Hello, and welcome to the Rémy Cointreau nine-month sales publication. My name is Josh, and I'll be your coordinator for today's event. Please note that this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you will be connected to an operator. I'll now hand you over to your host, Luca Marotta, CFO, to begin today's conference. Thank you.
Good morning, everyone. Thank you for being here with us this morning. As you have seen in the press release, Q3 sales showed a continued strong momentum above our expectations at +21% versus last year on organic basis, including around 2 points of extra growth linked to the Chinese New Year calendar, i.e. in absolute value of EUR 6 million. This performance implies a meaningful sales growth acceleration on a two-year basis from +26.9% in the H1 versus two years ago to 52.1% in Q3 versus two years ago. Overall, nine-month year-to-date sales recorded an outstanding growth of 38.1% versus last year, i.e. 35.7% to be compared to two years ago. This performance reflects a lasting high underlying demand across regions.
The second is solid resilience of the on-trade channel despite an increase in COVID cases as well as a strong double-digit growth in off-trade compared to the pre-COVID level. Looking at the overall sales performance by region. Let's start with Americas. The Americas generated a very strong double-digit growth in nine months, including a strong double-digit growth in Q3. On a two-year basis, this performance implies that sales value have been multiplied by two in Q3. APAC sales posted very strong double-digit growth in nine months, showing a continuous strong momentum into Q3. Moreover, Q3 sales growth accelerated versus H1 on a two-year basis. Finally, EMEA, Greater Europe region, grew at a strong double-digit both in nine months and Q3, implying that sales were back to growth in Q3 on a two-year basis. This was sell-in shipment.
In terms of value depletions at group level, all brands, we recorded a very strong double-digit growth in China and in Europe over the last nine months. In the U.S., depletions were down low single-digit over the last three months. This performance was impacted by the low level of VSOP inventories and amplified by strategic inventory management decisions as well as some logistical tension.
If we strip and we exclude VSOP, value depletions were up in the U.S. at strong double-digit over the past three months. If we take a step back, we have to remember that the base of comparison was very huge last year. November and December were the highest months ever on VSOP. What is more important for the U.S. is that on a two-year basis, cognac depletions are up at a stellar double-digit growth over the last three months.
To conclude on this very first slide, I would like to reconfirm our full year guidance that we upgraded last November. Now, on Pages 3 to 5, some initiatives that have been undertaken over the last quarter and illustrate our ambition to reinforce our A&P investment in H2, particularly on our global brands priority. Let's start with Page 3 and the new Rémy Martin XO campaign in China. As shared in previous session, XO is the game changer in China. The liquid is really fantastic and well appraised, and we have an opportunity to regain our fair share. This is why we are currently launching this new campaign, as we did with CLUB three years ago, with the success we all know. The new Rémy Martin XO film is starring the multi-award-winning actor, singer Li Yifeng.
34-year-old Li Yifeng rose to fame in 2007 after appearing on a Chinese talent show. His performances in China's highest rated TV dramas and blockbuster films have consistently won critical acclaim. He has reaped dozens of awards, including Best New Actor of the China TV Drama Awards and Best Actor at the seventh Actors of China Awards ceremony. In 2015, he entered the Forbes China Celebrity 100 list for the first time. The film is a celebration of excellence in life, all the elements it takes to achieve it, including people, places, and time, and all it takes to enjoy it, for which there is no better time than the present. This sense of urgency to experience the best thing in life is the hallmark of the millennial mindset, embodied by Li Yifeng, and encapsulated in the film's strong message, Excellence takes time, Taste it now.
With this film, we want to connect with a new generation of hedonists in China and highlight the exceptional excellence of Rémy Martin XO. The scenario captures the emotion and excitement of living in the moment while respecting clearly the past, and echoes the brand mission to team up for excellence. On Page 4, a couple of words on Cointreau, which is present in hundreds of cocktails.
We leverage the comeback of the Cosmopolitan in the U.S., which has been named among the most popular cocktails according to bartenders. Indeed, Cointreau is the number one brand spirit in Cosmopolitan on-premises menu listing in the U.S., which is very important. In the last quarter, in Q3, Cointreau partnered with one of the U.S.' biggest female celebrities, Jessica Alba, and one of the most prestigious media houses to reestablish the Cosmopolitan as the go-to cocktail.
Through this collaboration, we launched a limited edition Cosmopolitan cocktail kit sold exclusively online. This activation created a lot of buzz, and we are expecting more than 50 million impressions. At the same time, we launched a large campaign on the Margarita cocktail in Europe, including in the UK, focusing on outdoor advertising, digital video and social media during Christmas to drive awareness and consideration of Cointreau. As a reminder, the continued expansion of Margarita cocktail all around the world made with Cointreau, both in on and off trade, is a key driver of growth. As cocktail represent now around 55% of Cointreau sales, 40% still being drunk neat. Of this 55%, 40% is used for Margarita. We can say mathematically that around 20% of Cointreau is drank through Margarita cocktails.
Q3 has been another strong quarter for the brand, which continues to leverage the booming mixology trends and recorded more than +25% of sales growth worldwide. Page 5, The Botanist. We pursued our activation in the on-trade channel to increase awareness and visibility of the brands in Europe, in this case. One example is all the activation that we made to continue to leverage the rise of mixology through the martini drink strategy, which involved self-details on rituals, on-premise activation to grow our visibility, PR and social media. As you know, The Botanist is part of our global priority brands on which we would like to accelerate, notably in Q4, that will be animated by impactful initiatives. Q3 has been a strong quarter for The Botanist, with around +30% sales growth, and we are convinced that the potential is huge for the future.
As you can see, it's not everything about cognac in Rémy Cointreau group. Finally, Page 6 illustrates how we continue to animate our brands by innovating through limited and special edition. First, Bruichladdich Scottish single malt unveils the first ever biodynamic Scotch whisky. The unpeated spirit was distilled in 2011 from a single farm and matured for a decade on the island of Islay. The edition is limited to 5,000 bottles. Like organic farming, biodynamic methods don't use chemical pesticide or chemical fertilizers. The methods also enlivens the soil through biodynamic preparation and strengthen plants to guard against disease. Many wine growers in France apply biodynamic principle to nurture the soil in the belief that they improve the quality of the raw ingredients, resulting in a superior quality of flavor.
Second brand, Mount Gay, the world's oldest running rum distillery that will release a special limited edition bottling for 1703, The Republic Blend, to celebrate the move of Barbados to republic status last November. Limited to 200 bottles, The Republic Blend is crafted by Master Blender Branker. The result is a blend of pot and column still rums aged for 10-30 years in American oak barrels. Last but not least, Rémy Martin has teamed up with Scale Collective in China for a special edition of 120,000 bottles. Scale Collective is a group of French versatile artists bringing talents together to conceive a unique, immersive and scenographic experience. Inspired by the design of motion, this limited edition revisits the living heritage of Rémy Martin, celebrating the brand's vital elements, cognac, terroir, wine, and the eau de vie.
A symbol of nightlife, the bottle and the case honor the neon colors and bright strokes of the collaboration. This 360 activation program for CLUB focuses clearly on Asia and China to energize the brand, recruit younger clients, target and boost sales in on and off-trade and e-retail. Now, let's go back to figures for a while, moving to nine months sales analysis, slide number seven. Sales in absolute value amounted to EUR 1,085.8 million, up EUR 305 million year-on-year or on reported basis, +39.1%. This very strong result reflects on one side a strong organic gain of around EUR 300 million, EUR 297.9 million, i.e. +31.1%, +38.1% of organic sales growth, which includes 25.4% of volume effect and 12.7% of price mix.
A small limited scope benefit of EUR 2 million in turnover, i.e. a gain of +0.3% linked to the acquisition of Brillet and Telmont. Starting from the Q3, very clearly, a positive currency translation impact of EUR +5.3 million in nine months or a 0.7% gain in nine months, which turned positive in Q3, as already said, by a specific quarterly effect of +EUR 70 million. In terms of currency, this gain was largely driven by Chinese yuan, which contributed EUR +12.5 million to the total gain in nine months, and to a lesser extent by the British pound, which contributed EUR 2 million.
Conversely, on the negative side, the US dollar on the nine months deteriorated by EUR 10.2 million, showing a reduction of the loss that was EUR 17.3 million in the H1. Let's now turn to Slide 8, which shows on the left our quarterly performance over the past 11 quarters and the 12 months rolling organic performance of our Group Brands in red, which stand at +33.6% end of December. The Q3 2021-2022 performance confirmed the strong momentum seen in the H1 2021-2022, and this on the top of the highest base of comps of the year. Beyond that, our sales are also well above pre-COVID levels and even has even accelerated in the last quarters.
Sales grew by 35.7% compared to nine months two years ago, following a strong Q3 at +52.1% to be compared to two years ago, as shown by the right part of the slide, which is in red. Now, slide number nine, let's dig into organic trends by region. Let's start with Americas, whose organic sales were up a very strong double-digit in nine months. Inside America, let's start with the U.S. Sales in the U.S. were up double-digit in the last quarter, led by the high-end segment, including Louis XIII, XO, and 1738. The group continued to benefit from a strong demand driven by the dynamism of the on-trade.
Indeed, disruption linked to the COVID was limited, except maybe in the New York State, where some bars and restaurants staff were affected by the COVID, and which triggered some temporary closure. In parallel, off-trade channel continued to show a strong resilience versus pre-COVID level, being up strong double digit on a two-year basis. Overall, the level of the inventories remains low, particularly on VSOP. This has been amplified by, I repeat, strategic inventory management decision taken by us on VSOP, as we are structurally fostering 1738 over VSOP, as well as some, but minor than in the past, logistic tension. In this context, value depletion, the best approximation of the final sellout performance, was positive in the nine months, but down low single digits over the last three months, impacted by VSOP.
If we excluded VSOP, value depletion were up strong double digits over the last three months as well. As already said, base of comparison was extremely high last year in November and December. If you compare to two years ago, we are clearly in another game, in another league. Canada sales were impacted by shipment disruption in Q3 as strikes which occurred in Quebec blocked the arrival of some shipment of several brands. Conversely, Latin America enjoyed a dynamic very strong double-digit growth in Q3 on the back of the continued recovery of the tourism. End of December, the Americas region accounted for 51% of group sales, down 1 point year-on-year. Second big region, APAC, Asia-Pacific. Organic sales growth were excellent in the nine months, outperforming, if we want, the Americas, mathematically speaking. China, inside APAC, is clearly the most important country.
China grew at a very strong double-digit growth in Q3, led by Louis XIII, XO, and CLUB. Single-malt whiskey recorded another new excellent performance at triple-digit. From a channel standpoint, almost all channels were very dynamic. E-commerce recorded very strong performance, supported by excellent results during the Double 11 and Double 12 days. In the meantime, our own boutiques outperformed, while on-trade slightly marginally underperformed, impacted by some local closures due to the COVID. Looking at value depletions in China, they were up at very strong double-digit across portfolio. Talking about the rest of Asia, we also reported a strong double-digit growth following a reduction of health restrictions and led by Australia, Malaysia and parts of North Asia. End of December 2021, APAC globally accounted for 31% of group sales, up 2 points versus last year.
Last region, EMEA, organic sales overall were up at a very strong double-digit nine months, in line with value depletions as well. The overall performance of the quarter was led by Eastern and Western Europe, supported by market share gains, particularly on Cointreau and Botanist, as already said. U.K. also recorded very strong growth led by Cointreau and cognac division, in that case. Rest of EMEA countries showed strong dynamics, except if we want, on a less positive note, Benelux and Austria, where on-trade was clearly affected by lockdowns at the end of the year. End of December, EMEA big region accounted for 18% overall group sales, down 1 point versus last year. Now, let's move to our nine-month sales growth by division, slide number 10.
Our 38.1% organic sales growth at group level, i.e. 35.7% on a two-year basis showed a broad-based growth with the Cognac division up 38.5% in nine months or 38.4% versus two years. It's quite the same figure. +38%, +38% two years in a row. Wow. In Q3, the Cognac division also benefited from 2.5 points of positive calendar effect linked to the Chinese New Year, EUR 6 million. At the same time, after this stellar performance of the Cognac division, Liqueurs & Spirits were not sleeping, being up at +9.1% in nine months, i.e. +30.6% versus two years. This is the most important thing, I think, of the group. We are changing scale, and we are progressively more balanced between division and brands. It's not only about cognac.
Meanwhile, partner brands were up +20% nine months and +13.1% versus two years, supported by good dynamics, specifically for these brands in the U.K. and partially in Benelux, despite the on-trade last-minute closure. Let's now turn to Slide 11, and we start the analysis by division, and we start with cognac. Cognac posted a stellar organic growth of +38.5% in nine months, including 22.2 volume increase and 16.3 price-mix gain. So pricing power is at this stage there. At the end of December, cognac division accounted for 73% of our sales, stable year-on-year. Let's start the regional analysis of cognac beginning with Americas. In Americas, we start with North America, so U.S.A. and Canada.
Cognac says we are up a very strong double-digit in nine months on top of very high comps, and despite some strike in Canada, which impact the arrival of our shipment in the third quarter. U.S. generated a strong growth above our expectation, reflecting three elements, and this is very important to understand the dynamics in the U.S. The extremely high and resilient level of final demand, which is important. Second, a solid momentum in on-trade despite some COVID cases in some states. Third, the strong outperformance of the high-end segment, including Louis XIII, XO, and 1738, which is more accretive and higher in the mix, clearly, to be compared to the entry, which is VSOP for us. We are not in VS game, and we are happy not to be.
In terms of value depletions, they were down mid-single-digit over the last three months, impacted by the performance, as already said, of VSOP, which is also our decision. On top of low-level inventory, VSOP value depletions evolution was amplified by our decision to manage strategically our inventory as we continue to foster 1738, which is, I repeat, much more accretive, as well as some but minor logistics tension compared to the previous months. If we exclude VSOP, value depletions were up strong double-digit in the quarter as well.
Consequently, in terms of volumes, cognac depletions were down versus last year, but outperformed clearly the market, and they were up +46.8% over the last three months on a two-year basis, showing the huge base of comparison we had last year and the fact we are playing in another type of game. Price and mix effects were strongly positive in terms of value depletions by 10 points in the 12-month period ending December 2021, led by price increases as well as positive mix effect.
Latin America recorded an excellent performance on its high-end brands, including XO, Louis XIII, and 1738, while VSOP was impacted by its low level of inventories. Second big region for cognac, APAC, in which China recorded an excellent performance both in the nine months and the Q3, driven by the high-end part of its portfolio, Louis XIII, XO, and CLUB. Inside APAC, mainly China recorded a very strong double-digit sales growth across our cognac portfolio in Q3, translating into a strong double-digit growth in value depletion as well over the last three months.
This reflects a favorable calendar effect. I repeat, EUR 6 million, which is for the APAC region, around 5.5 points of extra growth in Q3 because of this phasing, as well as the strong performance of e-commerce led by 11.11, Double 11, and 12.12 special days. Looking forward, we are today cautiously optimistic for the upcoming Chinese New Year, considering the current COVID restriction, but we expect to gain further market share to outperform the market, clearly using CLUB as a positive and unique weapon. Hong Kong generated triple-digit growth despite some COVID impacts at the end of the quarter. Macau also recorded an excellent performance, while Taiwan was back to a strong double-digit growth in Q3, which bodes well for the near term.
Rest of Asia. In rest of Asia, we recorded a strong double-digit growth in the Q3 as health restrictions started to ease a bit during the quarter. In this region, Louis XIII performed particularly well as well. EMEA, in which cognac sales are lower compared clearly to the other two regions, but cognac sales generated a strong double-digit sales growth across the region, particularly in Russia, Germany, France, and the U.K. Overall performance was driven by 1738 and Louis XIII. Now, let's talk about the other division, Liqueurs and Spirits. Slide 12. Liqueurs and Spirits division posted a +39.1% growth in nine months, reflecting an increase of 30.1% in volume and mixed price gain of 9%. At the end of December, Liqueurs and Spirits accounted for 24% of sales, stable year on year.
Let's now review the performance of the division by region. Americas. North America, U.S. and Canada, recorded a very strong double-digit sales growth in nine months, including a strong double-digit sales growth in Q3 on top of very high comps as well. U.S. recorded a very strong double-digit sales growth led by Cointreau whiskey portfolio, as well as The Botanist, our gin.
The latter enjoyed very good dynamics in the on-trade channel and benefit from market share gains and new listing. In parallel, Canada, as already said, was also for liqueurs and spirits, little impacted by strikes in the Q3. Regarding Cointreau in the U.S., which is very important, value depletions were up strong double digits over the last three, six, and 12 months, clearly beating the market performance.
Volume depletions were up +27.3 in the last three months versus last year, and up 47.9% on a two-year basis. Besides, price mix was flat versus last year in the 12-month period for Cointreau U.S., ending December 2021, reflecting some adverse mix formats linked to the outperformance of the Cointreau 1L , which is used in on-trade for cocktail versus 70, 50, which is more off-trade. It's a negative price mix and a positive consumption news. In parallel, Latin America recorded an excellent performance in Q3 driven by Cointreau, Monin, and the whiskey portfolio on the back, on the heels of the gradual recovery of tourism. EMEA, which is very important for the Liqueurs & Spirits division.
In EMEA, sales grew at a very strong double-digit sales growth in nine months in Q3, led by all subregions and brands, particularly Western, Eastern Europe in Q3. This is very important, in line with depletion growth recorded over the last nine months because our inventories are very lean and clean in Europe. This performance reflects the strong rebound seen on the on-trade despite the rise of COVID cases in some countries, and off-trade remained resilient after the new game and new paradigm which ensued. On a brand standpoint, Cointreau outperformed in the last quarter, boosted by market share gains in key markets, and Botanist benefited from a new listing West Europe. Metaxa generated a strong double-digit growth led by Greece, Poland, and Germany on the back of the strong and pure commercial execution.
Last but not least, whisky portfolio recorded strong double-digit growth, reflecting new listing gains in the last quarter, Q3. APAC is less important in this stage for liqueurs and spirits. The insights we have, some elements to share. China posted an excellent performance both in nine months and Q3, led by single malt whisky, which enjoyed persistent strong dynamics among the new generation in Northern and Eastern regions. The Botanist generated another outstanding quarter, driven by the development of the category in the high-end segment of the gin market. Rest of Asia, the group posted a strong performance for Cointreau led by on-trade. The whisky portfolio generated another very good quarter in Southeast Asia, and Japan was impacted a little bit less by the restrictions, but impacted by low inventories. In conclusion, then we'll start the Q&A.
Slide number 13. This strong quarter ahead of our expectation reiterates our confidence to continue to outperform the exceptional spirits market in the fiscal year 2021/2022. As already mentioned, this will be a year of two halves, both in sales and operating organic growth. We expect to generate a strong organic sales growth for the year, with H1 being strongly above H2 growth. We also expect to generate a very strong organic COP growth that will be only driven by the H1 outstanding growth as H2 organic COP operating profit decrease reduction will be impacted by three elements. First, we confirm that we are significantly increasing our marketing and communication spend in the H2. Second, before the price increase that will be applied at the beginning of the next fiscal year, April, we reaffirm our decision to manage our strategic inventories of eaux-de-vie and aged eaux-de-vie.
Second, optimize as well our sales value on brands which are performing strongly this year, such as Cointreau, and will be impacted by the price increase as well for the next year. Third point, the high base of comparison of H2 if you compare to the previous year. All in all, we confirm an organic improvement of our operating COP, operating profit margin for the full year. One last word on the scope effect and FX on operating profits. For the full year, we expect a negative scope effect of EUR -2.4 million, which is now ended, so it should be fixed. While we now anticipate a neutral FX impact on operating profit, which is slightly better.
As you know, currencies are very volatile, and as I said many times, we update you with the best of our internal assumption every quarter to try to help you with your estimation. Thank you for your attention, and I'm now very happy to take your potential question if you have some. I don't know. Chinese New Year, maybe, I know, probably. I don't know.
Thank you very much. If you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad now, please. Please ensure your line is unmuted locally, and then I will introduce you into the call. That is star one on your telephone keypads now, please. We do have some questions in the queue already, and our first question comes from the line of Simon Hales from Citi. Please go ahead.
Thank you. Morning, Luca. Three questions, sort of please, if I can. Obviously, firstly, you clearly are upweighting investment, you know, as you've been guiding towards through the second half of the year, and you've given lots of examples, you know, of what you've been doing, you know, through Q3 in the presentation. But have you had any disruption at all with regards to your investment plans due to some of the COVID restrictions that we've had in markets such as in Asia and Europe, sort of impacting at all in Q3? Or are your plans exactly on track with where you hoped they would be? That's my first question. Secondly, could you expand a little bit more on your confidence in your expectations for Chinese New Year?
You know, how wholesalers, you know, have been buying in ahead of it. Perhaps some of the more recent e-commerce trends. Clearly, there's a bit more uncertainty than there was a couple of months ago with regards to the Chinese New Year outlook. Then thirdly and finally, I mean, overall, you've reiterated for the full year your organic growth expectations that you laid out with the H1 results, in November. You're clearly stepping up that investment. Given the strength of performance in Q3, which you said beat internal expectations, especially coming from some of the higher margin brands, how comfortable are you now with consensus expectations, which have been rising towards or the high thirties from an organic EBIT growth standpoint for the year?
Thank you so much. Three important question. The first one, A&P. As we explained many times, our approach is a long-term view. The objective is not to punctually boost our sales, but to build our brands for the future by increasing their desirability and awareness. We have today a fantastic opportunity to push forward the boundaries. The current environment, even if we have some punctual specific COVID restriction, is not changing our plan or changing margin. As of now, after the Q3, we are totally in line with our plan, our boost plan, but through a strong part of our spend will occur in the Q4. Potentially we might have some marginal disruption considering the COVID.
To give you a specific element, overall, in H2, we are clearly committed to have an A&P global spending growth that will be clearly outperformed at the sales growth of the H2. So the A&P, despite the marginal restriction, are not changing in term of execution or term of plan. Their growth, I repeat, will be bigger in H2 than the growth of the sales, helping to continue to improve the awareness of the brands and the strong pricing power that we have and that we apply since the beginning of the next fiscal year. Second question, Chinese New Year expectation. As shown by our Q3 sales, the performance was really strong in the Q3 in China, meaning that the confidence is strong.
Today, clearly, the situation is a little bit more cloudy compared to the one or two months ago because of some restriction, some punctual lockdowns. All in all, considering our result year to date in sell-in and our first sign of dynamism, we are today cautiously optimistic for the upcoming Chinese New Year, considering global situation. So far, also the depletions are almost in line with our internal expectation, clearly led by the strong outperformance of CLUB, which is important because if you consider in some restriction are also in terms of number of tables of people that can attend a dinner, means that our CLUB is winning market share on-trade, also in the more limited on-trade events and banquet. We are clearly capitalizing on that.
QSS plus Louis XIII XO are slightly low compared to our expectation, impacted by the on-trade punctual restriction. Overall, we are cautiously optimistic, and we think to gain market share. We do not expect Chinese New Year 2022 to be the best ever for all the industry, but we think that we'll be respecting our global overall expectation, and I repeat, counting on CLUB more than the other products. We will gain market share, meaning that we will outperform in our hypothesis the market performance. Restriction and punctual lockdowns in China are creating some local disruption. However, this is today manageable at this stage and, more importantly, is changing nothing in terms of what will happen in the future quarter and in future period in terms of pricing power and global final demand. Consensus.
I will try to answer you on both top and bottom line. Let's start with sales. If your question is, considering the better than expected Q3 sales performance, do you think the sales consensus is fair? The answer is yes, it is. The outperformance of the Q3 does not change in any way our full year outlook on the top line because it's mostly coming from the cognac division and whiskey, in which we are strategically managing our inventory in China and the U.S., and what is being sold in Q3 in terms of shipment will not be sold in Q4 because it's urgent not to sell too early before capitalizing on the future price increase. We are okay with the top line consensus. What about the bottom line?
Considering that the top line for the whole year is not changed because Q4 will be deducted in terms of performance what we overperformed in Q3, Q4 will be a negative quarter in terms of top line performance compared to the previous year. The fact that we are continuing significantly increasing our A&P, the consensus on organic growth is spot on at this stage, is the right one.
Even if we might have some specific disruption on A&P at this stage, the combination of two makes that both consensus are positioned at the right level for the top and bottom line. I hope it is clear. The news is that in terms of EPS, the improvement of the FX plays a positive role for your model in terms of the earnings per share at published level. We do not guide at published level. It's only a consequence. We guide on organic growth.
Okay. That's very clear, Luca. Thank you very much.
Thank you very much. Our next question comes from the line of Mitch Collett from Deutsche Bank. Please go ahead.
Hi, Luca. I've got two questions, please. Firstly, given the reduction or the decrease you're expecting in Q4, can you perhaps comment on where you expect inventories to be at the end of the fiscal year? What assumption for that you're baking into the expectations you've given? Secondly, you talked about taking up prices for some of your liqueurs and spirits brands. Can you comment on the quantum of that price increase? And do you expect that to be matched by products you compete with head on, or do you think that your products are gonna be moving up the price ladder and premiumizing with those price increases? Thank you.
Thank you so much. Let's start with inventories. Our vision at the end of the year, considering our expectation of a negative top line Q4, is that in the U.S., there will be low, very, very low on VSOP, low also maximum one month on to 40 days on 1738 and also in the QSS. As already experienced the previous year, you will have a mathematical rebound. It's too early to talk about the next year, but in terms of phasing, the fact that we are ending with low inventories, strong price increase, and catching back on between shipment and underlying demand makes that the first part of the next fiscal year will be pushed positively by this low level of inventories. In China, sell-in and sell-out were relatively aligned in the nine months.
We consider it should be relatively healthy at the end of the year. The coming weeks are very important for China because as I said, we are optimistic on Chinese New Year, but we have also to understand what will happen on a specific line by line of products. So will be probably very low on CLUB and a little bit higher on QSS Plus, but it's not changing a lot, and we are not in an unbalanced situation right now. Europe, no issues because they are very healthy situation at this stage between sell-in and sell-out. We might have one country more complicated than the other one, but overall, we'll never be in such a clean situation overall in Europe, in between balance between sell-in and sell-out.
It's not the most important region for the group, but there is no issues in terms of inventory. Overall, at group level, we are fine in two regions, and we are low level on the biggest one. Crossing fingers and touching wood, beginning of next year should be influenced by positive dynamism linked to this alignment between sell-in at the end of the year and strong underlying demand that continue to catch up. If we are able to realize what we are committed to, so to win and gain market share on sell-out or best approx sell-out everywhere in the world, and capitalizing also on the liquors and spirits more than the past, I think that we're in a very good position also for the next coming quarters, years, and the medium long term.
In terms of prices. Prices, we will continue to increase prices. Let me step back a moment because maybe we forget sometimes that we increased price in October 2020, April 2021, in some countries like U.S., October 2021, and you have seen the impact. Not only in cognac but also in liqueurs and spirits in terms of valorization in P&L and valorization also in depletion. We are very proud of that. We continue to increase prices also because if we... Strategic management of inventory is to valorize that, otherwise we will be stupid. In the beginning of the next fiscal year, we continue to increase prices. Not only on cognac and allocated specific product, we manage our inventories like single malt whiskey.
This is one of the major new compared to the previous past. On other brands for liqueurs and spirits, including Cointreau, we continue to handle the momentum with more A&P. The prices also are more part of the strategy, not only volumes for these accretive brands. Clearly there will be some difference considering different countries and the competitive arena as well. Overall, we have a strong expectation in terms of pricing and mix for an accretive journey for the next year. Which is important also because we are doing some inflationary cloud, which is a negative overall but can be also an opportunity to have a positive impact on price increases. Prices in 2022, 2023 will be growing strongly for the group.
Understood. Thank you.
Thank you very much. Our next question comes from the line of Laurence Whyatt from Barclays. Please go ahead.
Morning, Luca. Thanks very much for the questions. Three from me, if that's okay. Just following on from the last question around pricing. You mentioned it would be very strong, but of course, inflation is running at some fairly high levels across many parts of the world. Would you expect your pricing to be at least in line with that inflation that we're seeing in your main markets? Secondly, Liqueurs and Spirits. Many of the main products in Liqueurs and Spirits division are unaged. Therefore just wondering if there are any other reasons apart from wanting to sell this at slightly higher prices next year for holding back stock in this year. Finally, you mentioned that your VSOP business is being strategically managed. Do you intend for that, the absolute volumes of VSOP to continue to decline pretty much every year from now on? Thank you very much.
Thank you so much. The first question, we will not manage pricing considering inflation by country. We consider more the competitive area and the fact that we are stronger pricing support. We will not make some specific calculation on the country by country inflation. Overall, I can guarantee you that we'll continue to be quite bullish in terms of pricing because we think that our brands deserve it. Also the tools that we are putting behind our brands is increasing year after year in terms of strength of A&P and also operational means at the service of these brands. In terms of Liqueurs & Spirits dynamism, at this stage, maybe I misunderstood the question, but I don't think that we are unbalanced in terms of sell-in and sell-out.
We're performing quite well. I don't think that there will be an issue in terms of stock level. We continue not only to increase price because it's something new on that, but we clearly, as a first element, to increase the desirability and the awareness of our brands. Because the first name of the game, apart from Cointreau, which is a strong top of brands that to increase the U&A, the usage and attitudes of the brands, the other needs to be known. Let's start by The Botanist need to be known. That was a very, very good gin, which is in the highest part of the portfolio. There is a training and knowing, teaching game to be followed. A&P will be increased on these brands. VSOP, it's a little bit complicated.
It is not a strategy to reduce the volume per se. It's the consequence that we are globally trying to improve the market share of our intermediate plus and QSS product for the future. What is VSOP today can be, in some years, XO. We have to preserve this, which is a much more important and strategic weapon for the future. Prices will go up, also VSOP. The strategy is not to reduce the volume, it's more the consequence that VSOP will be valorized and addressed to the most profitable also countries in the world. We make a lot of arbitration with our local teams in the U.S., for instance. Sometimes you argue that some states are underperforming if you compare NABCA to open states.
It's important that you understand that we are guiding our decision also inside this line, state by state. There are states that are much more attractive in terms of gross margin than other. Clearly, open states are more attractive than controlled states. Sometimes we make some decision. It'd be more this ongoing exercise that, as a consequence, could weigh negatively on the volumes. That is not the first thing that we have in mind when we preserve our efforts for the future for the other ranges.
We are very, very pleased not to be in the VS game anymore since 10 years, because otherwise it would be much more complicated situation being dependent from another entry product. It is, in our opinion, a strong competitive advantage that the group has taken this decision in 2013, 2014. It's very, very important. It gives more freedom and ability to play in the highest part of the portfolio.
Understood. Thanks very much, Luca.
Thank you very much. Our next question comes from the line of Edward Mundy from Jefferies. Please go ahead.
Morning, Luca. Three questions for me, please. The first is on the U.S., and the Cognac category's seen some really good performance during the pandemic with, you know, some consumers trading up from brandy and other brown spirits into the category. Within your discussions with key customers, is there any nervousness that the withdrawal of stimulus could impact the Cognac category going into 2022? The second question is on your XO relaunch in China. Any early feedback from the trade on how that's going and how it's resonating with consumers? The third question, again, on China, have you got any more thoughts on common prosperity and what this means for your business? There has been some commentary in the media recently around government crackdowns. I'd love to get any more views on common prosperity at this stage.
Thank you. I will try to be succinct on the first one. We do not think the stimulus play a big role on the Cognac performance, at least for our specific products and our categories. In some times some specific case can play a specific tactic positive, but nothing change our performance if you consider over two years are not influenced by that. Cognac was part and it is part of the categories that are clearly winners after the pandemic and continue to be positive influence. If you consider the short term, it can be some negative in terms of depletions month-over-month or quarter because of the combination of huge comps and sometimes logistics, but also the fact that you can have some COVID restriction yo-yo effect.
No, if you compare over two years, we are clearly in another dimension, and we think that we continue to be structurally there. The off-trade was clearly less there two years ago, is there, and will continue to be there because the off-trade of the personal consumption at home, it's more stable than the on-trade, which is clearly more volatile. The on-trade has been back faster than we expected, and we are capitalizing on that. On top, e-commerce. E-commerce was 4% at worldwide level. Now we are between 8%-9%. Slightly decreasing compared one year ago because the strong growth is slightly less than the overall.
It is clearly another dimension which is added to the global footprint and to global categories, and not only in China, also in the U.S., Australia, U.K. and some other countries. In terms of China, common prosperity, I think that is an opportunity for us because our portfolio is well-balanced and with different category of people is not a threat at this stage. It can be a short-term potential theoretical element of disruption. So far is not playing a negative role, and I think the overall is an opportunity because our penetration is still very low, and overall the demographics and the macro elements are with us. In terms of the on-trade, we continue to perform correctly in all the regions.
Yes, we have some disruption, but they are well lifted if you consider China a bit in the last weeks. The only one being, for a very important region, Guangdong, in which we have some limitation for 10 people that need to attend to the bank. But as said, in terms of first data we are getting, we are increasing our market share, and the consumption is very strong in this location. Specific lockdown restriction will not be the best Chinese year of the last 20 years, but it will be a solid one so far, respecting our expectation.
Thank you very much. Our next question comes from the line of Jeremy Fialko from HSBC. Please go ahead.
Hi. Good morning. Jeremy Fialko, HSBC here. A couple of questions. First one following up on China. Yeah, you sounded a little bit reticent about the trends in the new year. Is this something that you really just attribute to some of the restrictions that are, you know, in place in local areas? Or are there any areas in which you feel the underlying demand might be weakening at all? Really getting a little bit more perspective on that. Secondly, if you could talk about travel retail and, yeah, I guess when we look at Europe, it feels as though in many areas, the restrictions are lifting.
When you think about the calendar 2022, maybe you could talk about what your expectations for that are and what percentage of the pre-COVID level it might recover to by the time we, you know, sort of six or 12 months time. Thanks.
Sorry, can you repeat the first one? Because it's not clear for me over China.
I was more talking about the, what you said is the underlying demand, from sort of consumers as the category. You sounded, I'd say, a little bit cautious in the tone on Chinese New Year. Is that purely due to the local restrictions that are in place, or do you feel that the overall consumer there has become a little bit more cautious? That was just to try and clarify between those two points.
Okay. Thank you. We are optimistic, but a little bit more cautious than we were two or three months ago. It means what it means. It means that we are still optimistic, but clearly, there are restrictions that are punctually playing a role on some sub-region, which has put some more cautiousness inside our short-term expectation. But again, it's not changing anything in the next quarters, it's not changing anything in the medium to long term. It's not structural at all. It is only to try to be as transparent as we can with you saying, "What about Chinese New Year? Do you expect which would be negative, will be an average, will be plus, will be a very positive?" We do not expect to be very positive.
We expect to be in line with our expectation, not the best crew of the last 10, 20 years. It will be to beat the competition and the market. It is, if any negative assumption has to be taken by somebody who is not a believer, is more critical in terms of approach, is only short term, is not structural at all. If you consider the structural element, if I may, you have to focus yourself more on the new generation that are coming on board and clearly out of cognac tasting and buying a lot of single malt whiskey, in which also we have to strategically manage our inventories because we don't want to sell too much too soon with another category. Some opportunities also in liqueurs and spirits that can only grow in China as well.
In cognac CLUB, which is really accretive compared to the old VSOP. As you understand, we never talk about a VSOP in China as well anymore. We have a bit, but it's not the focus of our strategy. CLUB is clearly beating expectation after expectation. If any negative assumption would be taken, it's by some of you, it's only short term. Don't be surprised, we'll continue to beat your expectation for the negative guys in the next coming quarters. I'm a bit bullish on that, a swagger, if you want, but I'm sure about that. The second point, it is GTR. GTR is performing well, very well compared to the previous year, but it's not important because it's nothing compared to the pre-COVID level.
At this stage, we will not be back at the pre-COVID level until at least 2022-2024. We are catching up. This is a long journey, it's complicated, and we are still very far from what it used to be. That is a good question because historically, we were very, very happy with our GTR business between 10%-50%, both top and bottom line. The day we'll be back, GTR will be playing an accretive role. Our long-term plan has been built with the GTR, which is progressively ramping up, and we are not counting on that too soon. No negative element on that. The fact that we are taking more time could be also an additional opportunity. As a reminder, GTR used to be and is very strong also on liquors and spirits brands.
Okay, thank you very much.
Thank you. Our next question comes from the line of Fintan Ryan from JP Morgan. Please go ahead.
Good morning, Luca. Two questions from me, please. Firstly, just in regards to what you were talking about within the expanding the Botanist brand and the sort of Martini cocktail serve, as I appreciate how iconic the Cointreau brand is for the cosmopolitan and the margarita serve. Are you sort of progressing your thinking around these greater emphasis on cocktail occasions? Would you consider maybe the need to acquire some of the adjacent ingredient brands within the sort of cocktail mix? Like, do you see if you're really going all in on the Martini serve, do you feel the need to have direct ownership of Vermouth brand? I guess similar with margarita.
I know you've done well so far, but is there a scope or a need for to have your own in-house tequila brands to sort of properly market the complete experience? Then secondly, I know there's been a lot of focus on in terms of the U.S. inventory, strategic inventory management and, you know, what that has led to in terms of your volume depletions. But when it comes to the supply chain and logistics tensions, I guess the external part of the equation, has there been any incremental improvement in the supply chain situation over the last, you know, two to three months? You know, what would you expect that those tensions and the weight on your depletions to hopefully drop out by the time you start FY 2023?
Thank you for your two questions. You're right. Cocktails are more and more important for our sales. Our strategy is really clearly shifting in terms of support more crucially to that, not only for Cointreau, which we also have a lot of other opportunities to be followed, but also for other brands like St-Rémy as well or Botanist. Botanist, our gin, the name of the game is to be able to taste it and to know it because we think that the liquid has a strong superiority, and there will be a teaching education exercise and some more occasions which will be shown off to increase the top of mind of the brands. For what it makes the U&A, usage and attitudes of this brand.
I have two answers to your question. The first one, our plan is built on organic basis without any specific M&A. The journey is not taking into account that could be also accretive to that in terms of top line. It's not so clear in terms of bottom line because when we have some acquisition, you have to deal also with some negative figures in the short term. It depends on the category, it depends on the jewel you are buying. In terms of interest, you are naming some of the opportunities. Clearly tequila is something that could make sense, even if it's more regional than our common way of thinking about acquisition, but could be an opportunity because makes sense to have an all vertical cocktail made with products done with group brands.
Some other ingredient could be, but they are not alcoholic, and our expertise is more on spirits and liqueurs than in non-alcoholic product at this stage. I think we are more on that optics so far. We are screening the markets every day. We look into a lot of potential acquisition. It is not the first aim of the group. It is the organic growth. We have a lot of opportunities, but we are awake on that, and we are more looking into alcoholic proposal eventually and then non-alcoholic. U.S., you're right.
The fact that we are strategically managing our inventories, and that there is some misalignment between sell-in and sell-out makes those figures need to be interpreted and to be analyzed because you have sometimes shipment up, depletion down, and so on. This is more a consequence of our route to market, which is quite long compared to other industry. What we have to consider is the strong underlying demand which is there. In terms of disruption linked to external factors like logistics, we witnessed some clear improvement compared to the months of July, August. Situation is more lean. You have some barriers, more episodic. For the future, we have to deal with increasing costs, first of all, which is taken into account in our expectation for the next year.
Saying that, I'm not putting any threats about the gross margin, because we are able to manage the cost-based increase in terms of gross margin next year. Be sure that the first tool, the first weapon of increasing the bottom line will continue to be the gross margin. We have to consider an increased cost of logistics. In terms of operations, we are not the only one that can decide, because there are a lot of dynamics. It can be also during next fiscal year, some tension, more or less accentuated, more stronger in a quarter. Globally, overall situation has been improved, and we took some specific measures also to try to be a little more independent in terms of logistics all over the world and mainly in the U.S.
It is a complicated situation, less complicated before. I repeat, the most visible part would be the increased cost of doing business through logistics. It is a threat for our margin and your expectation? No. It is taken into account as well as the inflation. We might have specific quarterly disruption or figures impact overall on yearly basis. They will be clearly absorbed and more than compensated, and gross margin continue to hammer positively for the next fiscal year.
Great. Thank you, Luca. Very comprehensive.
Thank you very much. Just as a reminder, it is star one, if you would like to ask a question. Our next question comes from the line of Chris Pitcher from Redburn. Chris, please go ahead.
Good morning, Luca. Thank you for taking the questions. I have a couple. Firstly, you mentioned you expect to beat short-term expectations. The outlook for this year implies sort of 9%, that sort of level decline in sales in the fourth quarter as you manage inventories. Should we expect that to pretty much reverse in Q1 fiscal 2023 pretty quickly, or do you think it'll take time for retailers and consumers to digest your price increases?
Do you think there may have to be some promo support around the higher shelf price? On the second question, obviously there's a lot of celebrity collaboration going on in the business. Can you give us a bit more detail on how these collaborations work? How long are the celebrities signed up for? Are they getting sort of flat fees? Are they linked into the Performance Brand? Is the cost of this taken through the A&P line? Thanks.
Thank you so much. The Q4 will be at group level, negative double digit, so not -9%, as you said, will be negative double digit, implying that the overall consensus is the right one. The strong demand being there are all the elements that are there to have a positive Q1, even if last year was a very strong one. This is not what we are 100% sure will happen because we have a very strong, huge comp, but there is no fear that the price increase can be a negative element of the growth of the next quarter. If there is any potential negative element, it's only the execution.
Because we have a huge comp that we have to match last year, it was more than 100%. The fact that we are retaining our sales for the Q4, putting that at the service of the stronger underlying demand in the Q1 makes mathematically a more positive expectation for shipment in the Q1 than it should be. With a strong execution, engagement and commitment for the group, because once again, we have a huge comp to match. In terms of celebrity, I will not disclose this kind of element because I'm too sensitive. Clearly they are part of the A&P as any celebrity star endorser is part of the support. Yes, it's not in OpEx, it's in A&P.
Thank you.
Thank you very much. Our next question comes from a line of Pinar Ergun from MS. Please go ahead.
Hi. Good morning. Just a quick one. Are you worried at all about the rising cost of living across the world? Is there a risk that could have an impact on premium spirits demand? Thank you.
A very quick answer. We are so underpinned and penetration is so low that the demographic will play a positive role. We are not worried about the increase of cost of living because if any negative impact will play a part of the actual base of consumption, we have still a lot to do to gain in terms of individuals to be able to profit of our wonderful spirit. We are not because the number of users are still very far from what we can get.
Great. Thanks.
Thank you. The final question in the queue comes from the line of Trevor Stirling from Bernstein. Please go ahead.
Hi, Luca. Thank you very much for all the explanations today. One technical question, Luca, which is trying to think about not so much Q4, which you've already indicated, but about Q1. If, let's say, underlying for demand in, is in double digits, and Q4 is negative double digits, is it right to think that that sets up a sort of roughly 20% easy comp in Q1 that would then be added on top of the underlying demand in Q1? Is that the right framework to think?
I don't think so, Trevor, because you have considered the stocks could be even more. The mathematics could be even more of that, because then the stock as a moment in time compared to the previous one. The fact that we have to remind that the comp is huge, and after our and my financial guys calculation, there are people on the field every day, they have to match on a daily basis, very strong comp. Your calculation could be even higher a bit in terms of performance. It is to be compared to have to cope with concrete operational daily basis.
Because the fact that we are changing gear and changing our game, means that we have to be able to follow the pattern and to be organized as a company which is increasing at very strong speed. In terms of expectation, we are very positive for the next year. All else equal.
Thank you very much, Luca.
Thank you. We have no further questions in the queue, so I'll pass you back over to the hosts.
Thank you so much for your question today. They were very interesting. I think that the conf call end of April will be very interesting as well, with a lot of question. That you, Trevor, and some of you already started in terms of what that means is negative on the short term. I will talk a lot about the long term. I will try to remind you that there is no long term without short term. It will be an interesting exercise on both of us. I will be more long, you will be more short. Okay. By the end, no problem. It will be summer. In a word, we are very, very happy about this performance. We are optimistic for the future.
We'll be witnessing a negative quarter in terms of top line, which is our decision. Retain only that. It is our decision. We might have some negative elements here and there. COVID restriction. Clearly, the situation is not balanced and is not yet 100% everywhere. We might. You might have some negative ideas about China in the short term. It's not worrying us because we think we are with the right product, with the right strategy, and we'll continue to gain market share. We'll continue to give a lot of satisfaction to our shareholders, improving financials year after year. We are sure that we continue to perform over the mid to long term, as we stated with Eric Vallat with the 10-year plan.
You will see it will be a lot about Rémy Cointreau in the next coming quarters of the year. We are entering in a new game, a new era, and we are very proud to share that with you, and we'll give you a lot of satisfaction.
Thank you very much for joining today's call. You may now disconnect your handsets.