Unilever Management Discusses Q3 2012 Results - Earnings Call Transcript

Oct.25.12 | About: Unilever Plc (UL)

Unilever (NYSE:UL)

Q3 2012 Earnings Call

October 25, 2012 3:00 am ET

Executives

Raoul Jean-Marc Sidney Huet - Chief Financial Officer and Executive Director

James Allison

Analysts

Celine AH Pannuti - JP Morgan Chase & Co, Research Division

Marco Gulpers - ING Groep N.V., Research Division

Jeremy Fialko - Redburn Partners LLP, Research Division

Martin John Deboo - Investec Securities (NASDAQ:UK), Research Division

Robert Waldschmidt - BofA Merrill Lynch, Research Division

Iain Galloway Simpson - Barclays Capital, Research Division

Jon Cox - Kepler Capital Markets, Research Division

Operator

Welcome to Unilever's Q3 2012 Result Conference Call. This will be presented by Mr. Jean-Marc Huet, Chief Financial Officer, concluding with the question-and-answer session. [Operator Instructions] I will now hand over to Mr. Huet. Please proceed.

Raoul Jean-Marc Sidney Huet

Good morning, and welcome to Unilever's Third Quarter Results Presentation of 2012. I will begin by reviewing the context for this set of results, our overall performance in the third quarter and the category highlights. James will then review our geographical performance and the progress we are making in growing the assets we have acquired in recent M&A. I will then conclude with some thoughts on the outlook for the year 2012. So let's get going.

First of all, I draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. With that out of the way, Chart 3. Before we turn to our third quarter performance, let's look at the wider context. The economic outlook remains gloomy. The IMF has just revised its forecast for global growth down to 3.3% this year and still a sluggish 3.6% for 2013. In developed markets, consumer spending continues to be held back by tough austerity programs and high unemployment. At the same time, growth expectations for emerging markets have been dampened by the slowdown in the developed markets.

Volatility remains high. Over the last 10 months alone, crude oil has been as high as $125 per barrel then as low as $90 and now back up to $110, with similar swings in a number of our other commodities that are particularly relevant for us. Examples are tea and rapeseed oil. And there are other sorts of volatility that we face today, be it the impact of conflict in the Middle East, serious inflation in the Southern Cone, South America or the effect of weather patterns that we have not seen before. So what is happening today may not be a good indication of what will happen tomorrow.

Competition in emerging markets continues to be intense as both multinationals and strong local players seek to capitalize on the obvious growth opportunities. And at the same time, in developed markets, consumers remain focused on value and retailers are seeking new ways to maintain or drive footfall. And as a result, promotional activity remains high.

So it's a challenging environment for all of us. And our response at Unilever is to set our own course and to invest behind the long term success of the company, be that in better products, better innovation or better advertising. At the same time, we will strive to be more agile and competitive, determined to continue the transformation of Unilever at the right speed and we will not run the business to try to hit quarterly targets.

Let's now have a look at some of the numbers. Sales in the first 9 months of 2012 was 6.6%. This is ahead of our markets. Once again, this is being driven by strong performance in emerging markets, with the breadth and the depth of our footprint is clearly a source of competitive advantage. In developed markets, we've delivered a solid performance with underlying sales growth of nearly 1% and this despite the economic backdrop. Our growth here is also broad based. All our categories achieved positive underlying sales growth.

Let's look at the building blocks of this growth. Chart 5. Year-to-date, our growth has been driven by strong volumes up 3% and price up 3.5%. Overall, our turnover has increased by 11.1% to nearly EUR 39 billion, with a 1.5% contribution from M&A and a further 2.6% coming from foreign exchange.

In Q3 specifically, turnover was EUR 13.4 billion. That's up 10.3%, and this really further builds our track record of consistent performance. Underlying sales growth was balanced. Volume growth contributed a strong 3.4% and price, 2.4%, which still reflects some carryover effect of price increases taken last year. Reflecting the continuing weakness of the euro, foreign exchange changes were positive, adding 4.1%. Net M&A was broadly flat, and this reflects on the one hand the acquisition of Concern Kalina, the Russian personal care business, in December of last year and on the other offset by the recent disposal of our Frozen Foods business in North America.

Turning to emerging markets. Sales here were up over 12% in the quarter, excellent underlying volume growth at 6.8%. Emerging markets today accounts for 55% of group turnover. That's up from 48% just 4 years ago. You can see the trend in this chart. It only goes one way. This is the sixth consecutive quarter of double-digit underlying sales growth, and it demonstrates again that the fundamental drivers are in place for emerging markets to be the key growth driver for Unilever for many years to come.

Now let me talk through some of the highlights of our category and brand performance in Q3. In Personal Care, we again grew ahead of the market, with underlying sales growth of 8% in the quarter and a strong contribution of 5.6% from volume. This was driven primarily by excellent performances in hair care and deodorants. In hair, we've strengthened our brand portfolio, improved our innovation and product quality and continued to roll out our brands into white spaces. Some examples. In the quarter, the Clear brand was launched in Australia. That's now 43 markets in which you can find this brand. This, together with the recent launch in North America and the relaunch in China, contributes to a brand that's now growing at 20% and gaining market share globally.

Let me turn to Tresemmé, launched in November 2011, now with a 7% market share in Brazil and close to becoming the third biggest hair care brand in that market. We are now taking the brand into India as well as Indonesia.

Dove continues to be a very strong driver of market share gains this year. And examples of this are the relaunch of Dove Damage Therapy, the introduction of Dove tonic oils and now with the recent launch of the Dove color care range in Europe. And in deodorants, with the Dove and the Rexona brands driving growth, we have continued to widen the leadership gap versus competition. Innovations such as Dove Maximum Protection or the MotionSense technology, which we have now incorporated in Rexona for Men, are catering for the needs of consumers all over the world.

Now let's move to our Foods business. In Foods, our underlying sales growth for the 9 months is plus 2%. In the quarter, underlying sales growth was minus 0.4%, impacted in part by sales brought forward in Q3 of 2011. In spreads, market value declined in the quarter, and our shares were also lower. And this reflects an intensely competitive promotional environment in markets like here in the U.K. and price gaps to competition in a number of other European markets. We have begun to take action in areas where our products are not priced competitively in this category. At the same time, Knorr jelly bouillon, Knorr baking bags support growth in savoury, driven by their extension into new markets and the addition of new variants, including local relevant flavors such as Borsch Soup in Russia or gravy in the U.K. Hellmann’s continues to deliver strongly especially in Latin America, where our Inspire campaign encourages new uses of mayonnaise. And the celebration of Hellmann’s 50th birthday raises the brand profile even further. Food Solutions benefited from the solid volume-led growth in particular in emerging markets, where our core brands, Knorr and Hellmann’s, performed well.

Now let me move on to Home Care. In Home Care, underlying sales growth were up 11%, well ahead of our markets, and volumes contributed by around 7%. This is really driven by our investments in better formulations, sustained innovation delivery and market development. The relaunch of the Dirt is Good brand with superior and fastest stain removal has reached over 20 markets, and it's helped us to drive growth particularly in Brazil, the U.K., France, all supported by strong communication. In some places, we have seen a return to more aggressive pricing, and our response as ever is to make sure that our brands remain competitive. Fabric conditioners also grew very strongly as we continue to innovate and extend variants into new markets. Two recent examples include Comfort Anti-Bacterial, which has been launched in Indonesia, and Comfort Sensitive, which has been introduced in Vietnam. And household cleaning again performed very well in the quarter. A new no-residues gel variant of Cif was introduced into Argentina in the quarter.

Let me now talk about the Refreshment category. Ice cream delivered another strong quarter of underlying sales growth, this time nearly 8%. This comes from a combination of solid momentum in developed markets and strong growth in emerging markets. Our increasingly global footprint in ice cream is driven by the rollout and success of our strong portfolio of global brands, i.e. Ben & Jerry’s, Cornetto and Magnum.

Let's look at Magnum in a bit more detail. We continue to see strong growth here, built on the recent launches in the U.S. and Indonesia, as you know, but also Malaysia, Thailand and the Philippines. Magnum Infinity, with its patented rich cocoa formulation, has been rolled out across Europe, Turkey, Mexico and Australia to the delight of real chocolate lovers in these markets. In the U.S., new flavors, improved advertising and promotional support and the successful introduction of Magnum Minis are sustaining the strong brand performance in the second year after launch. And more recently, Magnum pints have now been launched in Europe, capturing the essence of the Magnum experience in a novel format, which should unlock further growth.

In beverages, we had a better quarter, benefiting from the good performance of Lipton Yellow Label in Russia. This was driven by the product innovation based on incorporated aroma-enhancing liquid tea essence, which is now being rolled out to Poland with positive initial feedback. There is, however, much more for us to do to improve our performance each and every quarter in this Tea category.

Let me now hand over to James. He will give some more details on our geographical performance before commenting on the sales performance of some of our recently acquired brands.

James Allison

Thank you, Jean-Marc. Good morning, everyone, and let me start with our biggest region, which is Asia/AMET/RUB. Despite the more cautious macroeconomic growth outlook in many of the Asia/AMET/RUB countries, we continue to see robust growth in our markets, partly reflecting the everyday nature of our products and partly driven by the growing number of consumers able to afford to buy them. In this region, we also continue to benefit from having so many established businesses in so many markets, each with great distribution and products which span the price pyramids. Our performance was strong across the region, with volume and value share gains in many markets. The Home and Personal Care categories in particular underpinned our underlying sales growth of 10.7% in the quarter. In Asia, we saw a double-digit growth in many markets, including Indonesia, Vietnam and China, where we continue to perform strongly across fabrics cleaning, hair and skin cleansing, and our employer brand improved to the #2 position in the fast-moving consumer goods industry. And in Russia, we also enjoyed our best quarter's performance so far this year. Here too, Unilever is now the #2 ranked employer across all industries. The status of Unilever as a favorite employer in these very important markets is a pleasing signal that our investments are yielding a longer-term dividend. Although Africa was weaker in the quarter, South Africa continues to perform very well with strong momentum in key categories such as savoury, laundry and skin, where we have recently launched Lifebuoy Clini-Care 10.

The Americas region reported underlying sales growth of 4.7%, with volumes up 1.2% in the quarter. Underlying sales growth in North America was down 3.5%. But excluding the impact of sales brought forward into quarter 3 of last year, underlying sales growth in North America grew modestly, with good performance in Personal Care, offset somewhat by weaker performance in Foods. Strong momentum in Latin America continued with underlying sales up 13.7%. That's well balanced between volumes up 7.5% and price up 5.8%. In Brazil, we again saw a strong, volume-led double-digit growth, with particularly strong performances in the hair, deodorants and dressings.

In Europe, underlying sales growth in quarter 3 was 0.9%, with volumes up over 2% and shares positive. Pricing was negative, reflecting the continued promotional environment now becoming more visible after we lapped last year's price increases. Our businesses in France and the U.K. contributed solid growth, with laundry a key driver in both countries, again helped by the relaunch of our Dirt is Good brands. Southern Europe continues to be difficult, but we see performance stabilizing in Spain.

For the 9 months, our growth in Europe is plus 1%, in line with the market with a strong contribution from innovation, which is increasingly targeted to meet the needs of consumers at different price points. Appealing to male consumers at the high end of the mass market price band, we've launched the range of Dove facial products in the U.K. Initially introduced as a bit [ph] exclusive, it has started well, attracting new users to the Dove Men+Care franchise. And at the lower end of the pyramid, we've been active too. We've launched Cornetto value for money multipack cones in Southern Europe. And specifically in Greece, we've launched a range of value-priced food products under the local brand name, Elaïs.

More broadly, we're continuing to use M&A to shape the portfolio to accelerate growth and to improve mix. The Sara Lee brands are now fully integrated in Europe and growing ahead of the market. Neutral, Zwitsal and Duschdas are performing particularly well, and Radox is being rolled out in Central and Eastern Europe. These Personal Care brands have added to our category strength by filling out our portfolio at lower price points. And in Russia, Concern Kalina has started very promisingly with growth ahead of expectations. This acquisition provides us with a meaningful skin care presence in what is a very important market. In August, we completed the disposal of our U.S. Frozen Foods business to all intents and purposes, the last remaining part of Unilever's frozen savoury portfolio.

The Alberto Culver business has now been fully integrated, and cost synergies are ahead of plan. The key brands are performing very well, backed by Unilever scale, technology and infrastructure. You've seen already the degree to which we are extending the acquired brands, such as Tresemmé as you can see in the chart, and Simple into new markets, and this is set to continue. Also, a number of Alberto Culver executives are in leading positions within Unilever's wider Personal Care organization, bringing with them their deep understanding of the category, its consumers and brands.

Now with that, let me hand over to Jean-Marc for his closing remarks.

Raoul Jean-Marc Sidney Huet

Thank you, James. So in summary, our performance has held up well in the context of the particularly challenging environment. Growth is difficult to come by in the developed markets, as you are aware, and this has led to an increase in promotional volumes. Emerging markets offer outstanding growth opportunities, but the competition here continues to be intense. In fact, in a number of markets, we've seen aggressive pricing and we will respond to that without hesitation or as we sometimes say, without blinking. And then there are the commodity costs, which are so unpredictable, but over the longer term, we just assume that they will continue to rise.

2012 will be another year of significant inflation, with weakening currencies also impacting negatively. In these circumstances, we think that these are a solid set of results, demonstrating in particular the continuing strong momentum across the emerging markets and Home and Personal Care, specifically. Our Foods business continues to grow more slowly, partly reflecting a footprint more skewed to the developed markets and partly reflecting some decline in our spreads business, where our prices have not been sufficiently competitive in some important markets. We are already addressing this. And importantly, we are continuing to invest in the business, be it in the EUR 300 million that we've invested in product quality improvements over the last 3 years, so that's now 95% of our products performing at parity or better than competitors in blind tests; be it the very significant investment in capital expenditure, simultaneously investing for the future and correcting the underinvestment of previous years; be it the significant increases in support for our brands; or be it the investments we are making in leadership training. We are investing in the future. At the same time, our continuous improvement programs and the discipline and rigor with which we manage overhead costs are helping us to offset substantial cost inflation and providing the necessary fuel for growth. And as you know, we have taken many steps to sharpen the performance culture of the company, putting the accent on speed, agility and decisiveness.

All these things together are part and parcel of the transformation program, and the outcome of this is increasingly visible in our results. Our priorities remain profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow. And for 2012, we remain on track to deliver a modest improvement in core operating margin.

But for now, let's open the floor to all your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we have our first question, and it comes from the line of Ms. Celine Pannuti from JPMorgan.

Celine AH Pannuti - JP Morgan Chase & Co, Research Division

It's Celine Pannuti, JPMorgan. I have 2 questions. My first one is on the promotion comments that you have made. Can you flesh out -- so am I right in understanding that this is mainly Europe? Or can you flesh out whether it is as well in other areas? And can you also tell us which categories have been most impacted by that and whether this is something that could continue to be evident in coming quarters? My second question is on Home Care, where you had a fantastic performance in the quarter. And yesterday, we heard from one of your competitors that the promotion environment is somewhat easing. Would you concur with that? And can you give us the performance in developed markets versus emerging market in that category? And then just little one, is it fair to say that your European number was somewhat impacted by one less trading day quantifying that?

Raoul Jean-Marc Sidney Huet

Celine, thank you for your "2 questions." A couple of points. I think very important is we just look at our results in their totality. So we will not go down the road of one trading day or less. What that does do is reaffirm the importance of the type of reporting that we actually do today for Q1 and Q3. But please, the emphasis is to just invest in the entirety of the company. In terms of the promotional environment, we won't obviously comment on what competitors have to say, but the promotional environment is a difficult one and it continues to be so and to answer the first part of your question specifically in Europe. In terms of the categories, I would say it's across all categories. There are some categories where there will be less promotional intensity, like deos, but that will be on the margin. So assume that the theme is very much a European one across categories.

Celine AH Pannuti - JP Morgan Chase & Co, Research Division

And in Home Care, can you talk about the developed market versus emerging market?

Raoul Jean-Marc Sidney Huet

Well, the performance, to tell you the truth, of Home Care has been very, very good and it's been one of the better ones over the last quarters. We've been driving it through innovation, through execution, through product quality as much in the developed -- as well as in the developing market. But obviously, emerging market has very much driven that growth.

James Allison

Celine, it's James here. So our Home Care business in developed markets is really principally Europe because we don't have a Home Care business in North America anymore. And our business was up more than 2% in the quarter. So it performed very strongly.

Operator

And our next question comes from the line of Marco Gulpers from ING.

Marco Gulpers - ING Groep N.V., Research Division

Jean-Marc, 2 questions, if I may. The first is on -- we've seen some of your raw material prices easing, especially edible oils. We've seen also your statement on margarine. If I'm going to link the 2, can you explicitly share a little bit more detail on what your steps are and whether your gap to private label is closing now in terms of pricing, that is? And the second is indeed on HPC, continuing a very strong performance. Could you specifically tell us a little bit more on Kalina and how that brand is doing in Russia?

Raoul Jean-Marc Sidney Huet

Sure. Marco, thanks for those questions. Just the first one on raw materials and commodities, let me just tell you the situation remains very volatile. And while you can look at one specific cost and you can say it's gone down, I could give you a story for another raw material where it's gone up. Look at cocoa. Look at tea. Look at different types of oils. And as a result, not only does inflation remain high, the volatility continues. And if you were to ask me today, our commodity cost inflation for the year is high-single digit. In Q2, we said a little higher than mid-single digit. So I think, we are talking really on the other side of the decimal point, if I may say. It's really not material in any single way, but the overall environment is just continuing. On your second point in terms of pricing, I mean, specifically on spreads, I think that there are corrective activities that need to take place. And as a result, there are gaps between ourselves and our competition. Let me just talk about that in large. And that's something that we are suggesting as we speak. Lastly, on Home and Personal Care, indeed, those 2 categories have performed very well, specifically Personal Care, over a longer period of time. And I will say, as James mentioned in the slides, that some of the brands that we've bought through M&A have really helped. I think we've talked enough about Tresemmé given that it's now being so -- we bought the asset now 1 year, 1.5 years ago and you see what we're doing in Indonesia. You see what we're doing in India. You see what we're doing in Brazil. Specifically, Kalina, we only bought that at the beginning of the year, but all the signs are very positive in terms of growth and innovation. And in actual fact, based on recent visits, I think there's a lot that we can learn from those people in the assets that we've acquired.

Marco Gulpers - ING Groep N.V., Research Division

Okay. Maybe just one follow-up. The corrective activities as you're talking about spreads, have you already taken them or are you about to take them, i.e. in Q3? Or are we expecting those in Q4?

James Allison

Marco, it's James here. So we had -- we've already taken action in the U.S., where there were some price gaps. We see already the benefit of that coming through in improved volume shares in the quarter. In Europe, that's -- it's not the case. There is still some gaps. We won't allow ourselves to remain uncompetitive there. So we will be taking action in Europe.

Operator

And our next question comes from the line of Jeremy Fialko from Redburn.

Jeremy Fialko - Redburn Partners LLP, Research Division

Jeremy Fialko, Redburn here. A couple of questions. Firstly, LatAm, that really was an exceptional result. I mean, if you could go on to a little bit more detail about kind of what you've been doing in those markets and sort of how sustainable you think some of these numbers are. And then the second question is on your kind of in-quarter pricing. Can you talk about what that was and also what it might be in Q4 given the fact that you've still got some of these spreads price reductions to put through, but clearly that will be offset by a bit of price offset inflation in emerging markets. So how those 2 things balance out?

Raoul Jean-Marc Sidney Huet

Sure, Jeremy. On your 2 points, in quarter pricing for Q3, basically stable. If you look over the year, the contribution of pricing, most of it will be carryover, but some of it will be as a result of pricing taken this year, most of which will be in emerging markets. If you then look at our performance in South America, indeed, I think that what you saw in the third quarter is a very good performance across the board. While Brazil is our most important market in South America, we also have many other markets in Southern Cone, Argentina, Chile and the list continues that have actually done very well over the last 3 months. And it's very much driven by innovation, execution of product, new launches, white spaces and the likes. So it's really a repeatable story. I cannot pretend that we'll have that performance each and every quarter. That's the answer for this quarter. What I think we are driving is the testimony that we have a breadth and a depth of our business throughout our emerging markets.

Jeremy Fialko - Redburn Partners LLP, Research Division

Okay. Sorry, just can you say anything on the Q4 sequential pricing, that side of things?

James Allison

So Jeremy, yes, we've highlighted that -- I think you said it yourself actually. So there will be some activity in the spreads category in Europe probably. But in the same time, with the rate of inflation that we see in the emerging markets, quite likely that there will be some new pricing in emerging markets in the fourth quarter. So we're not going to give you a kind of -- a very accurate prediction of what it's going to be because you can never do that. But certainly, we wouldn't expect it to be down.

Operator

And our next question comes from the line of Martin Deboo from Investec.

Martin John Deboo - Investec Securities (UK), Research Division

Two questions really, which goes to the issue of margin, from me. I know this is not a margin report quarter but it's an outlook question. I just want to reconfirm, Jean-Marc, your commodity guidance. You're saying -- now saying high-single digits, which -- well, we're splitting hairs. It sounds like a slightly more downbeat take on commodities in H1. I just want to check if I understood that. And secondly is the issue of Home Care. The result is very strong, but it's your lowest margin category. Does the rapid growth in Home Care give you any worries from a margin mix point of view for the full year?

Raoul Jean-Marc Sidney Huet

Let me just take core operating margin. For the -- every year, we aim to deliver steady and sustainable improvement in full year core operating margin, as you know. And what we would like to do, and that will be our policy I think each and every year, is that rather than to increase our core operating margin further, it is always going to be our preference to invest in the long-term development of the business. So I prefer that nobody gets carried away. You're in the right place. And just make sure that you understand and appreciate that if ever there were to be upside, we reinvest back in the business to make sure that we start next year with a lot of momentum. So where are we for 2012? Like I said, we remain on track to deliver a modest core operating margin improvement. I think that the important point is if something happens with commodity costs either here or there, the point is agility in the system and we need to be able to apply different levers because we need to just assume that whatever happens, there are going to be bumps along the way. And that is the new environment in which we operate in. Secondly, your point on Home Care and mix, it's a very important one. And as we've gone through the journey in the transformation and as you can see through some of the speeches that we've made over the last month or 2, we are very focused on gross margin and driving mix within that gross margin. We have better systems, better reporting, better granularity to really tackle the point of mix, which you can't change from one day to the next. Obviously, Home Care growing high, lower margin, but you also have to look at the rate of margin progress and not just its absolute margin in terms of its contribution. So there is an issue that we deal with, and I think we're much closer to the theme of mix and driving that into our gross margins going forward.

Operator

And our next question comes from the line of Robert Waldschmidt from Merrill Lynch.

Robert Waldschmidt - BofA Merrill Lynch, Research Division

A couple of questions. Firstly, in terms of just going back on a modest margin definition, I just wanted to make sure I understand. I think previously, you've defined modest margin improvement is something in the arena of, say, flat plus 10, plus 20 basis points, which would appear to be what consensus is reflecting this year at least. Can you give some color on that? And then within China, Russia, in terms of the growth that's coming through there, which seems to be benefiting from your actions, are we seeing margins going up there? Or is it still more about getting the top line and market shares up and the margin will follow in the longer run? And then just really tacking on the same thing for margins still, can you remind us what cost savings you expect to deliver this year?

Raoul Jean-Marc Sidney Huet

Robert, thank you very much for those, let me call them, 2.5 questions. In terms of cost savings, it's really the same types of amounts that we've been talking about in the past, be it EUR 1.3 billion, EUR 1.4 billion around there. But that's less important as a number. It's really how we're driving the gross margin. And so savings is really going to be a driver to gross margin growth and the ability to fund inflation, very important in our business model. Back to your point on modest margin improvement, I'll let you define what modest is. What I'm saying and what we are saying today is that we think that where the market is, is the right place. And so I just let you define on what modest is. On the point of China and Russia, we've been investing disproportionately, be it either in terms of people, be it in terms of M&A, be it in terms of brand support. So our real focus has and will be growth and scale, talent, leadership, great organizations, and then the growth in terms of profits will come. But it's very much in that order of importance. Obviously, it's going to have to become profitable. But at this point in time, you can see the actions that we've taken in both countries and we're very enthused by the types of growth, profitable growth that we're driving.

Operator

And our next question comes from the line of Iain Simpson from Barclays.

Iain Galloway Simpson - Barclays Capital, Research Division

Just a couple of quick questions, if I may. Firstly, I think some of your peers have talked about sort of accelerated downtrading in Western Europe in the third quarter. I know you talked a little bit about introducing more sort of accessibly priced products in Greece. Maybe if you could just give us a little bit of a color over the downtrading environment that you've been seeing in Europe, particularly Southern Europe, and how that compares to previous quarters, that would be great. And also just on Tresemmé, any sort of color that you can give us as to what sort of growth rate that's running at now and exactly where you are in terms of the introduction of that into India or Indonesia would be very helpful.

Raoul Jean-Marc Sidney Huet

Iain, just on the last one, India and Indonesia, I think it's on the slides. India, I was there actually a couple of weeks ago and it was just getting launched as we speak. And I think that Indonesia is in weeks to come, but it's all basically underway. I don't know exactly the growth rate of Tresemmé. But you can imagine that with the introductions into places like Brazil, there is really a huge amount of momentum not only in these new markets, but it's also really helped us become the #1, at times, in the U.S. hair care market. So it's one of those brands that we're very, very happy is part of our portfolio. James, do you want to add anything on Tresemmé specifically?

James Allison

Yes. It's not such a straightforward question to answer because we have been extending this brand into markets that it hasn't been in before and we've spending a lot of money supporting the brand in doing that. So I think we have spoken about the fact that we expect Tresemmé probably to reach EUR 150 million in Brazil, for example, this year. Well, there wasn't anything there last year. So that's plus EUR 150 million. But some of that, of course, is cannibalizing other parts of Unilever's brands. So it's a kind of -- whilst I understand the question, it's a little bit difficult question to answer.

Raoul Jean-Marc Sidney Huet

On the first part, Iain, let me just give you a context so that you're aware. Greece, Spain, Italy is probably less than 5% of Unilever sales. So while these are important markets for our consumers in terms of our total portfolio, they don't really constitute a large part of our business. Yes, there is downtrading without a shadow of a doubt, but one of the things that we do need to make sure is that while we are more agile, while we try to cater in terms of value packages, new innovations at the so-called bottom end of the pyramid, we also need to continue working on the other sides of the pyramid because you can and we should also focus on premiumization in Europe. It may sound as a surprise, but we need to work all parts of the pyramid. If you then just take our performance overall, I think Europe is -- has improved. It's stabilized. There is less volatility. I think there are 1 or 2 markets that have actually done quite well. I mentioned France, the U.K., but even Spain has actually stabilized over Q3, so overall improvement to our business.

Operator

Then our last question comes from the line of Jon Cox from Kepler.

Jon Cox - Kepler Capital Markets, Research Division

Just a couple of questions from my side. I wonder if you just talk through the North America, the minus 3.5%, I think there was -- you mentioned the sales were brought forward last year by the SAP. I wonder if can sort of give us some indication on what you think the real growth was like in North America. Are things really deteriorating there? And then secondly, am I right in saying that you're seeing -- just for the last question, you're seeing a stabilization in Europe generally? Is this -- I guess you're referring to your portfolio in particular or are you starting to think that maybe the worst is over in Europe in terms of what's going on there?

Raoul Jean-Marc Sidney Huet

Okay. I should have been clear. When I was talking about stabilization, it was just specifically Spain that I was referring to, which is not an important part of our total portfolio. But given that you read about Spain every single day, I thought that I would just throw that in there. On North America, again, I do want to stress the fact that you need to invest in the entirety of the business. We are no longer giving any forms of caveats, excuses, et cetera. But since you asked that question, the impact of the SAP implementation was approximately 500 basis points on the North American performance.

Okay. Well, just to sum up. Let me first thank you for your time this morning. We'll see many of you at our Annual Investor Day event in Paris next month. And for those of you that are not able to attend, you'll be able to watch simultaneous broadcast of the key parts either on your laptop or on your iPad. And speaking of iPad, please look out for the upgrade in our iPad app, which will be coming up shortly. It should be available in around 2 weeks or so, so well in time to use some of the new features as you listen to the presentations in Paris. Once again, thanks for your time, thanks from James, myself, the IR team, and enjoy the rest of the day.

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