Good day, thank you for standing by. Welcome to the EMEA LATAM conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star one one on your telephone keypad. You will then hear an automatic message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Charly Montet. Please go ahead. Good morning. Good afternoon, everyone. We are very pleased to welcome you to our EMEA LATAM conference call. We are today hosted by Gilles Bogaert, our Chairman and CEO of Pernod Ricard, EMEA LATAM. I guess most of you would have seen the video we posted on our website this morning. In the interest of time, I suggest we go straight into the Q&A session. Operator, could you please open the line to the first caller? Thank you very much. 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 first question. Please stand by. The first question comes to the line of Olivier Nicolai from Goldman Sachs. Your line is open. Please ask your question. Hi. Good afternoon, Gilles and Charly. I've got three questions, please. First of all, on Europe, you mentioned a good recovery in the on-trade in many markets. Do you currently see any sign of the on-trade channel becoming weaker? Do you see any sign of downtrading across your portfolio? Secondly, looking at your costs and the cost outlook, we've seen gas prices coming down quite a lot. Do you expect a relief on glass costs in the region? Is it fair to say that glass cost inflation is much more of an issue for Europe than it is for LATAM and Africa? Lastly, question on Brazil, I mean, you've an amazing growth, 50%. Do you expect this very strong growth momentum to continue? When can we expect LATAM profitability to get closer to the group average or at least or maybe closer to even your main competitors in the region? Is it just a scale issue? Thank you very much. Thank you, Olivier. Good afternoon. I think your first question is on Europe, on the recovery of the on-trade, and fair to say that we still benefited in the Q1 of the current fiscal year of a strong on-trade recovery in some markets, in particular in Southern Europe, Italy, Greece, and in Iberia, in particular, Spain. This is probably the last, you know, tail of rebound post-COVID that we have in those markets. It helps the performance in the first quarter. That said, the on-trade demand across most geographies remains quite good. We have not seen any signs of deceleration in the on-trade. We just normalize in the quarters to come because we still have favorable comp in the Q1. On downtrading, we have not seen any evidence to today. You know, our business is up, spirit, premium spirits, you know, are more resilient than the other FMCG categories. Our portfolio is skewed towards premium products. We have a broad portfolio addressing different consumer occasions. It's an affordable luxury with a lower frequency purchase. So, we have not seen any evidence of downtrading so far. I think your first question was about energy cost and glass. I think you know that, you know, glass is among the dry goods which are under pressure from an inflation standpoint, with also some capacity limits from some glass suppliers. I think we've been managing well that situation, limiting any particular issue, limiting out of stock. Let's say we believe we'll keep, you know, living with that and tough environments from a glass supply standpoint and still with high inflation in the months to come. No major difference between markets. As we tend very often to bottle in the country of origin. There is no particular difference on that aspect between let's say European markets or Latin America markets. I think your last question was on the growth in Brazil. I think that Brazil has been quite dynamic in the last year. It's still dynamic in the first quarter. I think LATAM together with the SSA are two continents which have been taking off in the last 12 months thanks to, I think, the very good work we've been doing there. I think, the off-trade consumption has been quite strong in Brazil, with the development of the cocktail culture, and it remained resilient after the on-trade was back. We've been also able to pass on significant price increases, which has drive value even at higher levels. As a consequence, you know, in LATAM it's about gaining share, growing value ahead of volumes and getting the scale. That's what is happening at the time being in Brazil and in the other countries of the region. Obviously, mechanically, it drives margins, operating margins up also. This is the current dynamic that we have in Latin America and in particular in Brazil. Thank you very much, Gilles. 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 next question comes from line of Edward Mundy from Jefferies. Your line is open. Please ask the question. Good afternoon, Gilles. Good afternoon, Charly. Two questions, please. I'd love to get an update on the Conviviality Platform. Which markets and your territories are currently live and what does the roadmap for rollout look like? Second question, sticking with the digital transformation, where you have rolled out some of the KDP such as Matrix, RevUp, and Vista, could you perhaps provide some examples of how this is aligned for stronger execution, for instance, through leveraging data or through better sales focus? Third question is, I'm gonna come back to the question around cocktail culture. You know, clearly during COVID, there was quite a bit of home mixology and cultural mixing in Europe. You know, do you think this has helped accelerate development of cultural culture in Europe where there still is a gap, you know, versus markets such as U.S.? Sorry, the line was very bad. Your first question was on KDPs and the deployment of the Conviviality Platform. Can you please just repeat your second question, please? Sure. First question is which markets and how does the rollout look like? Second question is, you know, where you have rolled it out, you know, how are the tools aligned for stronger execution? The third question is around cocktail culture in Europe, to what extent you can close the gap, you know, to the U.S. Yeah. Thank you for your questions. I think on the journey to the Conviviality Platform, I think we are well on track in EMEA LATAM. We have an ambitious transformation roadmaps with I would say more than 10 markets involved so far, mainly the largest one. For instance, we have Vista in Germany, in U.K., Spain, and being deployed in South Africa and Turkey. As you know, this is about sales, and it drives incremental value with greater output targeting, assortments, optimize the sales team visit planning, new touchpoints, and at the end of the day, with the objective to increase our top line growth, improve our distribution. We also have the deployment of Vista RevUp, which is our price optimization, AI-based tool, in the U.K. and in Mexico, with I think some very good results so far that we can leverage obviously to help us in our pricing journey, which is obviously, as you know, one of our top priorities. Matrix, which is about the A&P allocation, helping us to properly allocate A&P by touchpoints, by brands. We have deployed it in Spain, in Germany, in the U.K. in particular. It's being deployed in Brazil, soon in Mexico. It has also delivered some tangible results, helping in particular to optimize the number of touchpoints and to refocus behind the touchpoint with the best return, and which has then driven some stronger overall performance. Good progress so far on the Conviviality Platform. We have other markets that will deploy some of those KDPs in the next 18 months. Cocktail culture is definitely something that has accelerated during COVID. The good news is that it has stayed since then. So it explains the resilience of the off-trade, the home consumption. We've been very active with our brands, with our marketing initiatives, to help sustain that cocktail culture. We did it in Europe, we did it in Brazil, where we launched Bar Aberto, which is a kind of MasterChef of cocktails and which has been a great opportunity to engage with people when they were at home, to help them to prepare cocktails. Yeah, this trend is still very strong and it's skewed towards premium brands, so it's very branded. Easy recipes, and we keep leveraging that in many markets in U.K., in Germany, even in Spain, in Italy, and in most LATAM countries. This trend was reinforced during COVID and has remained quite strong since. It's very good for our brands, considering the exposure to premium brands for Pernod Ricard. Very good. Thank you, Gilles. Thanks, Charly. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Dear speakers, there are no further questions at this time. I would now like to hand the conference over to our speaker, Charly Montet, for closing remarks. Hi, Priscilla. Can you please just ask if there's any further questions? Dear participants, once again, if you wish to ask a question, please press star one one on your telephone keypad. We will proceed with the next question. The next question comes from line of Edward Mundy from Jefferies. Your line is open. Please ask your question. Operator, I think Ed is trying to ask a question. Can you please try to connect him? Charlie, can you hear me? Yes, Ed, we can. Please go ahead. Okay, very good. Sorry, I've got bad reception. The question was around Malfy, where I think you've increased sales by seven times since you bought it. Can you talk about how you've been successful with that model, and does that give you more appetite for further bolts-on of interesting brands, you know, similar to Malfy? Second question is really the role of wine within the portfolio within Europe. Could you perhaps just remind us, you know, what role does it play? You know, which markets, you know, is it particularly meaningful to you? Yes, thank you for your questions. First one on Malfy. I think it's a great addition to the portfolio. Super premium flavored gin, Italian origin, great brand, great look and feel, great marketing assets. We've been growing very, very fast, well ahead of our initial forecast and, you know, reaching in the region close to 250,000 cases, you know, at the end of last fiscal year. Growing very strong double digits. It happened in many, many markets. It's in Italy in particular, is the home market. The brand has had a fantastic start. It's strong in the U.K., it's strong in Germany, it's strong in South Africa. Latin is interested by the brand also. It's a very, very good start. Again, leveraging on the brand, which is today largely skewed towards off-trade, and that we are gradually building also through the on-trade, but it was launched during COVID. Let's say the focus was mainly put on off-trade at the beginning. We are quite confident on the growth potential of that brand going forward, which again, is at a very high price level, super premium brand. It's quite good also for the, not only the growth of the region, but also the margins. Your second question is on wine. As you know, our exposure to wine in the region is relatively limited. It's 6% or 7% of the whole net sell in the region. Mainly in two geographies, in U.K. and in the Scandinavian region. Let's say the start of the year has been more challenging for wine. First because we have tough comps and there was some fading elements here also. Because our strategy is really to focus on high-end brands. It's not a volume game, it's a value game. We prefer to focus on the brands which are at the right price points. Wine is largely exposed to the U.K., as you know. The U.K. as a whole is probably today in a more complicated macroeconomic environment. As a consequence, wine has been suffering there a bit more. Thanks, Gilles. Just one final, if I may, I know that another question from some others. Just really around the healthy or the health of inventories, the level of inventories that you're seeing at wholesale and retail within your region. Any comments you want to make on that? Our trade inventories are quite healthy, normal levels, well-monitored, well-equipped with data to be able to monitor our trade inventories and properly manage selling and sell out. Healthy situation. All right, then. Thank you, Gilles. Thank you. Now we'll proceed to the next question. Please stand by. The next question is coming from Andrea Pistacchi from Bank of America. Your line is open. Please ask your question. Yes. Hi. Hi, Gilles. Hi, Charly. Two questions, please. You were talking about Malfy and some of the additions to the portfolio in Europe. You've done also a lot of bolt-on deals in the U.S. over the past few years, Jefferson's, and importantly the recent one with Sovereign Brands, which has, for example, Bumbu, which is growing strongly in the U.S. What potential do you see? What brands, what of these brands do you think are the main most interesting potential in Europe? The second question, a bit more general on the consumer environment. You're flagging that you really haven't seen any significant change yet. Should the environment, let's say, deteriorate going forward, what, how, what shape do you think the... How do you expect the weaker consumer environment to manifest itself primarily in in spirits and in your business? Is the main issue, in your view, channel shift or trade down? How are you positioning yourself? How are you preparing for channel shift? Thank you. Yeah, thank you, Andrea. First question is on the various, let's say, U.S. scale acquisitions, so we bought different U.S. Whiskies. We bought recently Código Tequila, which is largely aimed at the U.S. markets and we increased our participation in Sovereign Brands. We announced the deal recently. Even if those acquisitions are mainly done to sustain the growth potential of the U.S. market, definitely there is an opportunity also outside the U.S., in particular in Europe. I think on the U.S. Whiskey it's fair to say that, we are, you know, growing our supply so that we can, you know, deliver strong growth in the U.S. and then also start to seed the brands in Europe. It will happen gradually over the years to come but let's say, it will take some time, you know, before we can have a significant size of business coming from that. We have a plan, clearly to grow our American Whiskey portfolio outside the U.S., in the 10 years to come. Sovereign Brands is, we're very happy with that acquisition at LATAM because we believe a lot in the potential of Belair on the one hand, on Bumbu also. These are, you know, culturally led, you know, super premium brands which are very trendy. That's a model that works very well. We'll be very happy to distribute some of those brands in many markets of Pernod Ricard in LATAM with the objective to co-develop and seize the potential of those brands together with Budvar and Sovereign Brands. 'Cause those brands already have some early presence in many markets and we believe that, you know, his specific knowhow in this type of culturally led brands, his knowledge of all the influences, and the strength of our route to market, we can definitely seize a great opportunity in particular in the prestige portfolio, sparking wine, champagne, and rum. Sovereign Brands is a good investment for Pernod Ricard for the U.S. but also worldwide. Your second question is on the consumer environment. As I said, as you properly have noted, so far so good and consumer demand remains strong and we don't see any sign of downtrading. I'd say we remain confident because, you know, the momentum is there. We have strong brands. The consumer dynamic is positive. If the environment, you know, is getting more difficult and sad to say that some macroeconomic indicators show that, you know, the environment could get more difficult. We believe we are well-equipped. You know, we have a broad-based, you know, portfolio. We are present in many new geographies. Premium brands have shown their resilience through crisis. You know, I remember in the past, including with my previous hat, some discussion on, you know, will premiumization go on when times were tougher? you know, it shows us, history shows us that premiumization is a long-term trend that, you know, went through also during, you know, slower consumer demand periods. So with this depth of the portfolio, the ability potentially to, you know, leverage more some brands than others in when the environment is tougher. Our channel exposure also which, you know, we can also reallocate resources between channels, when needed, as we did, for instance, during the COVID when the on-trade was closed. I think makes me confident that we'll have the agility to be able to adjust to the situation. We can be very reactive also to adjust investment when needed. We start to be, you know, very, very well equipped on data, including pre-predicted data to help us to guide us with agility and speed when there are some changes of environment. I think that if a slowdown happens, we would be well-prepared and well-equipped to well adapt to that situation. Thank you. Thank you. We're going to take our next question. Please give us a moment. The next question comes to line of Jeremy Fialko from HSBC. Your line is open. Please ask your question. Hi there. A couple of questions from me. First, if you could talk about the performance of the aperitif brands, I guess mainly Lillet. You talked about that being +7%, that also being one of the main priorities for the region. I guess when we look at that versus the major aperitif peer, they've certainly grown somewhat quicker. Perhaps you could talk about what your strategy for the brand is, and what you think is actually kind of achievable for that brand on a longer term view. Then the second question is if you could talk about the volumes within the region. I think you talked about being +9% in Q1, but with double-digits price mix, which would therefore imply the volumes are a little bit negative at the moment. Could you talk about if that is indeed correct? You know, which parts of the business have got negative volumes and which parts have got positive? Thanks. Yeah, thank you for your question and you're right to speak about operative. This is definitely one of the growing moment of consumption. It happened during COVID at home. When the on-trade was open again, it was very strong also in the on-trade, and it remained strong also at home, even with sometimes virtual operatives which fortunately are becoming, you know, not virtual anymore nowadays. It's not just about Lillet, to be fair, I think it's about a larger portfolio. We have many operative brand, historical ones like Ricard, which is mainly about France. Our gin portfolio is also very, very strong in the operative moments. All brands, Monkey, Malfy, Beefeater, in particular with the Gin Tonic. We have Ramazzotti also, our Italian bitter which is quite strong in particular in Germany and has had some fantastic innovation in Chile, for instance. Yes, you're right, Lillet, which is probably our most fastest-growing operative brand, which was built in Western Europe, in particular in Germany and Austria, city by city, you know, starting with the White Lillet and then growing with new innovations like the Rose, which has a very good start and very strong in female consumption. Low sugar, lower ABV. I think it fits a lot with, let's say, the trends we see moment of consumption, you know, conscious drinking, both male and female consumption. It's, it's growing in many other markets. This is definitely a brand that we want to grow outside, you know, its core territory of Germany. We do it in the U.K., in Benelux. We have some ambitions in Brazil, in Spain, in South Africa. It's, we believe that the growth potential is quite significant. As you know, Lillet's position at a quite premium price, especially, comparing with the competitive sets, which I think highlights the quality of the brand and that allows to command a higher price level. In terms of volumes, I think as we said, most of the growth, you know, in Q1 has been driven by price mix, but need to take into account also that we have a very sharp decline in Eastern Europe because of the war in Ukraine. And so I would say the volumes, when restated, by Eastern Europe are resilience. I think that, our view for the future is that the top line growth of EMEA LATAM will still, you know, rely more on price mix than on volumes in the current environment and also with our priority to behind price. That's the situation on volumes. Okay, great. Thanks very much. Operator, I think we're gonna take our last question, please. Yes, of course. Thank you very much. Now we're going to take our last question. Just give us a moment. The last question comes to line of Olivier Nicolai from Goldman Sachs. Your line is open. Please ask your question. Thank you for the follow up. I got three questions actually, so not really the last one. Mostly on Europe. You mentioned the prestige sales, which have been very strong, 36% growth. Champagne was up 51%. Historically, the share of super premium brands in Western Europe has always been much lower than in the U.S., despite fairly similar GDP per capita. Do you expect the gap to close going forward and that the high-end consumer in Europe will spend much more on premium spirits going forward regardless of the macro? That's the first question. Second question is on margins. Margins in Europe have actually increased quite significantly over the last few years. Where are you on the cost rationalization in Europe, and how much cost do you still see in terms of opportunities? Lastly, you have acquired Código recently. Do you see a potential for Tequila in Europe? More generally, do you see significant opportunities to fill gaps in your portfolio via M&A? Thank you. Thank you for your questions. Prestige is definitely one of our trends also battlegrounds in EMEA LATAM, in Europe, in Sub-Saharan Africa, in Latin America also. This is the quintessence of premiumization. We have a very strong portfolio, very diversified, very broad. We've been building some specific commercial organizations to be able to seize the prestige potential. We're enforcing our go-to-market in the most attractive European market, in particular like Germany, U.K., Italy. We've been doing it also in Latin America, in particular in Brazil and Mexico. Yes, it's the size of prestige is smaller in Europe than it is in the U.S. or than it is in Asia. I think there are reasons for that and I think we don't expect to, you know, bridge the gap over the very short term. There is definitely a potential. There are consumers who want high quality products. If we can, you know, improve the way we identify them, we interact with them, including leveraging some direct-to-consumer opportunities, I think we'll be able to keep growing at good double-digit rates, which is our intent. On the, on margins, you well noted that we've been improving our operating margins a lot in Europe over the last three, four years, leveraging all drivers, improving our gross margin rate, thanks to strong pricing and then strong mix driven by premiumization. Also on A&P investments over time and thanks to initiatives like Matrix, we've been able to improve our, the effectiveness and the efficiency of our investment and making also the allocation sharper, which has also driven some margin benefits. Last but not least, on the structural cost side, in the last years we've been very disciplined. We've been able to also optimize our organization, in particular leveraging the management entity concepts, you know, sharing resources between markets, sometimes merging commercial organizations of markets like we did in Benelux or in Andina between Peru and Colombia. This type of initiatives have driven obviously some optimized structural cost to net sales ratio. The growth and the very strong growth we had was another key element, you know, to further improve the margins. We keep, you know, focusing a lot on margin. Let's say the short-term priority is definitely to protect our margins in a context of very high inflation. Let's say it's more about defending our margins, currently. We plan to keep investing behind our brands at more or less the same level in terms of A&P to net sales. On structural cost, let's say this year, we have some reinforcements of some organizations to be able to accelerate the transformation of the market companies towards the Conviviality Platform. Also, some higher inflation of some salaries in some markets. Definitely, the margin remains very high on the list. Your last question was on tequila. You spoke about Código and safe to say that Código was acquired mainly for the U.S. market. It's a nice complement to what we have there, and I think it will, it's priced at a very high level, and that fits well with the portfolio there. That said, outside the U.S., outside Mexico, we clearly start to see a growing trend on tequila. We happen to be quite strong in tequila outside the U.S. and Mexico, leveraging our portfolio. We have Olmeca, which is very strong in night on trade. We have Altos, our super premium tequila. We have Avión and Reserva 44 at the higher end. We have also the supply, which is increasing to be able to fuel that growth. Yes, we expect the tequila potential to be stronger in Europe in the years to come. Even if obviously it remains today quite small as compared to the size of the U.S. or even the Mexican market. Perfect. Thank you very much. Gilles, could I ask about Nigeria or is it... Are we running out of time, Charly? No, you, we can take the question. Okay, thank you. Just on Nigeria and Africa in general, first you mentioned Martell Cognac and the potential there. We often read about the Nigerian consumer are looking at trends in the U.S. rather than in Europe. Within the imported spirit category, where do you see the most potential in Nigeria? Is it Cognac? Is it scotch? Is it something else? More generally in Africa, how do you build the distribution in this region where you are less well represented than elsewhere? Could you talk a bit about the role of e-commerce? Knowing that you are, I think, on the board of one of the big e-commerce company, I had to ask you. Thank you, Gilles. Yes. That. Thank you. You're right to say that Nigeria is influenced by the U.S., even if they start to influence also the rest of the world because they are becoming so big, and they like premium brands. They like, let's say, show of consumption. Yes, definitely Cognac is an attractive category, and we see it with Martell. We have Blue Swift, which is the Martell SKU that was launched in the U.S., which is growing very fast in Nigeria together with BS. It's a very strong market also for whiskeys, in particular for Jameson, that we sold more than 200,000 cases last year on Jameson in Nigeria. We reached the milestone of one million cases on Jameson in Sub-Saharan Africa. Interestingly enough, the demand was mainly on the higher end of the range, in particular Black Barrel, which I think shows the premiumization potential of the Nigerian business. Jameson, Martell, Chivas, and let's say the whole prestige portfolio have a great potential in Nigeria. We are happy to have strong brands in all those categories, which I think is a competitive advantage as compared to other players. We also decided to play the card of mainstream whiskeys with the Seagram's whiskeys to be able to leverage the potential of this very strong middle class that we have in Nigeria and in the whole Sub-Saharan region. Back to the whole region and the route to market, I think we've been able over time to strengthen a lot our route to markets. Opening some new affiliates over the last six, seven years in some new geographies. In those geographies, strengthening our partnership with some distributors, with some wholesalers, with the modern off-trade, which is also starting to grow from a low basis. Yes, seizing also the e-commerce opportunity, which is starting in Africa. It's the beginning. It will take time, but it's a good way, I would say to complement our route to markets. When you know that most, you know, consumers have a smartphone and that it's very convenient to order on an e-commerce platform, on the marketplace, to then be delivered directly. It starts to grow maybe at a lower pace than what was forecasted a few years ago, but I think the potential is definitely there. We are quite happy with the route to market we have today in Sub-Saharan Africa. We start also to increase distribution going to more remote areas like India and Nigeria. We are focusing on the three main cities. We have a plan now to extend our presence to tier two cities. As you know, in Nigeria, we'll have many new cities above one million inhabitants in the years to come. That will become the third largest country in the world, population-wise. In South Africa, we increase also our presence in the townships, where there is definitely potential, including for premium brands. This is part of the strategy to keep extending our route to markets in each of the country where we operate. We may decide to open some new affiliate in some new market in the future, but for the time being, the priority is to extract the maximum growth potential we can in the markets where we operate. I think that definitely it works on, and I think Africa in the last 18 months for Pernod Ricard has been taking off with very, very strong growth, which then has led also to a better profitability because obviously scale matters a lot on that aspect. Thank you. Thank you very much. Thank you. Thank you. Thank you, Gilles. Thank you, everyone. Operator, I think we can close the call. That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a good evening.