Richard Williams: Thanks, Graeme. So we’re over the hour. Let’s just take two more questions. Can we go to Pinar, would you like to ask the first one, at Morgan Stanley?
Pinar Ergun: Hi, thanks for taking my questions. Just two quick follow-ups to Martin and Warren’s questions are there. The first one is, could you please talk a little bit about why you’re not expecting a deflationary cost environment in H2? Is that because of hedging, FX? Or are you making certain assumptions on commodities beyond where the spot rates are. And then the second one is coming back to Warren’s question. Unilever’s volumes are holding up a little better than some of your global peers despite strong pricing. But I guess at what point the declining share of business winning share becomes a longer-term concern for you that you might reconsider the balance between pricing volume and competitiveness.
Alan Jope: Pinar, let me take both of those. They are two of the most important areas that we’re focused on. We’re not expecting a deflationary environment in H2, but there is a wide range of potential outcomes. And I think there’s two things that are going to — two bellwethers to keep an eye on, on what’s likely to happen in the cost environment. The first is what happens to demand from China. We’re anticipating quite a strong opening up and recovery of China. There’s $1.5 trillion to $2 trillion of excess household savings in China. There’s limited places for the Chinese consumer to put that, the housing market is not an attractive investment option. There are limited financial investments they can make. And so we are expecting to see a little bit of a consumption boom in China.
And if you look at things like air flight bookings, travel and hotels, cinema occupancy, China is coming back quite quickly. And that demand will have an impact on global commodity pricing. Second is, frankly, what happens to crop yields, of which the soy crop in particular is very important. And the soy crop yields are very affected by weather patterns and have a knock-on effect on the cost of other soft commodities like palm, et cetera. As far — we will take advantage of spot pricing to lock in contracts. Frankly, most of our forward cover is through contracts. It’s not through hedging arrangements. And we’ll take advantage when we think that there’s a particularly low moment to lock in a contract. But watch China and watch the crop yields in particularly the soy crop.
And then in terms of volumes are holding up, but should we be concerned about competitiveness? Yes, of course, we’re concerned about competitiveness. It’s a very high priority measure for us. It’s in our team’s long-term incentives. And I can assure you, when Graham and I sit down and do the monthly performance reviews with our business groups, literally, the first thing we look at is not the rearview mirror of what happened over the last month or the last quarter. It’s what’s the outlook for competitiveness in the coming months and the coming quarter. Our best estimate is that we’ll start to recover across the 2023 quarter-by-quarter. And whilst we don’t hedge much on commodities, we are hedging a little bit on giving an exact moment when we think we’ll move back into positive shares.
The one thing that we’re very comfortable with is our innovation and investment plans behind our brands for 2023 are stronger than any of us can remember in the last 10 years. So let’s watch the space but we are very focused on market share.
Richard Williams: Thanks, Alan. Okay. Let’s squeeze in one last question and for that last question, let’s go to Celine Pannuti at JPMorgan.
Celine Pannuti: Thank you very much. Good morning everyone. So one last — I’ll try to make two small ones. The first one is on volume. You said that volume would be worse in H1 and potentially still negative in H2. Should we expect to be sequentially as bad as Q4? I mean I understand that in Q4, there were some extra elements that you mentioned earlier, Graeme. So can you give us a bit of a scale of what we should expect if volume effectively would continue into that same level for the first half? And then my second question is — you spoke about Europe. Just about emerging market, a lot of your emerging markets, Southeast Asia, excluding China or Latin America had benefited from a recovery in ’22. What is your view on how the consumers are behaving in those emerging markets as you enter ’23 with higher pricing. Thank you.
Alan Jope: Celine, I’m going to ask Graeme to talk the SCA situation, but he is not going to have much time to prepare that because the answer on volumes are very straightforward, which is, for the first half, we expect a sequential recovery in UVG from Q4, although not crossing into positive volume growth until the second half. Now of course, there’s the usual caveats around difficulty of predicting the future. But just to be crystal clear, what we’re guiding to is volumes still negative in the first half, but sequentially recovering versus Q4. Graeme, Southeast Asia.
Graeme Pitkethly: Good morning, Celine. Yes, I think we — in the 60% of our business in emerging markets and in the sort of powerhouses that we have in South Asia and Southeast Asia, we are in optimistic mood. If we look at Southeast Asia, Indonesia and Philippines have got sort of mid-single-digit or slightly higher GDP growth, consumer confidence is starting to return in Indonesia. Our markets are currently driven by price as we sort of — as we reset the business in Indonesia, we will be benefit from that. I said in the speech that all five of our business groups are extremely focused on getting Indonesia back to its strength. Philippines, consumers are looking for value. We’ve got a lot of value in our portfolio. Thailand, the market is recovering from COVID, I think there’ll be a big beneficiary.
I think as well Vietnam actually from the return to Chinese tourism, Alan just mentioned that. But as Chinese tourists start to venture overseas, Thailand and Vietnam will be big beneficiaries. Our business in Vietnam is extremely strong. And there’s an economic recovery happening there. So at Southeast Asia, yes, we feel good about it. And obviously, our performance in Southeast and — South Asia, strength continuing in India. It’s very important that we continue to hold on to that. That’s strength for us. It’s the Urban markets are up in value. Rural is a little bit more flat. The monsoon was good overall. But food inflation is rising fast. And that’s having a bigger impact on the less affluent part of the Indian population than elsewhere.
The rest of South Asia, we’ve got some challenges to manage. We’ve got a big and successful business in Pakistan, which had terrible floods and is rather challenged economically as a consequence. We’re having to manage that similarly in Bangladesh. But overall, I think we’re feeling good about the prospects for emerging markets in ’23.
Richard Williams: Thanks, Graham. We’ll end the Q&A there. Thanks for all the questions. If you’ve got any further questions, just e-mail the Investor Relations team, and we’ll set the time to speak to you. Alan, would you like to make any closing remarks?
Alan Jope: Yes, I will actually, Richard. A little bit of a break with traditional close. I would like to take this moment to thank the 150,000 or so women and men who make up the Unilever team around the world and who have worked incredibly hard through extraordinarily difficult external conditions and a major internal structural change that we imposed upon them as well to deliver a set of results that we’re proud of. So to any of the Unilever team who are listening on the call and on behalf of the whole company, a massive thank you. Richard?
Richard Williams: That’s it. Thank you. Thanks, everyone. Thanks for the questions. Thank you, Alan. Thank you, Graeme, and have a good day.
Operator: This now concludes today’s call. Thank you all for joining. You may now disconnect your lines. Goodbye.
