Good morning, welcome to the Nestlé half year results presentation for 2012. As usual, we will go through a few slides before opening it up for Q&A. We'll take the safe harbor statement as read. Without further delay, it's my pleasure to hand over to our Chief Financial Officer, Wan Ling Martello.
Thank you, Ian. Good morning. We are doing this webcast live from the SIX Swiss Exchange in Zurich. A very warm welcome to those of you who are joining us here in person. Before I get started, a special good morning to Roddy, who you all know is our head of IR. Roddy is recovering and will be back in top form sooner than later. I know, Roddy, you are watching, and if I'm not mistaken, this is the first call you're missing in 12 years. Roddy, this one's for you. We have an hour and a half together this morning. I will take you through the highlights of our first half, followed by a more detailed look at the performance for the year so far.
I will then spend some time talking about the key elements of our cash flow performance, as well as some important changes we've made in the spirit of building on our transparency in this area. With that, let us go to our group highlights. During the first half of 2012, we saw continuing macro trends with regards to consumer sentiments in both the developed and emerging markets. North America remains challenging, as you all know, while the European trading environment has deteriorated, no surprise, especially in the southern countries. In contrast, the emerging markets have continued to show robust levels of growth. This is the environment we are operating in. What is more important, though, is how we have anticipated, how we have responded to that environment, driving performance that is aligned with our strategic priorities. You know those priorities well.
They are reflected in the Nestlé Roadmap, which I gather you all have seen many times. I believe that the numbers we are going to discuss today demonstrate that we have indeed delivered once again, remaining true to our culture of combining shorter term action with longer term thinking. We have been fast moving and flexible, achieving strong performances relative to our markets in both emerging and developed countries. We've done this by embracing opportunities, making right choices, tough choices even, to deliver sustainable, profitable growth. We've continued to invest behind our innovations and our brands. We've been deepening and widening our distribution. We've been focused on flawless execution. We have benefited from having a well-established global multi-tier strategy from value to premium, capturing growth across all consumer segments.
Above all, we have benefited from having over 300,000 people aligned behind the Nestlé Roadmap, driving our performance such that regardless of the environment, we are able to reconfirm our full year guidance. Let's now take a look at our highlights of our performance. The group maintained the growth momentum with an organic growth of 6.6% in the first half of 2012. This reflects a very good balance between real internal growth of 2.9% and pricing of 3.7%. The group's trading operating profit was CHF 6.6 billion, up from CHF 6.2 billion in the first half of 2011. The resulting margin of 15% is in line with our first quarter conference call comment that our 2012 trading operating profit margin improvement will be weighted towards the second half.
You also see here the group's operating cash flow of CHF 5.1 billion, that's up from CHF 2.1 billion in 2011. Why is that? This is mainly due to improvements in operations as well as working capital that I will come back to later on in my presentation. Other elements of this chart, as you can see, I'd like to highlight our net profit, which was up 8.9% at CHF 5.1 billion, and the underlying EPS that rose 12.4% in constant currencies. Nestlé continues to grow in all three regions. Our European performance reflects some tough comparison for the globally managed businesses, but the zone continues to perform at the same level as Q1. Americas has maintained the momentum, with increases in both RIG and organic growth in North America in Q2. We actually saw increases in both RIG and organic growth from Q1 to Q2.
This despite the low consumer confidence there. Asia, Oceania and Africa continue to deliver double-digit growth. Overall, as you can see on this slide, the emerging markets continue to do very well and grew by almost 13%. The developed markets posted 2.6% organic growth, a good performance in view of the environment in Europe. Portugal, Italy, Greece, and Spain had a slightly negative organic growth overall. Last but not least, our billionaire brands grew over 8%, which is above the group average. Here you can see the overview of our zones and globally managed businesses. I'd like now to take you through the highlights of each of these individually. Starting with Zone Americas, Zone AMS, where we had 5.7% organic growth and a RIG that is flattish at around negative 0.1%.
While the North American trading environment remains challenging, like I said before, we actually saw a slight improvement in growth over the first quarter. The frozen aisle is continuing the trend we have seen. We recognize that as the market leader in this category, we are at the forefront of returning value to the category, be it through new product offerings or the approach we take in communicating to consumers. This is relevant whether we're talking about technologies like flash freezing that preserve the freshness behind our frozen brands, or successful new range extensions such as those launched by Lean Cuisine and DiGiorno. The frozen pizza category unfortunately remains soft overall, but our strong brands are enabling us to hold market share despite the significant pricing we have taken. Talking about pricing, we have also taken significant pricing action in ice cream.
The category has also seen increased pressure from private label, as well as the regional players in premium take-home. An important step change in premium for us is the relaunch of Slow Churned, Dreyer's brand Slow Churned, bringing all the taste but with half the fat and a third less calories. For those of you in the U.S., if you have not tried our Slow Churned, I urge you to run to the store. Don't walk to the store, run, after listening to this webcast. I promise you, I love ice cream. You can tell. It's fantastic. It tastes great. It tastes even better than full fat. We have also seen growth in ice cream snacks and the super premium. Confectionery has accelerated year-to-date with innovations such as Skinny Cow still growing very well.
Nescafé showed good organic growth thanks to Nescafé Clásico and innovations like Nescafé Memento that targets younger coffee consumers. Coffee-mate launched new varieties of Natural Bliss, enabling our consumers to individualize their coffee moment. That achieved high single-digit growth. Last but not least, for North America, pet care category is growing, and we have actually increased our share. Our innovations delivered high single-digit growth with examples like Beneful Baked Delights and Friskies Plus. We have also entered the ultra-premium segment through a specialty channel with Canyon Creek Ranch, which is a whole natural food for adult dogs with added vitamins and minerals. Our Latin America story is very positive with double-digit organic growth.
The key drivers by category are confectionery, coffee, and pet care, where Dog Chow and Pro Plan stood out, and by geography, Brazil, Mexico, Andean, and Plata regions are the highlights. Overall, market shares across all categories in the zone were mixed, with highlights being beverages in the U.S. and confectionery and pet care across the entire zone. The zone's trading operating margin increased 10 basis points. Moving on to Zone Europe, the growth is in line with our Q1 performance. Again, it's important to highlight that we did not see a deceleration, which is great. This despite the tough comparison to 2011. The trading environment has deteriorated during the year, as you all know, as I mentioned earlier, particularly in the South, we continue to see growth both with PPPs, our popularly positioned products, and with premium products, with PPP growing at over twice the zone average.
In the West, we achieved mid-single digit growth in the U.K., driven by coffee and culinary, and in France, with most categories contributing. In addition, the zone's organic growth in Iberia, Italy, and Greece actually remained positive. In the East, Russia improved in the second quarter with strong contributions from coffee and chocolate, while the Ukraine, Romania, and Adriatic were the geographic highlights. By category, chilled culinary, Nescafé, and frozen pizza were all strong. KitKat accelerated in the second quarter. Ice cream, unfortunately, had a weak half due to poor weather, and Purina continued to accelerate with strong performances in Russia and many Western European countries. Innovations, including the continued rollout of Nescafé Dolce Gusto, Nescafé Sensazione Creme, are doing well, as is the rollout of Felix, especially in Eastern Europe. Zone Europe's underlying operating performance was good.
The 100 basis points reported decline reflects the 2011 impact of restructuring and retirement plan changes. Next is Zone AOA. The zone delivered good growth. This performance was driven by emerging markets, most notably Greater China, India, Africa, the Middle East, and a number of Southeast Asian markets. Japan also showed solid growth. China and India continue to perform well and are in line with our expectations. Happy to report that our 2 partnerships in China, which is Yinlu and Hsu Fu Chi, are very much on track. New commercial structures and distribution models are having a positive impact, particularly in Africa, where our continued focus on route to market has helped the good performances across all categories. In the Middle East, dairy, coffee, and chocolate were the highlights. As mentioned at Q1, the trading environment in Oceania remains tough.
Japan, however, showed strong growth driven by innovations such as the Nescafé Barista and Nescafé Dolce Gusto systems, and a strong performance once again from KitKat. I love KitKat too, aside from ice cream. Throughout the zone, we've done very well across all price points. PPPs in chocolate with Shark in China and Munch in India, ambient culinary with Maggi, and mainstream products, particularly in dairy and coffee, have had double-digit growth. In premium, the rollout of Nescafé Dolce Gusto in Zone AOA continues to be a success. The zone's like-for-like trading operating margin actually improved in the first half of the year. We discussed this at the full-year results presentation. The reported figure of 18.9% reflects the dilution that we had expected from the partnerships in China. I will, however, mention that these partnerships are accretive, both from a cash flow and EPS standpoint.
Okay. Now we're moving on to our globally managed businesses. Here we have Nestlé Nutrition with organic growth of 5.7% and a 2% real internal growth. Let's start with infant nutrition. Double-digit growth across the emerging markets more than offset the slower performance in the developed markets. The key growth drivers were South Asia, Brazil, China, and the Middle East. Infant formula delivered double-digit growth, mainly driven by an acceleration of growth in the emerging markets. The U.S. sales have been under pressure as a result of general category softness, and this is largely due to, no surprise, declining birth rates and really tough comparables from 2011, where we benefited from a competitor's product recall. Baby food improved its organic growth performance. Cereal, especially in India and Pakistan, are the highlights. Jenny Craig, unfortunately, continues to be under pressure in the U.S.
We continue to take corrective actions, and it's taking longer time for us to see some results to materialize. In terms of performance nutrition, our strategy of going back to basics is showing improved results. We're happy with how things are going for our performance nutrition category. Trading operating profit for Nestlé Nutrition is down 50 basis points, and this is due to the impact of weight management. Next, we have Nestlé Waters. We delivered mid-single-digit growth driven by North America and the emerging markets, which again reported double-digit growth. There was a slow start to the peak season in Europe in comparison to the same period of 2011. If we talk brands, highlights include Nestlé Pure Life, the international sparkling water, S.Pellegrino, and Perrier. I was told this morning that we could not find any Perrier in the neighborhood.
Local spring water such as Poland Spring in the U.S., Al Manhal in Saudi Arabia, Minéré in Thailand, and Baraka in Egypt. Overall market shares have improved, especially in North America. Trading operating profit increased by 140 basis points thanks to sustained growth, a positive price impact, and significant cost reductions in our water business. Moving to the other segment, Nestlé Professional showed good growth for the first half of 2012, both in beverages and food, this is driven mainly by strong pricing actions. Emerging markets, which represent around a third of Nestlé Professional's sales, delivered double-digit organic growth, with Brazil and China among the highlights. Nespresso continues to grow at a high level, very much in line with our expectations. Nestlé Health Science delivered double-digit growth in North America as well as the emerging markets.
Happy to report Prometheus and Vitaflo, our most recent acquisitions in Nestlé Health Science, are both having also double-digit growth. Cereal Partners Worldwide, CPW, achieve strong growth in emerging markets. This is partially offset by softness in developed markets. The realignment of BPW, which is Beverage Partners Worldwide, is on track. Pharmaceutical joint ventures Galderma and Innéov also reported positive growth. Let's move on to product segments. As you can see here, all categories grew above 6%, with the exception of prepared dishes, which was impacted by frozen food in North America. Let me now go through each of these product segments in more detail. First one up is powdered and liquid beverages. This product segment achieved 10.8% organic growth. This, I want to highlight, is on top of the 12.5% growth last year.
All product segments, all markets, contributed positively with premium, out of home, and PPP offerings delivering outstanding growth. That's all product segments in all markets, which is very, very exciting. Soluble coffees had a strong performance and held market shares despite price increases. There was double-digit growth from Nescafé Dolce Gusto, Nescafé 3 in 1, and ready to drink. By geography, growth was double digit in the emerging markets. In Latin America, our regional brand, Nescafé Dolca, performed strongly with a good contribution from Mexico and Argentina. Western Europe grew high single digit with the U.K., Spain, and France among the highlights. There was also improved growth in Russia. The powder beverage business achieved high single-digit organic growth that's weighted to price and was double digit in AoA. Ready to drink also delivered high single-digit organic growth, driven more by RIG, with a strong performance in AoA in particular.
The trading operating margin reflected the input cost pressures for this product segment. Milk products and ice cream. This product segment posted 6.7% organic growth with 0.8% RIG. This builds on the double-digit growth achieved in the same period last year. Our milk business enjoyed strong growth driven by Africa, Middle East, China, and Pakistan. The continued success of this category is closely linked to our focus, not just on innovation, but also on nutrition. On this chart, you will see the picture of a product called Nestlé ActiCol, which was launched in Chile and Mexico across various formats from liquid to shelf stable. This is an example of our many value-added initiatives in this product category. Our ice cream business had positive organic growth with a strong contribution from emerging markets. In North America, pricing impacted real internal growth.
In Northern Europe, this business, much like our water business, suffered from a weaker start to the season compared with 2011. This segment did benefit from the very successful international launch of peelable ice cream. It's called Pirulo Jungly in Europe. This product group's trading profit margin increased mainly due to ice cream. Moving on to prepared dishes and cooking aids. This product segment was characterized by strong growth in ambient culinary, partly offset by the frozen category in North America. I have already commented on the issues related to our frozen category in the U.S. In contrast, a very positive highlight is our frozen pizza across Europe. Ambient was driven by double-digit growth in emerging markets, especially in Africa, China, and India. As an example, we fortified our Maggi cubes in Central West Africa with iron. This helps address one of the region's most widespread micronutrient deficiencies. Okay.
Now, I have a question for this group here. I know Ian talked about Q&A. The way I do Q&A is I do the Q and you guys do the A. The question is, how many cubes do we sell in Central West Africa every day? I'll give you a clue. It's in millions. Yes, sir. No clue. No clue. Like 7 million. 7 million. Okay. Senor. 50. Welcome. I'm sorry. 50. 50. Jean-Philippe. 75. 75. The number is going up. Jon.
Seventy-five.
75. Going, going, gone. We sell more than 100 million cubes every day across the region. So next time we see each other and I ask you the same question, I'd be deeply disappointed if somebody gives me the wrong number. But, so it's just amazing. More than 100 million cubes every day. This is not every year. I was supposed to take a water break when I was asking you guys a question. I got too excited. In Europe, continuing on this segment category. We have innovations building on the juicy roasting concept that really expand the boundaries of modern cooking. Globally, chilled culinary is stable with some bright spots, such as Herta delivering strong growth in France, where we have also built on our nutrition, health, and wellness promise through sodium reduction and improved consumer communications.
The 10 basis points decline in trading operating profit margin was mainly due to the frozen category. Next, we have confectionery, organic growth of 6.4% and a rate of 4%. We have been able to deliver growth on growth also in this category. The emerging markets delivered double-digit growth with brand highlights being KitKat, Shark, and Munch. We have seen an improved performance in Russia with good Easter results and revised portfolio, including the newly launched Rossiya tablets. This, together with our new commercial structures there, gives us confidence about the outlook for that market. In the U.S., Skinny Cow continues to do well, and our market shares remain stable. The strength of the Nestlé portfolio in confectionery lies in two things. First, our strong presence with local brands and the geographic balance across the portfolio being the second point.
In fact, over 50% of our confectionery sales are now generated in emerging markets. This means we still have a lot of runway ahead of us. We continue to drive our business for the long term. While we are investing behind the growth in our emerging market businesses, we are also protecting the fundamentals and investing behind established brands like KitKat. With the very successful launch of KitKat in Brazil and the continued strong performance in countries such as Middle East, Japan, and Iberia, this 75-year-old brand continues to go from strength to strength. The confectionery trading operating profit margin was impacted by a combined effect of input cost, mix, and last year's credit on restructuring and pension costs. Last but not least, our pet care business. The pet care business delivered organic growth of 8.2%, driven by strong growth in both emerging and developed markets.
The performance in emerging markets was due to double-digit growth in Latin America and Central and Eastern Europe, specifically Mexico, Russia, Brazil, and Argentina. Nestlé grew market share in all regions and across all major pet food segments, thanks to strong brands, innovative products, and expansion in new channels. The trading operating profit margin rose by 70 basis points versus last year, and this is because of improved mix, pricing, and lower fixed costs, partially offset by higher commodity costs. Moving on to the group's trading operating profit. On this slide, you can see our usual margin bridge depicting the evolution of the trading operating profit margin, which is 15% for the half year. Let me pause here and stress that 15% is the reported result. The input cost pressure during the first half of this year led to a cost of goods increase.
This was, however, mitigated by timely pricing and savings from NCE. You all have heard Nestlé Continuous Excellence, which we continue to roll out across the organization. The impact after this savings was 50 basis points, and for the full year, we very much maintain our outlook on our input costs of a low to mid single-digit percentage increase. No change to that. Looking at distribution costs, we were able to improve by 30 basis points, and this is due to the cumulative effects of mix and efficiencies. For example, in our water business, we've been able to get some savings out of doing some work on network optimization. Our reported marketing costs were down 40 basis points, and I will come back to this on the following slide. Admin costs were up 20 basis points due to the comparison with last year.
The first half of 2011 saw a decrease of 150 basis points as we benefited from restructuring of post-retirement plans. Finally, we continue to invest in R&D, driving our innovation, and this remains unchanged at 1.6% of sales. Like I said earlier, I was going to come back to marketing. Here we are. Our consumer-facing marketing spend was again up in constant currency for the half. We have continued to drive better returns from our marketing communication investment, improving our return on our brand-building efforts, more bang for the buck, so to speak. Specific global and regional initiatives have given us very positive results on cost, consistency, and quality in media buying and planning. In addition, our consumer-facing communication continues to improve. Our creative content has been recognized with Nestlé now ranked second based on the recent 2012 Effie Awards.
The Effie Awards were founded in 1968 by the American Marketing Association as a means to recognize the most effective advertising efforts each year. As you can see on this slide, on this chart, in the first half of this year, our top quartile TV ad performance improved by 12 percentage points over 2011, continuing the very positive trend. We've also continued to enhance our investment in digital communications, including strategic partnerships, particularly in the digital space. Two examples from the many are KitKat and Perrier. KitKat in the U.K. encouraged 600,000 consumers to choose the next chunky variety through various social media channels. Importantly, we were able to accurately measure the positive impact of the campaign on the KitKat brand sales. Perrier's Le Drop generated more than 3 million online views in less than a month.
This is one example of how we are creating significant earned media success for our brands. Let me now share one of this with you.
It's a good one. The performance of Perrier, as I mentioned earlier, was one of the highlights for water in the first half, building on its double-digit growth in the first half of last year. Very impressive. Moving back now to our income statement, you can see here that there are no major changes year-on-year, with the exception of the net financing line. The low interest rate environment over the first half of 2012, coupled with our attention to cash management, has delivered the results you see here. Now staying with the theme of cash management, I will spend the next few slides talking about the key elements of our cash flow performance and some important changes we have made to build on our transparency in this area. Cash flow and our efficiency in managing cash well remains a key priority.
By the way, this happens to be something I strongly believe in. As I said to many of you when we met at the beginning of the year, cash is king. We will continue to focus on our operating margin and working capital management, along with other critical elements that contribute to the cash flow, such as treasury and tax. At the same time, we want to build on our objective of being the industry reference for financial performance through increased transparency, highlighting the fundamentals of our cash flow evolution, and at the same time, delivering a more comparable disclosure. Before I go into the details of our new cash flow presentation, let's take a look at where we stood at half year. As you can see here, the group's operating cash flow was CHF 5.1 billion, up from the CHF 2.1 billion in 2011.
The chart shows that all the key elements contributed to the improvement. In particular, we had a higher operating profit of half a billion CHF. We've made a real improvement in working capital, but we also had an easier comparison to the same period last year, and that has contributed to the CHF 1.9 billion less in working capital that you see here. Given this easier comp, I would not expect the same level being maintained for the full year, and of course, it sets us up for a tough comparison next year. Having said that. Looking at the longer-term picture on working capital, I'd like to bring back this chart that you've seen before. Working capital remains an area of focus. I'd like to give you a few concrete examples of how we look at this internally.
It goes without saying that our structures, our policies, our principles, have a direct bearing on working capital philosophy. Across Nestlé, the concept of efficient working capital management is driven from the top down. We have well-established cross-functional ownership structures with clear improvement targets and incentives. These elements, among many others, have been driving improvement across several dimensions. At the same time, we will not compromise on quality of service. Our customer service levels are one of the key performance indicators for our management team, and we aim to be the best in class. My message to you is that we will continue to drive performance going forward. Although there may be a certain degree of volatility, the long-term trend that we have seen here is set to continue. I'd like now to return to my point on transparency.
Building on the level of detail that we've previously provided, we have enhanced our disclosure of the operating cash flow. The full details of this are in the appendix, in your book or if you download from our website. It's in the appendix with some illustrative examples based on full-year figures. In essence, we have broken out the cash flow before changes in assets and liabilities, added a line on the evolution and working capital, separated the disclosure of taxes and treasury activities. The objective behind all of these changes is to provide you with a better view on where the cash is being generated. At the same time, our definition of operating, as well as free cash flow, is now better aligned with our peer group companies.
While we are discussing changes, I would also like to draw your attention to some of the slides we have included in the appendix. In the spirit of being proactive, we have outlined for you the changes in pension accounting under IAS 19, and how it will impact our P&L from 2013 onwards. In the interest of time, I won't go into the details here. I will just emphasize that this is only an accounting change. It will have a 20 to 30 basis points impact on our margin, but needless to say, it has no bearing on our underlying performance or our cash generation capacity. We will, of course, restate 2012 when we report 2013. This brings me to my concluding remarks.
As I said in my opening comments, I believe this first half performance, in a very tough environment, demonstrates the power of alignment behind the Nestlé Roadmap. It's been said that great global companies do three things really well. They know the local consumers very well, they leverage globally, and they transfer knowledge very effectively. Nestlé, as you all know, is a very decentralized organization. We know how to meet our consumer needs. We know how to partner with our local trade. We are part of the fabric of the local community. The competitive advantage that Nestlé has that is not obvious to outsiders is our ability to align 330,000 people across 150 countries. For me, coming from the outside, this absolutely blows me away. There is also no doubt that the roadmap is as relevant today to drive performance as it ever was.
We have delivered what we needed, top and bottom line in the first half, to confirm our guidance of achieving the Nestlé Model once again in 2012. We have done so while continuing to invest and to make the right choices. Investments that will enhance our future performance, that balance of short and long-term focus that I mentioned earlier. Nestlé has delivered in the first half, will deliver for the full year, and continues to enhance our longer-term capabilities to win in our markets globally. This concludes my presentation. Let's now open it up for discussion.
Thank you, Wan Ling. We will now start with questions from the audience here in the Zurich Stock Exchange before opening up to those dialing in. For those of you on the line, please press star one on your telephones now to join the queue. If you change your mind, please press star two. As this is webcast, can I remind everyone to identify themselves, and for those with us here in Zurich, please wait for the microphone before speaking. Do we have any questions here? Yes, please.
Good morning. It's Alex Molloy from Credit Suisse. Two questions, if I may. Firstly, on cash flow. Clearly, in 2011, this was an area of considerable investor focus and generally not particularly favorable. With the better cash flow performance in H1, can you say to what extent was that due to increased focus on management's part and a determination to improve the cash flow performance? That's my first question. My second question is, margins in Europe were down 100 basis points. As you said, pensions and restructuring played a role in that. Could you say whether underlying margins, excluding this, were up or down? Thanks.
Just come up. Do I just have to press anything? Push?
Just talk.
I guess I could just talk. Hi, Alex. How are you? First of all, before I should have talked about the new rules of engagement. We expect questions to be multiple parts. If not, we do not answer those questions. You actually, without me telling you the new rules of engagement, you had a two-part question. In terms of cash flow, definitely, categorically, there is increased management focus. If you look at where we're going to end the year, it will not be Like I said earlier, do not extrapolate. Like the improvement in working capital, we will improve vis-à-vis the position last year. Don't do an extrapolation. All the elements, whether it's improving operating margin, it's better cash management, better management on working capital. To your point, it is management's focus and determination to make an improvement in cash flow.
In terms of our Zone Europe's trading operating margin, you're right. Excluding that, we actually improve.
Yes, please.
Jon Cox with Kepler. Sorry, Wan Ling, am I allowed to ask multiple questions, or do I have to ask them one at a time? I misunderstood what you were saying there.
Oh, you can ask a question, but it has to have multiple parts.
Multiple parts.
Yeah. Otherwise, we just ignore it.
Okay. All right. Back onto that cash flow trade net working capital. Do you have any sort of goal in your mind where you think you can get to as proportion of sales?
We obviously, like I said before, do have internal goals. We actually, as part of management's incentives, short-term bonus, everybody has a goal. We have specific targets by business that will roll up to the group. Obviously, it's a target that I'm not going to share with you all, but we do have goals internally.
On the U.S. issue, you say that basically organic growth accelerated in Q2.
That's correct.
Can you give us an indication of what the acceleration was? If you look at Zone Americas, it seems if you strip out Q1, Q2, organic seemed to slow down somewhat overall for Zone Americas. I'm just trying to work out, well, if the U.S. actually went up, what was maybe deteriorating?
No. In the U.S., for the U.S. market, we actually saw an acceleration from Q1 to Q2. I'm not going to specifically say which category, which product, but overall, our U.S. market did go up, both in terms of RIG and organic growth.
Okay. Just on your commodities guidance remains sort of unchanged. If anything, if you look at some of those soft commodities, they actually seem to be coming down even quicker than potentially expected. Is it now you're seeing the grain complex and saying that this will offset the soft commodities?
Yeah.
Is that?
We look at it, our guidance is a basket of input costs. You see it's a mix in the U.S., given the drought in the Midwest. We're going to see increase in those commodities coming from the corn, soybean. On the other ones, they're going down. In overall, as a mix, our guidance is not changing, which is still low to mid-single digit.
Just the last one on sort of coffee generally. Nespresso, you're talking about the growth remains strong, but you're starting to mention the word it's getting competitive out there. Can you just give us an idea of where you were in terms of Nespresso growth? Is it still running at 20% plus, or has it dropped into the mid-teen level? Just on Dolce Gusto, maybe just give an idea of the dynamics there, because that obviously is growing super fast as well. Maybe we should be focusing more on Dolce Gusto growth dynamics rather than what's happening with Nespresso.
No, you should be focusing on both Nespresso and Dolce Gusto. Nespresso, like I said, the growth is very much in line with our expectation. Before, we've been giving a lot more details on Nespresso, I'm not sure from a competitive standpoint I serve as well. I will say that we're very happy with the growth in Nespresso. It's very much in line with our expectation. I think it was a few, I can't remember which conference call where we said that our expectation is to grow the Nespresso business by half a billion CHF.
2010 Nestlé Investor Seminar.
Gosh, it's like a walking encyclopedia of when we said what. That's the answer to Nespresso. Very happy with how it's doing so far. Hey, it's very competitive. It has been. In terms of Dolce Gusto, very strong performance. Again, we're not giving specific. It's obviously double digit. Very strong. Seeing good progress as we roll out in zones like AOA.
Just on Nespresso, it's important to add that we are gaining market share as well.
No, that's true. That's a good point.
Thanks, congrats on the results.
Thank you, Jon. On behalf of the 330,000 people, thank you.
Okay. If you have any more questions from the room?
Yes. Jean-Philippe. It's not going to go without questions, I know.
Jean-Philippe Bertschy from Vontobel. You were mentioning China as well several times. You had 2 acquisitions last year, Hsu Fu Chi and Yinlu. I guess you will give some additional insights in September, but can you share maybe with us the growth for these 2 companies, and how do you see the synergies going forward?
Yeah. Are those 2 questions? 2 parts of one question? Okay, you qualify then. We do not give specific growth numbers for Hsu Fu Chi and Yinlu, but I will tell you that we are very happy with how it's going. It's very much in line with expectations. In terms of synergies, when we talk about acquisition, it's interesting. It's not sometimes necessarily on just cost synergies. If you think about the Hsu Fu Chi acquisition, overnight, it gave us access to thousands of sales force that now penetrates into the third, fourth tier cities in China. In Yinlu, it gave us entry into the breakfast category in China. Those are great from a synergy standpoint, the sales force resource. We're just really happy. It's very much on track. Those 2 partnerships are going really well.
Maybe the second one on nutrition. I think infant formula was growing double digits globally.
Yes.
The rest was negative as well globally.
Infant formula, it's growing double-digit in emerging markets. That's more than offset the ones in developed markets. I talked about how the reason being it's declining birth rates, and also we're comping against last year in the U.S. where there was a product recall by one competitor.
Good morning. Patrick Frei, Privatbank IHAG. What is the % of sales in the emerging markets, and what was the growth there?
We showed the growth % in terms of total globally emerging. Do you have that number?
It's just over 40%.
Over 40%.
Over 40%.
Yeah.
Yeah, the growth there is 12.9%.
Over 13%.
Daniel Gruneisen, Vontobel. I would have a question on the Western world or the developed world. I think it's beautiful to see Nestlé, what is going on here, that emerging market is growing very robust. We have some weakness in the Western part or in the developed world. What can be a strategy for Nestlé to kind of counteract what goes on? Is it PPP that you try and launch more aggressively or put more aggressively a focus on? Is it pricing? That's what you do, I think, be it in the pizza business to try and offset maybe a soft market. Could you elaborate a bit on that?
Yeah. First of all, thank you for the question. It's interesting when you see results like the ones that we just released and we just announced. By no means this is no walk in the park. These are hard-fought numbers, in the developed markets, even in emerging markets, thanks to a very strong team at Nestlé. In Europe, it's both PPP and premium that's doing well. To be able to get the kind of numbers in developed markets where it's very challenged from a macro perspective, innovation is going to be continuing to play to be key. Whether it's the Pirulo Jungly or it's Nescafé Dolce Gusto, those will continue to serve Nestlé well. People always ask, what do we see in terms of the balance of the year, for U.S., for Europe?
It's hard to tell, but what's very comforting for us is the fact that we do not see a deceleration going from Q1 to Q2. We are cautiously optimistic given our product categories and what we've seen in the first half, hence our confidence of reconfirming that we will once again deliver the Nestlé Model for the year.
One more question over here.
Michael Studer, Bank Bellevue. One question regarding the Americas again, maybe on Q2. You said U.S. is growing in RIG and organic growth. Is the conclusion right that you've seen quite some slowdown in Latin America? Maybe you can point out in which countries and maybe also how you see the remainder of the year. My second question may be an update on Pfizer Nutrition business. What we should expect there, when to close, and consolidation. Thank you.
Maybe start with the Pfizer Nutrition. When we announced the transaction back in, gosh, that was April, I think that was week two for me on the job. We had said that we anticipate closing probably beginning of next year. At the earliest end of this year. We are going through, obviously, process of working with Pfizer in terms of how we transition services. More importantly, we are working with the regulatory authorities in every jurisdiction to get approval. I'm happy to report that so far we have already seen a handful or more than a handful of countries approving, giving us the okay. That's going to, again, no change in timeline. Michael, it's going to be beginning of next year likely. No change.
In terms of Americas, like I said earlier, we saw actually from both from a RIG and OG perspective, acceleration for the U.S. or North America in general, and for the U.S. specifically. That was again very nice to see. We are again cautiously optimistic. That does not mean that Latin America is slowing down. I know in some of the calls with our peer group companies, some people have highlighted Brazil slowing down or Russia. We're not seeing that. Brazil is keeping, for us anyway, we are maintaining our momentum in Brazil. Russia actually is recovering very nicely for us. It's good to see that.
I think-
no slowdown.
If I may just add, the only thing that you might see down there is the Easter effect, especially in confectionery Brazil, which of course is one of our biggest categories there.
Might it be possible to give us the LATAM growth, or give us an indication if the LATAM growth is higher or lower than the BRICS growth?
Nice try, Michael. No.
Okay. All right. Thanks.
Maintaining its momentum.
We always give credit for people who try. The reason why this table it's not open is because Ian has warned me on things that I'm not supposed to share, he kicks me under the table not to give the details that we haven't given before.
You've also got to bear in mind, we don't manage the business by quarter-to-quarter basis. Over the long term, I think there's a much more broader perspective if you look at the full year comparisons. Okay. Any more questions from the room?
Yeah, there are two more.
Yeah. Patrick Hasenboehler, Bank Sarasin. Do you expect a further improvement of operating profit margin for Nestlé Waters business in the short and midterm?
We've been very pleased with our Nestlé Waters business. As you know, the water business, in terms of margin, it can be a little volatile. If you talk about the two businesses Well, first it's a commodity cost, then depending on what competition does. Needless to say, we're really pleased with how it's doing this year. Obviously, our expectation is that we hope that it will continue. Kudos to the Nestlé Waters team.
Next question.
That's an interesting question, too, because sometimes we get questions about do you expect the all categories to sort of deliver on the Nestlé Model? We always say that all categories and all regions should contribute to the Nestlé Model.
Joelle Hamida, Pictet. Can you give us a little bit more color on your PPP growth breakdown between the emerging markets and the developed markets and the targets that you have for this PPP product in the future?
We do not give targets in terms of the PPP products. You know what's really interesting? I know when I first joined Nestlé and I heard about PPP, the first thing that you go to is PPP is for emerging market. Well, I was wrong. It's actually for the emerging consumer. Whether the consumer is in the emerging market or in the developed market, it resonates to that consumer who wants to buy our PPP products. In terms of percentage, it's overall about 12% today, and it's very accretive in terms of growth and profit. Clearly, as I said in my presentation earlier, that it has helped both the emerging markets as well as the developed markets. It's really fascinating to see that how well PPP is also doing in the developed countries.
Good morning.
Good morning.
Alexandra Bossert from UBS. Just to follow up on the Pfizer Nutrition acquisition. What are your M&A intentions going forward? Earlier you guided for net debt of about CHF 15 billion-CHF 18 billion by end financial year 2012, 2013. Are you still sticking to that guidance? Thank you.
I'm sorry. The second part was the net debt, what was the first part? Oh, M&A. Yeah. We have been very public post the announcement of Pfizer Nutrition that we will not be doing any significant deals, if anything, we'll probably do Not probably. We will look at bolt-on acquisitions here and there, but no significant transactions post Pfizer Nutrition acquisition. The other thing, in terms of net debt, obviously our net debt position, because the Pfizer Nutrition, it will go up, but we're not giving any specific guidance at this juncture.
Okay. If we have any more questions in the room?
I think Jean-Philippe has another one.
Awesome. Jon.
Oh, Jon. Jon's going to have, like, five-part.
Just on the, what you were saying about net debt, I know you sort of moved to a bigger payout ratio and away from doing buybacks. Is that still the way you feel now you've been in the job for six months or so? Do you see that in the future, potentially, you'd move back to doing some buybacks? Would you rather continue to increase the payout ratio, which is very good already.
Yeah.
Is that how you would probably prefer to return cash to shareholders if you have sufficient?
Yeah. Thank you, Jon. We do not see the two being mutually exclusive. We have always said that we strive for a sustainable dividend policy. If you go back, how long have we started tracking dividend? It's been over 50 years. If you look back in the last 50, I think 56 years, we have never decreased our dividend in absolute terms. I would argue that that's pretty sustainable. We're not walking away from a sustainable dividend policy. We have said since the end of last year that there is no new buyback program, and that is more opportunistic. To the extent that we have excess cash, absolutely, we'll look at that. I don't look at those as mutually exclusive. Dividend policy, it's going to be sustainable, and that doesn't change.
No new buyback now, but we're open to that when the circumstances are right.
Just a question on the pension changes. I must admit, I was quite surprised to see what the impact will be for you guys next year. Of course, it is just an accounting change. You mentioned that your finance costs will go up by CHF 250 million. I guess that will be a cash outflow because you say there's going to be no cash impacts, but that net finance cost of CHF 250 million, would that be.
Yeah, no cash outflow.
No cash outflow. All right.
No. Absolutely no cash outflow. It's purely an accounting change.
Okay.
Like I said earlier, we will restate 2012 when we go into 2013. We just wanted to be proactive this early on to give you all some sense of what this accounting change, how it's going to impact our P&L.
Okay.
No, absolutely no cash flow, no cash outflow, simply an accounting change.
Okay.
I'm reminded, my husband always reminds me that the road to hell is paved with good intentions. As we're preparing, being more proactive and being more transparent on the cash flow, the back of my mind I thought, "Is this going to come back to haunt us?
Just a follow-up on the sort of-
Yeah
PPP. You mentioned, I think it's about 12% of group sales, did you say?
12%.
Just in terms of the premium part of your portfolio, what would you say the share is of that now, roughly?
Roughly-ish.
That's actually a difficult one to measure.
Yeah.
Yeah.
Yeah.
You can, yeah, because then you add Nespresso. Yeah, that's difficult. We don't have an exact figure. No, we don't. That's an interesting. We should take that question back.
Yeah.
Ian.
If you take into account Nespresso, Nescafé Dolce Gusto, the rates of growth that they've got, but then you've also got other categories where the classification of premium is blurred at best.
Yeah.
Especially if you look at the ice cream and other areas. It would be a difficult one to give an exact percentage of.
You could think that Nespresso, Nescafé Dolce Gusto, NAN, our sparkling water, S.Pellegrino, Perrier, you can tell Häagen-Dazs, ice cream, so yeah.
It's interesting what you say about the dichotomy between in Europe where you've got the low end doing very well, and you've got the high end doing well.
Yeah.
Obviously we all think, "Well, how big is the middle part?" What's happening with the middle part? Is that the part of the portfolio that's under some pressure?
If you see our coffee, I talked about our powdered beverage, our beverages business. It's all markets, all product segments contributing. That's very much our mainstream line, right? It's the dichotomy. One of the great strengths, one of the capabilities of an organization like Nestlé is the ability to operate on both ends of the spectrum. To be able to be successful in PPP and to be successful in the high end with Nespresso and other product categories. That speaks to capabilities. What you all see are in black and white, the numbers. Obviously, the company's capability manifests itself on the numbers.
Being on the inside, the other thing that's amazing to me is, I always say, "What is the acid test of somebody good or a collection of people if they're good?" It's the ability to manage something new without having to master it first. We as a manufacturer are able to go into Nespresso and 50% of our sales is now through e-com. A significant chunk of our sales is also through boutiques. Over 270 boutiques on a global basis. Having come from retail background, it's not easy to have a retail footprint that is meaningful, to be able to provide great customer experience when you walk into our boutiques. Those are capabilities that, even though Nestlé was never a retailer, was never involved in e-com, to now be able to do that speaks to a great strength of Nestlé.
It's that ability to manage something new without having to master it first. I'm, as a new person, I'm just really impressed. You're welcome.
With that, we will now go over to the questions from the phone. Please don't forget to introduce yourselves before asking your question. Could I have the first question, please?
Remember, it has to be multiple part. It's going to trip me up.
Our first question comes from Eileen Khoo. Your line is now open. You may begin.
Good morning, Wan Ling and Ian. This is Eileen Khoo here from Morgan Stanley. Two questions from me. The first one is on Russia. It looks like you've actually had an inflection point in performance there. Is that because of the macro environment or is that because of the internal restructuring that you've been doing? For example, I think it's quite interesting that in confectionery you did well compared to some cautious comments from one of your competitors there. The second question is on pet care. I noticed that your growth has been steadily improving and accelerated to close to 9% in the second quarter. You mentioned expansion in new channels as positive mix. Could you give us a bit more color on this? Is this mainly the U.S. market? Thanks.
Thank you for the question. On Russia, I will give credit to the Russia team as well as our Zone Europe management. I think we had talked about Russia being the market was a bit of a challenge for us in the past. Internally they've been doing some restructuring. They've been bringing some innovation to the market. The recovery really is thanks to the management team's focus on quality, on innovation. Kudos to them. Just like we did not blame the macroeconomic environment when we weren't doing well in Russia, I will also not take away the credit that we will give to the management team there, when things are going their way. Russia clearly is really, really nice to see the turnaround in that market. Kudos to that team.
Pet care growth, actually in Russia, as long as I continue the theme on Russia, pet care also strong growth in Russia along with Nescafé Dolce Gusto. In terms of pet care, the growth is also helped by the fact that we're going into specialty channel, and so in the U.S. Really great to see that we're increasing share as well as the categories growing. The thing that's really interesting also for pet care is we're doing well in emerging markets in Latin America as well as Eastern Europe. The thing, if you look at the pet category, we're actually under index in both Latin America and AOA, which again is what makes it so exciting for us. A very strong category like pet care for us to be under index in those two regions or two zones.
It's very exciting for us to be able, and we're seeing traction now. It used to be when for the pet care category, if the U.S. is not doing well, so like the whole product segment for us kind of goes with how the U.S. goes, so it goes for the category. Now with us doing well, seeing traction in emerging markets in Latin America and in Eastern Europe, they're now becoming a meaningful share of our pet care product segment. That's really a lot of credit to the team for bringing a lot of innovation into that category.
Great. Thank you.
Thank you.
Now our next question comes from Alain Oberhuber . Your line is now open. You may begin.
Good morning, Ian and Wan. Hello, Group MainFirst . I have two questions. The first is about the cash flow net working capital. Would you elaborate a little bit more about the development of net working capital? What were the main drivers that it increased slower in order to get more insight on that? The second question is coming back to North America again. Could you let us know where you gained market share, in which categories and in which categories you lost market share in U.S.?
Thank you for the question. I'll take the second part first, North America, specifically in the U.S. We don't obviously give market share by product category, by geography. I will say that it's mixed, and I've, I think mentioned a few categories early on in my presentation. I will say this however, that when you all look at market share from Nielsen, for instance, and we do, we tend to look at it on a more granular, which is more comparable I give you example, for instance, water. We don't compare, for instance, our water to sugar beverages in the U.S., which if you don't dive deeper and get the right level of granularity, it could be very misleading. Needless to say, for U.S., it's a mixed bag, and we do track it, obviously, on a monthly basis. Anyway.
In terms of working capital, it's a combined effect of both efficiency as well as our increased focus on driving down how much we tie up in terms of working capital to support the kind of growth that we see. Also, like I said earlier, it's an easier comp for us versus last year. One thing that you all should take away from this meeting, this session, is that there is increased focus on cash and working capital in general by all of us at Nestlé. It's something that Paul Bulcke, it's a top-down, driven by all the way from the top from Paul.
If I can just add, I don't want to contradict, it's always the exception that proves the rule. As Wan Ling mentioned in her presentation, we have seen some gains in market share, in different categories. I mean, pet care for one. I know we've also seen them across our pizza range and Lean Cuisine due to the innovations that we've launched there, amongst others, including confectionery. I think you can say that it's a mixed picture, but overall, we're holding our category growth in various key areas.
Thank you. Just a follow-up question about the Nestlé Continuous Excellence program. In the past, you gave cost savings of CHF 1.5 billion per year. Do you still give this guidance for 2012?
Yes. You're referring to Nestlé Continuous Excellence, our program. That's going in line with expectation, we are staying with the CHF 1.5 billion guidance that we have given you at the beginning of the year. It's really interesting, if you think about Nestlé Continuous Excellence, people, again, as a new person, when I first came in, I thought, well, it's some kind of a productivity program that's kind of like one time shot, right? You do it for a year, you do it for two years, you do it for three years, it's kind of like all over. It's not. It's really a change in mindset. It's pushing the ownership to the person responsible for doing the specific task, for doing the specific process.
The way to look at it is, whatever we do, we value what we do only if it brings value to the consumer. It's a continuous process. It's at all levels, in fact, NCE has not been rolled out to the whole organization. It's still very much in the process of rolling out, it's at all levels. It's not just at the COGS line, the cost of goods line. You'll see it in admin, you'll see it in distribution. It's across the whole enterprise, affecting all the lines on your P&L. Again, Nestlé Continuous Excellence, it's a mindset change, it's again, another very phenomenal thing that's going on at Nestlé.
Thank you very much, Wan.
Thank you.
Our next question comes from Mr. Warren Ackerman. Sir, your line is now open. You may start.
Hi, Wan Ling. It is Warren Ackerman here at Société Générale. Hope you can hear me. I have got two questions and one clarification. The first question is, were you a bit disappointed with confectionery margins down 200 basis points? Related, six months into the job, just be interested to hear where you think the biggest margin upside is in the Nestlé group, either by category or by geography. Secondly, Wan Ling, would you be able to touch on Japan? Obviously, it is an important market for Nestlé, very attractive margin structure. Just interested in what the growth was, what is driving that, is it sustainable? On the clarification, marketing down 40 basis points, but consumer-facing marketing up 1.3%. I am a bit confused by that. What marketing are you doing that is not consumer-facing? Thank you.
Warren, it's nice to hear from you. Why are you not here in person? I'm disappointed. Warren has four parts to his question, even though he's not here in person, and will attempt to answer that. Let's start with marketing, 40 basis points down. When we talk about marketing expenses, Warren, it's not just consumer-facing portion of it. It includes, obviously, what I call infrastructure, such as sales and marketing people, the folks who do a lot of work on digital. It's the SG&A or it's what I call the infrastructure part of marketing. Yes, when we talk about marketing, it's not just the consumer-facing. The 40 basis points down, first of all, in constant currency, we're up, like I said, 1.3%, and that is on top of last year, that increased about 6%.
More importantly, when we talk about marketing, you have to put it in context. First half of last year, for instance, in Nespresso, we saw the first ever global launch of Pixie machine, which was highly successful, and we had a lot of marketing spent behind that launch. Obviously, this first half, we did not have a new machine like Pixie. Marketing spend for Nespresso is down compared to last year. Having said that, we're excited, we have two new machines coming out, or has come out actually, for Nespresso that will be introduced to consumers second half. The other thing too is if you look at first half of last year, Warren, we had big events. You talk about Brazil had celebrated its 90th anniversary in Brazil, a lot of marketing spend behind that event.
The Philippines, another key market for us, had also celebrated 100-year anniversary. Also, if you look at Nescafé Dolce Gusto or so like, are now in critical mass. We did not give you the growth for Nescafé Dolce Gusto, but it's double digit, pick a number, whatever number you want to pick, 20, whatever, 30. That's not the number, by the way. You would not expect the same level of marketing spend increase year on year to support that kind of an increase. Marketing spend for first year, that's the reason behind the 40 basis points decrease year on year.
Just on that very quickly. If you were to take that whole marketing bucket, would you be able to give us a rough idea of how much is kind of consumer facing and how much is kind of this other kind of quote-unquote, infrastructure? Just to try and get a feel for whether you think this marketing as a percentage of sales being down, is that kind of going to be a long-term secular trend?
Correct me if I'm wrong, Ian, we do not break that out in terms of details, right?
No, we don't break that out.
Yeah, we don't break that out.
Warren knows that.
Warren knows that, Warren is just trying. Nice try. Okay, can I move on to your three other parts?
Yes.
Good. Thank you. In terms of confectionery, down in terms of trading operating profit margin, that's because of in Europe, where we had the credit last year from pension restructuring, as well as a decrease in restructuring costs. Underlying confectionery margin actually improved if you were to strip that away. Obviously, that's confectionery in Europe, because those two are related. In terms of Japan, again, kudos to the Japanese team. We are seeing strong growth, and it's a combination of the introduction of innovations like Dolce Gusto coffee and also KitKat doing well. Very happy to see that. Your last question, which is wanting me to opine on margin upside for the group by category. I will share this with you. When I first came in to the organization meeting, whether it's CFOs from our key market.
I also had the good fortune in the first month, April, we had the key market conference as well as the market manager conference. I had the good fortune of meeting a lot of people, also had the good fortune of talking about my perspective as a new person coming in. I shared an outside-in perspective, I said, Nestlé from a top-line perspective, if you were to look at the last 10 years compared to our peer group companies, competitors, we're best in class. That's just the last 10 years. If you look at margin, we have been able to improve margin in the last 10 years, meaningful increase in margin. We're in line with peers. Very much to the point that if you look at margin upside, there's still a lot of headroom, there's still a lot of opportunity to improve.
The key thing also, when I was talking to our folks about that, the interesting thing about those two, as you look the last 10 years against a competitive set, we were probably one of two companies that were able to deliver both top line and margin improvement. You see some companies who are able to drive top-line performance, but not so much in margin or the other way around, margin improvement, but not top-line growth. Kudos to the team to be able to do both. Having said that, our margin is very much in line with peers. A lot of upside because we strive to be, again, the financial reference for the industry. We would continue to drive margin improvement. Warren, I think I answered your four parts to your question.
Yes, that's very helpful. Thank you, Wan Ling.
You're welcome.
Thank you.
In the interest of time, could we just take one more question from the phones, please?
Okay. Our next question comes from Ms. Barbara Ambros. Ma'am, your line is now open. You may begin.
Yes, hello. Thank you. This is Barbara Ambros of LBBW. I have a question, actually, a question of a clarification for North America. Would you please maybe tell us if RIG and organic growth, you said they improved versus Q1 and Q2. Would you tell us if they were positive, please? A similar question on organic growth and RIG in Zone Europe in the first quarter. Western Europe seems to have performed better than Eastern Europe, and it sounds as if it was vice versa in the second quarter. Could you maybe elaborate a bit on that? I have a question on nutrition. The weight management business has been under pressure for years now because of weak economy, I understand that. You said you were going to take measures. What are those? I mean, scaling down the business or enhancing investment? Maybe you can elaborate a bit.
Thank you.
Thank you, Barbara, for questions. There are three parts to that. Let me take nutrition. Yes, we recognize we're not happy with the way the business has performed in the last year and obviously going into this year. It's interesting. The industry in general is not doing well, but having said that, we're not going to hide behind that. There are things that we can be doing and the team continues to try different things. It's interesting. Paul, in one of our roadshow, Paul Bulcke had said, if you think about mother, the woman in the household, in terms of in the order of priority, takes care of the baby first, then takes care of the pet, then takes care of the other children, if there's a husband, if the husband is lucky, and then finally, herself.
In a tough macroeconomic type environment, the mother, the woman in the household, who is really our target audience, tends to not take care. She's not the priority. Having said that, like I said, we are not going to hide behind the fact that the consumers are challenged and that the industry as a whole is difficult. The team is looking at different dimensions, everything from celebrities to online marketing to focusing on healthy lifestyle, both at work, collaborating with the American Heart Association. They're trying different things, and I will say it's not for lack of trying. It's just unfortunate that we're not seeing the kinds of improvements that we like to see. Hopefully the next time we get together, we will be able to tell you that there's some light at the end of the tunnel. That's a question on weight management.
In terms of North America, in the U.S. specifically, I will stress all businesses had accelerated in terms of RIG and OG, all businesses in the U.S. That's the U.S. In terms of Zone Europe, I think your question was Western Europe versus Eastern.
Western versus Eastern.
We're seeing good growth in both.
Across the group, we've seen good growth across all businesses, in all categories. You're right in that there are some key drivers, East or West, and of course, some positive turnarounds as we've seen some better growth in Russia, which is also encouraging, and that's had an influence of the East to West divide as well.
I think that was our last question, Ian.
That was the last question. I'm sorry. I have to drag Wan Ling away to some one-on-ones now.
Thank you for the questions, thank you for those of you who made the effort to come here in person. I would just like to close today by repeating that Nestlé has delivered a performance in the first half of 2012 that both is aligned with our strategic priorities and really sets us up for further performance improvement in the future. On a personal note, I am very excited to be part of that future, and I look forward to sharing it with you in the years ahead. Thank you again.