Unilever plc Barclays 19th Annual Global Consumer Conference

Okay. I think we're going to kick off. I'm delighted to welcome Unilever to Boston. Thank you, Fernando and Priya, for being here, especially Priya for coming all the way from Mumbai from your CMD. The session today is going to be a set piece presentation from Fernando, followed by Priya. I'm then going to ask a couple of questions. But importantly, we do have a breakout after this. For your questions, do please join us for that. With that, Fernando, thanks again.

Thank you very much. Thank you, Warren, and thank you for having us in the Barclays Global Consumer Conference. Always a pleasure to be here. For me, it's a privilege also to be with Priya today. She is the CEO of Hindustan Unilever. As you know, it's our second largest company. After the separation of Foods, it will be close to 17% of our revenue and a key engine of growth for the future. Most of the presentation will be Priya basically taking over our position in India and how we believe it will be a key contributor to the performance of Unilever in the next few years. Let me kick off basically highlighting a few things about Unilever at an aggregated global level, and this is a very different company to the one you used to know three years ago or so.

Many things have changed in Unilever. We have dramatically transformed our portfolio. As you know, two big moves, the separation of Ice Cream as an independent company, The Magnum Ice Cream Company, doing very well. We are also in the process of combining our food business with McCormick in what we believe it will be a combination that will generate one of the best food companies in the globe, a real global flavor powerhouse with very strong positions both at grocery retail and food service, and in some of the categories of foods that are having tailwinds instead of headwinds coming from GLP-1. We have also made significant bolt-on acquisitions in the last few years since 2019. In particular, our track record in bolt-ons has been very successful.

The likes of Nutrafol, Liquid I.V., Tatcha, Dermalogica, Paula's Choice, et cetera, really contributing to make our U.S. business much more competitive, defining what we believe is a superior growth footprint in the U.S. and from where we are now stretching these brands internationally. We have also changed our marketing philosophy dramatically. Our mantra internally is all about elevating our brands through what we call desire at scale, superior science, standout aesthetics, great sensorials, brands that are recommended by others, said by others because the times of big messages from corporations probably are gone, and also making our brands contemporary. A brand like Vaseline, 150 years to reach 1 billion. In the last three years, we have added 400 million to a brand. Really stepping up execution, what we call perfect store programs all around the globe.

Probably the best example of that is what we have done during the World Cup recently across 120 markets, executing more than 150 special items, more than 50,000 content creators working for us, really stepping up, showing what Unilever can do now at a geographical scale that probably is unmatched. Fundamentally also significant change in terms of our culture, much more accountability, much more performance management intensity, significant change in our incentives with absolute focus in volume growth and profit growth in hard currency, and all driven by significant changes in our leadership, both at board and executive level. Eight out of 10 board members have changed in the last three years. Nine out of 11 leaders in the top leadership table of the company are new to the position in the last three years, including myself and Priya.

Many things changed in Unilever, and I feel results are moving in the right direction. Our performance in the first half has been strong. It has been led by what will be our remaining company after the separation of Foods, what we call HPC, Home and Personal Care. We have upgraded our outlook in the first half with a little 4.8% USG with more than 4% in volume. When you look at our HPC business, 6% underlying sales growth with volumes about 5% with significant investment behind our brands. We are investing around 16% of revenue in brand and marketing investment. Three years ago, that level was 13%. The times in which Unilever used to under-invest behind the brands to manage the bottom line are gone. This put us in a very good position to deliver against our commitment in the midterm guidance.

We believe that this is a company that can deliver 4% to 6% consistently at the USG level, with at least 2% coming from volume. We are in right track. The first half or the quarter 2, that was the quarter in which we delivered the highest volume growth in 15 years, is not an outlier. When you look at the performance of Unilever across the last 10 quarters, we have delivered for the group 4.1% underlying sales growth with close to 3% volume, and we have delivered for HPC, for the remaining company, 4.6% USG with 3.3% volume growth and a margin expansion of close to 200 basis points. Not an outlier in the first half. We are gaining momentum. The company is becoming more competitive.

We are definitely growing ahead markets across most of our geographies, and this is what we believe the track record is starting to build. We will become, after separation of Foods, a EUR 39 billion HPC pure play with very good balance between our three key categories. Beauty and well-being, personal care, and home care. We have a very attractive business in India, and particularly beverage and foods that will continue being strategic for us in the medium term. We are the second largest VPC company globally, and we are the number one company in home care in emerging markets. Very solid foundations, leading positions, and with a very interesting geographical profile. It's getting difficult to get growth in developed markets.

It is true that we have been developing in the U.S. a very good business, and we have delivered 3%-4% volume growth in the last three and a half years. It is true that the fundamental drivers of growth of the future are attached to your presence in emerging markets, and we will have a business with 62% revenue in emerging markets. These are regions that have a better expansion to big consumption drivers. Superior population growth, significant urbanization potential, expansion of female presence in the labor force, wealth expansion, and a fragmentation of number of households. All these are fundamental trends that really support superior growth in emerging markets. Remember also that in macroeconomic terms, emerging markets are becoming much more attractive than in the past. Only 7% of the global population lives with double-digit inflation today.

Public finances in emerging markets are better than the ones in developed markets. There are many things that suggest that the historic negative currency effect of emerging markets will be lower in the future. We have unrivaled positions in emerging markets. We are the number one HPC company in emerging markets, so we have scale. 80% of our positions at category geography sales are in number one positions, and 95% when we talk about number one and number two. In the first half of the year, we delivered 6.5% underlying volume growth through a clear elevation of our brands. There are multiple growth opportunities across emerging markets. I feel Priya will cover this better, but we see expansion of consumption, we see potential for premiumization, we see opportunity for building new segments, new categories, and we see opportunity to occupy new adjacencies in our portfolio.

These four key drivers are the ones that we are really driving across all our emerging markets businesses. India is by far our biggest company in emerging markets. I feel when you look at the next five years, it is probably the market that for fast-moving consumer goods shows the only large exponential growth potential. We believe that India will have a significant expansion of the per capita consumption. When you compare in absolute terms, in absolute growth, it will only be behind the U.S. in terms of contribution to the fast-moving consumer goods industry. We have a fabulous company there, and I am very happy for Priya to present that.

Thank you, Fernando, and thank you, Warren, for having me at the Barclays conference. I am Priya Nair, and I am the CEO and Managing Director of Hindustan Unilever, which is the arm in India of Unilever. Let me just take you through some numbers of HUL. It is a $6.5 billion turnover. We are publicly listed with a market capitalization of $48 billion in India. We reach nine out of 10 households in India, and in greater than 90% of our turnover, we have number one positions. We sell 85 billion packs in a year in the country and reach nine million outlets. There are about 9.3 million outlets in the country, and we have an EBITDA margin of 23.6% in the financial year last year. Over a decade, HUL has had significant value creation. Between 2015 and 2025, we grew turnover 2x, EBITDA 3x, and our operating cash flow 4x.

A strong performance over the last decade. What I probably want to spend the most time on is the India opportunity, as Fernando Fernández mentioned. In that context, I think very important to think of some facts on India. A population of 1.5 billion with a median age of about 30, so a young country. GDP poised to become the number 3 country in the world on GDP, and underindexed significantly on FMCG spends at EUR 63 per capita versus our neighboring neighbors as well. Very underindexed on CPG. Possibly the change that is going to take place in income distribution will drive CPG growth and consumption, and I am going to talk most about that and the change that is taking place in India. This presents the biggest opportunity for HUL. There are five structural shifts taking place in India which are changing India.

The first is the population is transforming. We have 377 million Gen Z consumers in India, and these consumers are changing everything on consumption in consumer products. Whether it is the way they discover our brands, whether it is the way they buy our brands, this is changing radically. The next is more women at work. Fernando Fernández mentioned this. In India, the workforce participation of women have changed from 25% to 40%, and this dramatically changes how they buy our categories, the convenience they seek. Think about beauty and personal care and how they want to look as they step out of their homes. A digital society, 50% of the world's digital payments go through India today. That is the shift that is taken place in terms of India. Road connectivity, the government has invested significantly in the infrastructure and roads.