All right, thank you very much. We were just saying these armchairs feel a bit too comfortable for what we aim to do, but we'll take it on a Friday afternoon. Let me summarize the framework: we talked about a refreshed purpose, strategic goal, three areas of focus: excel in demand creation, accelerate capabilities, and dial up the Performance Edge. Fernando embedded this in the financial algorithm. We'll now take questions from the room and online.
Thank you. I'm Victoria Petrova from Bank of America. My first question is on organic growth. You mentioned 4-6% organic growth for the core business after ice cream separation, but you're talking about 2% volume growth. Are you still sticking to that algorithm? What are your assumptions on category growth and mix contribution?
The mid-term guidance is not changing today. For 2025, before ice cream separation, we stick to 3-5% top line and modest margin expansion. Since we changed guidance, there's a small uptick because of the ice cream separation. We believe the Growth Action Plan and mix change will help achieve that. We set the bar higher. This guidance assumes a normalized economy with 3% real GDP growth and 3% inflation. Great companies deliver around 80% of that nominal growth, that's our ambition.
Thank you. Second question: you had strong margin dynamics in the first half but guide lower margins in the second half. What is your starting point for gross margin initiatives? Is it the exit rate of 2024? What are five-year cost of goods assumptions?
Historically, commodity inflation is about 3%, with 2% from non-hyperinflationary markets. To keep margins stable at 45-50%, you need 3.5-4% price growth. We assume a normalized economy. The margin of the last 12 months at June is a good proxy for our base.
Warren from Barclays. Two questions: Could you talk about Prestige and Beauty? It's grown double-digit for 15 quarters, 4 billion revenue, but as base gets bigger, how do you keep that going? What is the vision for 2030, growth margin profile, and which brands are you most excited about for international expansion?
Sure, Warren. Priya will take that question.
Thank you, Warren. We are challengers in Prestige Beauty, which gives headroom for growth. Our power brands include Prestige power brands. 60% of revenue is in the US, 40% outside. We have significant headroom for international expansion in Europe, selectively China and India. We like all our brands, calling out Dermalogica, K18, Hourglass, and Polish Choice.
Harold Thompson from Citi. First question: On your clarity of thought, you've labeled about 100 markets into one Unilever pocket to be managed simply. What will you watch to ensure that doesn't cause problems for the bits doing well?
We differentiate clearly. The rest of the business is not neglected. For example, in Brazil, power brands are 50% share, but local brands provide resilience. Smaller geographies are margin dilutive but not loss-making. They will adopt innovation from top 24 markets. We want growth with less complexity.
Second question: On AI, is it more an industry or company benefit? Is it going to add complexity or create savings?
AI is the third wave of productivity. In the short term, it's not a big cost saving because you need investment and it changes roles. But you need AI to compete. Larger companies like ours can make bigger bets. We are making three investments on demand creation and three on cost side. AI also enables consistent brand management globally.
Gem Delmas from UBS. Two questions: On premiumization in Europe and North America, what percentage of sales are from premium products? Where do you see it going by 2030? Do you have critical mass in Prestige outside the US? Second: you target >2% UVG, but capacity remains 1% of sales. How to reconcile?
I can't give exact percentages. Premiumization has three levers: improve core, internationalize, rotate portfolio. On scale outside US: we don't have critical mass in Prestige outside North America. On capex: net book value of assets is $10 billion. 2% volume growth implies ~$400 million gross capacity investment. We allocate 25-30% of capex to capacity, enough for 2+% volume growth.
S. Pen from JP Morgan. Follow-up on premiumization: how do you assess opportunity vs reality of private label competition? Second: on FX, you talk about high single-digit constant currency EPS growth. How do you manage year like 2025 with strong dollar?
On private label: it's stabilizing around 7-10% in US and ~20% in Europe. Premiumization includes developing market conversions. On FX: our average negative currency effect on top line is 2% in past 10 years. Concern is time friction to pass devaluation to pricing. Strong dollar could also be a lubricant for pricing.
David Hayes from Jefferies. Two questions: On India, can you flesh out doubling down? Does it need to go back to high single-digit growth? Does it mean lower margin in Hindustan? Second: you said M&A focus on US and India. Why those two?
