Good morning, ladies and gentlemen, and thank you for joining us for Pernod Ricard's Q1 Fiscal Year 2018 sales presentation. We're hosted this morning by Gilles Bogaert, 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. Gilles, over to you.
Thank you, Julia. Good morning, everybody. We had a very good Q1 sales with growth accelerating and diversifying. 5.7% organic growth with a continued dynamism in the Americas, +6%. Good performance in the U.S. and acceleration of travel retail in the region. A significant acceleration in Asia, rest of the world, +7%, whereas we were flat in the first quarter 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, +3%. Very strong sales in Eastern Europe and modest increase in Western Europe with a strong dynamism in countries like Germany or the U.K., 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 Fiscal Year 2017, in particular global travel retail and Africa, Middle East. On the following slide, you have the different effects impacting the net sales. Organic sales were up 5.7%. Reported sales were up 2% because of an adverse ForEx impact of -3%, EUR 78 million on net sales in the first quarter. On the following slide, you have the sales growth by region. Good momentum everywhere. In the Americas, a continued dynamism, driven, as we said, by the good performance in the U.S. and the acceleration of travel retail. Asia, rest of the world, that's probably the region that drove most of the acceleration, 7%.
Strong Q1 in China, and a rebound in Africa, Middle East, and also in travel retail. In Europe, +3%, good overall growth. Very strong in Eastern Europe, more modest in Western Europe. By category, slide five. Good piece of news also is that the acceleration is driven by our strategic international brands, +8% over the quarter, whereas they were up +3% in the first quarter of last year. Many brands in those strategic international brands contributed to the growth. It was a strong, broad-based growth driven in particular by Martell, Absolut, Jameson, Ballantine's, Chivas and Malibu. Strategic local brands grew by 2%, the Seagram's Indian whisky's growth is still subdued, largely because of the highway ban. We had a strong growth in our tequila brands and in our gin portfolio. Wines had also a very good quarter.
They were up 8% in particular, thanks to Campo Viejo. Innovation participated also to that overall very good performance, delivering 2% incremental top line growth in Q1. 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%, that's a good performance in a market whose growth is stabilizing around 3, 4%, lower than one year ago. I think we benefit from a clear portfolio strategy driving diversification of our growth. Jameson, and looking at the Nielsen trends in value, continues a double-digit growth. We keep also increasing our price. We did it in September. Absolut is still in modest decline in a difficult category. The brand is having a better performance than most of the other premium vodkas.
Buchanan's and Avión clearly perform better in this Q1 as compared to the previous year, thanks to the different changes we've done last year. 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 de-stocking. Inventory were a bit higher at the end of June because of the risk of a strike in the Liquor Control Board of Ontario, which finally did not take place. Travel retail Americas growth 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. This improvement is driven by our strategic international brands, in particular Absolut and the Scotch portfolio. Also our standard Scotch Passports. Also an improved performance in Mexico following our strategic refocus there.
The disposal of Caribe Cooler and the Domecq brandies, and also the marketing and commercial reorganization. We continue to have a good performance in Argentina and Cuba. The impact of hurricanes and an earthquake is expected to dampen the business in the coming months, in particular the Caribbean and Central America. Asia rest of the world, significant acceleration of 7% as compared to flats last year. China up 15%. We enjoyed a sales acceleration in that Q1 driven by all categories, with a continued good growth for Martell across all price segments. Chivas was back to growth in Q1. That's a good piece of news following the launch of Chivas 12 Extra. Part of that was a pipeline fill. As you know, we also started to activate, in September, the new NBA platform.
Our team are excited, 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 first year of a new dedicated organization. It had just been implemented last year at the same period of time, we had a low basis of comparison in that respect. The Chinese New Year timing, as you know, will be three weeks later. Three weeks, it's a significant phasing difference as compared to 26 weeks in a semester. 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. Our Seagram's 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. The implementation ranged from April to September, depending on the states. We expect gradual improvement starting in Q2. As you know, the GST, the Indian VAT, was implemented as of 1st of July 2017. We are confident in our ability to offset that through price increases. Korea was still down, but it was only a modest decline in the quarter, that's better than in the previous quarters. We start to see the benefits of the implementation of the turn-around plan we put in place a bit more than one year ago.
We also benefited from a favorable promotional phasing. Travel Retail Asia, +18%, strong rebound on a low comp, because first quarter 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'état in Turkey, and we had a commercial dispute 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 anise. Spain had a slow start in the year with a modest decline in Q1. It was driven by a 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 first quarter of last year. We continue to benefit from the very strong development of the aperitif segment, in particular with our brand Lillet. Strong start in the U.K., in particular, thanks to a dynamic wine portfolio. Travel Retail Europe had some rebounds in that first quarter, 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. 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 GEM 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 a significantly adverse ForEx impact on our Profit from Recurring Operations. After this Q1, we confirm our fiscal 2018 guidance, which is an organic growth in Profit from Recurring Operations between 3% and 5%.
Thank you very much, Gilles. Now we will take your questions, please.
Thank you very much, ma'am. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. Please also ensure your mute function is switched off to allow us to hear through your equipment. Once again, ladies and gentlemen, if you wish to ask a question, please press star one. We'll just pause for one moment. Today's first question is coming from Sanjeet 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? In particular, how significant was the contribution from the pipeline fill of Chivas 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? Also, can you just give us some color on 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.
Thank you for your questions. I think, again, in China, the growth was driven by almost all brands. Martell growth in China was double digit. It was not very different from the overall growth of China. It was driven, by the way, by both Noblige, XO, Cordon Bleu, Distinction. 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 probably a few percents of the improvement of Chivas is coming from that. Let's say that, even restated by that, the improvement of Chivas in the first quarter in China would be quite significant. We just need to wait for more time to really assess the impact of the new NBA marketing platform.
The rest of the portfolio grew a strong double digits or above the rest of the portfolio, which is quite positive because these are the growth relays of the future. Let's say that the 15% growth we had in China for the first quarter is higher than our sustainable long-term view that we see for Pernod Ricard in China. We had guided two or three years ago, and now Capital Markets Day, midterm objective of a high single-digit growth in China. I think this remains our objective for the future. This quarter is showing that we are getting there. Spain deceleration. Yeah, the market is a bit less dynamic. It was already visible in the last quarter of last year. Let's say that Spain, after seven years, which had been very difficult post-2008 crisis, had two very good years with a strong rebound.
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 digits growth in value, and we are growing more or less in line with the market. 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. We are hopeful that Q2 should show some improvement in our performance in Spain. In travel retail, we had a very good performance this year. We grew by 14%, whereas last year, the travel retail was down. That's a clear improvement overall. It was largely driven by Asia and also the Americas.
The rebound was less significant in Europe, all travel retail regions contributed to that improvement. We had the low comp last year. Again, we were down, and the situation had improved in the following quarters. Don't expect this kind of double-digit growth to be an indication for the full year. It's above the underlying trends.
Thanks. Just a quick follow-up on China. I appreciate your medium-term ambition is high single-digit growth in that market. 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. 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. Now both the off and the on are good. We'll see. I think that for the longer term, this high single-digit top-line growth is probably a better proxy. As you saw in the outlook, we said we would post a better performance than in the previous year. The previous year was only 2% growth, we are 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 from me, please. First one on Martell. We're seeing steep declines in the U.S. scanner data recently, right, for the brand. I wanted to understand if this is an allocation decision, and you're taking advantage of the strong rebound in China, and that's what's driving that steep decline. 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. Lastly, when we think about the margin progression for the year, as China's rebounding faster than India, that should drive a positive mix, right, in terms of your countries.
I wanted to understand your thoughts of the reinvestment back into the business that you see and, why can't the 3%-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 brand in the U.S. in the last two to three years, it starts to pay off, which is quite good. 35% growth in Martell in the first quarter is a very strong performance. Part of the short-term Nielsen figures that you see on the volume side is driven by some significant price increases that we've done across the range in the U.S. We are quite happy with the development of the brand in the U.S. with Blue Swift. With also the new VSOP which we launched. We are gaining share, it's our intention, obviously, that 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 EUR 15 million 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, 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. This will drive some margin compression in India this year. Your question on the mix. Yes, in this first quarter, the mix is positive, the return to growth of China is quite encouraging. India grew only 2% in the first quarter. We would expect that to be better for the full year. I think that your question on the guidance, we stick to the 3%-5% organic growth of the EBIT. Why?
First, when looking at the Q1 in net sales, we believe that the underlying trends are more somewhere between 4% and 5% when you adjust for the low comp, for instance, in global travel retail, in Africa, Middle East, in Germany. As I said, in China, there were a few elements also which were positive. We estimate the top line underlying growth to be more somewhere between 4% and 5%. We believe that our guidance is quite consistent with that.
Perfect. Thank you.
Thank you much, sir.
Thanks.
We'll now go to Celine Pannuti calling in from JPMorgan. Please go ahead.
Hi, good morning, Gilles. Just two questions from me, please. The first one is on Chivas. 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? Then also, on a more longer-term basis, how much more investment is required behind this brand globally? The second one is on Jameson. You said double-digit growth still for Jameson. Looks like there's a slowdown if you look at the Nielsen numbers. This is just the U.S. Number one, can you quantify the price increase that you took in September? Is that in line with the low single-digit you've previously taken? The second bit is, what can be done to offset the slight deceleration in Jameson? Thank you.
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. Clearly, this year, fiscal 2018, should show some clear improvement on the brand. That's the objective of that higher investment. Apart from 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. Looking at the depletions, looking at the Nielsen in value, we are still growing double-digits, which is clearly the objective that we have on Jameson 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 million cases. Our objective is to be able to deliver in the next few years double-digit growth in value on Jameson in the U.S. The kind of growth that we had in the last two to three years is probably higher than the one we'll have in the next two to three 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, we have a stronger room for growth there. We remain quite confident on our ability to pursue a very strong development of Jameson going forward.
Innovation will also contribute to that. Jameson Caskmates is clearly doing it. We also expect to further grow value ahead of volumes, thanks to positive price and mix. That's why we keep increasing our pricing, even if the current retail sale price of Jameson is already quite high, around $25. Clearly above most of the young brown spirits whiskeys in the U.S. The increase that we do is different depending on the SKU and the state, 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 eau de vie pricing for Martell? Whether you think you've got sufficient supply to service that VS and VS Plus price point in the U.S. Secondly, on Chinese New Year, from your comments, is it fair to assume something of a EUR 20 million-EUR 30 million 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. We are happy with the inventory we have, which we believe is well suited to deliver the growth we are looking for the brand in the different elements of the range. 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. In terms of pricing, yes, there is some inflation of cognac eau de vie in the market. It's a few percent. I would say it's a normal price growth for eau de vie in the region. Chinese New Year, again, as I said, three weeks out of 26 weeks for a semester, it's a bit more than 10%.
That's I think 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 Pernod Ricard in China.
Thank you very much.
Thank you, sir. We'll now go to Andrea Pistacchi calling in from Deutsche Bank. Please go ahead now.
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. 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. Were there any other SKUs, brands, where you managed to put through some price? Was there any shipment phasing in relation to these price increases?
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. For 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?
The first comment I would like to do on emerging markets, and that's probably not a new comment, but I would like to do it again. Pernod Ricard is very strong in emerging markets. It's more than 40% of the group net sales. 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. As you said, we are the leader in China. We are the leader for premium Indian whiskeys in India. Those two markets are the number 2 and number 3 markets for us. They represent together almost 3 billion 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. I hope that those two markets will be a strong driver for the growth of Pernod Ricard, looking at the longer term. 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. We need also to increase the investment there, in particular in Mexico and in Brazil, to be able to get share. I think we are on the right track. Also on the low basis, sub-Saharan Africa is also an important driver, even if the first quarter was a bit slow there because of a tough macroeconomic environment and geopolitical tensions. We have the other tier 2 emerging markets in Asia.
Countries like Vietnam, for instance. All the Southeast Asia markets are quite important. Most of them have shown some good growth in that first quarter. 10% growth is probably a bit inflated by some favorable comps as we said earlier. Overall, 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 two 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. We expect overall positive pricing in the U.S.
It will be still, overall for the portfolio, relatively limited as this is the case, by the way, for the whole market. The market growth in value is ahead of volumes, this is driven by mix and not by price.
France.
The question shipment phasing also in the U.S., I think nothing particular to report. We believe that the 4% growth in value that we have for Pernod Ricard in the U.S., maybe it's a bit higher than what you see in the underlying trend, particularly in the Nielsen, it's not miles away from the underlying trend that we see in that market. France is -4%, 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 anise consumption. The market is not very strong at this time. We still have to deal with deflation environments, which has been the case in France for all consumer goods companies in the last few years, with a lot of pressure from retailers and a lot of commercial conflicts also. We are accustomed to it.
Let's say that this first quarter is probably below the trend that we've had in the last 12 months. We would expect probably the full year to be better than this -4%. That said, it will probably be a tough year in France this year.
Great. Thank you.
Thanks much, sir. We'll now go to Trevor Stirling calling in from Bernstein. Please go ahead.
Good morning, Gilles. Gilles, I wonder if you'd 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 few months? The second thing, in terms of what's actually driving it, you mentioned that the on-trade's 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. I don't have any recent update on shares. The last official one is a bit old now because it was the IWSR 2016, you know that it showed some stabilization of our market share in cognac in China. 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 fast.
It's already 8% of the volumes of Pernod Ricard 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. 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 has stopped declining and is probably back to modest growth. 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. There's a meal occasion around Martell. The development of the modern on-trade, the development of e-commerce, the development of our premium brands. 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 two more questions, please.
Thank you very much, ma'am. We'll now take questions from Mr. Edward Mundy calling in from Jefferies. Please go ahead.
Hi, Gilles. Morning, everyone. Couple of quick questions. The first is just a clarification. The pipeline impact from Chivas in China, is that a few % to China growth? Was that a few % to Chivas growth? The second is going back to your guidance again. With this type of acceleration, your revenue's growing 4% to 5% underlying. Your strategic brands are basically growing 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? 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.
Yeah. Well, on China, yes, the comment I made on the pipeline effect on the Chivas Extra was a few % of growth improvement on the Chivas brand. 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. That's something which has to be taken also into account. We need also to deal with some adverse one-offs on margins, like the GST, the very strong increase of the agave cost, or the grain neutral spirit, for instance, in India.
That's why we don't expect this year to have a very strong operational leverage. I think we see it more not far from being flattish. We are confident that this should improve in the following years. 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-
Sorry, on your last question on the hurricane. 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 the recent fires in California. We had also the dramatic slaughter in Las Vegas. Yes, we can expect those different events to have some impact in the next few months. Some of the impact were already visible in the first quarter. That was, for instance, the case in Florida. Florida was down in the first quarter because of those catastrophes. Houston flood impact is relatively limited because 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. First of 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 had been done. We are still checking the quality of the wine in the tank. This is something ongoing. This will probably have some impact on the whole wine supply in the regions. Will have some impact. It's hard to quantify it. 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.
Great. Thank you.
Thank you much, sir. Today's last question is coming from Mr. Matthew Webb, calling from Aquari. Please go ahead.
Yeah. Hi. Two questions, please. Firstly, just to go into a bit more detail, if possible, on the GST implementation in India. Have the price increases that you've taken been across the board, or has that only been possible in certain states? What sort of magnitude of price increases are we talking there? What's the consumer response to those been? 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, as you know, the 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. Overall, we've been able to offset most of those tax increases through price increases. It's not always in the same state. Maybe in some cases, the price increase is lower than the tax increase, in some others, it can be sometimes a bit above. 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 market. Our brands have prices ranging from the equivalent of, let's say, five EUR on a brand like Imperial Blue, up to 15 EUR for a brand like Blender's Pride. 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. 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, in particular with Scotch portfolio and on Absolut. I think it's a gradual recovery and it's a gradual improvement because the macroeconomic environment in Brazil remains a bit complicated.
Let's say that we start to see the end of the tunnel, 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. Thank you very much.
Thanks, Mr. Webb.
Thank you. Thanks, Gilles. 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.