Good morning, ladies and gentlemen, and thank you for joining us for Pernod Ricard's Quarter 1 Fiscal Year 2018 sales presentation. We're hosted this morning by Gilles Bogart, our Managing Director for Finance and Operations. We'll follow the usual format and take you through a quick presentation and give you some time for questions and answers. So, Gilles, over to you.
Thank you, Julia. Good morning, everybody. So, well, we had a very good Q1 sales with growth accelerating and diversifying, 5.7 percent organic growth with the continued dynamism in the Americas, plus 6%, good performance in the U. S. And acceleration of Travel Retail in the region, a significant acceleration in Asia Rest of the World, plus 7%, whereas we were flat in the Q1 of last year.
This was achieved in particular thanks to a strong Q1 in China and a rebound in Travel Retail and Africa Middle East. We continued having a good overall growth in Europe, plus 3%, very strong sales in Eastern Europe and modest increase in Western Europe, with a strong dynamism in countries like Germany or the UK, but a decline in France and a slow start in Spain. The acceleration of our top line growth is coming mainly from emerging markets, which grew by 10% over the quarter. This overall performance was partly enhanced by favorable basis of comparison in Q1 2017, in particular, Global Trial Retail and Africa, Middle East. On the following slide, you have the different effects impacting the net sales.
So, organic sales were up 5.7%. Reported sales were up 2% because of an adverse ForEx impact of minus 3%, €78,000,000 on net sales in the Q1. On the following slide, you have the sales growth by region. So, good momentum everywhere in the Americas, continued dynamism, driven, as we said, by the good performance in the U. S.
And the acceleration of Travel Retail. Asia of the world, that's probably the region that drove most the acceleration, 7%. Strong Q1 in China and a rebound in Africa, Middle East and also in Travel Retail. And in Europe, plus 3%, good overall growth. Very strong in Eastern Europe, more modest.
In Western Europe, by category, Slide 5, good piece of news also is that the acceleration is driven by our Strategic International Brands, up 8% of the quarter, whereas they were up 3% in the Q1 of last year. And many brands in most strategic international brands contributed to the growth. So it was a strong broad based growth, driven in particular by Martell, Absolute, Jameson, Ballantine's, Chivas and Malibu. Strategic local brands grew by 2%. So the Seagram's Indian whiskies growth is still subdued largely because of the highway ban, but we had a strong growth in our tequila brands and in our gin portfolio.
And wines had also a very good quarter. They were up 8%, in particular thanks to Campo Bierro. Innovation participated also to that overall very good performance, delivering 2% incremental top line growth in Q1. So let's go through the performance by region, starting with the Americas, where we grew by 6%, continued dynamism. The U.
S. Were up 4%, so that's a good performance in a market whose growth is stabilizing around 3%, 4%, so lower than 1 year ago. I think we benefit from a clear popular strategy driving diversification of our growth. Jameson, looking at the Nielsen trends in value, continues at double digit growth. We keep also increasing our price.
We did it in September. Absolut is still in modest decline in a difficult category. But the brand is growing is having a better performance than most of the other premium vodkas. Doug Lennywatt and Avion clearly performed better in this Q1 as compared to the previous year, thanks to the different changes we've done last year. And we have also other very dynamic growth relays, in particular Martell, which grew by 35% and our premium tequila brand, Altos, plus 16%.
Canada, there was a slight decline following some destocking. Inventory were a bit higher at the end of June because of the risk of a strike in Liquor Board of Ontario, which finally did not take place. Travel Retail Americas, gross acceleration driven by Absolut, Chivas and Ballantine's. Latin America, an overall good performance with a return to growth in Brazil in an improving context. And this improvement is driven by our strategic international brands, in particular, Absolut and the Scotch portfolio and also our standard Scotch passports.
Also an improved performance in Mexico following strategic refocus there, the disposal of Caribe cooler and the Domic brandies and also the marketing and commercial reorganization. We continue to have a good performance in Argentina and Cuba. The impact of hurricanes and earthquake is expected to dampen the business in the coming months in particular, the Caribbean and Central America. Asia Rest of the World saw significant acceleration, 7% as compared to flat last year China, up 15%. So, we enjoyed the sales acceleration in that Q1 driven by all categories with continued good growth for Martell across all price segments.
Chivas was back to growth in Q1, so that's a good piece of news following the launch of Chivas 12 Extra. So part of that was a pipeline in the field. And as you know, we also started to activate in September the new NDA platform. Our team are excited, but at this stage, it's still too early to assess the success of the new approach. We also had a very good performance of our premium brands, which as you know are an important growth relay for the future after the 1st year of a new dedicated organization.
It had just been implemented last year at the same period of time. And so we had a low basis of comparison in that respect. The Chinese New Year timing, as you know, will be 3 weeks later. So 3 weeks, it's a significant phasing difference as compared to 26 weeks in a semester. So it will obviously negatively impact Q2 and positively impact Q3.
India was up 2%, which is a good resilience on challenging comparison basis and considering the adverse regulatory changes. We benefited from an earlier Diwali, which was 11 days earlier this year as compared to last year. So our Seagrams Indian whiskies are in slight growth. Our strategic international brands are growing double digits and in particular, Chivas. We still have disruption from the highway ban, but this is easing.
And you know the implementation ranged from April to September, depending on the states. We expect gradual improvement starting in Q2. And as you know, the GST, the Indian VAT, was implemented as of 1st July 2017. And we are confident in our ability to offset that through price increases. Korea was still down, but it was only modest decline in the quarter.
So that's better than in the previous quarters. So we start to see the benefits of the implementation of the turnaround plan we put in place a bit more than 1 year ago. And we also benefited from a favorable promotional phasing. Trial retail Asia, plus 18%, strong rebound on a low comp because Q1 of last year was down. Africa, Middle East, double digit growth, which is largely driven by Middle East and largely driven by a favorable comp also.
Last year, at the same period of time, we had some geopolitical tension, in particular, the coup d'etat in Turkey, and we had commercial disputes in Middle East. Europe, 3%, continued good overall growth. France was down 4% due to tough environments with the market in decline, in particular for Annis. Spain had a slow start in the year with a modest decline in Q1. It was driven by market growth deceleration and also by some adverse shipments phasing that should start to be better in Q2.
Germany, very strong growth, lapping a commercial conflict in the Q1 of last year. We continue to benefit from the very strong development of the Aperitif segment, in particular with our brand, Lilae. Strong start in the U. K, in particular thanks to the dynamic wine portfolio. Trial and Retail Europe had some rebounds in that Q1, again on an easy comp.
This underlying improvement is linked in particular to the return of Russian travelers. Russia, very good quarter. We continue to enjoy a double digit growth, resulting in significant market share gains. So the outlook for fiscal year 2018 for the full year, well, we expect good sales growth to continue in the U. S, in Europe and Jameson in innovation.
We expect sales to improve in China, India and also for Chivas. We'll keep putting focus on our operational efficiency with some new initiatives ramping up. We'll also continue to have a strong cash flow generation. We'll have to deal, as we communicated last time, with significantly adverse ForEx impacts on our profit from recurring operations. So after this Q1, we confirm our fiscal 2018 guidance, which is an organic growth in profit from recurring operations between 3% 5%.
Thank you very much, Gilles. And now we will take your questions please.
Thank
you
Today's first question is coming from Sanjit Aujla calling in from Credit Suisse. Please go ahead. Your line is open.
Hi, Gilles. Three questions from me, please. Firstly, could you just break out the growth between Martell and Chivas in China? And in particular, how significant was the contribution from the pipeline fill of shivas 12 in that China number? Secondly, you just made some cautious comments on the market decelerating a little bit in Spain.
Can you just elaborate on that? What do you think is driving that? And also, can you just give us some color on how or the growth rate for travel retail at the group level? You've broken that out for Asia by the group level. That would be very helpful.
Thank you.
Yes. Thank you for your questions. I think, again, in China, the growth was driven by almost all brands. Market growth in China was double digits, and it was not very different from the overall growth of China. And it was driven, by the way, by both Noblidge, Ixo, Carbonbleu, distinctions.
So the whole range was up. Chivas was modestly up, which is obviously a marked improvement as compared to the previous periods. We highlighted that launch of Chivas Extra because there was probably some pipeline effect. It's hard to measure exactly the impact. It's probably a few percent of the improvement of Chivas is coming from that.
But let's say that even restated by that, the improvement of Chivas in the Q1 in China would be quite significant. We just need to wait for more time to reassess the impact of the new NBA marketing platform. And the rest of the portfolio grew strong double digits, so above the rest of the portfolio, which is quite positive because vis a vis the growth relays of the future. So let's say that the 15% growth we had in China for the Q1 is higher than our sustainable long term view that we see for the Panorica in China. We had guided 2 or 3 years ago in our Capital Market Day, mid term objective of a high single digit growth in China.
I think this remains our objective for the future, but this quarter is showing that we are getting there. Spain deceleration, yes, the market is a bit less dynamic. It was already visible in the last quarter of last year. Let's say that Spain, after 7 years, which had been very difficult post-two 1000 and 8 crisis, had 2 very good years with a strong rebound and Pernod Ricard was growing more than mid single digits in that context. The current environment is probably a bit less favorable.
It's probably going back to a more normative growth. The market is more low to mid single digit growth in value. And we are growing more or less in line with the markets, so consolidating our leadership. The Q1 performance was a bit driven also by a very hot weather during the summer in Spain that affected negatively the consumption of spirits during the period of time. So we are hopeful that Q2 should show some improvement in our performance in Spain.
And in Travel Retail, so we had a very good performance this year. We grew by 14%, whereas last year, the Travel Retail was down. So, that's a clear improvement overall. It was largely driven by Asia and also the Americas. The rebound was less significant in Europe.
But all Travel Retail regions contributed to that improvement. We had a low compound. Last year, again, we were down and the situation had improved in the following quarters. So we don't expect this kind of double digit growth to be an indication for the full year. It's above the underlying trends.
Thanks. And just a quick follow-up on China. I appreciate your medium term ambition is high single digit growth in that market. But given the strong start you've had to Q1, do you think you can grow double digit in China this fiscal year?
We are not going to give any top line guidance by country for the year. But yes, we had a very good start in China. I think the mood is clearly better. I think the market is doing better. The on trade is improving, which is, I think, a significant change as compared to the previous quarters when the improvement was driven by the off trade.
So now both the off and the on are good. So, we'll see. But I think that, for the longer term, this high single digit top line growth is a better proxy. We own as you saw in the outlook, we said we would post a better performance than in the previous year. So the previous year was only 2% growth.
So we are very, very confident that we can deliver that better performance this year.
Yes. Many thanks, Gilles.
Thanks, sir. We'll now go to Mr. Fernando Ferreira of Bank of America Merrill Lynch. Please go ahead, sir.
Thank you. Good morning, Gilles. A few questions for me, please. First one on Martell. We're seeing steep declines in the U.
S. Scanner data recently, right, for the brand. So I wanted to understand if this is an allocation decision and you're taking advantage of the strong rebound in China as and that's what's driving that steep decline? And then second question on India, do you still expect some margin impact from GST because per your comments it seems that you'll be able to offset it right with price increases? And then lastly, when we think about the margin progression for the year, as China is rebounding faster than India, that should drive a positive mix, right, in terms of your countries.
So I wanted to understand your thoughts of the reinvestment back into the business that you see and why can't the plus 3% to 5% EBIT growth be actually higher than this? Thank you.
Well, on Martell, in the U. S, first thing is that we have been investing far more behind the brands in the U. S. In the last 2 to 3 years, and it starts to pay off, which is quite good, 35% growth in Martell in the Q1. I think there is a very strong performance.
Part of the short term Nielsen figures that you see for the on the volume side is driven by some significant price increases that we've done across the range in the U. S. So we are quite happy with the development of the brand in the U. S. With Blue Swift, with also the new VSP which we launched.
And we are gaining share and it's our intention obviously to let Martell becomes a very important growth relay in the future in the U. S. In India, yes, we are confident we can increase prices to offset the €15,000,000 negative hit of the GST. That said, the Indian margin will be down this year because this is a country where you have some inflation. And if our price increases only help to compensate for the tax increases, it's not sufficient to offset for the inflation on the cost basis.
So this will drive some margin compression in India this year. And then your question on the mix. Yes, in this first quarter, the mix is positive and the return to growth of China is quite encouraging. India grew only 2% in the Q1. We would expect that to be better for the full year.
I think that your question on the guidance, we stick to the 3% to 5% growth of organic growth of the EBIT. Why? Because first, when looking at the Q1 in net sales, we believe that the underlying trends are more somewhere between 4% 5% when you adjust for the low comp, for instance, in Global Tri Retail, in Africa, Middle East, in Germany. As I said, in China, there were a few elements also which were positive. So we estimate the top line underlying growth to be more somewhere between 4% and 5%.
And so we believe that our guidance is quite consistent with that.
Perfect. Thank you.
Thank you, Mr. We'll now go to Kaumal Dhillon calling in from JPMorgan. Please go ahead.
Hi, good morning, Jeel. Just two questions from me, please. The first one is on Chivas. And probably you won't answer this, but is there any chance you can talk about the investment behind Chivas you made for the launch as well as probably incentivizing wholesalers and distributors in China? And then also on a more longer term basis, how much more investment is required behind this brand globally?
And then the second one is on Jameson. So you said double digit growth still for Jameson. It looks like there's slowdown in if you look at the Nielsen numbers, this is just the U. S. But so number 1, can you quantify the price increase that you took in September?
So is that in line with the low single digit you previously taken? And the second bit is what can be done to offset the slight deceleration in Jameson? Thank you.
Well, on Chivas, you're right. I won't give you the level of investment that we put behind the brand. I can confirm that we have increased significantly the investments behind the brand in China to be able to turn around the brand there, which is the objective, And clearly, this year, fiscal 2018, should show some clear improvement on the brand. That's the objective of that higher investment. Apart from that, that additional investment on China, I think the level of investment that we have behind the brand worldwide seems adequate to be able to deliver the growth ambition we have on Chivas.
On Jameson, the brand is still growing at a very good pace. So, looking at the depletions, looking at the Nielsen in value, we are still growing double digits, which is clearly the objective of we have on Janssen in the U. S. Don't expect the brand to grow 18% in value forever in the U. S.
I think that it's now more than 3,000,000 cases. Our objective is to be able to deliver in the next few years a double digit growth in value on Jameson in the U. S. But the kind of growth that we had in the last 2 to 3 years is probably higher than the one we'll have in the next 2 to 3 years just because of the scale and the size of the brand. All the indicators remain quite positive.
The brand equity scores are very good. The brand is growing in almost all states. There are some states where the market share is still low, like in Texas. So we have a stronger room for growth there. So we remain quite confident in our ability to pursue a very strong development of Jameson going forward.
Innovation will also contribute to that. Jameson Castmates is clearly doing it. And we also expect to further grow value ahead of volumes, thanks to positive price and mix. And that's why we keep increasing our pricing even if the current retail sale price of Jameson is already quite high, around $25 so clearly above most of the young brown spirits whiskies in the U. S.
And the increase that we do is different from depending on the SKU and the stay, but it's somewhere between 1% 2% depending on the states.
Thank you.
Thank you, ma'am. We'll now go to our next caller, sorry, will be Mr. Chris Pitcher calling in from Redburn. Please go ahead.
Thanks very much. A couple of questions. On Martell, obviously, you mentioned the strength of the U. S. Business.
But in terms of your big competitor being short stock and this year's harvest not having been that good, can you give us a comment on what you're seeing in terms of eaux de vie pricing for Maxtel and whether you think you've got sufficient supply to service that Versus and Versus Plus price point in the U. S? And then secondly, on Chinese New Year, from your comments, is it fair to assume something of a €20,000,000 to €30,000,000 dollars effect moving into Q3 in terms of sales, if you can just give some color on that? Thanks. Well, on
Martell, we constantly monitor our supply against the trends and our long term forecast. So we are happy with the inventory we have, which we believe is well suited to deliver the growth we are looking for, for the brand in the different elements of the range. So we believe we have clearly the right supply to be able to deliver the ambition we have on the brand, which I think is a good thing. And in terms of pricing, yes, there is some inflation of cognac eaux de vie in the market, but it's a few percent. So I would say it's a normal price growth for Eau De V in the region.
And Chinese New Year, again, as I said, 3 weeks out of 26 weeks for a semester, it's a bit more than 10%. So that's certainly a good assumption of what could be the impact for the first half. When you know that China is 9% of the group net sales and that Martell is not far from 80% of the net sales of Panrika in China.
Thank you very much.
Thank you, sir. We'll now go to Andrea Pistacchi calling in from Deutsche Bank. Please go ahead,
ma'am. Yes. Good morning, Gilles. I have a couple of questions, please. The first one on emerging markets, ex China and India really, where you've done a lot of work in some places refocusing your portfolio on international brands.
And you've had obviously a very strong quarter in a lot of places. How confident are you that you've really turned the corner in these other emerging markets? There's some comp issue, of course, in there, but is the underlying performance genuinely stronger now and sustainable even from a volume point of view? The second question on the U. S.
On price increases there. You took price you were saying on Jameson and on Martell. Was there were there any other SKUs brands where you managed to put through some price? And were there any was there any shipment phasing in relation to these price increases? And finally, if I may please on France, which has been quite a difficult market, I think minus 4% in the quarter.
Could you talk about that a bit, please?
Yes. So the first question
First question on emerging markets, ex China and India, where you've done a lot of work to improve your portfolio, strong quarter. If you think this is sustainable and
yes. The first comment I would like to do on the emerging markets, and that's probably not a new comment, but I would like to do it again. Pei Nordy Carre is very strong in emerging markets. It's more than 40% of the GroupNet sales. And we are very happy to have the exposure we have to Emerging Markets because we definitely believe that this is a strong source of growth for the future.
Yes, obviously, you need to deal with maybe more volatility of that top line growth as compared to mature markets, but the intrinsic growth potential is also higher. So as you said, we are the leader in China. We are the leader for premium Indian whiskies in India. Those two markets are the number 2 and number 3 markets for us. It represents together almost 3,000,000,000 people.
I think this is a fantastic position we have there. China is accelerating. India grew by 2%, but hopefully, the adverse regulatory changes start to be behind us. So I hope that those 2 markets will be a strong driver for the group of Panorica looking at the longer term. Then looking at the other emerging markets, there are some a bit everywhere.
Eastern Europe is doing well, in particular Russia. Latin America also is improving. Our scale there is a bit smaller. So we need also to increase investment there, in particular in Mexico and in Brazil, to be able to get share. But I think we are on the right track.
Also on a low basis, Sub Saharan Africa is also an important driver, even if the Q1 was a bit slow there because of the tough macroeconomic environment and geopolitical tensions. And then we have the other Tier 2 emerging markets in Asia, countries like Vietnam, for instance, all the Southeast Asia markets are quite important. And most of them have shown some good growth in that first quarter. So, the 10% growth is probably a bit inflated by some favorable comps, as we said earlier. But overall, it's yes, it's a good performance and we are confident we can keep posting good performance in emerging markets going forward.
On the pricing in the U. S, Jameson and Martell were probably the 2 candidates for price increases in the portfolio. The price will be more muted on the other brands. We will also, as we said, increase our promotions and activation investments behind Absolut in the On Trade because we want to strengthen our ability to recruit new consumers in that very important channel in the U. S.
So, we expect overall positive pricing in the U. S, but it will be still, overall for the portfolio, relatively limited as this is the case, by the way, for the whole market. The market's growth in value is ahead of volumes, but this is driven by mix and not by
price. France?
The question on shipment phasing also in the U. S, I think nothing particular to report. We believe that the 4 particularly in the Nielsen, but it's not miles away from the underlying trend that we see in that market. France is minus 4%. So, it's a tough start.
We had an adverse summer weather in the North of France during the summer, which has an impact on the annis consumption. The market is not very, very strong at this time, and we still have to deal with the deflation environment, which has been the case in France for all consumer good companies in the last few years with a lot of pressure from retailers and a lot of commercial conflicts also. So we are accustomed to it. Let's say that this Q1 is probably below the trend that we've had in the last 12 months. And we would expect probably the full year to be better than this minus 4%.
That said, it will probably be a tough year in France this year.
Great. Thank you.
Thank you, sir. We'll now go to Trevor Stirling calling from Bernstein. Please go ahead.
Good morning, Gilles. Gilles, I wonder if you could give us just a little bit more color on cognac in China. It looks like all your major competitors as well had very strong quarters. Have you any feel for what your share trends have been there over these last couple of few months? And the second thing in terms of what's actually driving it, you mentioned that the on trade is up.
Is that modern on trade or modern traditional or family KTV? Some sense of what's underlying that would be great, if you can.
Yes. Good morning, Trevor. Well, shares in China, we don't track that on a quarterly basis. So I don't have any recent update on shares. The last official one is a bit old now because it was the WSR 16.
And you know that it showed some stabilization of our market share in cognac in China. So, we're consolidating our leadership. That said, in the recent period, we had a stronger growth on Martell than in the previous 12 months. The improvement in the on trade is driven by both the modern one and the traditional one. I think the modern one is clearly growing, driven by the new types of consumption that we see in China, like the Family KTV, for instance.
The e commerce is also growing very, very fast. It's already 8% of the volumes of Panorica China, which are done today through e commerce, which is probably one of the highest figure that we have worldwide. It's less in value because it's more skewed to the premium brands. But it's an important trend and we are clearly getting equipped to seize that fantastic e commerce growth potential in China. The traditional on trade is has stopped declining and is probably back to modest growth.
But clearly, this trend that we see in China, this good growth that we see there is more driven by the new types of consumption in China, the meal occasion around the around Martell, the development of the modern on trade, the development of e commerce, the development of our premium brands. And that's why we are confident that the underlying drivers for that growth are sustainable going forward. That's very different from the type of growth that we had pre 2013. This is not driven in priority by the Business Entertainment.
Okay. Just mindful of time, we'll just take 2 more questions, please.
Thanks so much, Matt. We'll now take questions from Mr. Edward Mundy calling from Jefferies. Please go ahead.
Good morning, everyone. A couple of quick questions. The first is just a clarification. The pipeline impact from Chivas in China, is that a few percent to China growth? Was that a few percent to Chivas growth?
The second is going back to your guidance again. With this type of acceleration, your revenues growing 4 to 5 underlying your strategic brands are basically going at double the rate of last year. You're seeing some pricing in the U. S. There should be some operating leverage.
Why shouldn't we see some benefit from margin expansion in 2018? And then the third question is you flagged some impact of hurricanes and earthquakes into current quarter. Perhaps you could provide a bit more color on that impact?
Yes. Well, on China, yes, the comment I made on the pipeline effect on the Chivas Extra was a few percent of gross improvement on the Chivas brand. So it's less than that on the overall, obviously, Chinese performance. Back to your question on the guidance and the margins. Well, we, as you know, are working hard to improve our margins.
We have many initiatives ongoing to improve that going forward, both on our operational efficiency roadmap, but also our total revenue management initiatives. That said, it takes some time. The pricing environment overall worldwide is still muted, so that's something which has to be taken also into account. And we need also to deal with some adverse one offs on margins like the GST, the very strong increase of the agave cost of the grain neutral spirit, for instance, in India. That's why we don't expect this year to have a very, very strong operational leverage.
I think we see it more not far from being flattish, But we are confident that this should improve in the following years. So that's why we believe that our profit from recurring operations guidance is consistent with the 4% to 5% underlying top line growth that we see in that first quarter. And on the And on your last question on the hurricane then, yes, it's true that by the way, I could extend the list unfortunately to many catastrophes that took place in the recent past. We had the flood in Houston. We had the hurricanes that affected Florida, also Cuba and other Central America countries.
We had recent fires in California. We had also the dramatic slaughter in Las Vegas. So, yes, we can expect those different events to have some impact in the next few months. Some of the impacts were already visible in the Q1. That was, for instance, the case in Florida.
Florida was down in the Q1 because of those catastrophes. So Houston flood impact is relatively limited and because I think it represents the Houston area represents, I think, 2% of the group net sales. In Nevada, in Las Vegas in particular, probably the sales in October will be impacted by that dramatic event. The fires in California, so first of all, all our employees are safe, even if some of them unfortunately lost their houses and had to be evacuated. Our production assets and vineyards are safe.
Most of the harvest has been done has been done. We are still checking the quality of the wine in the tank. So this something ongoing. But this will probably have some impact on the whole wine supply in the regions. So we'll have some impact.
It's hard to quantify it, but let's say, it's not big enough to change the trajectory I just mentioned. That's something we should be able to absorb overall.
Okay. Thank you.
Thank you, sir. Today's last question is coming from Matthew Webb calling from Macquarie. Please go ahead.
Yes. Hi. Two questions, please. Firstly, just to go into a bit more detail, if possible, on the GST implementation in India. I mean, have those have the states?
And then states? And then also, what sort of magnitude of price increases are we talking there? And what's the consumer response to those being? And then the second question on Brazil, you talk about an improving context. Could you just flesh that out a little bit?
Is that across the board? Or is that sort of more skewed to the higher end perhaps? Thank you.
Well, on GST, well, as you know, this GST has impacted, by definition, all states because it is a federal tax. On the top of the GST, by the way, we have, as we have every year, a few other specific state tax increases that we also need to deal with and absorb. So, overall, we've been able to offset most of those tax increases, full price increases. It's not always in the same state. Maybe in some cases, the price increase is lower than the tax increase.
But in some others, it can be sometimes a bit above. So, overall, we should be able to offset that. At the consumer level, in terms of retail sale price, this can lead to an increase of the price of our brands by a few percentage points. We believe that this is something our brands can absorb. We are focused on the high end local whiskey markets.
Our brands have prices ranging from the equivalent of, let's say, €5 on a brand like Imperial Blue up to €15 for a brand like Blender's Pride. So, it's clear that it's far better to cope with those tax increases when you have premium brands than when you have some local cheap brands because you have less volume elasticity linked to the price increase. So, we believe we are in a good situation there and probably a better situation than the average of the market. On Brazil, we've seen some improvement, in particular, on the international brands, particularly with Scotch portfolio and on absolutes, I think it's a gradual recovery and it's a gradual improvement because the macroeconomic environment in Brazil remains a bit complicated. But let's say that we start to see the end of the tunnel and I think we are ready to grow again in that market with also some increased investment behind our strategic priorities, in particular, Chivas, Absolut and Ballantine's.
Brilliant. Thanks very much.
Thank you, Mr.
Webb. Thank you, Gilles. And that brings our call today to a close. Adam and I remain available should you have any other questions. Thank you very much, and have a good day.
Thank you.