo.
Morning, everybody. It is Martin Deboo at Jefferies. I would just like to amplify Celine's first question. Let me phrase it this way. Why is your H2 growth guidance as cautious as it is, given you have got something like a two percentage point easier volume comp, which reflects the helping hand of lapping the China destock? Your underlying volume performance across H1 is, if anything, improving. I get it that pricing is coming off, but arguably pricing isn't coming off that much. Just why are you, in my eyes, as cautious as you are on H2? Secondly is one, I think, for Jean-Marc. Jean-Marc, what was the trend on your commodity basket in H1, and where do you think that is going in H2? Thanks for those.
If I start again on the first one, we can talk ourselves up in great numbers, but we would be fooling ourselves. There is no doubt that we have slightly easier comps in the world, but it is also if we have done now the 2.9% of just being very granular here for a second in the answer, 2.9% over the first half. If we need to come in between 3%-3.5%, that means we need to have a top line growth over the second half of 4% in a market that is growing 2%-2.5%. We can talk about the positives, but I don't want to make us feel depressive, but the slowdown in Brazil is real. That country is in a recession. Argentina has been holding the things together, but we also think that there is uncertainty on the horizon there.
China continues to be a volatile market, as we have seen with the recent stock market. If we all would like to live in a world where we say everything works for us, but what history now shows that certainly over the seven years I have been here, that there are some downsides that we will be talking in the six months from now. To go from a 2.5%-3% growth level that we are now on to get to the 4% growth level with our mix of brands that we have is still a step up. We can all fool ourselves, Martin, if you want to, but I have always had a straight, direct conversation with you and the market, and I think I would like to keep it that way.
We feel that that is probably the most prudent outlook that we now have for the second half.
In terms of commodities, Martin, no change to guidance. We continue for the year flat, including currency effects. You may know out of our basket of around EUR 20 billion of commodities, around 20%-25% is indirectly or partly affected by oil. That takes around four to six months to work through all the normal forward covers and get into our P&L. Slightly up in the first half, slightly down in the second half, including currency effect, if you want to get very granular. But for the year, no change in guidance.
Okay. Thank you. Very helpful granularity as you can be.
Yeah. Thanks, Martin.
The next question is from Jeremy.
Hi, good morning. It's Jeremy Fialko, Redburn here. Just the one question from me. Can you talk a bit about the prestige business that you have been assembling in the first half of the year? The first point is, do you think that with these four acquisitions that you've made, that's sort of a good level for you now to, let's say, take a bit of a pause from doing transactions and see how you can grow them over the course of the next year or so? The second question is, if you could talk a little more about how you can, let's say, benefit from the scale of having those four businesses together, and how you'll go about boosting your distribution with those brands. Thanks.
With the acquisition of Ren and Kate Somerville, which are relatively small, and then Dermalogica and Dr. Murad, which are a little bit bigger, we have a business that is rapidly approaching EUR 500 million, EUR 400 million plus, at the moment. We think that it's certainly the critical mass. We will be a major player right away now in that segment. Actually, this builds on a very strong personal care business. Our personal care business in total is now the second biggest personal care business in the world after L'Oréal, and is obviously very well-performing. You've seen again, the last quarter last year, the first quarter this year, the second quarter this year, you will see that our personal care business again is on a continuous improvement path. We think that we have the critical mass to be a player in this segment.
First and foremost, to attract the talent. We have had some great talent that has come in that understands this business. We're very blessed with the talent that is in the companies that we acquired. Dr. Murad himself, Jane and Raymond Wurwand from Dermalogica. These are great people that understand their businesses very well. At the same time, we now have enough critical mass to attract other people as well. We have specifically focused on skin and hair. Skin certainly is not only the biggest segment of this enormous market. Overall market is about EUR 70 billion. Skin is the biggest part of that. Hair, where we have technology advantages, where we have know-how, and where we can also actually use the innovations that come in at premium to trickle down on our core businesses.
We will run this business separately because the go-to-market systems and the activity systems are quite different. I've studied the past. I've studied some of our competitors. Obviously, we're not rushing into this. That's why you see these moderate acquisitions. We are learning our way into this in a very mindful way. If there are some opportunities to strengthen our current portfolio, we would certainly look at that. For now, I think we have enough on our plates to integrate these brands and make them work for us.
Great. Thank you very much.
Yeah. No, thank you.
I believe the next question is from David Hayes.
Morning, gentlemen. Thank you. Two from me. Just firstly, obviously the new baking and spreads unit set up on the 1st of July. Can you just talk about whether there's a retrospective growth number that you have for the first half, having broken that business out now? Then moving forward, what you see the target being or what the management of that unit's targets are for that performance. What do you think is realistic and what their objectives are in terms of changing the way they manage that business now that that's set up? Then secondly, on the de-stocking in North America. It's been mentioned a couple of times. I just wonder whether you can be a little bit more specific about what's driven that de-stocking, whether you can quantify it for the first half, and then how it plays out the rest of the year.
Is that done now or is there more impact of that to the third and fourth quarter? I just wanted to get the dynamic specifically on that. Thank you very much.
Yeah. On the BCS unit, as we now call it, we don't break that out. We report it under foods, and we continue to report it under foods. What you've seen is our total foods business from a minus 0.8% that we reported over the six months, it's now growing 1.4%. There's a significant step change, but most of that is coming from our savory business, which is now top of class growth in that category. Actually in Europe was the fastest growing category over the first six months. Our spreads unit is still going down, in terms of absolute numbers and the bread eating habits, the rapid change that is happening in that market, the prices of butter that are for the first time in history, may I say, below the prices of margarine, doesn't make that easy at this point of time.
Despite that, we're growing share in the segment. Moderate share growth we find in Europe, and we're starting to see that also in the U.S. We think that the benefit of setting up this unit is going to be the speed with which we can roll out these innovations in the company, and then obviously driving efficiencies in its total operating structure, which should also reflect in costs. I'm fairly confident that we will deliver on that as we move forward. We will not break out the unit separately and have no plans to do so. Obviously, management itself is well incentivized behind their specific targets. That goes without saying. On the de-stocking in the U.S., we look at our market shares, we look at the latest shares as reported.
I just saw Andrew Wood putting out the shares this morning on the U.S., which broadly look good for us in food. In fact, they are record shares. Increases driven by ice cream, but also by balance of our businesses. Our personal care business is more or less flattish in share, with a little bit of competition in the hair segment that we have to deal with right now, and we're responding to. Overall, our business in the U.S. is good performing. Our destocking is basically in the major retailers, where in a low growth environment of the U.S., we just see, again, a little bit of better management of their total stock levels. That's reflected in these numbers, which I think, again, we will not have to deal with in the next months moving forward. Jean-Marc, you wanted to add to that?
No, I just wanted to emphasize there's nothing unusual whatsoever. If you were to put a number over the first half, it's around a little more than 1%.
Okay, that's great. Thank you very much.
Yeah. That's it.
The next question, I believe, is from Javier.
Good morning, everyone. I second Harold on Jean-Marc. Good luck in your next post. I have a question with regards to the personal care business. It seems to me that, well, it's the only business that margins are down 20 basis points. It seems like you must have increased AMP spending the most in this area. Are you getting the return in that spending in personal care? If you aren't, is it the consumer? Is it the competition? Is it the shift in retailing from online in China to specialty retailers in the U.S.? That's question number 1. Question number 2 has to do with the acquisitions, but from the angle of their scalability. It seems like very small brands, and the acquisitions that you did before targeted more emerging markets and the distribution.
This time around, these acquisitions do not seem to benefit from your pipeline in emerging markets. Should we expect other kind of acquisitions going forward? Thank you.
Yeah. If I may start with the last one, on the acquisitions on developing markets and developed markets. I remember sitting here, when we were buying the Alberto-Culver brand, first the Sara Lee brands, people were saying, "Why do you buy in Europe?" That has been a very strategic acquisition in terms of making our European volumes grow again and strengthen our brands. That was right. Alberto-Culver, "Why do you buy in the U.S.?" Not only has that been very important for the U.S., where we are now number 1 in hair, and has really built our personal care business, which I explained then, but as I did on this call as well, it has been an engine for expansion in emerging markets.
If you look at the beauty market as well, the prestige beauty market, it's actually fairly concentrated, and 70% of this market is only in a very few countries. This is not a story of let's expand into all of these emerging markets. Let's expand in the markets where the beauty business is very much concentrated at this point in time. Japan is a very big market for skin, for example. It's one of the biggest markets. We will be focused not on expansion into new emerging markets with this category, but we will be very much focused on building that business in the markets where currently prestige beauty is. Now, in terms of small or big, it doesn't really matter. These are fairly big brands for prestige beauty already, especially Dr. Murad and Dermalogica.
I also want to remind you that every big brand has started out small. We will do some moderate learning, then we will grow these brands, which we think we can obviously grow above market and add some of our other brands to it, like Regenerate or Nexxus or the other ones I talked about. We think that strategy is prudent. It is also a strategy that manages the risks that come with it and the investments. You have also seen that it is at the same time as we do all of this, it is accretive to any number that you can think of. We think, like on all the other acquisitions that we have made, more or less, that it is a very responsible way to spend our shareholder money. In terms of the first question, which was Remind me the first question, I apologize.
I am looking at my notes here. The low growth.
Absolutely. It is that when you look at personal care, the growth-
Yeah. Sorry
is 3%.
Yeah. Sorry.
There was the margin investment. Do you think that this is an issue of competition? Is it shifting channel?
Yeah.
Is it the categories itself? What do you feel is happening there?
I'm sorry
kind of the return is spending?
Yeah, no, got it. I had written it down, but I didn't write down personal care. I apologize. The growth of personal care is, what you see now is again, in quarter four, we had a 2.1% growth. We had 2.7% growth in first quarter, now a 3.3% growth in the second quarter. Personal care is on an uptick, and we've actually heavily invested behind personal care. We have an enormous string of innovations coming through that we feel actually very pleased about, and they are back half weighted. We have the Dove Advanced Hair Series, which has obviously launched and doing very well. We have the dry spray launch I talked about in the U.S. We've launched the TRESemmé premium. We've introduced Lifebuoy in China. We have this upgrade of Lifebuoy Active Natural. I could go on.
If some people were doubting the innovation capabilities, I think you see in this category, you see a very strong innovation pipeline, and actually more so in the future now that we have the prestige business as well. We're spending money behind that. 20 basis points for us is a rounding, to be honest. We expect from the total year to be positive, but we had to invest. The other reason we had to invest is that still in some parts of the world, notably in the U.S., we see very heavy competition on hair care especially, where one of our competitors wants to gain share at any cost and reminds me a little bit of some of these detergent battles which we have successfully fought. We have to be sure that we stay competitive on our brands, and that's what we're doing.
Thank you very much.
Thank you.
The final question on the line is from Richard.
Yeah. Good morning, guys. It's Richard Withagen at Kepler Cheuvreux. Just a quick question on your European margin. Obviously, the environment in Europe has been tough, still you managed to improve your margins considerably in the second half of last year and also in the first half of this year. Is the current level of roughly 17.5%, is that sort of the normal, sustainable level going forward? The second part to this question is, could we expect that actually to go up further, and what would be driving that?
Richard, thanks for the question. It's my honor to give the last question of this conference call to my friend, Jean-Marc, which will also be the last question he will answer after 50 quarters of history. Take it with emotion, and since we're talking about the margins in Europe, also have a few tears in your eyes. Here he goes.
It's unfortunate to say, I can't give you the answer on the last part of your question because we don't give any guidance on margins on a European level. Absolutely, the margins are high. If I'm not mistaken, 17.4%. By the way, they were at around 17.7% in the second half of last year. Overall, it is high margin. A lot of the increase in the first half is driven by savings, by higher gross margins, lower overheads, and good discipline driven by Jan Zijderveld. There has also been the positive impact from pension plan changes in the Netherlands, as well as lower restructuring costs. There has been some impact from pensions in the first half, but overall, these are high margin levels playing the role within the total portfolio.
I think this concludes our conference call. I want to thank you again once more for your support and interest. We're overall pleased with these results. Once more, not only because of the absolute numbers, we can always talk a half a % more or less in any of them, but it's the robustness of the numbers. It's a top-line growth slightly ahead of the market. It's a gross margin improvement. It's an investment in brand spending. It's a discipline around indirect that is better, then getting, again, a core operating margin improvement, which ultimately is 16% earnings per share. That is the robustness that we want to have in this model. Call it boring, call it efficient, call it effective.
In a more volatile world, that is what we want to do seven years in a row, there is no reason why we cannot do this for the whole year, with moderate confidence over the second half. My only thing is don't run ahead of yourselves. We have been fairly explicit that we see it anywhere between 3.5% and 4% on the top-line growth for the second half, which gives you a total year slightly south of 3.5%, our margin progress will be what you've more or less become accustomed to. That is what we deliver, that allows us not only to have a solid year in 2015 once more, but also to guarantee that we maintain this performance for future years to come. That's the long-term strategy that we put into Unilever, that's not something that we will deviate from.
Let me finally say before I wish you all a happy holidays and taking a break, let me finally thank Jean-Marc once more. I've learned a lot from him over the last five and a half, six years that we've worked together. He's been a super CFO for Unilever. He certainly helped us put this virtuous circle of growth in place, and I'm grateful for the robustness with which he leaves our company. Certainly, on a high, with a high level of confidence that we have a model now that can withstand the shocks of time, and that is ultimately the proof of a good strategy. Jean-Marc has been a major part of that, and obviously, having an internal promotion again as a CFO, which we haven't had for a while, may I say, is something that we all are very proud of here.
Thanks for your support once more. Enjoy the holiday season, and hopefully see you soon either on the roadshows or shortly after that. Thank you very much.
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.