Gentlemen, and thank you for standing by. Welcome to today's Q3 Financial Year 2019 Sales Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you, the conference today is being recorded on Thursday 18th of April 2019.
Without any further delay, I would like to hand the conference over to your first speaker today, Julia Masys. Please go ahead.
Good morning, ladies and gentlemen, and thank you for joining us this morning for Panerica's Q3 fiscal 2019 conference call. We're hosted this morning by Helene du Tissot, our Finance Operations and IT Director, will take you through a brief presentation and then open the floor to your questions.
Helene, over to you. Thank you, Julia. Good morning, everyone. So let's start with our Q3 net sales performance. So very strong and diversified year to date growth.
We are delivering an organic year to date sales performance growth of plus 6.3%, and this is driven by emerging markets growing by 15%. So if we start with Americas, plus 3%, with a good performance there. The U. S. A.
Are broadly in line with markets. And this is I'm talking about the underlying rate here because we have some start of the wholesaler inventory optimization, which is happening in Q3 already. I'll come back to that. Asia Rest of the World, plus 12%. This is a very strong performance.
And obviously, our 2 key markets that are China and India are strongly contributing to that performance. Europe, plus 1%, very good sales in Eastern Europe and contrasted performance in Western Europe. So Q3 has delivered a plus 2.5% growth, which is fully in line with our expectation, and this is mainly due some technical factors I will come back to. So Americas plus 2%, improving performance in Latin America. And, as I mentioned, for the year to date, shipments in the U.
S. That are reflecting the start of this wholesalers inventory optimization Asia Rest of the World, plus 3%. And this is, as I mentioned, in line with our expectation with a very significant impact here of earlier Chinese New Year and sustainable growth management of Martell. And we have some route to market change in Korea impacting Q3. Europe, plus 2%, with some improvement there, driven by a very strong performance in Russia and as well U.
K. In Q3 despite some commercial disputes impacting us in Western Europe, especially in France and Germany. So moving to the next slide. You have here all the figures. So net sales figures of €7,188,000,000 plus 6.3%, as I mentioned, in terms of organic growth and plus 4.9% reported growth.
If we look at the performance across our markets, so mature markets, stable and emerging markets, as I mentioned, growing by 15%. Diversified growth as well in terms of brands, which obviously is a key part of our strategy. You have here the key figures for our categories: strategic international brands, plus 8% strategic local brands, plus 10 percent Specialty Brands, plus 14% and Strategic Wine, minus 5%. I move to the next slide. So here you have all the figures.
The organic growth figures I mentioned for both year to date and Q3, some non significant perimeter impact and FX impact, so negative for the year to date, €70,000,000 negative FX impact despite a positive impact of U. S. Dollar. But there is some negative impact coming from the emerging market currency that you have on that slide. For Q3, the figure is positive in terms of FX, and this is the mainly driven by the positive impact of the U.
S. Dollar. If I move to the next slide, sales growth by region. So as usual, we show that slide as well the performance for the full year last year and the convertible basis of the 9 months the previous year. So Americas, plus 3%, as I mentioned, with, again, this clarification in the U.
S, we are broadly in line with the market. And there is the start of the wholesaler inventory optimization, which is impacting us in this Q3. Asia versus the world plus 12%. So you see here the acceleration versus the previous period, very dynamic growth, thanks to China and India. We'll look at the figures for China and India, but they are very strong.
And despite the route to market change in Korea, which is impacting us in the Q3 and in the year to date. Europe, plus 1 percent. So as I mentioned, strong momentum in Eastern Europe and Russia is in strong double digit and contrasted performance in Western Europe. And you have then the percentage of sales across the region, as a reminder. If I move to the next slide, which is showing our performance by brand, by category of brands.
As I mentioned, a very good performance, strong and diversified, as you can see on that slide, with Strategic International Brands accelerating, so this plus 8% for the 9 months. And this is driven by Martell, Janssen, Scotch brands, Befitter and Perrier Direct. And we have as well very strong pricemix contributing to that performance. Strategic local brands, plus 10%, acceleration as well on this category. And this is obviously as well largely due to the very strong performance underlying fundamentals of our Seagram whiskies, Indian Seagram whiskies.
Specialty brands, plus 14% as well, very good performance here, in particular, thanks to Lide growth, but as well, Monty 47, Raybrecht and Altox. And Strategic Pines, so minus 5%, with a return to growth in Q3. And this is mainly due to a great performance of Campoliero and Kenwood. I take the opportunity of that call and of that slide to happily announce the signing of the an agreement almost, let's say, a few hours ago for the acquisition of this super premium Italian gene, Malfi. We are very happy to welcome that new brand in our portfolio.
If I move to the next slide. So let's deep dive into Americas first, so plus 3% year to date, with the U. S. At plus 2% with sellout broadly in line with the market. So you can see here the estimation we have on the market trend, plus 4.5%.
If we did dive into the brands, so Jameson, continuation of the very strong performance, and we are rebalancing our investment strategy throughout the year to be less reliant on St. Patrick's Day. Absolute is in decline in the difficult category. There are a few important things about to happen in the coming days months on Absolut. The launch of Planet Earth, favorite vodka in the coming days.
It's a great campaign, we believe. And the launch of Absolut Juice, which is an innovation in Q4. Our growth relays are are growing double digits, and this is the case for Martell, Avion, Altos and the Glenlivet Funders Reserve, sorry. Dynamism of our specialty brands with, as you know, the new brand Venture division, which is in charge of that category. And in particular, we had a very good performance at Monkey 47, Smooth Ambler and Delmaguay.
That's our 3 brands that we bought in the recent past. Q3 shipments, reflecting this finished goods inventory optimization at wholesale level, as announced in February, we are putting in place that optimization to deliver operational efficiency. And we expect this optimization to have an impact close to 2 weeks for the H2. Canada, so good diversified growth with double digit performance for Absolute following the launch of that campaign, Planet Earth Fabry.ca that we did, if I remember well, back in October. Travel Retail America growth driven by strategic international brands, in particular, our Blended Scotch, Malouf and Martell and Latin America growing by 6%, with a strong growth in Brazil, especially on Bifida and scotch and Mexico back to growth in Q3 with good performance of Passport and Absolut.
Moving to Asia Rest of the World, so plus 12% on a year to date basis. So this is a very dynamic growth, which we continue to deliver in that part of the world. China, plus 21%, strong very strong Chinese New Year. Martell momentum, obviously, continuing and contributing very significantly to that great performance with very strong growth across all segments. 5% price increase has been announced early February.
And Q4 should reflect the inventory management of Martell, which, as you know, we are continuously monitoring to support growth sustainability. Chivas in continuing growth, and this is thanks to the successful relaunch campaign we did in 2017 at the end of 2017. Premium Brands continuing with a very strong performance, and this is definitely the case for Absolute and Jacobs Creek. And we did announce as well, a few days ago, the conclusion of a distribution agreement with Domaine Barrande Rothschild, which will start in early fiscal year 'twenty. India, plus 19%, very strong growth in India.
And this is true for the whole portfolio, meaning the Cigar Indian whiskies, but as well the international spirits portfolio and Jakob's Wig performing very well in India. Korea, so double digit decline, and this is mainly due to the destocking of Imperial that happened in Q3, ahead of the change of route to market, knowing that we are starting 1st April with Drinks International, which is now the distributor of Imperial in Korea. And we had as well some impact on our Strategic International Brands portfolio in Q3 linked to the restructuring organizational changes that we put in place in the in our market company in Korea in Q3. Travel Retail Asia, growth driven by Martell, the Glenlivet, blended whiskey and our champagne Perlej Vette. And Africa and Middle East, double digit growth, thanks to Befitter, Scotch, Absolutte and Jameson and with a very strong performance in Turkey with good volume growth, very strong pricing and mix.
If I move to Europe, so plus 1% year to date. Strong momentum in Eastern Europe and contrasted performance in Western Europe. So France, minus 3%, and we had commercial disputes in Q3 impacting our performance. RECA on a year to date basis is in growth, and we have some great dynamism for growth relays that are absolute befitters, again, live at and Lillet, but it's still difficult on the whisky category. And we have as well the impact of the new e gallium law, which came into force early February, which is likely to impact our sales negatively from Q4.
Spain in a modest decline with a continued good performance of Seagram Jeans, but we had some pressure on Valentine's and Beefitter. Germany declined, driven by a commercial dispute as well impacting Q3, but Lillet continuing to perform strongly. UK, double digit sellout for spirits, so very strong performance there. And this is especially true with the performance we are delivering with the Beefeater and the Jean category. But as well, Jameson, Chivas and Absolut.
We still have a slight decline year to date in the UK driven by our value strategy on the wine portfolio, but U. K. Is back to growth in Q3 with as well a strong rebound of Campo Viejo, of Spanish wine, in this period. Travel Retail Europe, good performance, thanks to our strategic international brands and, in particular, the whiskey portfolio and beefeater. And Russia, as I mentioned in my introduction, very good performance there, plus 13%, very strong across the portfolio, most notably, thanks to Ballantine's, Jameson, Ararat and Absolute.
If I move now to the final slide of that presentation for the conclusion and outlook. So conclusion, as I started with, a very strong and diversified year to date sales performance. So in that context, for the full year in an environment which remain uncertain, we believe we can expect a good this good diversified growth to continue with the continuity of the management of Martell's sustainable growth and the full execution of the U. S. Wholesalers inventory optimization.
The good pricemix should continue as well. As announced in February, we are confirming the completion of the 16/20 Operational Exelters Roadmap, €200,000,000 savings P and L to be fully completed by the end of the year, meaning 1 year ahead of our initial plan. At the same time, we will continue to invest in A and P and as well continue to invest and build strong strategic inventory and invest in our CapEx to ensure a sustainable long term growth, which is obviously our core strategy. We're going to deliver circa 50 bps organic improvements in our profit from recurring operation. And we estimate at that time of the year the FX impact to be positive and around €20,000,000 on the profit for recurring operation.
So in that context, we are increasing our guidance for the full year, and we believe that the organic growth in our profit from recurring operation should be circa +8%.
Thank you very much, Helene. We will now turn to your questions, please.
Ladies and gentlemen, we will now begin the And we do have the first question from the line of Fernando Ferreira from Bank of America. Your line is open. Please go ahead.
Good morning, Alain and Julien. Thanks for the questions. I have a few questions on your U. S. Business, please.
On the first one, when we look at the scanner data from Nielsen, we've seen the 1st decline for Jameson in March, right, for a very long time. We understand that monthly data can be volatile, but can you discuss maybe some of the reasons behind that slowdown? Was it due to pricing that you've taken on the brand or perhaps increased competition that you're seeing on the Irish whiskey category? And also if you can remind us what are your growth aspirations for Jameson last in Q4 will be similar to the one we saw in Q3?
Okay. Thank you for your questions. So as you I'm sure you are referring to the 4 weeks NIIF and data that show a minus 3% trend for Jameson. As you mentioned, obviously, this is only 4 weeks period. The 52 weeks period, just as a reminder, is reflecting a plus 9% trend in value for Odjansen, which we believe is much more the right, let's say, reflection of our brand underlying performance, meaning strong growth.
And I will start by answering your second part of the question, which is Batiste's our ambition for Jameson. No change. Our ambition is double digit growth. So back to your question on this 4 weeks period. There are different things happening there, but I would like to clarify first that we believe that Jameson had a good performance in that month and especially around St.
Patrick's Day, meaning what do I mean by good performance? I mean gaining market share. So let me give you a bit more insight on that because there are different things that probably need to be clarified. So first, this year, St. Patrick's Day happens to be on a Sunday, that is a Saturday last year.
So this is already something that could explain different, let's say, part of the different figures. Here, we were as well in the previous year launching a CASK based IPA during the same month. So we had a, let's say, high comparable basis. But back to my initial point, which is about gaining market share, we believe that Jensen has market share, let's say, around 20% on an annual basis. This year, Jameson gained market share during this 4 weeks period, probably up to 26% market share.
In the previous year, this market share gain was even stronger, getting to probably something close to 29%. So there is this, let's say, comparable basis. Good performance again because on the basis of a strong share position, Jameson managed to gain additional market share during these 4 weeks, but a bit less than the year before. Then I think from a strategic point of view, it's fair to say that we believe, and that's what we mentioned in the call of the presentation, that Jameson needs to perform, obviously, during the full year and that's with probably less emphasis on this specific event that is St. Patrick's Day.
And we've been, I believe, quite consistent with that strategy in terms of reduction of promotional intensity and as well in terms of pricing position. Just to give you as well additional information on that, the price the average price of Jameson during this 4 week period increased by 2.6%. So we are rebalancing our investment strategy to sustain a strong growth of Jameson during the whole year with less emphasis on the St. Patrick's Day event. But even with this rebalancing, Jameson managed to gain significant market share during that month.
Then I think your second question was on the wholesalers' inventory optimization. Yes, so as I mentioned, we have already an impact of this optimization in Q3. And just to illustrate that, the net sales performance of the U. S. Market was stable in Q3, which obviously is due to this to the start of this optimization.
As I mentioned as well, we believe that this optimization should more or less represent 2 weeks of sales, and our objective is to implement the full optimization by June 2019, knowing obviously that execution is key in that exercise, and we want to avoid disruption and out of stock situation. So we're going to keep working on making that optimization as complete and as efficient by the end of June.
Your next question comes from the line of Sanjit Aujla from Credit Suisse. Your line is open. Please go ahead.
Hi, Elena. A couple of questions from me, please. Firstly, on Korea, are you able to quantify the impact from the destocking in Q3? And what's the breakdown of your portfolio there between Imperial and the Strategic International Brands? And then secondly, can you just provide an update on the commercial disputes across a few of your European markets as we go into the summer selling period?
Is there any signs of that situation improving? And finally, on India, do you anticipate any disruption during the election period there?
Okay. Thank you. So I'll start with Korea. So as you know, we rented the distribution rights of Imperial to a third party starting early April. So that's why we had some destocking in Q3.
And that's why we have some double digit decline in our Q3 numbers, and we expect this double digit decline to be as well impacting us from Q4 till H1 of next year because of the change of food to market compared to the previous situation. So then in terms of weight of the Imperial in our total portfolio in Korea, it's probably 50% of our portfolio there. And the as you know, the strategy we have now is really to focus on the strategic international brands. And we did restructure the company significantly to reflect that strategy. Your second question was on the commercial disputes.
So let's move then to Western Europe because this commercial dispute impacted us in France and Germany. And in both markets, the we are reengaging with our customers in Q4. So the situation will progressively normalize during Q4. And your last question was on India. So India, as I mentioned in the core presentation, very strong performance there.
Q3 was a bit lower just because of the very high comparable basis last year, But the underlying trend is very strong, and we don't expect significant disruption from the general election. So we are we remain very confident with the performance of India.
Thank you. The next question comes from the line of Olivier Nicolai from Morgan Stanley. Your line is open. Please go ahead.
Hi, good morning, Helane and Julia. Just three quick questions, please. First of all, Lillet is doing very well in Germany, also in France. Is there any plan to roll out the brand in the rest of Europe and also perhaps in the U. S?
In Spain, I understand that Ballantyne's is under pressure since the scotch category is quite weak. But can you explain why what's happening with beef eater? Why is it under pressure? And if you are losing share overall in the gin category? And just lastly on China, could you please give perhaps a bit more detail on the strategic rationale of the partnership you signed with Rothschild regarding the distribution of some of their wines?
Olivier may. Can I just clarify your second question? Because you asked about what was the question on the
Essentially, it's in Spain.
I was trying to understand what was going on with the Beefeater brand, why it was under pressure and if you are losing share in the gene category in Spain.
Okay. So I'll start with your question on Lilly first. So as you rightly highlighted, we have a very strong performance of Lille in Germany, and this is largely due to a fantastic job done by our affiliate there. And the moment of aperitif is booming, and Lillet is performing extremely well. This is as well a very performing brand in France.
And as you rightly mentioned, we have the ambition to leverage that success in other markets. And just to give you an example, I think there's already a great ambition for that brand in the U. S. And so this is Lillet is one of our big bets. So this is a great innovation, and we have lots of ambition for that brand, leveraging the success I just highlight in Germany and France.
I'll move to China. I'll come back to Spain afterwards. So we did announce a few days ago this partnership with Domaine Varonde de Rothschild. So we're very happy to have that partnership. It's going to start probably very early in our next fiscal year.
And in terms of strategy, this is really, for us, very relevant to reinforce our leadership among the international players in very key segments or moments of consumption or channels that are meal occasion and e commerce. So this is really what is at stake here. If I come back to Spain. So Spain, well, I think, first, the difficulty you mentioned, it's really linked to as well the market, the pressure that we have on pricing, both as well by competitors. And coming back to the we see that's exactly what is at stake.
In term of gene, it's true that we are a bit struggling there. We did launch Bifitter Pink last year, and we're going to reinforce our investments in Q4 on both Bitter and Siegente. So in terms of market and back to your question on market share, it's probably fair to say that we are stabilizing our market share in Spain in the last few months. And my comment on the market share is more kind of a global comment. For the gene specifically, if I understand well your question, which was about gene, we are even doing better than the category.
So that's obviously a very positive thing. And the new media campaign that we're going to launch in Q4 are probably going to reinforce that trend.
Thank you. The next question comes from the line of Nico Von Stackelberg from Liberum. Your line is open. Please go ahead.
Hello. Yes, with the Melfi acquisition, I think it's time to take stock of how you approach deals. I was just wondering, how do you look at the deal in terms of how many years it will take to cover your cost of capital? Or if there's other sort of relevant metrics for how you approach the valuation process on acquisitions, please could you elaborate? The next question is on France with the Egalene.
Can you discuss if this has any impact on profits. I understand a lot of it is linked to promotion. So could you discuss the profit impact for this? Thank you.
So good morning. I'll start with your first question on the malphi. So this is obviously very consistent with our strategy in terms of active portfolio management, and we've been looking at buying and integrating very nice brands for many years already. And if I understand correctly, your question is in terms of criteria for selecting those brands and value proposal assessment. So on this, it's very clear what we are looking for are brands with already kind of a good growth trajectory with strong potential and where we believe that for a reason that can be specific to the respective brands, the integration of those brands into the Panorica family distribution network and with the expertise and resources that we can bring and put behind those brands will create significant value for our shareholders.
So then obviously, it's a question of strong business plan, what are our assumption in terms of growth and profitability of those brands once they join the Pernod Ricard portfolio. And we are assessing the value creation using this business plan. The valuation coming from a very basic DCF computation and being sure that we have very significant room for value creation. But that could be multi specific because I think that's quite nice for me to have the opportunity of that call to come back to that acquisition, which happened a few hours ago in terms of signing the agreement. So this is a super premium Italian gin with a very nice variance and a strong price positioning.
We've already some significant growth, so we are very happy to welcome Malphine into our family. 2nd question was on Regalim. So just to mention, because I'm not sure of what you said around promotions. So LEGALIM, to clarify, is the Loire des Etats Generaux de la Limontation, which was voted back in November and which came into force in February and which is, let's say, forcing retailers to increase prices to stop selling at Atlas. So this is not changing, sorry, our prices, but this is changing the retail selling price.
The reason why we mentioned this as potentially negatively impacting our Q4 is that because of technicalities, this additional markup is based on the price, including tax and duties. So there has been a significant increase, for instance, Enrica starting last February, which has a 10% increase. So the 1 meter price is above €20, which is, on top of that, a psychological threshold, let's say. And this could have a negative impact in term of net sales. I'm not going to quantify it.
It's a risk for the coming months.
Can I just go back to the first question on the M and A? So if you're using DCF, could you share the cost of capital that you use for the calculation and suppose rough growth metrics you've used for this brand, I guess, on a 5 year CAGR?
No, I'm sorry, I cannot go into that specifics. But as I said, we are very happy, and we believe this is going to create value.
Okay. And actually one last one, if I can just chime in. For China, can you give us the your 9 month to date volume for Martell that you sold, basically trying to back into your Q4 growth rate?
Well, in terms of year to date performance, the current run rate is double digit. And you know that globally, not only for China, but globally, our medium term strategy for Martell is high single digit, but this is a midterm ambition, and we could have slightly more than this for 1 year or the other. But again, the ambition is as well to internationalize Martell outside of China. So no change in terms of growth sustainability for Martell.
Martell. The next question comes from the line of Chris Pitcher from Redburn.
A couple of questions. Are you able to give a bit more detail on the growth achieved in Travel Retail Asia, which was the important part? You didn't give a specific number. And if not, can you give us a feel for what your global travel retail business is doing in terms of sales growth? And then secondly, on the recently proposed U.
S. Tariffs which hit champagne and cognac, have you seen any stock building yet ahead of a potential tariff increase in these categories yet? Or is it still very much waiting to see what goes ahead with that? Thank you.
Thank you. So I'll start by the second question. I think you're answering it in your question. It's much too early. So nothing to comment at that stage.
And as you know, there could be many things happening in the coming weeks on that matter. So I didn't see we didn't see anything happening in terms of stock buildup, and we'll keep monitoring the situation, obviously. So back to Travel Retail. Your question was on Travel Retail Asia. So as I mentioned across the presentation, anyway, Travel Retail is performing well in each geography.
But to be more specific with your question, it's, let's say, between mid single and high single digits in terms of year to date net sales performance for Travel Retail in Asia.
Thank you very much. If you have one quick follow-up. In the U. S, you're still talking about Glenlivet founders reserve. Do you have enough stock yet to push the classic Glenlivet 12 yet?
Or is it are you still very much building stocks at that brand?
Well, we have sufficient stock. I would just maybe just modify the word we use, pushing, because that's sort of strategy. It's not a push strategy, but I'm sure your question was more to say, can we supply what we need as well for the Glendivet world? And the answer is yes.
Thank you.
Thank you. And the next question comes from the line of Andrea Pistacchi from Deutsche Bank. Your line is open. Please go ahead.
Yes, thank you. I have a few very brief questions, please. Firstly, going back to Korea, if you could possibly say how much Korea was down in Q3? And then you said that because of the changes to route to market, obviously, this will impact your sales until well, for a year as you, I think, capture less of the value chain. Does this, however, also mean that you should have a positive impact on margin because the margin through the distributor will be higher.
And then on Europe, whether there has been any impact from either stock build or shipment phasing around Brexit, either wine into the U. K. Or maybe scotch into Europe? And finally, please, on Brazil, where you had a strong performance. Are you seeing is this a function of comps, of phasing?
Or are you seeing a more fundamental improvement there?
Okay. Thank you very much. I'll start with Korea. So as you rightly mentioned, we're going to have probably kind of different shape of our profitability there moving forward since we granted those distribution rights. So our sales moving forward will be, let's say, reflecting the significantly lower selling price, which is the one we're going to have to these new distributors.
But we're going to have as well some income linked to the use of the intellectual property rights, I mean, the use of the entire name. So that's what's going to happen. That's why we're going to have significant decline in term of top line because of this lower selling price to distributor, but as well some income coming from this royalty flows. Your question on margin is very relevant, and we should have a better margin because on top of that, as I mentioned, we did restructure the organization there to adapt the size of our teams to the new focus on strategic international brands. And your second question on Brexit.
So on Brexit, we did have some safety inventory buildup, but this is more for intra group finished good inventory. So nothing to comment on this in terms of net sales performance. This was, again, more to try to limit business disruption by having some finished goods stock into our markets. Your last question was on Brazil. So Brazil, it's not a question of technicalities in terms of comparable basis.
We are gaining market share, especially on a strategic international brands. And with the fast growth in standard scotch. That's why I was mentioning Passport a bit earlier in the morning and with as well some price increase on Chivas.
Thank you.
Thank you, MJ. We'll take our 2 final callers, please.
Absolutely. The next question comes from the line of Laurence Wyatt from Barclays. Your line is open. Please go ahead.
Good morning, Helane and Julia. Free for me, if that's okay. On the inventory optimization in the U. S, could you some detail about which brands in particular are going to be affected? Is that largely hitting your larger brands or some of your growth related also going to be impacted there?
Secondly, on the Absolute brand, I see you've launched the Juice line. It's been a very big success or your nearest competitor on one of their vodka lines. If you manage to get absolute back to flat lining, would that be a good result for you? And then finally, on your whiskey brands in China, you mentioned that Chivas is continuing its growth. Could you comment please on how Ballantine's and Royal Salute are doing in the Chinese market, please?
Thank you.
Okay. So I'll start with the U. S. So inventory optimization, a question on how it's going to impact the different brands. So I'm not going to give you details brand by brand because it's going to vary, obviously, depending on each brand position, knowing, as I mentioned before, that the execution of the optimization is key, and we want to avoid disruption and out of stocks.
Obviously, we will keep monitoring this the execution of this optimization brand by brand. It's fair to say that it's going to definitely impact our big larger brands, but probably not only those brands, but as well some other growth release. But we are really going to do that, and we are already doing it in a kind of very, let's say, agreed approach with our wholesalers. Question on absolute. Well, what I would like to say is that, 1st, as I mentioned before, we believe Absolut Juice is a great innovation, and we launched it in the UK last year, and this has been quite successful.
So we'll see what's going to happen in the U. S, but we have confidence that this is a great innovation there. And back to your question in term of strategy, As you rightly mentioned, our ambition is to stabilize absolute in the U. S, and innovation is going to contribute to that objective. Then your last question was on the whiskey brands in performance in China.
So well, I'm happy to confirm that both Ballantine's and Royal Salut are performing strongly double digit in terms of depletions.
Thank you. And the last question for today comes from the line of Trevor Stirling from Bernstein. Your line is open. Please go ahead.
Good morning, Helene and Julia. Two questions on my side, please. So the first one, Helene, could you just give us a little bit more background to the U. S. Destocking and why you're doing this destocking?
Is it because you had a slow but steady stock buildup in distributors and then you're correcting it? Or are you changing the way you're working with the distributors? And the second question, you increased or rather you tightened the range of guidance from 6% to 8% to around 8%. In terms of what lay behind that, was it increased confidence on sales or increased confidence on margin?
Okay. Maybe I'm going to ask you to just rephrase the second question because the song was not so great. Can you please repeat?
Yes. Alan, you sort of tightened the range of guidance from 6% to 8% to around 8%. I'm just asking what lay behind that? Was it more confidence in terms of achieving sales numbers? Or was it more confidence in terms of margin performance?
Okay. So maybe I'll start with this one. Thank you for repeating. It's definitely both. It's confidence in our top line performance.
And obviously, this confidence is supported by the strong year to date performance that I just commented and as well confidence that with the our premiumization strategy, the operational excellence initiative that would be completed by the end of June, our strong A and P investments and strict discipline on structured costs, we're going to be able to improve the margin to the extent that we mentioned, which is roughly 50 bps. Back to your question on the U. S. So we discussed that a few weeks ago. This is really happening in the context of renewal of our contracts with our wholesalers.
And we believe this is a great thing to do than to be able to implement those operational efficiency initiatives at their levels through this optimization of finished goods inventory. We have obviously some good counterpart in terms of brand activation behind our top priorities from the wholesalers, and that's exactly why we are putting that in place.
Great. Thank you very much, Helene.
You're welcome. Thank you very much, ladies and gentlemen. Thank you very much, Helene. And that closes our call for this morning. Thank you, and have a good day.
Thank you. Bye bye.
Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect.