Good afternoon, good morning everyone. I'm Seline Penuti, head of consumer staples at JP Morgan. Thank you very much for joining me today. I have the pleasure as part of a CEO fireside chat series to be at Unilever with Fernando Fernandez, CEO of Unilever. Fernando, thank you very much for hosting us.
No, thank you for having me, Seline. It's a pleasure.
It's my pleasure. Obviously, there was a lot of change this year. You became a CEO during that year and yesterday the Magnum company has started its life as an independent company. Obviously you came with a remit to accelerate change and we saw as well there's been some disposal, some acquisition, but what I would be interested to know is from within, what acceleration of change has been like at Unilever under your leadership.
Well, yeah, it has been a very important day. Yesterday we completed a process that started in March 2024: we announced the separation of ice cream. It was very important to complete that this year and we have done it. Now it's behind us. We will be cheering for Peter Turu and his team on the Magnum ice cream company. In our case, I took over in March as CEO. It has been a very intense period. It was very important to continue accelerating our performance and competitiveness. I believe we have done it. You have seen our results: volume growth accelerating along the year, Q3 at 1.7%, we expect at least a similar performance in Q4. Our competitiveness is improving. We are putting a lot of emphasis on doing things differently, particularly elevating the quality of our portfolio and brands, ensuring flawless execution. The other two elements are talent and culture. One of my principles is to be uncompromising on talent. In terms of culture, there is a coexistence of pockets of excellence and mediocrity, and we are trying to elevate everything. A lot of work, but we are making significant progress.
So maybe if I can go a bit deeper on that point about culture because obviously you've been close to 40 years at Unilever, you are really a Unilever product, and yet you are pushing for culture change or elevation. Can you explain what you are trying to achieve? Where is it, like with example maybe, and then how you measure that and how is it linked to compensation and rewards?
Yeah. Well, you are reminding me that I'm too old, but I believe that my 37 years in Unilever is a big advantage when you have to drive change. This is a complex company, 120,000 colleagues. It's important that you align them, that they are very clear about what is important, what are the metrics. Every time I join a meeting I say: volume growth, positive mix, consistent growth, margin expansion for profit growth in local currency. It looks silly but it's very important to align the company. We are also aligning on how to do business and run our brands. Regarding incentives, there have been significant changes: the vast majority of our long-term incentive plans are now currency linked. For our 8,000 managers, annual bonus is linked to line of sight. Also, from 2026 onwards, we're including restructuring in the calculation of profit growth. Unilever's restructuring cost has been historically above the sector. These changes are important and we don't expect significant further changes.
2025 was also quite specific year because it's the first year that the four business groups are operating with 24 market or business group markets and then you have the One Unilever structure. So can you explain how you think this has gone and how do you measure that it's been effective? The other point is that your biggest division, beauty and well-being, is still without a head of division. So can you talk about what are the skill sets you are looking for for this person and when do we expect to have an announcement?
Well, first of all, if I look a bit longer, we moved from a geographically led organization into a category-led organization in 2022, and now we run the P&L through four divisions called business groups. This change has been very important to build a more consistent and coherent portfolio and focus innovation. This year we divisionalized our sales force; we now run the company with 63 different sales forces in our top 24 markets representing 85% of revenue. For the rest, we adopt a simpler model called One Unilever. The heavy lifting of organizational changes is behind us. Regarding the business group president of beauty, this is a decision for the next 10 years. We are looking for someone who understands high margin, high investment business models, digital fluency, and the ability to scale globally. We will take the necessary time. In the meantime, the team is performing well and it is our fastest growing category.
Yeah. Okay. So now that the Magnum company has a life on its own, early in 2024 when you announced your ambition to grow mid single digit with modest margin expansion and to be top TSR company. At that time the world was looking a certain way. The world has changed and slowed. Mid single digit the market is interpreting at 4 to 6%. In an environment where competitors are calling out category slowdown, how do you relate to that 4 to 6% ambition in a tougher environment?
Our medium-term guidance remains unchanged. Our two-year CAGR in volume terms is about 2%. Q3 volume was 1.7% and we expect Q4 to be at least in line. The market is tougher, there is decoupling between GDP and market growth. Market volume growth is more in the 1% range than the historical 2%, but I don't project long term from six months. Over the last decade, Unilever is exposed to 2% plus volume growth markets. CPI has slowed but wage inflation is 4 to 6%. That alignment will come. We focus on what we can control: innovation, brand elevation, execution. Our competitiveness is improving, with close to 60% of revenue winning share. In Europe and US we are gaining significant share. Our focus is to outperform markets. I don't want journalists telling me the context; I want people who perform in any context.
Yeah, absolutely true. I think an environment where growth is slowing, the ability to outperform will set you apart. That was my next question and you already said the key word: marketing machine. I wanted to hear because it feels there is a lot of change happening in Unilever, not just changing your portfolio but also the ability to outperform in faster growth categories. Traditionally, Unilever has not been seen as at the forefront of beauty and personal care. So can you explain how Unilever is different in terms of agility, digital fluency, innovation, and ability to premiumize? You presented the Sassy model a few months ago, but put some color on how you can effectively change this company to operate at the highest level and win share in these categories.
Yeah, first of all, we are outperforming in practically every category. Our food business outperforms, beauty and wellbeing numbers speak for themselves, same in home care. The Sassy framework is just simple language to align the organization. SASSY stands for Science, Aesthetics, Sensorials, Said by others, and Young spirited brands. It defines product development and models of reach, engagement, and validation. We are talking about science for superior functionality, aesthetics and sensorials as drivers of preference. A real revolution in social-first marketing. We now operate with close to 170,000 influencers in the company, total close to 300,000. Broadcasting messages can become suspicious; brands need a solid infrastructure for recommendation by others. We are making significant progress. I stand in front of Walmart shelves for Dove and it's a very different brand from three years ago. In UK and France, the innovation with personal care looks different. Our product offering is improving dramatically. For example, Vaseline, a 155-year-old brand, has been growing volume at 12% per annum, now number four brand in US skincare. We are making progress but I'd score us a 6 or 6.5 out of 10; we need to get to 8-9. But there is a significant step change in marketing. I spend 80% of my time on this, 20% on talent.
So following on that premiumization, there will be two parts to my question. We'll talk about prestige and well-being in the second part. But first, I think you said overall for the group the ambition is to be 50% premium, right now it's about a third. When you look at the core brands which have the right for premiumization, what are the geographies? And in an environment with consumer pressure, is it the right time to think premiumization will work for Unilever?
Well, let me say first that we don't see significant consumer downtrading in high involvement categories. At this stage, private label expansion is not seen in beauty, personal care, or home care. In basic food, yes, but even in condiments there are premiumization opportunities. I'm obsessed with premiumization because of two seismic shifts: digitization has increased consumer knowledge and interest in science; people are prepared to pay more for products that perform. Second, the reduction in population growth but increase in household numbers means more one- to two-person households where people spend more on self-indulgence. That's a fundamental driver. We have 30% of revenue above the price index, intend to bring to at least 50%. Also, retailer concentration means you need to be in the right profit pool, which is shifting to premium.
So 7% of your sales are in prestige beauty and well-being, growing double digit adding close to 1% to total group, showing the power of premiumization. Now I'd like to dip a bit more into the sustainability of Nutrafol and Liquid I.V. Those two brands alone are getting close to being billion-dollar brands. They're quite young. So what makes you believe there is sustainability in that growth? What is different in terms of science, barriers to entry, investment? And can those US-based concepts travel outside the US?
Well, we have had double digit growth in that space for five years now. I cannot promise double digits forever, but these spaces are accreted to Unilever topline. I'm very excited by the wellbeing opportunity. There is a soft spot in what I call the urban wealthy female opportunity. Liquid I.V. was acquired in 2020 at $120 million and will be around $1 billion this year. Nutrafol was acquired in 2022 at $220 million and will also hit close to $1 billion. It shows that if you establish a strong leading position, you can scale fast. Penetration is still low. In prestige beauty, we see it as an extension of skincare and hair care. Prestige used to be a channel play, but e-commerce opens opportunities. It has been a successful unit, though saw some slowdown in the US last year. But high-end prestige like Hourglass, K18, Tatcha continue growing. Potential for international rollout is significant. I took a conscious decision to solidify the US presence first, and now we are ready to roll out internationally.
So the US, 75% of your business in beauty personal care and well-being, growing volume above 4% for the past two years. It's a good playbook if you can replicate elsewhere. We just discussed wellbeing and prestige. If I think about the core personal care and food portfolio in the US, can you talk about what growth rate you are seeing in an environment where peers say the market is slowing? What are you doing differently in go-to-market channels and brands? And you mentioned still demand for premiumization. What about GLP-1? Is that something that could impact your food business in the US?
Our core in the US is doing very well. We just received the Advantage survey from top 130 retailers and we're ranking number two in the US, number one in personal care, number three in beauty, number one in foods. This is unprecedented. We are growing with Walmart and Amazon. There is significant growth in the core, like Dove and Vaseline. We have had five consecutive quarters of more than 4% volume growth in the US. We have built one of the best growth footprints for any big company in the US. We have an excellent leadership team and great intimacy with retailers. Some of our power brands are reaching price points they have never before.
We continue having offering for the mainstream, but we are now stretching our brands into segments where we put our best science. Consumers are recognizing that. In GLP-1, we haven't seen a significant impact. Hellmann's is very strong with 46% share in condiments, one of the most attractive food categories. There's huge opportunity for premiumization as people eat hotter and pay more. Dipping sandwiches are trending toward a French style, and Hellmann's is profiting. We've had a good run in foods. In GLP-1, no significant impact yet, but in the US we're anchored around condiments.
