Demystifying UVG

In this presentation, we
will be discussing some
details about UVG and
UPG.

Why isnt direct volume growth

equal to UVG?
and
Why dont UVG and UPG add up
to USG or sales growth?

We will also answer two

important questions

UVG = Underlying Volume Growth

UPG = Underlying Price Growth
USG = Underlying Sales Growth
To explain simply, UVG includes
both pure volume growth and
some mix factors. Thats why
To answer the second question, the
UVG is different from pure
simple answer is that it is
Volume Growth.
mathematically wrong to add two
growth
rates
theisresulting
Thus,
UVGwhen
+ UPG
not equal
growth rate is cumulative.
to USG. To arrive
at a cumulative growth rate, the
individual growth
factors will have
Rather,
to be multiplied.
(1+UVG)(1+UPG) = (1+USG)
If you want to see further
explanation of both
questions with examples,
please continue to the
next slides

To understand UVG, first we

must realize that UVG does not
refer to the extra volume we
Wait waitMix? What do you
are selling.
mean by that?
Lets to
take
an
example
your has sold
This
year,
the company
Rather it refers
the
amount
sells
two products,
A
extra
volume
of both
products.
But 55 extra tons were sold in
of extracompany
turnover
we
are
Now,
this
is how
we are
calculating
total. So, Volume grew by
andextra
B. As
rate is higher
the
prices/rates
remain unchanged.
getting from the
volume.
volume growth:
compared
Bstotal
rate.
Last is 455 tons 14%. That means UVG% is
Thusto
the
volume
14%.
Vol Gr% = (CY Vol / PY Vol) -1
year, the company
sold 400
and turnover
is $8050.
Please
keep in
mind the assumption
Tons
and made
$7500.
But for UVG, we are doing this: It should be that simple.
that rate is unchanged is crucial.
UVG%
(CY to
TOthis
/ PYassumption
TO) -1 *
Well
get=back
during the second question.
* This formula works only when rate is unchanged
Using these two formula, UVG% and Vol
Gr% will always be the same at lower
product level ( A and B).
But at total level, UVG% might deviate
from Vol Gr%. The amount of deviation
will depend on the mix of A and B in
both years

I must
you
Now Again,
all these
three remind
examples
that volume
Vol Growth%
is
have equal
growth
Since we
still have some confusion regarding
different
UVG%.
UVGIn this example, the mix is
20%.
But thefrom
UVG%
varies
mix,
we will look
the
previous
unfavorable
asat
the
low
priced example
product
%
relates
to
the
extra
because of the mix effect.
This
with
emphasis
on
mix.
If
we
look
at
UVG%

B has increased sales while sales

for
turnover
from the
extra
also
clearly shows
how
from aAdifferent
perspective,
we
might
say:
volume;
themight
extra has remained constant. Thus,
increased
total NOT
volume
though volume grew by 20%, UVG%
volume
or might not
result itself.
in similar
UVG% = Vol Growth % + Mix Effect
increase in total turnover.is only 5% Here, the mix factor can

The secondas
example
shows
be considered
negative
15%.

That means
depending
onthe
mix,
UVG% will
unchanged
mix
both
products
be lower
or by
higher
than
Volume
growth%.
grew
20%.
Thus
the mix
effect

is 0 resulting in equal UVG% and

Volume growth%. This can only
happen when products are sold in
The last example shows favorable
equal ratio as the previous year.
mix where only the higher priced
product A has increased sales
resulting in a significantly high
UVG%.

Good point. Vol Growth% is easier

Okey, okey. I understand UVG%
to calculate. But it is not a proper
and Vol Gr% are different. But Id
KPI. Vol Growth% does not
prefer to use the Volume Growth%.
indicate the increase or decrease
Its easier to figure out. Besides, I
in Turnover. A high Vol Gr% with a
dont think most people would go
lower UVG% might mean a
into these complex mumbo jumbo
deteriorating mix.
calculations of yours
So, if you want to properly
And
as for the calculations,
evaluate
performance,
UVG%
your
finance
colleagues
have
is the way to go.
these
ready at
Besides,
it isinformation
the Unilever
everyRegion
product
level every
defined way.
or Central
month.
So, you
do not have to
do not
recognize
Vol Growth
calculate
%... them yourself.

There is a common misconception

that UVG% + UPG% = USG%. In
othertopic
words, if you add the
Moving on to the next
underlying volume growth and
underlying price growth, it should
total to the sales growth.
It is WRONG.

WHAT?
No no no you are
wrong

Lets look at a simple

example. You sold 100
Look, I have known all
Units of A at the rate of 10
along
that Volume growth
It is clear here that the
normal
Um ok last year.
And this year,
volume growth (20%)and
andPrice
Pricegrowth adds up to
your sold 120 units at the
total
growth (50%) do not add
upsales
to growth your
rate
of
15.
calculation
method must be
Now,
the same
thing
happens with
the sales
growth
(80%).
wrong
I think you should
UVG%, UPG% and
USG%.
checkare
your
However,
the calculations
a formula..
However,
bit different.
(1+20%) * little
(1+50%)
= (1+80%)

In this
the clears
first example,
we kept the
I hope
your confusion
rate unchanged while calculating
UVG%. Now lets do the calculations
again with different rates

In this scenario, we sold

different volumes of A and B
at different rates in PY
and turnover is used to calculate
Deflated
CY. To calculate UVG
and and UPG% separately. At lower
UVG%
Also, considering
UPG, we calculate aproduct
newUSG%
level
(A or
weTO)
can get
= (CY
TOB),
/ PY
1, Def
measure called deflated
T/O
by multiplying
CY Vol with
PYisRate:
When
rate
is
UPG%
0.
And
thislevel
isunchanged,
how
we calculate
the
At
higher
product
(Total),
the
Def
T/O is
turnover.
Then,
growth figures:
bottomed upDef
or aggregated.
So
at Rate
total level:
T/O
= CY=Vol
* PY
USG%
UVG%
= Def
(CY
TO
/atPY
TO) 1
Def T/O
=USG%
sum
of
So
when
rateT/O
is unchanged,
By multiplying
Vol
with
PYlower
Rate, levels
we are
UVG% the
= (CY
TOconstant,
/ PY TO) like
1 I
keeping
rate
UVG%mentioned
= (Def TOearlier.
/ PY TO) - 1
Based on those formula, it can
= seen
(CY TO
/ Def
-1
.. As UPG%
we have
in the
firstTO)
example.
even be mathematically proven
that:
(1+UVG%) + (1+UPG%) =
(1+USG%)

It doesnt.

OK that actually makes

No matter how you price your

sense now
products
this year,
your UVG% will
Sure
go ahead
Ok How does current years
remain unchanged. Thats because
pricing affect UVG%?
Now,
I have a few
UVG calculationWell,
does not
consider
first of all, sell more in
this years rate / pricingIfinyou
any have
way. capacity questions regarding the

total. And also sell

However,
indirectly,
it is evident
constraints,
to produce
proportionatelytry
more
of thewhole growth calculation
that
price of
leads
to higher
andlower
sell
more
higher
First of all, how can I
higher
priced
product.
volume
sales and
vicewill
versa.
priced
products.
That
increase UVG%?
significantly improve UVG
But thats an indirect effect and
%.
does not change the calculation
model.

Well, the entire sale for

that product would count
as UVG%. So thats
another way of
increasing total UVG%.
Right
In that case, the old
product is substituted
with the new product
and the calculation
model doesnt change.

If we introduce a new
brand or product in
But that also
means
if I how would
current
year,
delist a product
or a UVG / UPG
you calculate
But the
then
whatsales
brand,
entire
for that?
happens
when
loss
would
bringthere
down
is aUVG%,
relaunch
or a
right?
packsize change?

Well, you dont need to bring them

down to one type of
measurement. UVG% calculates
the extra turnover from the extra
volume. So, you can have one
product in tons, another in cartons
A lot of things.. List
and another in units. Deflated
price,
sales tax, trade
turnover for each product will
return,
TTS
extra
all these
represent
the
turnover from
affect
your
price
each of the product.

growth.

One last question, when

measuring volume, we
About
use ton, liter,Hm
carton
and UPG..
affectsonthe price
even units What
depending
the product. Howgrowth?
do we
bring them down to one
measurement?

Thus, even at total level,

when the individual Deflated
Turnover is summed up, UVG
% will show the proper
growth, even though the
measurement for volumes are
different.

You are most

welcome.

Well, thanks for

taking the time to
clear out all the
confusion.

Got Questions?
Minhazur.Rahman@unilever.com