Haleon - Earnings Call - Q1 2025 TU

Transcript

Jo Russell (Head of Investor Relations)

Good morning, everyone.

Operator (participant)

Hello, and thank you for attending. My apologies. Please, please go ahead.

Jo Russell (Head of Investor Relations)

Good morning, everyone, and welcome to Haleon's conference call for our first quarter trading statement. I'm Jo Russell, Head of Investor Relations, and with me today is Dawn Allen, our CFO. Just to remind listeners on the call that in the discussion today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to [out-of-the-result disadvantage] from those expressed in or implied by any such forward-looking statements. Today, we'll focus on organic revenue performance. There is a full reconciliation of organic revenue in the appendix to the company's slide presentation. Following Dawn's remarks, we'll take your questions. For those listening to our webcast who'd like to ask a question, you can find the details on page 3 of the press release.

With that, I'll hand over to Dawn.

Dawn Allen (CFO)

Thank you, Jo, and good morning. We've had a good start to the year with our first quarter performance in line with our expectations. We delivered organic revenue growth of 3.5%, driven by strong market share gains across our key markets. We saw growth across all our categories and regions, which demonstrates the strength and resilience of our portfolio, despite a more challenging market backdrop. Our emerging markets continue to perform particularly well, up 6.5%, with marked strength in India and China, which saw double-digit growth in Sensodyne across both markets. Innovation continues at pace, and during the quarter, we had a number of successful launches, including Voltaren 2% strength in China and expanding the Sensodyne clinical platform range and Otrivin Nasal Mist in a number of markets.

Whilst the macroeconomic backdrop continues to be volatile, our full-year guidance is unchanged, and we expect to deliver 4%-6% organic revenue growth with organic profit ahead of this. Now let's look at the first quarter in more detail. Revenue of GBP 2.9 billion reflected 3.5% organic growth, split 2.4% price and 1.1% volume mix. Reported revenue declined 2.3% in the quarter due to a 2.9% drag from the disposal of ChapStick and non-US Smokers' Health business, and a 2.9% drag from translational foreign exchange due to sterling strength against a number of currencies. Now let's turn to the categories where we saw broad-based growth. In oral health, revenue grew 6.6% ahead of the market, driven by a strong performance in Sensodyne with continued share gains, underpinned by successful innovation and in-market execution across the Sensodyne Clinical range.

Clinical White, it continues to attract a younger demographic to the brand and has amongst the strongest repeat rates in the sector. Strong performances were seen in a number of markets, including India, China, Central and Eastern Europe, and the U.K. Parodontax grew double-digit with strength across a number of markets, including China, where we are seeing strong consumer feedback following our launch at the end of last year. We are also seeing a strong performance across a number of markets from Parodontax Gum Strengthen & Protect and multi-format range across toothpaste and mouthwash, which has driven incremental share gains. In the U.K., we have seen a record market share for Parodontax. In VMS, revenues grew 9.9%, underpinned by innovation-driven growth in Emergen-C and Caltrate. Centrum declined mid-single digit.

We saw good growth in Asia Pacific, and AMEA and Latin America, particularly in Middle East and Africa, Southeast Asia, and Taiwan. This was more than offset by a decline in North America. This decline was driven by lapping a tough comparative from the activation of the cognitive function claims on Centrum Silver last year, overall weakness in the multivitamin category, and increased promotional activity amongst competitors in North America. In China, we had a number of successful innovation launches, including Centrum Daily Wellness Packs tailored to Asian lifestyles, which we have also launched in South Korea, and it is performing well.

In Central and Eastern Europe, we rolled out a vitamin D with glucosamine that has had an even stronger effectiveness claim. Across OTC, Pain Relief grew 2.6%. This was driven by Advil and Voltaren, which were both up mid-single digit. During the quarter, we launched Voltaren 2% strength in China.

Whilst it's early days, initial performance indicators are strong. Panadol was up low single digit, with growth held back by phasing of retailer stocking patterns in the Middle East and Africa. This is expected to reverse in Q2. As part of our drive to reach lower-income consumers, we launched the Sonridor brand in Brazil, which uses Panadol's Optizorb technology. Initial results have been encouraging. In respiratory health, revenue was up 1.7%, with a stronger-than-expected cold and flu season towards the end of the quarter in North America, driving growth in Robitussin and Theraflu, which saw strong share gains in the U.S. This was partly offset by a weaker season elsewhere. Otrivin performed well, helped by the rollout of Otrivin Nasal Mist, which is driving share gains and market penetration, with 50% of users being non-spray users in the U.K. Finally, Digestive Health another was up 3%.

This was driven by innovation in Tums and ENO, which was partly offset by a decline in smoker's health and Nexium due to market softness. Now let's look at the regional performance, starting with North America. As others have observed, the consumer and customer environment is cautious and uncertain. This has been seen in consumer confidence measures, which are at the lowest level since 2021. Despite this, organic revenues grew 1% in the quarter, made up of 1.8% volume mix and 0.8% from negative price, with the latter largely driven by higher promotional activity relative to last year. Consumption saw healthy growth and was ahead of organic revenue growth. We have a strong position in North America, with the top five retailers making up more than half of our revenue. Whilst it appears that some retailers are more cautious in ordering patterns, our products continue to demonstrate their resilience.

In Europe, Middle East, Africa, and Latin America, organic revenue increased 5%, with 5.6% price and 0.6% decline in volume mix. Pricing in Europe was up around 4% and higher across markets in MEA and LATAM, in line with inflation. The decline in volume mix was largely driven by weakness from the cold and flu season. Excluding this impact, volume mix would have been up around 1% for the region. Looking across the region, we saw strong growth in Latin America, up double digit, helped by pricing and the launch of Sonridor. Both Europe and Middle East and Africa grew mid-single digit, with strength in oral health and VMS. Finally, in Asia Pacific, we saw good momentum. Organic revenue increased 4.2%, with growth coming from price up 1.5% and 2.7% from volume mix.

We saw growth across all categories except in respiratory health, which was impacted by a weaker cold and flu season. India performed well, up high single digit, helped by double-digit consumption growth in Sensodyne. China was up mid-single digit, with strength in oral health and VMS, underpinned by the innovations I mentioned earlier. We are well positioned in China, with strong market positions and favorable structural tailwinds, with consumers increasingly focused on health products, which we are supporting through our e-commerce platforms. Turning now to our 2025 guidance. Whilst the macroeconomic environment remains both challenging and uncertain, we remain confident in our full-year outlook. We expect to continue to deliver the guidance we set out at year-end, with organic revenue growth of between 4%-6% and organic profit growth ahead of organic revenue growth.

Whilst the situation on tariffs remains dynamic, based on what we know today, the impact across our business is limited and is included in our guidance. On foreign exchange, the FX impact on revenue and profit in quarter one was broadly in line with our expectation. As you'll recall, at full-year results, we provided an estimate of the translational FX impact for 2025 based on Bloomberg consensus rates averaged over the year. As of the 31st of March, this consensus indicates a headwind of 2% on revenue and 3% on adjusted operating profit. There is no change to our net interest expense or tax guidance. In summary, our first quarter trading was in line with the expectations we set out earlier in the year, despite a dynamic and more challenging backdrop, which continues to remain uncertain. Our global portfolio is resilient, with strong brands solving consumer needs.

Our innovation launches are performing well. As I just mentioned, we have confidence in our full-year guidance. Before I open up to Q&A, I want to remind you all that we will be hosting our Capital Markets Day in London tomorrow. We will share more on our continued confidence in driving long-term growth, with deep dives on categories and regions, and we will share the opportunities we see across our supply chain. With that, let me hand over to the operator to open up for Q&A.

Operator (participant)

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. To remove your question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question.

We'll pause here briefly as questions are registered. Thank you. We have our first question from Guillaume Dalmas from UBS.

Guillaume Delmas (Equity Research Analyst)

Thank you very much. And good morning, Dawn and Jo. A couple of questions for me, please. First one on Q1 specifically, and what may have surprised you either positively or negatively during the month of March? Because if I remember, at the time of the full-year 2024 result in early March, you sounded probably a little bit more cautious on respiratory, but you ended up posting like a nice positive number in Q1 thanks to that double-digit development in the US. If U.S. respi was potentially stronger than you anticipated, what were the areas that maybe proved a little bit softer in Q1 and specifically that month of March? My second question is on your outlook for the year.

Everything confirmed, reiterated this morning, you're still guiding for 4%-6% organic sales growth. Maybe, Dawn, can you say if you will be back in that 4%-6% range as early as Q2, or whether we will have to wait for the third quarter? On this, again, what underpins your confidence in that material acceleration step-up in organic sales growth in the second half? Is it down to more pricing? Is it the current retailer's inventory level that may be a bit low in some categories? You would expect some strong sell-in from Q3 onwards. Any color on that would be very helpful. Thank you very much.

Dawn Allen (CFO)

Thank you, Guillaume, and good morning. Yeah, I think Q1 we had a good performance in 3.5% growth, and I think that reflects strength and resilience across our global portfolio.

In terms of what surprised us, you're right, respiratory in the U.S. towards the end of the quarter ticked up in terms of the number of cough, cold, and flu incidences, but that was also balanced by softness, actually, in other parts of the globe. Probably the other difference was in the U.S., and others have reported in this that the U.S. environment is uncertain, consumers are cautious, and we are seeing retailers, or we have seen retailers take action in terms of their inventory levels in line with consumption. As I said at the beginning, I think what you see from us is a strong, balanced performance across parts of the globe and across our portfolio. In terms of the outlook for the year, we remain confident in our 4%-6% guidance.

As we said at year-end, we are expecting second half to be stronger than first half. In Q2, we're expecting that to be broadly similar to Q1, given what I talked about in terms of the U.S. performance, in terms of the U.S. market. What gives us confidence in the second half is three things. Number one is in terms of our innovation. I called it out in the summary. Our innovation continues to perform incredibly well. In the second half, we're launching into a number of new markets, and we'll also get the benefit of markets that we launched in the first half as we see continued momentum. The second area is in terms of our investment levels. We continue to invest at healthy levels in A&P and in our route to market. The third area is in a couple of pieces.

If you remember from Q4 last year, we saw a soft cough, cold, and flu season. If we see a normal season this year, we'd expect to get a benefit from that. When I look at certain geographies, geographies like India, where we expect to see the total market pick up in the second half on the back of government stimulus, we'd also expect to see its benefit from that. I think that's what underpins our outlook for the year.

Guillaume Delmas (Equity Research Analyst)

Thank you. Thank you very much.

Operator (participant)

Thank you. We'll have our next question from Rashad Kawan from Morgan Stanley.

Rashad Kawan (Equity Analyst)

Hey, good morning, Dawn and Jo. Thanks for taking my questions. A couple from me, please. First, I mean, you talked about the challenging and uncertain environment. No surprise, obviously.

Can you talk about just a bit more detail around what you're seeing in terms of change on the ground in consumption habits since your last update at the end of February, particularly in the U.S.? I know you've called out multivitamins in particular being weak, and you mentioned kind of retailer patterns. Have you seen any weakness or deterioration in other categories in terms of consumption? Second question, just on tariffs. I know, Dawn, you addressed that in your opening remarks, but I think over 80% of your business in the U.S. is local. Of the imported aspects here, can you remind us how much comes from China and what you think the impact could look like as things stand today and what mitigating actions you're thinking about here? Thank you.

Dawn Allen (CFO)

Yeah. Good morning. A couple of pieces.

In terms of the U.S., I talked about and others have talked about consumer confidence being soft, which we are seeing. Also from a retailer perspective, I mentioned that retailers have lined up inventory more in line with consumption trends. I think if I look at our categories in particular, I mean, oral health continues to perform well. Our innovations in terms of clinical, the clinical range is driving strong trial and strong repeat rate, and we feel very confident in that. Yes, we had some phasing of shipments in the first half, but actually the fundamentals on oral health, both globally and in the U.S., remain very strong. In terms of VMS, we have seen a softness in terms of the overall category. I think in the first quarter, the VMS category was broadly flat.

That is, of all of our categories, that is a more discretionary category in terms of choice of the consumer. We're seeing that. I think in terms of the other categories, respiratory, pain, and digestive, actually a strong performance from us in the quarter. We are seeing slightly softer consumption trends, but overall, as I said, I think the fundamentals are strong. If I come back out of that and what I talked about in terms of it's not just about the U.S., our globe, we have a global portfolio, and we're balanced across the categories. If I look at Europe, Latin America, and Asia-Pacific, they continue to perform incredibly well.

If I move on to your second question in terms of tariffs, what we said at year-end is that tariffs, we expected tariffs to be in the kind of tens of millions, and that is built into our guidance. Yes, tariffs have changed in terms of the moving from impacts in Canada and Mexico to actually a more global piece, as you called out, and also a shift in terms of just finished goods to actually also impacting raw materials. As I said, the overall impact remains very similar to what we talked about from year-end, and actually the impact from China is relatively small. As I said, the overall impact for us is low tens of millions from what we know today on tariffs, and that is fully built into our guidance.

Rashad Kawan (Equity Analyst)

Thank you very much. Thank you.

Operator (participant)

We have our next questions come from David Hayes from Jefferies.

David Hayes (Managing Director and Equity Research Analyst)

Great. Thank you. Good morning, all. I'm just going to quickly follow up on that last comment, if I can, Dawn, in terms of the tens of millions. Just to clarify, is that a gross number before any kind of mitigation plans that you might have in terms of pricing, etc.? My two questions were after that. Just in terms of the puts and takes on the shipments relative levels in terms of oral care, there seems to be a bit of a lag into the second quarter, but maybe a little bit of pre-shipment in terms of net Pain Relief. Just trying to understand whether the net of those two is pretty neutral or whether you should get a little bit of a net benefit in the second quarter.

The last one was just on FX. You obviously called out that it was the guide's dated as the end of March, but I guess the US dollar sterling's moved 3% or something in the last few weeks. Is there a spot rate update version of that available at all if you were to sort of take today's rates and run it forward? Thank you.

Dawn Allen (CFO)

Yeah. Look, let me kind of run through your questions, David. In terms of tariffs, as I said, kind of in the low tens of millions, we're working proactively in terms of mitigation, in terms of leveraging dual sourcing where we can, inventory levels. In all of these situations, we always look at to balance the risk, but we also look at it from the other side and go, where could this be an opportunity for us?

It's an opportunity to develop deeper relationships with our retail partners. It's also an opportunity in terms of it changes some of the competitive dynamics. When we think about tariffs as well as managing changing tariffs, we also think about how do we look at risk mitigation, but also where are there opportunities, where can this open up opportunities for us? When we talk about the tens of millions or low tens of millions, that would be after those mitigation actions. The second thing in terms of the shipment phasing in the U.S., yes, you're right, we had phasing of shipments lower on oral health in Q1, which we would expect to pick up as we move through the year, and the reverse on Pain Relief. I would think about those two as broadly neutral.

As I said, what's important for us is our consumption and share performance. I think overall in the U.S., we continue to perform well. In terms of your third question on FX, a few things to say on this. Q1 translational FX impact came in where we expected it to be. We always expected the FX impact to be higher in the first half of the year than the second half of the year. If you remember what we're lapping in terms of Q3 last year, which was a big drag in terms of FX. We always expected that phasing, and it's come in line with that. When we update our Bloomberg Consensus Forward Rates at the end of March, we've called that out in the press release. That is broadly similar to what we said at the end of February.

Actually, when we look at spot rates at the end of March, that's also very consistent with that as well. You're right to call out April, and what we've seen over the last few weeks has been incredibly volatile. If I give you a forecast today, I'd probably have to change it maybe this afternoon or even tomorrow. I'd be updating it every day. I think we're obviously watching that situation closely. We'll update you again at half-year, hopefully, when things have settled down. I mean, let's see.

David Hayes (Managing Director and Equity Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. We'll have our next questions come from Warren Ackerman from Barclays.

Warren Ackerman (Managing Director)

Yeah. Good morning, Dawn and Jo. Warren here from Barclays. I've got a couple as well. The first one, Dawn, how much visibility do you have on U.S. retailer inventory?

Just thinking about where do you think inventory days are versus the start of the year? I mean, you said that five customers are 50%, but what about the other 50%? How does that sort of split? Are you seeing any specific caution by channel? That's the first one. Second one, just on Centrum U.S. I think you said that the category for VMS was flat, but Centrum was down double digits. It looks like you're losing share in the U.S. Are you responding to the higher promos that you're seeing in the U.S.? Is there any difference that you're seeing between Centrum Silver and kind of core Centrum sort of everyday multivitamins in terms of kind of what's holding up better? Just finally, just on India, I think you said, Dawn, that you expect the India category to accelerate on better macro.

Can you maybe just sort of spell that out? What kind of acceleration are you expecting in terms of the market growth? Thank you.

Dawn Allen (CFO)

Yeah. I think in terms of your first question, in terms of U.S. retailer inventory, what we saw as we came into the quarter is higher inventory levels in terms of respiratory given the soft season in Q4, which has worked through in the quarter given the stronger performance on respiratory. We do have good visibility, actually, particularly in terms of our top 10 retailers in the U.S. that we partner and work really closely with. I think at the end of the quarter, we'd see them broadly flat, as I referenced retailers have looked at their inventory levels and balanced that with consumption.

I think from a channel perspective, I mean, very consistent trends in terms of what we've seen. Drug continues to be under pressure, which is not new. We've been seeing that. We've been seeing that for a while now. What we're also seeing from a consumer perspective, given the consumer confidence pieces, consumers are either moving to buying in bulk from the larger retailers, if you think Costco, or they're moving to lower initial outlay in terms of some of the dollar stores. We are seeing some of that dynamic. Actually, if you look at our distribution and our coverage across the U.S., we're well placed. As I said, we've been dealing with that channel dynamic for a while. I think we're in a good position there.

The other thing I'd say from a channel perspective, when I look at our e-commerce business in the U.S., actually, we're performing really well. I'd say balanced across there. When I look at Centrum, I mean, we have the number one multivitamin brand globally with Centrum. It's underpinned by deep science and clinical claims. If I just looked globally for Centrum for a minute, I mean, in China, as I mentioned, we've launched our daily wellness kits. They're personalised to the consumer, to the Asian consumer. They are performing incredibly well. We've also launched Centrum Essentials in Brazil, which again, are tailored to the local market. That's a pack more aimed at lower-income consumers, and that's driving value. Both areas are gaining share. If I look at Caltrate and some of our local duals across VMS in Italy, they're also performing incredibly well.

I think we need to look at the broad picture first. If I think about the U.S., yes, we are lapping in quarter one, a very strong quarter one from the previous year where we had activation on Centrum Silver. It was close to around 30% growth in the first quarter last year. As we talked about, we've also seen the category slow down in the first quarter too. I think when we look at that, we always look at the balance across the categories. I think Centrum Silver in particular continues to perform well, not just in the U.S., actually, but more broadly globally.

Warren Ackerman (Managing Director)

India?

Dawn Allen (CFO)

Oh, yeah, India. Thank you. Thank you for reminding me of that. I was out in India, actually, a few weeks ago, and it was great to see the team on the ground. We went out.

We visited some of the villages outside of Delhi. It was good to see some of our packs out there. I saw a Sensodyne 20 INR pack, which continues to perform well. We also talked to consumers. The consumer that I was speaking to, he had a sachet of ENO that he got out. He got a few sachets of ENO that he got out of his pocket to talk to us about that. I think what I am also seeing in India is just the coverage and the reach. Since we took the sales force in-house, we are continuing to build that team, and we are continuing to increase our coverage and reach. We feel really good about India. The vast majority of our portfolio is gaining share. I think it is a really strong performance.

As I referenced earlier on, if I think about some of the government stimulus that we expect to come through in the second half of the year, I think that gives us even more confidence in terms of India.

Warren Ackerman (Managing Director)

Okay. Many thanks, Dawn.

Operator (participant)

Thank you. We have our next question comes from Celine Pannuti from J.P. Morgan.

Celine Pannuti (Managing Director)

Thank you. Good morning, Dawn. My first question is on the balance between volume mix and pricing. I think you had mentioned that for the year, you expect that to be balanced. With the +1% in Q1, do you still expect around +2% volume mix for the year? Given what you said about Q2 being roughly in line with Q1, that would imply quite an acceleration to around 3% in H2.

I wanted to understand where that would be coming from since it seems that it will need to see a pickup in the U.S. market where you flag a lot of uncertainty. My second question is on the division, the region, EMEA and LATAM. Could you please give us, which now is growing in the mid-single-digit range, could you please give us the split between LATAM performance and EMEA? In both, some of your peers have been talking about a slowdown in LATAM, but as well, normalization in the European market with some consumers as well starting to be a bit more cautious. Could you give us a view of what the market is looking like in those two regions? Thank you.

Dawn Allen (CFO)

Okay.

I think in terms of pricing volume mix, what you've seen in the quarter is a balanced performance in terms of price volume mix, which is a continuation of what we saw in the second half of the year. As we move forward through the year, we'd expect to continue to see that balance. Obviously, it's different across different geographies and across different parts of the portfolio. I think we would expect to see that balance continue. In terms of Europe and LATAM, we see a very strong performance across both. I think LATAM in particular is high single digit, and Europe is mid-single digit. I think we feel really good about that. We're gaining share across parts of the portfolio.

I think it's a good performance, and I think we would expect to see that continue as we move through the year.

Celine Pannuti (Managing Director)

Just to follow up on the first question, last year, fiscal year 2024, volume mix was 1.3%. Do you expect an improvement this year on that number?

Dawn Allen (CFO)

Can you just repeat the question?

Celine Pannuti (Managing Director)

Yes. No, I'm just trying to understand your point about balance because I thought the balance meant that volume mix would be at least around 50% of your total legs for legs, so at least 2% volume mix. Do you expect volume mix to be at least 2% this year?

Dawn Allen (CFO)

As I said, I think it'll be balanced price volume mix. Is that 60/40, 40/60? It's difficult to say. I think what is important is that we have the balance. As I said, that varies across different categories, across different geographies.

Celine Pannuti (Managing Director)

Thank you.

Operator (participant)

Thank you. We have our next question come from Tom Sykes from Deutsche Bank.

Tom Sykes (Managing Director and Head of European Consumer Equity Research)

Yeah. Morning, everybody. Thank you. Just on the I'm trying to unpick the inventory issue a bit more in the U.S. How different are the ordering patterns of drugstore chains versus e-commerce and large retailers? And perhaps how different are the inventory to sales that they hold? Because the channel shift does seem to be deflationary continually on the level of inventory that's held. I guess in particular, around cold and flu, I would assume that drugstores would order more earlier than others. If cold and flu is based more on demand rather than pre-buying, would that not make it less profitable over time?

Just finally on A&P, when you step up or you are stepping up A&P, as you said, is that around specific launches, or is that in general a step up in A&P? How long is normally the lag that you see between an A&P step up and improved purchases, please?

Dawn Allen (CFO)

Yeah. Thanks, Tom. Let me start with that. Let me start with this second question first. I think in A&P, we have a healthy level of A&P, and we feel really good about that. Last year, we were at 19.2% A&P of sales. I think what's important when we look at A&P is that we have the flexibility. You have seen us dial it up, particularly in areas such as Sensodyne Clinical platform, where it is performing incredibly well. We are also investing in key markets, in key geographies. I talked about India earlier on.

We also dial it down in areas where we're not seeing the ROI come through, and you've seen us do that. I think over time, as well as ensuring that we continue at a healthy rate, we're also very focused on improving the effectiveness and the ROI. The other thing that's important in A&P, actually, is expert, because expert is a key part of our business model. We have very strong relationships with experts, and that is an area that we continue to invest in across the globe. I think that's in terms of A&P. I think on your inventory question, as I talked about earlier, we have really good relationships with retailers in the U.S. On our top 10 retailers, we have visibility in terms of inventory levels. We're very well versed in terms of working with retailers on different ordering patterns across different categories.

I think we'll continue to do that.

Tom Sykes (Managing Director and Head of European Consumer Equity Research)

Right. Thank you.

Operator (participant)

Thank you. We have our next question comes from Edward Lewis from Redburn Atlantic.

Edward Lewis (Partner and Senior Analyst)

Yes. Thanks very much. I guess just a couple of questions from me. Just thinking about the whole VMS category, particularly in the U.S., it's been on a pretty good run of, I guess, since COVID and coming into a more softening consumer economy over there. How do you think about sort of the category and the kind of feedback from retailers about the category? Any thoughts there? Let's wait tomorrow on that. I guess we haven't really touched on China. It looks as though it was a good quarter. Just sort of initial thoughts on China as you consolidate your JV and you're having success with innovation. I guess I got an update on China would be appreciated.

Dawn Allen (CFO)

Yeah.

Let me take your second question first in terms of China. I mean, we feel really good about China. We were mid-single digit in the quarter, like India. I was also out in China earlier in the year. As I referenced, in terms of the sales force perspective, we have obviously announced that we are buying out the remaining 12% in the China OTC joint venture. That will mean that we will have a combined sales force, and we expect to get broader reach and benefit from that. The other things to call out in China, strong performance across the categories, but also our e-commerce performance, which actually we have real strength in online to offline that we have developed over the last few years. We are also working with key influencers in terms of digital channels, Douyin and WeChat. I think that continues to perform well.

Our bone-up campaign in terms of Caltrate, where we're partnering with the government in terms of bone density tests and actually solving for osteoporosis, is also important. I think we have a really strong position in China. We feel really good. As I referenced, we launched Parodontax, and that's performing incredibly well. As you know, in China, gum health is a challenge in terms of the population. I think that brand is well placed, actually, to help in terms of that health need in China. We feel good about that. In terms of VMS, I mean, I talked about this earlier in terms of our strength globally on Centrum and in the VMS portfolio. Yes, VMS, particularly in the U.S., is a more discretionary category. We have seen the category slow down in the first quarter.

I think the strength of our products, the strength of our claims underpinned by science, I think as consumer confidence continues to come back in the U.S., then we would expect to see a stronger performance. The other thing I would say in the U.S. is actually our Emergen-C brand performed really well, actually, as we saw an uptick in the cough, cold, and flu season. Emergen-C also benefited from that.

Edward Lewis (Partner and Senior Analyst)

Thank you.

Operator (participant)

We will take our next question, comes from Victoria Petrova from Bank of America.

Victoria Petrova (Managing Director and Senior Analyst)

Thank you very much, Jo. Thank you, Dawn. My first question is on your expectations through the year. If I understand you correctly, Q2 should be kind of around Q1. In our previous discussions or understanding, Q3 is supposed to be better than Q2, and Q4 should also be better than Q2, not necessarily stronger than Q3.

Suggesting that a sell-in into cold and flu season would be absolutely crucial. Are you confident that inventory levels are at the right level everywhere, not just in the U.S.? What are your assumptions on the flu season in the fourth quarter to meet your expectations? That's probably number one. My second question is balance between disposals and M&A opportunity. You obviously have Smoker's Health, which is non-core for you in the United States. Do you think the environment for potential M&A is changing? Does it also offer some more lucrative opportunities for you on the buy side of this equation? Very last clarification question, is there any update or change in Erexon? Thank you.

Dawn Allen (CFO)

Yeah. Okay. Let me kind of talk through those.

I think I outlined the reasons why we have earlier why we have confidence in terms of second half versus first half, whether it's around our innovation, our continued investment levels, and also a more normalized season and certain geographies where we see stimulus from the government in terms of the geography picking up in terms of India. I have outlined that. I think from an inventory levels, I think we would expect to see there at a normal level across the globe. We would expect to see that pick up as our expectations are for a normal season in the last quarter of the year. I think in terms of your second question, what we've seen in terms of the M&A backdrop is obviously a softness across all categories in terms of M&A. I think we've done a really strong job in terms of portfolio optimization.

If you think about the disposals that we've done, which has helped to delever the business, we're also very focused on acquisitions in terms of building depth and breadth in the categories that we're in. We continue to remain focused on that. In terms of your third question, in terms of Emergen-C, as we talked at year-end, this is a new product in a new category and a new consumer behavior for us. That was always going to be more challenging. I think that we've seen that in terms of the performance of Emergen-C. The other things to call out is just around kind of lockboxes, which we've seen a rise in lockboxes in the U.S. I mean, when you go in store, a lot more products are locked up than historically we've seen. That's impacted the performance of Emergen-C.

The other thing that we saw, given the nature of this product and given that it might not be a product that some people will either want to ask for if it's in a lockbox or might not want to purchase in store if they're with other people, we saw it more weighted towards online. Therefore, the impact of initial reviews online had a disproportionate impact in terms of Erexon. I think, as I said, this is always going to be challenging. I think that's what we've seen in terms of the position of the product.

Victoria Petrova (Managing Director and Senior Analyst)

Thank you very much.

Operator (participant)

Thank you. We have our next question comes from Jeremy Fialko from HSBC.

Jeremy Fialko (Head of Consumer Staples Research)

Hi, there. Thanks for taking the question. First one, just to get a bit more color on the phase in the full year.

To clarify, you're saying Q2 will be about three and a half. That takes the first half to around three and a half. You do understand we expect an acceleration in H2. Just given the fact that the first half, you could end up being a bit below your guidance range, does it mean that it's more likely for the full year you would end up towards the lower part of the 4%-6% range? Is that not something you would necessarily say at this stage? Secondly, could you talk about the pricing element within the U.S.? We could see the pricing went a little bit negative in North America in Q1 because of higher promo. Is that something that you would expect to be the case in subsequent quarters?

Or was it very specific to the activity that you had in this quarter? You'd expect the pricing to sort of kind of be positive in subsequent quarters and over the full year? Thanks.

Dawn Allen (CFO)

Yeah. Thanks, Jeremy. I think, look, we've been clear in terms of we've reiterated our full year guidance in the 4%-6%. We've also talked about how we expect the phasing of that revenue performance to be delivered. We expect it to be second half weighted versus first half weighted. I've outlined the reasons why we feel confident in terms of second half. We've also said that we expect Q2 to be broadly similar to Q1, given what we've talked about in terms of the U.S. In terms of your second question, in terms of pricing in the U.S., yes, Q1 was impacted by the promotional phasing.

We would expect pricing to pick up as we move through the year in the U.S. As I said, overall, on the portfolio, we would expect to see a balance of pricing and volume mix.

Jeremy Fialko (Head of Consumer Staples Research)

Thanks very much.

Operator (participant)

Thank you. We have our last question comes from Karel Zoete from Capler.

Karel Zoete (Equity Research Analyst)

Yes. Good morning. Thanks for taking the question. I have a question with regards to greenfield introductions. Maybe it is something more for tomorrow. You highlighted a couple of successful launches in big markets. Can you talk a bit about the headroom for the different platforms you have when it comes to greenfield introductions? Thank you.

Dawn Allen (CFO)

Sorry. Can you just repeat the first? Were you talking about innovation?

Karel Zoete (Equity Research Analyst)

Yeah, innovation. Yeah, you called out Parodontax in China. I think you called out Brazil in the Pain franchise and a couple of others.

What are big launches for this year, market entries, but also a bit the longer-term headroom here?

Dawn Allen (CFO)

Yeah. I think if you take a step back and you think about consumer health more broadly, I mean, as a category, it is underpinned by consumer tailwinds, whether it's more broader macro consumer tailwinds in terms of rising middle class, in terms of preventative healthcare measures, whether it's around the incidence versus treatment gap across a number of our categories. The number of incidences is a lot higher than is actually treated. We do see significant headroom coming from that. We also see across a number of geographies, just the maturity of the category. If I take India as an example, the penetration on oral health as a category is high. If I went to Therapeutic Oral Health as a category, that has huge headroom for growth.

I think across incident versus treatment gap, across penetration opportunity, and also from a premiumization point of view, if you think about what we've done with the Sensodyne Clinical range in terms of premiumizing, those would be the types of levers. The other thing I would say is we're really excited about tomorrow and our Capital Markets Day. You're going to hear from the team in terms of our confidence in terms of our future growth potential. You'll hear a lot more about that.

Karel Zoete (Equity Research Analyst)

Thank you.

Dawn Allen (CFO)

Thanks, everyone. Thanks for your interest on the call. As I said, we look forward to seeing a number of you tomorrow. For those of you who can't join, our Capital Markets presentations will be on the webcast on the Haleon website.

In the meantime, if you have any further questions, please reach out to our investor relations team. Thanks, everyone. Bye.