Hello, and welcome to the Rémy Cointreau Q3 Sales 2023- 2024 Call. My name is Laura, and I will be your coordinator for today's event. Please note, this call 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 will now hand you over to your host, Luca Marotta, CFO, to begin today's conference. Thank you.
Good morning, everyone. As you've seen in the press release, nine-month sales were down 22.7% in organic terms, including a decrease of -23.5% in Q3. This performance has been mostly impacted by major destocking in China and Europe. In addition, start to Chinese New Year was soft, but improving in January as cash pressures in trade weighs on wholesaler orders. Postponing of orders contributes to inflate the negative calendar effect of around -2.5 points, around EUR 10 million in value, linked to the timing of the later Chinese New Year this year. In parallel, North America showed a strong sequential improvement, partly driven by some positive phasing effect in Liqueurs and Spirits division.
Overall, the 9-month sales decline is split between a volume decrease of -17 and -5.6% of price mix effects, impacted clearly by the Americas region as a result of the sharp Cognac's underperformance compared to Liqueurs and Spirits division. Finally, the cost-cutting plan is progressing well and in line with our guided roadmap. Looking at the overall sales performance by region, Americas was down very strong double-digit in 9 months, including, however, a sharp sequential improvement in Q3, led by Liqueurs and Spirits. APAC was down a single-digit in 9 months and down very strong double-digit in Q3, due to major destocking in China and softer market condition in the rest of Asia. EMEA was down low single-digit in 9 months, including a strong double-digit decline in Q3, affected by destocking and softer market condition. This was sell-in.
Now, talking about value depletion at group level, the best approximation of final consumption sell-out, over the past nine months, we can say and observe that in the U.S., value depletion were down mid-teens and down high single-digit, excluding VSOP. As compared to pre-COVID level, value depletions were up +15% and increased by 55, excluding VSOP. In China, value depletion were down mid-single-digit in nine months against very high comps. On a four-year basis, however, China's value depletion were up +35% in nine months. In Q3, important to highlight that value depletions in China improved sequentially versus Q2 and were up low single-digit year-on-year. Finally, in EMEA, value depletion were up high single-digit. This represents an increase of around +15% versus nine months, 2019-20.
Overall, all in all, at group level, this means that nine months value depletion grew at approximately +25% on a four-year basis, so clearly faster than sell-in, which was up around +17% in the same period, four years. To sum up, some negative effects, such as the stocking in APAC and EMEA, are temporary and should not being seen with the same amplitude and magnitude in the Q4. However, the underlying performance, particularly in the U.S. and partially in China, is unfortunately close to our most cautious scenario. This is why, for the full year, we expect to confirm our guidance of organic sales decline by the lower end of the guidance, i.e., around -20% in terms of top line. Now, pages 3 to 5. We pick up some marketing initiatives that have been undertaken over the past weeks.
Let's start on page three with Rémy Martin, which is kicking off a year of celebration around the globe for its 300th year anniversary. To mark its tricentenary, the house has planned a year of special activities around the theme, We Dream Forward, and the release of an exceptional Cognac, the 300th Anniversary Coupe, available in a very limited edition, 6,724 individual numbered bottles from January the eighth.
This special release has been created by Cellar Master Baptiste Loiseau, clearly from Rémy Martin, Réserve Perpétuelle, a collection of exceptional, incredible, amazing eau de vie, exclusively from Grand e Champagne terroir, clearly, saved and passed forward by generation of cellar master. Throughout the year, a series of events to celebrate this occasion, the tricentenary, will also take place around the world, including, first of all, a virtual visit of the vineyards to explore Rémy Martin's terroir through immersive VR technology in selected airports all around the world. Second, the Centaure Birthday Tour, Birthday Tour, that will bring the celebration to some of the globe's top nightclubs. And third, several important local events alongside specific activation during Chinese New Year. Page four, a quick word on China, with several events expected for the Q4.
First, on Club, with the launch of a new product package, the campaign teamed up with China's top celebrity, Li Xian, as Rémy Club's first brand spokesperson. Li Xian is one of the most popular Chinese actor. Starting from January, the brand new package featuring him has been launched on various media channels across the country. Rémy Club was looking for a celebrity to further interpret the brand manifesto, which is uncover your edge. Li Xian has a huge fan base, both domestically but also internationally. His movies and active performances on social media will benefit to Club awareness, and will further enhance the brand's competitiveness in the Cognac category. So far, Club new product launch campaign has yield exceptional results across brand content, media communication, CRM, e-commerce, social and PR.
Second, Rémy Martin XO teams up with Blossoms Shanghai, China's most popular TV series of the movie director, Wong Kar-wai, who asked to have a Rémy Martin on board. XO is present for a total of 13 minutes in the series. As an official partner with multiple product placement, the group will leverage this fantastic opportunity to rejuvenate the brand, recruit drinkers from the movie tribe, clearly, build its point of differentiation versus competitor, and continue to establish Rémy XO role in movie to drive consideration, relevance, and at the end, share of heart. Finally, one word on e-commerce, which is one of our key direct channels in China, showed a strong performance in the current context. Thanks to all specific activation made all around the festival, Eleven Eleven , and Tmall, alongside the launch of an exclusive edition, Club Ship Le Centaure.
Page number 5, a word on the U.S. I would like to highlight two important events. Still small in terms of business contribution, but a very good important illustration of all the work done to enhance and further develop direct to consumer channel and enhance the portfolio management. First, the opening of the first pop-up store, Louis XIII, on November the eighth, during the Ultimate Race Week Formula One in Wynn, Las Vegas. The retail pop-up experience showcases an extensive selection of Louis XIII's most coveted offerings, including the iconic collection, the Drop collection, Rare Cask 42.1, and an exclusive assortment of the brand's bespoke accessories, complemented with personalization services. Results were strong in terms of sales, 60% above our internal target set, CRM activation, image impact, and data collection on top.
The pop-up on top will get 2 extension periods and will be now open until February 18, to be present during the Super Bowl events as well as the Chinese New Year. Second, we are very proud of the outstanding result that we recorded on Westland during the quarter, and which concretize all the work carried out in recent years on the quality of the brand and image of this exceptional single malt, American single malt. Following a strategic shift on our marketing plan since last June, alongside the continued commitment to liquid excellence, Westland Garryana Edition No. 8 has been selected as No. 3 in Whisky Advocate top ten list of the most exciting whiskey of 2023. This marks the first time an American single malt has been selected in a top three position. It is very important.
This recognition marks another step forward and has triggered an amazing sales acceleration December, with overall +135% sales growth in the quarter, in Q3, including more or less 14 times of growth in December on our direct to consumer channel. Westland Garryana the eighth edition was sold out since December 26. Now, slide number 6, let's move back to figures. In the nine-month sales analysis, sales amounted to EUR 956.6 million, down EUR 348.1 million year-on-year, or -26.7% on a reported basis. This reflects, first, a very strong organic decline of around EUR 300 million. To be precise, EUR 295.5 million, i.e., -22.7% on organic sales decrease.
This performance is split between -17 on negative volume effects and minus 5.6 on price mix, linked to the Americas performance, and split by division of this performance. Regarding the latter, this is a combination of a positive price effect, low- to mid-single-digit at group level, and a negative mix effect around negative high-single-digit. Second, clearly, to have the bridge between organic and reported performance, we experienced a negative currency translation conversion impact of around EUR 53 million less, 52.6, which equals to -4% loss in the nine months, 2020 to 2024. This loss was largely driven by the deterioration of Chinese yuan conversion for EUR 24.9 million, and US dollar for $20.9 million.
In addition, Canadian dollar, Japanese yen, and Hong Kong dollar posted a slight loss, respectively, EUR 1.7 million, 1.2, and 1 million. On slide number 7, we look a little bit on a longer horizon, and the U.S. performance division versus 9 months four years ago, before pre-COVID level, pre-COVID. I will not detail all the figures which are on the slide. You can see that, but in a nutshell, volume performance is slowing down on Cognac amidst the current U.S. context, while price mix continues to be very, very strong. Overall, total Cognac sales are still up +3.5% versus pre-COVID level, including important stock in the U.S., and specific in the last quarter, in China.
In parallel, Liqueurs and Spirits division continue to generate an amazing, outstanding performance versus pre-COVID level, driven both by volume and price mix, so it's very balanced equation. Now, important slide, slide number 8, to dig into organic trends by region. Let's start with the Americas, whose organic sales recorded very strong double-digit decline in the nine months, i.e., more or less +10% versus prior year in the same period. Mostly impacted by volume, while price mix was also negative, due to the strong underperformance of Cognac compared to Liqueurs and Spirits. To dig in more specific in the U.S., sales were slightly down in the Q3, showing a sharp sequential improvement from Q2, led by, first, a gradual but slow sequential improvement in depletions. Second, positive phasing effect in Liqueurs and Spirits in terms of sell-in.
Overall, all in all, Q3 was strongly above pre-COVID level, more or less +45%. We continued to destock in absolute value over the quarter, and now the level in them, for example, in absolute value, is in line with pre-COVID levels. But unfortunately, this is not yet visible in terms of days of stock coverage, due to the continued negative depletions and some positive phasing effects in Cognac, in liqueurs and spirits. At the end, basically, to end the year in the best possible condition, we have decided to anticipate some shift in Q3 instead of Q4. As a consequence, level inventories is still more or less, everything counted, around five months at the end of the Q3.
On the nine months basis, value depletions are down mid-teens year-on-year, down high single digits, excluding stripping out VSOP, and approximately up +15% versus nine months 2019/20, and +55 excluding VSOP. In Canada, sales were slightly up in Q3. Like the U.S., Canada benefited from positive phasing effect in Liqueurs and Spirits. In parallel, Latin America was down strong double digits in Q3. End of December 2023, the Americas accounted for 40% of our group sales, down 10 points compared to the previous year. Second region is APAC, in terms of weight, clearly. In APAC, organic sales were down high single digit year-on-year nine months, i.e., up at more than 30%, 30, 30, on a four-year basis. Looking at the volume value equation, the performance year-on-year was only impacted by volume, while price mix was positive.
China sales were down very strong, double-digit in Q3, affected by a series of elements. First, major destocking ahead of Chinese New Year, next New Year. Second, negative calendar effect, as highlighted, 2.5 points at group level, but specifically for the region is more, is 5.5 points at the level of APAC region. And third, cash pressures in the trade. Direct channels continue to significantly outperform, led by e-commerce as a channel, which was up 10% to reach 35% in terms of weight of sales of the quarter. Meanwhile, nine months value depletions at group value were down mid-single-digit, which corresponds to more than +35% compared to 2019/2020. But as I highlighted, I repeated, Q3 showed an improvement, they were up value depletions, low single-digit.
They were much above Céline, which implies a strong destocking during the quarter, accounting for most of the expected defaults. As a consequence, this kind of asymmetric movement, more sell-out and less sell-in, in the quarter at the end of the Q3, determined that inventories were strongly down versus Q2 and still slightly high. However, the stocking is still catching up and very quickly in January. So the dynamics stand last in January. The rest of Asia reported a strong double-digit decline in Q3, impacted by Australia, Singapore and Malaysia. In parallel, Japan continued to recover sharply. End of December 2023, APAC accounted for 38% of our group sales, up 5 points versus last year. EMEA region, organic sales, were down low single-digit in the nine months, but grew more than 5% versus four years ago.
This year-on-year performance includes a strong price mix effect, while volumes were strongly negative. If you look inside the sub region, Western Europe was down strong double-digit in the quarter, impacted by Germany and Spain. This performance reflects one-off destocking, a more promotional market and a touch softer demand. UK, down, was down mid-teens in Q3, following Q2 restocking ahead of excise duty increase and affected by downtrading to cheaper categories, partially. In the rest of EMEA, we were down double-digit, affected by destocking as well in Africa, Middle East and Benelux. In terms of value depletions, in 9 months, they were up a single-digit year-on-year, representing more or less +15% compared to 4 years ago. End of December 2023, EMEA region accounted for 22% of our group sales, up 5 points compared to the previous year.
Now, slide number 9 and 10, we have the analysis by division. Let's start by Cognac. Cognac posted an organic decline of 31.4% in nine months 2023-2024, reflecting a significant important decline of 36.3% in volume and a strong price mix gain, considering the situation, of 4.9 points. At the end of December 2023, Cognac division accounted for 64% of our sales, down 9 points compared previous year. Inside the Cognac division, let's start to analyze the APAC. Sorry, I drink a bit of water because I'm dry. It's good for my skin. In China, sales were down very strong double digit in Q3, significantly impacted by the destocking before Chinese New Year and a negative calendar effect.
I repeat, because it's very important, the equation, the matrix, the cube, China Cognac is very important in this publication. The underlying trends are softer, a touch softer, due to lower consumer confidence and rising cash pressure waves on the trade. But as said, depletions in the last quarter were far better than sell-in, and this destocking is catching up in January. By channel, on-trade is slightly improving, but shows some downtrading toward cheaper categories a bit. Within off-trade, brandy were more resilient, and e-commerce, as said, was still very, very dynamic, boosted by 11.11. And every time we get in touch in a direct way with the consumer, we are experiencing very good results, at least, if not better than our major competitors. Overall, value depletions were down mid-single-digit nine months, but I repeat, I re-ask, slightly up in the Q3.
As a result, at the end of the nine months, our inventory level is still slightly high, but much lower compared to the end of Q2. Again, the destocking is catching up quickly in January. Our objective is to reach a sound level post-Chinese New Year, and this will support a Q4 in China that will be in strong growth. In parallel, we recorded a strong quarter for Hong Kong and Taiwan, while Macau remained weak as gaming has not yet bounced back. Rest of Asia saw a decline, a very strong double-digit in Q3, impacted by Southeast Asia, particularly Malaysia, Singapore and Australia. Japan, on the opposite, recorded a solid growth. Second region by weight, Americas in terms of Cognac. So there was a switch in terms of weight with that APAC.
In North America, Cognac sales recorded a very strong decline in the quarter, but improving sequentially compared to the Q2. Sales are back to growth versus Q3 2019-2020, +10%.... This performance reflects continued destocking in absolute value, in a persistent, promotional, intense market and soft underlying demand. In the meantime, Q3 U.S. value depletion were down -13.7% year-on-year, improving quite materially and sequentially compared to the Q2, but still negative. They were down -7.6% on top versus Q3 2019-2020. In this context, even if inventories are down big time in absolute value, the level inventories in Cognac is still around five months in terms of days of coverage, because the figures are going better, but still in negative territory.
Price mix effects were positive at +3 points year-on-year, in the last 12 months period, ending December 20, 2023, led by price increases more than mix. On a 4-year basis, price mix is clearly very much up, at +21 points. Latin America sales were down very strong double digits Q3, while domestic market was quite resilient, duty free fell sharply. Last region by weight for the Cognac, EMEA, in which Cognac sales were down very strong double digits in Q3, impacted by the destocking, following a slowdown in sell-out at the end of Q2. And second, a touch softer demand as inflation weighed on purchasing power in some key countries. Third, negative phasing effect in the UK, as said, because we increased Q2, following, trying to anticipate the rise in excise duty done in August.
Same type of analysis in Liqueurs and Spirits division, slide number 10. The Liqueurs and Spirits division was up at +1.5 on organic basis, nine months, including a decline of 4.4 in volume and a positive, massive price mix effect of 6.9. This is very important. It was not a given for the year. At the end of December 2023, Liquors and Spirits accounted for 34% of sales, up 9 points, the switch with Cognac and liquors and spirits compared to the previous year. Now, let's review the performance by divisions, starting with the biggest one in terms of weight, which is the Americas.
In North America, sales were up very strong double-digit year-on-year in Q3, more or less +165% versus Q3 2019-2020, driven by a resilient momentum and boosted by some positive phasing effect as we fostered, as said, shipment in Q3 rather in Q4. More specifically on Cointreau, in which U.S. value depletion were down -2% over the quarter, but a massive increase compared to Q3 2019-2020 of 64.5%. Beyond the very high comps, the negative performance in terms of depletions of the quarter, reflects a touch of cautiousness by some big retailers as the year-end approached.
Besides, price mix in terms of value depletion was up a little bit less than 1 point, 0.6 point versus last year in the last 12 months period, but 22 points on a 4-year base for Cointreau. So you have the same symmetric dynamic between Cognac and Cointreau on value depletion, price mix, accretive impact on a 4-year basis. So think of that, it's massive. In parallel, Latin America sales were slightly down in the Q3, less than Cognac, but still down. EMEA, second region by weight, in terms of weight for the luxury spirits, sales were down mid-teens in Q3 year-on-year, impacted by destocking in a softer demand due to persistent inflation environment.
The U.K., I repeat it, was impacted by some phasing effect following the excise duty increase, intense promotional environment, as well as some down trading to some cheaper categories. Benelux and Western Europe faced some destocking, following a very strong H1, and last but not least, Africa was mainly impacted by South Africa, rising price competition and geopolitical tension all over the region. In APAC, which is the smallest region in terms of weight for the Liqueurs and Spirits division so far, China posted a very strong double-digit sales decline in Q3, impacted by continued destocking in whiskeys and weak end demand, mainly from younger generation for whiskeys. Rest of Asia recorded mid-teen sales decline in Q3, mainly impacted negatively by Australia, New Zealand and Singapore. Japan saw a step rise as recovery continued.
One last word on non-group brands, which represent 2% of group sales, so stable year-on-year, they were down -13.5% of the quarter, and touch less, -7.7% in the nine months. Two last slides. Next slide is we can say one word of the current Chinese investigation. On January 5, 2024, Industry Association, Spirits Europe and BNIC, a industry players, including Rémy Cointreau, were informed that the Chinese MOFCOM had opened an anti-dumping investigation. This investigation targets brandy exports from European Union member countries to China, in containers of under 200 liters, for the period between October 1, 2022, to September 3, 2023. It may run for up to 12 months and can be extended for a further 6 months.
Rémy Cointreau immediately contacted its trade representatives, and is fully cooperating with the Chinese authorities in this investigation. China is a long-standing trade partner of Rémy Cointreau, and the European spirit industry as well, and we have always had excellent relations and levels of cooperation. So we are convinced that our products and business practices comply fully with Chinese international regulation, and approach future discussion with confidence and diligence. Well, I could have ended the presentation there, but it's better to say something about the guidance, I guess. So in conclusion, on slide number 12, what's the message? We reconfirm, and we respect the guidance that was updated end of October. Following Q3 original trends, we are now able to be more accurate. The guidance is the same.
Basically, for this year, we expect to record an organic sales decline at the lower end of the guidance range. It contained organic decrease in CoP Operating Profit Margin, including a resilient gross margin and a selective reduction of A&P, mostly in Cognac division. To do so, and based on what I've just presented, and repeating what we guided end of October, and even more accurately, in the end of November, we will be strongly focused on supporting sell out and depletion growth and dynamism. Second, maintaining a strict pricing policy. Third, selecting A&P that drive impact, leverage, digital, and below the line initiatives. Fourth, continue to execute, it is well in line, of the EUR 100 million cost cutting plan that need to be realized before the end of this year. Thank you so much. So now maybe you will have some questions.
We have some information on the current trading, and I will drink some water, and then I'm ready for you.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our first question from Simon Hales, Citi. The line is open. Please go ahead.
A couple, please. Can I just sort of start off on China? Could you just give us a little bit more color on how depletion trends perhaps evolved through Q3, if you can? Maybe outside of the e-commerce channel, in terms of what you're seeing, in terms of that trading in the on-premise and in the off-premise. You've talked about low single digit aggregate depletion growth for the quarter. I just wonder what the exit rate looked like, 'cause there's clearly been a bit of mixed messaging around the health of the Chinese consumer through the back end of last year, and maybe associated with that, a bit more detail as to how you think around Chinese depletions as we head into Chinese New Year, and your confidence around offtake levels.
And then secondly, looking forward, appreciate the reiteration of the, of the guidance for 2024, but how are we thinking about 2025? I mean, back at the half year stage in late November, you were talking about the fact that we probably wouldn't see high single digit group organic sales growth for fiscal 2025. Is that how you're still thinking about the year? Is there any reason we should think that there's been a change in the way you think about the outlook for fiscal 2025? Thank you.
Thank you so much. So currently in China, it's a huge topic. I will try to stick to your question, can be more, is wider in terms of answer, but talking about the dynamics that influenced the positive Q3 depletion performance. First point is the channel. I think that on-trade improved slightly, but showed some downtrend to cheaper categories is not there, even if we got good performance that we gained this slight loss to single digit. It is e-commerce, clearly, in which we are very, very strong, boosted all the activation made by the teams, and also off-trade and banquets resilient has been a winning channel in the periods just before the Dragon Year. More generally, because you have boutique, you have direct sales.
Direct channel overperformed big time, not only on sales, but even more on sell-out and depletions during the quarter, the previous period, and are responsible in a positive way for this destocking, which is continuing right now in January, allowing the destocking to be very positive for the Q4 dynamics, but I'll be back on that point. Let's focus by brand. Clearly, high-end of Cognac portfolio more affected the current context, so a little bit of negative mix inside this recovery. And out of Cognac, whiskey, as said, was the category which most impacted by the destocking, the performance.
Also probably a stronger exposure to younger generation, a little bit more volatile considering the context, is not an issue for Bruichladdich per se. It's more general for the whiskey, the most precious and prestigious whiskey in China. Louis XIII performed correctly, even if, as said by Éric Vallat, also in November, the transition Louis XIII model, more retail—it is clearly a huge journey. It's taking a little more time to educate, to have the level of requirement respected. But also like Louis XIII, even more, direct channels clearly outperform the weighted average.
In conclusion, these dynamics, in a visibility that remains limited, okay, we acknowledge, and blurred by important calendar effect. Mid-Autumn Festival was three weeks later, as well as Chinese New Year, which is a EUR 10 million or 2.5 points, group level 5.5 points for the APAC, for Cognac level. And yes, but base of comps complicate the equation. But on a positive side, the destocking is continuing, final demand is there, and for the year, on the heels of this third quarter and the Q4, in which you continue to model this kind of performance, sales should sequentially improve, driven by less destocking and a positive calendar effect in Q4.
So overall, we anticipate in the quarter, a strong growth that sell-in will determine that a yearly level we will end in China with a slight positive sales growth, even if strongly below the budget expectation. In terms of value depletion, because you have to look at that as well, not only the dynamics of the asymmetric of the sell-in, on the heels of the Q3, I repeat, we expect the Q4 and so the H2, in terms of value depletion for China, to be positive compared to the previous year. The aim is to end the year strongly than Q3 and with the health inventories condition. In terms of guidance. Okay, I'm quite... I'm disappointed. I was thinking that you would ask about 25, 26 or 27, 20, 28 or something like that, it would be more fun. Now, jokes apart.
Let's start with the 2023-2024. Company sales consensus is already at the bottom end of the guidance range. We are fine with that. Minus 20, I just confirmed. It is definitely the right level to consider, considering the recent regional trends. On operating profit, as already said, for this year, 2022-2024, being at the bottom end of the sales range, make the gaps of 5-6 points that I highlighted between sales and COP decline, much more difficult to achieve. So at this stage, I can be more accurate. The company consensus implies minus 20% in sales, I repeat, fine, it's okay, we're okay, and minus 27.1 in operating profit, so 7-point gap in terms of decline organic terms. We are fine. I will be slightly more conservative, but we are not far in terms of bottom line.
2024, 2025, if I may, is the most surprising element, because this high level expectation for the next year, it is not respecting our comments at pre-guidance of during the H1 result. We were pretty clear on the fact that we were not, not expecting to reach high single digit top line dynamic for the next year, and company consensus, in terms of sales, is still at 7.9%, so it is clearly high single digit. High single digit is the compound average growth rate that we are modelizing for the remaining part of the next six year to realize the Ten-Year Plan. But for the next year, it is not what we are expecting, high single digits. So in this moment, I'm quite surprised because the company consensus in terms of sales, it is not aligned with our, with our comments.
I can agree, okay? So I want to develop that. I can agree that base of comps will be low in the U.S. However, we need to be realistic and consider different criteria and parameters in the growth equation. First, U.S. depletions, they are going better, they're improving, but they are still negative, which means that inventories are still too high in terms of days of coverage. You cannot expect strong shipment sell-in in Q1, H1, if inventories are too high in terms of days of coverage. Second, base of comps in China, even if Q4 will be strong, but the comps of 2022, 2024 is very high in the H1, and the context is improving, but still a little bit softer than we expected the budget time. Third, the third region, Europe, shows a softer underlying trends that will not reverse overnight.
So overall, I repeat, that's the reason why we confirm that the high single digit is the algorithm of top line for the next compound average growth rate for the next six-year or the long-term journey, but this is not what we modelize for the next fiscal year in terms of top line.
Got it. Thank you very much, Luca.
Thank you. We'll now take our next question from Edmund Mundy at Jefferies. Your line is open. Please go ahead.
Morning, Luca. Morning, everyone. Two questions for me, please. The sentence in your outlook that you aim to, you know, finish this fiscal year, you know, heading into fiscal 2024, 2025 in the best possible conditions. Could you elaborate a little bit more on what is best possible conditions? Is that in terms of brand equities, in terms of inventory, what exactly does that imply? You know, in particular, as there's a little bit of destocking, you know, going on. And then the second question, you know, coming back to your opening remarks that your shipment trends are up 17, but your depletion trends are up 25.
If we take those comments as to slide seven, and assuming that the plug really is in Cognac, that would sort of imply that your Cognac nine months 2023-2024 sales should be closer to EUR 700 million, assuming that your liqueurs and spirits are sort of in an okay position. Does that therefore mean at some stage, not necessarily next year, but you know, over the next couple of years, there will be a catch up in terms of shipments, you know, relative depletions, where your on, on a full year view, your shipments have been running below depletions?
Okay, I got two, but you said three questions. I got two. Overall, okay, but I will try to answer to this one, which are already quite intense. So what does it mean to be able to end the year in the best possible condition? So that, it means that we want to avoid to be in a overstock situation at the end of the year. We really respect the guidance, but there is no need to charge, to staff the channel with EUR 10 million more if the depletion rhythm is not at the same speed. So far, the inventories level at the end of December are the following: For the U.S., more or less five months, which is more stable versus Q2.
A little bit more on liqueurs and spirits and less on Cognac, even if the absolute value decreased a lot. For China, I repeat, at the end of Q2, end of Q3, they are much below Q2, but still a slight high. The destocking was catching up in January is decreasing, and the rest of the world is already in healthy level. So, end the year, the best possible condition is not force ourselves to do stupid things that will impact next year, which is not a walk in the park as well. The second question, the equation, compared to four years ago, at group level, comparing sell-in and sell-out is a very complex one.
Because it's difficult to modelize, because as you noticed, we are declining compared to four years in terms of Cognac, compared in terms of depletion, so that will have an impact in term of, on increase. So even if increasing, I don't know, mid-single- digit, in term of depletion, that could be, not an assumption, an idea. What is the impact at the, compound level compared to four years ago? It's complicated to acknowledge. Next year, we compare ourselves to 2019, 2020 as well, but 2021 and 2019, 2020 were not so different in terms of dynamics. The real stretch was clearly created in 2021, 2022. So, as not a guidance, it's more an idea, mid-single- digit increase to high single digit maximum on term of depletion dynamics for next year could be, could be, an idea.
Base of comps are easier, but still depletion so far, they're still negative. So at the end, we have to fight with the short-term figures, and at the end, comparatives are there. They are nice for to compare to where we stand in the past, but to solve the day-by-day problem, you have to compare what you are doing at the point of sales yesterday, not four year ago. So it is a mix of nicer and softer footprint, the more we go, and difficulties on the day-by-day. In a nutshell, I repeat, we are improving. The speed of this improvement, we hope will be fostered, will be improved as well, to have a global positive impact on our performance. I hope it's clear.
Very clear. Thanks, Luca. And just to, I guess, follow up on Simon's question. You know, I think you did reiterate back at H1 that, you know, high single digits is the medium-term run rate, not necessarily the right run rate for fiscal 2025. Do you think you should see shipment revenue growth in fiscal 2025?
In terms of, at this stage, it's early to say, but I only say that high single-digit is clearly a compound annual growth rate, CAGR. And the start of the year, considering the situation in the U.S., will not be a walk in the park. After a -20%, clearly, we are waiting for something better next year, and clearly, possible growth.
Thank you.
Thank you. We'll now take our third question from Mitch Collett with Deutsche Bank. Your line is open, please go ahead.
Thanks. Good morning, Luca. I've got two questions. I know it's normally not the done thing to comment too specifically on your competitors, but on LVMH's call last night, they said they weren't discounting, but you and Pernod are. I mean, to quote them specifically, they said, "There were no discounts. We canceled the price increase. Discounts is what Pernod and Rémy do." And there are also some press reports that suggest that Rémy Martin is being discounted in China. So I wondered if you would comment on whether you are engaging in any discounting, and perhaps linked to that, any pricing plans for this year? And then secondly, I appreciate it's very difficult for you to comment on the outcome of the China anti-dumping investigation.
But in a scenario where your China business was substantially smaller, what would you be able to do to find additional sales growth, or indeed to manage the cost base more tightly? And then, sorry, actually, one third one is, have you seen any initial reaction from consumers in terms of social media activity or purchasing, when it comes to the anti-dumping investigation? Thank you.
Thank you. I will start with the second one, which is far more strategically important. So, on the anti-dumping investigation side, we cooperate with due diligence. We think that we are totally in line with the rules, and we do it with calm and being sure that the cooperation will be the best. In terms of what will end at the end, we cannot comment because it's too early stages, so we are providing all the information, this is just a change. In terms of the consequence of the consumer confidence, the confidence or the impact of sales, so far, no. If you want to quote the said, the destocking is improving with time in January.
So far there's no negative trade business consequence on that, so far. Also some external element, TV series, word of mouth, share of heart is not declining. If one day it will be a hit in term of cost of doing business in China, it is part of a global worldwide equation. As we have done, we have supported Americas, even if sell-out depletions and top line has been clearly, clearly storm and hurricane this year, we didn't cut all the means in the U.S., will be the same. So it is, we have a global worldwide business. We play all cards, all brands, and brands to contribute. So, China is a key country. Even the cost of doing business should increase one day, we will not react as we were only selling in China. We're selling everywhere.
We are a worldwide company, and we will activate all means to preserve the strategic disposal and the weapons to operate in China in the best possible condition. So you are—We are focused, we are clearly concerned, but we are calm and serene. In Italian, I don't have the word in English right now. Okay, talking about competition. I have two answers. One is the official one, one is the personal one. As the personal one, I started laughing yesterday night, I'm still laughing now. This is, ended. I opened the bracket, I closed the bracket. And it was quite comic. Second answer, more directly on the business. We are—When you are very strong in some channels, direct to consumer, and you have specific operation done, you don't discount.
You have operations that go in 11.11, that respect a specific trade price, and you have the campaign that is, aligned, and the operators at the end is free of these, of these prices. We are not down trading or making discounting for the sake of it, and we want to enter in the dynamic. Maybe one day we can do a specific call talking about mechanics, because, one thing can be discounting, one thing is the repricing, cutting the price of, twenty, 30% of your product. So there is a bit of down trading in term of the mix, but, without entering into specific peer-to-peer comparison, we are clearly the company that put pricing, integrity, and power on the top of the list. And, I was clearly laughing yesterday night, and still laugh. Thank you.
Okay. Thank you, Luca.
Thank you, and we'll now take our next question from Olivia at Goldman Sachs. Your line is open. Please go ahead.
Hi. Good morning, Luca and Céline. Just two quick follow-up, please. First, on the U.S., regarding the destocking of inventories in the U.S., you, you still have, as you said, on the slide, five months of inventories at the end of December. With the current trading that you're expecting, is it fair to assume that you're going to be back to a healthy level of inventories by, by June or end of, of Q1 2025? And second question is on the EUR 100 million cost savings. Could you give us an update on how much of these, uh, EUR 100 million, uh, will be permanent and will reduce your cost base in 2025, or, and how much of it is obviously just temporary, such as marketing, uh, reduction? Thank you. Hello?
Hello, do you hear me? Because the mic had a problem, so-
Yeah, yeah, I can hear you now. Thank you.
Okay. Today, we are at five months. When we'll be back to four, three, it depends on the rate of the depletion. So far, they are still negative. So it means that in the short terms, to be able to reverse the equation between selling and depletion, depletion should be better than selling. Has been realized for a while, in absolute value, but need to improve even more. The visibility to that, so when we'll be back to, it's impossible to answer to me to that. It will be during the year of 2024, 2025, clearly, so it's our expectation. But so far, I need to be cautious because we improve, but we are still negative. We will cycle, clearly, lowest comps, easier comps, but still, so far, the reality is that we are negative.
So our assumptions that we'll be reducing during the fiscal year 2024, 2025, precisely, if it is end of June and September, I can't answer. I will be a liar. I can't answer. It depends on the depletions rhythm, clearly. Cost cutting. Cost cutting, let me remind the dynamic of the EUR 100 million, which are clearly not at risk. They will be realized this year. By type duration, 40%, so more or less EUR 40 million, is structural, forever, and 60% is one-off. So your question is, let's focus on the EUR 40 million. We have more or less of this 40%, half, it is AMP. AMP, more linked to the Cognac division and more linked to the brand awareness, less than the BTL activation and digital expression.
On top, we have to remind that in the compounders for the past, you have Super Bowl for a huge amount, which is something that cannot be replicated soon, not at this extent, because we have done, we've done something this year, but it's not at the same scale. Then, we have, more or less, 88%, so of this, of this 40, that are, are manufacturing logistic and is 100% structural. So we changed some proceeding manufacturing. We improved, in terms of, operation, logistic ads, the way we are performing supply chain, and, and factories operation with saving, that will last. So once again, 40%, EUR 40 million, half of that it is, it is, AMP, not working AMP.
8%, so a little bit more than one quarter on the manufacturing logistics, and the remaining part is the structural overheads saving, means that we didn't replace some positions. We organized in some regions some brand of operation without making huge restructuring plan. With the right sizing that we were able to have the difference, the different part, 12% of the long-lasting saving. This is the split of the EUR 40 million that will last, more or less.
Thank you very much.
Thank you, and we'll now take our last question from Chris Pitcher with Redburn Atlantic. Your line is open. Please go ahead.
Thank you, Luca. So a couple of questions from me. Luca, just following up on a couple of things. In terms of the China anti-dumping legislation review, can you confirm whether temporary tariffs have already been imposed? And is there a risk that you see perhaps some stock build ahead of the potential restrictions? And then, your comment that you're a worldwide company, given the uncertainty in both the U.S. and China, are you increasing your investment outside of those two markets, in spite of the cost savings? And if so, which of the markets are you targeting as your medium-term priorities to hopefully balance out U.S. and China over the next 10 years or so? Thanks.
Thank you so much. So for the anti-dumping, so far, we didn't see any temporary measure, and we are not changing overnight the way we are doing operation, not on consumer base, not on logistics. So there is a business as usual. Once again, we don't panic, and we remain focused, and we don't change the way we are organizing things in China. It is a dialogue. It is clearly an investigation, but not panic, and we continue to do business as usual, and no specific temporary measure that is put in place so far by the Chinese government. In terms of right sizing, as I said, yes, we are investing in other markets, clearly GTR, some Asian countries, some European countries, also can be also in part of the Americas.
We might have some specific investment in the very short future to improving. But also, we are not giving up and switching the attention totally from China and US, because, okay, we are cutting AMP, but more in the long term. Depletions US need to be supported by below the line, visible working field AMP. So two years ago, in the boom of the consumption, with the shortage, we could we had improved our AMP footprint, putting more money on the table for the long term distribute of the brands, and it's paying its dividends. Now, we are more in a fighting mode, in the guerrilla, and so we need to put the attention on the AMP.
So, we still need to unlock, to invest in the U.S., clearly in China, to grab more depletion, because depletions means, at the end, retailer disposal, retailer sales. If we don't have depletion, all the mechanism is stopped, so we need to move that. So there is a part of reinvestment in other part of the world. Travel retail, I confirm that at the end of this year, we'll be more or less at the same level of pre-COVID, with another type of business model, even more long term. In other countries, we are doing a very good job to increase the footprint, but we are not switching overnight and giving up on China and in U.S. Also, because if you compare to pre-COVID level, we are still having very good performance, also in the U.S.
But if you're talking about China, the change of gears has not been compromised by the negative quarter. We are in another world. We are clearly stronger than before, so we don't want to give up to invest in China and the U.S. Absolutely not.
Thank you. You, you say GTR will be back at pre-COVID levels in sales. Some of your competitors have improved profitability. Is that the same for you as well?
In what you said in terms of profitability?
Travel retail. You mentioned a change in model and approach.
Ah, yes.
Some of your competitors are more profitable now in travel retail.
It's like, a bit less, in our case, knowing this model is more long-standing in terms of profit, profitability, but it will be little bit less, because we are putting more specific means, more specific investments, initiatives, more dedicated teams. So compared to pre-COVID level, the profitability, it will be a little bit less. But pre-COVID level for Rémy Cointreau, GTR was operating in another mode, with more also of, invoice, and, invoice, act, without, adequate support, to support the depletions, making that travel retail in the past was way too much a cash cow, so it's much more balanced today. And at that time, if I may, why was that? Because profitability of some countries, like China, was not the right one.
Excellent. Thank you for your color as always, Luca. Thank you.
Thank you. I'm now happy to hand it back to Luca for closing remarks. Thank you.
So thank you so much for your attention. It was an important quarter, because even if with some storm, some headwinds, we are able to confirm our guidance. It is a low end of the range, but the dynamism of the underlying depletions is improving. It's not the rhythm we'd like to have. We want, want to have more of that, but clearly we are progressively on the right path. Next year, 2024, 2025, the algorithm of the medium-term growth, a single digit, is too optimistic. How much it is, which phasing, what's implication, day of stock coverage, this will be, during next quarters, dialoguing together, part of our interesting chat and discussion. Have a nice day, have a nice weekend, and all the best for you and your families. Thank you.
Thank you. This concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.