Q1 21/22 TU

Jul 20, 2021

Hello, and welcome to the 2021 to 2022 Q1 Sales Publication. My name is Jeff, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask And you will be connected to an operator. I will now hand you over to your host, Luca Marotta, CEO AFO to begin today's call. Thank you. Good morning, everyone. Thank you for being here with us this morning. As you have seen in the press release, the Q1 sales showed a strong start to the year at 105% growth compared to last year on an organic basis. In addition, this performance implies that sales were up Plus 36.5 percent compared to Q1 twenty nineteen-twenty twenty. To put it another way, We are well above the pre pandemic levels. This performance reflects, First of all, a broad based growth with all regions, all brands contributing to this growth. While the U. S. Continue to enjoy what we call the new paradigm, Greater China confirmed the recovery seen in H2 2021 And Europe as well is gradually emerging from the sanitary crisis. From a channel point of view, the group relied on the Sharp on trade reopening in the U. S. And more importantly, a stronger resilience of the off trade channel to a level much above Q1 twenty nineteen-twenty twenty, both in the U. S. And in Europe. At the same time, Greater China continues to perform very, very well. 2nd point on this performance, this reflects a low base of comparison across the world. This effect, however, will ease throughout the year. And finally, as expected and guided, Some significant replenishment effect mainly in the U. S. As a reminder, we ended the year 2021 With an extremely low level inventories, and we are facing a stronger demand on the back of the new U. S. Paradigm. Looking at overall global sales performed by region. Americas, as global region, generated a 3% old digit sales growth, led by strong underlying demand and some replenishment effect. APAC region posted a sales growth that was close to triple digit, Confirm the H2 2021 sharp recovery. And finally, EMEA region recorded a very high Double digit growth supported by on trade reopening since May, June and a low base of comps and low inventories at the end of the previous year. This was sell in. This was what is inside our shipments. In terms of value depletions, Value depletions at group level, so the best approx of the final sellout, we recorded a strong double digit growth in Europe and in Greater China Over the last 3 months, while depletions, as you can see, in the U. S, were down mid single digit versus last year. One additional word for the U. S. In the U. S, this reflects a high base of comps and a low level of current inventories Still now, especially on 7,030 8 Acor Royal. Excluding streaming off 7,038, the group U. S. Value depletions would have been up mid single digit. And on top of that, like many industries, many sectors, we faced Some global supply chain tension at both customs and truck levels. This extended and continues to extend the Total supply changed lead time. On a 2 year basis, U. S. Group value depletions were Up, as you can see, very strong double digit, which illustrates quite well and clearly that we drove the upbeat dynamic of the market. So to conclude on this very important slide, we reiterate, We repeat and we ask our strong confidence for the full year. Now let's move to the Q1 sales analysis, Slide number 3. Some figures here. Sales amounted to EUR 293,100,000, Up EUR 143,000,000 year on year or plus EUR 95,300,000 on a reported basis. But this reflects A very strong organic gains at plus 105 percent or EUR 157,600,000, which can be divided in plus 75 percent, 0.2 percent, our volume effect and plus 29.80 percent, plus 30 percent on pricemix. A small marginal scope benefit of EUR 1,400,000, I. E, plus 9% linked to the Turnover of the acquisition of Brie et almont and a negative currency translation impact of around EUR 16,000,000 minus EUR 15.9 million or 10.6 percent. This was largely driven by the U. S. Dollar, Which contributed negatively to EUR 16,000,000 to the total loss in terms of our currency translation in the period. Most of our other currencies also deteriorated, including Japanese yen, Russian ruble and kong dollar. Only 4 currencies generated marginal currency gains, so Australian dollar, British pound, Chinese yuan and Canadian dollar. Now let's turn to Slide number 4, which shows on the left in gray our quarterly performance of the past 9 quarters and the 12 months rolling organic performance of our group brands in red, which stands On a 12 month rolling basis at plus 26.6 percent at the end of June. The Q1 2021, 2022 performance confirmed the recovery In H2 2021, of course, low base of comps and replenishment have been a key support to this outstanding quarterly performance. But this performance was already estimated, and we are performing as we expect. Beyond that, our sales are also well above pre COVID levels and grew by 36.5% Compared to Q1 20 nineteentwenty twenty as showed by the right part of the slide in red. Now let's turn To Slide number 5 and to dig into organic trends, global trends by region. Let's start with the Americas, whose Organic sales were up triple digit in Q1 versus last year and close to triple digit versus Q1 twenty nineteen-twenty twenty as well. In the U. S, sales were equally up triple digits, benefiting from a strong underlying demand, which confirms the new paradigm of Consumption. The quarter also enjoyed significant replenishment on the back of the low level of inventory at the end of March, And Remy Coentro recorded very dynamic trends supported by sharp on trade reopening and a strongly resilient off trade. However, very high comps coupled with the low level inventories and high demand weight on cognac depletions. And in addition, the industry's lead time has increased on the back of supply chain's global tension in terms of both Customer and Trucks. I repeat that because it's very important. As a result, our group brands total brands Well depletion were slightly down at minus 5% over the last 3 months, but implying plus 10% growth over 6 months And plus 33.1 percent growth over the 12 months period ending June. In Canada, sales growth was also triple digit led by Cognia Division and Ceramics, While Latin America enjoyed the same pace of growth, thanks to early sign of recovery in tourist areas. End of June, the Americas accounted for 59%, 5.9 percent of our group sales, up 3 points year on year. APAC Asia Pacific organic sales growth was close to triple digits versus last year as well And up double digit, excluding Asian Travel Retail, on a 2 year basis. So a very sound, strong performance. Greater China grew at a very strong double digit growth in Q1, led by continuous strong momentum both in on and the off trade. From a sub region standpoint, which is interesting, the strong performance of Mainland China and Hong Kong more than offset weaknesses in Taiwan, the latter one being impacted since May by the resurgence of COVID cases. Looking inside Mainland China specifically, value depletions, so the health of the business, We're up very strong double digit in Q1, led in terms of range by Remy Martin Club, but also Ixo and Lui Tertien. From a channel standpoint, all channels are booming. E Commerce, which accounted for 30% sales in Q1, was up 50% year on year. And OX Trade as well are outperforming the market, while our own boutiques recorded an amazing start to the year. Rest of Asia also reported significant growth in terms of top line compared to last year, led by Australia, and this is despite the implementation of Several health sanitary restrictions in the North of Asia and lockdowns in the South. End of June 20 20 1 APAC accounted for 23% of our group sales, down 1 point versus last year. Last but most Not least, EMEA organization showed a very high double digit growth in Q1 versus last year, but still slightly down on a 2 year basis. All brands and countries, top performance including UK, Benelux and Germany, contributed to this excellent performance, Led by the gradual on trade reopening since May, June and the strong resilience of the off trade. More broadly, more largely, And beyond the low base of accounts, this performance reflects some replenishment effect linked to the positive expectation before the summer seasons. End of June, EMEA region accounted for 18% of group sales, down 2 points versus last year. Now We switch from region to division. Moving to our Q1 sales growth by division versus last year, I. Q1 2021, Slide 6. Our 105% organic sales growth, so more than doubled last year at group level, was driven by an outstanding performance of the cognac division, up at 14.4%, While glycos and spirits were strongly up at 90.5%, so by the same speed and partner brands Only in 2 brackets, plus 55.3%. In the Q1, Partner Brands accounted for 2% of group sales stable year on year. But it's very interesting also to look inside Slide number 7 where we have the same chart but versus Q1 2019 2020 pre COVID pre pandemic levels. As you can see, all division recorded a strong double digit Organic growth on a 2 year basis, I. E, before the pandemic, cognac, up 29.8%, while Life Host and Spirits, up 58%, so more than that. With the letter, we can start to measure all the work has been done in the last 2 years by our teams, especially on some brands like Cuentro, our single man whiskey And the Botanes gene, which gained market share across the globe and is according to the strategic plan highlighted by Rick Waller 1 year ago. Finally, partner brands were up as well plus 21.8%. All in all, the group was up 36.5% The most top line on organic basis versus Q1 2019 2020. Now let's turn to Slide 8 and get rise by division, Starting with cognac. We just mentioned that cognac posted organic growth of 114.4% in Q1 versus last year and up More or less 30%, 29.8% versus 2 years ago. But what happened inside the regions? In North America, cognac sales We are up triple digit, supported by stronger growing demand, fueled by shop and trade reopening as well as solid resilience of trade. The overall performance has been also reinforced by synergies and U. S. Replenishment on the back of a low level inventory end of March as well as new parading will require more stock. This contest coupled with high comps on extended lead time wave completions, particularly on 1738. This translated Into a decrease of 15.9% in our volume depletions, in this case, in the last 3 months previous versus last year, But which nevertheless represent an increase of 48.5% versus 2019. So down the short term specific element on volume depletions, but very, very strong compared to 3 years Excluding 7038, which was victim of its own success and touched by the logistic perturbation as well, Volume depletions would have been slightly positive over the last 3 months as well. This technical effect on Depletions this time will gradually ease in the coming months and the strong underlying demand to become increasingly visible in our volume depletion as well. Price mix effect on depletion were positive by 2, 3 points in the 12 months period ended June And even stronger in the last 3 months, 6, 7 points. Within APAC, Greater China recorded a growth close To triple digits with Mainland China enjoying a very strong growth across the Kania portfolio. In Mainland China, value depletion trends were up strong double digit In Q1, led by club, XOLIO13, with all channels showing very dynamic trends. Oncology, encouraging trends with early sign of local consumption recovery, even if on marginal basis, and Macau as well was back to growth. However, Tainawire sales were down impacted by the resurgence of COVID cases. Finally, Sales in Southeast Asia reported a triple digit growth supported by strong head on consumption despite the closure of several trade markets. North Asia, Japan was up double digit as well in a continued challenging sanitary context. Inside EMEA, cognac sales generated very strong double G growth. This performance affected broad based growth Led by UK, Germany and Switzerland for cognac, it was helped by low base of comps as well as solid expectation before the summer season with the Italian countries. Talking about the volume value equation in the cognac business, the 114.4 percent bank sales growth was driven by 94.6 percent volume increase and 19.8 percent, around 20% pricemix gain. End of June, Primary Division accounted for 68% of our sales, up 2 points year on year. Now let's move to Slide number 9 and a few words on the new Remy Martin campaign in the U. S. As already mentioned by Eirikva at our full year result, 1 month ago, the growth of our sales has allowed our sales to invest even more than budgeted Estimated to increase the awareness and the relevance of the brand in the U. S. We launched the next Iteration of our team up for excellence campaign with the American artist Usher a few weeks ago. Beyond driving relevance and awareness, the objective was to leverage the excellent momentum that we experienced in the U. S. The first results are very promising and created a buzz on social media. With more than 3,000,000 viewers on YouTube, we reached our targeted audience and an all time high on social share of mouth. As a result, Remy Martin was ranked the 3rd top spirit brand On social media by the Spirit business, and we received the award at the Cannes Lions Festival of Creativity. Meanwhile, we managed to increase our visibility to a wide billboard campaign in several key cities in the U. S, as you can see. This campaign will be deployed all around and throughout the year. Now let's turn to Life Coors and Spirits division, Slide number 10. The Life Coors and Spirits division posted Very strong growth, plus 90.5 percent in the Q1 versus last year, I. E, plus 58% if you compare to 2 years ago, Q1 20 nineteentwenty twenty. Looking at the volume value creation in the LIFO sales period for Q1, the plus 90.5 percent organic sales growth was driven by Both volumes, EUR 68,900,000 and pricemix, plus EUR 21,600,000. It's very interesting to look that the pricemix It's quite the same in terms of increase between cognac and liposaspirit, around a little bit more for liposaspirit, 20%, Very strong. End of June, Lycos and Spirits accounted for 29% of sales, down 2 points versus last year. Now let's review overall and very synthetically the performance of the division by region. In North America, sales were close to triple digit growth As well, not only driven by, 1st of all, Cointreau, which is up was up triple digits. This performance reflects a steady high demand in key states Such as California, the sharp reopening of the on trade as well as a strong resilience of the on trade Continued booming at home consumption and its successful strategic focus on the original Margherita Cartel have been key drivers. As a result, volume depletion were up plus 21.8% in the last 3 months versus last year and up 52.2 percent on a 2 year basis. Besides, pricemix benefits added around 2 points in the 12 month period ending June 2021. 2nd, very strong results for the Botanist in the U. S. And better than The sales in Canada for Saudi. Moreover, Latin America recorded as well a triple digit sales growth, Thanks to low base of comps, early signs or recovery from tourist areas. In EMEA, Second of it in terms of weight for Lexus Spirits. Sales grew very close to triple digits, led by all brands and regions, particularly Western and Eastern Europe. Overall, better than expected performance was due to an early on trade reopening as well as Solid expectation from our distributor before the summer season. As a result, Cuentro posted very strong start For the year, resulting from market share gains in the off trade and strong on trade activation. Metaxa generated a very strong growth, Led by solid commercial execution in Eastern Europe and some replenishment in Greece clearly ahead over some season. And finally, Botanist and our whiskey portfolio recorded triple digit growth reflecting market share gains in Western Europe as well Some new listing gains like in France. In APAC, Lagos and Spirits division A recovery that we have seen in H2 2021 in Inter China that has been confirmed in Q1, Led by the amazing traction of our single mild whiskies portfolio with the younger generation, more sophisticated new codes, Including Octomore, the most peated whisk in the world, which is particularly well appreciated in the South of China. As aware, business grew at a very strong double digit growth led by Southeast Asia, thanks to amazing growth of Cointreau in Australia and in New Zealand. Moving to Slide 11, some initiatives made by Cointreau to continue to leverage the cocktail culture around the Cointreau Manderita. Given the strong progress that we did last year on the off trade market, the objective is to continue to hammer to leverage this gain, not only in on trade. This is what we did in the UK, for instance, with the Margarita Day to celebrate it. Cointreau has teamed up with the Superlanta delivery service To launch the first on deliveries of margaritas. This is also the case with our Cuatro margaritas terraces in London, when We have selected 5 key Terasas in May to celebrate the return of the hospitality. And last example, on the right, With our commando teams in 5 key cities in China, where Cointreau celebrated Margherita Original to a series of exceptional events with our key business partners, mediums and key opinion leaders. The Glycos and Spirits division is not only about Cuatro, there are other brands. And This time, we took the opportunity to say a specific word on the Botanist and our whisky portfolio. Let's start with the Botanist and the launch of its first innovation, a limited edition bottling to celebrate its 10th anniversary, Crafted by our ad distiller, there's a small batch of Aira dry gin has been matured in next Bordeaux French red wine cask since 2011. Through this innovation, we drove positive uplift in all metrics and channel, more than plus 300% in social media engagement, Plus 22% of new website visitors and multiplied by 4 the number of sign up in their CRM platform. Last but not least, the opening of our 1st pop up store in Tokyo at famous Rapongi Hills, Well, during the week, we organized some testing workshops to introduce our whisky brands in unique place with an exceptional decoration highlighting The importance of transparency. Throughout this 360 degrees activation, which brought people into the Brugglady universe, The results were really strong in terms of media coverage and also in terms of sales results. The letter increased by more than 80% in the Q1 in Japan, And we were out of stock following the success of this event. Now last slide, and then we can go to No, no, we can go to Q and A, for sure. I'm joking. Let's turn to Slide number 13 in the 2021, 2022 full year outlook. On the heels of the strong performance in Q1, but expected, we reiterate our strong confidence In our ability to continue to outperform the exceptional spirit market and to generate a year of strong growth. 2021, 2022 is expected to be, as already said, a year to halve with H1 benefiting From low base of comparison and some replenishment effect, that will be mostly skewed to Q1. And the second half of the year, H2, We will renew with higher comps. Being ahead of our 2030 roadmap and given the favorable environment, We have decided, as you know, as already stated and communicated, to step up our 2021, 2022 strategic investment campaign, including strategic advertising promotion, strategic OpEx, CapEx and strategic increase of our working capital To fuel the rebound and to fuel our brand awareness and visibility. The Expected mid teens growth operating profit, that is what we guided for at this stage, should be tempered by the currency effect, Which we expect between minus EUR 16,000,000 to minus EUR 20,000,000 at And the first question comes from the line of Laurence Wyatt from Barclays. Please go ahead. Good morning, Luca. Thanks very much for the question. 3 from me, if that's okay with you. You mentioned there was strong replenishment in the U. S. Channel. And I understand at the end of last or the end of the full year, You're on about 30 days' worth of stock in the channel. Could you let us know what sort of levels we are now at in the U. S. In terms of your cognac Portfolio, are we back to the 90 days of stock you normally expect to be in the channel? Secondly, you mentioned that Germany, the UK and Switzerland are very strong in EMEA for the success of cognac business. You mentioned sort of Eastern and Western Europe for Licks and Spirits. I was wondering if you could be a bit more specific on which exact countries were driving the success of the Lickers and Spirits in EMEA. And then finally, you mentioned before that you are going to be upweighting your advertising spend this year Take advantage of your strong sales. I was wondering if the cost of advertising have changed at all recently. Has there been any Change there. Are you getting the same bang for your buck in the advertising? And similarly on costs, have you experienced any increasing in logistic costs or any other costs Potentially related to COVID or elsewhere. Thank you very much. Thank you for your question. If I answer analytically, we'd stay here 2 hours. Okay. I will try to be synthetic. So let's start with the stock level in the U. S. And what we're also in the other because it's a global question. So in the U. S, as far as I speak, at this stage, our level of inventories is still low, Notably on 7,038, replenishment has happened, but we'll continue partially in the Q2 probably until October as well. So as we state, where we stand? We stand more than March for the SOP, more or less around 1.5, 1.7 months. It's very complicated to be precise because the new paradigm is changing. It's improving. So the coverage in months doesn't mean So much. So the absolute value are booming because you have to cover much more. And the into bracket issue, if we took that, Mathemati speaking, it's 17.38, where we had only just a few days, weeks in March, now has increased as well, There's no more than 1 month on average. So it depends take the stay from it. So there is clearly revenues that will continue In the Q2, probably until October, and we are still on the low level. One word, we haven't said that 90 days is the normal Compared to the new paradigm, we said more around 2 months of coverage in the end of the Q2. Now for these Victims of our success and also the increase of retail will answer that on top for the logistical reason. We have a little bit more time to reach this kind of stock level. But the major reason is that the success is clearly Better than expected in terms of final underlining demand. One was on China in terms of stock. The Cirencelato are quite aligned, so our level in inventory is healthy. And in the rest of the world, we have done, as you remember, good job Previously, so we were very, very low. So we are profiting of debt. We're just cleaning up inventories according to the decision was already done, Particularly in the EMEA and positive on the positive side, we have more positive expectation from the retailers For the summer season, okay, COVID is not behind us. It's still there, ways or things can change. But at this stage, we are still A little bit on the low level and the performance are better than expected for the EMEA. This was the first question. EMEA performance in for key countries in the Eastern Europe was the classical important countries for Lycos and Spirits or Czech Republic And partially Russia and some other minor countries, more the total Ecosystem of the Eastern Europe that has worked according to our expectation in that case for likewise and spirits. A and P cost change, no, we didn't see that. We are not seeing an increase of the cost Doing business in terms of advertising and promotion. So it's real a wheel from our side To profit of the increased gross margin that I confirm despite all the impact that We might have a negative way from the logistic crisis will be increasing gross margin for the year. That will be the first driver to fuel An increased pattern, as already stated 3 months ago, 6 months ago of the investment. We are not changing guidance in terms of increased spending. We still sit on the same hypotheses. The strong Performance in Q1 in sales is not something which is not unexpected. Everything is going according to our global overall region. Certainly, if you go into detail from 1 key stage to 1 key brands, we might have some difference. But overall, we are running at the pace we have estimated And stick to our plans. No increase to our R and P base cost, different things for logistics. So what happens in terms of what's happening at this stage, not only for Immigranto, it's something that It's impacting all the industry Latinos and Spirits and all industry for what we understand and what we know as well. On the back of the pandemic and the sharp global economic recovery, the whole supply global chain at worldwide level is under tension At both level, containers level, customs, timing and also trucks, mainly in the U. S, As you know, and several industries are impacted by this scarcity of capacity. In this context, Higher demand that we are witnessing right now by our final consumer versus offer As in a way magnified the logistic issues, magnified into bracket and a low level of stock at the end of March. So that this It was an increase even more for our sales compared to the others in terms of the acquisition phase to these difficulties. Being a little bit less philosophical, we observed an increase of the lead time. So from 1 to 2 months, Too much for the some countries in Asia or Australia as well and 20 to 30 days for the U. S. Also, without being polymix, there is a fact, lack of labor force in the U. S. To be truck drivers or dock workers does not help At all. So we are stuck more time than we should need at customer level in the docs in the force. Tension will probably remain for a while because all the market is dynamic. We are beating the market in many, many countries, But also, they are not leaving our competitors. They are also performing very well. So there is a fight. We'll be not sold overnight. In this context, there will be some other cost. This is not expected, but we are managing To integrate that, that and our gross margin will continue to be strongly accretive in term of basis points compared to the previous year Compared to last year. So we are adjusting our internal cost saving footprint To be able to deliver these objectives despite the potential of logistics. And in this context, We expect and should expect to continue to replenish throughout the Q2 in time of sell in Or even until October and to land more or less around 2 months of inventories. But clearly, this Defhasing between demand, operation and then because of the 3 tier system Or 5 to 6 in China, you have additional lead time to reach the final sellout might create also in the coming months Some discrepancies that need to be explained by us to you, by Celia that are launched by me when we met by Eric Pallas Because otherwise, fever will be complicated to understand because we highlighted many times the past technical effect of the Celine, Now we are entering a new, more complex world. We will highlight some technical effect on the sellout or on depletion because sell in comes first And then this increasing lead time process could change a bit the reading of the figures. I hope I was a little bit I wasn't clear. I'm sure I was wrong, but I hope at least it's clear. The next question comes from the line of Finjan Ryan from JPMorgan. Please go ahead. Good morning, Luca. Thanks for the opportunity to ask some questions. Just 3 for me, please. Firstly, just confirm on the guidance, I think you said that you're still in for mid teens organic EBIT growth. But I think back when we spoke in June, you'd be looking for mid This is well mid teens organic sales growth. Given the story you talked about logistics costs and deferred sales, maybe the Q1, I mentioned maybe that the organic sales outlook is a bit higher than you previously anticipated, but you're still keeping your sort of the powder dry in terms of organic EBIT growth. Secondly, look, you mentioned the sort of the focus on the rollout of Cointreau in China. I appreciate you said sort of launch Test launch of 5 cities currently, but is there any sort of changes in terms of how you're pitching the product to the Chinese consumer versus Margarita serves that you're sort of talking about in sort of Europe and North America. And any sort of complement charities or differences in terms of route to market? Appreciate e commerce as well. It might be a bigger driver for that brand. And then finally, just Sort of a bit more technical point, just so that you're in a minor legal dispute with Canopy Growth over one of their RTD products called Quattro. I think in terms of the press article I read yesterday, I think one of Remy Comptroller's arguments was that You're looking to launch into the RTV space. I appreciate it probably because a lot of things going on in the background. But you elaborate on like what you'd be looking at or considering in terms of RTD launches? Are there like key brands that'd be behind that or the market that you'd be targeting? Thank you for your questions. So let's start with the Consensus. So at this stage, we start with the full year and then elaborate on the H1. On the full year, we confirm what you already said. So we stick with the mid teens In terms of operating profit growth and as well in indirect in terms of the top line, because as you know, We don't guide on top lines, but we consider that we are confident to have a muted COP evolution, meaning at this stage, a TRD level on the yields on the year 2 halves, strong H1, A strong Q1, a little bit less strong, more than a little bit less strong H2. We think to have an equal speed between top line and bottom line mid teens. At this stage, talking a bit more technically, the consensus in terms of yearly level, we are relatively comfortable what you That's globally because the market does not fully consider a yearly level That there will be a year of strong investment in A and P, but strategic OpEx as well. Consensus is not in mid teens, and we confirm that we are We plan to be in growth, but around mid teens. And more technically, consensus is not aligned to our ForEx Impact negative expectation that I re asked and reiterate just before because if we say something, We should like to listen to that. In terms of the H1 consensus, we are comfortable In terms of top line operating profit as the market, you just seems to have considered a different term of piece of growth between Q1 and Q2 Into the comps and the recognition. So overall, the plus 105% of top line is a very good result. But in a small quarter last year, The absolute value speaks for themselves, EUR 150,000,000 in terms of top line Q1, EUR 280,000,000 Q2. So it's still Early. And everything is going as expected, and we stick to our plans, investing more. In terms of the second question in China, the clear turning point in lactose and spirits in China At this stage, it's not Cointreau. It's more the whiskey, where we are grabbing new Consumer younger generation, new quotes, some of which is really new and very positive because it continues like that. We might add positive results at very high double digit growth on this product For the following quarters and years. So this is clear, very strategic. On Cuatro, nothing changed in terms of Global consumption. We are still in the on trade, more the off trade, but we are Also profiting over different commercial footprint for Cointreau to be able to tackle better The intermediate level. So we changed something at the commercial level, but in terms of consumption base, there is no major switch. I insist the big news out of cognac for China is single malt whiskey. It was as you know, we do not comment current legal compliance. There is Our approach is drink less but better is Mostly throughout mix and price, not volume. So overall, as global thinking process, We are not interested in this market, the regulatory ink or surveillance at this stage. No need to replace alcoholic volumes by no alcoholic volumes. But with what that said, some of these new categories, like lower V, could make some sense for some of our brands in the future. We are monitoring closely consumer trends, which are emerging. We remain open for our option, But no decision of plan that we set for. So why we are making compliance on that? Because it's our brand. They are calling Cuatro. When you spell it, there is a clear confusion. So I don't want anybody to recall with my name. It is not me. I don't want somebody called Marora or using The success of Cointreau to be on the field And surfing on the wave or something that not belong to them. So simply that, it's our project and we fight for that, but Without entering a more deeper analysis. The next question comes from the line of Simon Hales from Citi. Please go ahead. Thank you. Good morning, Luca. A couple for me, please. Can I just go back to the EMEA region? Obviously, a good start to the year. I think you've Talked about seeing some restocking or some replenishment as the on premise has been reopening there. I wonder if you could sort of Let me quantify perhaps how much of the benefit you saw in Q1 from that. And should we expect that to continue at all into Q2? Or do you think ahead of the summer season now, The on premise and stock levels are at the right levels. And secondly, I may have missed this, but with regards to No logistical costs and the tension you're seeing in the supply chain. Do you think those costs have worsened since you talked to us at the full year results in terms of how you see That outlook for the whole of the fiscal year? Or is it in line with your expectations overall? And then finally, I wonder if you could just update a little bit on the travel retail You didn't mention it much, but I know there is, of course, an increased tour to the Americas in parts of Asia. Thank you for the question. Could you repeat Most definitely, the second one on the logistic cost because the sound is very low. So I cannot hear you very well. Sure, Luca. It was just whether or not Your pool is too noisy, so I'm joking. It's whether or not you think That logistical cost backdrop and the tensions in the supply chain, the extra costs there have been getting worse since you updated us at the full year results In early June, however, what we're seeing there is really in line with the expectations that you thought for the full fiscal year anyway. Clear. So EMEA region, Slightly better than expected. In terms of quantification, We are not talking a big amount, €3,000,000, €4,000,000 Can we expect this to continue in the Q2? It depends clearly on the summer season. It Thanks for the delta variance because we have some very good expectation. The kickoff was very good, Now there's the match to play. The match is now almost all these green paths, Which are healthy measures, very important, but can also limit a bit the enthusiasm maybe. So I'd like to be prudent on the Q2. Well, I can re ask what our expectation for Global Europe for the year in term of sell ins or top line. It is mid single digit growth because low inventories at the end of the year. Depletion sellout as well, mid Single digit in terms of value of depletions, remembering that we are clearly Linked to the final consumption and the fact that the dynamic consumption will be there because we have less Pricing, increasing power compared to cognac. So it's more a volume game also because most of the Lagos and Spirits brands that are very important for Europe are already very accretive in the low gross margin. So the more you sell, the more you are beating the gross margin and grip level. So good results. What will be in the Q2? It depends very much on the on trade lasting performance. Logistic cost, It is clear, worse than expected. So even 1 month ago, so we are the situation is sharply Deteriorating, but we are taking all the measures, and we are confident That we respect our overall financial economic estimations that are based as a first Tool, the sharp increase of the gross margin. So we will offset this logistics increase, thanks to cost saving program and increasing our gross margin. Travel Retail. Travel Retail, if you consider performance in Q1 compared to last year, is clearly A very good one. It's very small basis. So 'twenty one, 'twenty two will be still another tough, tough year. The recovery will take some times. We do not expect to be back for travel retail or region Consider to pre copy the level before 2023, 2024. So it's taking a bit more time as well at this stage. Historically, remember, target was very important for us, around 10% of our top line. So clearly, when we say that we are able To do, 36% to this point 5% compared to the 'nineteen, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, 'twenty, Without restating the travel retail, we are clearly booming on local markets. There can be a switch between travel retail and local mass, maybe partially, but it's not the same consumer. So can retail a little bit longer than estimated, even if That doesn't affect at all the estimation of the year. Travel Retail is very, very Margin at this stage and we planned a year with a cautious configuration of travel retail performance. So no issue on travel retail lack of speed at this stage compared to what used to be. No issue in terms of bottom line of gross margin because of the logistic tension. We operate as we can do and we will do The next question comes from the line of Trevor Stirling from Bernstein. Please go ahead. Good morning, Luca. Two questions from my side, please. So first of all, Luca, you mentioned at the start there are 3 factors behind it, the spectacular growth in the quarter. There's an easy comp from last year. There's underlying demand and then there's a replenishment effect as well. I know it's really tough, but is there any way of estimating the split between those three factors? And the second question is really around supply and supply strategy and how you're going to keep up with this amazing level of demand. I think in the past, you talked about The cognac can support 4% volume growth. Is there a way of accelerating the expansion of the vineyards in Pietro Grand Champagne? Or what's has anything changed in terms of supply strategy? Thank you so much for your interesting question. So the Q1 split are not able to make a very analytical disclosure. What I can say that more than half of that growth It's linked to the strong underlying demand because, as you remember, we said we estimated The Q4 to Q1 impact restocking, mastering assembly and then restocking the Q1. We estimated that Between €40,000,000 €50,000,000 we can say that we have done 2 third of this amount in the Q1 and 1 third remains €15,000,000 to €20,000,000 for the Q2, logistic, anything for that. So it means that more than The art for the growth is sound, clear, there for the underlying New paradigm in the U. S. And not only in the U. S. Supplies in the future. Clearly, we cannot sustain The growth at that doubled the cognac sales every quarter is impossible. We guided for the 2030 plan on CAGR between 2% or 3% on cognac volumes And 6 to 8 in terms of the price mix. So high single digit progression at compound average growth rate long term for the cognac. So clearly, we cannot expect to continue to grow like that. How to face that? 2 things. We have 2 things long term. So retain also sometimes like we have done in terms of strategic management of Stock at central level and the local level before selling it too soon. And pricing power, this clearly reinforced because if there is a strong underlying demand, If we are in a moment in which the demand exceeded the offer The brands are well supported, well communicated with a strong campaign to increase awareness. Pricing power has been strong. That's the reason why an A and P expense you see today Increasing the P and L, we have to translate in terms of top line and bottom line tomorrow quite easily. What is at stake is the pertinence, the relevance, the content of the A and P, not the expense in our sales. Don't be afraid of expenses. Expenses are future operating profits. We don't plan to increase that. As far as I know, The land in terms of coverage, the supply in terms of cognac region, But we guided for EUR 80,000,000 of working capital ODD supply increase every year, And we are committed to that. It's not easy because we are not only the only one growing. There is a strong fight Yes. We are committed to feed our future without increasing our working capital of ODD Every year, as hammered, every year, every year without changing the vision for the year. We are not searching the new land. We know that this land is good one, and we have to our fair share, even increasing share Of buying. Thank you so much, Trevor. Hope it's clear. The next question comes from the line of Ed Mundy from Jefferies. Please go ahead. Good morning, Luca. Good morning, everyone. 3 for me, all on the U. S. The first is really you talk about this new paradigm of structurally more buoyant consumption trends in the U. S. Is that a comment on cognac or you think that's a comment for the overall spirits market? And then the second is on the U. S. Consumption patterns normalize and people start going back out to the on trade, have you seen any evidence of down trading In the off trade, from perhaps, let's say, cognac back to Brandy. And then the third one, the U. S, looking back at Slide 8, I know you show your volume Depletion trends of minus 15.9% for the last 3 months. I appreciate that's tough comps and the supply Constraints as you flagged, but have you seen volume to patients improve as you've gone into Q2? Thank you so much. So the new Paradigm, We are clearly interested for the cognac, but it's not only not only cognac, it's all the up trading categories. So More single malt whiskey than bland one, uplift in Luxurious tequila more than the entry one. It's more that people like to please themselves. They are more interested in High quality and well, so high priced products. So it belongs to cognac, but not lower. Clearly, looking in our market, the cognac, we have to educate on cognac and Martin what we consider It is to be our product superiority. By adopting sometimes also some different codes, some whiskey codes in terms of communication on the website And the social networks, we have a switch in terms of base of consumption and retaining them. And once again, A and P is very important, not only terms of global advertisement, in terms of country and states and local advertising And also partnering with Like Our Source, leveraging the address book, spring drinkers, increasing cognac visibility on e commerce website. So there is a wave more wide than cognac. We are clearly in. There is a momentum in which We need to profit through changing year. Changing year is also linked to increase of A and P expenses. In terms of the on trade, we didn't witness down trading. We witnessed compared with expectation Reopening first in sight that are overall faster than expected. Too early to be too enthusiastic because COVID is still there. The variance are there. But as far as we speak, the on trade reopens a little bit faster. 85% of the on trade, as far as I speak, Reopen in the U. S. Compared to 70% expected. And the spend rate is quite the opposite, increased by 20%. Firstly, we did not witness any down trading. We are witnessing an increase in expenses per capita. Again, I don't have a clear Average basket per unit analysis to legitimate digging inside the range with this global statement. So increase on trade presence and increased spending per capita. EMEA, it's too early to say, but as I said, more dynamics than expected. Some of the streams should be a good one. And China, I don't talk too much of China, but China is the strongest sure value as far as I speak, both in off trade Without the major disalignment between Celine and Celleto, so it is a machine gun, which is performing as expected, very, very good. Last words, off trade. We were scared about the off trade collapse reducing, not at all. Rough trade remained much, much above 'nineteen, 'twenty levels In many parts of the world, we might discuss that sometimes in the UK, e commerce could be, for a month, a bit lower than expected compared to Prismac. Overall, off trade dynamics have not been lost, are there, very strong, very dynamic. To support that, have to continue to invest. Q2 depletion, minus 15.9 on Koynayaca. It is more linked clearly sublimate, magnified, as I said, by the supply chain tension because A strong part of the sell in, it is or in the docks in this moment or in the wholesale warehouse because We don't have the trucks to deliver to the individual retail. So they will be reversed progressively in the Q2 And also the year part in October. But don't be scared about this Selling and depletions, fevers, consider to normalize all that the performance of the industry By state, by country and of our several major competitors over 2 year basis. Over 2 year basis, As we said in Italian, on a year basis, everything is there because pre COVID, no perturbation. It is a global year to date all recent method compounded analysis of what We are experiencing right now compared to the pre COVID level. And if we do that, you will see that in the short term, Remy Martin U. S. Is a little bit more penalized than our competitors because of new paradigm. If you do it in 2 years, we are far better than the market, far better than our competitors. And if you do that, stripping up 1738, with these victims of all success, it is clearly Bingo. The next question comes from the line of Olivier Nicolai from GS. Please go ahead. Hi, good morning, Luca. I've got three questions, please. So you mentioned a new paradigm on cognac, But are we seeing the same as well for your liquor and spirits division? It looks like we hear a lot more about Bruichladdich, about the botanist over the 2 quarters. Your portfolio has improved significantly compared to 8 years ago when you joined Remy. So how should we think about the sales growth algorithm for the division in the medium term? Is kind of a mid single digit organic sales growth reasonable? Just to stay on this division, you've been very active in M and A. Which category or geographies Exposure do you still think is missing for the divisions? And then lastly on FX, The euro has weakened quite a lot against the dollar since your last update in June, And yet your FX guidance is unchanged. Now I understand you probably don't want to update us every month on FX. But if the euro dollar sales were at $1.18 could Remy benefit from it this year? Can we expect the date at H1? Or is everything locked for this year? Thank you. Thank you for the question. So the new paradigm for Life Sciences space. Thank you. Very interesting question Because the top of mind answer I have that is stalling the Paradigm More than you Paradigm. Because we have the necessity to prove that we are successful in the Historically, it has good promises, but the results were not what we expected for many years. And today, with the programs, what we are doing, we think they are Much more optimistic, and it is less a price game, more volume games. We have a lot of positive weapon, not only control, but the whiskies. It's Something that will be discovered also by ourselves in terms of the future quarter to try to set also the vision, the clear one For the future. We have strong expectation. The results are clearly better than expected in the short terms In some part of the world that are very interesting like whiskies for China, some European countries, out of the U. S. As well. A new paradigm in the U. S. May be only for the fact that we are able to have a size that was not That big to allow ourselves to enter a new game like Cuentro, advertising the Super Bowl, playing in the A League. So the new paradigm, I think we'll be more specific on that in the next coming quarters. Clearly, there is a lot of momentum Of positive energy there, and we discover Quarter by quarter, where the limit are. We are very positive on lipos and spirits on some brands, and this is the very good news. In terms of M and A for Aquas and Spirits, as you know, the plan for the strategic roadmap for 2030 is build organic. So we are first of all, our best acquisition is to be able to beat the market Yes. For every band we have, we have a lot to do about that, a lot to do in terms of advertising expression, a lot to do in terms of net revenue management, a lot to do in terms of Volume optimization, range, channel. So we have a lot to do In terms of Global Mechanics of the Existing Lands. So at this stage, we do not target a Specific category for M and A. We are clearly looking a lot of to see a lot of topics every year With the Ricola with the Board of Directors, but there is nothing Cheap and relevant at this stage because also with the need to increase profitability in the long term, this Acquisitions should be sizable and also a little bit accredited, I don't say from day 1, but maybe for year 3 and 4 Without waiting too many years. And there is nothing very interesting for sale as far as I speak or at least for our Understanding our knowledge on the market. So a lot of intellectual curiosity, but nothing very concrete at this stage. And I repeat, the clear priority, also in terms of cash allocation, Is to feed the existing growth also in the Alacruzate period. FX. So FX, we are not updating because at this stage, you remember, we are We covered more than 80%, 85%, if I'm not mistaken, percent of our needs for this year. We have granted rates At a little bit more than 1.20. So we have clearly 60% of options. That option is very good. If you are deviating from the in terms of spot in a very bad or very good. If you are switching plus or minus 2%, you are covered. You are guiding with the sustainability because you have Visibility, but you are not gaining so much. If you want, what we can gain is on the 15%, which is not covered, the difference between $1.18 to this spot and $1.20 if you stay like that for the remaining part of the year. So in terms of bottom line ForEx, we speak to what We said I will be more precise at the end or the Q2 or more precisely in November with the half year result. With Celia de la launch, we update all the figures. In terms of currency translation, the top line, if you consider to remain on term of the spot, Maybe the 2025 or yearly level will be a little bit better, but we don't know. As you know, we don't cover top line. We cover all of the net So far as I speak, it is not a matter of cautiousness. It's a matter that our Policy allows ourselves to cover far in advance the needs for the next year. We are already covering 2022, 2023. So in 2022, with the cost of all what we have to consider the time And the cost of option, we are already committing sometimes on 2021. So this is the price to pay when you have an insurance. You want to be to have visibility from the future in your ForEx, you have to cover that. Otherwise, you are exposed to The plus and minus level at least at the market. Once again, I will be very precise end of November with Celia and Verica Our estimation for the rest of the year. The next question comes from the line of Richard Woodhagen from Kepler Cheuvreux. I have two questions, please, Luca. First of all, on e commerce In the U. S, can you say how wide your brands are distributed? And are you on all the platforms? Or are you putting Bigger efforts behind some specific platforms and why would you do that? And then the second question is on as you step up the investments In the business, what are your plans on opening more boutiques? And where especially are you targeting to open more boutiques? Thank you for your question. I'm sure you'll be frustrated, but I cannot answer to your question in a specific way because I delivered to the competition, everybody is listening, the need or the heart of our What's the strategy in a specific way? So I will answer in more global generic way. So in e commerce, before pandemic in the U. S, we're at 4%, now between 8% 10%. We use a lot of platform according to the legislation, which is we cannot allow ourselves to be 3 years we can be in other states. We leverage it, but we're still passing through the classical wholesale mechanism. It is an opportunity in terms of new customers and opportunities also in terms of profitability because even if In terms of channel management, today is not factored as a specific route to market. The more and more we are beating with this result, A new stock equation in terms of e commerce in the U. S. Demonstrating that the rotation The wholesale, not only ours, but the wholesale is moving faster than of the sell in, Sell out and remaining stock will be able to differentiate the trade allowances or at least To grab additional services from the Mercedes for the new business that is booming and which the merit belong to both of us and everybody stood to profit. So an increase in footprint overall, But I don't disclose the specific platform and why we are on that. In terms of boutiques, we have 5 today in China. So we are intending to increase the direct to consumer and boutiques is one of the tool Together with other, would be more in the future, but I don't disclose the calendar where and because it's too Sorry, if it is displayed, it is not funny for you. I understand it's frustrating, but Please understand that it's clearly important for our strategy. There are no further questions in the queue. So I hand the call back to your host for some closing remarks. Thank you so much for being with us today And a very strong quarter. The second one will be another quarter of growth, double digit growth. And we are continuing to perform as we expected. I repeat, strong year with a strong H1, Less stronger, but it's still positive H2 to drive the midpoint through to A year of mid teens operating profit growth and the muted operating profit evolution, Meaning, top line and bottom line organically, driving at the same speed. Thank you so much, and speak to you in October. Thank you for joining today's call. You may now disconnect your lines.