Good day, and thank you for standing by. Welcome to the Pernod Ricard North America conference call. At this time, all participants are in listen only mode. After speakers' introduction, there will be the question and answer session. To ask a question during the session, you will need to press star and one on your telephone keypad. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Edward Mayle. Please go ahead. Hello, and welcome everyone to Pernod Ricard's 2022 North American hosted today by Ann Mukherjee, Chairman and CEO for Pernod Ricard North America. I hope you've had the opportunity to watch Ann's video released earlier today. Before we begin, I remind you that Pernod Ricard will hold its capital markets day in Paris on June eighth, with a particular focus on its data and digital transformation, building Pernod Ricard's growth model, the Conviviality Platform. Ann will join us there and will share in more detail just how she's bringing the transformation to life in North America. Back to today. We'll entertain your questions now for around 45 minutes. Let's begin with today's first question, please, Nadia. Thank you. The first question comes from the line of Edward Mundy from Jefferies. Please ask your question. Morning, Ann. Thanks for taking the question. I've got three, please. The first is on premiumization. You mentioned that consumers are considering the price to quality ratio of their purchase, and it sounds like some of these premiumization trends are quite sticky. As people go back into the on-trade where inevitably, you do spend more money, are you seeing any evidence of de-premiumization, you know, within the off-trade? It's the first question. The second question is around D-Star. I think you gave the example of a 72% uplift in Black Barrel. Could you provide a bit more granularity around that? You know, what really led to that uplift? Was Black Barrel under-penetrated in that store? You know, how exactly did sort of D-Star work? The third question is really around the level of buy-in within your organization around some of these digital initiatives. You know, how are you incentivizing employees to use these new tools? All three great questions, Ed. Nice to hear from you. Let me start with the first question on the premiumization trends that we're seeing in-home. We're actually seeing very good continued premiumization trends, on-trade as well. I think what people have now begun to understand is that this is a category of affordable luxury. Even though you are partaking of better quality spirits at home, the trade-up is not that dramatic, but it is for the industry. When you're going out, you've now kind of conditioned yourself to enjoy these higher premium cocktails. We are seeing that continue on premise as well. It's kind of enjoyable to be in this category when you see kind of the buoyant trends that we're seeing with our consumers really wanting to partake of an affordable luxury when times are tough. It's something we're continuing to see. On the second question on D-Star, I'm gonna get into more detail at the Capital Markets Day. I will tell you this, we are seeing. We have multiple examples that we'll walk you guys through, but that's the beauty of D-Star, whether it understands those very, very high potential outlets and whether the next best action is the way we talk about it. Is it the next best offering that we should have at that space or that outlet that might be under-penetrated? This helps us identify it. Or it could be we have a current offering and the next best action is to drive more facings or velocity or orders. That's the beauty of D-Star. It really helps us understand the next best action and build off of it. I would say, you know, as we have been working this with the organization for the last few months, it's one of the things that I've been really pleasantly surprised about. I've done a lot of change management at a lot of companies, and the enthusiasm that we're getting, not only from our own internal frontline employees, the excitement that we're getting from our distributor partners, because it's a real win-win because it's about growing the category. That's great for all of us, including our retailers. I've seen a lot of enthusiasm. I've seen a lot of enthusiasm to take on the change. We've also worked very hard on change management, 'cause we know that's always the key issue in launching initiatives like this. I remain very optimistic about the ability of our organization to absorb this as a new capability. Great. Thanks. coming back to the first question, it sounds like people are trading up in the on-trade when they start going out again. Given that their dollars are more stretched in the on-trade, are you seeing any evidence of people trading down in the off-trade, you know, given that they're now spending more when they go out? Or are people continuing to, you know, keep their sticky premiumization trends within the off-trade? Yeah, no, it's a great question. I'll be honest, I thought kind of as we're coming out of COVID, we would see a little bit more slowdown in in-home kind of cocktail consumption, but we're not seeing that. We continue to see that stickiness in-home, so therefore it's continuing to make off-premise very buoyant. I do see a little bit more share of off-premise versus on-premise. It's a couple of points. It's still early, but it's not going away, and we're seeing it in both our channels. Great. Thank you. Of course. Thank you. The next question comes from the line of Jean-Olivier Nicolai from Goldman Sachs. Please ask your question. Hello, Ann, Edward. Just a couple of questions, maybe three, actually. Just first on Jameson Orange. Looks like it's had a very good start. How much of the Jameson brand's growth is driven by Orange versus the core? And also, can you give us an idea of how big Orange is today, and if you have already any kind of data on repeat purchasing for Jameson Orange? And second question is, well, actually the third one really, is on the Spirits RTD that you're mentioning in your presentation. It looks like there's quite a lot of potential there. Could you perhaps give us an idea of how big do you think that category will become? Which of your brand could be extended in that, let's say, you know, Spirits RTDs category? Also, if you are seeing some kind of, let's say, normalization between the excise rates that you have between hard seltzer and spirits ready to drink. Thank you. Absolutely. Great questions. Let me start with the first one. We are very happy. Again, it's still early on the launch of Jameson Orange. What's great about how we have launched Jameson Orange is it's really kept with the brand equity of Jameson. This is a very whiskey-forward flavored whiskey. So it's. Our competitors tend to be far more sweeter. So the reaction that we're getting from our Jameson consumer base has been very, very positive. As I said, it's early, so I don't wanna share too many early preliminary numbers, but the repeats that we're seeing, it's some of the highest we've seen. So I remain very positive about the launch. This is something that it is trending to be one of the biggest whiskey flavor launches that we've seen from Pernod Ricard in the category. I have a lot of optimism and the growth that we're seeing, again, very early, but we're seeing a lot of new users come into the franchise, and so it's growing the whole pie, and that's what you really want when you do an innovation of a very big brand. You know, on RTDs, wow, I can't even tell you where that could go. Look, it's sourcing from malt RTDs, and there's a real easy consumer reason why. You know, conscious consumption is on the rise. People are looking for lower ABV alternatives. What the problem with consumers on kind of the RTD malted, you know, ready-to-drink has been flavor. Again, what we've seen in the pandemic is that people are really enjoying cocktails, but they just want a convenient way to get it. When you see flavored or cocktail RTDs, it brings flavor back. What we're seeing is you get the beauty of convenience, you get the beauty of low ABV, and you're getting the beauty of a big brand that can bring in the quality and the flavor credentials of a ready-to-make cocktail. I will tell you, we've already launched Absolut, we've launched Malibu, we just launched Jameson. I think what we're looking at is what are the right brands that have that cocktail credential that can go into this space. We continue to look at it, we continue to innovate against it. I think there's a lot of opportunity. We've already seen it be almost 5% of the category. I think there's a lot of upward momentum, and there's a lot of incremental users coming in, 'cause you have a lot of users that might be a little bit more intimidated by coming straight into a spirit, but this is an easy way to come into this category and start getting more familiarity with some of the big spirits brands. I remain very positive and optimistic about how this is gonna continue to drive growth in the spirits category and continue to source from beer and do a lot for our portfolio, given how many brands we have in our portfolio that we can potentially take advantage of. Thanks a lot. Thank you. The next question comes from the line of Trevor Stirling from Bernstein. Please ask your question. Hello, Anne. Hello, Ed. Just one question from me, please. If I look at the latest NABCA data for March and then look at quarter one, it looks as if Pernod Ricard volumes are down about 4% in a market that was broadly flat. Is that representative of what you think the growth gap is at the moment to the market? Maybe it's different in value terms compared from volume. Whatever that growth gap is, what do you think the big levers are to close that gap and indeed to end up in your aspiration of growing faster than the market? Thank you for the question. I think the gaps that you're seeing, and if you look at the most recent weeks, we're beginning to slowly close some of those gaps. We're not quite there yet, but we're getting very close. I, if you just look at it on a trended basis, both in Nielsen and in NABCA, we're seeing a lot of our total portfolio begin to stabilize, and begin to close that gap. I think as you go forward, you know, we've always talked about in our second half, we have a lot of innovation. We're being very good with our media. We're investing in our brands. I think that momentum that you are seeing will continue. As I've said, you know, we are putting in place the capabilities for us to be able to not only start matching the market but sustainably start beating the market, and that is always have been our goal. I think that, you know, as we move forward, what I get really excited about is I'm now beginning to see the power of our portfolio. I think that's the biggest change we've made over the last two years, is that now we're really leveraging that power. You know, we're now beginning to understand which one of our brands has the highest right to win, and which occasion, which really helps us grow the whole pie. You know, I think that one of the things we always have to remember, and it's hard for me because I come from the CPG industry where, you know, when it comes to sell-out, there is a much bigger understanding of sell-out. You know, NABCA is only a few of our control states. It's the only kind of source that we have for on-premise. You know, it's hard to see the whole picture. As we triangulate our numbers, we're feeling pretty good. I don't know whether those digital tools that you're mentioning are helping you to be closer to the consumer, because many times we feel spirits are a bit behind the curve in terms of the time between the selling and basically when consumption happens. My second question is on RTD. You were talking about the opportunity there. I was just wondering about the investment. How should we look overall in the U.S., how you balance your investment spending and RTD, if anything you can tell us about the economics of that as you are still quite small in terms of scale. Maybe if I just one more, if you've not spoken much about Absolut, if you could give us a bit of a view of where we are now with brand and what we should look for. Thank you. Thank you. Let me make sure I get all those three questions and answer it correctly. On the first question around really understanding the short term, let me be very clear. I think long term, the premiumization trends that we're seeing is going to continue. Everything that we see from a consumer perspective seems to indicate that. I think in the short term, that is the big question. You know, will there be a trade down, you know, from an affordability perspective? We're watching that very closely. Here's what for us that is really good, is when you look at our full portfolio, we are very, very balanced between, you know, what I'll call premium, super premium, ultra premium. We have the ability to flex, depending upon what kind of indicators we get from the marketplace. I still think you're going to see premiumization in the short term. You're definitely gonna see it in the long term. We have an ability to be able to be very agile. You know, that's why we make sure we're understanding, you know, kind of, the signals that we get from our retailers, from the marketplace, from our distributors. This is a category where you're gonna have to have a lot of feelers out to really understand where you're gonna see pockets, 'cause it can be very different across the country. You might have very different trends geographically. That's one of the big issues around the United States. You have to be able to be mindful about understanding those geographic patterns. That's the first thing. On the RTD business, you know, here's the thing about the economics. I always talk about incremental profit. You know, the RTD business is an incremental business. There's a lot of new users that are coming into the spirits category. As a result of this kind of convenience conscious drinking trend that we're seeing. For us, this is an important investment. We make it thoughtfully. You know, we're not just going crazy and trying to launch everything under the sun. We're being very thoughtful about which brands should go in. We're being thoughtful on the supply chain because what's different about ready to drink versus spirits, of course, is that ready to drink has an expiry date. Managing that supply chain, managing that production, investing in the right way, these are all considerations to making sure you have the right economics around the proposition. Probably the third thing I'd say on Absolut, we're encouraged by some of the trends that we're seeing on Absolut. When we look at the total franchise, including ready to drink, Absolut is actually growing as a franchise, as a total trademark. What I'm also really feeling good about is a lot of our flavors on Absolut are doing well. I think what we figured out on Absolut is that Absolut is a brand that really needs to be less about, you know, we're the best vodka. It's more about we were made to mix into cocktails. That's really important because the trends that we're seeing in cocktails are huge. What people are looking for are brands they trust to help them make the cocktails they desire. A lot of our new campaign around Born to Mix, a lot of the responsibility campaigns that we've done with Absolut, again, 'cause that is the history of the brand. It's a brand of provocation. It's a brand of inclusion. We're beginning to see better trends on the business. It's still early. This is a brand. It's a huge brand, that, you know, I've done a lot of brand turnarounds, but these are early indications that we're on the right track, and I feel good about where Absolut is going. Thank you. Has landed across your customers and consumers. Can you compare the magnitude you've taken versus the rest of the industry? That's my first question. Across the presentation this morning, a lot of emphasis on organically beating the market. I think in recent years, there's been a lot of bolt-on M&A across the portfolio. Can you just talk about your openness to do more bolt-on M&A? Are there still gaps in the portfolio you'd like to fill? Thank you. Of course. Two very important questions in the industry and for us right now. On pricing, yes, we did take pretty significant price increase in February. You know, it's again, I will say it's still early. This is a three-tier system, and that pricing working through the system is something that we literally monitor every week. So far, the prices, pricing that we're seeing and the response that we're seeing from our businesses is pretty good. I feel good about it. You know, consumers' willingness to pay more, this goes back to this industry and you know, value for money. We're not seeing necessarily people come back at that pricing and say it's too much. I think we're being very thoughtful about our pricing. We are trying to only pass on the pricing that is really to offset you know uncontrollable costs. You know, in terms of more pricing, I think all of us in the industry are watching very, very carefully. We are seeing input costs go up across the industry. I think everyone is being thoughtful about which segments, which brands. This is not just about pricing anything. It's about really understanding the segments that consumers are willing to pay for and matching that against the segments where we're seeing the cost increases. You know, it's a tricky exercise, but I feel good about our ability to leverage pricing as a lever in terms of you know margin protection. You know, moving forward, I think everyone in the industry may need to look at more pricing, you know, given where we're seeing input costs go. But it's a category that, you know, consumers, it's an affordable luxury, so they're willing to into real organic growth is really something that I'm very proud of our teams to be able to do. Yes, we will always look for those opportunities that will continue to really help us round out our portfolio, and be able to drive even more organic growth for the portfolio as a whole. We're always on the lookout. Can I just follow up on the pricing point, Ann? Yes. Would you say you've priced ahead of the industry at this stage and you'd expect several competitors to follow? Have you been earlier than the competition, do you think? I think we went out almost simultaneously. Okay. I don't think we've priced ahead. I think we are pricing based on what we think the market can bear. You know, I think everyone's looking to the other one in terms of who's gonna price next. I think we've probably, versus history, been more proactive in our pricing actions than we've been in the past. I think that's again one of the big changes that you're gonna see from us here in Pernod Ricard North America. I think that's because, you know, we're finally beginning to really invest in our brands in a way that we feel good about our ability to hold that pricing in the marketplace. Great. Thank you. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star and one on your telephone keypad. The next question comes from the line of Richard Withagen again from Kepler Cheuvreux. Please ask your question. Yeah, thanks. Good morning, Ann. Good morning, Abs. I have got two questions, please. First of all, can you perhaps talk about the development and trends of your Agave brand? So you just mentioned them as one of the growth drivers for the business, going forward in the webcast. And then the second question I have is on your go-to-market. You changed them for some parts of the businesses in the U.S. in the last couple of years. You know, the collaboration with Lafite and the tie-up with Sovereign Brands, for example. So what are the learnings from these initiatives, and are you considering other changes in your go-to-market strategy? Yes, on the first question, you'll have to remind me 'cause I was. What was your first question? Yeah. Your agave portfolio. Okay. Yeah. What is the focus there? Yeah. Yeah. Yeah, absolutely. You know, I will tell you on agave, it is a smaller part of our portfolio. But you know, it is an important part of our portfolio. Let me start with, I think the strength of our agave portfolio, which is clearly Mezcal. We continue to be the leader in this segment. It is a growing segment, and Del Maguey has performed brilliantly. And we continue to increase our investment around our agave support for our brands. Again, we're seeing a lot of good and positive trends on the kind of higher premium side of tequila. And our Reserva business is one that is very, very positive, and that's why we've innovated off Avión, and we've just launched Cristalino. Again, very early but looking very positive. I think you're gonna continue to see us double down in this segment, and we're really trying to build these brands to compete above their weight in our portfolio. You know, as we look at rounding out our portfolio, we'll always look at agave opportunities, 'cause I do see the long-term trend on tequila is gonna continue to stay hot. It's overlapping a lot of you know, high growth, and it's gonna get more complicated to grow in tequila. I think we're being thoughtful about how we're approaching the segment, and being really smart about our investments on doubling down. Your second question was around. You'll have to remind me. What was the second part? Yeah. The route to market. The route to market. Yeah. Yeah. Here's the thing about this industry. It is a very complicated industry, and one of the big focus areas that we've had is, in the last couple of years, is simplification. Getting focus in a three-tier system is job one, job two, job three, because our distributors have a lot on their plate. Being thoughtful about, first, on our main portfolio route to market, how do we simplify the way we work with our distributors, how we simplify, how we manage our distributors, has been a huge undertaking. That's why having other route to markets the way we do with Laffite, et cetera, it helps bring focus to the portfolio. Because our job is to grow every brand in the portfolio by finding their right to win with the consumer and finding the right to win with our distributor. Being able to manage that is a really important part of managing this business. That's why you're seeing kind of our approach to route to market the way we're doing it. Clear. Thanks, Anne. Absolutely. Operator, are there any more questions? If there's no more questions, then I think we can move to close the call. There are no further questions at this time. Well, thank you very much, Anne, then, for taking the time to answer the questions, and thank you everyone for joining us today. Please stay safe, and we look forward to seeing, I hope, many of you in Paris in just a few weeks. That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day. Thank you. Bye-bye.