This announcement was also made locally in China today. It's a long-term project, and we expect to start distilling in 2021, and I look forward one day to be able to taste this great single-malt Chinese whiskey with all of you. Now, back to our fiscal year 2019. Well, an excellent year, which is a clear demonstration of business acceleration. We've had very strong delivery, with a top-line growth of 6%, so very dynamic, while at the same time optimizing our finished goods products in the U.S. Strong pricing, which marks somewhat of an inflection point on pricing, 2%. The accelerated completion of our operational excellence roadmap of EUR 209 savings one year in advance, which leads also to profit from recurring operations of 8.7%, which is the highest growth since fiscal year 2012.
At the same time, margin has improved by 74 basis points, and also there has been a strong cash flow conversion, 88%, and recurring free cash flow, which is up 4%. The free cash flow itself is down 5%. We'll see later on with Hélène. It's related to the base and non-recurring items. Of course, a strong investment paving the way for future success. This was year one of the rollout of our Transform and Accelerate strategic plan. We'll get back to that in a couple of minutes. Active portfolio management, in particular through gin and American whiskey acquisitions. We've had, let's say, a dynamic summer this summer. The launch also of our 2030 Sustainability and Responsibility Roadmap. I'll talk more in detail about this later. Strengthen route to market, both in the U.S.A. and in global travel retail.
All this with clear and sustained A&P investment at 16.5% of net sales. This is under new IFRS 15. A significant increase, again, paving the way for the future growth of Pernod Ricard in aging stocks of EUR 300 million, specifically on cognac and whiskey. These great results, the acceleration of our performance, both in P&L terms and in cash flow terms, have led us to the inflection in our financial policy. We propose to increase the dividend payout ratio to 50%. This is basically one-year acceleration versus what we had told the markets 18 months ago. We also plan to launch a share buyback program of up to a maximum of EUR 1 billion spread across this fiscal year and next fiscal year. I won't dwell into these numbers. By now, we know them.
In any case, we'll go through them one by one later on, especially with Hélène. I mentioned Transform and Accelerate. This is the first year of our three-year strategic plan. We launched Transform and Accelerate in July 2018. Remember, we had our medium-term ambition framework with our must-win markets. This was shared with you for the first time in 2015. Mid-single-digit growth in the U.S. Right now, the sellout is at around 4%, broadly in line with market. High single to low double-digit growth in China. Actually, we've had a remarkable performance in China with 21% growth. Low double-digit growth in India, which we believe is the long-term sustainable growth pattern we can deliver in India. Right now, remarkable performance of 20% and so on and so forth. We'll be going into all of these case by case. Leveraging our unique premium portfolio. Strategic international brands up 7%.
Strategic local brands up 12%, accelerating. Specialty brands up 12% with a continued dynamism. Strategic wines down 5%. This is mainly driven by ourselves in the U.K. and U.S.A. Innovation still contributing dynamically to our top-line growth. We'll see this later on. I just want to spend some time on our active portfolio management. There has been quite a number of news over the last few months. An acceleration of dynamic management of our portfolio brands around four key pillars. Number 1, leveraging basically brands that are positioned on dynamic categories. Example, leveraging the gin boom with Monkey 47 a few years ago. More recently, during the last fiscal year with Malfy and with also some more regional plays in Brazil, for instance, or in South Africa. Leveraging dynamic categories.
Second pillar, basically reinforcing our footprint, our presence in key strategic markets and must-win markets such as the U.S. and the acquisitions or partnerships we have recently formed or made in Kentucky, in Texas, a few years back in West Virginia. With Smooth Ambler, with Rabbit Hole, more recently with TX Whiskey, and potentially following the tender offer we announced last night with Jefferson's Bourbon. We are reinforcing our presence in our number one strategic market with the U.S., which is ticking two boxes, by the way. Leveraging dynamic categories, American Whiskey, and reinforcing our presence in key strategic markets, in that case, the U.S. The Chinese example is another way to have a dynamic management of our investments, because this is a greenfield investment. The third is to reinforce our presence in routes to market.
I think that our route to market, the Pernod Ricard distribution platform, is one, if not the best route to market globally. The acquisitions, for instance, of Bodeboca is designed to accelerate or reinforce our presence, for instance, in the e-commerce route to market. Bodeboca is the market leader in e-commerce wine and spirits in Spain. The fourth and final pillar of our dynamic management of portfolio and investments is basically selling what we believe are non-core assets or non-strategic brands. Over last fiscal year, for instance, the disposal of some of our Argentinian wines, for instance. Other ways as well, like the outsourcing of the distribution of Imperial to a third party for Pernod Ricard Korea to focus solely on our strategic portfolio of international brands. A pretty dynamic year in terms of active portfolio management.
I mentioned the strong performance in our Must Win Markets. I'll go more in detail in a couple of minutes in each one of these markets. Overall, from a regional standpoint, this year has seen quite a remarkable performance of Asia, which has clearly driven part of our growth with a 12% top-line growth for Asia, rest of the world. Americas has grown 2%, Europe 1%. We'll detail this later. Q4 was up 5%. I mentioned it earlier, in spring, we presented based in Cognac, our Good Times from a Good Place 2030 Sustainability and Responsibility Roadmap. Building on our previous 2020 roadmap with eight very strong, very ambitious commitments with a number of milestones between now and 2030. This clearly will involve several hundreds of millions of investments over the next decade.
It is absolutely critical in today's world for every company, and Pernod Ricard in particular, to play its role, to make the world a better place. If we go into the markets, let's start with our four Must Win Markets. For the U.S., our sell-out is broadly in line with the market trends. We have had stable sales. As you know, we had shared with you our desire to optimize our finished goods inventory at wholesale level, which we have done. No surprise, it's a two-week reduction in inventories, and this puts us in a position to basically accelerate our performance in the U.S. market. Our star brand, Jameson, which represents a little bit less than 30% of our sales, is growing, let's say, a high single to low double-digit value. In particular, with an acceleration of our super premium variant with Black Barrel.
We've had a slowdown in H2, which was driven by the fact that given the size now of Jameson, we've decided also to rebalance our investment strategy and de-seasonalize basically, the brand's performance. Jameson is no longer just an Irish whiskey. It's a brand of its own right. Of course, St. Patrick's Day is part of its heart and roots, but Jameson is an all-year brand. We're also somewhat lapping the Caskmates IPA launch, which was done previous fiscal year. The growth relays, which are now weighing in our performance in the U.S. positively of growth, of course. They represent today now 14% of sales. Think about it, maybe six, seven years ago, they represented nothing. The Glenlivet growing at mid-single digit, which has accelerated thanks to innovation and Founder's Reserve. It is also playing its role of recruiter outside of the single malt category.
Martell sales are up 53%, very strong momentum driven by the Martell Blue Swift innovation we launched now three or four years ago. Increasing distribution, increasing velocity, great innovation. Our two tequila brands, Avión and Altos, both developing quite strongly. Future growth stars as well are growing very nicely, with a particularly strong performance of Monkey 47, Lillet, Del Maguey, much more recently, Malfy. Great performance as well of our Irish whiskey portfolio. As I mentioned earlier, our new American whiskey portfolio with Smooth Ambler, Rabbit Hole, and TX Whiskey. Our bastions represent a bit less than a third of our sales, with the likes of Absolut, Malibu, and Kahlúa. Absolut is still in decline in a category that remains competitive. We've launched Planet Earth's Favorite Vodka in April, end of April. We also launched in July, Absolut Juice, with a campaign featuring Lizzo.
I think Pernod Ricard USA announced yesterday. I think it was yesterday or about to announce today. I hope I'm right. I've said maybe too much, but no, I think they have made it already public. They basically launched a program with Absolut across the U.S. this week, let's say. Basically asking consumers to donate money to an NGO regarding the rainforest, the Amazon, and Absolut will also invest accordingly. Malibu, mid-single digit growth, very great performance, gaining share in its category, and good growth as well with Kahlúa driven by innovation. That was for the U.S. China, outstanding growth. I have to say that the team has performed quite remarkably in China, much beyond what we had guided in terms of our medium-term ambition. We still maintain that the medium-term ambition, sustainable ambition over time for the Chinese market, is high single to low double-digit growth.
We feel comfortable about this. There'll be better years like this year, there might be worse years like we've known a few years back. This year has been a remarkable performance across basically all of the portfolio. We are broadening the base, of course. The dynamism behind Martell is still ongoing. Strong double-digit growth across the entire range. VS, VSOP, XO, and so on. We've maintained our market leadership with roughly 42% market share. Return to growth for Chivas. As you know, two years ago, we embarked on a regenovation strategy, a relaunch of Chivas with strong investments. These investments proved to be the right ones.
The growth of Chivas is now confirmed. Of course, our new, less and less new, it's now been two years, premium brands route to market is delivering with great performance of brands, notably Absolut, growing strong double digits, Jacob's Creek, Ballantine's Finest, The Glenlivet Single Malt, and also good growth around our champagne brands. I won't dwell into this anymore, other than say this represents our first-ever single malt distillery for Pernod Ricard in China. Represents an investment of 1 billion renminbi, EUR 150 million in euro terms for the next decade, which represents strong commitment of Pernod Ricard in our second largest key strategic market. India. Well, I wouldn't like our Indian colleagues to be jealous from what I just said regarding our Chinese colleagues. That's quite a healthy race between the two markets, I have to say.
Unfortunately, by one percentage point, they're going to have to beat China this year in that case, but up 20%, which is also quite a remarkable performance, which was somewhat boosted with a good favorable base of the previous year. In any case, it doesn't change the fact that the underlying performance of Pernod Ricard in India is very strong. Our Transform and Accelerate ambition there is low double-digit growth. This year we've done better, but we believe we can sustain, over time, low double-digit value growth in our third key strategic market, which is India. Acceleration of Seagram's Indian whiskeys. Leadership maintained with a little bit less than half of the market, 45% value market share. Acceleration as well of our strategic international brands portfolio, with strong growth across the whole range.
It's interesting to note, a very strong growth of our strategic wines with Jacob's Creek, which is market leader in India. Finally, in terms of must-win markets, strong growth in travel retail, driven by Asia, but driven as well globally. Our Transform and Accelerate ambition there is basically leveraging our leadership in the premium plus segment. It's a great showcase channel. It's a very strategic channel, but it is also a profitable, of course, channel. With a lot of effort made on pricing, on mix, a strong focus on consumers, accelerating pace as well on a number of innovations. Over the last fiscal year, we've launched Chivas 15-year-old Royal Salute The Lost Blend, Ballantine's 17 and 21 limited editions. I could go on and on. More recently, we've launched Jameson Triple Triple, which is an exclusive.
We're leveraging, especially on the prestige end of our portfolio, rare and aged single malts and so on. Strong also value growth for Martell. Very good performance of the entire whiskey portfolio. Very encouraging results on Beefeater as well. As I mentioned, growth across all the regions. Europe. Well, modest growth in what we qualify a contrasted environment. First of all, Western Europe. While -1%, but very strong price mix, +3%. I would say the disappointing result this fiscal year is mainly France, -5%, but in a way, disappointing with not too many surprises. The market continues to decline. Quite difficult from a structural point of view. Also, that decline has accelerated with a more conjunctural item which is the EGalim law, which has induced strong consumer price increases, which don't benefit ourselves. Actually, they don't benefit anyone.
The reality is with close to 10% price increases, you can expect volumes to decline. Very strong growth of Absolut, double-digit growth of Absolut in a declining market, which is great, driven by flavors, but also by innovations behind Absolut. I was mentioning the EGalim law. You can see this mainly impacted our Q4. I won't dwell on our commercial disputes, which have been resolved back in spring. Stable performance in Spain with market leadership maintained, positive price and mix, with continued good growth around Seagram's Gin and launch as well of innovations behind some of our other brands. Some modest decline behind premium whiskey, in our case, Ballantine's and Chivas. U.K. stable. That's a tale of two stories. Very strong growth in spirits. Double-digit sell-out driven by gin and innovation around gin by Absolut, Jameson, Chivas, Havana Club. Market share gains and positive pricing.
On the other hand, but that's voluntary, we have adopted a very strong value approach on wines. Basically accepting to delist the brands where we don't believe there's any decent profit to be made. Which has hit our top line much more, of course, than our bottom line. Germany, minus three. That's clearly a result of the commercial disputes we had, which has been resolved, at least so far. In Q4, you see the improvement, plus 11%. Very strong development of Lillet, which is a star brand for us in Germany and becoming, by the way, a global star brand as well. Ireland, plus 9%, driven by Irish whiskey, principally Jameson, Absolut, and gin as well, just as is the case in the U.K. Eastern Europe, very strong performance. Continued dynamic growth in Russia, up 11%.
Very good growth in Poland, 6%, and very robust growth in other Eastern European countries such as Ukraine, Kazakhstan, Romania, just to name a few. Other key markets in Americas, acceleration in Canada with good growth driven by Absolut. Further to the Planet Earth's Favorite Vodka launch last year just ahead of Christmas. Good growth also driven by Jameson and our single malt at that, Glenlivet. Very successful innovations as well around Jameson through the RTD launch in Canada and around Captain's Reserve for The Glenlivet. Very good growth in Brazil, up 13%, driven by the way by Ricard, but also our whiskey brands and Absolut. Good news, that's a direct result of our strategy there, which is focused on international Scotch, Absolut, and leveraging small niche category booms like gin.
I would say same story for Mexico, although it doesn't show with the -4%. That decline is mainly due to destocking and pricing disputes and so on. The underlying trend is mid-single digit value sell-out for our portfolio of brands, again, Scotch and Absolut. Asia, rest of the world. I would say Japan up 9%, acceleration there driven by Scotch and Champagne and Jameson, just to name a few. -24% in Korea. This is a direct consequence of the outsourcing of Imperial, which we will still live with in terms of impact up until, I think, spring of this new fiscal year. Excluding Imperial, we're down 3% in Korea. Africa, Middle East up 16% with very strong growth, and particularly stress the strong performance in Turkey. Just by brand, this is where we can say it's broad-based growth.
Strategic international brands up 7%, strategic local 12%, specialty brands 12%, strategic wines, I mentioned -5%. If we go into more detail, Martell, remarkable growth of 18%, of which 11% in volume and 7% in value, price, and mix. With regards to China, as I mentioned it, there has been an acceleration of the growth across all segments and all channels, and strong pricing as we had already mentioned it to you last time we met. In the U.S., our strategy behind Martell with Blue Swift is paying dividends. We see our value growth in the U.S. of 53%. Clearly, our strategy behind Martell is very straightforward. We want to globalize Martell. Of course, I'm sure Hélène will detail more that sustained investments in our strategic inventories to support the medium-term growth for Martell. Jameson up 6%.
In the U.S., sales have been impacted, of course, by the optimization of our finished goods inventory. There has been a positive price and mix, which was clearly driven by price increases. Negative mix related to state mix. Sellout right now is in the high single-digit range with double-digit growth behind Black Barrel, with a Q4 which has been the strongest quarter ever behind that SKU, which is an innovation, and high single-digit growth for Jameson Original. We still lapped, now less so, the Caskmates launch of fiscal year 2018. In Europe, Jameson is up 8%, very strong growth in the U.K., and double-digit growth across all Eastern European countries. There, for Jameson as well, we have a clear global expansion strategy with double-digit growth basically everywhere else in the world.
Just as is the case for Martell, good growth, very strong growth, and confidence in the future behind brands like Jameson requires a little bit of investment. In that case, EUR 150 million spread over the next two to three years. Absolut, globally minus 3%. Let's start outside the U.S., which is now the biggest part of the sales, with 60% of the sales up 4%. Growth is quite healthy, driven by both innovation and now the activation of our global campaign. Continued development internationally with double-digit growth in some 20 markets. Look at India, 33%, China 32%, Africa, Middle East, strong also double-digit growth. Double-digit growth as well in Canada, in Brazil, and a number of other Latin American countries. Double-digit performance, as I mentioned earlier, in France and a number of other countries.
In the U.S., sales have been impacted as well, again, by our wholesale inventory optimization. Sellout is, let's say, -4%, -5%. We launched our campaign, as I mentioned earlier, in late April on the 22nd, and Absolut Juice was launched in July with initial promising results. Acceleration of our Scotch portfolio, +7% for Scotch sales. For our strategic international brands, it's 6, 9, 7, 16. If I had to summarize, 6 for Chivas, 9 for Glenlivet, 7 for Ballantine's, and 16, great performance for Royal Salute. This is also driven by a number of innovations across all of the brands. Other key brands, Ricard, I won't dwell over it, again, -3%. Beefeater up 8%, would've been double-digit excluding Spain. Havana Club stable with double-digit growth in Cuba, but again, commercial disputes in two of Havana Club's key markets.
Its number 2 markets, Germany and France, have somewhat dampened the performance of the brand. I think it was for the greater good, as we say. Malibu, -1%, which has been, as well, driven by the commercial context, Germany, France. The brand is gaining market share in the U.S. with great performance. Mumm +1%, driven by the U.S., China, Japan, and offset by France, which is upsetting, of course. Perrier-Jouët +5%. Great success in Japan, as I mentioned. Also very strong price and mix and a great activation platform. Specialty brands, 12 strategic wines driven by our value strategy, clearly. You can see this through the price mix of 3%, and also dampened by the inventory management around Kenwood in the U.S.
Again, mentioning the great performance of Jacob's Creek in its future growth relays, China, India, and Campo in the U.S., which is flying off the shelves. Innovation and luxury, again, two of our key business accelerators, key strategic pillars around Transform and Accelerate. Innovation up 26%, basically in line with our ambition. Luxury growing double digit at 14% and now represents 13% of total group sales. I won't go back into detail here, as I mentioned it in the introduction. Now, Sustainability and Responsibility. We walk the walk very clearly. We announced our new strategic 2030 Roadmap back in April, based in Cognac. It was live, by the way, on the internet. By 2025, we have a clear and very strong commitment to eliminate complete unnecessary plastic packaging. We've already started. To have 100%, basically, reusable plastic, recyclable or biodegradable packaging.
To integrate recycled plastic into our packaging. Finally, roll out sustainable packaging guidelines for all our existing packaging and new product development. Of course, this has an underlying strong investment behind it, and we're committed to make this happen because it's the right thing to do. Also, let's be clear, consumers are driving this as well. This is to pay tribute to our teams. By the way, when I say our teams, it's not just our sustainability and responsibility teams, but our teams globally in Pernod Ricard. Sustainability and responsibility today is embedded into Pernod Ricard everywhere. It's nice to see, as a recognition, some of these accolades. To finish on sustainability and responsibility, it's also about people and the success of Pernod Ricard. Pernod Ricard's past success, current success, and of course, future success, is driven by people.
We just started having the results of our fifth edition of our third-party independent iSay survey, which is run by Towers Watson every two years. 88% engagement rates. By the way, 88% participation rates across the world, across our 20,000 colleagues, which in and of itself, is a strong signal of the engagement rate. 94% of the people are proud to work for Pernod Ricard, and this makes me proud. I'm part of them, by the way. I also participated anonymously to the survey. I'm part of these 94%, of course, but these results make me proud as well to know how committed our colleagues are. Also, we've launched our first-ever employee share ownership plan covering 18 countries, which is approximately three-quarters of our 20,000 global headcounts. I wish we could have done more, but then there are legal, tax, complicated issues.
Hopefully, going forward, we can do better. Very strong, record high-type, participation rates, 42%. I just mentioned India. Three-quarters of our Indian workforce are now proud shareholders of Pernod Ricard, and half of our Chinese workforce are also proud Pernod Ricard shareholders. I think this sends somewhat of a confidence message on their behalf, and they'll be shareholders for a minimum of five years now. That being said, I will now pass on to Hélène.
Tough transition for me. I must say, well, I'm proud to work for Pernod Ricard.
The results are okay.
for sure. Exactly. Very proud to have as well participated to the employee ownership plan, and proud to present the financial performance. Let's go through the profit from a recurring operation right away. You did cover already, obviously, the top-line growth, so I will jump into the other financial indicators. Gross margin expansion. Gross margin improving by 7% from an organic point of view. You see here how much is at stake in term of gross margin expansion, 39 basis points. This is thanks to the strong pricing on strategic brands that you already mentioned, Alexandre, plus 2%. We had some headwinds in term of cost of goods, in particular agave glass and GNS in India, but we are able to offset part of this hit by accelerated completion of our operational excellence roadmap one year in advance.
Negative mix linked mainly to the strong Seagram's Indian whiskeys performance, as well as some impact from the U.S. wholesaler inventory management. Moving to the A&P, growing by 6% with the A&P to net sales ratio, which is quite stable. Obviously, this is very consistent with our strategy, which is to keep strong investment behind our top priorities. The A&P are increasing broadly in line with net sales, with strong arbitration and focus behind strategic priorities. To name a few, obviously, China and India are having strong investment. Structure costs are growing by 4% below net sales, with the impact in terms of margin of 33 basis points. Moderate increase in the context of the business acceleration, thanks to strong discipline, again, on this resource, focus on key priorities.
Profit from recurring operations, +8.7% from an organic point of view, +9.5% from a reported point of view, with some positive FX impact, giving this 74 basis points, in terms of margin improvement, thanks again to positive pricing, gross margin improvements, and structural cost discipline. If we go now quickly through the profit from recurring operations performance by region, first with Americas. The profit from recurring operations here is stable from an organic point of view, +7% from the reported point of view. Obviously, you have here some positive impact from the U.S. strengthening. Good underlying performance dampened by the U.S. wholesaler inventory optimization. Good underlying trends with strong dynamism that you already mentioned, Alexandre.
The impact of the inventory optimization on our sales in the U.S., which is giving these stable figures for the U.S. with, obviously, the underlying trend, which is in line with the market, as already mentioned. Gross margin growth of 1% with a negative impact in terms of gross margin. This is mainly driven, obviously, by the decreased weight of the U.S. A&P modest increase driven by priorities such as Martell, The Glenlivet, and Jameson in the U.S., but as well, Beefeater in Brazil. Structural cost increase, +2%, a bit over the sales with strong discipline here. With reported profit from a recurring operation of +7% that I mentioned already, thanks to the favorable USD evolution. Moving to Asia, rest of the world. You mentioned already the excellent growth in terms of top line.
This is, of course, even probably more stronger in term of bottom line. This figure is extremely strong, +19% from an organic point of view, with this strong margin expansion. Sales growth, no need to come back to that. You know which markets are the key contributor to that growth. Gross margin improving by 15% with 121 basis points expansion, thanks in particular to positive pricing and mix in China and as well pricing in Turkey. Strong A&P growth, +13%, with focus on core priority. Again, on this, we are mentioning Martell China, but as well India media investment and to the max strategy.
Structural cost +7%, which is reflecting the targeted investment in growth relays and profit from recurring operation with this excellent margin increase I was mentioning before, thanks mainly to pricing, continued significant investment both in term of A&P and structural cost behind future growth. Profit from recurring operation growing by +2%, with strong growth in Eastern Europe, but the difficult context that we mentioned already in Western Europe with sales growth at +1%, gross margin +2%, with some margin ratio improvement of 69 basis points, driven in particular by the operational excellence initiative we did complete in this fiscal year. Structural costs tightly managed, +2%, knowing that obviously we have some impact in the ratio because of the weaker top line in some of our two main markets in Western Europe with a commercial dispute.
Profit from recurring operations +2% with some modest improvements in terms of margin. A reported profit from recurring operations impacted by some negative FX. If I move now to the net profit. First, talking about the earnings per share on the recurring operations, double-digit growth, +10%, obviously driven by the robust business profit growth I was just mentioning, +9.5% from the reported point of view. Slight increase in financial expenses. This is mainly due to the higher short-term USD interest rates and some as well FX impact with stronger USD in this fiscal year. Tax rate, it is close to 26% as announced earlier in the year, with a slight increase versus last year. This is mainly due to the profit increase in countries with higher tax rates. Non-recurring items.
Let me start first with the non-recurring operating income and expenses, minus EUR 206 million. With the impairment charge of EUR 69 million, driven mainly by Brancott Estates and as well some capital losses on the Argentinian wine disposal. Restructuring cost, EUR 77 million, reflecting our ongoing adaptation of our business model and mainly this year in Korea with the changes we've mentioned post the outsourcing of Imperial distribution. We did reorganize our affiliate back in spring to focus on strategic international brands. Other non-recurring income and expense, this is mainly driven by one of non-cash items that were already there in the H1, meaning the equalization reform impact on the AG2R LA MONDIALE pension fund. Corporate income tax, a small income. What is really relevant here is probably the comparable basis.
You remember last year we had a significant non-recurring income on that line, mainly the U.S. tax reform and the French withholding tax reform. If we move to the net profit, -8%. This is linked as well to the higher tax charge we have with the positive non-recurring items in fiscal year 2018 I was just mentioning. Decrease in this net profit despite the excellent growth of our profit from recurring operation, mainly driven by one-off item in fiscal year 2019 and unfavorable comparable basis due to very positive one-off effects in the previous year. Now let's move to the cash performance. Continue very strong free cash flow, +4% in term of recurring free cash flow. Free cash flow, -5% is again mainly linked to the non-recurring items, the cash impact on the non-recurring items I was just mentioning.
If we go into the details of the recurring free cash flow performance. Strong recurring operating cash flow. You have here the figure in terms of growth versus FY 2018. This is a strong performance with the maintenance of high conversion rates in a context of the business accelerations, positive operating working cap evolution and supported by the operational excellence initiatives we have on top of the P&L impact. As I'm sure you remember, we have as well EUR 200 million roadmap in terms of cash benefit. Increase in strategic inventory builds of EUR 300 million. This is an additional EUR 100 million versus last year. Alexandre mentioned it. It's mainly driven by the investment we are making in whiskey and cognac to support our growth ambition.
This is something we intend to continue into FY 2020, so you should expect circa EUR 300 million as well in terms of increase of strategic inventory in FY 2020. Talking about CapEx, the ratio has been quite stable this year, 4%, so very similar to the previous year. We do expect this ratio to increase to 5% to support key investment priorities. We mentioned already a few in the introduction. Talking about now the financial expense, so a slight increase as well from a cash point of view with the same reason than the one I mentioned already, higher short-term interest rate in the U.S. and as well some FX impact. Higher cash tax, and this is directly linked to the increasing profit in the higher tax jurisdiction.
Non-recurring free cash flow, this is mainly due to restructuring and giving this free cash flow at -5% versus the previous year due to positive one-off in fiscal year 2018. To be even more clear on, in fiscal year 2018, we had some positive cash linked to the sales of Bell's Scotch and as well the reimbursement of the French withholding tax. Now let's look at the impact in term of reduction of our net debt. The net debt is reducing by EUR 342 million, which is putting us in a leverage ratio figures down to 2.3. Despite, I must say, increased dividend that we announced one year ago, as well dynamic M&A. Which I think you have all the detail here.
One point I wanted to highlight is some negative phasing with respect to the employee share ownership plan because we had the cash out in June and the cash in from the employee contribution in July. Negative translation adjustment as well in this net debt reduction figures of €78 million linked to the USD evolution. In that context of the strong business performance as well strong cash generation and deleveraging, we are able to announce an inflection of our financial policy, with the decision mentioned by Alexandre of proposing a payout ratio of 50% for the fiscal year 2019. You have here the figures of the dividend per share. That would be subject to the shareholders' meeting vote. As well, the announcement of a share buyback up to €1 billion for the fiscal year 2020 and fiscal year 2021.
It's giving us the opportunity to update our financial policy with the following priorities that we have while retaining our investment-grade rating. Number 1 priority is it's obviously increasing our investment to support our future organic growth, in particular the items that I mentioned, such as strategic inventories and CapEx. We will continue to have a quite active portfolio management with the value creation M&A strategy that we've been pursuing for already a few years now. Accelerating the dividend distribution with this increased payout ratio to 50% from fiscal year 2019. The launch of this share buyback program up to EUR 1 billion across this fiscal year and next fiscal year. Proposed dividend, I think I covered that already. The launch of the share buyback program, to be implemented over these two fiscal year, the shares will be canceled.
The intention is to execute this plan at market condition. We have the ability to suspend or terminate the program at any time. Let me hand over back to you, Alexandre, for the conclusion and the outlook.
Well, thank you very much, Hélène. Again, excellent fiscal year, which stresses the business acceleration and long-term value creation, which is the story of Pernod Ricard. Growth is diversified across the portfolio. We've had strong pricing of 2%, remarkable performance in China, India, and with strengthening of our roots to market in travel retail in the U.S. We've accelerated the completion of our initial operational excellence plan, the 2016, 2021. With one year advance, we will continue to focus investment to support our future growth, as you've seen. Again, I won't go back on the results. As an outlook, we usually start by saying for this new fiscal year in an uncertain environment, we've just added the word particularly uncertain environment. Within that particularly uncertain environment, we expect to continue the execution of our Transform and Accelerate strategic plan.
We are now in year 2 of that plan, focusing on dynamic growth and delivering leverage in line with the objective of maximizing creation over time. Dynamic sales growth is expected to continue, albeit at a more moderate level, in line with our medium-term ambition for India and China. India, low double digit. China, high single to low double digit. As I said consistently with our plan, dynamism in the U.S. following the inventory finished goods optimization, and clearly increased investment, as you've just seen with Hélène behind our CapEx and strategic inventory priorities. We just mentioned we'd start a share buyback program at some point during the course of the year. Please note that Q1 is expected to be somewhat soft, but that's basically driven for technical reasons, basically an unfavorable comparison.
Remember, last year, Q1 was up 23% for Asia, rest of the world. You should expect, on the other hand, a dynamic start in the U.S. This has driven us to share with you our fiscal year 2020 guidance of an organic growth in profit from recurring operations, anywhere between plus 5% and plus 7%. Thank you very much. Julia, back to you.
Thank you. We'll kick off our Q&A. Are there any questions in the room? Marion?
Hi, good morning. Marion Cohet-Boucheron from MainFirst. Two questions for me, please. The first one would be on the impact of the U.S. wholesale optimization. Could you quantify the impact it had on EBIT for this year? Another question would be on the latest trends you had from China, if you could give us a bit of color. A third question would be on commercial disputes. What are you expecting in the markets that were affected in the upcoming fiscal year?
Okay. I will start with the first question. Could you please just clarify the impact of the U.S. on the business profit in fiscal year 2019? That's the question?
Yeah.
Well, as you know, we said it's two weeks in terms of sales impact that has been done at the end of the fiscal year, which put the U.S. in a stable top line position for fiscal year 2019, due to this reduction of wholesale inventory optimization. Obviously, it has some impact in terms of business profits, that we are not detailing.
With the latest trends in China, as you know, we've grown 21% over last fiscal year. We believe it's more of an exceptional or remarkable year than just the business case. Our medium-term business case for China is high single to low double-digit value growth. There will be better years like we've known. There will be worse years like we've also known in the past. This is where we believe we'll be during the course of this fiscal year. Obviously, Mid-Autumn Festival has not happened yet, which will be an initial indication of what the year could look like. Again, given the importance and the weight of Chinese New Year, that's as far as we can say. So far in China, the underlying trends are good. They're growing, and again, expect high single to low double-digit value growth for China.
When it comes to commercial disputes, my point is very clear. We cannot, Pernod Ricard cannot afford to agree terms and conditions with some clients that we believe or we deem unreasonable and that don't create value for ourselves, of course, for our clients as well. If terms and conditions in the future tend to be unreasonable, please expect commercial disputes. If commercial terms appear to be reasonable, there won't be any commercial disputes. That's the strength of our business model. We can afford to say we want reasonable terms. It's important because of the strength of our business, by the way, that's important relating to our investment strategy behind our brands. It's important to have strong brands. Consumers choose. Customers are there to service consumers, so are we, but under reasonable terms. That's as far as I can go.
We'll see.
you don't have any negative growing from last year and every other?
Just let's be clear. We have commercial disputes every year. This year was an inflection point of a commercial dispute, which was much bigger, weighed more than the usual ones. Is it an exception or is it now going to become the rule? I have no idea.
Thank you.
Is there more questions in the room? In which case, we'll go to our callers, please.
Certainly. As a reminder, it's star and one. If you'd like to ask an audio question. Your first question comes the line of Edward Mundy from Jefferies. Please ask your question.
Morning, everyone. I've got three questions, please. First question is. Actually, you're guiding for growth in China and India to moderate or normalize towards the medium-term ambition from the 20% that you delivered in fiscal 2019, in fiscal 2020. What's driving the more normalized outlook? The second question is on your wider organic EBIT guidance for the group. I appreciate you're always quite cautious at the start of the year. I was interested in what led you to include the word, particularly, and what exactly does this pertain to? In particular, does the guidance take into consideration ability to absorb some of these particularities? The third question is on the U.S. I appreciate this year has been held back by wholesaler inventory optimization. As we look into fiscal 2020, should we get a restock, i.e., shipments running ahead of depletions?
Should we assume that shipments and depletions run in line?
Thanks, Ed, for your questions. Listen, China and India. Well, two reasons. We have always said, we still fundamentally believe that the underlying sustainable growth story in both markets is, for China, high single to low double-digit value and for India, low double. That being said, if you look at China has been boosted to some extent by Martell. Martell was up globally by 11%. Of course, part of this is clearly related to China. Double-digit volume growth for Martell is just not sustainable, let's be honest. What we have always guided is Martell, medium term, can sustain high single-digit volume then, let's say mid to high single-digit volume. Obviously 11% is a little bit too much.
It's not always easy to put the brakes on the volumes, but we're going to have to put a little bit of brakes also on our volumes this year for the sake of our ongoing growth story behind Martell. This also will impact somewhat and therefore come back to more, in that case as well, I would say reasonable growth rates in China. With regards to India, basically, part of the performance in India was also boosted by a strong, actually a weak comparable base the previous fiscal year. That's done. Again, low double-digit value growth for India is a great place to be, especially when you're a market leader. With regards to the outlook, why did we add the word particularly? What that word basically suggests is that the degree of uncertainty we all are facing has probably nudged up a little bit.
If you look at and read newspapers this year from this summer next to the swimming pool, you'll see that the tonality has somewhat worsened a little bit versus the previous years. Uncertainty, in a way, is the new norm, we get the feeling, however, that the level of uncertainty has nudged up just a little bit. Within that degree of uncertainty, we feel, of course, confident with our guidance. One example, or a number of examples, just to be clear, we don't know how well the tariff war will end between China and the U.S. We don't know whether there will be any tariffs on European spirits in the U.S. We may or may not know. By now, I don't know anymore, there may be a hard Brexit a few weeks from now.
We had planned for that last year, but we'll plan for it again now. I'm just saying that the degree of uncertainty has somewhat nudged up a little bit. The foundations and the way our business is built can obviously help us absorb, as you put it in your own words, absorb some of these risks if they were to materialize.
Maybe let's talk about your question in terms of stock in the U.S. The intention is not to restock this fiscal year. Let me maybe just remind you why we did this reduction of finished goods inventory at wholesalers level this fiscal year 2019. It was really to strengthen our route to market there so that we can be more agile and accelerate. What do I mean by agile? Probably with a faster route to market, which obviously is quite useful in terms of launching innovation, price increase potential, and so on. The intention is not to restock the U.S. in fiscal year 2020.
Thank you. The next question comes to the line of Laurence Wyatt from Barclays. Please ask your question.
Hi. Good morning. Thanks very much for the questions. Three from me. Firstly, on your advertising, you obviously increasing your investment in your CapEx and your aging stock, and your advertising spend of 16.5% is slightly ahead of the 16% that you guide to post the change in IFRS. Is that the sort of normalized advertising spend that you expect going forward? Is that on the higher end, given where your current guidance is? Secondly, on your Irish Whiskey portfolio, we spend a lot of time talking about Jameson, obviously but there's been a number of new entrants into the Irish Whiskey category in recent years. You've got a large portfolio of Irish Whiskey brands with Irish Distillers, and I was just wondering if you had any plans to roll those out more widely or what are your plans for those brands.
Thirdly, slightly related to that, there's been a number of new acquisitions of smaller brands, particularly in the U.S. whiskey category. Could you just give us some confidence of how much management time these sort of projects take up, given their small size? Just give us confidence you're able to focus on the full business. Thanks very much.
Let me answer the first question. As you rightly mentioned, we want to keep investing behind our brands, and as well, in terms of CapEx and aging stock. We did say that the A&P to net sales ratio, it was more like a circa 16%, including the IFRS 15 impact. To answer your question, we believe that this 16.5% is more or less, the new norm with post IFRS 15, meaning that we will keep investing significantly behind our key strategic priorities. At the same time, bringing efficiency in our A&P spend, because we did announce on top of the first wave, if I can call it that way, at the Operational Excellence Roadmap from 2016 to 2019, that we are going to have a new EUR 100 million savings from 2020 to 2021, including A&P efficiency.
We will have additional efficiency in term of A&P, which will enable us to keep investing behind our key priorities with, at the end of the day, this ratio, which should remain quite stable.
Yes. Vis-a-vis Irish whiskey portfolio, of course, Jameson is our star brand, but we have, over the course of the years, developed quite a large portfolio of niche, high-end, high margin, high growth potential Irish whiskey brands leveraging their heritage. I could mention Redbreast, which is growing quite significantly. I could mention the Spot range, which is a single pot still range. By the way, IDL has a vision. Our single pot still Irish whiskeys are to the Irish whiskey category what single malts are to the Scotch category. There's the Spot range as well. There's Powers, of course, which has developed as well, an ultra-premium, single pot still variant. I could also mention Method and Madness, which is much more of a craft high-end Irish whiskey brand.
Finally, on the luxury end of things, I could of course mention Midleton, which I strongly recommend, the Midleton Very Rare. Vis-a-vis M&A in the U.S., and more broadly speaking, we announced two things a while back, part of our Transform and Accelerate strategy and roadmap. Number one, our house of brands now includes what we call specialty brands that are growing at a fast pace. They're small in volume terms and big in value terms and growth potential. Of course, if we have now a new house of brands on the brand side, we just need to make sure we have the right route to market to service all of these different brands. We're seeing our routes to market by market, including in the U.S., being more granular.
In the U.S., we had announced, I think it was two, maybe three years ago, the creation of NBV, New Brand Ventures, which will, of course, manage a number of these acquired brands. Not all of them. Some have already enough size in terms of volume and value to go in what we call the main route to market or main book. The more niche, crafty brands are managed from a route to market point of view, through New Brand Ventures. Please do not worry when it comes down to our big, strong brands. There is a full focus on them on our main book.
Excellent. Thank you very much.
Thank you. Next question comes to the line of Sanjeet Aujla from Credit Suisse. Please ask your question.
Hi. Three questions also on the U.S., please. Firstly, on Jameson. You talk about depletions running at high single digit. Is that the new run rate, or do you think, given the phasing of some of the investments that could get that to double-digit growth? Secondly, on Absolut, you've done a number of line extensions, particularly with flavors. Can you just give us your assessment of how Lime and Grapefruit have performed, and how you would expect Juice to perform in comparison to that? Just on the Castle Brands acquisition announced overnight. The margins there seem quite low. Do you think over time you can get those margins to broadly in line with your U.S. margins? Thank you.
Thank you, Sanjeet, for your questions. Jameson U.S.A. new run rate. Jameson. From my point of view, is a high single to low double-digit growth story in the U.S. Some tough years, it might be high single. In some better years, it might be low double. Black Barrel is clearly a double-digit growth SKU in the brand franchise and for the foreseeable future. Jameson Original, it can be anywhere between high single to low double. What dampened a little bit the performance for the last fiscal year, beyond the St. Patrick's effect and the de-seasonality strategy we're applying to the brand, is basically lapping the Caskmates launch the previous year. With regards to Absolut line extensions, Absolut Lime was a huge success.
I think it was one of the best Nielsen innovation successes back in its time, which created a strong comparison, I would say, for grapefruit, which was less so versus lime. Everything is relative. Absolut Juice has just been launched. Let's be clear, it launched in July. In terms of current numeric distribution growth, it is basically so far even slightly in line with Absolut Lime and better than Absolut Grapefruit. As for Castle Brands, I would just say, at this stage, we have launched a tender offer. I would not like to comment anything.
Got it. Thanks.
Thank you. Next question comes the line of Simon Hales from Citi. Please ask your question.
Thank you. Morning, Hélène. Morning, Alex. 3 also from me, please. Firstly, Alex, can I just clarify on your comments around the particular on the outlook statement. Are you including, and there's some risk therefore of EU/U.S. tariffs within your 5-7 guidance, is that built in, some assumption of that, one way or the other? Secondly, Hélène, you talked about the higher finance costs and charges in FY 2019. How should we think about finance costs, in FY 2020? Also, on the financial side, can you tell us a little or give us some guidance around FX impacts on the P&L for FY 2020? Just going back finally to all of the bolt-on M&A you've been doing. Should we expect the deals that you've done to date to be accretive to earnings immediately as we look into 2020?
Specifically around the American Whiskey portfolio you've built out, a number of acquisitions there over the last couple of years. Do you feel that you're broadly done now with the portfolio of brands that you need to access that American Whiskey opportunity?
Good morning, Simon. On your first question, yes, we have built in some assumptions on the potential tariff risk. These assumptions, at this stage, we would not like to share them with you. Of course, we've done what we do all the time, by the way. In these days, we do risks and opportunities analysis. Part of the risks include some assumptions around these kind of disputes.
Just to say, obviously, it's difficult to have a very exact view. That's why the environment is volatile. We don't have, obviously, information in terms of timing, quantum, nor what could be the final list at stake. That's why we are making some assumptions here. For your second question, in terms of cost of debt, it's roughly 3.9% this year. We believe that could be a bit higher than that, probably circa 4% next year. In terms of FX guidance, obviously, it's quite early in the year. It's obviously quite sensitive depending on the Euro/US dollar assumption. We are taking, right now, the assessment we are making is slightly positive in terms of impact for the fiscal year 2020.
M&A equity.
M&A equity earnings.
Small.
Yeah, it's small, though. As we say, we are very happy to have new brands helping to strengthen our position in the U.S. and in this great U.S. whiskey category. It's still small brands that we will take lots of attention to protect and grow in a profitable manner.
Thank you. Just in the interest of time, we'll just take two final callers, please. Thank you. Your next question comes from the line of Trevor Stirling from Bernstein. Please ask your question.
Good morning, Alex and Hélène. Two questions from my side. Alex, when you referenced putting the brakes on Martell in China, is that the classic taking price up to reduce the volume growth? Or is there something else going on as well? Second question, probably for Hélène. Hélène, you mentioned agave as a headwind in fiscal 2019. Clearly, prices are staying higher for longer than we expected 12 months ago. If prices normalize, what order of impact could we expect on the cost of goods sold?
Thank you, Trevor. On your first question, as you know, we had increased our prices on Martell two years ago in February, if I recall, 2017, and then we increased them again in February by 5%. We just need to be careful vis-à-vis consumer demand and so on. We never disclose our pricing plans because it's quite sensitive. The only point is we cannot grow double digit our volumes on Martell. That would not be sound for the long term. Of course, you should clearly expect volume growth and therefore volume value from Martell to moderate versus what we have known this year.
In terms of pricing, obviously, as you know, pricing is a very important part of our Transform and Accelerate ambition, what we call the Revenue Growth Management. We are going to keep focusing on that to have the best pricing policy and impact in our financial delivery. The COGS evolution, what we can say is that it's probably going to have as well some negative impact from headwinds in fiscal year 2020. To name a few, agave is probably going to have a significant impact once again for us in fiscal year 2020 and as well as some significant cost in terms of inflation of some commodities. That could be as well GNS in India and glass. We are implementing as well operational excellence initiative to mitigate those hits.
Thank you very much.
Thank you. Your next question comes line of Andrea Pistacchi from Deutsche Bank. Please ask your question.
Yes, good morning. Hi. I have three questions, please. The first one, just following up on now on the COGS and the gross margin question. You said that the input costs, the gathered glass should still be a bit of a headwind, as was the case in FY 2019. When you think of the other important moving parts that affect the gross margin, so country mix and pricing, how do you think of these drivers versus FY 2019? Where I'm trying to get to is whether the 40 basis points of gross margin that you delivered this year, whether that is a sustainable level for the medium term. The second question regarding the Q1 that you flagged will be soft because of the comps. One of the reasons, if I remember last year, why Q1 was strong was in China, which was very strong.
You had done some early shipments already ahead of the Chinese New Year. Chinese New Year is about 10 days early, I think, this year. Just wanted to ask whether this could be something you do this year, too. My final question, please, on the situation from your point of view in Hong Kong and how large Hong Kong is as a % of your sales, and just to confirm that I think when you report China growth, that doesn't include Hong Kong. Is that correct?
I'll let Hélène answer your first two questions, Andrea. Just on Hong Kong, obviously, we're not going to comment other than to say Hong Kong in itself is not the biggest market of Pernod Ricard, just to make it quite clear. Other than that, no comment.
Maybe on the gross margin expansion, obviously it's a bit difficult to give you visibility on this at this time of the year for FY 2020. Back to your question in terms of midterm ambition, you remember that we did communicate that in the Transform and Accelerate ambition, we have this operating leverage ambition, which is circa 50 to 60 basis points, subject to top line between 4%-7%. Parts of this operational leverage come from gross margin, but not only, because we have as well some efficiency coming from the structural cost discipline and allocation. To answer your question, in terms of mix, I think you mentioned all the drivers in terms of gross margin, so a positive one with pricing, but as well mix in terms of premiumization of our brands and depending obviously on the product mix.
We had some significant positive impact in FY 2019 with the strong growth of Martell. The moderation of this growth in FY 2020 would not have the same positive impact. Obviously there's the country mix. Very difficult to predict all those things at this time of the year. We are working to improve the margin. On top of what I just said, we have as well to offset as much as we can the headwinds in term of COGS. For the Q1, first, I would like to say that in the soft Q1 assumption, we have as well some impact from Korea, which is going to have a kind of significant impact in this Q1.
When it comes to your question for China, first, let's start with the first festive season, which is the Mid-Autumn Festival and Golden Week before Chinese New Year. On this, probably no significant impact necessarily between mid-September compared to end of September. This should not change significantly Q1. Obviously for our Chinese New Year, it's much too early for me to comment on this.
Thank you. That brings our question session to an end. Thank you, Alexandre. Thank you, Hélène. Ladies and gentlemen, have a good day. Thank you.
Thank you.
Thank you.