Q2 2025 Haleon PLC Earnings Call - Q&A
Jo Russell: Good morning, everyone, and welcome to Haleon's half-year 2025 result Q&A conference call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer, and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions 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 actual results to differ materially from those expressed in or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. Hopefully, you've all had the chance to see that ahead of this call.
Good morning everyone and welcome to Helen's, half year 2025 results, Q&A conference call. I'm Joe, Russell Head, investor relations. And I'm joined this morning by Brian McNamara, our chief executive officer and Don Allen our Chief Financial Officer.
Just to remind listeners on the call that in the discussions today. The company may make certain forward-looking statements, including those that refer to our estimates plans and expectations.
Jo Russell: With that, let's open the call for Q&A, and I'll hand back to the operator.
Operator: Thank you. Just as a reminder, to ask your question, please press star followed by one on your telephone keypads. When it is your turn to ask your question, please ensure your device is unmuted locally. Our first question comes from Guillaume Delmas from UBS. Your line is now open. Please go ahead.
Please refer to this morning's announcement and the currently UK and SEC filings from more details, including factors that could lead to actual results to differ materially from those expressed in or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with the video, running through the results in detail. So hopefully you have all had the chance to see that ahead of this call. And with that, let's open the call for Q&A and I'll hand back to the operator.
Thank you. Just as a reminder, to ask a question, please press star followed by 1 on your telephone keypad.
When it is your time to ask, ask your question, please. Ensure your device is unmuted locally.
Our first question comes from Gilliam Delmas from UBS. Your line is now open. Please go ahead.
Guillaume Delmas: Thank you very much, and good morning, Brian, Dawn, and Jo. I have two questions for you, please. The first one is on North America. In Q2, both India and LATAM and APAC were well within your medium-term 4-6% organic sales growth guidance, but North America was a clear outlier with a, I think, nearly 2% organic sales growth decline. Could you maybe help us unpack this performance in North America in Q2? In particular, do you think it was primarily down to temporarily lower category growth? Is it down to significant discrepancy between sell-in and sell-out? Are you also seeing some share erosion? My last question on this, would you expect North America to return to growth and ultimately back to the 4-6% range over the coming quarters, or may it take a bit longer as the challenges persist?
Thank you very much and good morning, Brian Dawn. And Joe. So 2 questions for me, please. Um, the first 1 on North America. Uh, because in Q2 both imia, latam and APAC were were within your medium-term 4 to 6%. Organic sales course, guidance.
But North America was a clear outlier with a, uh, I think nearly 2% organic sales growth decline. So,
could you maybe help us unpack this performance in North America in Q2? And, and in particular, do you think it was primarily down to temporarily lower Kate category growth? Is it, is it down to significant discrepancy between selling and sell out? Or are you also seeing some Cher erosion?
Guillaume Delmas: My second question is on ANP, which increased significantly in the first half. I think it was up 130 bps. The question here is, in which areas are you disproportionately reinvesting? Do you feel you get some great returns on this incremental spend? Looking ahead, what should we expect for ANP spend? Was the first half a bit of a one-off, or should we expect another marked step up in H2 and beyond? Thank you very much.
And and I guess last question on this, would you expect North America to return to growth and ultimately back to the 4 to 6% range, over the coming quarters? Or it may take a bit longer as the challenges persist.
Um, and
Question here is in which areas are you disproportionately reinvesting? Um do you feel you? Get some great Returns on this on this incremental, spend and I guess looking ahead. What should we expect for A&P spend? As in was the first half, a bit of a 1 off, or should we expect? Another Mark step up uh in H2 and Beyond, thank you very much.
Brian McNamara: Thanks, Guillaume. I appreciate the questions. Let me take the first one on North America, and I will pass it to Dawn for the second question. As I get into North America, we do feel good about India, LATAM, and APAC, and also feel good about the back half in both those areas. We also feel great about the organic profit growth driven by the gross margin, 160 bps, and the strong cash flow. But there is no doubt that North America has been a challenge. Maybe you step back. I think there are two market dynamics, and then let me touch on our own performance. First, there is no doubt that there is a challenging consumer environment, and consumer confidence is at a low.
Uh, thanks Gil. I'm appreciate the questions. Let me take the first 1 on North America. I'll pass it to Don for the second question. And maybe just, um, as I get into North America, we do feel good about email, latam and APAC, and also feel good about the, um, the back half. And in both those areas, also feel great about the, uh, the organic profit growth, uh, driven by the gross margin 160 basis points, and the, and the strong cash flow. But there's no doubt in North America has been a challenge, and maybe if you step back, I think there's 2 market dynamics. And then, let me touch on our own performance. I mean, first, there's
Brian McNamara: I think our categories are more resilient than most in that context, but we are impacted in certain categories, and smoking cessation is definitely one of them. I talked about it in the past. This is a $30 to $40 price point range. So we are seeing trade down in that category. Outside of that, we are not seeing trade down overall in the business, and that has been a drag on growth. I think the second thing is we continue to see the shift to a dollar and club, which are more value channels, which is what we are seeing in this consumer environment and e-comm. I would say in all cases, we have strong presence in those channels, and I have talked about e-comm, where 16 of our top 18 brands, they actually have better shares online than offline. So that is very manageable.
No doubt that there's a challenging consumer environment and consumer confidence is at a low.
And I, you know, I think our categories are more resilient than most in that context, but we are impacted in in certain categories and smoking sensation is definitely, 1 of them. I talked about it in the past, this is the 30-40 price point range. So we are seeing trade down in that category.
Brian McNamara: But we are continuing to see these inventory pressures, drug retailers, but I think everybody, all retailers in the U.S. are dealing with that kind of environment. As far as our performance, our consumption is growing ahead of the market. To be clear, the market is slightly down about a half percent, and our consumption is slightly up about a half percent. So we are growing ahead of the market, but not significantly, to be clear. We are seeing strong growth in market share gains in oral health and market share gains across digestive health. Brands like TUMS and Benefiber are doing extremely well. But overall, we are not satisfied with the performance, and we have a bit mixed performance in pain relief and VMS. So let me unpick that a bit. In pain, in the first half, we have slightly lost share on Advil. We have taken action.
Pressures uh drug retailers. But I think everybody all retailers in the US are dealing with that kind of environment.
Now, as far as our performance, our consumption is growing ahead of the market. Now, to be clear, the market is slightly down, um, about a half percent and our consumption is slightly up about a half percent. So we're growing ahead of the market, but not a significantly to be clear. Now we're seeing
Strong growth in market, share and games, and oral health and market share gains across Digestive Health Brands, like tons and benefit fiber are doing extremely well, but overall, we're not sat.
Brian McNamara: We have new plans in place. We have a new media campaign that is on air live now, and we see early signs. I mean, the back half of Q2, we were getting, we were back to share growth on Advil. On VMS, we have two brands, Emergency and Centrum. On Emergency, we continue to see really strong consumption and share gains. Sales were up low single digits. Emergency was one of the brands that at the end of last year, when we saw that very low cold influences in December, we started the year with a bit of higher inventories. But overall, the brand's very healthy. Centrum's been a challenge. Overall on Centrum, really good growth, mid-single-digit growth outside the U.S., high single-digit growth in Q2 outside the U.S., but we saw declines in the U.S.
With the performance and we we have a bit mixed performance and pain relief in VMS. So let me unpick that a bit. So in pain in the first half we have uh slightly lost, share on Advil now we've taken action, we have new uh plans in place. We have a new uh media campaign that's on air live now and we see early signs, I mean the back half of Q2 we were, we were getting, we were back to share growth on Advil.
Now on zms, we have 2 Brands emergency and Centrum on emergency. We can send you to see really strong consumption.
Brian McNamara: A year ago is when we first activated our cognitive claims on Centrum Silver, and we grew high teens consumption about four times the market. So we're indexing across a high base. But listen, that said, even with a high base, our expectation is we continue to grow share. So we've firmed up our plans. We are reactivating the Centrum Silver with a new claim, slows cognitive aging by 60%. Some innovations in the U.S. on Centrum in the back half, and we have a new partnership with U.S. Women's Soccer that we're beginning to activate that we're optimistic about. So in the back half, I definitely expect to see improved share positions on Centrum and Advil, but we do believe the inventory reduction will continue to happen.
Um, and and share gains. Now, sales are up low, single digits, emergency was 1 of the brands that at the end of last year when we saw that very low, cold influences is in, in December, we started the year with a bit of higher inventories, but overall the brands very healthy, Centrum has been a challenge. Um, now overall on Centrum really good growth. Mid single-digit growth outside the US, High single digit growth in Q2 um, outside the US. But we saw declines in the US. Now, a year ago is when we first activated our cognitive claims on Centrum Silver and we grew High, Teens consumption about 4 times, the market. So we're indexing across a high base, but listen, that said, even with, uh, a high base, our expectation, is, we continue to grow share. So, we've formed up our plans. We have, we are activating reactivating. The central silver with a new claim, slows cognitive aging by 60%, with some Innovations, uh, in the US on sentum in the back.
Cast and we have a new partnership with U.S. Women's Soccer that we're beginning to activate, and we're optimistic about.
So, in the back half, I definitely expect to see improved.
Brian McNamara: As we look at inventories across retailers, I think they've been much more proactively managing their inventory levels as they're seeing issues with them delivering on their numbers in the whole environment. We want to more proactively manage that with them going forward. Really, really important that we do what we need to this year to make sure that we're at the right levels as we exit the year into next year. So in our around 3.5% guidance, we are not looking for a significant improvement in the U.S. environment at all, and we're expecting to continue to see inventory pressure. I will say, though, looking forward to the medium term, we have a fantastic business in the U.S. Really, really pleased with oral health in the U.S., where we gained a half a share point in the first half and continue to go from strength to strength.
Chair positions on Centrum and Advil, but we do believe the inventory reduction will continue to happen. Um, as we look at inventories across retailers, I think they've been much more proactively managing their inventory levels, as they're seeing um, issues with them, delivering on their numbers in the whole environment. We want to more proactively manage that with them. Um, going forward, really, really important that we do what we need to this year to make sure that we're at the right levels as we exit the year, um, you know, into into next year. So in our around 3 and a half percent guidance, we are not looking for a significant Improvement in the US environment at all. And we're expecting to continue to see inventory pressure. I I will say, though, looking forward to the medium term, we have a fantastic business in the US. Um, really, really pleased with, uh, oral health in the us where we begin to have a SharePoint in the first half. And,
Brian McNamara: And we're confident in 2025, 2026, and beyond as we strengthen the business in the back half. Why don't I pass it to Dawn to talk about ANP?
Continue to go from strength to strength, um, and we're confident in 2025, a 2026 and Beyond, as we, uh, as we strengthen the business in the back half.
Dawn Allen: Yeah, thanks, Guillaume. Good morning, everyone. I think the first thing to say is, as we laid out at Capital Markets Day, we have significant opportunity in supply chain productivity. You saw that come through in the half. The benefit that has come through in gross margin has enabled us to continue to invest in ANP and R&D. That provides the flexibility and agility that we have talked about across the P&L. In terms of if I focus then on ANP, ANP is up 6.8% in the half to 20.8%. We are leveraging ANP to focus on the three growth drivers that we have outlined, closing the incidence treatment gap, driving premiumization with our innovation, and expanding reach to lower-income consumers.
Why don't I pass it to Dawn to talk about AMP?
Yeah. Thanks game. Good morning everyone.
um, so I think
We have significant opportunity in supply chain productivity and you saw that come through in the half.
And the benefit that's come through in gross margin has enabled us to continue to invest in AMP and R&D, and that provides the flexibility and agility that we talked about across the P&L.
So in terms of, if I focus then on AMP so amp is up 6.8% in the half to 20.8% and we are leveraging. Am to focus on the 3 growth drivers that we've outlined closing the incidents treatment Gap.
Dawn Allen: If I think about from an innovation perspective, you know we have been rolling out very successful innovation, particularly around our Clinical White range, Otrivin Nasal Mist, and Panadol dual action. The first area that we have been focusing on in terms of spend is around supporting the innovations. If I think from a geographic perspective, we have been focusing on driving growth in key markets. Particular markets like India, where we saw just under double-digit growth, in Mia, in Central Europe, and also in China. Obviously, expert and our recommendation by expert for our brands is a critical part, and that is the other area of our investment. It is not just about increasing the investment. It is also about the effectiveness of that investment. In the half, we have improved ROI by 4%. We continue to look at the balance of working, non-working.
Driving premiumization with our Innovation and expanding reach to lower income consumers.
We've been focusing on, in terms of spend is around supporting the Innovations. If I think from a geographic perspective, we've been focusing on driving growth in key markets. So particular markets, like India, where we saw just under double digit growth in Mia, in Central Europe, and also in and also in China and obviously experts and our, you know, recommendation by expert for Our Brands is a critical part and that's the other area of our investment
Dawn Allen: I think there is more opportunity for us to go on that. I would not say this is about phasing. If I look to the second half, you know I would expect us to continue with similar shape, and I would expect us to continue to invest across those areas that I talked about and, you know, in terms of our ANP.
But I it's not just about increasing the investment, it's also about the effectiveness of that investment. And in the half we've improved Roi by 4% and we continue to look at the balance of working non-working and I think there's more opportunity for us to go on that. So I wouldn't say this is about phasing. If I look to the second half, you know, I would expect us to continue a similar shape and I would expect us to continue to invest across those areas that I talked about and you know, in terms of our amp
Guillaume Delmas: Thank you very much.
Thank you very much.
Operator: Thank you. Our next question comes from Rashad Kawan from Morgan Stanley. Your line is now open. Please go ahead.
Thank you.
Rashad Kawan: Hey, good morning, Brian and Dawn. Thanks for taking my questions. A couple for me, please. First one on North America, again, in the 3.5% growth for this year. You said you are not expecting a significant improvement in the U.S. in the second half. I think the expectation, obviously, was that you will see quite a meaningful step up in Q3, in particular, given the late end to the cold and flu season last year and retailers starting from a low base. I guess what has changed around expectations there? Is it just that destocking trends, maybe costs from retailers continued more so than you expected, smokers' health being weaker? Just trying to unpack kind of the key changes from when you spoke to us in Q1 versus where we are today.
Our next question comes from Rashad kawan from Morgan Stanley, your line is now open, please go ahead.
Hey, good morning, Brian and and Don thanks for taking my questions. Um, a couple for me, please on first 1 on North America again in the 3 and a half percent growth for this year. You said you're not expecting a significant Improvement in the US in the second half. I think the expectation obviously was that you'll see quite a meaningful Step Up in Q3 in particular. Given the latest into the cold and flu season last year and retailers, starting from a low base, I guess.
What's changed around expectations there. Is it just the destocking trends.
Maybe cautiousness from retailers continued more so than you expected. Smokers' health is being weaker. Just trying to unpack kind of the key changes from when you spoke to us in Q1 versus where we are today.
Rashad Kawan: Then just second question on the business, the % of business gaining or maintaining share, decelerating from the 71%, I think, in 2024 to 58%. Can you just kind of talk about what the key drivers of those are? I think you have said in the past, kind of think of where we want to be is somewhere in the 60% range. Is that the right way to think about it longer term? Thank you.
Um, and then just a second question on the business. Uh, the percent of business gaining or maintaining share.
Decelerating from the 71%, I think in, in, in 2024 to 58% can you just kind of talk about what the key drivers of those are? And I think you said in the past kind of think of
Where we want to be, is somewhere in the 60% range? Is that the right way to think about it longer term. Thank you.
Brian McNamara: Thanks, Rashad. I will take both of those. I think, first of all, on North America, when we look at Q3, a couple of dynamics are happening. If you remember last year, we did reduce our PE products in cold and flu in Q2, and we repiped in Q3. This year, it did not show up in the numbers because we had a low allergy season. We have not talked about that yet, but that has an impact on us that Flonase is a pretty significant brand in the U.S. environment. Q3 needs to deal with that base on the sell-in. The reality is the environment is uncertain. The environment is difficult in the U.S. and the retailer environment and the stock and trade.
Thank you. I'll I'll I'll
Brian McNamara: To be clear, I do not think our stock and trade levels are too high from historical or versed peers, but it is really the retailers tightly managing that as they are struggling with things like foot traffic and sales growth and things in that difficult environment. What is the second question?
Of those, I think. First of all, on, on North America. And we look at Q3, I mean, a couple Dynamics are happening. If you remember last year, we, we did, um, reduce and, uh, our PE products in cold and flu in Q2 and we replied in Q3. Now this year, it didn't show up in the numbers because we had a low allergy season. We haven't talked about that yet, but that has an impact on us that flow, and a is a, pretty significant, um, brand in the US environment. So, you know, Q3 uh, needs to deal with that base on the, on the sell end. And the reality is, um, the environment is uncertain. The environment is difficult in the US, and the retailer environment, and the, and the stock and trade. And to be clear, I don't think our stock and trade levels are at our our too high from historical or or verse tears, but it's really the retailers um tightly managing that is they're struggling with things like foot traffic and and sales growth.
And things in that difficult environment.
and then the second question,
Rashad Kawan: game to maintain share.
Brian McNamara: Oh, yeah, game to maintain share. Apologize. Yeah, no, thank you, Rashad. Last year, we had a very strong result at 71%. I think I said it was a fantastic result. I think I said at the time, listen, my objective and ambition is always to maximize that number, to be clear. I felt like that was a high number that would be difficult to sustain. You are correct. I've always said that where I feel like we want to be is at 60% plus. We are slightly below that in the first half. If you look at the two big drivers of that going from 71% to 58%, is the two that I talked about both in the U.S. Advil grew share for full year last year in 2024. This year, in these numbers, it's not growing share.
Brian McNamara: Again, we've seen green shoots, and we're growing in the back half of Q2, but this is the year-to-date number. Centrum is not growing share in the first half. Actually, we've seen consumption decline against that high base. Again, you know, we are working on plans to kind of stabilize that in the back half. Those are two big things. With those two growing share, obviously, we would be well in the 60% range. Again, we want to maximize that number. I think 58% is a good number, but it is a bit below what I'd like to see on a consistent basis.
You gain to maintain share, I apologize. Yeah. No. Thank you Rashad. Um, so last year we had a very strong role at 71% and I think I said it, it was fantastic result. I think I said at the time, um, while listen, my objective and ambition is always to maximize that number to be clear, I felt like that was a high number. That would be be be a difficult to sustain and you are correct. I've always said that where I feel like we want to be is a 60 percent plus and we are slightly below that in the first half. If you look at the 2 of the 2, big drivers of that going from 71 to 58 is the 2 that I talked about both in the US, Advil Bruce share for full year, last year and 2020 uh in 2024 and uh, this year in these numbers, it's not growing share again. We've seen green shoots and we're growing in the back half of Q2, but this is a year to date number and Centrum, Centrum is not growing share in the first half. And actually we've seen consumption decline against that high base.
Working on plans to kind of stabilize that uh, in the back half. But um, but those are 2, a big things with those 2 growing share. Obviously we would be well in the 60, uh, percent range. But again, we we want to maximize that number. I think 58% is a good number but it is a bit below what I, you know, I'd like to see on on a consistent basis.
Guillaume Delmas: Thank you very much.
Thank you very much.
Operator: Thank you. Our next question comes from Callum Elliott from Bernstein. Your line is now open. Please go ahead.
Thank you, On. Next question comes from Callum. Elliot from the band Stein. Your line is now open. Please go ahead.
Tom Sykes: Perfect. Good morning, everyone. Thanks for the questions. I want to start with the U.S. again, hoping that we can talk about the retailer environment, which you call out again in the presentation. I guess my question is twofold. Firstly, maybe can you give me a sense or give us a sense of the channel split for your U.S. business and specifically how big the drug channel is as a percentage of revenues, which I guess is the problem that you're calling out? More broadly, the drag that you talk about, I love your thoughts, Brian, on whether there's anything that Haleon plc as a company can actively do to offset this, or do you just have to accept that it's an externality, so to speak? My second question is on some of the strategy from the CMD.
Perfect. All right. Good morning, everyone. Thanks for the questions. Um, I wanted to start with the U.S. again, hoping that we can talk about the retailer environment.
Uh, which you call out again, in the presentation. I guess. My question is is to hold firstly, maybe, can you give me a sense?
It will give us a sense of the channel split for your U.S. business, and specifically how big the drug channel is as a percentage of revenues, which I guess is the problem that you're calling out.
And, and then more broadly.
Um, the tag that you talked about, I, I love your thoughts, Brian on, whether there's anything that Haley on as a company, can actively do to offset this, or, or do you just have to accept that? It's an externality, so to speak.
Tom Sykes: You had obviously set out some very ambitious strategic plans just a few months ago. My question here is, with the core business clearly struggling a little bit and the negative revisions to four-year guidance that we've seen today, does that de-emphasize or deprioritize some of those strategic pushes that you had spoken about at CMD in terms of democratizing, expanding access to lower-income consumers, lower price points whilst you fix the core business, so to speak? Or do you think of these as two completely separate things, Brian? Thank you.
And then, uh, my second question is on, uh, some of the strategies from the CMD. So you had obviously set out some very ambitious strategic plans, uh, just a few months ago.
Uh, my question here is with the Core Business, uh, clearly struggling a little bit and and, uh, sort of the negative revisions to to, for your guidance that we've seen today, there's that the emphasized or or deprioritize some of these, um, some of the Strategic push, that, that you had spoken about at CMD in terms of democratizing expanding access to to lower income consumers, lower price points.
Whilst you whilst you fix the core business so to speak or or do you think of these as to completely separate things? Brian. Thank you.
Brian McNamara: Thanks, Haleon plc. Appreciate the questions. Let me start first on the U.S. retailer environment. Listen, we are like most companies that Walmart is our number one customer in the U.S. and roughly a quarter of the business. We tend to be a little more skewed toward the drug channel given our portfolio. The combination of the drug channel is less than what Walmart would be in the business. Then it cascades down from there for all the big companies. Listen, in the end, what we own and control and need to actively do is perform and deliver share in the U.S. and also drive market growth. We are category leaders. So part of our role is, you know, while the market is struggling a bit, part of our role is to grow those markets. We have done that in the past. We need to continue to do it.
Uh thanks. I appreciate the uh the questions let me start first on the on the util us retailer environment. Listen we're like most companies that Walmart is is our number 1 customer in the US and roughly a quarter of the business. We tend to be a little more skewed toward the drug Channel. Given our portfolio, the combination of the drug channel is less than what Walmart would be in the business and then the Cascades down from there for all the big companies listen in in
Brian McNamara: Obviously, the one place we continue to do it is in oral health. I mean, we are driving category growth in oral health. That is our focus. So, you know, we need to deal with the current environment, but we are very focused on our performance and our share growth. Listen, as far as CMD in additions, absolutely nothing changes. I feel really confident about the medium term. We are clearly dealing some headwinds on the business and in the U.S. is a challenging environment, and we are not immune to that right now. But as Dawn Allen mentioned, as we look at our investment, you know, part of our investment is that long-term consumer packs we are doing in India, the INR 20 Sensodyne pack. We will be launching more SKUs on Sensodyne as we look at the balance of the year into next year.
In the end we own and control and need to actively do is is perform and deliver Market uh deliver share in the US and also Drive market growth. Listen, we are category leaders. So part of our role is to is, you know, well, the market is is struggling a bit part of our role is to grow those markets and and and we've done that in the past we need to continue to do it. Obviously the 1 place we continue to do it is in oral health. I mean we are driving category growth. In oral health.
Um and and and that is our Focus. So, you know, we need to deal with the current environment, but we're very focused on our performance and our and our share growth. Listen. As far as CMD conditions, absolutely nothing changes. Uh, I feel really confident about the medium term. We are clearly dealing some headwinds uh, on the business and in in the US um is is a challenging environment and we're not um, we're not immune to that right now, but as Don mentioned, as we look at our investment, you know,
Brian McNamara: You know, Centrum Recharge in India, ENO, our INR 10 pack in India, are launching Brazil that we talked about at Capital Markets Day, a Sombra Door, which is our foray into systemic pain relief there with low-income offerings. So that continues to be there. The innovation-led premiumization has always been core to our strategy, and we are going to continue doing it. Then core penetration is all about closing this incident gap. So listen, we are staying very committed to what we said at Capital Markets Day on the growth side. Feel, you know, medium term, we will be where we need to be. Productivity, which is the other thing I laid out at Capital Markets Day, I feel really, really good about our progress, to be honest with you.
Investment is that, um, you know, loans can consumer packs, we're doing in India. The 20 rupee sensitized pack and we'll be launching more excuses on sensitizing as we look at the balance of the year and the next year, you know, Central recharge in India, you know or 10 rupee pack in India are are launching in Brazil. That we talked about a capital markets day, a summer door which is our uh foray into uh into systemic pain relief there with low income offering so that continues to be there. The Innovation Le premiumization is always been Corridor strategy and we're going to continue doing it and then
Brian McNamara: We had talked at Capital Markets Day the reduction of SKUs that we did in 2024 that we were not starting from zero. We are seeing that pay dividends in the gross margin, 160 bps in the first half. Feel great about that. That enables us to deal with these growth headwinds, invest to make sure we are competitive going forward, and deliver the operating leverage on the business. As Dawn said, it gives us an awful lot of flexibility on how we can manage the P&L while we are facing a bit of the growth headwinds in the U.S.
And core penetration is all about closing, this incident Gap. So listen, we're staying very committed to what we set a capital markets day on the growth side. Feel you know medium-term we will be where we need to be productivity which is the other thing I laid out a capital markets day. I feel really really good about our progress today.
We had talked a capital markets day.
The reduction of SKUs that we did in.
Onset. It gives us an awful lot of flexibility on how uh on how we can manage the pnl and what we're facing a bit of the growth headwinds in the US.
Tom Sykes: Thank you very much.
Thank you very much.
Operator: Thank you. Our next question is from Celine Pannuti from JPMorgan. Your line is now open. Please go ahead.
Thank you.
Our next question is from Selene Ponui from JP Morgan. Your line is now open. Please go ahead.
Celine Pannuti: Thank you. Good morning, everyone. My question is trying to zoom out a bit of the discussion on the short term. If I look at your volume performance, 0.8% this year, it was 1.3% last year. It was 1% the year before. I presume for this year, we land around 1%. So three years of 1% volume mix, what gives you confidence that you can deliver 4% to 6% in the mid-term? I think we would need a step up in volume, and we are not seeing that. If you could explain what you think has not worked and why you think confident that you can still do 4% to 6% in the mid-term. My second question may be somehow related. We have seen, you said you feel strong about Latin America, Europe. We have seen some other companies talking about weakness there.
Thank you. Uh, good morning everyone. Um, my first question is trying to a bit, uh, uh, zoom out of the discussion on, on, on the short term. And if I look at your volume performance, uh, 0.8% this year, it was 1.3 last year. It was 1% a year before I approved for this year. We land around 1. So 3 years, uh, of 1% volume mix. Um, what gives you confidence that you can deliver 4 to 6? Uh, in the midterm? Um, I think we would need a step up in volume and we are not seeing that. I mean,
Celine Pannuti: I would like to hear a bit your outlook in that region. Thank you.
Yeah. If you could explain what you think, has not worked and why, uh, you've seen confident that you can still do 4 to 6 in the meter and then my second question may be somehow related. Uh we've seen you said you you feel strong about uh, Latin America Europe. We've seen some other companies talking about weakness there. Um, yeah, I would like to help with your uh Outlook uh in that region. Thank you.
Brian McNamara: Thank you. Listen, I will answer the first question. I will pass it to Dawn on the question about India and LATAM. Listen, if you unpick our results a little bit, if you look at India and LATAM, volume growth accelerated from a half a point in Q1 to 1.6% in Q2. In Asia Pac, volume mix accelerated from 3.3% to 3.9%. We were 0.8%, you are correct, in the half. That is completely linked to the dynamics and the challenges we are seeing in the U.S. U.S. volume was down 1.8% in Q2, and 0.6% in the half. No question that we see the challenges, and we are on it in the U.S. environment. I talked about some of the actions we are taking to firm up the business in the back half. We do have new leadership in the U.S. as of May 1.
Thank you, listen. I'll answer the first question. I'll pass it to, uh, to uh, don on the, uh, on the question about emia latan. So listen, if you look unpick our results, a little bit, if you look at emia latan, um, you know, volume growth accelerated from a half a point in q1 to 1.6% in Q2 in Asia, Pac. Um, volume mix accelerated from 3.3 to 3.9%. So if you and, but we were 0 8%, you are correct in the half and that's completely linked to the Dynamics, um, and the challenges we're seeing in the US,
Brian McNamara: I feel great about our leader there, and I am confident that we will do what we need to in the back half and really be set up to return to growth in 2026. I absolutely continue to be confident in our medium-term guidance. Dawn?
Dawn Allen: Let me just, I will just build on that and then come to the Europe piece. I think, as Brian McNamara said, if you look across the other regions, our volume has improved in Q2 versus Q1. If you look at Asia Pac, two-thirds of our growth in Q2 came from volume. Actually, we continue to see that accelerate. I would expect the second half, the growth in Asia Pac to be more weighted to volume. If I look over the last three years in Asia Pac, our growth is actually 4.6%. So actually, it is very strong. It is consistent. If you look at India and LATAM, again, improving trajectory in Q2 versus Q1. If I look to the balance of the year, we would expect a more balanced price volume mix growth.
Um, us volume was now 1.8% in Q2 um so and 0.6 in the uh in the half. So you know, no question that we see the challenges and we're on it in the US uh environment. I talked about some of the actions we're taking to firm up the business in the back half, we do have new leadership in the US as it may 1. I feel great about uh, about our leader there and I'm confident that we'll do what we need to in the back half and really be set up to return to growth in in 2026. And I'm, I'm absolutely continue to be confident in our medium term guidance Dawn. Yeah, let let me just I'll just build on that. Um, and then come to the come to the your um, the Europe piece. So I think it's Brian said, you know, if you look at the other regions, our volume,
Has improved in Q2 versus Q1. If you look at Asia Pacific, 2/3 of our growth in Q2 came from volume, and actually we continue to see that accelerate. I would expect the second half of the growth in Asia Pacific to be more weighted to volume. If I look over the last 3 years in Asia Pacific, our growth is actually 4.6%. So actually, that's very strong; it's consistent. If you look at EMIA and LATAM, again, there is an improving trajectory in Q2 versus Q1. If I look to the balance of the year, we'd expect a more balanced performance.
Dawn Allen: Actually, if you look over the last three years, we have been seeing that trend in that region in terms of volume growth. To Brian's point, we talked about the situation in the U.S. in terms of consumer environment, retailer environment, and a couple of our brands. So actually, when I look at the volume piece, it is to do with the U.S. Actually, we are seeing the shape we would expect to see across the other regions. As I said, I would expect to see that shape in the second half. If I then talk about Europe in particular, actually, we are seeing Europe is pretty resilient. Actually, we are seeing a good performance. We are seeing high single-digit growth in Central Europe, mid-single-digit growth in what you might call kind of continental or Western Europe. So for us, that is holding up pretty well.
Price volume mix growth. And actually, you know, if you look over the last 3 years, you know, we we've been seeing that Trend in in that region in terms of volume growth to Brian's point. You know, we talked about we've talked about the, the situation in the US in terms of consumer, environment, retailer environment, and a couple of Our Brands. And so actually, when I look at the volume piece, it is to do it is to do with the US and actually we're seeing the shape, we would expect to see across the other regions. And as I said, I would expect to see that shape in second half. If I then talked about Europe in particular actually, we're seeing Europe is pretty resilient. Actually, we we're seeing a good we're seeing a good performance.
Dawn Allen: Why is it holding up so well? We see real strength in oral health. Actually, it is a core driver of that. We have talked about some of the innovations, the successful innovations across the regions.
Successful Innovations across the regions.
Celine Pannuti: Thank you. May I just follow up on the previous question? I think that Kellum asked. You have a high single-digit organic, reported EBIT growth as a target going forward. Again, if you think about my question about volume mid-term, does that kind of, if the growth is less important, would you want to reshuffle some of your potential profit growth back into the business, i.e., grow less but try to stimulate volume?
Thank you, may. I just follow up. Um, and maybe on the previous question, I think that Kellum asked. I mean, you have a high single digit, uh, organic, uh, sorry, uh, reported a bit growth as a, uh, Target going forward. Um, again, like, if you think about the, my question about volume meter, um, I mean, does that kind of like if the growth is less important, would you want to reshuffle some of your potential? Uh, profit growth back into the, uh, the business IE, uh, grow less, but try to, uh, stimulate volume.
Brian McNamara: Thanks for the follow-up, Celine. We guided to high single-digit growth, operating profit growth at constant currency, driven by the gross margin opportunity we have. You can see this year, again, we are a bit more challenged than we have been in the past on growth, and specifically in the U.S. The gross margin improvement and with the leverage in the P&L has allowed us to invest in ANP and R&D in a healthy way and still drop the organic operating process as a bottom line. Obviously, we still have a drag of a couple of divestments that we will anniversary once we get through Q3. I feel very confident about the algorithm we set out at Capital Markets Day and the fundamental tenet of the opportunity we have in productivity, which is coming through.
so, the
New, uh, High single digit growth. Uh, operating profit growth that constant currency uh, driven by the gross margin opportunity. We have so you can see this year, well again, we're a bit more challenged than we've been in the past on growth and specifically in the US.
The gross margin improvement, and with the leverage in the pay P&L, has allowed us to invest in AMP and R&D in a healthy way and still drop the, you know, drop the organic operating profit at the bottom line. Obviously, we still have a drag of a couple of divestments that we will anniversary once we get through Q3, so no, again, I feel very confident.
The algorithm we set out at the Capital Markets Day and the fundamental tenet of the opportunity we have in productivity, which is coming through.
Celine Pannuti: Excellent. Thank you.
Excellent, thank you.
Operator: Thank you. Our next question is from Warren Ackerman from Barclays. Your line is now open. Please go ahead.
Guillaume Delmas: Yeah, hi, Brian McNamara. Dawn Allen, Jo Russell, Warren here, Barclays. Sorry, some of these have been asked. I had a few technicals. The first one, Brian McNamara, on Advil, you talked about some green shoots from that brand. What are you doing to fix it? I think it's been losing share for a long time. I would be interested to get any perspective on that specific brand. Secondly, on smokers' health, are you able to tell us how big it is in the U.S. and what your expectations are for smokers' health in the second half of the year? I mean, do you need to take pricing down to make it more competitive versus private label or something else? Thirdly, on Centrum, thanks for your comments on Q2.
Thank you. Our next question, is from Warren, aqumin from Barkley's. Your line is now open. Please go ahead.
Guillaume Delmas: Is there anything happening on Centrum on innovation in the back half where we should feel a bit brighter in terms of the outlook for Centrum in the U.S.? Thanks.
Yeah. Hi Brian Dawn. Uh, Joe it's Warren here at Barkley's. Um, sorry. Some of these have been asked, I had a few technicals. Um, so the first 1, Brian on Advil, you talked about some green shoots on that brand. What are you doing to fix it? Um, I think it's been losing share for a long time. Be interested to get any perspective on that specific brand and then, secondly, on smokers Health, are you able to tell us how big it is in the US and what your expectations are for smokers Health in the second half of the year? I mean, do you need to take pricing down to make it more competitive versus private label or or or something else? And then thirdly of the Centrum? Uh, thanks for your comments on Q. Is there anything happening or Centrum on innovation, in the back half, where we should feel a bit, you know, a bit bit bit, bit brighter, in terms of the outlook for Centrum in the US. Thanks.
Brian McNamara: Yeah, so a couple of things. I think first on Advil, it has been a bit of an up-and-down story, to be honest with you. We did exit last year for the full year growing share on Advil. It was one of the things that contributed to the 71%. That was a bit of strength as we exited the year, and it brought us into share growth for the full year. But it has been a bit up and down without question. The green shoots that we are seeing are, listen, we have had a new media campaign with strong promotional plans in the back half. We feel like we feel good about Advil and where we will be. Listen, there is no question this has been a battle with Kenvu on Tylenol, which I have said in the past.
Yeah, so a couple of things I think. First, on Advil, it has been a bit of an up and down story, to be honest with you. We did exit last year for the full year, growing share in Advil. It was one of the things that contributed to 71%, and that was a bit of strength as we exited the year, and it brought us into share growth for the full year, but it's been a bit up and down.
Brian McNamara: It is one thing that was working well for them, and they doubled down. But we feel good about our brand, and we feel good about the plans we have in the back half. Smokers' health for us is a couple hundred million kind of business for us, that kind of range. Listen, we are looking at it. We expect that in the back half, as we look at our plans, that we will see less decline in the back half on smokers' health. But we are not at a point where we think we will get that back to growth. Because we do not expect much change in the U.S. consumer environment, if that changes, then something would be different. We also do have an innovation on smokers' health, a dual-layered tablet that we have FDA approval on.
Without question, uh, the green shoots that we're seeing, oh, listen, we've we, we've had new, uh, New Media campaign, uh, the strong promotional plans in the back half, you know, we feel like we feel good about Advil and lower B. Listen, if there's no question this has been a battle, um, with Ken view on Tylenol on Tylenol, which I said in the past, it is 1 thing. That was working well for them and they doubled down, but we feel good about our brand and we feel good about the plans, we have in the back half.
Brian McNamara: It will launch in e-commerce in the back half and a dual full launch in 2026. So that gives us some reason to believe that we will have something that is differentiated in the market that can help us there. What was the third question? Oh, Centrum. Apologize. Listen, on Centrum, a couple of things. I mentioned the new claim. Again, one of the things that drove Centrum tremendously in the U.S. last year was the Centrum Silver claim we had on cognition. We are reactivating with a new claim. I think I mentioned it. It is slightly different, but it is meaningful. The new claim being slows cognitive aging by 60%. Aging, obviously, also a very big topic for consumers in that cohort. So we have that. We do have a couple of innovations that are going out.
Smokers health for us is a is a couple hundred million kind of business for us that kind of range. Um listen we're we're looking at it, we expect that in the back half um, you know, as we look at our, at our plans that we'll see less decline in the in the back half on a smoker's Health. But we're not at a point where we think we'll get that back to growth and because we don't expect much change in the US consumer environment. Is that changes? Then something would be different. We also do have an innovation on Smoker's Health. A dual layered tablet that we have FDA approval on. It will launch an e-commerce in the back half and a do a full launch in 2026. So that gives us some reason to believe that we'll have something that's differentiated in the market that can, uh, that can help us, um, there.
Brian McNamara: I will not talk specifically about them because I do not think they have been announced to the market, but a couple of things that we think will also help firm up. Listen, it is a big focus for us. Like I said, Centrum is a great brand. It is doing quite well outside the U.S., but clearly facing headwinds in the U.S. on a base of tremendous performance a year ago. We want to grow despite what the base is, to be clear. That is a big focus for us going forward.
Won't talk specifically about them because I don't think they've been announced to the, uh, to the market. But a couple of things that we think will also help firm up and uh and listen, it's it's a big Focus for us. Like I said, Centrum is a great brand, it's doing quite well outside the US, but clearly facing headwinds in the US.
Guillaume Delmas: Super. Thank you.
On a base of tremendous performance a year ago but again we want to grow despite what the bases to be clear. So that's that's a big Focus for us going forward.
So, thank you.
Operator: Thank you. Our next question comes from David Hayes from Jefferies. Your line is now open. Please go ahead.
Thank you. Our next question. Comes from David Hayes from Jeffrey's. Your line is now open. Please go ahead.
David Hayes: Thank you. Good morning all. A couple from us. One on the nicotine replacement and one on the margin. On nicotine replacement, just to come back to this, we may have missed this, but could you just quantify the drag that it had on the second quarter? Also, can you quantify what impact it has in that new guidance of 3.5% or around 3.5% growth for the full year? Staying with that topic, you just talked about a new innovation, but it always feels like this is a little bit of a periphery category for you. I think it is a partnership with Kenvu and even Sanofi as well. Is it fair to say it is less of a focus for investment? How do you account for it, given you have got these partnerships? Is it fully consolidated with the minority?
Thank you. Good morning all. Um, so so a couple of the last 1 on the the replacement and 1 on the margin so and it gives you a placement just to come back to this. We may have missed this, but could you just quantify the drag that it had on the second quarter and and also can you quantify what impact it has in that new guidance of 3.5% or around 3.5% growth?
David Hayes: Given the partnership structure, is that why you have kept this business in the U.S., whereas obviously you have exited in Europe? Is this something you are kind of stuck with, or could we just see it as it could go at some point? The margin question was just on putting it all together, high single digit on organic, the FX and the M&A dynamics. Is the guide effectively for flattish margin year on year on a headline reported basis? Is that the right kind of conclusion? Thank you so much.
For the full year, and staying with that topic, um, you just talked about a new innovation, but it always feels like this is a little bit of a periphery category for you. I think it's a partnership with Kenview and even Santa Fe as well. So is it fair to say it's less of a focus for investment? How do you account for it, given you got these partnerships? Is it fully consolidated with the minority? Um, and then given the partnership structure, is that why you've kept this business in the U.S., where it's obviously you've exited in Europe? Is this something you're...
Kind of stuck with or or could we just see it as, you know, could go at some point. Um, and then the, the margin question was just on putting it all together. High single digit on organic the FX and the m&a Dynamics is the guide effectively for flattish, margin you 1 year uh on a headline, reported basis. Is that the right kind of conclusion? Thank you so much.
Brian McNamara: Thanks for the questions, David Hayes. Listen, I will pass the growth question, margin question to Dawn Allen. Let me start with the nicotine business and the structure. It is a bit of a three-way venture in the U.S. There is a part of it that is with Apella. Apella has a joint venture with Apella. Kenvue is a supplier of Nicorette. As you know, Nicorette is a brand that Kenvue owns outside of the U.S. So they are our supplier on that business, and there is a three-way partnership there. Listen, it is a category that is quite difficult to innovate in, if I am being honest with you. The innovation that we are going to do that we will have takes FDA approval, and it takes quite a bit to do it.
Thanks for the questions. David so listen, I'll pass
The growth question, margin question on on, uh, to, uh, to Dawn. But let me start with the nicotine business and the structure it is a bit of a 3-way, uh, Venture in the US. There's a part of it is with uh aella and Pella has a, it's a joint venture with aella, and then can view is a supplier of Nicorette. As, you know, Nicorette is a brand that that can be owned.
Brian McNamara: There is no question that that is a business that is, I think, harder to innovate on. But it is in our portfolio, and we will continue to do what we need to to get the growth. Listen, it plays a really important role, to be honest with you, with consumers and in healthcare systems and things like that. But it is a complicated ownership structure, to say the least. Dawn?
Outside of the US. So there are, there are supplier on that business and there is a 3-way partnership there. So, um, listen, it's a category that's quite difficult to innovate in. As I'm being, as I'm being honest with you, um, you know, the Innovation that we're going to do that. We we will have is, uh, takes FDA approval, and it takes quite a bit to do it. So there's no question that that's a business that is, um, you know, I think harder to innovate on, um, but it is in our portfolio and we'll, we'll continue to do what we need to do, get the growth. Listen it plays a really important role, to be honest with you with consumers and Healthcare systems and things like that. So, um, but
Dawn Allen: Yeah, so let me just give you some specifics on smokers' health first. To Brian's point, it is about 5%, 6% of the U.S. business. In the quarter, we did see significant decline. The impact, though, it has a 60 basis points impact on the total group. That would take us to 3.6%. For North America, it would take North America from minus 1.8 to minus 1.2. So it is a big change in the quarter, and it has a disproportionate impact. That's the first thing to say. The second thing to say in terms of the margin, to Brian's point, we're really pleased with the margin in the first half, 9.9% growth of 140 basis points. It's not just the number.
It is a complicated, uh, ownership structure, to say the least, uh, Dawn.
Yeah, so let me just give you some specifics on Smoker's Health First. So, to Brian's point it is about 5 6% of the of the kind of us business. And in the quarter, we did see we did see significant decline, the impact. So it has a 6D basis points impact on the total group in terms of, you know, that would take us to 3.6%. And for North America, it would take minus, it would take North America from minus 1.8 to minus 0.2. So it is a big change in, it is a big change in the quarter and it has a, you know, it has a, it has a size of has a disproportionate impact. So, that's the first thing to say. The second thing to say, in terms of the margin to Brian's point, we're really pleased with the with the margin in the first half, 9.9% growth of of 140 basis points.
Dawn Allen: It's also the quality of that earning in terms of the delivery through gross margin, investment in A&P and R&D, good cost control in G&A, which has then enabled that margin to come through. If I look to the second half, the shape that we've delivered in the first half, I would expect a similar type of shape in the second half in terms of strength in gross margin, investment in A&P, and continued good cost control. That is why we've updated the guidance to high single-digit operating profit growth for the year. If you look at the other moving parts, obviously, we've given the guidance on FX. M&A, interest, and tax remain unchanged. When you put all of that together, I would say that we are comfortable where consensus is today.
And it's not just the number; it's also the quality of that earnings in terms of the delivery through gross margin, investment in AMP, and R&D. Good cost control in G&A, you know, which has then enabled that margin to come through. If I look to the second half.
David Hayes: Thank you. Just on the full year, I mean, it looks like NRT, to your point, it's 50, 60 bps of headwind. So I know you just want to take out bits that aren't going well and get into that game. But I guess it would be fair to say that without that, you'd have been close, you'd have been around a four, I guess, to the guidance point going down to three and a half. Is that a fair conclusion?
The guidance on FX MMA interest and tax remain unchanged. So when you put it or when you put all of that together I would say that we are comfortable where consensus is today
Brian McNamara: Well, listen, I think David's hard to kind of speculate on that kind of thing. I think we don't expect that drag to continue at that level in the back half. So we'll see where it ends up in the full year. But no question, it will be a drag on the growth in a full year. And it's made it more challenging for us to hit that low end of the guidance.
Thank you, and and just just on the full year. I mean, it looks like nrt to your point is 5060 basis points of headwind. So do that. I, I don't, I know, you just want to take out bits that aren't going well, uh, and getting to that game. But but I guess it would be fair to say that. Without that, you would have been you've been around a 4 I guess to the to the to the guidance Point going down to to 3 and a half. Is that is that a fair conclusion?
David Hayes: Okay, got it. Thank you so much.
Well, listen, I I think Davis hard to kind of speculate on that kind of thing. I think we don't expect that drag to continue at that level in the back half, so we'll see where it ends up for 4 year. But no question, it will be a drag on the growth in a full year and uh, and it's made it more challenging for us to hit that low end of the guidance.
Got it. Thank you so much.
Operator: Thank you. Our next question comes from Tom Sykes from Deutsche Bank. Your line is now open. Please go ahead.
Thank you. Our next question comes from Tom Sykes from Deutsche Bank. Your line is now open. Please go ahead.
Tom Sykes: Morning. Sorry to bang on about the U.S. retailer trends again. There are obviously two issues. One is the stock levels per channel, and another is the channel shift. Of the headwinds you have at the moment, would you be able to split the volume headwinds between channels that are destocking and the channel shift? Amazon, I think, in your scanner sales has grown by over 30% in the last 12 months, and the rest of your business is flat in aggregate. Therefore, there are massive channel shifts occurring. It would be helpful to try and understand what the shift impact versus destocking by channel is. Why would not this occur in other countries? I appreciate that there are differences in regulation, but you are very overweight, clearly, the pharma channel in Europe.
Yeah, morning. Sorry to bang on about the US retailer trends again, but, um,
I think there are obviously two issues: one is the stock levels per channel.
And then another is the channel shift.
So if the headwinds you've got at the moment, would you be able to...
Split the volume headwinds between channels to the Beast docking. Um, and the channel shift because.
Amazon, I think in your scanner sales have grown by over 30% in the last 12 months, and the rest of your business is flat.
Tom Sykes: It feels like this is something that is going to be pervasive across all economies eventually. I am just interested in your thoughts on that, please.
In aggregate, and so therefore, uh, there's massive channel shifts occurring. And so it would be helpful to try and understand what the shift impact versus docking by channel is. And then why wouldn't this occur in other countries? I mean, I appreciate that there are differences in regulation, but you're very overweight, clearly, the farmer channel in Europe.
Brian McNamara: Yeah, thanks for the questions, Dawn. Listen, destocking by channel in the U.S. The channel shift is something that has been happening over time for quite a while. The drug channel does tend to have higher inventory levels, so there is a bit of an impact there. The biggest impact is, frankly, I think you are seeing inventory pressure across channels, maybe a bit disproportionately in drug because they are struggling more. If you look at the Amazon growth, we do have stronger shares on Amazon. I have talked about Sensodyne in the past, where we are in the low 20s in bricks and mortars and more like 28 on Amazon. As we see more move to there, we are moving to a channel with higher share.
Um, and it feels like this is something that's going to be pervasive across all economies, uh, eventually. So just interested in your thoughts on that, please.
Brian McNamara: I think it would be hard to break down exactly, but I think the bigger impact is the downward pressure as retailers in the U.S. are feeling the pressure of the economic environment, the foot traffic, and all those things and trying to manage that situation. Outside of our categories, there are other categories that they deal with that are much more affected than we are, and that impacts their overall financial performance. If I think about other countries, to be honest with you, if you think about pharmacies in Europe, in mainland Europe, 70% of our business goes through pharmacies, very, very low inventory levels in pharmacies. There is no real stocking up. We have people that call on pharmacies weekly in some cases for the bigger pharmacies and taking orders. It is not like there is a massive stock-up opportunity or that they carry really high levels.
Yeah, thanks. Thanks for the question, Tom. So listen docking by channeling us. Listen, the channel shift is, uh, is something that's been happening over time for quite a while. Uh, the drug channel does tend to have higher inventory levels. So there's a bit of an impact there, but the biggest impact is frankly, I think, uh, you're seeing inventory pressure across channels, maybe a bit disproportionately in drug because they're struggling more. Um, and again, if you look at the Amazon growth, we we do have stronger shares on Amazon. I talked about the sensiderm
Is the downward pressure is retailers. In the US are feeling the pressure of the economic environment, the foot traffic and all those things, and trying to manage that situation. Because again, outside of our categories, there's other categories that they deal with that are much more effective than we are and that impacts their overall, overall financial performance. If I think about other countries, to be honest with you, you know, if you think about pharmacies in Europe, uh, in in Mainland Europe, 70% of our business goes through pharmacies very, very low inventory levels in pharmacies, there is no real stocking up. We have people that, you know,
Brian McNamara: Now, there are distributors in between. Sometimes our pharmacy channel and us and distributors in general are pretty good at managing inventory levels and things like that. I think that is really the dynamic. I think it is very different in the U.S. than, let us say, in mainland Europe where the pharmacy model is just very different.
Tom Sykes: Sorry, just one follow-up. Would you see the channel shift as at all impacting your operating margin? Is Amazon lower margin than other parts of the business, please?
Pharmacies, uh, you know, weekly in some cases for the bigger pharmacies and, and taking orders. So, it's not like there is a massive stock up, uh, opportunity or that they carry really high levels. Now, there are distributors in between, uh, sometimes our, our Pharmacy Channel and us and distributors in general are are, are are pretty good at at managing inventory levels and things like that. So, you know, I think that's really the, the dynamic I think is very different, um, in the US than, let's say in Mainland Europe, where the, the pharmacy model is, uh, is just very different.
Brian McNamara: No, listen, on balance, if I look at e-comm on a global basis and I look at this, it is all relatively similar. It is all within our outlook and guidance. We expect that e-comm will continue to grow. By the way, Amazon is becoming less and less a piece of that as omnichannels become more important. We are really strong in walmart.com, and that has grown well. That is all within the context of our outlook and the medium-term guidance we give.
Than other parts of the business, please.
Tom Sykes: Okay, thank you.
No, listen, um, you know, on balance, if I look at e-commerce on a global basis and I look at this, it's all relatively similar and it's all within our, you know, within our outlook and guidance. We expect that, uh, e-commerce will continue to grow. And by the way, Amazon is becoming less and less a piece of that as omni-channel becomes more important. Walmart, we're really strong in Walmart.com and that's grown well. So, you know, that's all within the context of our, um, of our outlook and the medium-term guidance we give.
Okay, thank you.
Operator: Thank you. As a reminder, to ask a question, please press star followed by one. Our next question comes from Oliver Nikolai from Goldman Sachs. Your line is now open. Please go ahead.
Thank you as a reminder to ask a question. Please press star followed by 1.
Tom Sykes: Hi, good morning, Brian, Dawn Allen, and Jo Russell. Just one question on my side, actually. Going back to the U.S. specimens for VMS and for respiratory health, would you say that you are losing share against private labels, or is it more against other branded players there?
Our next question comes from Oliver Nikolai from Goldman Sachs. Your line is now open. Please go ahead.
Hi, good morning. Ryan, do you enjoy? I just have one question on my side, actually going back to the US performance for VMS and for Respiratory Health. Would you say that you are losing share against private labels, or is it more against other branded players?
Brian McNamara: In respiratory health, to be clear, we are growing share on the balance of respiratory health. If you remember, we have now put smoking in respiratory health. That has moved to private label. Frankly, we are primarily the branded player in the U.S. So that would be private label. In VMS, it is probably more competitive pressures that we see. Again, where we gained significant share a year ago, some of that we are now giving up. As I said earlier, it is not our intention, and we are very focused on getting that back. I would say that is probably the dynamic with the two. If you look at respiratory, Theraflu has grown share really well. Robitussin OK, even Flonase in a down market. It is really about the smoking business, which is a down trade.
Tom Sykes: Thank you.
Um in respiratory Health to be clear uh you know we're growing share on the balance of respiratory Health, if you remember we've now put smoking or respiratory Health that is a move to private label. Frankly we're primarily the Branded player in the US so that would be private label. Um in the, in the MS. It's it's uh probably more competitive uh pressures um that we see. And again where we gain significant share a year ago, some of that we are, uh, is we are we are now giving up. And as I said earlier, it's not uh, you know, our intention and we're very focused on on getting that back. But I would say that's probably the dynamic with the 2. But again, if you look at respiratory therapy, flu has grown share really well robust and okay, even flow is in the down market. So it's really about the smoking, uh, business, which is a, which is a down trade.
Thank you.
Operator: Thank you. We currently have no further questions, so I'll hand back to our speaker team for closing remarks.
Thank you.
We currently have no further questions, so I'll hand back to our speaker team for closing remarks.
Brian McNamara: All right. Well, listen, thanks everyone for joining us today. I look forward to catching up with all of you on upcoming roadshows and meetings. Please feel free to reach out to the IR team with any further questions. Thanks for the continued interest and support.
All right. Well, listen, thanks, uh, everyone for joining us today. I look forward to catching up with, uh, with all of you on upcoming Road shows and meetings, and please feel free to reach out to the IR team with any first or questions. Thanks for the continued interest and support in Halo.