Welcome to today's Pernod Ricard North American webcast following the video released earlier today. We're joined now by Ann Mukherjee , Chairman and CEO of Pernod Ricard North America. If you have questions to put to Anne, please enter star one one on your keypad, and we can begin the Q&A now, please.
Just give us a moment. Now we will take our first question. The first question comes from the line of Simon Hales from Citi. Your line is open. Please ask your question.
Hi. Good morning, Ann. Thanks for the webcast earlier. Three questions if I can for you, Ann. Firstly, you're clearly excited still about the RTD opportunity. I wonder if you could just talk a little bit more about the scale of growth you've seen in your portfolio of RTDs over the last sort of 12 months since you last updated us.
What percent of your business is it now, and where you see scope for that RTD portfolio to expand further, perhaps using some of your other brands? Secondly, I wonder if you could just talk a little bit more about Skrewball. I appreciate the acquisition's only just hot off the press, but a bit more detail on where that brand plays, a bit more on the occasions, the geographic penetration, you know, across the U.S..
Just finally, thirdly, you mentioned in your presentation some of the phasing issues that you saw in H1 2023 with NSV running ahead of depletions. I wonder if you could just share a few more thoughts on how those trends are evolving through Q3 and the second half of the year, and how we should think about the run rates between NSV and depletion rates over the coming months.
Lovely. Thank you for all three of your questions. You know, let me start with Simon, if that's or with Skrewball, if that's okay. I am very excited by this acquisition. You know, flavored whiskey has been a key category in the U.S., and it is doing unbelievably well. It's a category that I think really rounds out our American whiskey portfolio. Just a couple of facts about it. You know, it is the number three brand in value after both Tito's and Casa Azul in terms of the scale it's bringing. It's what I love about the brand is, you know, it really commands a premium price point, which fits perfectly into our portfolio.
It's a brand that I think has got tremendous potential that comes to us at scale, but there's even much more room to grow as we really accelerate our American whiskies portfolio. As you've seen from our success with Jameson Orange, which is a flavored whiskey that we launched under our big trademark of Jameson, we are seeing continued buoyancy in flavored whiskey.
This is one that I think is very exciting. I think it strengthens our portfolio in our quest to beat the market. I have to tell you, the founders are just amazing. What an incredible story that they have built with this brand, and they're just lovely to be able to work with. A lot of excitement on Skrewball.
You know, on RTD, this is one that literally we've been doubling this business, and it's becoming a very important part of scaling our business in the United States. We see it to be very incremental to the portfolio. It's mainly sourcing from, you know, hard seltzers, and wine and beer. It's a great entry point for a lot of people on our brands. It's, you know, if you take Jameson, it's a wonderful RTD and a refreshing RTD that many people are enjoying as a cocktail and then really brings them into our franchise. Our RTD scale is really, really something that's important to us.
As you know, this year, after 13 years of growing, spirit share over beer, this year, we actually overtook the share position, number one share position from beer, according to DISCUS. There's a lot of momentum in spirits RTDs and one that we're gonna continue to double down on. Finally, your question around, you know, our net sales versus depletions. First, let me talk about our 5% net sales performance in the first half. It is ahead of depletions, and there's a reason for it. We had some pricing that we took in January on Absolut. We also had St. Patrick's Day.
If you go back to a year ago, we had some challenges around some shipments and some supply chain disruptions. This year's St. Patrick's Day was very strong, and we saw a lot of forward buying on that. In terms of our 3% depletions, we think that's very much in line with the market and what we've seen the market grow as the market normalizes post-COVID. Depletions is more towards the market trend level.
As we go into Q3, we are gonna see some negative shipments on our business because this year, this time last year, we had a pretty massive pricing action that we took. There was a lot of forward buying for that pricing that we are going to overlap in Q3. As we close out the full year in the second half, we are absolutely going to be aligning our shipments with our depletions to maintain our healthy stock levels. I feel very confident about that.
Brilliant. That's really clear, Anne. Thank you very much. Thanks.
Lovely.
Thank you. Now we'll go and take our next question. The next question comes from the line of Chris Pitcher from Redburn. Your line is open. Please ask your question.
Thank you very much. A couple of questions on the investment you're putting behind the business, Ann, please. I mean, firstly, on route to market and selling headcount. Can you give us some idea of what you might have done in terms of reworking your commercial investment? How, how much has your sales headcount increased in the United States? Secondly, you talk about a 250 basis point increase in the A&P spend in U.S. Can you give us a bit more color on how that's being funded? Has it come out of gross margin expansion? Have you found some cost savings? Like some of your competitors, have you got a lower operating profit, in the U.S. as a result of that higher investment? Thanks.
Absolutely. Thank you for both the questions. Yes, we continue to, I will say, strengthen what we call media to shelf. Really aligning up our brand activity all the way to the last three feet. I will tell you, in our route to market, you know, our investment or our approach has really been more in terms of how to wire it better, really align it with our distributors, really getting the key of converting our brands with the right playbook. You know, I think we have continued to invest in route to market, but we've tried to invest in a way that builds capability. That's how we've approached it. It's been a major overhaul in the last couple of years, led by John Barrett, our Chief Commercial Officer.
I think as a result, that's the better execution that we are seeing because we really have lined up each brand with the right commercial playbook, much better integration with our distributors, our lead times in terms of planning, to meet retailer timelines. We plan much earlier ahead, and I'm just really proud of the wiring that we have that's getting to, I think, more effective execution, that we're seeing in our, in our depletions performance.
From an A&P standpoint, yes, we do invest ahead of the group average of 16%. You know, we maintain our margins and protect our margins at the group level. And we'll continue to invest in the U.S. As Alexandre Ricard has said many times, the U.S. is the number one, number two, and number three priority.
You know, the company's made an incredible amount of investment in this, in this affiliate and, you know, over $1 billion as you look at, you know, all the acquisitions that we've made. We are putting our money where our mouth is, we will make sure to put the right A&P investment to really capitalize and monetize on the acquisitions that we've received.
Thank you.
Thank you. Now we'll go and take our next question. Please stand by. The next question comes from the line of Celine Pannuti from JP Morgan. Your line is open. Please ask your question.
Thank you very much. Good afternoon, Ann. A few questions for me. Maybe first on the growth of the market, you were saying 3%, it's normalization post strong buy-in tiers. I just want to understand, if I think about high pricing component in that, what do you think is happening? Are we seeing a bit of downtrading?
Are we seeing a bit of volume elasticity that led to only 3%? What is the expectation for market growth for this calendar year? My second question is on the on-trade recovery. Could you tell us how, you know, Pernod is doing, and if you are how you're doing as well in terms of market share? Yeah, that will be it. Thank you.
Thank you. Thank you for your questions. Yes. In terms of the market, you know, this is something that we've been talking about for a couple of years. We knew that post-COVID, the market would normalize, and that is exactly what we're seeing. What's interesting is, and I think the thing that makes me excited is that the kind of three-year CAGR through COVID of 8%, we're not giving that back. It basically says that spirits continues to be a juggernaut industry and category, especially versus, you know, other parts of the category, beer versus wine. I think we should feel really good about that. I know there's other categories that have given some of that back, but we have not.
You know, I think as we look to the remainder of this year, we'll see that normalization continue. You know, I think it's less about, you know, are there worries in the horizon. I think it's just a normalization, we should be seeing, you know, our historical pre-COVID growth around 4% or 5%. Now, don't quote me on which date that's gonna happen. I wish, you know, I had a crystal ball. You know, we feel very confident that this category will come back to pre-COVID levels. You know, you look at this recession, you know, there is even lower disposable income out there, yet people still look at spirits as a very much an affordable luxury.
I feel very good at the trends that we're seeing. We're seeing a little bit of slowdown in premiumization, but I think again, that's a corrective action. We feel very strongly that premiumization will continue. Of course, we've been leading on pricing. And I've been really pleased with the accretive nature that pricing has brought in.
You know, we were probably the most aggressive in the industry, and it's great because our brands are worth buying. That's what we're seeing. Our elasticities are great. And while you're gonna see some volume drop off from that, you know, overall, it's accretive in value, and that's what we were pushing for. I'm feeling pretty good about where the market is and our performance versus the market.
You know, I think, in terms of, you asked the question about on-trade, you know, we are seeing the on-trade recover, obviously. Is it completely back to pre-COVID levels? Close, not completely there. Our performance at Pernod Ricard has always been a strength of ours, and we continue to beat the market on trade, so we're feeling very good about our recovery.
You know, as we look forward, I think there's even more upside in on-trade as it fully comes back. I have to tell you know, the thing that gets me excited on trade is, you know, Jameson. Jameson is such a powerful brand on trade, it's really led the way. Even better, as we look to the future, Código is a fantastic brand on trade. We're continuing to build more strength as we move forward.
Can I just ask as well on pricing, a follow-up?
Yes.
You said that you've been quite aggressive on that. How is the pricing now, is there a space for further pricing, and how do you think that could be received by consumer or the trade?
Yeah. Great question. Look, I will tell you this, you know, I think the volatility of input costs, it's still out there. Hopefully it's getting better. You know, we will do everything we can to protect our margins, full stop. The great news is, we have brands that are worth paying more for. That's what we're seeing in the market. That's why we continue to significantly invest in A&P.
Because if you build brand equity, you can realize your pricing actions. I will tell you, we've been aggressive this year on pricing. We took a pricing action last February. We took another one this past October. I think as you see us going into fiscal year 2024, you will see more pricing actions.
I think from a consumer standpoint, you know, employment's at the lowest we've ever seen in the U.S. I think people continue to engage in our category. There is pricing or spending power out there, and we are one of the categories that I think people are willing to spend their money on because it is a small luxury.
People, you know, people have to get through life, and spirits is a wonderful way to celebrate. That's why we talk about, you know, we're in the business of, you know, moments that, you know, we can unlock as people come together. I think you're gonna see us continue to be aggressive because we will protect margins, and we've got brands that will withstand it.
Excellent. Thank you.
Mm-hmm.
Thank you. Now we'll go and take our next question. The next question comes from the line of Andrea Pistacchi from Bank of America. Your line is open. Please ask your question.
Yes. Hello, Ann. Three, please, three questions. The first one, you've, you're clearly narrowing the gap towards your objective of, you say, sustainably beating the market. The recent deals you've done, Código, Sovereign Brands, Skrewball, are all very attractive and all pretty sizable. Is this enough to close the gap, do you think, versus the market when, obviously at some point they'll be contributing to your organics? Should you expect an improvement there on the back of this? The second, in part connected to this, if you could just talk a bit about Luc Belaire and Bumbu Rum, the opportunity that you see there. You didn't, I think, mention much of these brands in your prepared remarks.
The last question, please, is this, that you've added a lot of critical mass and a lot of new brands to the U.S. business and as clearly some attractive brands. At the same time, you've still got a few brands that are maybe a bit less core, not growing as much, underperforming the rest. Does the fact that you've got a broader portfolio now mean you're in a better position to consider potential disposals? How do you think of disposals in the context of the broader base and more brands you have in the U.S.?
Thank you. Listen, let me take each one of the questions. First, let's just talk about the acquisitions we've made, and the role they will play in terms of our continued quest of beating the market. Again, let me just take a step back and say, look, you know, in the past three years, if you look at the CAGR of the category, it's about 8% growth, right? We've been growing at about 7%, and that's just one point lower than where the market is. As we all know, you know, we did not necessarily have the scale in places where we saw the rest of the market grow. And that includes things like tequila. That includes things like RTD.
You know, we started, you know, our kind of play into American whiskeys. You know, that's why I get confident that as we move forward, we're only one point behind. As we look at these acquisitions, and they were done strategically because we wanted to strengthen our portfolio. You know, with American whiskey, with Skrewball, which is a scaled acquisition, you know, that's gonna be very, very important to us as we close that gap. Obviously, Código is a huge play for us and, you know, it's a, it's a brand that will close that agave gap that we had. You know, we already have the number one leading mezcal. You know, this is something that we feel really good about.
In terms of, you know, disposal, I'll be honest, I don't even think about it that way. You know. Maybe headquarters, but, you know, I think about some of our smaller brands. I have to say one thing about this category. You know what, maybe down now, three years from now may be up, right? We've got a lot of great brands that are not necessarily growing as fast, but, you know, we have a way to play them that is still accretive to the portfolio. May not be driving a lot of scaled growth, but, you know, they do drive scale for us. We know how to manage them as part of our portfolio approach. I feel really, really good about it.
As for, you know, Luc Belaire and Bumbu and Sovereign Brands, you know, that is managed by the Sovereign Brands team, the management team. That is one that, you know, they really focus on because it's still a, you know, a growing entity, and so they run that. You know, that's one that's not necessarily in my perimeter, but, you know, we feel great about it for the company.
Can I ask on these brands that's still managed by the team, by the founders, to what degree can they leverage your strong platform in the U.S., and is there a plan over time to fold it into your own business?
Right now, we keep it independent, because these guys are really good at what they do. We'll always keep the door open to see if there's a time that we might be able to help or if there's synergies. You know, right now that team is really looking to expand beyond the U.S. There's a lot that they are managing directly and, we're taking the divide and conquer approach.
Super. Thank you.
Uh-huh.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Now we're going to take our next question. The question comes from line of Edward Mundy from Jefferies. Your line is open. Please ask your question.
Morning, Anne. I've got three questions, please. The first is, can you talk a little bit more about the shift from a brand focus to portfolio focus? It sounds like before you were operating a very much, how does every brand win approach to now, how does the portfolio win collectively? Could you perhaps provide a few examples of how leveraging the power of the portfolio helps to unlock incremental growth?
That's the first question. The second question is around complexity, and I think one of the goals of the Conviviality Platform was to activate more brands, but that brings in more complexity into your business. Could you perhaps talk about how some of the digital tools are allowing you to both, on the one hand, activate more brands, but also navigate that complexity effectively?
The third question is around learnings that you're sharing with the broader business. I think you mentioned that you've got some of the best people from the spirits industry and also from CPG that's helped to transform the capabilities of the U.S. business. Could you talk to some of the best practices or learnings that you've been sharing with Paris or the broader business at Pernod Ricard?
Oh, Ed, thank you. All good questions. A lot of where I've been spending my time. First let's take the question you have around, you know, this brand shift to portfolio shift. It's been an extremely important one. To your point, you know, when it is a brand-led strategy and, you know, the problem there is, every brand has a mouth to feed, and you never have enough resources to feed all the mouths. You know, some may require more food than others. I think, by us going to this portfolio approach, it was very much underpinned by understanding the broader category and what is predictive of demand. When you approach it from that standpoint, that's one of our KDPs called Maestria.
This notion of really understanding first, independent of your brands, where is the demand? What occasion matters? How big is each occasion? In that occasion, what are the attributes that really matter in terms of a brand having advantage? Then overlaying your brands to understand where they have a right to win. Why is that important?
Because if there are predictive indicators and your brand matches them, you can spend more efficiently because you don't have to spend money convincing people it's the right brand for that occasion. They already start with a right to win. That makes your spending far more efficient and far more effective, which leads to your second question, which is how is it that we can support more brands and do it in an effective manner? This is why, it's a starting point.
Now by understanding this portfolio play and making sure we understand which position each brand plays on the team, they play as one team and not as individual stars. The reason we can make this less complex is because we have all this science, not only around how people are predictive of demand and consumption, we also have for each of those occasions, what's the path to purchase.
Now for every single brand, we have created a complete playbook from how we, you know, do it from media all the way to shelf. In some cases in that path, you know, search may be more important for a brand, or in another brand, the playbook may be that on-trade is more important in terms of awareness.
Every single brand now has that playbook, so every $1 we are spending is absolutely optimized for how to win in that occasion for the brand that has the right to win. That is wired all the way from, you know, our brand codes to our marketing teams in the United States to all the way to our shopper marketing teams, our retailer teams, our distributor teams, and then of course, in that last 3 ft. That's where you get that precision. That now leads to the third question that you had. That is a lot of what I'll call taking the best of CPG and the best of this incredible category that we compete in, which is wines and spirits, and putting the best of the two together.
I really am very lucky that my leadership team is a combination of the best of Pernod Ricard and some of the best minds in CPG. When you put the two together, it really revamps the game that we are playing. That's why we are very excited about where this business is going in North America. Hope that helps, Ed.
Thanks, Anne. Just, I mean, in terms of any learnings you might be sharing with the broader Pernod business outside of North America, I mean, any that particularly stand out?
Can you repeat the question? I'm sorry.
Are there any learnings as you've rewired the U.S. business that you might be sharing with the broader Pernod Ricard business globally?
Yeah. Yeah. Absolutely. You know, that was one of the, you know, the briefs that Alex had given me when I first joined. You know, I'll give you one really great example. Our approach to Maestria or understanding consumer demand, that has a different footprint, depending upon the market that you're in.
While the underlying demand is all about human need, how people express or act against that need is dependent upon the competitiveness of that particular market. You know, what is the disposable income position of the consumers in that market. What this has allowed us to do is apply this learning in all the markets around Pernod Ricard. It's allowed us to create a growth equation that really allows us to optimize how we spend.
It allows us to understand the role of each brand in the global portfolio and how they go across different affiliates. This approach has really been at the heart of the Conviviality Platform that you mentioned, because now based on each country's understanding of their demand, they now know which part of the Conviviality Platform they can really maximize to grow their business. This has really been a group-wide effort and, you know, it's been fun being able to share this across the company.
Thanks, Anne.
Thank you. Now we'll go and take our next question. The next question comes from the line of Jean-Olivier Nicolai from Goldman Sachs. Your line is open. Please ask your question.
Hi. Good morning, Anne. Hello, Ed. Just three questions on my side. First, if we start with Código, can you give us a bit of an update on the size of the brand, since you have acquired it, and how much distribution gain should we expect? Also in term of production, I assume it's still outsourced.
Do you have any capacity, if the brand had the same success as Rabbit Hole, for instance, to supply the market? That's kind of first question. Second one, just to follow up on the previous question, you have recently acquired, so Código, Skrewball, Sovereign Brands, I think Sotol as well. How much potential of growth in term of organic terms is it going to add to Pernod Ricard USA next year? Just lastly on Skrewball, I was curious if you could share with us any bit of details or any bit of background on how you managed to convince Steve and Brittany to join the Pernod Ricard family. Thank you.
Yeah. Let me start with, you know, Código. You know, this is a brand I have to tell you, we have a great kind of playbook, I think, at Pernod Ricard in terms of really incubating amazing brands through their founders. Because really founders are just, they're amazing. With Código, you know, this is a brand that's been nurtured by, you know, some incredible founders that we work very closely with, both with Ryan and Fred. You know, I think that what they've built with Código is just the start of what we're gonna see of this brand. I think this is a brand that we're looking to massively accelerate. It's got great distribution potential.
We're always seeing very effective positioning, and the advertising that we are testing has been really positive. I think this is a brand that you are going to see accelerate a lot through distribution, as well as a lot of velocity around the brand. The brand, you know, is one that we are now transitioning as we speak. We have some integration work that we are doing over the next couple of months. I have a lot of excitement around where we can take it. From a production standpoint, you know, this is very well wired with the management team at Código. They do a fantastic job down in Mexico
You know, we've kind of done the due diligence, and we feel very good where we are from a capacity perspective. Here's what I will say about forward-looking statements, which is not much. What I will tell you is, do I feel confident that we will have very good growth moving forward, with the acquisitions of Código and Skrewball, et cetera? The answer is absolutely yes. In terms of how we convince the founders of, Skrewball to come partner with us, you know, I have to tell you, Steve is an amazing man.
You know, someone as me who believes very strongly in diversity and, you know, I, as an immigrant to the United States, feel very close to people who come to America and are grateful to what America has given them. That is Steve. You know, Steve's background is just unbelievable.
The hero's journey. He's always been about giving back to America. You know, when he came over from Cambodia, you know, one of the first things that they gave him when he got to the U.S. was peanut butter. I, you know, that's what was the genesis of Skrewball. What I think is gonna be really amazing with this brand is, for me personally, is to take it to the next level with Steve.
I will tell you, the secret sauce of this brand is also his wife, Brittany. She has been such an incredible partner to Steve. To see the two of them together and how they built this together, it's very inspiring for us. I think we have shared values. You know, I think that's one of the reasons, you know, Steve and Brittany were willing to come with us. It's one that's very near and dear to my heart.
Sorry for getting a bit emotional on that one. Yeah. You've got a very scaled business, almost 600,000 cases with Skrewball, and you've got Código at about 200,000 cases, or a little bit more than that. These are big injections into our portfolio. Hope I answered that to what you were looking for.
Yeah. Absolutely. Thanks a lot.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from line of Chris Pitcher from Redburn. Your line is open. Please ask your question. Excuse me, Chris. Your line is open. Please ask your question. As a reminder, Chris Pitcher, your line is open. Please ask your question. Now we're going to take our next question. Thank you. Now we're going to take the question from Trevor Stirling from Bernstein. Your line is open. Please ask your question.
Hello, Anne. Two questions on my side, please. The first one concerning your liquid supply strategy for North American whiskey. You told us the, gave us the background for the new distillery in Lebanon. Is that going to be supplying Jefferson's only, or will it supply Rabbit Hole as well? You know, the liquid requirements for Skrewball, are they included, or is that something you're gonna have to work through over time as well? The second question is, you laid out there's a lot of the great initiatives that are underway at Pernod Ricard, but you've also said you're still growing about a percentage point below the market. Which of the elements of the portfolio are the drag on growth at the moment?
Thank you for your question. Let me take the first one. Look, our, you know, the distillery we're building in Kentucky, which is quite a sizable investment at $250 million over five years, and carbon neutral, which I'm very proud about, that has been designed to not only understand how to supply the explosive growth we're seeing for Jefferson's, but we do have, you know, capacity if we want to look at other whiskey brands. Now, Skrewball just came into our portfolio, you know, we're still integrating that business. Yes, as growth is seen in other parts of the American whiskey portfolio, we have that opportunity to leverage the distillery. For now, Rabbit Hole has more than enough capacity in Louisville.
I have to tell you, it's a beautiful distillery that the founder, Kaveh, has created. You know, we feel good as we look at our liquid supply moving forward. Finally, in terms of I wouldn't say it's a drag on our business. You know, we've been a point behind in the CAGR, you know, as you look at our performance in the first half, you know, we're pretty much in line with the market. It's less about being a drag on our portfolio as opposed to strengthening our portfolio. That's what we did with both Código and Skrewball. I feel confident that as we move forward, you know, we'll continue to accelerate our performance.
Thank you very much, Anne.
Yeah. One other clarification had just kind of nudged me, which I'm talking so fast I'm not even thinking. Código 1530 right now, the size of the business is roughly 100,000. I think I said 200,000 then. Sorry. My bad. It's about 100,000, and of course, Skrewball is in that 600,000 range. Okay, next question.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from line of Richard Withagen from Kepler Cheuvreux. Your line is open. Please ask your question.
Thanks for the question. Good morning, Anne. I've got a two-part question on Martell, please. First of all, how are you positioning Martell in the U.S.? Is the focus especially on Blue Swift? What are your thoughts on the price position of Martell versus your competitors? The second part of the question is, you mentioned the challenges of the cognac category in the U.S. in your presentation. What are, in your opinion, the main factors behind slower growth for the cognac category?
Yeah, no, great question, Richard. Cognac and Martell for us is a really big bet. Let me start with Blue Swift. Yes, it continues to be a huge focus for us. you know, and while it's off a small base, we've seen, you know, double-digit growth for the last 2 years, and continue to accelerate. I think from a pricing position, you know, you will probably see a little bit more pricing on Martell as we move forward. So far we feel good with all the actions that we have taken.
I also think you'll see more of an emphasis as well, on the Cordon Bleu business, and it's a fantastic part of the Martell portfolio, bringing in multiple price points across the cognac category, so I think that's also gonna leverage our scale in Martell. In terms of, you know, the kind of the segment of cognac, look, you know, there's been just a lot of, I think, really significant pricing that's been taken, multiple pricing actions through COVID. You know, these are really, really high price points. Last year there was a lot of stimulus checks that went out. We don't have those stimulus checks in the economy right now, I think there's a little bit of corrective action that's happening in the cognac category.
I think where we are, we have a lot of, I think, momentum, both from a supply side, from a brand building perspective. I think in the long term, there's gonna be a lot of, I think, momentum coming from Martell. Again, as I said, it's a, it's a low base, you know, we've been seeing, you know, almost 100% growth in the first half of fiscal year 2022 and almost 53% growth in fiscal year 2022. You know, I continue to remain very excited about our portfolio play with Martell.
Yeah, clear. Maybe as a follow-up, do you see any cognac drinkers moving to, you know, U.S. whiskey or tequila? Do you see that's, that happening?
Can you repeat the question? You cut off the first part of your question.
Yeah. I mean, Let's say the typical cognac drinker, do you see him moving to tequila or U.S. whiskey or to other categories?
Look, I think if you look at anything in the category, it's all, it's going to tequila, right? I mean, this kind of growth by one segment is astronomical. Do I think, you know, there are people moving from cognac to tequila? Yeah, just like tequila moving from vodka from lots of segments. I think that that is part of it. I also think, you know, there are some specific things that have happened in cognac that I think just needs a corrective time of period and the segment will bounce back. It's a really important segment in the U.S.
Great. Thanks, Ann.
Yeah.
Thank you. Dear participants, as a final reminder, if you wish to ask a question, please press star one one on your telephone keypad. Now we're going to take our next question. The question comes from line of Edward Mundy from Jefferies. Your line is open. Please ask your question.
Hi, Ann. Thanks for taking the follow-up. I just wanted to dig in a little bit to this HALT Right Act that you mentioned in your pre-recording. Can you talk a little bit about the technology? Is it breathalyzers? Is it cameras? Sort of what is the path from here?
Ed, thanks for the question, great to hear from you again. Yeah, this one for me is a little bit near and dear to my heart. Look, the technology actually exists, and that was the point of the act, the bill that got passed, which is requiring U.S. car manufacturers to start testing the technology and the best application of it.
Think of it, you know, this is probably a just an illustrative way of thinking about it, that there is technology that when you get into a car, like the ignition won't turn unless, you know, you kind of go through this kind of breathalyzer thing. The idea is not to make this, you know, difficult for people, you know, who are, you know, fine and not drinking.
For people who are drinking, you know, sometimes, not know how much. It's a great safety mechanism. The question is, when the technology exists, why shouldn't we use it? You know, Ed, as you and I have talked about, you know, this is near and dear to my heart 'cause my mother was killed by a drunk driver. You know, if this technology existed, she might be alive today.
You know, this is about us being responsible in the industry. It's about us standing up for making this a safe category for everyone. That's why I'm excited about this act. I'm really excited that President Biden signed it and U.S. manufacturers have to work on that technology and start manufacturing, you know, coming in the near term. Thank you for asking. I think it's something we should do more of.
Thanks for taking the follow-up, Ann.
Thank you. Dear speakers, there are no further questions. I would like now to hand over to the management team for any closing remarks.
Hey, good. Well, thank you very much, everybody, for your time this afternoon. A very interesting range of questions. We appreciate that very much. Thank you, Ann, for joining us today. With that, we'll close the call. Bye-bye.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.