Welcome to Rémy Cointreau Q1 Sales Publication Conference Call. My name is Alan, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad, and please limit yourself to two questions during your turn. If you require assistance at any time, please press star zero, and you'll be connected to an operator. I'll now hand you over to your host, Luca Marotta, CFO, to begin today's conference. Thank you.
Hello, everyone. As you have seen in the press release, Q1 sales were down -15.6% in organic terms. This performance of the quarter reflects a continued de-stocking, particularly in the U.S., high base of comparison, notably in APAC and EMEA, as well as a soft context of consumption globally, alongside a strong promotional activity. Overall, the Q1 sales decline is split between a strong volume decrease, -20.2%, and +4.6% price mix effect linked to limited price increase and a lower decrease of cognac compared to liqueurs and spirits that gives the mix effect. Looking at the overall sales performance by region, America generated a strong sales decline, reflecting the de-stocking in the market not showing any sign of depletion recovery yet. APAC recorded a slight decrease, mostly affected by Southeast Asia, while China was almost flat due to high comps and a persistent tough market.
Finally, EMEA showed a very strong double-digit decline, impacted by high comps, some phasing effect, and also some softer consumer trends. This was sell-in shipment. In terms of value depletions at group level, all brands, over the past three months, starting with the US, value depletions were down strong double digits. Compared to pre-COVID, value depletions were up +10% and clearly stripping out the SOP, excluding the SOP, +55%. In China, value depletions were down mid-teens in the Q1 versus last year and as well compared to 19/20. The latter one can be considered particularly negative.
However, and we'll be back on that point, I'm sure, I would recommend not to pay too much attention considering the very short period of time, which creates some volatility, small size of Q1 for China in absolute value, and a different split in terms of business compared to 19/20 linked to the Duty Free. On top, and we'll be back on that, you have to combine that at least a six-month moving average, reminding that the last quarter we are 200%, three times the weight of 19/20 value depletion footprint in China. So you have to combine that. Following the strong rise in Q4, this is the situation in China. So value depletion should be appreciated on a rolling basis. So combining that in terms of numbers, they are up +70% versus 19/20 on six months, and up mid-single digit versus last year.
Once again, Q1 cannot be appreciated alone because it's a small and volatile quarter. Finally, a word on EMEA, value depletions were down mid-teens versus last year and down low single digit compared to Q1 19/20. But excluding Russia, value depletion would have been flat versus five years ago. Overall, at group level, that means that three months value depletion decline of 4.5% on a five-year basis in line with selling trends -4%. But this global alignment compared to five years ago includes some contrast situation. One, strong stocking in the U.S., clearly is there. Second, a more natural evolution in China where the small size of the quarter cannot really influence the level of inventories. And third, a more or less neutral evolution compared to five years ago in big EMEA region. To conclude on this very first slide, we confirm our full year guidance.
On pages 3 and 4, we pick up some main marketing initiatives as usual of the quarter. As announced in June and as part of the US plan to improve growth rates, we have started and improved the reinvestment rate behind the SOP to improve its visibility on the point of sale, the conversion rate. We continue to leverage a cocktail momentum through activation around Cointreau, particularly during the week of Cinco de Mayo. Results are positive, depletion speaking all channel coverage included. In parallel, we have deployed Mount Gay Eclipse Navy Strength, which will contribute to improve the profitability and the visibility of the brands. And finally, last but not least, we pursue our efforts around Bruichladdich, single malt Scotch whisky to increase education and awareness. This is only the beginning, and we hope that we'll be able to improve next trends in the US.
On page 4, a quick word on China, e-commerce, and particularly good result achieved on 618, 18th of June, 618 Shopping Festival that achieved +14% sales growth. As mentioned by Éric Vallat, e-commerce is a very solid weapon for China. The ambition is to continue to grow, building on a team whose know-how and relationships and soft skills with the key players are a true asset and a competitive edge. We have successfully launched 2 exclusive new products for e-commerce channels and achieved a great depletion number through 618 campaign. In parallel, at the same time, we leveraged the pop-up stores that we opened in Shanghai to celebrate the 300 years of Rémy Martin using live streaming session and social media. Now, let's go back to dry figures, moving to the Q1 sales analysis slide 5.
Sales amounted to EUR 217 million, down EUR 40.5 million year on year, or 15.7% on a reported basis, 15.7%. This reflects, first, a very strong organic decline of EUR 40.2 million. It means 15.6% of organic sales decrease. This performance is split between, as said, -20.2% in negative volume effect and +4.6% of price mix. And as said by Éric, it's important, this is a combination of the slight positive price effect and low to mid single-digit positive mix effect. We have also, albeit, a very slight negative currency translation impact of EUR 0.4 million, or 0.1% loss for the quarter, so very marginal. But this is interesting because this loss is really mainly driven by the devaluation of the RMB, the Chinese currency, for EUR 1.2 million, and the Japanese yen for 0.4. And in parallel, in terms of conversion, US dollar turned positive with a gain of EUR 0.9 million.
On slide six, the usual performance by division versus now five years ago, pre-pandemic, Q1 19/20. I will not detail all the figures because they are clearly highlighted on the slide. But in a nutshell, volume performance is strongly down in Cognac amidst the current US context, while Price Mix continues to be very strong. Overall, total Cognac sales are now down 17% versus pre-COVID, while value depletion is strongly down at the same time around -20%. In parallel, Liqueurs and Spirits division continue to generate a significant performance of +35.1% versus pre-COVID, driven both in combined balance way, volume, and Price Mix, and well below value depletion trends which set at +45%. At group level, this shows a global symmetry between sell-in -4% and value depletion -4.5% versus Q1 19/20.
Inside that, we have different situations by region and by division, as I highlighted, I suppose. Let's now turn to slide seven to dig in more analytical organic trends by region. Let's start with APAC, whose Q1 organic sales were slightly down year-on-year and up at the same time more than 20% on a five-year basis. If we look at the volume value equation, the performance year-on-year includes a strong positive price mix effect and a low double-digit negative volume effect. Inside that, China sales were almost flat in the Q1 in a market that remains complex, tough, particularly for the high-end segment. In this gloomy environment and market, the only channel we can say we emerged very clearly and positively is e-commerce. In the quarter, it grew more than 15%, representing more than 35% of sales penetration in China.
The overall performer also reflects a strong negative impact coming from Taiwan, Macau, and Hong Kong. In this context, Q1 value depletion, so no sell-in, but value depletion, best approximation of sell-out of the group, group level in the region, were down mid-teens year-on-year and as well versus Q1 19/20. But I repeat, +70% on a six-month rolling period versus 19/20, took into account some phasing effect between Q4 and Q1 of this year. Moreover, the misalignment between sell-in and depletion does not impact our level of inventories, which remains healthy at the end of June. The remaining part of Asia reported mid-teens sales decline in Q1. The market is very tough in Southeast Asia, particularly in Australia, Malaysia, and Singapore. At the same time, Japan, on the positive note to this publication, generated very strong sales growth boosted by tourism and partially also the weak yen.
At the end of June 2024, APAC region accounted for 39% of our group sales, up 4 points compared to last year. Let's talk about Americas. Q1 organic sales were strongly down again year on year and down -25% compared to 5 years ago, mostly impacted by volume, while price mix was slightly negative. And digging talking about the U.S., well, sales recorded a strong sales decline in Q1 impacted by continued stocking given the absence of signs of depletion recovery yet. Despite another round of the stocking in absolute value in the U.S., which now brings down the level of inventories to the level of pre-COVID, this is not visible in terms of days of stock coverage, considering further sequential deterioration of depletion over the quarter that just ended. But the absolute value is very, very, very low.
As a consequence, in terms of amount of coverage, level of inventories in the U.S. is still around more or less 5 months at the end of the Q1. On a three-month basis, value depletion is down strong double-digit year-on-year and more or less +10% compared to Q1 1920. And as I said, +55% excluding the SOP. In Canada, sales were down low double-digit in Q1 impacted by cognac, and Latin America was also down at very strong double-digit. End of June 2024, America now accounted for 35% of group sales, which is the same weight of last year at the same period. Finally, the third region in terms of size is EMEA, big region in which Q1 organic sales were down a very strong double-digit and grew at low single-digit versus 5 years ago.
This year-on-year performance mostly includes a very strong negative volume effect. Digging in, Western Europe was down a very strong double digit in Q1, affected by Germany, Greece, and Spain, facing ICOMS and some destocking in a couple of countries. However, this quarter showed a strong disconnection between selling and depletion. UK was down double digit in Q1, impacted by ICOMS as Q1 of last year, 2023-24, was boosted by some restocking ahead, you remember, of the rise in excise duty in the country. In addition, the economic context showed some encouraging signs of improvement on the back of less inflation, positive effects that start to be seen on the final consumption, on sellout.
The remaining part of the huge EMEA region, sales were down a very strong double-digit, impacted by the stocking in Africa Middle East, some negative phases linked to the Orthodox New Year in Eastern Europe, and negative cognac trends in Benelux. Over the last three months, value depletion, so more linked to the sell-out, were down mid-teens year-on-year and down low single-digit on a five-year basis. Excluding Russia, however, value depletion would have been flat compared to five years ago. Overall, inventories are now back to healthy levels, slightly up compared to the previous quarter, but we said at that time they were a little bit on the low side. End of June, in terms of weight, EMEA region accounted for 26% to 6% of group sales, down 4 points versus last year.
So in terms of weight compared to one year ago, America is flat, EMEA -4%, APAC +4%. Now, let's turn to slide 8 and the analysis by division, and we start by the cognac, so cognac. Cognac posted a Q1 organic decline of 12.2%, reflecting a decrease of -18% volumes and a negative price mix of -4.2%. End of June 2024, cognac division accounted for 62% of our sales, up 2 points versus the previous year. In this cognac division, let's start with the APAC. And inside APAC, let's start with China. China sales for cognac were flat in Q1, affected by ICOMS and a weaker consumption. In a nutshell, consumer confidence remains low and continues to impact consumption, while cash pressure as well weighs on all sellers. As a consequence, value depletion was down mid-teens in Q1 year-over-year and versus five years.
But within this global evolution, Club, our key reference, is overperforming, clearly overperforming, while the high-end products are a little bit more on the underperforming side. By channel, On-trade is the most affected one in the current context, also in terms of down trading and lower spend per capita, while e-commerce is clearly up. I repeat, +15% boosted by the 6/18 festival and banquets, which were relatively resilient during this low season. On the negative side, Hong Kong, Taiwan, and Macau were particularly weak, impacted by ICOMS, destocking, and tourist preference for Japan over Hong Kong. Rest of Asia was down mid-teens in Q1, particularly impacted by Malaysia, Philippines, Singapore. But on the positive side, Japan generated a very strong double-digit growth in the cognac division. Second region in terms of weight, it is for the cognac, is America's.
In North America, Cognac sales were down low double digits, still impacted by the stocking on the back of persistent negative depletion, which are not showing any sign of spark yet. Overall, the market remains highly promotional, and underlying demand continues to be weak. Q1 US value depletion was down a very strong double digit for Cognac year-on-year and minus 10 versus Q1 of five years ago, showing a sharp underperformance of the SOP. In fact, Q1 trends are below Q4 of last year. However, we should consider the ICOMS that explain this sequential deterioration. Indeed, June depletions were up mid-teens last year in 2023-24 before the implementation of the price increase from wholesale to retailers beginning end of June, beginning of July.
Considering all that, what I already said, the level of inventories in cognac in the U.S. is still around more or less five months in terms of daybook coverage. That is one of the lowest levels in terms of absolute value. 12-month value depletion, rolling 12, includes two points of negative price mix effect year-over-year, end of June. On a five-year basis, price mix is up 18 points. Finally, a word on Latin America sales that were down for cognac, very strong double-digit in Q1, impacted by a very strong, fierce promotional competition. In EMEA, cognac sales were down a very strong double-digit, reflecting ICOMS, negative phasing, and softer markets. Overall, EMEA was mostly impacted by South Africa and Germany. The U.K. showed a really good resilience despite very high comps.
As a reminder, last year, we benefited from a strong restocking effect ahead of the rise of excise duty. In addition, I repeat that because it's important, sellout shows early signs of improvement alongside the inflation decrease, which is encouraging. Western Europe, as a subregion, was down double-digit in sales. However, sell-in was well below depletion in sellout, which is something with a positive expectation for the next months. Finally, overall, EMEA value depletion was down mid-teens year-on-year in Q1 and down very strong double-digit compared to Q1 19/20. Let's now turn to Liqueurs and Spirits division on slide 9. Liqueurs and Spirits division was down -20.4% on the quarter on an organic basis, including a very strong decline of volumes, almost 24%, 22.9, and a positive price-mix effect of 3.5%.
End of June, Liqueurs and Spirits division accounted for 35%, 3.5, down 2 points versus last year. Let's now review the performance of the division by region. In this case, the most important region is America. In North America, sales were down double-digit in Q1, of which Canada was up low single-digit. North America was impacted by some destocking alongside the greater cautiousness from wholesalers in a slow market. So the cautiousness of the wholesaler is impacting as well Liqueurs and Spirits, creating some mathematically speaking inexplicable disconnection between dynamics of depletion and replenishment in selling. However, the underlying trends are resilient, as shown by the Cointreau Q1 US value depletion, or channel, which were up low single-digit year-on-year and approximately +95% versus 5 years ago.
So Cointreau doubled its size of business compared to five years ago in terms of value depletions, all channels. The Botanist, our gin, also showed positive trends. Besides all that, price mix was down 5 points versus last year in the last 12-month period ending June and up 18 points on a five-year basis. In parallel, Latin America sales were down, also for this division, very strong double-digit in Q1, once again for a persistent promotional market. EMEA, a very strong region, important region for Liqueurs and Spirits, realized sales for Liqueurs and Spirits that were down strong double-digit in Q1, impacted by ICOMS, negative phasing effect, and a softer consumer trends. In parallel, value depletion was down high single-digit versus last year in Q1, but 30%, 3.0 more than five years ago.
Inside all that, while Benelux shows a good resilience driven by Cointreau, UK was impacted by high base of comps, and in Western Europe, it was sharply down on the back of ICOMS, some destocking in Germany, and overall, a soft market. For Eastern Europe, it was impacted by some destocking following also some slight changes in route to market. Third region so far in terms of weight for Liqueurs and Spirits is APAC. Inside APAC, China. Let's talk about China. China posted for this division a strong double-digit decline in Q1, impacted by continued destocking in whiskeys and a weakened demand, mainly from younger generation, more volatile in terms of habits. However, value depletion was strongly positive for Cointreau and The Botanist, while Bruichladdich value depletion posting a more limited decline, so some small sign of positive inflection compared to previous quarters.
Overall, value depletion was up high single digit versus last year and increased 40% versus 5 years ago. So focusing on 5 years ago, at the end of Q1, Cointreau +95% and APAC, EMEA +30, +40. So a huge increase of the footprint of Liqueurs and Spirits and Cointreau, more specifically in the region, so in all regions, so for the group compared to 5 years ago. Rest of Asia posted a mid-teens decline in Q1. Southeast Asia faced a sluggish consumption, Australia, New Zealand mainly, but we continue to gain market share in a very depressed market. Japan still booming, also for Liqueurs and Spirits, driven by Bruichladdich and Lanson Champagne. One last word on the performance of non-group brands, which represent almost 3% of group sales, so stable compared to last year and the year before.
They were down -24.6% in Q1 and -14% versus Q1 2020. This is clearly okay and fine with the strategic journey that Éric Vallat put in place five years ago. To conclude, let's switch to page number 10. On the back of Q1 sales results, which do not show any specific news, nothing new under the sun, we confirm our full-year guidance, which includes two distinct periods. H1 sales are still impacted by U.S. destocking, ICOMS in China, and softer consumer trends in EMEA. H2 sales that are expected to show a recovery, mostly driven by the U.S. In this tough, very tough context, the group is well determined to use tight cost control and its value-driven strategy to protect its profitability, i.e., its organic COP margin. In the full year 2024-25, the group will build on these compounders.
First of all, the resilience of its gross margin, thanks to a measured selective rise in price amid moderate inflation. Second, normalization of the ANP/OSA ratio at a much level much higher than in 2020, but lower than last year. And third, a tight control overheads to offset most of the rise in cost, in overheads, resulting for the reversal of temporary saving achieved in 2023-2024, as you remember. For the sake of clarity for everybody, this guidance does not take into account any potential impact linked to duties increase in China or elsewhere in the world. No duty increase spikes taken into account in this guidance. Thank you for attention. And now I am happy to answer your question, but before I have to drink a bit of water. Thank you.
If you'd like to ask a question or make a contribution on today's call, please press Star 1 on your telephone keypad. To withdraw your question, please press Star 2. You'll be advised when to ask your question. As a reminder, please limit yourself to two questions during your turn. We will take our first question from Andrea Pistacchi, Bank of America. Your line is open. Please go ahead.
Yep. Good morning, Luca. My first question is on liquors and spirits, which has shown quite a deterioration in the last two quarters. So the question is, how much do you reckon of the 20%-25% decline that we've seen in the last six months is really phasing effects and what is more underlying? And how do you see the rest of the year panning out in liquors and spirits?
From an underlying point of view, where is the most difficult area for your liquors and spirits business at the moment? Is it the U.S.? Is it APAC or EMEA? The second question, Luca, please, is a couple of things on tariffs in China. I don't know how much you'll be able to say on this. There's a lot of uncertainty. We don't know, of course, how much the tariff will be. We don't know if it will be still applied to the transfer price or further down the value chain. But two points I want to ask. One, is it reasonable to assume that you will pass it on in full to the consumer? Second, how are you thinking about shipment phasing around the potential tariff? Would you be shipping product to China early to get in before the higher tariff is applied?
Would you be able to ship more product to distributors ahead of the tariff? Or would this even be possible in the current environment? Yeah. And any sense of the timing? I think, I mean, we should hear something before the end of August. Do you have any more insight into potential timing of any announcement and potential implementation? Thank you.
Thank you for your question. So we start with tariffs. So what are the latest developments following the hearing on July public hearing on July 18? The hearing was organized by the MOFCOM held in Beijing, partly on anti-dumping investigation. Everybody was there. It's part of the willingness of the association, as well as European companies, to fully cooperate, I reiterate that, with Chinese authorities in this context. The hearing enabled various European parties to reject the unfounded allegation of dumping, which had neither technical nor legal support.
And on our side, we firmly reiterate the absence of dumping, injury, or threat of injury. So what are the next steps? So far, the MOFCOM did not make any official communication regarding the exact timing to make their decision. So the procedure is still going on. We cooperate. Why I'm saying all that? Because consider the second part of your question. We will not, in a shaky reactivity mood, change our way of making business in China. So we don't take any different habits compared to the previous quarter. So far, the investigation didn't affect the consumer taste or the essence of the business. So we are not changing also the operation to try to anticipate, offset in an extraordinary way the technical impact. Because, frankly speaking, we still think that we are on the right side, so we don't see why we should be penalized.
But that is not only in our end. And if the day comes, we'll be prepared to react. I cannot say today that we'll be everything covered by price increase. In our very calm way, we are there, we cooperate, and we react. We are in a reactive move, and we are not changing our gears in terms of habits compared to the usual ways of doing business in China. In terms of Liqueurs and Spirits dynamics of the quarter and more rolling six months and what will happen in the future. So we start with the end. For the year 2021-2025, we consider that Liqueurs and Spirits, the stage, will beat cognac performance. So no change in guidance in terms of division footprint for the 2024-2025.
Also for the medium to long term, Liqueurs and Spirits is meant, and we invest a lot, not only in ANP but in all means to improve the size of the business. So coming to your question, we think this is more a short-term concern. Short-term that needs to be differentiated by region. Let's start with the more easy one in terms of explanation, which is China. China, and it is still a small part of the business, reacting still good. Cointreau, The Botanist is also in terms of size. The attention is taken by the cognac, but we continue to improve its size. And for the Liqueurs and Spirits negative part, it is more Bruichladdich is the single malt that has a more roller coaster performance in the last two years with the high spikes, younger generation getting on it.
Part of also of speculation in terms of buying to store and capitalize on the value of the bottles is not something linked only to Bruichladdich but also to some other brands of our major competitor in this business, Scottish business. I will not name it, but everybody understands who we're talking about. So this decline is linked to the volatility of younger generation and some resale value that has been lost during the global gloomy period that we are living in terms of visibility. But it is temporary and is not weighing so much for the overall performance of the group. Second one is EMEA. EMEA is much more jeopardizing situation because we increased the prices very much, starting with Cointreau. We are clearly on the right strategy, but now there is a pause in terms of volume.
So it needs to be an assessment, not an assessment, stabilization of the consumption that will become normalization after this huge price increase. We are continuing to improve the set of tools to improve visibility and rotation. But it's really a game country by country. It's very difficult to encapsulate that in only one figure. Overall, at this stage, EMEA is the region which we need to focus more for Liqueurs and Spirits to be able to deliver a clear and steady run rate, positive run rate for the future because of the different situation of every single market. It's a global, very complex situation. For the U.S., it is a complex and very easy-to-answer situation. There is a clear misalignment between sell-in and depletions. What I tried to say in an elegant way before is that sell-in is negative, clearly running behind the performance on sell-out and depletion.
We can say that sometimes on a given quarter, Nielsen is negative, but we look at all channels. Nielsen, remember that for us, is totally not representative. Only 35% against 44% for the market because not taking into account some major chains and independent local stores in which we are beating other peers. So this misalignment is linked to what in the U.S. and we need to solve. It is not a strategic point. It's more a tactical negotiation execution point. But that we need also our wholesalers in the U.S. to play the same game. Destocking following Q4 negative depletion, clearly. But strong caution from them for wholesalers and to record in global context, value depletion are positive. So in a nutshell, cognac depletion underperforming for Rémy. Rémy is cognac, is weighing negatively for all other brands.
It's our job, but the job also of the wholesaler to understand that in 2024, we need to work in a more analytical, skilled, and digging basis. Overall, at group level, I repeat, we think that there are more conjunctural specific elements that are outweighing the negative news of the publication. I'm really aware that Liqueurs and Spirits is a miss compared to the expectations. But it is more conjunctural than long-term threats. Every single region and country for EMEA need to have a specific boost plan or re-engineering plan to address that, starting with Cointreau, but not only Cointreau. Also for Bruichladdich and for Europe Metaxa as well. Metaxa specifically was opened and was penalized also for some changes in route to market in Eastern Europe, as I said.
Please. Sorry, Luca. Just to clarify if I understood what you just said on the US destocking situation. You're saying that the situation in Cognac with very weak depletions and the destocking, that is also weighing or that is driving in part the destocking that you're seeing on your other brands. So it's an execution thing that you have to fix in how you're dealing with the distributors.
Totally exact. Thank you. Cognac underperformance is overshadowing positive news. So it is an execution element to fix in which we need also wholesaler collaboration. We can't react only looking at global figures. Brand by brand, SKUs by SKUs.
Perfect. Thanks.
We will take our next question from Edward Mundy. Apologize. We will take our next question from Sanjit Aujla, UBS. Your line is open. Please go ahead.
Hi, Luca. A couple of questions from me, please.
Firstly, can you just elaborate on the implementation of the VSOP boost plan, how that's progressing? Appreciate its early days, but any color you're able to share as you've made those changes in the US over the last couple of months. And my follow-up question is on EMEA. You called out intensified promo activity. Can you just go into a little bit more detail? Is that broad-based across categories or any particular categories and markets you'd call out where you've seen that step change? Thank you.
Thank you so much for your question. Let me allow to give to yourself and everybody a more global vision of what's happening, the current trading in the US, apart from figures. So it is clearly there that Q1 depletion in the US showed a sequential deterioration versus Q4. So first, the topline, there's a deterioration. Why that?
ICOMS, last year before the implementation of price increase to retailer, June was up mid-teens for the cognac category. The exit rate was very, very strong. Tough market, still tough market, still driven by strong promotion. And we are far less promotional than other peers, as you know. And promotion intensity is not lowering, absolutely not. You can also see it in our spreadsheet when we bench on three months or six months the market and discuss compared to our peers. You will see a huge positive. It's clearly driven by other ranges that we donate in the portfolio, i.e., BS. That means also what does it mean in terms of alignment between sell-in and depletion for other big peers. Spirits market is low overall versus Q4. Market is low in that. Current trading, we do not see the spark yet in the U.S. Limited visibility, still negative.
Let's see how the next quarter will move forward. So far, small positive news. July showing strong sequential improvement. Not saying positive, but strong sequential improvement. Too early to determine if it will be sustainable and lasting for the Q2, even if on the low base. Another point is important to highlight is the asymmetry between states. We are clearly some very good performance in the U.S., Georgia, Nevada, and we have huge underperformance, California, Texas, New York, and partially Illinois. So it is a very complex dynamic state by state. It's like having a huge European state inside a lonely U.S. market. We have just penalized on the positive side implementation of our boost plan. We started to reinforce our activation of 0.06 with VSOP. We implement our smart pricing strategy that I highlighted very clearly with thresholds.
The duties can be up in some states, down in some states. We have a threshold which is aligned. Too early to conclude because just started, the benefit should be there more in the Q2. So far, we recorded encouraging trends in a few states, one of them Michigan. Then, if all confidence and the market is still down, it's very difficult to acknowledge the performance. It is more a performance which is less negative should have been than a clear positive. But so far, some encouraging trends in some states are repeat. And end of Q2, we will be more precise on the result of the boost plan on this week. We have signed also something very important, new partnership with Usher that will also contribute to animate the coming months. And we are confident that we can be better than today.
But so far, for the short term, Q1 was a deterioration. And Q1, in terms of depletion, was clearly a miss compared to our expectation. So global, overall, at group level, not only US, we have been very marginal miss in sell-in. And more important, some points more in terms of depletion compared to our internal estimation. Liqueurs and Spirits, let me repeat what I just said, but it's very important. For the US, we'll see the misalignment between sell-in and depletion for the reason just highlighted, destocking following Q4 negative depletion, and strong cautious from wholesale to take orders in this current context. Value depletion are very positive, including for Cointreau and The Botanist is top of mind. Fundamentals, specifically on Cointreau, are very, very solid. We gained market share very clearly in 2023, 0.9 point and 7 points of market share compared to five years ago.
We intend to continue to leverage this good moment. In terms of EMEA environment, I will try not to be too long because it's a complex region. The current trading, apart from figures that you already highlighted, Q1 sales, we are impacted by softer underlying trends. Inflation waves on purchasing power. The fact that we increased strongly our pricing last year and we took time to consume it absorb it. ICOMS in the UK, some negative phasing effect, particularly Eastern Europe, weighing on Metaxa. Weak markets in South Africa and Nigeria. In terms of dynamics and depletion, down mid-teens and down low single digit on five-year basis, and inventory back to healthy level. The global environment, I repeat, is more complex than other states because it's state by state, country by country, operational plans that need to be put in place.
With the new organization that has been changed at the beginning of the year, as we highlighted the full year result, we switched from a more geographical footprint and business unit system to a more developed market and future growth. There is also a time of this new organization to be put in place. The question you might have is, is this slowdown more an ongoing concern or is a short-term issue? So far, at this stage, we continue to think that Europe will be able to deliver a positive top line dynamic for the year. But we started lower than the expectation. We don't think there is a long-term issue. It's a short-term problem linked to inflation, reaction to consumer, normalization, and adjustment or route to market and our organization to this new environment.
So we should witness in the coming quarters and more clearly from the Q3, a recovery and a respite of the region. I hope it was clear.
Great. Thank you.
We will take our next question from Edward Mundy. Jeffries, please, your line is open. Please go ahead.
Hi, Luca. Morning. Two questions for me first. So on China, it appears that your performance is a little bit better than your peer who reported yesterday. Clearly, you've got a slightly different portfolio with that gap between VSOP and XO closed with Club. But could you talk about some of the other differences perhaps between your business and your peers' business, in particular on route to market with your very strong e-commerce and also potentially your channel exposure relative to your peer? What is it that allows you to potentially outperform your peer within China is the question.
And then the second question is around your guidance. Clearly, one quarter in. I think you're signaling there's no new news really. Today, you'd had expected the first quarter to be quite tough. But do you think the second quarter will be just as tough as the first quarter, or do you think it'll be worse, or do you think it'll be better? Appreciate that Q2 has also got very tough comps relative to pre-pandemic levels.
Thank you for this very easy question. Finger in the nose. So China. As we said, if you look at our figures on depletion at Q1, first reaction is that there is a stocking impact at the end of the Q1. Today, we tried to animate this conference and Q&A even more, taking also part of your question thinking and trying to tackle the point in a very clear way.
As I said, on a six-month basis, this is totally reversed. Part of the footprint and the business model compared to five years ago changed the way we operate. We are more China-owned and less reliant on extra retail on operators in Macau and Hong Kong. So you cannot compare apples to apples in a very clear way. But overall, we are running at value depletion on a moving average in a very positive way, in our opinion. However, to moderate that, the mid-teens decline in depletion encapsulated and overall slowed down the activity on top of ICOMS. So to be able to confirm the fact that we are clearly able to beat our peers in China, to tackle your question, we need to assess the situation very clearly at the end of Mid-Autumn Festival at Chinese New Year, Q2 and Q3. This is key.
The quarter is 15% Q1. The very important part, more than 50%-60%, is Mid-Autumn Festival in Chinese New Year. So far, on the negative side, I will start on purpose on negative, not because I'm bearish today, but because I want to be clear, and then I will detail the positive side. Low level of confidence in the country, real estate, poor performance in the finance sector, high unemployment, low expectation economic growth, and consumers showing their willingness to be lucky by spending less on high-end products. You can see also in our performance, I said very clearly, Club is beating, and the high-end is a bit underperforming. Cash pressure in the trade is clearly visible. So we deal with that, but we do not compromise also to sell in with trade terms of MAD.
If I may say that, a bit of nationalism sentiment protection is consumed local. On the positive side, so why we are getting there, why we think we are going to be proud of our performance in China at this stage? Because for the negative channel overall, on-trade, we are less exposed. So we have also this kind of off-trade. We are continuing to do a very strong job. Our team, we are very proud, is very strong. We have a very strong China team. E-commerce is a deadly weapon, positively speaking. Every time we get in touch with consumers, I say it every time, but the results are there. Every 6.18, 11.11, we are clearly, clearly beating our internal estimation and beating competition.
Overall, even if it's complex, our switch on direct sales for some part of our business, our retail part for Q13, it is improving in terms of image, and it will be soon in terms of result as well. So we have some advantage in terms of channel, in terms of teams, in our opinion, in terms of lower exposure to on-trade. So for the year, we do not change our forecast for China. It is more complex in terms of global environment than estimated, but so far, it is to be slightly up, but in sell-in and depletion for the year. I repeat, at this stage. But everything is linked to two important moments. Everything can be better or worse. Mid-Autumn Festival and Chinese New Year combined between 55%-60% of the business.
On this point, MOFCOM customs duties can waive only in terms of financial, not in terms of consumer sentiment. So far, we didn't get any negative impact about the investigation. So I tried to answer to you in a balanced way, putting in the first line the negative elements in China for us and for everybody and what it makes the difference. Guidance. Too early to comment precisely. It's only the start of the year or the year. What we confirm is that the year is very unbalanced between H1, H2. Timing US recovery comps, depletion running worse than Q1 or the sell-in is something that is a red flag. So we cannot ignore that. It is enough to change the guidance? No, no, no, no, no, no, no. We believe in the guidance. It is something that can vary on Q2? Yes. Yes.
At this stage, the visibility is blurred, but we are committed. There are three important positive points in this publication. I'm quite modest, and I don't want to put China better than peers on that. The first one is Japan, something common. For fundamentals, also yen. The second point, which is specifically for us, sorry. At this point, I will not be modest. E-commerce. The third point, very positive. The fighting spirit is there. Everybody is committed. It's not because we are -15.6% that we are sitting in our offices looking at the figures, making simulation, and resetting the six revised forecasts every day. We are fighting. Then we will count, but we are fighting. That's why I also made some comment in terms of collaboration. All the chain of actors need to be mobilized with the same spite-fighting spirit. What are the consequences for your estimation?
That, based on the strong negative Q1 performance there and depletion being a little bit worse than our expectation and worse than sell-in, -15.6, -18.6 on depletion group level, Visible Alpha consensus today seems not to take into proper assumption the asymmetric trends between H1, H2. So far, the consensus on top line H1, Visible Alpha, if I'm not mistaken, is more or less -9.5, -10. So it is too optimistic. So gives space to the second part of your question, short term, what we'll be having tomorrow for lunch or for dinner. What is expected performance for Q2? No spark visible in Q1 in the U.S. for depletion. End of Q1 group level shows a slight de-stocking overall compared to end of March. Why? I repeat, sell-in -15.6, depletion down 18.6.
Based on current trends, so I'm not sure, I'm really not sure that we'll generate a sequential improvement in Q2 versus Q1 in sales. July started better in depletion in the US, but too early to conclude, I repeat, if this trend is sustainable and it will be enough to encourage wholesalers to increase orders and stock. Stock that are at minimum level. So I'm sure that Trevor Stirling is thinking, what you will do, his question will be, when tomorrow depletion back to positive and we'll call you at the phone every two minutes to replace you, we'll be out of stock in two days. Because he's right. He's right. Trevor is right. It's what will happen. China is still impacted by ICOMS, plus 100% in Q2 last year versus Q2 19/20, even if it was another way of operating. And the market remains very tough, particularly for high-end segments.
EMEA, too early to say if trends will improve during the summer. We are mobilized on that, but it's still tough. So all in all, I think you understand for the Q2, we will not be in a positive land. And also the sequential improvement compared to -15.6%, I'm not sure that will be there. I cannot be more clear than that. We are committed on the guidance. But it's very, very different from what you are expecting right now in Visible Alpha. Q2 is going to be the same Q1 or worse?
We will take our final question from Laurence Whyatt. Barclays, please, your line is open. Please go ahead.
Morning, Luca. Thanks very much for the questions. A couple for me as well, more clarifications. But you had a very strong performance in Japan, and I'm just wondering what's the relative?
We miss you. We are not hearing now. Something happened.
Apologize. The participant line seems like disconnected. So once again, Laurence Whyatt, if you can hear us, please press star one to join back into the queue. We have Laurence Whyatt back on the line. Please proceed with your questions.
Hi, Luca. I don't know what happened there. I could still hear you all the way through, but just to repeat everything. I assume that you are not blackmailed by me. I'm not sure that I blackmail you. I know. You were one of the more positive. You will be back one day, I'm sure. Exactly. Just a couple of questions then. On Japan, just wondering what the relative pricing environment is in that country, particularly versus China. Do you typically sell? Are you currently selling products in Japan at about the same price as you're selling them in China?
Are people buying higher-end or lower-end products in Japan versus China? And then secondly, just given the relative weakness in the on-trade recently and your current high strength in e-commerce, could you give us a breakdown of sort of the sales splits between those three regions, your on-trade, your off-trade, and your e-commerce, just to help us understand that? Thank you.
Thank you for your question. Japan for us, we are not at the niche. Japan is a positive element, but it's very small weight. So it's 2%. So clearly, there is some sales that are going to the Chinese tourism. Maybe what you are intending here, that can be somebody, some traders making some deals to replenish the China market. It is marginal.
And clearly, the yen, the weak yen is playing a role, but at group level, at group scale, can switch the weight of 1%-1.5% to 2%-2.5%. So we are talking about EUR 5 million-EUR 10 million. So at global level, so it is not a disturbing factor affecting the local basis of consumption. What is affecting is part of travel retail performance because maybe you have some local sales in Japan for the Chinese tourists that are in Japan that should belong to the other type of, at the end, disturbing effect on top line, very minimum, increasing the lower gross margin, marginal group level, very marginal, bottom line, not much assistance in EMEA. So bottom line, it is squared. In terms of weight, today, the weight for us in on-trade is no more than 5%. Used to be 40%-35% before COVID.
We are very weak today in on-trade, which is a negative element. We can improve. It is also protection in the short term, also because on-trade in China is less profitable than it is profitable, but it is less profitable than off-trade. E-commerce so far, it is 35% of the weight. So the difference is all the remaining channels between off-trade, the direct. The weight of the e-commerce, don't forget, will be normalized in Mid-Autumn Festival and Chinese New Year because in that part, classical business will sell and direct sale will improve. So yearly level should be between 24%-27% in terms of weight of e-commerce. Frankly speaking, we prefer to be 20% as well because it means that the other channel is improving compared to the actual scale of growth. At group level, this is an important point.
E-commerce now, end of Q1, group level, not China, is 18% of the business against 43.6. So the group realized -15.6. E-commerce channel, all countries, all brands together are slightly negative, more or less flat, with China booming. So every single country is doing more than its job on this channel. And thank God, we think that this is a clear, distinguished positive weapon that we have. Thank you. Thank you very much. See you in September.
That is all the time we have for question-and-answer session today. So I will now hand you back to your host for closing remarks.
I don't have any special closing remarks. So I hope that you will have a very nice, peaceful summer. Have fun. And see you during next month and talk to everybody end of October for the Q2 and H1 top line performance. Have a safe and beautiful summer. Ciao, ciao.
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