Good morning, ladies and gentlemen. Welcome to our 2016 nine-month sales conference here in Vevey. This conference will be held in English, but you can also follow it in French or German using your headsets. If you're watching the webcast, you can choose the right language by clicking on the respective link on the webcast page. On the podium, we have our CEO, Paul Bulcke, and our CFO, François-Xavier Roger. I take the safe harbor statement as read. Now let's start. Paul, you have the floor.
Good morning, ladies and gentlemen. First of all, welcome to our 2016 nine-month sales conference. Also, welcome to all of you who are following this conference through the webcast. You saw the figures which we published this morning. Over the nine first months of 2016, we achieved sales of CHF 65.5 billion, with an organic growth of 3.3% and a real internal growth of 2.5%. In this soft trading environment, which is marred by deflation and low raw material prices, we have continued to privilege volume growth, which is at the higher end of the industry, and that in both emerging and developed markets. At the same time, our pricing remains soft but is increasing. Our growth was also broad-based across categories which allowed us to gain or maintain market shares in most of our businesses.
We are also making good progress in addressing our challenges and driving our different initiatives amidst this generally softer trading environment. We also continue to invest for the future. That align with our strategy. We maintain a high level of brand support while continuing to build an innovation pipeline, both globally and locally. At the same time, we drive more operational and structural efficiencies through standardizing, sharing, and scaling more and more activities above market. Now for the full year, and considering the current softer environment, we expect Nestlé to deliver organic growth of around 3.5%, with improvements in margins and an underlying earnings per share in constant currencies and increased capital efficiency. Let me now hand over for more details to you, François. Please.
Thank you very much, Paul, and good morning to all. In the first nine months of 2016, our sales reached CHF 65.5 billion, RIG stood at 2.5%. I remind you that RIG is a combination of volume and mix. OG is at 3.3%. We had a negative foreign exchange deviation of -1.7%, and net divestment, M&A, had a -0.6% effect. As a consequence, our reported sales increased by 1%. In a context of deflation and weaker consumer demand, we deliver a solid RIG and we gain or maintain market share in almost 60% of our business sales. This reflects the resilience of our portfolio and our strong execution capabilities in a difficult context. Pricing remains low, but with some sequential improvement since June, mainly coming from Brazil and Russia. First, looking at our performance by geography, I remind you that this split includes our zones and our GMBs.
Our growth has been broad-based across the three zones. In Americas, RIG was 2.3% with OG of 4.8%. EMENA had RIG of 2.4% with OG of 2.1%. AOA had RIG of 3% with OG of 2.5%. This is relatively consistent with the shape of growth that we saw in H1. The main variance from the half year comes from Zone AMS, where we rebalance our growth from volume to value, mainly in Brazil. Looking now at the shape of our growth between developed and emerging market, developed markets account for 58% of group sales, while emerging markets are accounting for 42%. Organic growth is pretty consistent with what we had in H1, with developed markets growing 1.9% and emerging market by 5.3%. The notable change is that pricing improved in emerging markets while RIG was softer. The biggest driver of that was Brazil.
In developed markets, the dynamic was more consistent, with positive RIG driven by innovation and continued negative pricing in a deflationary environment. We don't see really any improvement in pricing in developed markets in the short term. Moving to our businesses by reporting segment, I will start with Zone AMS. We achieved sales of CHF 18.8 billion, OG of 4.5% and RIG of 1.6%. In North America, the environment remains deflationary, reflecting both low commodity pricing and pricing pressure in the market. RIG remains solid but decreased slightly from H1. Pet Care and Coffee mate remains as key growth drivers. Frozen food continued to grow well with further market share gains. After a complete overhaul of the marketing mix, frozen has reached a normalized level of low to mid-single-digit growth. Confectionery in the U.S. remains difficult, with pressure on the entire category.
Latin America is still a mixed picture. Mexico is one of the leading performers of the group, with good growth across all categories. Brazil remains positive with a different growth profile. We implemented some price increases in recent months, mainly in dairy, we did it as well in other categories like cocoa and malt beverages, chocolate and coffee. Our price increases have had an impact on volume in the short term, as we anticipated, as a trade had increased their inventories before the price increases. Volume started to stabilize towards the end of the period, we need to remain cautious on Brazil because the environment is quite unstable at this stage. Moving now to Zone EMENA. We had sales of CHF 12.2 billion, 2.2% of OG and 2.7% of RIG.
The momentum differs across the three sub-regions of the zones, overall, we continue to see good RIG momentum driving market share gains across geographies. Going by sub-region, I will start with Western Europe, pricing remains negative with deflation across geographies. We had good RIG performances in France, in Germany, in Southern Europe. I would talk there about Spain, Portugal, and Italy. The U.K. has been notably more challenging since the half year, mainly in confectionery and coffee. By product category in Western Europe, Dolce Gusto, Pet Care and frozen pizzas were the key growth drivers. Central and Eastern Europe had both positive RIG and pricing. Overall, we continue to gain market share in the region. Russia remains a leading performer with double-digit growth driven by both RIG and pricing. Poland, the Baltics and Ukraine have been more challenging.
Pet Care continues to do exceptionally well in the region, with strong double-digit growth. Nescafé soluble coffee is still enjoying a very good growth as well. Middle East and North Africa overall maintained positive results, but with a mixed picture by country. Turkey remains a key growth driver with double-digit growth, along with the North and East Africa regions. The Middle East is more challenging, and the ongoing instability has impacted our ability to supply countries like Iraq, Yemen, or Syria. Finally, in MENA, we are happy to confirm the start of our operations at Froneri, our new ice cream joint venture. We will move to equity accounting for this business from the 1st of October 2016, and we are very excited about the significant potential for value creation through this partnership. Moving now to Zone AOA, with sales of CHF 10.6 billion, 2.8% of OG and 2.7% of RIG.
The majority of markets in AOA are showing a good and sustainable growth with meaningful market share gains. This includes some categories in China, but as expected, Yinlu remained challenging and diluted the growth acceleration of AOA since June. Southeast Asia has maintained its high single-digit growth. Most markets performed strongly, from Indonesia to the Philippines and Vietnam. This strong performance was driven by Milo, coffee, ready-to-drink beverages and Maggi. Sub-Saharan Africa continued to grow well across most categories, especially with Maggi and overall the affordability range, what we call PPP. Within the region, countries like Nigeria, Angola, Ghana, Ivory Coast are the highlights. As far as developed market is concerned, Japan's solid growth continue to build on innovation and premiumization, mainly with Nescafé and KitKat. Oceania is still under pressure, mainly from pricing, in a very challenging trade landscape with intense retail competition.
Moving to India, we have made a strong return to growth in the market. Maggi Noodles have continued to gain market share since the relaunch. We are now at 58% market share. Sales are back to about 80% of the pre-crisis levels, ahead of expectations. Our strategy to continue engaging with consumers, even at the heart of the crisis, is really paying off now. Looking in more details at China, the market remains rather challenging. The food and beverage categories in which we operate are basically flat in terms of growth. We have performed well in coffee and chocolate, as both had double-digit growth. As we said at this year's investor seminar in May, the turnaround of Yinlu will take time, as trading conditions remain difficult. Let's move to our globally managed businesses. I will start with Nestlé Waters.
We had sales of CHF 6.1 billion, with 4.2% of OG and 4.4% of RIG. Nestlé Waters delivered solid growth in all geographies with strong growth in emerging markets. We also saw solid growth in Europe in spite of the very challenging comparatives. The U.S. grew well despite the fact that we lost some sales from the destruction of one of our factory in Texas by a tornado earlier in the year. The international premium brands, Perrier and S.Pellegrino, continued to drive an attractive performance across markets. Nestlé Pure Life remains accretive to growth for the water business. There were strong contribution from many of our iconic local brands. I would mention there Poland Spring in the U.S., Buxton in the U.K., or Santa María in Mexico. Moving to Nestlé Nutrition, we had sales of CHF 7.7 billion, 1.3% of OG and 0.8% of RIG.
Our modest growth reflect the category dynamics in our two largest markets, namely China and the U.S. In China. Our biggest market, the category is basically flat. Low dairy prices and the challenging competitive environment, we have there more than 100 players, continue to impact the market. We start seeing as well some inventory de-stocking in the trade ahead of the new regulation that will be introduced at the beginning of 2018. Premium and mainstream segments have taken the largest hit with significant price reductions. We are more focusing on the super premium segment, and our super premium brand, Illuma, continued its excellent growth at over 30% year to date, confirming our leadership in the segment. Overall, in China for nutrition, we are gaining market share and we are consolidating our leadership position.
Whilst we are losing a small amount of share in offline channels, we are making strong gains in the online B2C channel. Moving to the U.S. for nutrition, we experienced some pressure from the beginning of the year following the transition to new packaging for meals and drinks, from glass to plastic. We also had some supply issues with pouches, but this is largely behind us now, and we are starting to regain positive momentum in the U.S. We had good performances in a number of other markets across Latin America and Asia. I would mention there Brazil, Mexico, the Philippines, and Indonesia, just to name a few. However, the social and political instability in the Middle East has impacted our ability to supply the market. Let's move now to our other businesses, which include Professional, Nespresso, Nestlé Health Science, and Nestlé Skin Health.
We had sales of CHF 10.1 billion, OG of 4.6%, and RIG of 4%. Starting with Nestlé Professional, this division grew in both emerging and developed markets, although Europe continues to be a little bit tough. We have announced earlier this month a change in the business structure of Nestlé Professional, which will be effective from the 1st of January 2017. We will be merging Nestlé Professional into the zones with the support of a strategic business unit. We believe the new structure will allow us to better leverage market-specific knowledge and platforms. We will restate our group accounts next year in order to allow comparison. Moving now to Nespresso. Nespresso maintained its good growth momentum across all regions. The geographic expansion continued. We opened 21 new boutiques across the world since the beginning of the year.
Europe's growth remains solid and resilient in the context of an increased competition and higher penetration rates. We have seen a strong momentum in the U.S., driven by the VertuoLine system. Talking about the VertuoLine system, we have now even launched this system in France at the beginning of this month. We also see double-digit growth for Nespresso across AOA and Latin America. Moving to Nestlé Health Science, which performed well. We have seen double-digit growth in our consumer care business, driven by Boost and Carnation Breakfast Essentials in the U.S. We rolled out Meritene in Europe, and it is going very well, and we have a strong pipeline for further geographic expansion for our consumer care franchise globally. Medical Nutrition also delivered good growth, driven by our allergy portfolio, mainly in China.
Moving to Nestlé Skin Health, our consumer business has performed well, driven by the Cetaphil and Daylong lines. Aesthetic and Correctives has also gained momentum with market share gains in the U.S. The Rx business, the prescription business, is more complicated, with some pressure from generic substitution overall for the category as well. Moving now to product categories. I will not spend too much time here because we covered most aspects as part of the zones on globally managed businesses. We will just cover quickly powdered and liquid beverages that had a strong and consistent performance, driven by continued good growth momentum across Nescafé Dolce Gusto, soluble coffee, as well as Nespresso, as I just mentioned. Overall, for coffee, we gain further market share during the period. Waters, we have discussed already. Milk product and ice cream, the performance of this line is impacted by Yinlu, which we have already discussed.
In terms of dynamics since June, pricing has accelerated whilst RIG has slowed down, which largely reflects the pricing action that we had in Brazil and that I mentioned earlier. Nutrition and Health Science include Nestlé Nutrition, Nestlé Health Science, and Nestlé Skin Health, and we have already talked about it, so I won't repeat myself. Prepared dishes and cooking aid, it improved since H1 with the successful relaunch of Maggi Noodles in India, and we are also seeing sustained good results in U.S. frozen, particularly with Lean Cuisine and Stouffer's. Confectionery remains under pressure with negative RIG. We face challenges in the mainstream chocolate market in the U.S., as well as some softness in Brazil and also in the U.K. KitKat continues to do well globally. We are addressing our challenges in confectioneries through innovation and marketing support behind our brands.
Pet Care, to finish, has maintained its good growth momentum with strong contribution from Latin America and Europe, particularly Eastern Europe, and with very good market share gains across zones. The U.S. continues to perform well for Pet Care, and we have recently relaunched both Beneful and Dog Chow. In summary, we feel these results demonstrate our resilient portfolio and strong execution, which is supporting real internal growth momentum in a context of weaker consumer demand globally. We continue to make further market share gains, and in the current climate, this volume-driven growth is unique and differentiating in the industry, and it reflects our long-term value creation model. By growing volume and premiumizing, we are creating substance and bringing relevance to both our consumers and to the trade. Pricing does remain low due to the deflationary environment, but we saw some improvement since H1.
For the full year 2016, considering the softer environment, we now expect to deliver organic growth of around 3.5%, improvements in margins and underlying earning per share in constant currency, and increased capital efficiency. Now, I will hand over to Paul for his final remarks.
Well, thank you, François. While these figures reflect indeed a global soft trade environment, our volume growth is a point of differentiation. What this figure also reflects is the fundamental resilience and strength of our portfolio. The fact that our growth is broad-based. We grow both in emerging and in developed markets. We grow consistently across a wide range of different categories and businesses. What they don't fully reflect yet are the many innovations, actions, and initiatives that we have been taking and are taking to strengthen our portfolio, where we explore and invest in new avenues for future value growth. The many initiatives and programs that we are implementing to be leaner and more efficient and cost-effective as a company. That is what we have been doing through our 150 years of history, permanently challenging ourselves, reinventing ourselves so that we can compete successfully.
That is, again, what we are doing today, challenging and reinventing ourselves. Yes, we have to care for the short term. Yes, we have to perform. At the same time, we have also to invest and make choices to build for long term. These are important times with so many challenges and opportunities converging, times to do the right things, to shape the future, and to set up our company for long-term success. To do this, innovation. It's all about innovation. Innovation is at the core of everything we do. It starts with innovating and renovating what we have, our products, our brands, formulating and reformulating thousands and thousands of products each year, adding value to them and adapting them to the evolving expectations of consumers and society.
Our product innovation is broad, it is diverse, it is global and local, and it leverages our unique R&D capabilities. Often, these innovations are small, incremental improvements, but it is also about putting resources behind bold and disruptive ideas and giving them the time to develop, like we did with Nespresso 30 years ago. Nespresso has evolved to what it is now today, a global iconic brand present in almost 70 markets and countries, completely redefining how we enjoy the best cup of coffee. With the new VertuoLine, which we are now extending from the U.S. to Europe, we are bringing a new dimension to it. The same goes for Nescafé Dolce Gusto, a global beverage system now that we built in just 10 years, also present in 90 markets already.
That goes also for Purina Beyond in pet food, Illuma in infant formula, or the rollout of Boost and Meritene to answer the needs of an aging population, and I could go on. Innovation is not just in products and systems or services. It's also about new businesses and business models like our joint venture of Froneri that just started. Here, we are combining our ice cream business with R&R to create a leading player with presence in more than 20 countries. It's all about innovation. Also innovation in the ways we work, how we organize ourselves, that is what Nestlé Business Excellence is all about. Over 10 years ago, GLOBE gave us a significant competitive advantage. GLOBE was about processes, systems, data, now Nestlé Business Excellence is taking this all to a next level.
It is redesigning our processes and structures for the future, simplifying and on average, cutting the steps involved by half. It is about realizing the benefits of scale and skills and rewiring completely how we work as a company. We are organizing ourselves through Nestlé Business Excellence in a way that frees up our markets, our operations in the countries to focus on what matters, consumers and customers, and innovation, and on generating demand. It is a multi-year journey, and we are halfway through. This is also linked to how we further leverage our procurement above market level, how we revisit our global industrial setup and other initiatives. We are all about innovation. Innovation also with digital, where we are going beyond communication and e-commerce and commerce by building digital ecosystems, engaging and working with all relevant players, global and local, small and big.
Finally, innovation is also about pushing the boundaries, the boundaries of nutrition. This is also what we're doing now through our new platforms, Nestlé Health Science and Nestlé Skin Health. These businesses are shaping entirely new opportunities that entail a fascinating promise of growth and value creation. Well, ladies and gentlemen, Nestlé is about consistency. Nestlé is about continuity, permanently balancing the taking care of the short term, while at the same time building and investing for the future. This has characterized us during 150 years, and that is exactly what we're doing today. As I said, these are special times where we don't want to compromise, that in order to get even stronger. I thank you very much for your attention, and Robin, take over.
For those of you on the call, if you want to ask a question, please press star 1 on your phones to join the queue. If you want to withdraw your question, please press star 2. Please limit yourself to two questions. Now let's take the first question from the call. Warren Ackerman of the Société Générale.
Good morning, everybody. It's Warren Ackerman here at Soc Gen. Two questions, please. The first one is actually for François-Xavier. If I take you back to the first half results, you were confident that you could get back to the Nestlé model or around 5%, or close to 5%, here we are at close to 3% in Q3, so a marked slowdown rather than an acceleration. My question is, were you not too bullish back at H1? What has been the biggest variance versus your expectations in Q3? You already knew that China and Brazil were very tough back then. Have they got materially worse, or has category growth rate slowed materially in Q3? Then the second question is on pricing. Commodity prices are now turning, sugar, dairy, but you're still saying you don't expect any improvement in pricing in the short term.
What does this say about Nestlé's pricing ability globally? Thank you.
Okay. Thank you, Warren. I will answer the first question. In H1, we said that we expected indeed a growth acceleration in H2, which was mainly driven by pricing, which actually happened because we implemented pricing in Brazil, in Russia, and in other geographies. We expected as well to get an acceleration coming from easier comps, because we had a one-off adjustment last year, it happened as well. Because of innovation, which happened as well, and portfolio management, but portfolio management is something that will happen in Q4 because this is linked to the Faurecia deconsolidation. We had said as well at that time that there were a couple of risks. One of them was the impact on volume in the short term due to the price increases that we have put through. Some of it happened, and especially in Brazil.
At the end of the period in Q3, we started to be back to positive volume growth in Brazil. There was not really a negative elasticity, as I said earlier. There was a little bit of piling of inventory, maybe by the trade before we put through the price increases and then some adjustment in July and August, but we were back to the normal situation at the end of September. What I would say surprised us a little bit is a general soft consumption across the region, which we didn't expect. I think that through that, we can see that the growth is relatively fragile in the fast-moving consumer industry overall. I don't think it's only for us, I think it has been reflected as well in markets in general. Moving to your second question on commodity pricing.
We have seen, indeed, over the last two quarters, some increase in commodity pricing. It doesn't reflect fully yet in terms of pricing because we have some inventory first, and we have put in place some hedging. Usually there is a six to nine months delay between the commodity pricing in the market and the time when it impacts our P&L. I don't think that we can conclude anything at this stage in terms of pricing power. We are confident that we have good pricing power because of the strength of our brands overall.
On growth, it's true that actually, I'm an optimist, I would not say bullish. It's true also that the deflationary environment is somewhere lasting and is deeper and lasting longer than we all would have expected. Pricing, we backed off. We are privileging through all the initiatives we have in innovation, etc., volume growth, because that is what sticks. We saw some pricing. We thought we had more pricing needs than actually considering the deflationary environment we actually have to apply. That is what combining these two things is what brought us where we are. I just want to stress again, we have volume growth linked with market share gains on the higher end of the whole industry, and that is what stays afterwards. Yes, that's why we projected 3.5% for the full year.
Thanks, Paul. The next question from the call is from Eileen Khoo, Morgan Stanley.
Morning, gentlemen, it's Eileen Khoo here, Morgan Stanley. I have two quick questions. The first one is I suppose on the pricing market share equation, obviously you're talking about the fact that you're prioritizing volume and market share. I suppose now that you're starting to take pricing, are you seeing that reverse? Can you talk about that generally? Secondly, when you talk about guidance being now around 3.5% for the full year, am I right in understanding that that implies an acceleration in the 4Q? If so, what confidence do you have that momentum will improve? Is it to do with the innovation pipeline that you alluded to earlier? Can you just give us a bit of clarity on that? That would be great. Thank you.
Well, pricing and volume is always a fiddle line. You know why we always say pricing is done locally. There's no such thing as a global dimension or a global instruction of our company. If you have a lot of efforts going on in innovation, if you have a lot of brand support, etc., that has to reflect in your market positions and driving the categories. We have leadership in many markets, so it is for us to drive these categories in a deflationary soft environment. That is what we're doing. That's where these market and shares and volumes are coming into play. This is important to us. As I mentioned, that is what stays. When we do pricing, yes, you have certain effects. We saw that to a certain extent in Brazil, where we had quite substantial pricing in certain categories.
There you have a certain adjustment. We have always a little bit up front of pricing, some retail actions, et cetera. We saw it straight away coming back. The strength of brands and the strength of the support behind our brands is what, at the end of the day, stays. As I said, sticks. That is what we are looking for.
Just to be more specific, if I take the example of Brazil, we increased our prices significantly in June. That being said, we continued seeing our market share increasing in Q3. Which mean that we managed to handle it, I think very well. Obviously we changed the profile of our growth more from, as far as Brazil is concerned, from volume to value in Q3. You were talking about Q4. Our guidance for 3.5% this year is actually very close to where we are today at 3.3%. We see some color coming back from innovation, from pricing, obviously, but we want to be cautious in view of the consumption slowdown that we noticed across the board in Q3 for us and for our markets.
We saw it in the third quarter already, some pricing that's going to be part of that too. That's why we project 3.5%, around 3.5%.
Okay, thanks. Now let's take the first question from the room. Ralph.
Ralph Atkins from the Financial Times. Mr. Bulcke, it's your last press conference, I understand, as Chief Executive. Yet again, sales are below the long-term target. You have 5%-6%. Do you think this 5%-6% long-term target is going to remain? Second question on the U.K., can you tell us what your intentions are as regards pricing in the U.K., given the fall in the pound recently? How much is a KitKat going to cost in the U.K.? Thank you.
Well, you said this long-term target of 5%-6%. I say no, that's our ambition, that's something that we are building this company for over time. These are now a few years of very soft trading environments and deflationary environment where the raw material prices, et cetera. That's why we speak about a projection of 3.5% for this year. What matters to me is that it's on the higher end of the industry, especially in volumes. Again, I repeat, that is what matters. It's a relative game towards winning in the marketplace. That too, as I mentioned before, an innovation drive. I think innovation, having the initiative, driving your categories, that is what matters, and that's where we invest in.
Also building the capabilities of having out of this softer environment that we all live with, to come out as a company much stronger and not going for short-term bypasses. I think that's an obligation that the leadership of a company has to do. That is what we're doing. We don't make these trade-offs so easily for growth for the future. This ambition stays. Now, in the U.K., that's a question that we have read quite a little bit about. First of all, I want to say pricing is done in the markets. Pricing is done in the U.K. by our people there. What they do is consider all elements. You refer to the fact that the devaluation may induce some need for, they're going to have to sort it out and to do that responsibly, again.
That means seeing all other possible actions to absorb the maximum of the needs. We produce actually almost over 90% of all what we sell in the U.K. locally. There's quite a lot of local dimension, and that absorbs quite a bit of that need. I think KitKat is going to stay a very enjoyable, great break. I don't see that in the short term turning differently.
The next question comes from the call, Jon Cox of Kepler. Jon, you have the floor.
Yeah, good morning, guys. Just a question. Well, actually I have two questions. One is a margin question. Obviously, you've got a lot of headwinds this year in terms of top line. You've said that you will deliver more than maybe we've got used to in terms of margin. I see consensus is around for a 40 basis point margin improvement this year.
Are you comfortable with that currently? That's the first question. The second question, really on sort of a slowdown in food or packaged goods you guys alluded to, something of a, I wouldn't call it a crisis within packaged goods, but a feeling that things have decelerated, and they are unlikely to come back anytime soon. I wonder if you can just give your thoughts on that. What can you do as a leader in the industry to try and get growth going? Is it you need to focus on more innovative products? It seems that a lot of the small startup independents or local players are winning share from the big packaged producers, which are maybe seen as producing not particularly healthy food. Wondering if you could just give us some thoughts on that. Thank you.
Well, what we say is that we have growth with margin increase. That combines many things. I don't pronounce on numbers or specific on that. I also believe in the continuum of year after year, having margin increase, which is actually linked with our strategy, more than just going after margin for margin. We also combine that margin increase with deeper investments behind brands. You have seen it over the last years. We have increased our brand support, supporting our innovation. We are investing more in R&D because I feel the differentiation and the drive, the engine behind growth for the future is going to be new products. Exactly answering your second question. That is what's going to drive, we, as market leader in many categories, have to do that. We see many areas in our portfolio that are growing very handsomely.
That is basically through innovation. You mentioned small players finding angles. We have to cover these angles too, and we can, and we have through, for example, what we have done by relaunching our frozen business in the U.S. that are growing above our average. These are the things we have to do. I don't feel that our industry per se is there to be low growth as an industry. I do see, if you think about where we have been speaking about the millennials, how they pressure and how they value food much more in their lives, and for that, spend more on food. I see actually upsides. If you see the new venues we're exploring and investing in, they have still to come to bear the growth momentum that I definitely believe it's in there.
If the Health Science, they already are creative on our sales growth, well, that is going to gain momentum over time. These are all dimensions that society is embracing, that consumers are valuing and are going to make part of their lives, and as such, also buy products from. These are the quite, I would say, new connections that we as a company are making that are having and entailing a good promise of value growth. You see these shifts in commerce. I tell you; we are living on an inflection point in society too, and our whole industry is adapting to that. You speak about the commerce, e-commerce and the digital ecosystems that are building up. It's not only commerce or only social media. It goes much beyond that. That's why I say these are ideal times.
These are ideal times of a company like Nestlé to invest. If you combine all that, we are also increasing our efforts in adapting, considering these inflection points, our organization. Nestlé Business Excellence is part of that. This is not small. This is overarching the whole organization of Nestlé and in all countries. It is really resetting, call it reinventing, challenging the structures we have today. This is rewiring in a much more, call it the fourth industrial revolution. At the end of the day, we are in the process on that inflection point of adapting and anticipating and structuring and investing. We have also, and that is all covered by the figures we are promising. A substantial more, call it restructuring, per se, or building new dimensions into this company that are all covered by the same promise of higher margin.
I think that is the quality of what we promise on the bottom line.
Just maybe to complement what Paul said on the margin. We are committed to deliver our trading operating profit margin improvements this year. This is part of our model. This is part of our guidance. We just reiterated it. We will do it again this year. Be aware of the fact that our trading operating profit is after restructuring. We are going to do more restructuring this year. We didn't do that much in the first half, but we will do more in the second half as part of the structural saving program that we have announced in our Capital Markets Day a few months ago. We will increase restructuring this year, but we will increase, obviously, our trading operating margin after restructuring as it is part of our model and guidance.
Let me stress a point, John. Thank you for your question, actually, because it goes beyond margin. We could sit here also and promise margin and say, "Let's have 100 basis points." I cut a little bit with my support behind the brands, and we have actually added to it. We do a little bit less here, a little bit less of longer term, because at the end of the day, longer term or medium term, we can say we have brand momentum, so brand strength. I tell you one thing, that is exactly what we should not do, because that creates what I call business anemia or company anemia. It's that balancing out That is what we want to be as a company, balancing out this continuous delivering, because it is intrinsic to our strategy, added value, more efficiencies. That should reflect on the bottom line.
At the end also, continuous in investing so that we have this fine balance of short, medium, and long term. I think that is what brought us here as a company. During now 150 years, this is an anniversary year, that is what we do now today. We can do that today because somebody did it in the past well. I want whoever comes after to say the same thing. You have to balance it out. Yes, you have to deliver today, too. That's what we call the model.
The next question is from the call, from James Targett of Berenberg. James, you have the floor. James? Okay, let's take the next question from the room. John?
John Revill, Reuters. Good morning, gentlemen. A couple of points. I was wondering, just follow up to Ralph's point, could I have a little bit more color on how you see the U.K. market developing in the future post-Brexit? Also, how will this affect your investments in the country? That's the first point. Then secondly, you said that 90% of your products are produced in the U.K., but obviously you still want to buy quite a lot of commodities to go into your factories in the U.K. The currency shock is going to have some effect. Can you give us kind of color on the effect of the currency shock, how that will affect pricing there? I know you do it locally, but there's got to be some kind of ballpark guidelines there.
Then secondly, you've talked in very broad terms about innovation and things like that to drive growth moving forward. Is there any kind of specific examples you can refer us to or give us a bit more specifics on how you think you're going to get pricing back moving forward? Thank you.
Well, let's first Brexit get some form and shape and definition because we all speak Brexit. I wouldn't speak about Brexit until they really land it, what it means and all that. Fact is, our investments, we're going to see, we have invested quite heavily in the U.K. So whatever they export again, while the added value they deliver is actually making them more competitive in that sense, and we export quite a bit to Europe from the U.K. We have an investment plan that is basically a long-term structure. We're not going to start now revisiting all the investment we did and starting to readjust that. Let's first let the dust settle, and let's give that some perspective. Investments are long-term commitments, so we're not going to start doing short-term dimensions and corrections and decision-making on something that is, for us, medium-long term.
Even more so, as what I said before, let Brexit first get some form and shape. We do import, yes, we do. We have cocoa very strongly, coffee very strongly. Again, that has to be seen how we fight and land that dimension in the U.K. There is many forms and actions that can be taken to help, and we actually also in an efficiency drive to help to absorb part of it. Then locally, when it has to be, it has to be. We're going to see. Then again, it is not back to back straight away. You have to pace that out, and you have to be empathetic with the consumer. You have to care also about the substance of your business. Combining that's the balancing act that we're always doing. We have increased prices in Brazil, but balancing that out.
In Russia, we had to increase certain parts of our business, too. I would not ask for more definition for the time being. Let the dust settle first.
The next question is from the call, David Hayes of Merrill Lynch. David, you have the floor.
Morning all. Thank you. Firstly, just on the sequential profile of the quarter, you've obviously alluded to the fact that the beginning of the quarter was tough due to the pricing shock and the inventory build at the back end of last quarter. I just wonder whether I can tempt you to be a little bit more specific about maybe the months within the quarter or certainly the beginning of the quarter, the back end of the quarter in terms of the RIG. As you look at the 1.9%, how much better at the exiting of the quarter it was. Secondly, Mr. Schneider, I believe, has been with you now for about six weeks or so, shadowing Paul, I imagine, over that period.
I just wonder whether you can tell us what he's been up to in the early days at Nestlé, and then I guess more specifically as chairman, Paul, and as part of the board, what kind of objectives and remit you've given Mr. Schneider as he comes into the business beginning of next year formally. Thank you.
Maybe I'll take the first part of the question.
Yeah.
I don't want to comment on months because it's difficult to read anywhere. On the top of it, there were different number of invoicing days in July and August, it's very difficult to read. Even from time to time for us, it's very difficult to read, we don't manage the business by the month. My comment earlier was just about Brazil, because we saw some pileup of inventory prior to the price increase at the end of Q2, we went back to a normal situation as far as volume growth is concerned post price increase for Brazil. I don't want to comment further on any given month specifically. Mark Schneider, indeed, he is six weeks with us. He is the most, I would say, visible trainee we have.
He is actually not shadowing me In that sense, what he does is he gets to immerse in the company and its operations. He's connecting with all the different dimensions of this company here at the center, also in the markets. He is with me in certain dimensions, like our executive boards, clearly. What he does is being a sponge and absorbing this multifaceted or fascinating dimension Nestlé is. That's what he is in for. You ask about the objectives as chairman is to be chairman of this company. I think one of the very important objectives for next year is also to make sure first that I assume and get in the saddle there. I have the privilege of being part of the board already for many years. Also having worked with Peter in Continuum, that's going to help.
Another objective is to make sure that Mark is very firm and good in the saddle and that there is continuum in this company. I think these are the objectives for the time being.
Thanks. The next question is from James Targett of Berenberg. James, you have the floor.
Morning, everyone. Hope you can hear me this time. Two questions. Firstly, on Nutrition. Just looking at the outlook, really, the last few quarters growth have been in the zero to 2% range. Going forward, obviously, we've got improving dairy prices. You mentioned the supply chain issues in the U.S. have been resolved. Should we expect material pickup in Nutrition, or is the volatility surrounding the new regulation in China going to continue to be a big drag, you think, on growth during 2017? Secondly, just on Nespresso and VertuoLine, I guess clearly the rollouts into France has been driven by good response in the U.S. Perhaps you could talk about how strong the growth has been of VertuoLine in the U.S., and also if you have any plans to roll out VertuoLine further in other countries soon. Thank you.
Well, on Nestlé Nutrition, indeed, we had a convergence of quite a few, I would say, soft elements. The whole category worldwide was soft or I would say flat. Also, you have to know that in Nestlé Nutrition or in the nutrition business per se, China is very important. Worldwide, it's almost half of the business. China has its specifics. This whole category is resetting itself also in expectation of this new law that is actually going to clean up some gray areas and formalize this business a little bit more. That goes into our hands. What we have is, again, I'm going to be repeating myself again, we had some supply issues by the conversion of a whole product category. These are the things that are operationally over now.
I think innovation again, in our infant formulas, definitely we have a major innovation that is now being played, that is going to give also this impetus to our products. In spite of the figures you have, we have actually been gaining market shares in many areas, be it in infant formulas or infant cereals, et cetera. I do see the whole category with all the players seeing more growth in the future. The milk prices is going to be also pricing. We had some pricing that should now also play and help us to give a little bit more organic growth. I do also see potential volume growth. With Nespresso and VertuoLine in U.S.A., we have good growth. It's double-digit growth in Nespresso. I must say, U.S.A. is by now far also the second-biggest market we have in Nespresso.
You may remember we were slightly underrepresented there, that was a little bit hurting us. Now Nespresso is having very good traction, and VertuoLine is really playing into how U.S.A. is seeing a good cup of coffee, is playing into what they expect from it. It is another different kind of coffee, the VertuoLine enhanced. That's also why it complements very nicely what we have as Nespresso, this short espresso-like coffee. That's why we also are launching it now in Europe through France. Are we extending that later on? I think yes, because it has a complementary projection to our offerings. You know that coffee is our world. We have that fantastic brand, Nespresso, to cover the different areas there, too, and the characteristics and the personality of Nespresso is what VertuoLine does. Then we have also the Nescafé, because that's how we see coffee.
We have two fantastic brands arming this market very well and complementing the different angles to this market. We see Nespresso with VertuoLine that complements the offerings we have so far as having continuous growth for the future as it had in the past.
Just to add some color on VertuoLine in France. As you know, VertuoLine is addressing the need for long coffees. What is interesting is France is our largest market as far as Nespresso is concerned, but we cover only 38% of the home consumption, given that short coffees or espressos are only 38% of home consumption of coffee in France. We are now, with VertuoLine, addressing the other 62%. It's quite an interesting proposition from that point of view. Just coming back to nutrition in China, it's difficult to read what the future will be made of. There are some positives. There is a second child policy, for example, which might impact positively the market. The fact that milk prices internationally have increased significantly recently. The fact that the gray market is somewhat stabilizing or getting reduced significantly.
All of this is moving in the positive direction. That being said, we still expect some, not turbulences, but a little bit difficult time maybe in the short term, given that there is a fairly large level of inventory in the trade, not necessarily for us, but overall for the industry. There is a risk that ahead of the legislation, some traders might be tempted to dump product or to reduce prices in the short term. We remain quite cautious still as far as China is concerned for infant nutrition.
Thank you. The next question from the call is from Mitch Collett of Goldman Sachs. Mitch, you have the floor.
Hi there. You talked about stepping up marketing spend, we can see that marketing and admin has increased as a percentage of sales pretty consistently since 2012. You're about to report your fifth straight year of organic growth slowdown. Do you think you're getting an adequate return on your marketing spend? I guess what would it look like if you hadn't have kept increasing? Secondly, I just wanted to ask on the pricing environment in the U.S., why do you think that has deteriorated given that soft commodities are generally starting to rise? Did that mean that your organic sales growth in the U.S. was in decline this quarter? Thank you.
Did you get the second part?
More or less.
We had a very bad connection, so I heard the second part. Let me first go to the PFME has gone up, you say, how do you compare that with an organic growth that is slowing down? Part of that slowing down of the organic growth is linked with very low prices. For me, our marketing spend is not to justify prices, it's just to create value, is to explore new venues, new offerings to the consumer, et cetera. Our PFME goes up. You have always to challenge, is it wisely spent? That is something that also digital helps us to do even better, to focus and even better these investments.
I think it is intrinsic to our strategy that I see the support behind our brands, the connection with consumers, the personalization of offerings, is like inducing a higher support behind our portfolios and behind our brands. I think also, the new venues that we are exploring are definitely more added value. More, I would say, benefits built into our products and brands. Millennials, call it the millennial phenomena, as a consumer, the relationship with that kind of consumer is more intense, hence also more PFME. I think the PFME is linked also with the business models and the business offerings we have. It's not just to force growth per se, but as a consequence of that deeper engagements, as a consequence of that more intense innovation with more brand support, yes, indeed, it should flourish back into more growth.
Volume growth we have already, I repeat again, at the higher end of the industry. That's the effect of having continued investing in our brands.
The question-
I think you were talking about the pricing in the U.S. We are clearly, as far as the food and beverage industry is concerned, with a negative trend from pricing. Clearly, deflation in the U.S. Volume is not that great either. I think the food and beverage market even declined by volume last year, which is probably the first time it happened in the U.S. history. In that context, we are quite happy actually to still grow in the U.S., and we are gaining market share overall in the U.S. as a combination of both positive volume and some negative pricing as well. Overall, we are gaining market share in the U.S.
I think you ask if you think that we are softening and even going down in pricing in the U.S. Well, it is at the same vein and the same level as the first half. At that sense, there is no softening or losing, but it's on a low level. Actually, in certain categories, we're going to see how that's going to play out in mix. We have some price increases, like in Nestlé Skin Health, et cetera, that's going to start playing out more positively.
Thanks. The next question from the call is from Céline Pannuti of J.P. Morgan. Céline, you have the floor.
Yes. Good morning. First question is on volume growth in your categories. Is it possible for you to tell us what you think is right now the volume demand in your categories across the globe? You mentioned that you have a better RIG and volume performance than peers. I just was wondering whether we also see the risk of further decline as you are going to face tougher comps on AOA from next year. Overall, whether effectively you are going to feel the pressure of lower demand. That's number 1. Number 2, could you share with us the performance in China? What has growth rate done in the quarter? Yinlu seems to have deteriorated. I think that they were effectively relaunched. You did say that it will take time, but what is now the further step down in that performance? Thank you.
The first question was?
The first question you ask about the volume growth by category. We operate in quite a large number of categories, so it's difficult to cover all of them. Overall, the market, the food and beverage market by volume is close to zero, slightly positive. We are doing better than the market, actually. We have the highest, I think, the highest or one of the highest growths by volume in the industry, which we clearly see. We see that in all our categories with one exception, though, which is confectionery.
For what is China, actually, it's a little bit frustrating because there is indeed quite a lot of good stuff and growth happening in very different categories we have. I think about coffee. Nescafé, for example, is growing very handsomely. We have also our biscuit confectionery is growing very well. We have actually on the platform of Yinlu, the platform of the company Yinlu, very good things happening like our Nescafé RTD is growing double-digit. We launched Shakissimo, that is growing and having a very good takeoff. We have a Milo RTD on that platform that is going very well. It is this specific peanut milk that was, and is still, wrong footed. We have cleaned the label, et cetera, and it is in proportion big. That is why it overshadows a lot of what's happening in China.
That we have to tackle, and we are in the process. We have reformulated, we are differentiating the positioning. It's a little bit the whole marketing mix again, and it takes time. That combined with actually a food and beverage industry in China that is give or take flat. That is what hurts us in China. That combined with the size we have there is overshadowing so much. That's actually a story of Now China is a fantastic place to be. Food and beverage in general is a dimension that has prospect of growth. We see soft pricing now here, et cetera, too. Deflationary environment in China. Can you imagine? That's going to take colors back. We have very good elements of growth in China, but overshadowed somewhere by that specific issue that is also linked with what you actually see in China.
There's a whole resetting that goes much deeper than just destocking, what we have had in the last two years. That linked with the slow growth. There's a whole resetting, redefining of distribution. We have mentioned that we had quite a lot of stocks and that multilayer distributor structure that we had. We had something like three, four layers sometimes of distributors to get to the small shops. In the past, to a certain extent, that was distribution growth. When you're in an upswing. Was done by many players and partly also by us, by actually call it land grabbing. It's going and engaging with a new distributor, going to a city from one to two, city four, and lower and smaller villages by engaging new distributors.
What's happening is with this slow growth and more fragile distributors with less financial et cetera, are going out of business. There's a de-engaging of quite a lot of dimensions of distribution. That combined with the march of e-commerce, e-commerce is important to us there, too. It is growing very handsomely for us. It's already way above 10% of our business in China. In certain businesses, it's touching 50%. Pet Care is at 35%, for example, and growing very fast. That's resetting a whole, I would say, road to market or getting connection physically the products to the market. It entails opportunities, but there is correction. I think also what we learned there in China is going to be reverse inspiration for many things we're going to see happening in the other parts of the world.
I see this as a huge opportunity, but we have to, yes indeed, try to get out of that overshadowing dimension of Yinlu, and that's what we're doing. It lasts longer, it's deeper because it combines with other negatives that are a little bit out of our reach, but that we live in.
Thanks. The next question from the call is from Patrik Schwendimann of the ZKB. Patrik, you have the floor.
Good morning, Paul. Good morning, François. What's your best guess expectation for the environment for 2017 for the emerging markets, e.g. China, Brazil, and Africa, and for the developed markets, e.g. U.S. and Europe? That's my first question. Secondly, what does this mean for organic growth for 2017? Similar growth to 2016 or better? Thank you.
We're not even finishing 2016, you're asking me already for 2017 and et cetera. Look, worldwide growth is projected to be what, three? Slightly over 3%, which is not We all feel depressed and saying, "Look, this is bad." I just want to remember that before this, I would say these easier golden years that we had before the crisis, this crisis, already eight years ago. That was golden age, but it was a worldwide growth of four point something percent and all that. Before that 20 years average, 3.5% max. To a certain extent, we get used to growth figures that sometimes in the past we didn't have, and we forget them. Now, 3% plus, again, we should be able to grow above that. That's a projection.
On the emerging and developed markets, it is known and it's projected, and that's why we have always said we are an and company. That's why we never disengage from the Europes of this world. That's why we have always grown in these markets. Through the whole crisis, we never had one year of no growth in Europe, Western Europe. It is projected that the worldwide growth, value growth, in spite of emerging markets catching up, worldwide growth, 50% of the worldwide GDP growth is going to come from developed markets. That's why we don't disengage from there. It's going to be different. It's going to be different venues or different offerings. I do feel food, diets is going to gain.
I'm speaking longer term now, that's why I think there's no such thing as, well, growth is going to be in the emerging markets more than the developed markets. I don't think that. We have to maintain that and dimension in the offering. The emerging markets is going to be, again, a painting of different colors. We all say, "Well, China." China as a country is growing, and it is growing on a much bigger base. We have the food and beverage in a resetting somewhere, the country as such is growing. Slower pace, on a bigger base. Russia, a challenge. We are growing very handsomely in Russia this year, and there's some pricing too, we have volume growth. I think, again, that's the resilience of our industry, that combined with innovation. There I go again. Brazil is in turbulent times.
There is instability and all, but again, we have this local savoir faire of understanding the intricacies. We have people there. Again, the Mexicos of this world, growing very well. You have, because we are always India, growth projections, and we're going out of our troubles there very handsomely too. We speak about these big blocks, and then you add the many smaller ones, and they have very good dynamics. The Philippines, Indonesia for us, Vietnam for that matter. You go to Africa in what we call CWA, Central West Africa region. There's turbulence there, too, but that was always part of the worlds in certain places. Growing there, very, very good. I got to stop here because you're going to say I'm too optimistic, but I don't project any figures.
I don't think it's all of a sudden a flip-flop and we're going to get into an environment of. No, I'm cautious, and we will be cautious. I do believe there is opportunity, and it is exactly that why we are investing.
Thanks. The next question from the call is from Martin Deboo of Jefferies. Martin, you have the floor.
Thank you very much. Two quick questions. I'd like to come back to Jon Cox's question on the margin outlook. François, having been very clear that there's going to be an increased restructuring burden on the trading margin in H2. My question is, what about underlying margin? Pricing is sequentially improving. You're not yet seeing the worst of commodity inflation. I don't know what's happening to marketing. What would we expect to see in terms of the underlying margin outlook in H2? The second one is just really a very simple question, leaving aside your hedging and forward buying, just how is your commodity basket moving at the moment at spot prices?
Okay. On the margin side, indeed, I think you're right that we will have to look probably in the next couple of quarters at the margin before restructuring, because we will have more restructuring costs in the second half of 2016, and we will have some significant amount again in 2017. We'll come back to you in due time with amounts because we are still working on a certain number of projects and finalizing it. You could see that our margin before restructuring had increased by 30 basis points in June. That being said, we don't give any forward-looking statement as far as margin is concerned, beyond the fact that we will increase our trading operating margin. You have seen as well that our growth margin has increased significantly, 380 basis points, I think, over the last four years.
This is something that we continue working upon in order to continue improving our margin as a consequence of pricing and as a consequence of cost efficiency. That will remain and will allow us to continue as well investing further in marketing, as Paul said, and investing further as well in R&D. Talking about commodities, we have seen some increase in commodity pricing in terms of our basket of commodity pricing over the last two to three quarters. I can talk about milk and coffee and cocoa or even palm oil. It was a little bit less obvious, I would say, the increase maybe over the last quarter. Still, we believe that we have hit probably the bottom probably two quarters ago and might have reached an inflection point. Could mention oil as well because oil impacts, for example, our water business through PET.
We are, as you know, and as I mentioned earlier, we have hedging policies in place. Which means that we don't necessarily need to reflect it in our pricing in the very short term, but there might be a time when we have to reflect it. Price increases is not always the answer that we have. I'm just reflecting back again on the U.K. situation. Whenever we have an increase in input cost, the first thing that we do is really to work at cost efficiencies.
Obviously price increases is the easy part, but it is largely linked to competitive forces in a given market. The first answer is immediately to look at cost efficiencies in order to be able to remain as competitive as we can.
We see some pickup there, François mentioned milk was on a historical low. It is not healthy to have extremely low commodity prices. It is a very unstabilizing factor. I think also for an economy to have a slight low inflation is like a stabilizer, that deflationary environment, remember, that is a very difficult thing once you get really into it, to get out. Also low commodity prices is not good because it conditions the lives of so many people in the world. We see some color coming back in the broader format, much softer and slower than we thought, that is reflecting also why we are revisiting some figures, but much softer than we thought if you see historically, et cetera. That reflects again, the softer trading environment, and you go on.
I think once we get a little bit of that momentum back, I hope that they will be on a moderated pace, but firm and not like we had these dramatic low raw material prices. That's a false impression to have. That helps us. Well, at the end of the day, it doesn't help. It's softer than we thought, but it's at least coming back some colors specifically in base raw materials, cocoa, over time again, cocoa, coffee, and milk for us. We see the impact of oil prices. We have to wait to see what's happening there. They had some, how firm is that? That affects then also so definitely quite importantly agricultural materials.
Thanks. The next question from the call is from Jeff Stent of Exane. Jeff, you have the floor.
Good morning. Just one real quick question. I think I'm correct in saying it's the last time that Paul will be addressing this audience as CEO. Reflecting on your last eight years, Paul, if you were to say what your one biggest achievement's been and your one biggest regret, what would they be?
I don't like Well, still sitting here is a good thing, right? I never speak about legacies or what is et cetera, but at the end of the day, we, and that's all the people who have been part of this journey also, these were not easy years. These were actually 8 years with the crisis, and you go on and turbulences, a combination of macroeconomics, but also societal, political, also technologies. I call it as an inflection point. I think it's fascinating the opportunities it gives, but at the same time, I think we went relatively steady through all that. That is somewhere a point that we all can be proud of because these were turbulent times. We did weave through these woes all these years and have been delivering, as I mentioned, also in the developed markets growth and maintained our agenda.
Yes, we have to reset certain dimensions and all that, and good, I would say, reaction on realism and pragmatically. At the end of the day, being able to do that and investing for the future, I think that's important. Having done, in my eyes, the right things and balancing the short term turbulences, et cetera, and yet doing what needs to get stronger. I think this company is definitely stronger. When then some more environmental tailwind is going to come, that's going to be much more visible. That I would say is something that we're proud of. So that's basically it. Was there another part of the question?
Regrets.
The what, sorry?
Regrets. If any.
That it was so fast going over and by. Eight years indeed, and it is very fast. That's a regret, that it goes fast and somewhere does it end. I'm so happy I'm still going to be part of it from another angle, and that I can still serve this company, that I have dedicated my, well, 37 years is not bad so far. That's maybe a regret.
Thank you very much.
Okay, thanks. The next question is from Alain Oberhuber of MainFirst. Alain, you have the floor.
Thank you very much. Good morning, everybody. Two questions. Just regarding the growth again, do I understand it right that we expect now similar pricing but an acceleration in the organic growth, in particular in the RIG? Then for next year, there's obviously high base in H1. Could we expect that the organic growth next year is more geared and skewed to the second half? My second question is regarding the U.S. frozen dish business. Could you give us a little bit more insight about the development of Stouffer's, the pizza as well as Hot Pockets, please?
Maybe you ask the first part. On Stouffer's and Lean Cuisine, I must say, we continue gaining market share. Last year we had a good, I would say resetting. Very good growth. That growth is a little bit less now on better growth of last year, but still growth and gaining market share. I think we're doing the right thing. What we should not do is fall in the trap again of we already relaunched and that's it. That's why we have a permanent revamping the category in our portfolio now, and it has and it continues to give us a good promise of growth for the future. That in Lean Cuisine and in Stouffer's and in Hot Pockets. It is really quite motivating. On this balancing, I-
On the balancing, as Paul said earlier, let us finish our 2017 budget first before we talk about the phasing. I think it's far too early to talk about the phasing between H1 and H2. On the question on pricing acceleration, as I mentioned earlier, we don't expect any pricing at this stage, at least in the short term. In the Western countries, we are still in a deflationary environment, there is no evidence of a turnaround there. It could happen later, maybe in 2017, once again, if commodity pricing was really picking up. Once again, there is a delay between market prices and what we reflect to the market. In the developing market, in emerging market, there could be a little bit more pricing. For example, what we did in Brazil is largely linked to foreign exchange pressure, which translate into additional input cost.
There might be a little bit more of it in Latin America or in Eastern Europe, probably in the later part of 2017 again.
Thanks. The final question is from James Edwardes Jones of RBC. James, you have the floor.
Yes. Thank you. François, you mentioned that there'd be a need to look at margins before restructuring costs. Can I just confirm that your outlook for the year for margin growth refers to margins after restructuring costs?
Yes. We will increase our trading operating margin after restructuring costs, while increasing the restructuring amount in 2016 over 2015.
Thank you.
I can't give you the amount of restructuring because we are still finalizing it. It depends. The cut of debt has a significant influence on the amount that we could book, but we know already that even while increasing restructuring cost in 2016, we will improve our trading operating margin. This is once again part of our model and part of our guidance.
We commit to a figure of margin improvement, covering that additional more intense restructuring. I think it's, again, balancing things out, not resetting or asking for a moratorium. I think that's the quality of what we promise.
You're closing the mark?
Well, no. Look, these are soft trading environments, et cetera. This balancing of short term, but also having quality in our sales, which I see in the dimension of volume, which is not volume for volume. It represents something that is as leading in many categories that we own also towards the category, to ourselves, to drive categories. I think there was quite a few years of accelerated changes in all these categories. We are engaging, reengaging, connecting, reconnecting, et cetera, but the growth was always there. That is what I see the quality to be in the higher end of the industry, we say. Because we also lead in quite a few categories, and years of indeed building the capabilities of compete. To be competitive is to be able to compete, and that is what we are investing in.
At the same time, there's more longer term, it's this innovation. I cannot stress enough the importance of keeping a mindset, but also an engagement and resources behind innovation. That is linked again with science. It's knowledge. It's engaging in different models. It is also maintaining, and in a company like ours, it is a sizable company with a lot of, I would say, also tradition and history and all, which is a strength to be a liability. Not to make it and allow it to be a liability is reinventing ourselves, hence I use the word NBE. It is to really restructure and reassess and be more efficient and be much more effective. That is in the process we are in.