Tom Sykes

Tom Sykes asked for quantification of the shelf space stocking benefit expected in Q1 or Q2 in North America. He also questioned the effectiveness of Haleon's A&P spend, noting an almost 8% increase to 20% of sales while volumes are negative, asking where the A&P is ineffective versus effective, and its allocation between oral care and non-oral care businesses.

Answer

Brian McNamara, CEO, stated that Haleon would not quantify specific improvements from shelving increases but confirmed they contribute to confidence in stronger results later in the year due to increased brand visibility and shelf space. Dawn Allen, CFO, explained that A&P increased by 7.5% and R&D by 7.7% to ensure long-term sustainable growth. Half of the A&P increase went to oral health, which shows strong ROI and growth momentum. The other half was allocated to emerging markets (India, China) and expert engagement (Haleon Health Partner). Allen highlighted improvements in working/non-working media split (12% growth in working media), mid-single-digit ROI increase, and 60% of working media allocated to digital, emphasizing focus on efficiency and effectiveness.

Tom Sykes asked for quantification of the shelf space stocking benefit expected in Q1 or Q2 in North America. He also questioned the effectiveness of Haleon's A&P spend, which increased by almost 8% to 20% of sales while volumes were negative, asking where it was ineffective/effective, its impact on non-oral care businesses, and allocation between oral care and non-oral care.

Answer

CEO Brian McNamara declined to quantify specific shelving increases but confirmed they contribute to confidence for stronger results later in the year due to increased brand visibility and shelf space. CFO Dawn Allen explained that Haleon increased A&P by 7.5% and R&D by 7.7% to ensure long-term sustainable growth. She detailed that half of the A&P increase went to oral health (yielding strong ROI and high single-digit growth), and the other half to emerging markets (India, Douyin in China). A third area of investment was expert engagement (Haleon Health Partner registrations up 27%). She highlighted improvements in A&P efficiency and effectiveness, with a 12% growth in working media, mid-single-digit ROI improvement, and 60% of working media allocated to digital, emphasizing a healthy investment level of 20.5% of sales.

Tom Sykes of Deutsche Bank AG pressed for more detail on U.S. retailer trends, asking if the volume headwinds could be split between inventory destocking and channel shift towards online. He also questioned why similar destocking and channel shift pressures would not eventually emerge in other regions like Europe, where Haleon has a high concentration in the pharmacy channel.

Answer

CEO Brian McNamara clarified that the primary issue in the U.S. is broad inventory pressure across all retail channels, which is a bigger impact than the channel shift itself. He explained that the dynamic is very different in Europe, where pharmacies traditionally carry very low inventory levels, making a similar large-scale destocking event unlikely. He also noted the shift to e-commerce is on balance margin-neutral and factored into guidance.

Tom Sykes asked for a breakdown of U.S. volume headwinds between channel destocking and the channel shift to online. He also questioned why similar pressures wouldn't eventually occur in Europe, where Haleon is overweight in the pharmacy channel, and if the shift to Amazon impacts margins.

Answer

CEO Brian McNamara stated the inventory pressure is happening across U.S. channels but is disproportionately felt in the drug channel. He contrasted this with Europe, where pharmacies carry very low inventory, making the dynamic different. He noted the shift to Amazon is manageable as Haleon has stronger shares there and confirmed the e-commerce channel shift does not negatively impact overall margins.

Tom Sykes from Deutsche Bank AG requested a breakdown of U.S. volume headwinds between retailer destocking and channel shift to online. He also asked why similar inventory pressures are not expected in other regions like Europe, and whether the shift to e-commerce impacts operating margins.

Answer

CEO Brian McNamara explained that while channel shift is a factor, the bigger impact is broad inventory pressure across U.S. retailers, particularly in the drug channel, due to the tough economic environment. He contrasted this with Europe, where pharmacies carry very low inventory levels, making the dynamic different. He stated that the margin profile of the e-commerce channel is relatively similar to others and is factored into the company's overall guidance.

Tom Sykes inquired about the channel shift occurring in North America and its impact on Unilever, specifically regarding lower shares on Amazon compared to offline. He asked about the outlook for Unilever's share on this channel, the effect of its growth, and how the growth of smaller peers influences Unilever's innovation cadence (fewer/bigger vs. more iterative innovations).

Answer

CEO Fernando Fernandez highlighted strong double-digit growth in digital commerce across classic marketplaces (Amazon, Walmart.com), social commerce (Southeast Asia, China), and quick commerce (India). He noted that acquired digitally native brands contribute to this. He observed that the Q4 slowdown in North America was more related to physical stores. He acknowledged e-commerce as an an entry point for small brands but emphasized the scaling advantage of large brands like Dove and Vaseline, which see even higher e-commerce growth. He stated Unilever is well-prepared for accelerating e-commerce, especially in Asia.

Tom Sykes of Deutsche Bank asked about A&P allocation for different retail channels like Amazon and Walmart, and whether the company is achieving a sustainable 100 basis points of productivity benefit over COGS.

Answer

CEO Fernando Fernandez discussed the shift to 'new models of reach and persuasion,' including retail media, to drive growth on platforms like Amazon and Walmart. Acting CFO Srinivas Phatak confirmed that procurement teams are on track to beat the market by at least 100 basis points in buying efficiencies, contributing to gross margin expansion, as part of a broader, end-to-end productivity drive.

Tom Sykes of Deutsche Bank asked for clarification on the guidance for H2 volume/mix improvement despite price increases and inquired about the contribution of the 'Project Sky' retail initiative to North American growth.

Answer

CEO Hein M. Schumacher explained that H2 volume growth will benefit from the annualization of business resets in China and Indonesia, which are expected to turn positive year-on-year. Regarding 'Project Sky,' he described it as a key AI-driven initiative being rolled out globally to improve planning and forecasting. CFO Fernando Fernandez added that this has contributed to a significant improvement in Unilever's retailer satisfaction scores.

Tom Sykes asked for clarification on the 2025 guidance, questioning how volume/mix could improve in H2 while prices are increasing. He also inquired about the impact of 'Project Sky' with Walmart on North American performance and its expected benefits.

Answer

CEO Hein. M. Schumacher explained that H2 volume growth will be supported by the annualization of turnarounds in China and Indonesia. He attributed Q1 volume volatility to factors like holiday timing and retailer destocking in Latin America. He described Project Sky as a key AI initiative for improving planning and forecasting, which is being rolled out globally with positive customer feedback. CFO Fernando Fernandez added that this improved execution is reflected in significantly better retailer survey scores.

Tom Sykes asked about the '6 Ps' framework, inquiring what percentage of the portfolio will see renewal by year-end, and questioned what Unilever's factory and supplier infrastructure might look like in three years.

Answer

CEO Hein M. Schumacher explained that the 'unmissable brand superiority' framework is a dynamic process applied across the portfolio, with a goal to double the average size of innovations. CFO Fernando Fernandez stated they are happy with the current supply chain setup but are investing over 50% of CapEx in margin-expansion initiatives to increase productivity, maintaining a balance between owned and third-party manufacturing.