And I already talked about the ForEx effect, transactional currency effect that we see in some of our important ice cream markets, for example, in Turkey. So the actions in Ice Cream really should come from a much stronger execution, a new look at the total supply chain and transforming our distribution and our network into a very competitive set. We believe that there’s opportunity to do so. Peter has taken some very drastic action when it comes to leadership change, around 80% in the business group has — of his key leading positions has changed. So we’re not sitting still. We’re addressing the issues with enormous speed and decisiveness. And I expect a better Ice Cream in 2024 along with the key metrics.
Unidentified Company Representative: Our next question comes from Jeff at BNP.
Jeffrey Stent: Firstly, just a word of thanks really to Nitin who, I think, has been an incredible servant to Unilever over, frankly, longer than I think any of us can really remember. So I hope he has a very — enjoys his downtime, if I can say that. So 2 questions. The first one is, somewhat curiously, you put on one of the slides that vertical integration on key materials is going to be a priority. Could you just explain what that actually means? And the second thing is you also commented that focusing more on absolute profit would be a priority. Now if I take consensus and I apply your minus 5% currency guide on earnings, it would sort of imply that EPS won’t really grow this year. So I just want to get your comments on that. Is that what you’re guiding to that there shouldn’t be sort of meaningful currency EPS growth this year?
Hein Schumacher: Thanks, Jeff. Three points, let me just respond to and just echo your words about Nitin. Thank you, by the way, for making note illustrious career. Really great to work with. I’m very grateful to Nitin for everything he’s done in the company. By the way, he will continue as the Chair of Hindustan Unilever for the foreseeable future, and I’m very grateful that he will and we’ll use all his expertise and experience in that key role. Now handing it over to Fernando on the 2 questions. One is on key materials and the other one was on absolute profit and the relationship to EPS guidance. Fernando?
Fernando Fernandez: Yes. Vertical integration is — let me give you a couple of examples. For example, if you look at our surfactants cost in North America, we have a significant disadvantage. We are one of the few players that are not vertically integrated in the sulfonation and production of SLES. That has a significant cost to our business and we believe that this is an opportunity that we can really materialize in the future. There are other materials in which I will not go deeper at this stage, this is for confidentiality reasons. But we believe that there is a role to really improve our leverage in our procurement strategy and have a significant impact in our gross margin going forward. Let me go now into the absolute profit growth.
Every time I get into a new role, I try to look at the long-term trends. There are 2 things, looking at the last 10 years’ performance of Unilever that I’m sure that it’s not a surprise for you, but really, I would like to highlight. The first one is that our volume growth has been below what our footprint in terms of geographies and categories alone. And the second is that in the last 5 years, our profit in hard currency — in current currency have stagnated, and we know that we need to fix these 2 things. So I will not get into details now about the outlook and the guidance. But I want you to be very, very clear that we are very conscious about really compensating some of the negative effect that currency headwinds have and we are working hard on that.
Unidentified Company Representative: Our next question comes from David Hayes at Jefferies.
David Hayes: Two for me, one on the divisional heads planning process; and the second one on SKU rationalization. So can you just talk us through the timing and the process of these new divisional heads in terms of their presentations to ExCo in terms of that 2024 and midterm plans? And during that process, what were the biggest surprises and the identified challenges that came out of that? And is there a plan for them to come back again given they are new in those roles to elaborate and be more detailed in what they see as the ambition on what they need for the next few years to deliver? And then just on SKU rationalization. Is that done now? I know you’ve done a lot of that over the last couple of years, but the 30% — or 25% of sales in the Power Brands, is there are a lot more to do in terms of both SKU and brand rationalization to kind of streamline that tail, so it doesn’t become a drag on the overall group performance?
Hein Schumacher: Thanks, David. On the — your first question on the divisional — what you call, divisional heads, I’m not sure that I fully got the question, but let me just elaborate a bit, but please come back if you feel that I’m not answering it. Last year, in October, we refreshed the leadership team of the company and we made a number of internal appointments. So Priya Nair heading up Beauty & Wellbeing; Eduardo, heading up the Home Care division; Peter ter Kulve changing from Home Care into Ice Cream. And I believe we appointed there people with a proven track record and very hungry, of course, to take on the challenges that we have. The targets and the goals for them for 2024 are completely aligned with the Growth Action Plan.
We’ve cascaded that rigorously, I would say, and in a much more rigorous fashion than probably was the case prior. We have just made the appointment of Mairéad. There is one outstanding position on the ULE and that is the President for Nutrition. We are in finalizing stages of that, and I expect to be able to announce in the next couple of weeks. There were some technicalities why we couldn’t do it today. It is what it is, but we are moving forward on that quite fast. Ultimately, I aim for a good mix, obviously, between internal and external views. That’s why we made the appointment of Mairéad today. And hey, I would say everyone is really — is on to it, started on the 1st of January formally the new roles. But yes, I’m happy with the progress made so far.
On SKU rat, we’ve done some significant SKU rationalization to simplify operations, help our procurement teams in particular. And of course, the global category teams that are now the primary access to which we manage the company, they have taken a very hard look at, hey, how can we simplify our business going forward and make our propositions more scalable. Mid-20% or so in terms of SKU rat, significantly, of course, that has harmed some competitiveness and some volume, but we’re happy with the action taken. Going forward, I would not expect similar reductions, of course. I think we have sort of bottomed out and we need to grow from here.
Fernando Fernandez: Yes. Let me add only that I would see — I would look at this as one of the key benefits of a business group-led organization. It was very difficult in the past when we were organized on a geographical basis to take decisions in simplifying our assortment. We have done it. It has a cost in terms of volume. It has a cost in terms of competitiveness, but make us leaner, faster, sharper and we have been decisive on doing that.
Unidentified Company Representative: Our next question comes from Karel at Kepler.
Karel Zoete: I have two questions. One on the Beauty & Health Wellbeing business and one on Hair Care. Starting with Beauty & Health Wellbeing, that’s been elevating growth in the North American market field for a while. At the same time, I don’t necessarily see all these brands traveling very quickly across the globe. Is that part of the plan of these brands? Or are they so far called to be predominantly leveraging on the growth opportunity in the North American home market? And the other question is in relation to Hair Care, that’s been a difficult category for you for a bit longer. At the same time, we’ve seen quite some action on the portfolio last year. How should we think about your Hair Care performance in ’24?
Hein Schumacher: Thank you, Karel. I’ll take part of the first question, and again, given Fernando’s role in that business, both responsible for Hair Care as well as on Health & Wellbeing and the Prestige Beauty side, he will add. Clearly, these Prestige brands, roughly 1/4 of the business group, Beauty & Wellbeing, of course, we want to scale. This is an important theme of our Growth Action Plan, scalable propositions, multiyear bets and so forth and these brands fit that extraordinarily well. However, we want to make sure that we put them on a very solid footing and the United States is — or North America is a very significant market. So we were really keen to drive growth there initially, and we’re looking for expansion.
But let me tell you, in fact, we have expanded on Liquid I.V. We’ve introduced it in a number of countries, amongst them are Canada, but we’re also looking for more internationalization. More on that to come, so stay tuned. Dermalogica, in fact, available in multiple countries, actually now available in the U.K. as well. Paula’s Choice, I hear from your accent you’re from the Netherlands. In fact, our European operations for Paula’s Choice are based out of the Netherlands. I was there recently. All digital, very strong growth, similar growth rates that we’re seeing in North America. So we’re actually very excited about that. But we will do it very targeted and where we feel that the moment is right and that we have sufficient and — sufficient presence and base in the United States, and then we will look for internationalization.
Fernando, maybe a few words to that and as well as Hair Care.
Fernando Fernandez: Yes. I feel one of the powerful features of the portfolio that we have been building Health & Wellbeing and in Prestige is the fact that North American brands travel. These kind of strong brands in the U.S. give us the possibility of building a more harmonized portfolio across the globe in the future. So definitely, global rollout of this brand is something that we will pursue with decisiveness in the next future. There are some differences when you look at Prestige this year. In the case of Health & Wellbeing, there are regulatory constraints that have to be overcome but overall, just the decision is to really go global with most of these brands. I feel one point that Hein touched base — touched on that and I feel it’s important, we wanted to solidify our position in the U.S. first.
