Earnings Call Transcript
Haleon plc (HLN)
Earnings Call Transcript - HLN Q3 2025
Operator, Operator
Good morning. Thank you for joining us for Haleon's 2025 Quarter 3 Trading Statement. My name is Sarah, and I will be your moderator today. I would like to hand the conference over to our host, Jo Russell, Head of Investor Relations. Please proceed.
Joanne Russell, Head of Investor Relations
Good morning, everyone, and welcome to Haleon's conference call for our third quarter trading statement. I'm Jo Russell, Head of Investor Relations. And with me today is Dawn Allen, our CFO. Just to remind listeners on the call that in 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 actual results to differ materially from those expressed in or implied by any such forward-looking statements. Following Dawn's remarks, we will take your questions. For those listening to our webcast who would like to ask a question, you can find the dial-in details on Page 3 of today's press release. And with that, I'll hand over to Dawn.
Dawn Allen, CFO
Thank you, Jo, and good morning, everyone. We made good progress in the third quarter, driven by strong in-market execution and the continued rollout of our innovation pipeline, leaving us on track for our full-year guidance. We delivered 3.4% organic revenue growth in the quarter with a good balance between price at 1.8% and volume mix of 1.6%. Looking across the regions, we saw consistent growth and sequential volume improvement across EMEA and LatAm and Asia Pacific, with emerging markets in both these regions up 7% led by India and strong growth in a number of smaller markets, including Thailand and Malaysia. In North America, despite the challenging consumer backdrop on consumption, we have outperformed the market each quarter this year, with particular strength in Oral Health, Respiratory Health, and Digestive Health. Oral Health was once again the standout performer as Sensodyne continues to drive penetration with strong growth in a number of key markets, including the U.S., India, and China. In India, we are continuing to make good progress by expanding our reach through expert coverage, which is up 70% since the start of the year. We are bringing new innovations, including Sensodyne Pronamel, to market. Our Sensodyne offering for lower-income consumers is now in over 500,000 outlets across 10,000 villages. From a strategic perspective, we are making great progress against our objectives as outlined at our Capital Markets Day. From a growth perspective, we continue to focus on driving category growth through innovation-led premiumization with a number of new market launches in Q3, closing the incidence treatment gap, an example is Otrivin Nasal Mist, which is seeing over 80% repurchase intent amongst users and expanding reach to lower-income consumers with household penetration gains in India and Brazil. We also continue to deliver against our value creation framework. Our supply chain productivity agenda continues to move at pace. We have made significant progress across service, cost, and inventory. Since the beginning of 2024, we have reduced the number of our SKUs by 19%, and we have improved overall equipment effectiveness by double digits. This improves both gross margin and results in better working capital and improved cash conversion. On A&P, we continue to invest at healthy levels as well as making progress on effectiveness and efficiency, where we are focused on improving both contribution to revenue and ROI. We also continue to be disciplined in our cost base and are on track to deliver the remainder of our GBP 300 million target savings this year. All of this provides us with flexibility and agility in our P&L, enabling healthy investment in our brands and further strengthening our innovation pipeline to drive future growth. Finally, we are delivering on our capital allocation principles, having completed in the quarter the GBP 500 million we allocated to share buybacks for 2025. Now let's look at the quarter in more detail. Organic revenue growth was 3.4%, balanced between 1.8% from price and 1.6% from volume mix. Volume mix saw sequential improvement in the third quarter in EMEA and LatAm and Asia Pacific. Reported revenue grew 0.7% in the third quarter, impacted by the drag from divestments of 2.3% and 0.4% from foreign exchange. It's worth bearing in mind that this is the final quarter with a drag on reported revenue growth from announced divestments. Now let's look at the growth drivers, starting with our performance across the categories. Oral Health continued to deliver strong growth, up 6.9% in Q3. Growth was underpinned by innovation-led premiumization and geographic expansion. The key drivers of this were penetration growth in more than 80% of our major brand market combinations, high single-digit growth on Sensodyne, more than two-thirds of which came from volume and innovations, including the Sensodyne Clinical Platform and Pronamel Kids, and continued double-digit growth on parodontax, driven by innovation and our continuing successful rollout in China. With exciting plans for continued innovations across our Oral Health business, the runway for future growth is strong. VMS grew 4.9% in Q3 with double-digit growth in Centrum. Key highlights were premium innovations, including Centrum Daily Kits in China and Korea, strength in the Philippines from increased distribution of lower-income consumer packs, and expanding distribution of local brands such as Caltrate in Latin America. In Pain Relief, we grew 3.7% for Q3. Panadol was up high single-digit, underpinned by outperformance in the U.K. and Southern Europe. Improved consumption in Voltaren, supported by innovations, including Voltamed, our new natural herbal product. Growth in these brands was partly offset by Advil. Whilst consumption continues to improve following the activation of new campaigns, performance was impacted by short-term supply constraint on Liqui-gels, which has now been resolved. Respiratory Health declined 1.8%, lapping elevated COVID cases in Q3 last year. The impact of declines in Smokers' Health moderated in Q3 compared to Q2. Otrivin continues to perform really well with Nasal Mist bringing new consumers into the spray category in markets, including Sweden, Poland, and the U.K. Ahead of the start of the cold and flu season, we saw the sell-in of cold and flu products in Q3 at relatively normal levels. Digestive Health grew 2.1%, including growth in Tums, thanks to innovations, including Tums Gummy Bites+, a strong performance in Benefiber from our Grow What Feels Good campaign, and an improved performance from ENO in India. This performance overall was partly offset by a decline in Nexium. Finally, Therapeutic, Skin Health, and Other declined 1.1% with strength in Bactroban in China, offset by a decline in Fenistil from a weak mosquito season in Europe. Turning now to the regions, starting with North America. In North America, we delivered organic revenue growth of 0.4%, driven by 0.7% price with volume/mix down 0.3%. In the quarter, we continued to drive market share with our consumption outperformance widening as we progress through the year. Organic revenue growth was driven by continued strength in Oral Health, driven by innovation, including Pronamel Clinical Enamel strength and successful activations, including Gum Expert on parodontax, a better VMS performance with Centrum growth and a strong performance from Benefiber and Tums. All of this was partly offset by Respiratory Health, which declined due to the continued weakness in Smokers' Health and from Pain with growth in Voltaren offset by a decline in Advil that I mentioned earlier. As we shared at the half-year, we feel there is more growth to be had from our North America business. We are focused on a number of initiatives, which will drive stronger results. These include further strengthening our innovation pipeline, accelerating net revenue management through strategic pricing, price pack architecture, and channel mix, and reinforcing our relationships with partners through key activations. Collectively, these actions, combined with our focus on ensuring inventory is at an appropriate level by the end of the year, set us up well to return to growth next year. Turning now to Europe, the Middle East, Africa, and Latin America. Organic revenue increased 5.3% with sequential improvement in volume mix of 1.8% and price at 3.5%. Growth was driven by innovation-led premiumization across the clinical platform on Sensodyne Pronamel Kids and Otrivin Nasal Mist, a strong performance in VMS with Centrum up double-digit, underpinned by a number of new launches, including Centrum Vital+ nutrient. In Pain Relief, growth came from higher consumption of Voltaren and Panadol from innovation launches like Voltamed that I mentioned earlier. Looking across the region, Europe performed well with particular strength across the pharmacy channel, which makes up the majority of our revenue in the region. Whilst category growth slowed, we continue to outperform given our innovation and excellent in-market execution. Latin America grew double-digit, driven by Colombia and Mexico. This was partly offset by weakness in Brazil, given a softer macroeconomic environment impacting category growth. Finally, turning to Asia Pacific. Organic revenue increased 5.1% with strong growth across India and Southeast Asia and sequential improvement in China. Across the region, volume/mix, which was up 4.4%, and price was up 0.7%. With a relatively stable consumer market backdrop, we continue to drive category growth and expand our offering to lower-income consumers. India delivered double-digit growth, largely driven by strength in Sensodyne as we further increase distribution and drive penetration. We expect continued strong growth in the fourth quarter, driven by our sales force investment and an improving macro environment. Also in the quarter, China saw mid-single-digit growth with continued strength in Oral Health and VMS supported by key innovations, including Caltrate for Kids, Voltaren 2%, and Fenbid Gold. Across China, consumers continue to invest in health and wellness, and we are well placed to capture this trend given our focus on building trusted brands, closing the incidence treatment gap, and innovation-led premiumization. Our products are available across different channels, including pharmacies, hospitals, and digital platforms, ensuring we can effectively serve a wide audience with different shopping habits. Digital has been a particular strength, growing 20% with our online-to-offline platform growing 25% and representing one-third of our e-commerce business. We have now fully integrated the OTC joint venture and are realizing the benefits of a more efficient route to market. We expect growth in China to improve further in the fourth quarter, helped by distribution and increased investment in the faster-growing e-commerce channel. Turning now to our 2025 guidance. We expect organic revenue growth of around 3.5%, assuming a normal cold and flu season. In North America, we expect growth in the second half to be broadly similar to the first half, with Q4 reflecting further action on inventory at slower-growing channels. We expect this to be completed by the end of the year. In Asia Pacific, we should see an acceleration in Q4, driven by stronger growth in China and India. In EMEA and LatAm, we continue to expect good performance driven by Europe with market share gains, offsetting a slightly softening macro picture. In Latin America, we are closely watching the macro environment given the consumer pressures in the region. Finally, the pace of progress on our supply chain productivity initiatives provides a strong underpin to our expectation of high single-digit organic operating profit growth. In conclusion, we delivered a good performance in Q3 and remain on track to deliver our full-year guidance. We are pleased with the actions we are taking in the U.S., which set us up to return to growth next year. We're continuing to invest behind our brands to build flexibility and agility in our P&L by unlocking productivity savings. Altogether, this should give us confidence in delivering against our value creation framework and our medium-term guidance. Now let's turn to questions. Operator, please, can you open up the lines?
Operator, Operator
Our first question comes from Guillaume Delmas from UBS.
Guillaume Gerard Delmas, Analyst
2 questions for me, please. The first one on North America. Dawn, I was wondering if you could talk a bit more about your performance in the region in the third quarter, which was clearly better than expected. What were the main drivers behind this sequential improvement? And were there any one-offs or restocking benefits we should be aware of that may have flattered your performance in the region in Q3? And still on North America, looking ahead, your guidance for the second half to be similar to the first half seems to suggest around minus 1% organic sales growth in Q4. Could you talk a little bit about the reasons for this anticipated slowdown sequentially? Lastly, I know it's early days, but for 2026, what would be your expectations? Because looking at the last 3 years, you've been growing by an average of, let's say, 1.5%. Wondering if your ambition is to materially accelerate next year versus this 1.5% run rate? And then the second question, shorter one, I promise, on Asia Pacific, strong but decelerating sequentially despite India being in double digits. So it would be helpful if you could shed some light on the main moving parts behind this slowdown. You sound confident about a Q4 uptick. Do you think you can maintain this momentum going into 2026?
Dawn Allen, CFO
Thanks, Guillaume. So let me take your 3 questions in turn, and I'll start with North America. As we said at the half-year, we expect the second half to be broadly similar to the first half, and we're tracking in line with our expectations. It's a challenging environment in the U.S. We have outperformed the market in terms of consumption every quarter this year with particular strength across Oral Health and Digestive, and that gap has actually widened as we've moved through the year. In our results, that's been masked by the inventory movements, the difference between sell-in and sell-out as retailers have managed their inventory and working capital. In Q3, there are a few moving parts. Of the 220 basis point swing from Q2 to Q3, there are 2 main things to call out. The drag from Smokers' Health has halved. In Q2, this was a 160 basis point drag. In Q3, it's now an 80 basis point drag. The remainder of the difference comes from better performance in Oral Health and Digestive Health, as I mentioned. If we then look forward to Q4, if we're working on the assumption that we expect the second half to be broadly similar to the first half, that implies, as you said, around a 1% decline in Q4, reflecting tough comparatives from the prior year. We're lapping the launch of Eroxon, and we have some further action to do on inventory. Moving to next year, as I said, we expect the region to return to growth. You talked about where it had been historically. We would expect to get back to that level. We feel good about the actions that we're taking in North America. Next year, we won't have the drag between sell-in and sell-out. We expect that gap to disappear, and we feel positive about our pipeline, and we think that brings deep consumer expertise and execution. We're focused on net revenue management and have new innovations coming to market. For Asia Pacific, we are really pleased with our performance, particularly in India, where we've seen double-digit growth and mid-single-digit growth in China. We are lapping some phasing in the prior year, particularly with the price increase phasing in Japan last year. Given the momentum in this region and expectations for the macro environment to improve in India, we feel very good about Q4.
Guillaume Gerard Delmas, Analyst
And Dawn, just to follow up and to confirm, so no one-offs in the third quarter in your performance in North America?
Dawn Allen, CFO
Yes, I wouldn't say that. In Q3, that's the quarter where we sell in ahead of the season. We're obviously shipping in relation to the season. We have a price increase that goes live early November in the U.S. But there's still quite a big time lag between those 2 pieces. We always said that the tariffs were in the low tens of millions, and we're taking supply chain actions to mitigate that. The other piece we see is the increase from the pricing action.
Operator, Operator
Our next question is from Olivier Nicolai from Goldman Sachs.
Olivier Nicolai, Analyst
Just 2 questions, please. First of all, at group level, you had a strong pipeline of innovation across many categories this year in 2025. Looking at next year, how do you see the strength of the pipeline? And is there any Rx to OTC that we should expect as well for full year '26? And then just going back to your guidance. I know it's early stage, but you did mention that you assume a normal cold and flu season. I know that the U.S. does not provide data at the moment. But perhaps anecdotally, how do you see things for the coming cold and flu season?
Dawn Allen, CFO
Yes. Let me take the innovation pipeline question first, Olivier. Across all of our categories, we've seen real strength in terms of our innovation pipeline. From an Oral Health perspective, the Clinical range on Sensodyne continues to perform really well in terms of bringing new users into the category. We're gaining or holding share in more than 80% of our brand market combinations on Sensodyne. If you think about the Clinical range, we have 5 variants. On average, you've got 2 of those variants in the market, so there's huge runway in terms of Oral Health. I also talked about Nasal Mist in terms of respiratory, particularly Otrivin Nasal Mist, which is recruiting new users into the category. I referenced that purchase intent has now surpassed 80%, and we've got further rollout behind that. Another notable example in VMS is Centrum, which has a new claim in terms of slowing cognitive aging that we've just launched along with Centrum Essentials and Daily Kits. Across all our categories, innovation plays a vital role in our growth strategy, driving growth and reaching lower-income consumers, while also aiming for premiumization through innovation. The contribution to growth varies, but we have significant headroom for continued rollout. In terms of switches, we don't need those for our growth forecast; I'd focus more on our innovations. Regarding the cough, cold, and flu guidance, we have a strong portfolio. It's an attractive and relevant category for consumers but inherently seasonal. No two years are the same; it depends on the size and timing of the peak. With about a third of our cough, cold, and flu business in North America and half in EMEA and LatAm, we plan for a normal season but will stay agile in supply chain terms.
Operator, Operator
Our next question is from David Hayes from Jefferies.
David Hayes, Analyst
Just going to follow up on Guillaume's question if I can, in the U.S. Just to sort of quantify or get the dynamics a bit more. So just to be clear that you're saying there wasn't really any prebuying into the price increases that you've taken in oral and cough and cold in the quarter. Is that a fair summary? And in terms of the channel dynamics, can you talk us through maybe the growth rate comparisons in new channels like Amazon and Walmart compared to the pharma channels? And is there an element of as the shift continues to happen, Amazon and Walmart stocking up more as they're getting more of the market? Or is there really no offset in that sense? And then the second question is just on the supply chain cost savings running to plan and very extensive. Is there any incidence or evidence that that affects the service levels, the sales performance at all? Is there an inevitability that as you go through some of those changes there are some hindrances that will dissipate? Or would you say it's a completely separate dynamic?
Dawn Allen, CFO
Yes, David, so I think I obviously talked about the pricing piece coming early November. Let me talk a bit more about some of the other moving parts in terms of inventory and the channel dynamic. We work closely with our retail partners on inventory levels; there isn't a one-size-fits-all approach, and it obviously depends on consumption. In the drug channel, our inventory is down double digits compared to this time last year, whereas in faster-growing channels like Amazon, our inventory levels have increased, reflecting more traffic and stronger consumption trends. There's obviously more work to do in Q4 on inventory, as I referenced. Our objective is to exit the year with cleaner inventory and to grow on the back of that next year. We're seeing really strong growth in digital with double-digit growth on Amazon. I believe we continue to partner effectively with them. Regarding supply chain, as I mentioned in the brief, we are making progress across service, cost, and inventory. We're working closely with our customers, implementing new systems and processes to improve our forecast accuracy. This is helping us to reduce inventory levels while improving service.
Operator, Operator
Our next question is from Jeremy Fialko from HSBC.
Jeremy Fialko, Analyst
I know we've had quite a lot on the U.S., but I wanted to ask one more, but more general question on the consumer. It feels like it's a very bifurcated environment where you've got certain things that are doing well, and certain things are struggling. Perhaps you could break your business down a bit and explain from a consumer standpoint what is going well, what things are going badly, and why that's the case? Secondly, could you talk a bit more about China? As you say, you're kind of most of the way through this merger of the sales forces from the 2 businesses that you bought together. Could you just talk about the progress you've made there and how you think you can be more effective over the coming quarters as a bigger combined organization?
Dawn Allen, CFO
Yes. Thanks, Jeremy. So let me talk about the U.S. first. From a consumer perspective, we have seen consumption in the market track down this year. I previously mentioned we are outperforming the market on a consumption basis, with that gap widening; our Q3 outperformance was around 100 basis points. What is important for us is broad channel coverage; we are where consumers shop. We have seen shifts in purchasing behavior as consumers buy larger packs with lower unit prices or lower price point packs from dollar stores. What's important is that we can cater to those behaviors with a variation in our price pack architecture. Regarding China, we are pleased with the joint venture. We have integrated the sales force, optimizing our visits to retailers while expanding distribution to more tiers in Chinese cities. We're also investing in that space. We are present across all channels and outperforming the market in every channel.
Operator, Operator
Our next question is from Celine Pannuti from JPMorgan.
Celine Pannuti, Analyst
So I have 2 questions, but I'm sorry, I just want to clarify something on the U.S. First of all, thank you for providing clarity on your Q4 expectation. But to put it simply, you are guiding for a minus 0.5% for the U.S. this year, and I think sellout is somewhere between minus 1% and minus 1.5%. You're saying that your sell-in has been better than your sellout, yet you talk about easy stock levels for next year. I want to understand this part. Regarding my two questions, first on Latin America and EMEA. If you could speak about pricing evolution, as we've seen that it has been a bit weaker, commenting on softness in consumer there. Should we expect that to continue? Also, in terms of pricing in Asia Pacific, you mentioned lapping Japan; will that improve or not in the fourth quarter? The second question is on your outlook for the year. If I look at what you said for Q4, with minus 1% in Europe, U.S., EMEA being good, and an acceleration in APAC, I'm getting a growth rate that's lower in Q4 versus the 9 months. Is that the right level?
Dawn Allen, CFO
Let me take the middle question first on pricing. We notice that when consumption softens, competitive pressures and promotional activities increase. As I mentioned, we observe shifts in consumer behavior towards larger and cheaper packs with smaller initial outlays, impacting pricing. Despite the observed softness in consumption, we have seen sequential volume improvement in EMEA and LatAm this year, which is a positive sign. In Europe, we are hanging in with resilience. Oral Health continues to be one category that is not experiencing the same level of softness. Since pharmacy channels represent much of our revenue in Europe, this is contributing to our resilience.Regarding the outlook for the year, I discussed the acceleration in Asia Pacific, particularly in India and China. While we see challenges in some categories, we are outpacing the competition and we monitor the macro environment in LatAm closely. In terms of consumption in the U.S. and sell-in, sell-out, we set out at the beginning of the year that we had roughly a 200 basis point difference. We've noted that the gap has narrowed as we've moved through the year. This variation differs across channels depending on consumption. Oral Health continues to show strong consumption, and we've observed solid growth in decom as well. For instance, among our top 18 brands on Amazon, 16 have a higher share online than offline. This trend reflects our sustained strength in that channel. In Q3, we traditionally see the sell-in of cough, cold, and flu products. Looking into Q4, we intend to align sell-in and sell-out effectively, with an exit-focused strategy to ensure inventory levels are adequate.
Operator, Operator
Our next question is from Karel Zoete from Kepler Cheuvreux.
Karel Zoete, Analyst
I have a follow-up question regarding the contribution of innovations in the third quarter and how that might look going forward, as you highlighted a lot of things that you're enthusiastic about. Can you quantify a bit more on that during Q3, along with a possible outlook for the quarters thereafter? Additionally, in the Pain franchise, while it appears to be improving, I found the U.S. performance to be rather soft. Can you explain what is going well in the Pain franchise and how we should view the U.S. market?
Dawn Allen, CFO
Let me address the Pain question first. We've launched our No Pain, More Gain campaign for Advil in July this year. Certain key metrics show improvement; for instance, purchase intent is on the rise, and the relevance of our messaging is performing ahead of benchmark targets. Although we experienced supply issues with Advil Liqui-gels during Q3, this has been resolved. While it is premature, we are experiencing positive signs through our Advil metrics. On innovation, I discussed many new market launches in Q3 and their positive contributions to our growth and market expansion. For some examples, Voltaren and its 2% formulation in China, our natural Voltamed products in Germany, and Panadol's new Dual Action and Four Count formulations in Indonesia are notable mentions. Innovation is a critical growth driver across all categories, enhancing accessibility for lower-income consumers and encouraging premiumization through distinctive innovations. The contribution of each category continues to vary, yet there is considerable ongoing potential across our innovations.
Operator, Operator
Our next question is from Ms. Misha Omanadze from BNP Paribas.
Mikheil Omanadze, Analyst
I have 2 questions, please. The first concerns your general view on the category. Since Haleon came to market, you've indicated that consumer health is relatively insulated from down-trading pressures, a category where brand strength is critical. With 2025 approaching and particularly the U.S. market evolving, has your perspective changed regarding the category's resilience against the down-trading phenomenon? My follow-up question relates to the medium-term growth target of 4% to 6%. Has the regional composition of your growth expectations shifted since 2022? Are you now anticipating less growth from North America and more from the other 2 regions?
Dawn Allen, CFO
Thanks, Misha. In terms of consumer health and our categories, there remains significant growth opportunity across all our categories discussed during Capital Markets Day, whether broadening access to lower-income consumers, driving premiumization through innovation, or addressing the incidence treatment gap. We perceive substantial headroom for category growth. Consumers increasingly prioritize health awareness and the enhancement of daily lives through health improvements. This trend endures. Compared to other categories, we are notably more resilient, and if you observe Oral Health this year, you can see the evidence of that. However, we are not immune to macroeconomic influences, and those factors do exert pressure. Nonetheless, our relative resilience is noteworthy across categories. Regarding our regional expectations, we continue to see substantial opportunity for growth in emerging markets, which is evident in our performance. For North America, the market size and underlying consumer trends remain promising, and we believe there is significant growth potential within this segment. We foresee unlocking further growth through strategic initiatives, reinforcing that it plays a major role in achieving our medium-term growth target of 4% to 6%.
Operator, Operator
Our next question is from Tom Sykes from Deutsche Bank.
Tom Sykes, Analyst
Sorry, I'm going to revisit the U.S. issue again. In terms of the drag from the drug channel in Q4 versus Q3, are you expecting that drag to be similar? Additionally, regarding budgeting for next year within the drug channel, are your inventories at the normal levels for your channel footprint, or are your inventories below normal because you expect the drug channel sellout to be worse next year? Finally, on China, I might have missed the specifics, but could you share the offline and online exposure and the split between old e-commerce versus live streaming and your targeted approach for 11/11 this year compared to last year, which is critical for the Asia Pacific performance?
Dawn Allen, CFO
Yes. Let me start with China. As I mentioned, we operate across all channels in China, with e-commerce representing around one-third of our business. Within that, different segments are growing at impressive rates, particularly Douyin. We see strong double-digit growth there thanks to our investments. Online-to-offline is also performing well. In regard to 11/11, you're absolutely right, it's an important event, and we are enhancing our investment this quarter to align with that opportunity, contributing to our Q4 growth expectations in China. Concerning the U.S., we're closely collaborating with retailers to ensure appropriate inventory management to facilitate growth next year. It's not an exact science; the approach depends on consumption variations. However, we have managed similar dynamics over several years efficiently and will continue to do so. Regarding Q4's drag from the drug channel compared to Q3, yes, we will see similar challenges.
Operator, Operator
Our next question is from Warren Ackerman from Barclays.
Warren Ackerman, Analyst
It's Warren here at Barclays. Can I clarify a couple of things? On the Oral Care business, the 6.9% in the quarter was below consensus. Is there anything peculiar with Aquafresh and the Denture business aside from Sensodyne worth mentioning this quarter? Secondly, could you comment on the promo environment in U.S. VMS and possibly in Germany, as our data indicates substantial increases in both? Lastly, you mentioned outperforming the market in the U.S. by 100 bps, with sellout down 1.5%. If you're outperforming, does it imply that the U.S. market sellout in Q3 is down about 2.5%? If this is accurate, could you elaborate on the market slowdowns?
Dawn Allen, CFO
Yes. Regarding Oral Health, we've noted a softer performance from Aquafresh and Denture Care, and we're also lapping the price phasing from the previous year in Japan. However, we feel optimistic about Oral Care's future. While you highlighted increased competition in VMS and the rise in promotional activities correlating with soft consumption trends, this is indeed the case, particularly for U.S. VMS products. In terms of inventory, you're correct that consumption has dropped in North America; based on Q3 data, including external scanner data, we are seeing a consumption drop in the market as you described. The two primary categories driving these lower figures are indeed VMS and Respiratory, with the latter affected by adverse comparisons to last year's COVID spikes. About sell-in and sell-out, you're accurate in observing the drop in U.S. sales figures. We noted a 1.5% decline this quarter, and our own growth metrics remain ahead of the competition. However, an increase in promotional efforts centered on VMS has contributed to the overall decline in category performance. We look forward to addressing this dynamically and seeing improved results moving forward.
Operator, Operator
Our next question is from Edward Lewis from Rothschild & Co Redburn.
Edward Lewis, Analyst
Just 2 quick ones for me. Looking at volume/mix growth in Asia Pac, I believe it grew 4.4% this quarter, down from 7.1% the prior year. There may have been some headwind from GST in India. It would be great to hear your views on the differences in volume mix breakdowns. Secondly, regarding SKU reduction, I see it's now down 19% from minus 16% in H1. How significantly would this impact volumes in the quarter, if at all? And can we anticipate further SKU reductions moving forward?
Dawn Allen, CFO
If I take the volume/mix question first in Asia Pac, historically, about two-thirds to three-quarters of our growth in Asia Pac is volume-led. This indicates strong quality growth, and we continue to witness this. Our performance is primarily driven by India and China, both showing double-digit volume growth in China. Regarding SKU reduction, you're right that we're making substantial progress with this initiative, which is vital for our productivity agenda. While we are reducing SKUs, we're also concentrating on ensuring consumer accessibility and enhancing shopability at stores. So, the reduction not only serves efficiency purposes, such as cutting costs and reducing complexity in our supply chain and inventory but also benefits consumers by improving visibility on shelves. In terms of GST in India, we didn't observe negative impacts. Our Indian team executed a commendable job managing distribution effectively. We anticipate continued benefits in consumer offtake as we move toward Q4 and into next year.
Operator, Operator
We have a follow-up question from David Hayes from Jefferies.
David Hayes, Analyst
I'm going to just follow up on the North American topic once more. In terms of Q4 guidance at minus 1% and your context, broadly speaking, is the assumption that consumption will remain flat YoY, with a 1-week reduction in the pharma channel equating to roughly 100 basis points of headwind? Is that the essence of the picture you're describing?
Dawn Allen, CFO
Consumption is quite difficult to predict. There are several moving parts affecting these projections. We have a modest price increase effective early September. We need to observe how the season unfolds, acknowledging that it can vary significantly in the cold and flu category. Our global full-year guidance might see a 50-100 basis point swing, so that could influence things. The price increase assumes consumption flat, but there might be variability based on cold- flu dynamics. Ultimately, a clean exit from this quarter's inventory is the priority, with expectations to return to growth in North America in the upcoming year.
Operator, Operator
We have a follow-up question from Warren Ackerman from Barclays.
Warren Ackerman, Analyst
On pricing, could you indicate the effectiveness and timing of pricing actions in North America, the expected range of price hikes, and your relative stance compared to peers? Are you factoring in any volume elasticity assumptions on this pricing? Regarding Brazil, could you elaborate on category performance given the softer macro situation?
Dawn Allen, CFO
The pricing goes live at the beginning of November across parts of our portfolio, varying by SKU but generally in the low single digits mainly focusing on Oral Health and cough, cold, and flu. Given the market dynamics, others have taken pricing increases; we'd expect lower elasticity levels. The strength of our brands and the value consumers find in them contribute to pricing resilience. Regarding Brazil, challenges stem from macroeconomic factors and local competition, slow consumer response; we are outperforming in the Pain and VMS segments despite overall market weakness, but we're closely monitoring macro changes. In Brazil, while macroeconomic pressures persist with high-interest rates impacting consumers, we are seeing strong performance—particularly in pain relief and VMS products—but with caution. We also see some pressures in the E-commerce landscape; thus, performance will depend on close monitoring.
Operator, Operator
There are no questions waiting at this time. So I'll turn the conference back over to Dawn Allen for any further remarks.
Dawn Allen, CFO
Thank you, everyone, for your time and interest in Haleon. We look forward to meeting a number of you at our upcoming conferences. Our next formal update will be our full-year results in February. If you have any further questions, please contact our Investor Relations team. Thank you.
Operator, Operator
Thank you.