Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Campari Group First half 2021 Results Presentation Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.
Of the Campari Group. Please go ahead, sir.
Thank you. Thank you very much. Good afternoon and a very warm welcome to our first half twenty twenty one call. As you can imagine, we're quite pleased to celebrate 20 years as a public company with such a nice set of numbers. If you'll follow me to Page number 4, our kickoff with the highlights.
As you can see throughout the presentation, we have strong double digit growth all of our indicators. Importantly, not only versus the first half of last year, but also versus the first half of twenty nineteen with quite a strong acceleration in Q2. We have strong momentum across all of our key markets and brands, And this is thanks to a combination of a sustained home consumption as well as the benefits of the gradual reopening of the on premise across markets. Kicking off with net sales. On an organic basis, we have an overall growth of 37.1% versus the first half of last year.
The second half, as I mentioned earlier, accelerated sorry, the second quarter accelerated by 54%. Clearly, these numbers are also benefiting from a favorable comp base. Last year, we were down in the first half by 11.3% and in the quarter the second quarter by 15.9%. If you look at our core markets, the U. S.
Is up 29% Italy, 55.8% Germany, 11.9% and Australia, 11.5 All of our priority brand clusters are up double digits. Global priority is 35.7%, driven by very strong Aperol, Campari and Grand Marnier. Regional priorities are up 44.3%, mostly driven by Espolon And local priorities are up 39%, driven by our RTDs. Our overall organic growth was 32 point 3% versus the first half of twenty nineteen. And I think that's very important given all the fog due to the fact of comp basis and shifts from channels.
With regards to the Q2, we're up 30.2% versus the Q2 of 2019, and this underlying solid business momentum. I already discussed most of our core markets, but clearly Across the range, all markets are growing very, very strongly. Brand wise as well, Aperol, Campari, Wild Turkey, Grand Amier, Jamaican rums and Espolon all grew by double digits. On a reported basis, we're up 30.2%, and this reflects a negative perimeter, Down 1.3%, mainly due to a termination of an agency brand portfolio in Germany. But on the other hand, from a ForEx standpoint, we have a negative effect of 5.6%, so quite substantial, driven by the devaluation of the U.
S. Dollar as well as emerging markets currencies. Looking at adjusted EBIT, organically, we're up 88.7% versus the 1st half of last year leading to a 6 40 bps margin accretion, and this is driven by the favorable sales mix as well as the easy comp base. You'll recall that last year in the first half, we were down 30.8% and had a 4 70 bps dilution in marginality. Gross margin was accretive by 130 basis points.
Again, here, the favorable sales mix was driven clearly by the aperitifs, which more than offset the dilutive effect of Espolon. A and P was slightly dilutive on the 10 basis points, whilst SG and A were highly accretive, 5 20 basis points, driven by the very strong top line growth as well as the easy comp base. Versus 2019, our organic growth is a very solid 3.3%, leading to 190 bps accretion, driven clearly by the top line. On a reported basis, the adjusted EBIT is up 71.2% after the negative perimeter effect as well as the negative ForEx effect. Net profit on an adjusted basis came in at $156,800,000 up triple digit 101.9 percent And on a reported basis, even stronger, dollars 159,600,000 up 118.7%.
Moving on to free cash flow and net financial debt. We've had we've generated recurring free cash flow quite strong at 141.6 million, up triple digit, 117.7 percent versus 2020 and up a very strong double digit versus 2019 of 64.2%. On the basis of this, our net financial debt stood at the end of the period at €1,065,000,000 which is down €39,000,000 versus the end of 2020, and it's mainly driven by the positive free cash flow generated by the business. This, together with the strong generation of EBITDA, led to a net financial debt to EBITDA ratio down to 2.2x, significantly down from the 2.8x we had at the end of the year. Moving on to Page 6.
And here, we illustrate the off premise sellout value growth as well as our shipment value growth, both versus the first half of last year and the first half of twenty nineteen. And it's important, we believe, to look at it from a 2 year stack standpoint because as I mentioned earlier, there's quite a bit of fog there Due to the high comp base, you will recall our consumption indicators were very, very strong in Q2 of last year. And obviously, that forms a comp base. It's also interesting to make the comparison versus 2019 to see what the lasting effect is of the penetration of cocktail culture at homes. If we look at the anchor market of the Americas in the U.
S, The sell off versus 2021 is slightly down. That's because we were very, very strong, one of the fastest, if not the fastest growing company last year. If we compare it to 2019, we're up 33%. In Germany, we're up 6.3% versus a very strong first half of last year and up 29% versus 2019. In Italy, Our sellout is up 23.8% versus last year and 45.8% versus 2019.
Clearly, in Italy, when you look at shipments, there's a big difference between how we did versus last year as we suffered significantly from the lockdown in Q2. But net net even in Italy were up 4.3% versus 2019 really showing the solidity of our brands and their momentum. Australia, least but not least, sellout up 9.5% versus a very strong 2020 and up 27.5% versus 2019. The following chart, chart number 7, is probably my favorite from this whole presentation because it shows that we're firing on all of our cylinders. Effectively, if you see the performance of the top line by region as well as by Priority cluster, you would see that we're growing double digit across all of our regions as well as all of our priority clusters, not only versus 2020, but also versus 2019, and that's quite a remarkable Moving on to Page 8.
There's not much actually to report here. I think it's more interesting to move on to the following one in the Americas. The Americas overall were up 34.2%. And again, here, it's a combination of resilient home consumption as well as the very positive effect of the gradual reopening of the on premise. Our largest market, the U.
S, was up 29%, Solid growth across all of our core brands with acceleration in Q2 where we were up close to 43%. The reasons I just highlighted earlier. Bear in mind though that we are in the U. S. Favored by an easy comp base in Q2 2020, driven by destocking, we were down by 8.6%.
In particular, our heroes in the U. S. Are Espolon, Grand Anier, Wild Turkey and the Jamaican rums, which had all of them had strong double digit growth in the half. Also very pleased to see our Aperitis Cantare Natura back to very positive territory in Q2, growing, respectively, 47.6% and 145%. So we're clearly back in recruiting mode.
Our overall sales performance was up 24.6% versus 2019, which you will recall was also a very strong first half. So On the back of strong numbers, we're growing double digit. And this is thanks to strong brand momentum across the portfolio. Sellouts, on the other hand, reflected a very tough comp base versus H1 2020. But again, As I reiterated earlier, when we look at it versus 2019, which is the right benchmark, you can see that mostly our in house consumption is holding on.
It has actually grown significantly and we're up by 33%. Canada is up by 20.7%. We're seeing nice sustained growth led by 40 Creek, Aperol, Aperol, Aperol, Dayton, Grand Marnier and this despite the normalization obviously in Q2 due to the same tough comparable base effect we saw in the U. S. Jamaica, up strong double digit, 33.9%, Very positive growth.
On the one hand, yes, we had an easy comp base, thanks to the resilient off premise performance as well as some We're seeing some initial recovery of the local tourism sector, which is obviously helping with the on premise consumption. Strong performances again across our core brands, Rhein Nephew over approved, Campari, Appleton Estate and Magnum Tonic.
If you
look at the remainder of the region, a very strong growth, 74.4%. Clearly, this is happening in a very volatile trading environment, and it's helped by a very easy comp base from last year. But it's also good to see markets such as Brazil, Argentina and Mexico returning to an accelerated growth in Q2. Moving up to CEMEA on Page 10, where we see the strongest SAC, ASKVA, 57.4%, very strong in Q2. Italy leads the way, up 55 point 8%.
So we're clearly seeing revenge conviviality. I mean, if you come to Italy, out of the sidewalks, a lot of tables, bars, restaurants, and you'll see wave after wave of orange and red. Quite positive results. Yes, the comp base was easy. We were down 33.1%, but we're really seeing the effect of the reopening of the on premise the second quarter, which was up 106.5%.
And this is clearly traced to the positive developments linked to the acceleration in the vaccination campaign where Italy is doing very nicely. There is also some slight stock replenishment ahead of the peak summer season, but it's important to say that these aren't really material. Now very positive performance in Q2. And if we look at it on a brand basis, Campari up triple digit, 121 percent Aperol, triple digit as well, 124%. Nice bounce back on Cludino, up 74.7% and Campari Soda continuing with its positive momentum, up 81.8%.
Compared to the first half of twenty nineteen, which was obviously which is a benchmark that was unaffected by the COVID-nineteen pandemic. The Italian business was up 4.3%, which really confirms the strong brand momentum. France also is going from strength to strength, up 61.8%, Very positive brand momentum driven by the likes of Aperol, Ricadona, and Squares Riviere runs, which have actually reverted to our distribution network in January onwards. Campari, Gormeniere and the GlenGrant are also giving us satisfaction. GTR is up 24.3%.
That might look like a nice number, but we need to bear in mind that last year, we had a very easy comp base, unfortunately, where we were down 60.7%. The initial lifting of travel restrictions is helping, but clearly, We're very far from where we were from the unaffected base of 2019. And if we compare versus that base, we're down 52%. The rest of Southern Europe, Middle East and Africa is up 67.5%. Again, these are performances driven against an easy comp base, particularly in on premise food markets such as Spain, which were up 58.3%.
In South Africa, we've had, again, progressive restocking as we had changed our route to market last year. But when we look at it from a total group basis, that clearly is not material. Moving on to North Central and Eastern Europe, going from strength to strength, up 23.5%, sustained strong performance, also by the Alpine's reopening. Germany, up double digit, 11.9%. Nice strong Q2, up 14.4%.
And importantly, it's just one must look at those numbers within the context of a prolonged lockdown as well as record cold weather in Germany in the month of April. So these are very, very strong numbers within that context. The performance of the group in the first half was largely due to Aperol, up 17.1%, Campari 6%. And we've had also a very, very successful launch of the Aperol scripts ready to enjoy. We're seeing nice resilient home consumption.
And as soon as the on premise opens, we see droves of consumers going back to it. And that should also start impacting positively Averla and Bulldog. Crudino, which is turning into an interesting business in Germany, but also in the whole North, Central, Eastern Europe cluster is up 27.7%. Actually, if we look at total Corollino now, about 18% of the volume is coming from this region, so it's nice development in the past 2 to 3 years. The UK continues to remain very, very strong, up 37.1%, triple digit growth on Magnum Tonic Wine, sustainable double digit growth on Aperol, up 22%, ReignNephew 32% compared to 26.1%.
Again, here we're able to combine resilience in the off premise as well as strong performances in the on prem. Russia also strong, quite strong, up 44.1%, very positive performance with an acceleration in Q2, almost 70% up, again double digit growth rates behind The rest of the region, Central Europe and the Nordics are up 28.1%, very, very nice performance. It's coming from strong basis in key markets such as Switzerland and Austria. To round it all up, APAC up 30.8 We're seeing nice continued growth, helped also by shipment recovery as we've made a lot of route to market changes in Asia last year. Australia, which is where obviously we didn't do any changes, is up double digit, 11.5%, very positive performance in the half.
We've had a strong start to the year, but a normalizing trend in Q2, up 1.7% due again to the very, very tough comp base. We were up 19.2% last year.
If we look at
the rest of the region, it's up almost 93%, Very positive results in Japan, New Zealand, China and South Korea, which were not only positively impacted by consumption, but also from the strong shipment recovery due to the post route to market changes. If you look at China, we're up 37 point percent and here the key drivers are X-ray Diffusion Liqueur, Aperol, Skywalka and Wild Turkey Bourbon. Japan was also nicely growing behind Wild Turkey Bourbon, GlenGrant and Campari. Moving on to Performance by our Global Priorities on December 14, again, some wonderful performance indicators Starting with our Aperitifs. Aperol up 42% versus year ago, 25.7% versus the unaffected base of 2019.
And as you'll see in the text on the right, which I'm not going to go through, we're growing double digit across the range. As we're back in the on premise recruiting via our very effective activations. Campari, the same, up double digit versus both benchmarks, 39.5% versus a year ago and 24.6% versus 2 years ago. Again, strong growth across the base. In Chart number 15, you see From a consumption indicator standpoint, the indicators versus the unaffected base, and again, you see very nice progressions.
Moving on to Page 16. Wild Turkey also growing double digit, 26.8% versus last year, Double digit 17.4 percent versus 2019. Good strength in the U. S, Canada, whilst Australia was impacted by the very tough comp base where the brand had grown almost 47% last year. Sky is up 12.6% versus year ago and down 5.8% versus 2 years ago.
But clearly between the unaffected benchmark and today, we've had significant destocking in the U. S. On Sky last year ahead of the brand rebalance. So obviously, that impacts the KPIs. We have overall positive performance, mostly driven by the international markets at this stage, Argentina and South Africa as well as Germany and China.
In the U. S, the brand was relaunched. As you know, we did the distribution in the Q2 and we started the escalations in the Q3. On a full half basis, we're up 1.5%. Moving on to Grand Marnier, which is really benefiting from the premium tequila brand and the premium margaritas brand with the Grand Margarita, up 52% versus year ago and 39% versus 2 years ago.
We're also seeing nice performances in France and Canada. Our Jamaican run portfolio, up double digit as well, 29.7% versus last year, 45.6% versus the unaffected base. Appleton Estate, as you know, has reacted very well to the relaunch with new packaging, new ranges, liquids and price repositioning. RainNet Fuel Approved is just continuing on its regular growth pattern, up 27%, doing very nicely in Jamaica, the U. S, Canada and the UK.
The rest of the portfolio, including Kingston 62, which we launched this year and place some of the lower level Appleton ranges is doing nicely. Moving on to Page 17. Espolon, very, very strong, 56.4% versus year ago, 62.8% versus 2 years ago. Clearly, in the core U. S.
Market, that 56.4% was also helped By anticipated sales, we tried to limit them to the minimum possible. Ahead of the price increase in July, beginning of July, we took 2 price points on the big size and one price point on the small size our regular sizes. And again, we're one of the few companies taking pricing in this category. Bulldog returning to nice growth again, 50.9% this year ago and 15.9% versus 3 years ago. And this despite the fact that one of its main channels, GTR, remains depressed.
And the impact of GPR can also be seen even more on GlenGrant where the brand is down 2.6% versus the unaffected base of 2 years ago, but clearly up 43.6% versus this year. Our Canadian Whiskey is progressing nicely, up 15% versus year ago and double as much versus 2 years ago. Italian visitors are doing nicely versus a year ago, but are still slightly down versus 2 years ago, it's clearly it's more the outdoor spaces of restaurants which are being used. So the of people is instilled back to where it was. Cinzano, after 3.4% versus last year, a solid 8.7% versus 2 years ago.
And Mondoro and Ricadonna, which are the more premium Sparking lines up very strong, both in the 70s versus last year and the year before. Closing off with our local priorities. Carisola gives us a lot of satisfaction, and that's very important. So we're really benefiting from this ready to go cocktail occasion, up 24% versus years ago and 79% versus last year. Credido is doing well versus last year, but it's still down launch of the Aperol Spritz ready to enjoy in many markets.
We're up almost double versus year ago and Almost tripled versus 2 years ago. We've introduced it in 10 markets, including the test market in the U. S. And the results are very satisfactory so far. Our RTDs in Australia continue to perform very nicely, up 14% versus year ago, 40% versus 2 years ago.
Magnum, again, very nice Jamaican GEM up 70% versus year ago and 60% versus 2 years ago. X rated buoyed by strong performances in China and Korea doing very nicely, doubling versus a year ago and again almost tripling versus 2 years ago. Last but not least, Cabo, which is mostly an off premise brand, is obviously penalized by the high comp base in the U. S. Last year, but still showing nice progression versus 2 years ago.
So this was the round up on the brands on the sales. I'm going to pass it over to Paolo for the juicier bit.
Thank you, Bob. If you follow me to Page 20, where we have the analysis of net sales and EBIT by region, We can see that the Americas as a region still remains the group's largest region in terms of net sales at 43.9% as well as at 45.6 percent of group's EBIT. EBIT. EMEA, which was the region heavily hit by pandemic, given its strong exposure to the on trade channel, particularly for the high margin aperitatives, has largely improved its weight in the first both in terms of net sales at 29.3% as well as profit at 18%. Moving on to the analysis of the largest region Americas, Page 21.
We can see that On a reported basis, net sales were up 22.6 percent and EBIT was up 47.6 percent in value terms from €60 €9,000,000 to €101,900,000 with 3.90 basis point EBIT margin expansion in the first half of the year. But if we focus on the organic performance, we see that net sales were quite robust, up 34.2%. And EBIT was up 73.6 percent overall with 5 70 basis point margin accretion. Focusing on the organic performance to the right hand side, we can see that the gross profit increasing value by 35.6 percent, up €74,000,000 at a stronger pace than sales leading to 100 basis point margin accretion due to favorable sales mix combined with positive impact from the U. S.
Import tariff suspension. The favorable sales mix by brand as well as channels was mainly driven by the high margin brands, namely Gramerne, Wild Turkey, Campari Aperol, which more than offset the negative effect of Espolon, with margin continuing to be affected by the stable but still elevated agave purchase price. The A and P increased in the first half by 34% in value, €19,500,000 with an acceleration in the second quarter behind key brands to benefit from the gradual reopening of the on trade channel in key countries, particularly the U. S. And in particular behind Sky Vodka in connection with its complete relaunch.
The A and P growth was broadly in line with top line, hence was margin neutral. SG and A expenses grew at a more moderate pace, 4.1 percent in value, EUR 3,700,000 leading to 4 70 basis point marginal accretion, Thanks to the very strong top line growth. Perimeter and FX, Overall, an haircut of €18,000,000 with 180 basis point margin dilution, primarily driven by the depreciation of key group currencies such as U. S. Dollar, which was particularly negative in the first half, why it would be a little bit more ease in ease comp in the second half of the year, as well as the hyperinflationary effects in Argentina that negatively impacted FX and perimeter performance.
Moving on to Page 22. 2nd largest region, EMEA. On a reported basis, top line was up 60.6% And bottom line, the EBIT moved from negative territory, EUR 1,800,000 to positive territory, EUR 40,200,000 with EBIT margin expansion of 14.7%. If we look at the organic performance, Again, to the right hand side, gross profit increased in value by 60.5%. As you can see, €68,200,000 gross profit uplift At a pace that was clearly stronger than net sales and in so doing leading to 120 basis point margin accretion.
Margin accretion was driven by the outperformance of the high margin Aperitifs at the beginning of their peak season, so Very, very strong results. A and P increased in value by 40%, corresponding to €13,000,000 Reflecting the accelerated investments in the Q2 of this year behind key brands, particularly Campari and Aperol benefited from the on premise reopening and were properly supported. The increase in A and P was below top line growth and that generated 100 basis point margin accretion. SG and A increasing value by 12.9 percent corresponding to €10,500,000 against a very low comp base. And they were highly accretive 12.7 percent, thanks to the strong top line growth in the region of organic growth of 57.4%.
FX and perimeter, neglectable effect, just €2,700,000 with 120 basis points margin dilution. If we move on to the following region, North Central, Eastern European Region, Page 23. Overall, net sales grew by 11.6% and EBIT by 26.6% from €57,400,000 to €72,700,000 with EBIT margin expansion of 4 50 basis points on a reported basis. If we focus on the contrary on the organic performance, the right hand side EBIT, adjusted organic growth accounted for 33 percent or €19,000,000 which was higher Then the net sales leading to 2 60 basis point margin accretion. The gross profit contribution was 28 percent growth in value, €31,400,000 higher than net sales, driving 2 basis point EBIT margin expansion, totally attributable to the strong performance of the Aperitifs in the region.
The A and P step up accounted for 33.3 percent in value or €8,600,000 Again, higher than net sales leading to 120 basis point margin dilution, whereas we saw sustained investments, marketing investment behind key brands, investment that accelerated in the Q2 following the gradual reopening of the on premise channel. The SG and A were up in the first half by 13.7 percent in value, EUR 3,900,000 against again a fairly low comp base and negative 3.7% in the first half of last year. The SG and A growth was clearly lower than net sales and generating the 130 basis points acquisition that you see in the chart. FX and perimeter performance was overall negative €3,600,000 But overall, accretive to the margin ID by 190 basis points. The negative impact was attributable to the depreciation of ruble and negative perimeter most attributable to the termination of low margin agency distribution contracts in Germany.
If you move on to Page 24, APAC, still the smallest region, but again, very, very strong results. On a reported basis, top line was up 37.2 percent and EBIT up 48.1 percent in the first half from €5,700,000 to €8,400,000 On an organic basis, the EBIT performance was quite robust, 21.3 percent up but lower than net sales generating 70 basis point dilution, which is fine given the focus that we have in the region to build up the business on the back of A and P investments and investments in route to market capabilities. And in fact, if you see A and P Notwithstanding an increase of gross profit of 30%, corresponding to €7,900,000 A and P has been stepped by 75.3 percent in value or €4,700,000
and SG and A has
been increased by 14.3 percent, €2,000,000 more than offsetting the almost offsetting the gross margin contribution. FX and perimeter, although tiny, drove a positive impact on P and L, €1,500,000 on the back of The appreciation of the Aussie dollar versus the euro. Page 25, the P and L at a glance. Again, on a reported basis, this is both versus 'twenty and both versus 2 years ago, the unaffected basis of 2 2019 versus last year. On a reported basis, net sales were up 30.2% and EBIT adjusted was up 71.2% from €130,000,000 to €223,000,000 But if you focus on the organic performance, Top line, quite robust in the first half, 37.1 percent up and EBITDA adjusted up 88.7 percent with €115,600,000 EBIT uplift coming from existing business and 600 basis point of organic EBIT expansion, driven by €181,500,000 of gross margin uplift, By the way, driving 130 basis points EBIT margin expansion, partly reinvested in A and P step up by €45,800,000 and SG and A investments of €20,100,000 leading to an almost neutral effect on A and P, 10 basis point dilution, but you have a strong operational leverage within the SG and A line, driving 5 20 basis point EBIT margin Perimeter and FX haircut accounted for EUR 22,800,000 in the first half, It's clearly a very negative impact in the first half, which is destined to be each year as a comp base in the second half and 110 basis points dilution again from FX and perimeter.
Worth noting the performance versus 2019 where we have net sales up 23% and EBIT Adjusted up 33.3% versus quite a strong year 2019. More in detail, Page 27 versus first half of last year. Gross margin on a reported basis, 33 up in value, 140 basis point accretion. The organic performance, which I've mentioned, which was 40.1% in value, leading to 130 basis point margin accretion was due, as in the segment analysis to favor our sales mix and to the outperformance of aperitifs started to benefit also from the U. S.
Import tariff expansion, coupled with stronger absorption of these production costs, so operational leverage within costs, driven by high production volume and an easy comp base. Those 2 positive effects were able to more than offset the relative effect of Espolon, which versus last year accounted for 100 basis points and versus 2 years ago accounted for 180 basis points as you can see below. Again, A and P, a meaningful organic step up in A and P, 37.6 percent in value, Neutrolo margin reflecting the accelerated investment in the 2nd quarter behind key brands, aperitifs in their peak season as well as we do a low front base. And SG and A organically up 10% in value with a very strong margin accretion. EBIT adjusted performance already mentioned before organically, again, 88.7 percent in value, up 640 basis point margin accretion versus 2 years ago, the gross margin bit is still quite robust, 18.2 percent with still a margin dilution of 200 basis points that we need to recover going forward.
We've achieved 130 basis point organic gross margin recovery versus a year ago, but we're still lagging behind 2 years ago by 200 basis points. And this was due to unfavorable versus the 2 years ago sales mix driven by, Again, as Polon, which I've mentioned, which is 180 basis points of the 210 basis points and the only brand that is behind the 2019 that is Sky and probably Crodino indeed, the 2 brands, Sky and Crodino in the Italian market. But again, on a 2 year basis, the A and P step up is still quite strong, 10% over 2 years with 180 basis points accretion given the robust 18.2 percent the robust 22.3 percent top line growth. And the SG and A growth over the 2 year period was okay at 10.6%, so 5% plus year after year with margin accretion of 220 basis points. EBITDA adjusted versus 2 years ago on an effective basis, 33.3% once higher with 100 basis point expansion.
Moving on to Page 28. We see operating adjustments Previously called 1 offs €100,000 primarily attributable to restructuring initiatives. Last year, We had €27,400,000 of negative one offs, primarily attributable to brand impairment losses, non cash. On the total financial charges, we've recorded €8,800,000
versus €19,200,000 But if we
carve out the effects of the €1,000,000 But if we carve out the effects of the exchange gain and losses, in the first half of this year, We achieved €4,200,000 of exchange gains. And last year, we've register €1,300,000 of exchange losses. So net of the one off exchange gain losses effect, The total financial expenses before exchange gainlosses accounted for €13,000,000 this year versus €17,900,000 of last year with a significant compression of the coupon, down from 3.9% to 2.4% due to the liability management transactions that have been carried out in 2020. If you look at the 2.4% Average cost of net debt excluding the exchange gain and losses, this is due to a true cost of net debt excluding the negative carry 1.7% plus a top up 0.7% of negative carrying effect. On the financial one offs, financial adjustments, we have €4,600,000 that are relating to interest income resulting from the favorable closure our previous tax disputes in Brazil.
So we won the case in Brazil. And then we have minute put option effect of €400,000 and a positive effect related to and joint venture accounted for €1,900,000 is due to the reassessment of the group participation in the South Korean JV, which we acquired a controlling stake in the beginning of this year. PBT profit before tax reported was up 100 and 0.4% adjusted of 1 offs in operating Financial adjustments and whatever, we have a profit before tax adjusted increase of 93 0.5% at €213,100,000 If we move on to the following page, 29, We can see that the taxation came in at €54,900,000 on reported basis and group net profit came in at €159,600,000 again on a reported basis, 818.7 7% versus a year ago. Adjusted of the one offs, group net profit came in at €156,800,000 and €6,800,000 and was up 101.9% versus a year ago. Looking at the tax rate, even here we see some positive news.
The recurring tax rate down from 29.7% on an adjusted basis to 26.5% and on a reported basis 28% to 25.6%, but most notably the recurring cash tax rate, cash tax rate clearly under control and below last year from 23.6 percent down to 21.8%. If I manage to turn the page, we'll move on to Page 31. We have the free cash flow analysis. I will focus on the recurring performance. EBITDA adjusted up 64.2%, €90,000,000 year on year from €169,700,000 to 261 €1,000,000 We then have taxes paid that have been stable on a recurring basis year on year at about €23,000,000 And then we have a change in working capital.
It's clearly leading to €43,000,000 increase in change in working capital from negative €5,000,000 to negative €98,700,000 clearly is totally driven by the acceleration of the top line in the of the business in the first half. So increase in receivable, as you can imagine. And cash flow from operating activities increased by €78,000,000 80.9 percent year on year from €96,800,000,000 to €175,000,000 With regards to interest paid, fairly stable at 8.3 on a recurring basis, 8.3 €1,000,000 And then we have the CapEx coming in on a reported basis at €74,400,000 with maintenance CapEx at €25,300,000 with an extra operating CapEx increase related to the purchase of real estate investment in London. The new London In London, the new London office that was bought to move the regional quarter in the new office. Recurring free cash flow, up €5,400,000 64.2 percent versus a year ago and a very positive news on the ratio of recurring free cash flow over EBITDA adjustment adjusted that grew from 38.3% of last year to 54.1% this year, which is a level even higher than 2 years ago, 2019 on an affected basis, which posted 40.1% recurring free cash flow over EBITDA of last year.
Moving on to operating working capital, Page 32. As said, organically, we have an operating working capital of €98,800,000 driven by increase in inventory €45,000,000 of which €55,000,000 is aging liquid To support the growth trajectory of Langhran Glamarnier, increase in receivable of €44,000,000 minute decreasing payable of €9,700,000 ForEx had a positive impact of €11,000,000 A perimeter, a negative impact of €2,500,000 Again, on KPI's perspective, operating working capital as a percentage of net sales came in at 36.5% down 160 basis points compared with last year and down 110 basis points compared with 2 years ago 2019 And those are in line with our target of achieving 1% operating working capital compression over net sales in comparison to 2019, Page for the full year. Page 33, net debt reduction. To positive business performance, we've seen recurring free cash flow of EUR 141,600,000 reported free cash flow of €82,900,000 And then we have the dividend, net purchase sale of our shares accounted for an income of a cash flow positive cash flow of €20,600,000 leading to 6 months June end net indebtedness of €60,800,000 With regards to that maturity profile, again, even here quite a solid position. Long term euro bonds and term loans account for €150,000,000 We're seeking over €668,000,000 of excess cash, which is more than enough to repay loans and bonds that are expiring in the coming 2 years with an average nominal coupon of 1.42 percent And a fixed interest rate that accounts for 78% of the overall gross debt, so with very solid position visavis the hedging of interest rate risk in which may or not arise in future years.
I think this is it on numbers, but I would happily back to you on the conclusions.
Thank you, Paolo. Before we get to the conclusions, just some uptake on business developments. On Page 36, you'll see we're very pleased to introduce the notes collection. It's a new range of non alcoholic super premium spirits dedicated to the high end on premise. Can have them both as well as mixers.
Now clearly, this is a segment of the market which is seeing A lot of action, it's very interesting, but we do believe that we have an edge in the quality of the liquids because Unfortunately, whilst there's a lot of action in this category, it is littered with products which don't have much of a taste. So look at this page. We're going to take our time to build it on the on premise, but hopefully in the mid- to long term, it will become a nice addition. Our brands continue to receive very strong accolades for their liquids, be it Bisquis, Deboucher or the Appleton Estate Age range, very active on new campaigns. As well as premiumizing our brands, we're launching Premium Cristalino, which is a special form of anejo tequila and Espolon, we've launched it in Mexico quite successfully relaunch in the U.
S. In the second half of this year, and we have high expectations behind that. Last but not least, we're introducing a 60 years 60 year old Glenn Grant to celebrate our master distributor, Dennis Malcolm, who's been 60 years in the industry. He actually spent almost of those years, he started in GlenGrant and then came back to GlenGrant after his retirement. And this is a Super premium and well, ultra premium to be honest and quite unique as nobody else in the industry can claim to have put something into a barrel and then actually put it into a bottle 60 years later.
Moving on to SKYY, we're clearly Right into the middle of the relaunch. We did the distribution job in Q2. And now the Relaunch campaign is in full swing, so we kicked it off at the Independence Day and we're going to stay on this for quite some time. We're very pleased with all of the assets which were developed, which were very well received by consumers and the trade. But clearly, this something which we need to stay on for a long time because turning around a brand in the highly competitive U.
S. Vodka category will take some time. Moving on to Aperol. As I said earlier on, Aperol has become the symbol of the reopening, be it in the UK, in Italy or even France, where you can see the picture in the bottom of the French President Celebrating the reopening of the terraces with a wonderful apparel spritz in his hand. But more important than that is the fact that we're back to recruiting new consumers quite aggressively with a lot of activations and a lot of events throughout the world.
So the world continues to be turned orange. One nice addition, which we think is going to be strategic for the long term because it's the beginning of a program. We're going to open a Terraza Aperol in Venice, which is the heartland of Aperol this late summer in Campo Santo Stefano, that's it took us more than 3 years to find the location. That's where 9,000,000 tourists walk by every year. So clearly, it's going to be a very important, I think, embassy for the brand as well as a model for more Aperol Terraces, which will pop up around the globe in the years to come.
On Page 42, Yuval, this is something we've announced a few weeks ago. We've gotten together with our friends at Moore, Tennessee, and we've pulled our stake in Tanico into a joint venture with them, which is 5015. And this makes 2 strong and complementary players, obviously, there to support the growth of Tanico, which already started via making an important acquisition in France, but this will not be the last one. Last and but not least, we're very proud. As you can see on the ESG front, we've been upgraded by MSCI from a BBB to an A and this is definitely for us further incentive to continue on raising the bar in this very important area for us.
Before moving on to the conclusions, as I kicked off at the beginning of this call, This month, we're celebrating our 20 years as a public company. It all started on July 6, 1991 sorry, 2001. I'm getting my maths wrong here, taken over by the emotions. And we're quite proud to see that market cap has grown to €13,000,000,000 15 times And we've delivered an annualized CSR of 16% and outperformed all of our relevant indices and becoming the 10th largest company from a capitalization standpoint in the FTSE Mid. Clearly, we couldn't have achieved this Without really the continued support of all Camparista as well as our shareholders, we've always said, This is a business which we build for the long term and the long term support of shareholders is absolutely fundamental as well as the daily passion, sweat and tears of Camparistas in building our brands.
So we'll be celebrating this tomorrow at the Camparino, and I think some of you who are Italy based will probably join us, And we look forward to raising a few cocktails to the health of our industry. Now in conclusion, what to say, that quite positive business momentum continued in the first half of twenty twenty one. And we're benefiting from the volume consumption, which is a combination of the partial reopening of the on premise and sustained home drinking, the penetration of cocktail culture in homes. Clearly, it was also helped by the comp base, but I think overall, the outperformance is driven by consumer pool and consumption. Now looking at the remainder of 2021 and our underlying performance, we're quite positive on our brand momentum.
We expect it to continue, and it will be fueled by sustained marketing initiatives, which will accelerate the Aperity's peak season, so in Q3. And we will make the most out of the progressive food reopening of the on premise channel as well as home consumption opportunities across our various markets. At the same time, though, we're living on this planet, and we know that some uncertainty remains and particularly in connection with the achievement have widespread vaccination in some key countries that has slowed down. There's a spread of new variants and that can impact the overall evolution of the global economic environment. So we're quite diligent, we'll remain agile and we'll make the most out of the situation.
Looking at ForEx and perimeter, we and the Effect on adjusted EBIT on ForEx, our current outlook is not we're not a full year basis if we think about termination of agency brands, etcetera. So this is it on our side, and I see there are already quite a few people in the queue for you to ask the questions and we're all ears and everybody will give the satisfactory
answers. Excuse me, this is the Cosco conference operator. We will now begin the question and answer session. The first question is from Andrea Pistacchi with Bank of America. Please go ahead.
Hi, Bob. Hi, Paolo. Congratulations on these results. I have 3 questions, please. The first one is on the U.
S. There's a lot of moving parts in this very strong performance in Q1 and H1. On trade, obviously, reopening the resilience of the off trade, etcetera, the comps. Could you talk about maybe where You are what the situation is with the distributor stock levels. Last year, you said that last year, you lost $28,000,000 of sales in the U.
S. And you thought this probably wouldn't come back, whether that has changed and some of this is coming back, please? The second question is on emerging markets. They've been a lot of your emerging markets have been in the past 2 or 3 quarters remarkably strong. Brazil, Russia are something like 50%, 50% ahead of 2019, I think, in H1.
Jamaica, strong, too. So what do you think, underpins really lies behind this? And how sustainable business performance in emerging markets? And maybe the third one is for Paolo on logistics costs. Some of your peers, some of the other consumer companies are flagging logistics cost as quite a headwind to margins this year.
You didn't You didn't mention it in your prepared remarks. So I was wondering what you're seeing on logistics cost, whether this could affect your margin and maybe How much of this could be a headwind to your margins this year?
Thank you, Andreas. So I'll take the first two questions. As I mentioned in the presentation, We don't we haven't seen any material restocking across any of our markets. Now particularly in the U. S, our largest markets, Obviously, there are a lot of moving parts as you said.
And if you look at our distributor stock levels, I mean, in terms of days, They have removed remained unchanged. I mean, we came down in days significantly last year, and we're committed to maintain those top days. Clearly, on an absolute level, as the business performs well, the stocks might increase. I mean the 1 or 2 brands where we've done slight adjustments, but again, it doesn't move the overall needle is on imports due to obviously The constraints you see in logistics and the ability of finding containers to cross the ocean. So net to net, we haven't seen any and we are not looking at having any major restocking in the U.
S. In emerging markets, it's a combination of 2 things or 3 things. I mean, I
think one
is also in Q2, As the weather improved, people emerging out of lockdowns have been wanting to live their lives again. There's revenge conviviality in those markets as well. At the same time though, we've been working very hard at the fundamentals of our business, particularly in South America and the changes which we're making both from a marketing as well as Sorry, management, marketing and route to market standpoint are starting to be felt. In Jamaica, it's a combination not having winning brands with the pandemic overall pretty much in control and tourists starting to arrive, albeit on a low level.
Yes. Andre, on the logistic cost Headwinds and more in general on input cost, I'll shed a little bit of light on how we see it. We need to separate this year from next year. With regards to this year, more in general, input cost not an issue to us. We have a very strong cross margin expansion, which we expect potentially investing to continue in the second half of the year.
Logistic and availability of 3PL is more a bottleneck to make sure that shipments regularly flow The channels, distributors, importers and our own in market companies, Nothing that we want to signal. So we're clearly managing it and we do not envisage any issue there. Clearly, The perspective going forward is less benign. There is clearly evident signs there are evident signs of increase of raw materials. So if you take as a benchmark last year 2020, Cost of goods sold in our case accounted for roughly 42% of net sales with gross margin at 58%.
Now we need to break down this 42% cost of goods sold into the 4 buckets. Typically, you have packaging and raw material that in our case accounted for 50% of net sales. Then you have production that is 27 Logistics that is about 12%. And then the right 11% is agency brands that we buy and then sell into the marketplace. If you look at packaging and raw material, this is the area where we're noticing an increase in input costs and some pressure.
You have packaging that in our case account for roughly 40 20 sorry, 24%, where the biggest component is glass 1% And contrary to soft drink manufacturers and beer players, cans is just 1% in our case. So we're not much exposed to aluminum cost increase as we do not have we're not particularly fan of bottled dark spirits as others do. And then you have raw materials that account for 20%, 26%. So looking at inflation on raw material and packaging material, we expect that overall For next year on a per liter per bottle basis, including some procurement productivity programs that we have in place like Central buying of product related materials. We believe next The pressure overall will be at about 3% of overall COGS.
So quite a different perspective vis a vis a year ago. But that said, we believe that we have a number of offset, which put us in a very strong position. 1st and foremost is pricemix. So we've started taking price this year. We'll do that more aggressively next year.
So we believe we have quite a Strong brand momentum. We primarily rely on proprietary brand, not directly competing neck to neck on promos. And so with a very low price sensitivity, We feel quite good at raising price to offset input cost pressure. Secondly, We have the possibility of seeing some upside from the agave cost. It's a big piece of it because it's worth this year a profit opportunity of €40,000,000 So we're starting signs of positive signs on the agave market.
So we feel pretty confident that next year We will benefit from some material tailwinds on agave. And thirdly, there is the operational leverage on fixed Production cost. Production costs are 27% of net sales within which the fixed component is at 25%. So given the quite robust top line growth trajectory that we're experiencing And that we're expected to continue in coming months and quarters even there on the production operational leverage There is quite a strong offset that we can enjoy. So net net, we're not concerned about The inflation effect on raw and packaging materials and also on logistic Euro cost, this is something we can clearly manage.
If anything, we see costs as a percentage of sales as an opportunity with upside on gross margin on sales going forward, both this year and next year as well.
Thanks. Just to clarify one of those numbers you said, Paolo. I think you said that raw materials and packaging combined Should drive around 3% of COGS inflation, the on a per liter basis. However, you've got various Factors that can offset this?
Yes. Correct. 3% of the 42% to be yes.
Okay.
For the whole thing, yes.
The next question is from Simon Hales with Citi. Please go ahead.
Thank you. Good afternoon, Bob. Congratulations on that 20 year anniversary. 3 for me as well, please. Firstly, you called out some stock replenishment in senior In Q2, as the on premises reopening, are you able to sort of quantify how big a benefit that was in the quarter?
And is there any other regions where that With material and perhaps linked to that, Bobby, you just said you were happy with stock levels in the U. S. At the end of the half year. Does that hold true to stock levels in all of your major markets globally? So that's the kind of first question.
Secondly, you obviously delivered good levels of profitability in the first half ahead of market expectations. Are there areas where you expect to redeploy some of perhaps some of that excess profit through the second half of the year, maybe Specifically, your thought process around A and P spend in H2. I noticed, obviously, that in senior, A and P spend was running below sales growth in the first half. Should we expect that to catch up? And then just finally, just a quick one for you, Bob.
A couple of quarters ago, you talked about the fact that you thought maybe between 10% 25% of on premise outlets might never reopen Post COVID, is that still the sort of range of numbers you're expecting or things are a little bit better than you see it?
Thank you, Sam. And I'll start with the last one. Yes, I think we were quite pessimistic when we came out with the 10% to 25% On premise closure rate, I mean, particularly in the U. S. Because a lot are reopening.
And even in Europe, what we're seeing is The number is much, much lower because obviously all of the support which came from governments has really kept them afloat. And particularly What they've done is, as you know, is allowed outlets to operate outdoors while taking over sidewalks, and that has given them quite a bit of oxygen. Now they're not back in Root Health, but at least they do have oxygen. Moving on to your question on stocks overall. I mean overall, last year, we really came down significantly with stocks across markets and brands and channels.
And we are still continuing at low stock levels, which means that any surge in demand from consumers and on premise partners has an immediate effect on our supply chain. And I must say they've done really miracles in this first half to respond to the increases on a weekly basis of forecast. Overall, as I said earlier, there's no material restocking effect. There's some slight phasing in equity. But I mean, if I look at how our Italian Business is actually trading in the month of July.
There's absolutely no effect from the slight replenishment at the end of June. It's all demand driven. It's all pool driven. So we will our aim is to remain at those levels and ensure that from a supply chain standpoint, we're able to satisfy that demand and be very active and agile.
Yes. Also given the constraint on 3P availability, managing shipment is somehow Living in a constrained environment. So even if we someone wanted to leave it, it wouldn't be possible, Very sticky. So talking to the second part of the year, how we see H2, Clearly, let's start from top line. Clearly, in the first half and second quarter, there was a clear bid of about €100,000,000 on net sales.
We believe this is definitely under our belts and this is something that will flow through to full year net sales. Then with regards to gross profit, I'd say the current positive momentum in terms of gross profit on sales With gross margin accretion of 130 basis in first half is destined to continue in the 2nd part of the year. So we feel Pretty confident about that. Then with regards to A and P on sales, clearly we manage A and P sales with a margin neutral stance, so that's the way to go with some flex of 20, 25 basis points on sales. And depending on top line performance and gross margin expansion, we will maneuver the A and P to potential going forward.
And then there is the SG and A line, which given the very robust Top line performance can, going forward, generate some slight accretive effect due to operational leverage in SG and A. With regards to phasing of
the first and the second A
and P and SG and A, clearly, we see A and P on sales heavier in the 3rd quarter, where we still have to support big season for the aperitifs, whilst we see on the SG and A the toughest comp in Q4, Well, basically last year, basically, we had a very low level of synergy, which is the fact that basically we've cut Down back on FTIs, FTIs, bonuses and whatever. So the comp clearly this year is tougher. As you know, given the robust performance, we're in positive territory on bonuses. So but overall, we feel pretty confident that this year we will deliver a very strong result given the fact that Also Q3 started pretty nicely. So We're in a good position.
We feel we're in a good position at the moment.
The next question is from Trevor Stirling with Bernstein. Please go ahead.
Hello, Bob and Paolo. So 3 from my side, 2 please. First one, Bob, it's probably too early to say we're post COVID, but certainly as we look forward, do you think the big residual drags are today? I think you highlighted GTR, probably indoor hospitality in Italy. Are there any other pockets of the world where you still see some opportunity for a COVID recovery?
Second question is, if you look at the U. S. Where we're almost Completely open ground in the entree. Certainly, it's states like Florida and Texas more than fully open. Any learnings from that reopening process What you'd like to highlight.
And the final one, I think a quarter or 2 ago, Bob, you said that one of the impact of the COVID crisis have been that maybe some potential M and A Partners were more inclined to sell as a result of the experience for COVID with the recovery in place of those now having some cold feet and going back into the shelves.
Yes. Thanks, Trevor. With With regards for opportunities for recovery, I mean, clearly, there are some markets in South America, which are still quite subdued and they're closed. The same can be said for most of non Pacific Asia. I mean, we still have quite a few lockdowns across Asia, which isn't helping us as we're more on premise skewed in those markets.
China is the exception, but the rest of Asia is pretty much locked down. And the same can be said on an off and on basis in Africa, particularly in South Africa. So in addition to GTR, those would be the 3 geographic areas, which I would add to the list. Learning from the reopenings is it's clear to see that as soon as markets reopen, consumers really go out there with a revenge mentality. I mean, they want to go out, they want to celebrate, they want to see their friends And they're going back to their established cocktails.
So we're seeing that across the range. Overall, when you look particularly in the U. S, I mean, the Premiumization trend is very, very solid. And the acceleration in tequila, high end dark Spirits, be it American whiskey or rum is happening as we speak. With regards to M and A, I mean, I think some people got scared about what they But they know that it can happen again.
So I don't think that the reopenings have really changed fundamentally outlooks. I think Overall, there is some deep consideration as to what the future will bring and what is the best choices for individual company. So we'll have to wait and see what the end result is. But I don't think that necessarily the reopenings have given have changed, let's say, or eliminated the questions which were planted by the first lockdown.
Thank you very much, Bob.
Our next question is from Edouard Mendy with Jefferies. Please go ahead.
Good afternoon, Bob, Paolo. Three questions from me as well, please. The first is Around sustained home consumption trends versus the gradual on trade reopening, on the home consumption element, as spend gets rebalanced between the on and the off trade, Are you seeing any reversal of the premiumization trend we've seen in the off trade over the last 12, 18 months? The second question, going back to Slide 7, where you said there's very, very strong growth, not just versus last year, but versus H1 2019 as well. If we drill into your biggest market, The U.
S, I think one of the learnings is you're seeing this longer lasting benefit from a consumer reaction to lockdowns around making At Home, as we think about 2022, do you think we just grow off the higher base at a more normalized level, 4 or 5 in terms of the industry? Or do you think there is scope to grow off the high base at a much faster level given these habits formed during COVID as home mixology as well as premiumization? And then the third question is really around your tie up with Mount Hennessy. I appreciate it's early days, but is there optionality for a broader global collaboration over time?
Now with regards to the sustained home consumption trends, is there any reverse of premiumization? We're not seeing it. Mean, we're seeing the premiumization continuing, particularly in hot categories such as tequila, rum, American Whiskey, so no change there. Now with regards to the U. S, looking at the base versus '19, clearly, all the consumption indicators show that there's been a significant increase of cocktail culture and penetration in home consumption.
I mean, if you look at our data, we're up in strong double digits across all of our brands. Question mark is what will 2022 give. I think it will probably mean that we will consolidate that acquired overall increase in penetration and build on that, but probably at a more normalized basis. And I'm afraid I'm I didn't make a note of your third question.
No entity and the e commerce in Europe. What is the opportunity of a sort of longer term for more global tie up?
Look, I mean, we're still dating and let's see how it goes. I mean, agreement is to have a JV, which is focused on Europe. There's plenty to do in a very, very fragmented marketplace. And before we start even building that, we need to go through the usual moves, antitrust as well as bring this to a closing. So that's what we're focused on.
Meanwhile, in TANICO, they're busy integrating Vonta a Pro Piete, which is the step of the consolidation on a European basis. And it's exciting. There's a great management team there at Tanico, with the support of MH and ourselves, I think has great opportunities ahead.
The next question is from Olivier Nicolai with Goldman Sachs. Please go ahead.
Hi, good afternoon, Bob, Paolo. Just three questions from my side as well. First on Espolon, The demand has been very strong. You mentioned that there is a price increase in July. Can you give us a bit more details on the magnitude of this price increase?
Secondly, just to stay on Espolon. If you go back to the slide, I think
it was Slide
38 in your presentation. So I managed to find the price of the bottle on the right, but actually I was interested
to know what was the price of
the bottle of It's Paul on Cristalino. And if you think that this Cristalino brand expansion can essentially participate in the super premium tequila segments? Or do you still look to add new premium tequila brands to your portfolio? And then just lastly, since you mentioned the impressive 20 years track record, That has been built on organic growth, but also on a very active role in M and A. Just thinking over the next maybe 20 years, if you think or at least in the future, if you think that M and A will play Still a big role in Campari's growth or should we expect just perhaps small bolt on deals or perhaps JV announcements like the 1 year
at non Swiss Motor Energy. Sure. Now on the Espolon price increase, as I said in the presentation, we took 2 price points. That means $2 on the large size, on the liter $75 and one price point on the $75 on the liter. With regards to pricing on Cristalito, yes, it will be priced in line with super premium brands because not only is it an aniejo, but then it goes through other processes and the packaging is very, very premium.
By the way, it's an excellent liquid. But that doesn't exclude the fact that we continue to look at the Super premium and up part of Takeda as an area of opportunity and between M and A potentially as well as Some of the things developed into web internally, this is certainly an area which we will cater to in the years to come. No doubt about that. Now with regards to will M and A play a role in the next 20 years? I would say absolutely.
I mean the whole move to the Netherlands from a corporate registry standpoint is actually based on that to create a lot more flexibility in our capital structure. We've said that we're doing it for the long term. It doesn't mean that on day 1, There's a transformational deal, but we like to prepare everything for when the opportunity becomes concrete.
The next question is from Lawrence Wyatt with Barclays.
Good afternoon. Thanks very much for the questions. Firstly, you mentioned that next year you expect the agave prices to be beneficial to your margins. I was wondering if you could quantify, sort of in terms of percentage moves, where you think agave price has moved over the past few months and sort of what you're expecting to see for next year. Secondly, we've seen a dramatic increase in both at home consumption, but also the recovery of the on trade suggests a dramatic improvement in on trade consumption as well.
This looks like Overall volume consumption by consumers has also dramatically increased. Do you see that as a sustainable trend? Or Is this increase in per capita consumption? Or is this a more people coming to different alcoholic products? Or How do you see that evolving as maybe we get through the revenge spending and consumption trends?
And then finally, on your upgrade from MSCI to A grade on your environmental credentials, Do you think that was what has driven that change? Is that something you've done internally, something you've changed internally this year? Or is A greater engagement with these agencies. Thank you very much.
Yes. Let Paolo answer the first question and then I'll take the other 2.
Well, on the aggregate price, we're I said quite positive visavis the prospects for 2022 as well as for 2023 when quite a significant part of in house agave production will come to will be available at fixed internal cost of production costs. With regards to price, actually, we've just started debating and discussing and negotiating with suppliers the prices for next year. We'll start becoming more concrete from September to December. So we're not now in a position of We think we could target, but directionally we
can say that we're in
a good spot for next year. And then in 2023, we will get more upside from internal production.
With regards to your second question, I think there are really 2 trends, which are summing themselves up. I mean, one trend is, with As a reaction to the pandemic, people really do want to make the most out of their free time when They're able to meet friends, be it at their own homes or outside of home. So I think that this revenge from reality is here to stay for quite a while. I mean, I don't want to be as presumptuous and say that it's going to be exactly like the roaring 20s after the First World War and the Spanish flu, but I wouldn't be surprised if something like that happens. At least that is the sensation I get from whatever I'm reading and people I'm talking to.
So it's Carpe Diem, let's make the most out of life. We've taken too many things for granted. The other thing is that if you look at it from a category standpoint is that within the setting of conviviality, spirits through cocktail culture are taking market share from beer as well as from wine. So it's a combination of those which are making for quite robust demand for our products. And we believe in Campari that it is here to stay for quite a while.
This theory will then show whether we are right or wrong. Now with regards to the MSCI upgrade, I mean, it is linked to increased disclosure, particularly on target setting, which we've done this year. And we're also this is an area where we've developed an internal organization, which is clearly engaging with the relevant institutions out there and making sure that internally we all march to the same drumbeat and are there to hit the KPIs.
The next question is from Vincent Ryan with JPMorgan. Please go ahead.
Good afternoon, Bob, Paolo.
Two for me, please. Firstly, just in terms of the relaunch of the SKYY vodka brand. How I appreciate you said that June was more sort of sell in and then July has Be the just a big push in terms of e commerce and the activations. But I mean, could you give us any sense of how you think that relaunch has gone so far in the U. S?
And any sort of targets you might be looking out for in terms of the market share within the vodka segment? I appreciate just all this call is ongoing. The Nielsen data for a big chunk of July has come out for the U. S. And you still see the brand is quite weak at least year on year.
So any further there would be quite welcome. And then secondly, I think the I appreciate some of the on versus On this off trade dynamics and the fact that you talked about before, but specifically within the RTD or the ready to enjoy portfolio, Note that Australia has slowed some parts in Q2, given that's quite large RTD markets for you in particular. Are you seeing any As the entree is reopened, are you seeing maybe a switch away from the RTD part of the portfolio? And how does that That's your thinking when it comes to launch of the Aperol, when to enjoy product across your key markets? Thank you.
I'll take that last question first. I mean, we're seeing light up with consumer pool behind our ready to enjoy propositions, be it the sky blue RTD In Mexico and in Japan, whether it's the wild turkey RTDs in Australia for Campari Soda and Aperol Spritz in Europe. So I mean, this is an area which is now going to grow in the years No question. And then depending on the market, there are movements from 1 month to the next depending again on the opening and closure of the on premise. I mean, currently, in Australia, the on premise is mostly closed and we're seeing very strong growth again back on the RTD.
So We're going to have this volatility going forward. But having said that, if you look at the secular trends, they're all quite positive. Now with regards to the relaunch of SKYY, I'm going to disappoint you here because I mean it is really way too early to come to any conclusions. I mean Every single element of the brand assets as well as the new liquid were thoroughly tested quantitatively in many markets and they've tested very, very well. So we feel very good about the proposition.
But a brand like Sky in a category like vodka We'll take quite a bit of time to be turned around. I mean, this is a supertanker. You don't get build momentum within 2 or 3 weeks of the start of the campaign. We're going to stick to this because we believe in it, and I think we'll have a fair read probably in a year or 2 years down the line.
Very clear. Thank you.
The next question is from Mitch Collett with Deutsche Bank. Please go ahead.
Bob. Hi, Paolo. Just a couple of quick ones. A follow-up on Aperol, ready to enjoy. Can you just comment on how many markets you're in now?
And can you also maybe give us a bit of color on How the ready to enjoy product affects Aperol as a core brand? Is it in any way cannibalistic or perhaps even accretive to overall Aperol. And then I appreciate Credino is a very small brand, Can you maybe comment on your rollout plan for that and to take advantage of nonalcoholic And drinks. And also maybe feels a bit harsh to pick out the one brand that has gone backwards versus 2019. But Given it's been successful in Germany and Switzerland, can you perhaps comment on the decline that Cardino is seeing overall relative 2019, I guess that's because Italy remains under pressure.
Thanks.
Yes. Look, Crodino, now international markets account for about 18% of the total volume basis or net sales basis. So this is quite a development coming from basically nil a few years ago. We've introduced the brand in Central Europe, Germany, Austria, Switzerland, Benelux. And we I think it's available now on Amazon in the U.
K, and we'll be expanding it gradually across all core markets. So we see a great opportunity there. There's a big difference between The brand visual identity and the size of Crodino in international markets versus Italy, I mean, it's support behind it. In Italy, it's a very established brand. We're looking at its fundamentals, And this is something we're going to tackle very, very soon.
So we'd expect it to the same way as what we did with Campari Soda For it to take probably a year or so, but then start responding to what we do to it. There's no question that we've set a standard for the brand internationally, and now we need to reflect that into the Italian proposition. Aperol ready to enjoy. I mean, it's currently only in 10 markets. And when I say 10 markets, one of them is only a It's actually a test market in New York State and the U.
S. We've just started there too about a month ago. So really, we're in 9 markets. It represents about 5% of the total mother brand. Again, it's coming from nowhere.
And what we're seeing in all the markets is that it is additional volumes because it really is focused in the off premise and convenience stores and particularly warmly embraced by people who either live on their own or couples who don't necessarily feel like they want to open a whole bottle of Prosecco when fixing themselves drinks. So large gatherings, which is the heart and the core of Apro, continue to be satisfied With the perfect serve, with the full size product and full size Prosecco, You see that a case in point. I mean, in Germany, we grew by 17% despite the significant or very successful introduction of the Aperol Spritz ready to enjoy. We've also had it in Italy now, I think, 5 to 6 years and we've seen the mother brand continue growing double digit on a regular basis. And again, here, we've kept it very precise in the off premise and targeting it to special and particular occasions.
Got it. Thank you.
The next question is from Paola Carboni with Equitasim. Please go ahead.
Yes. Hi, hello, everybody. To Paolo and to Bob. I have a few questions. The First one, I appreciate your comment on gross margin, marketing and selling, which we're referring to the comparison on 2020.
I don't know if you can give us a sense of how we should expect these dynamics to be compared to 2019? And in particular, if you believe your confidence, let's say, on gross margin trend is enough to offset the drop that we saw in 2020? 2nd question It's about your long term growth. We have had already several questions on what could be a sustainable trend in particular in the off trade. I was just curious to hear from you, Let's say, kind of updated midterm target that you used to envisage midterm organic revenue growth for Campari, in the past, we have already seen a bit more of that in past years.
So I'm wondering if you have probably now A higher guidance for a sustainable growth for the group. A further point, sorry, probably I'm missing something. I would like you to come back On the point of restocking replenishment, which is a word you mentioned here and there in the presentation about In your answers, you have played down a bit this kind of dynamic. And in particular, I was looking to the Slide number 6. So in fact, I understand you play down it because We see that compared to 2019, sellout is still quite ahead of shipments.
But I was just struggling to give the right importance, let's say, to the few times you mentioned replenishment or restocking during the presentation. So I'm wondering whether maybe in that case you were referring to on trade whilst Maybe this chart on Page 6 is comparing sellout off trade with overall shipments, including on and off. So I was just I would like you to help me in understanding this chart and your comments on restocking. And really last point, Ravi, also a bit Boring, you mentioned the positive impact from U. S.
Tariff suspension. Could you quantify it for H1? And How much could this help also in H2 should the situation remain like it is today? Thanks.
Paolo, if you want to let me take
the 2 middle questions. Let's start studying.
Paolo is trying to gather some oxygen today. With regards to guidance, I mean, look, Within this environment with the pandemic still being true, etcetera, economies going up and down, we're not going to revise any guidance, I mean, you know us, we'll always sell as many cases as we can. Clearly, if you look at the fundamentals of the business, what we've been doing for the past 5, years have significantly strengthened the fundamentals of the business, our brands, our route to market, the organizations, our capability. So if this were a benignly normal world without external shocks, yes, we definitely would be doing better than what we've done historically, but this is not the time to pick out the number from a hat and give you that number further. We're too serious to do that.
And with regards to the stock replenishment, I was very clear in saying that the stock replenishment has not been material. I mean, we're still continuing with low stocks across the board, brands and markets, and we aim to maintain that situation, putting more pressure on the supply chain. On a selective basis, on a brand A or brand B, if it's got to travel 8,000 miles to go somewhere, We might have increased a little bit the stocks, but I mean in the grand scheme of things, it hasn't really moved the needles And that's where we'll stay.
On the other two questions, Paolo, if I get the first question correctly, if we look at 2021 versus 2019, not versus 2020, Well, I've described how we see gross margin A and P and SG and A moving in the second part of the year. The question is, Would you be in a position of recovering entirely the gross margin dilution you suffered in 2020 versus 2019? If we go back 1 year, we've lost last year versus 2019 to 180 basis points of gross margin. And if I remember it well, we've lost 380 basis points at EBIT level. Now, at June, we've recovered 130 basis point of gross margin, I'd say that we're expecting the trend to continue in the 2nd part of the year, but we will not be in a position of recovering the 280 basis point gross margin shortfall that we suffered last year.
And this is clearly due to the agave issue, which over the 2 year period accounted for 180 basis on gross margin dilution. So I said that we need to be a little bit patient and wait for 2022 to see the the full catch up. That said, we were quite positive because aside of gross margin expansion that is there and will continue in coming years. We also now rely on some very interesting operational leverage, which give us a little bit of flex on A and P spend, on structured cost, and this is very good. So the objective is clearly To fill the gap that pandemic created in 2020 versus 2019, we will not be in a position of filling entirely the gap this year, even at the EBITDA level, we're talking 70 basis points.
Okay. Thanks. And just to be your last question, Wes?
Sorry. Yes, the last question, I forgot. If the question is tariff, Impact overall is €18,000,000 €19,000,000 which we sell around 50% this year and 50% next year. In H1, we've revised $2,000,000 positive. And the remainder will be accrued in second half.
So for the standard in H2.
Okay. Thank you very much.
Mr. Kuntzakonjevic, there are no more questions registered at this time.
All right. Thank you. Thank you all very much joining us, and we truly look forward to hosting as many of you as possible tomorrow at the Camparino. These have been great 20 years and we look forward to even better 20 years in the years to come. So stay well, enjoy your summer, happy idea, make the most out of it.