Davide Campari-Milano N.V.

Good afternoon. This is the Coral School Conference operator. Welcome and thank you for joining the presentation of COMPARI's first quarter 2024 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Matteo Fantacchiotti, CEO of Campari. Please, go ahead, sir.

Thank you very much, and good morning, afternoon, and evening, everyone, and thank you very much for joining us. Very pleased to lead this first 2024 performance update and first quarter results presentation, together with Paolo, of course, and the investor relations team here in the room with us. So going straight into it, organic sales were up plus 0.2% with solid underlying trends against a top comparison base due to temporary phasing effect in Q1 2023 from trade forward buying ahead of price increases. As a reminder, we drew Q1 2023 around plus 20%. So overall, we observe continuous strength in aperitifs led by Campari and Aperol, despite the challenging conveys, and largely thanks to core European markets and U.S., while Espolon, also in the U.S., continues to show very solid momentum. If we exclude the temporary positive phasing effect in Q1 2023, which was mainly impacting the U.S. and Italy in aperitif and espalon, the organic growth will came at approximately plus 6%. EBIT adjusted organic is at minus 2.3% and margin at 22.8, which is a dilution of 60 basis point versus Q1 2023 with some diluting effect of HGNA due to flattishness growth. Excluding the temporary positive phasing effect into 1.23, the EBIT adjusted organic growth will be at approximately plus 13%. Growth margin is flat, plus 0.2%, neutral on margin with some carryover effect of last year pricing quizzes, offsetting the expected COGS headwinds due to the carryforward production stock effect we disclosed in our last call. AMP is minus 1.6%, generating 20 bits accretion due to some AMP investment phasing. And SG&A at plus 4.2%, generating 80 bits margin dilution due to a softer top-line growth with ongoing investment, as you know, in route to market and commercial capabilities. So our outlook remains unchanged. Since last time we spoke, which was only a couple of months ago, not much changed indeed. So I would say that the key message is probably no news, which I guess in our case is good news, as we continue to outperform the category in all key geographies and we progressively have easier comps as we go into second half of the year. And probably the only one change which was somehow expected, but it's now finally done, is that we are now officially proud owners of a beautiful cognac maison, which is Courvoisier. So going to the next chart and looking at performance by regions and portfolios. Both American and Europe performed in line with expectations with very high con base and were winning market share, mostly led by aperitif and tequila. Now, important to explain the APAC numbers. As a matter of fact, we're discounting a couple of important factors. Number one, a route to market change, both in China and India, which happened in Q1 in both cases. and we expect to start to see much more positive trends on both markets, starting from, I would say, second half of Q2. And then a phasing effect in Korea, where we had a material difference in opening stock this year, driven by a soft Q4 in 2022, driven by market macroeconomics and trade environment growth. Without those, Asia-Pacific will be still growing and we're still positive for the full year outlook for the region to maintain a positive growth trajectory on a full year basis. At the same time, it's great to see our global priority brands are growing even against the high conveys that demonstrate the momentum again on Aperitif and Espolon. So quickly, deep diving into the regions in the next chart, looking at America. When it comes to U.S., classic shipment performance against the Tafcon Bay. So Q1 last year was up 23%. But again, positive growth for Espolon, Aperol, and also Grand Marnier. Although Grand Marnier, there was also a positive impact of low conveys last year coming from this stocking and some weakness in sky. But overall, I'm sure there will be questions. You will see that our share performance momentum in U.S. continue, especially driven by APRO and Espolon. Jamaica is negative, but I would say Jamaica is more of a supply story. We'll be happy to explain. Yes, we had a high conveys, but the number is negative because of some temporary shortages, while the underlying consumption trends are positive. And as you know, we're addressing supply shortages with the CapEx investment we did in Jamaica. And some good numbers coming up from other markets, especially driven by Brazil, both from aperitifs and the local Brazilian brands. And Canada with, again, Afro and Espolon doing particularly well. Moving to the next chart, going into EMEA, again, a positive growth, 2.2%. And this is, I would say, share performance, generally positive everywhere. and especially in the data available in the Easter readings, also generally very positive, mostly driven by operatives across markets. And when it comes to the organic sales growth numbers, Italy, in a small quarter, is declining against a very high con base. In fact, last year, Q1 was up 21.6%. where we had price increases in early Easter, which was also early this year, but obviously in 2023 against 2022 was way earlier. And especially April was Q1 up 33%. Germany, very good growth, double digit, also against a comp base. With April aperitifs, it's Sarti Rosa, which is our innovation, doing particularly well, and also Crodino, which is nice to see. France is growing well. UK is a combination of, again, icon-based, but also is another market that is temporarily impacted by supply constraints in Jamaican realms. And other markets, generally speaking, doing well across Austria, Spain, Netherlands, and Belgium. Again, mostly an operative story, although some of the other brands are also growing. But as you know, in Europe, from a smaller comp base. Moving to Asia-Pacific. So Asia-Pacific, actually, the story is twofold. On one side, we still continue to see a very positive trend across most APAC markets. It's part of our APAC growth story, where in markets like Japan, New Zealand, Korea, our depletions are growing double digits. We're doing well. We're winning market share. As expected, we were planning to change route to market in China, and I think that's a positive news, as it gives the sign that we have real confidence in this market, and we believe that, as we learned over the last two, three years, we are ready to go on our own, even more now with the addition of a cognac like Revozier in our portfolio. And also we did change both management and route to market in India. So Q1 for India and China was almost close to very little sales ahead of the route to market changes and stopped moving from old route to market partners to the new ones. So I will say Asia is positive. The one market that is really struggling at the moment is Australia, where first the macro environment is challenging from a macroeconomic standpoint in the country. And the competitive set, especially in terms of category mix, is really not playing in our favor. And we're struggling a little bit in barbon, especially RTDs. where widespread RTDs are going much faster. And within Barbon RTDs, we took quite some price over the last couple of years. And we're at the moment seeing a lot of promo pressure going and we're losing a bit of share in Barbon. And this is the only performance issue that I will call out on EPAC. So for the full year, we remain positive that this region will still deliver growth as in line, especially in the key priority markets with previous trends. Moving to brands, global priorities, like I said, very nice to see that both April and Campari are still growing, even against very high conveys, both at plus 6%, which means actually the brands are doing really well across most of the key markets, be it You know, Germany, U.S., France, for April, and most of the others also for Campari. Espolon, double-digit growth, again, besides a very high comp base. which shows the real momentum for this brand, which seems really unstoppable, both in the U.S. and also in the international market that now we can finally activate as we are unconstrained. White Turkey is a bit down, and I will call out two things here. Number one, also, we need to acknowledge that when it comes to White Turkey, this brand is 71% bigger than it was in 2019. So this is a brand we really developed a lot. And number two, as we discussed in the past, our strategy on Wild Turkey is really value over volume and have to deep dive. But besides the icon base and I'm going to repeat this for most brands again, there is some temporary phasing for some some of the non-U.S. markets like South Korea and even even Japan. But also our strategy in action of volume versus value. So the priority SKUs of Wild Turkey, the one we want to grow for the future, which is one on one and above, are all growing and winning share, which is what we care about. Jamaican rum, as I said, is mostly a phasing problem, but it's nice to see that Appleton is in great shape and it's winning share also in U.S. Grand Marnier is growing, although you will see it later on. We're investing on the brand. We're doing well. But this number at plus 8% has also some easy con base after the stocking last year in U.S., Sky is the one that, as you know, vodka is having a bit of a tough time in the U.S. We keep share. Actually, in the last quarter, we gained a little bit of share, but the category is under pressure in the U.S., although Sky is growing in other international markets. which now account for a good proportion of the volumes. And we're pleased to see that positive trend, especially after the new packaging launch some 12, 18 months ago. Moving to regional and local priorities, I will not dwell again on commenting on the high-con basis, but basically I will just summarize very quickly, saying that sparkling wines and champagne is doing well, and this is obviously a reflection of sparkling wines. As you know, for us, it's very much linked with Apple Performance, and champagne, we're building nicely our L'Allier brand. Whiskey, especially when it comes to Plain Grant, is more of a phasing. And to mention Cordino, which is something we are starting to invest outside of Italy to activate our non-alcoholic spritz offering, and it's starting to perform really well. And when it comes to local priorities, I will say everything is in line with our expectation. And the one single thing to flag is White Hockey RTD, which we discussed already. But the rest is performing okay. Before we go into the financials, a few snapshots of last quarter activations, which was, as always, quite active. And I think they represent, again, I would say, our proprietary beautiful marketing model in action. First of all, April of Australia opened. 2024 marked the return of April as the official operative of the Australian Open after a few years break due to COVID. And when you look at some of the buzzwords we always use in the industry, like omni-channel and consumer or shopper journey, I think our tennis program was a clear example of those buzzwords really in action. Like, if you happen to be in Melbourne during the Australian Open, you could get TO THE ICONIC ROAD LABOR ARENA BY OUR BRANDED APRIL BOATS THAT YOU CAN SEE IN THE PICTURES. YOU COULD WALK AND ENJOY A REFESHING APRIL SPREAD WALKING ALONG THE RIVER IN SOME OF OUR ACTIVATION IN THE BARS AND TERRACES ALONG THE RIVER. IN THE PRECINCT AROUND INSIDE THE ARENA WE HAD an immersive Aperol experience with 300 square meters terrazza Aperol. You could also this year, which was a novelty, order Aperol sprees at the bar inside the tennis centers. So you could sip an Aperol sprees watching world-class tennis. And then we had activation also outside of the arena in on and off spaces. So Uber activation with some approach for an open partnership inviting to visit some of our on-premise activation. We had off-premise installation with limited editions for Australian Open. We had pop-up stores at the airport in Melbourne, and then a nice above-the-line campaign across digital, social, programmatic, and linear TV with a dedicated campaign for April, which was called Serve Up Summer. So a beautiful 360 campaign, which delivered very strong results, and April is going double-digit in Australia. Going to the next chart, while it was summer in Australia, it was winter on this side of the world, and we did our de-seasonization program with beautiful activations in ski resorts, alongside also World Cup ski events. And for me, honestly, being back in Europe for Christmas this year, I was also excited myself to start to see apparels, which is popping up over lunchtime on the slopes everywhere. So it is really good to see how we're activating apparel also in wintertime now in Europe. Next page is Grand Marnier, which I think is also an interesting novelty because, as you know, we keep cementing the iconic and statusful brand positioning for Grand Marnier, winning in Margarita and expanding also its consumption versatility. And lately, knowing the black American consumers, which have high spending power, so our correct target for Grand Marnier and high cultural influence in U.S., are moving in between cognac and tequila. And as you know, Grand Marnier is a cognac-based liqueur. We identified an opportunity to connect with these consumers by way of hip-hop as an affinity territory. And February 2024 was the first time we stepped into this strategy. And so resounding results as Grand Marnier took its place in the cultural conversation during Grammys weekend, Super Bowl, and NBA All-Star weekend with incredible results. I can just give you one, which is... In one month, we earned over 1.7 billion PR impressions, which exceeds total full year last year. So very promising start of this platform for Grand Marnier. Next page, basically we keep executing Campari association with cinema, and this February was in Spain, both at Goya Awards and with our partnership with Fotogramas de Plata, which is the country's premier cinema magazine. and sponsoring the Campari Cinema Award at the event in February, which is a very nice anticipation of what we will do very shortly at the 2024 Cannes Film Festival. We will also launch, it was announced yesterday, our dedicated campaign, which is mostly digital. We are cinema for Campari. Last but not least, a quick mention of our Tequila portfolio in the next chart, because obviously, like I said, Expolon is really shining. It's now part of the global priority brand cluster, combining strong U.S. presence and unconstrained volumes for internationalization opportunities. And in Q1 2024, Espolon has been growing share and value and volume double digit in most markets. And by the way, this year is worth reminding that the brand is celebrating 25 years since the introduction of its signature Tequila Blanco. And we're launching a limited edition, which you can see in this chart. First of its kind for the brand, created by renowned Mexican street artist and illustrator Edgar Saner Flores. And we will dip down in Q2 in terms of what we will do beyond the limited edition bottle for this milestone anniversary with a series of underground events, partnership, and experiences as always amplified through digital and through consumers doing the amplification for us. And our other Mexican gens, by the way, continue to shine, and they just won several awards, as you can see in the chart. both in terms of tequila and mezcal with Monte Lobos at the San Francisco World Spirit Competition. Last but not least, because it just came a few days ago, is the Cocktail Report 2024 by Dreams International. It's finally out, and we have great news to share with you. Because for the third year in a row, Negroni is confirmed as the number one best-selling cocktail globally, and obviously featuring Campari, because there is no Negroni without Campari. And as you know, this is one of the most followed report by bartenders and trade influencers. Therefore, the number one position for Negroni is an important recognition that we should continue to leverage with Campari. This being said, additionally, Aperol Spritz is moving up one place from nine to eight position and is the one single branded cocktail in the world. I mean, you can argue Negroni is also branded, but with Aperol Spritz is even in the name of the cocktail. And the other thing we were very pleased to see is that, as you know, for us, The strategy with Espolon was, of course, to participate into Margarita, but from the very beginning to push a more sessionable drink, we believe, be the Paloma with our Espoloma. And now the Paloma moves up four places and is in the top 10. So we believe we can also leverage this platform as we did since the very beginning, and now we can ride on these trends. So I think that summarizes our marketing activation and numbers, and I will let Paolo to bridge with some Courvoisier information and financials.

If you follow me to page 15, as you can see, on the 30th of April, we've announced the closing of the Courvoisier acquisition. after having successfully completed the various applicable regulatory processes, including the antitrust one. The upfront enterprise value is confirmed at $1.2 billion, including within the enterprise value $410 million of maturing inventory. Should the earner be paid in 2029, the total enterprise value is therefore confirmed at 1.32 billion dollars, equivalent of 1.22 billion euros. The integration of the Kubernetes operations has been initiated, including supply chain, back-office, and distribution. We expect, you know, quite a smooth end over given the successful pre-closing achievements of our clean team and the positive contribution of the sellers team. The brand strategic assessment is currently underway. Meanwhile, the commercial structure strengthening in core brands and regions, namely the US and UK, is already started. The perimeter is expected to start reflecting the consolidation of Courvoisier from closing with limited impact expected in the first transition year. So here we confirm the 10 million Euro contribution from the acquisition. If you follow me to page 16, we can see that the EBIT adjusted organic change came in at a negative 2.3%. with a margin, EBIT adjusted margin of 22.8%, showing a 60 basis point organic change, negative organic change. Organically, the gross profit was flattish, plus 0.2%, thus neutral on margin, as pricing and positive sales mix fully offset the expected first quarter COX headwinds. The NP in value was negative by 1.6%, generating 20 basis point margin accretion, totally due to phasing of our NP budget. The SG&A increased in value by 4.2%, generating 80 basis point margin dilution due to the softer top line growth with ongoing investments. If we excluded the temporary phasing effects of the first quarter, the EBIT adjusted organic growth would be, as we said before, 13% still with a flat gross margin. The EBIT adjusted on a reported basis came in with a negative value change of 4.9%. with a negative perimeter effect of 0.2% due to the net effects of the changes in the agency brand portfolio. The effects had a negative impact in value of 2.4%, and that was mainly driven by the revaluation of the Mexican pesos versus both the dollar and the euro. The bid adjusted came in at 181 million euros with a reported growth of a negative 1.7%, of which 0.6% is a positive organic growth, a negative 0.2% perimeter effect, and again a negative 2.1% FX effect. If we move on to the following page, we can see that operating adjustments came in at €2.2 million negative, mainly attributable to provisions linked to restructuring initiatives. The total financial expenses came in at €11.9 million, with a decrease of €4.3 million versus a year ago. If we excluded the exchange rate effects, the net financial expenses were down to 12.1 million euros versus 12.9 million euros of first quarter of last year, within which we have 25.8 million euros of inter-expenses, including the incremental interest on the convertible bond issued in the first quarter to finance the acquisition. And those, you know, 25.8 million euros were partly offset by, you know, 13.8 million positive contribution from interest income on the resulting cash position ahead of the closing of the Courvoisier acquisition. The cost of net debt came in at 3.1% versus 3.3% of first quarter of last year. The exchange gain came in at €0.2 million versus an exchange loss of €3.3 million over the first quarter of last year, with benefits from low volatility in exchange rates. The hyperinflation effects due to Argentina came in at a positive €8.1 million. Pre-tax profit adjusted came in at 146.5 million euros, up 3.7%. Pre-tax of 144.3 million, up 6.4%. Post non-controlling interest before taxation, the group pre-tax profit adjusted came in at 147.3 million euros, up 5.8%. The group pre-tax profit came in at 145 million, up 8.6%. Moving on to page 18, as you can see, the net financial debt stood at 1,315.3 million euros with a decrease of 538 million euros versus December last year, mainly driven by the cash injection from the equity raise and the convertible bond, which were carried out in January this year to finance the Kuvazi acquisition. Those, you know, positive, you know, effects were partly offset by an increase in gross debt to the convertible bond, which here we could recognize net of the equity, of its equity component. The net debt would be adjusted at March end, came in at 1.8 times versus 2.5 times the back end of last year. But, you know, if we factor in the negative effect of the Payment of the covers a consideration. The net that would be the ratio would be 3.5 times still excluding the positive panel effect of the first time consolidation of was here. So it's you know the more prudent. I think you know my mother. This is it on numbers. I would end back to you for conclusion and outlook.

Thank you, Paolo. So. Like I said, I would say. No news for us. I believe it's good news. We continue to grow and we continue to outperform the industry, including the temporary phasing effect. And if you like, even some of the APAC go-to-market changes, our growth is still at mid-five single digits, both top line and bottom line. Our outlook remains unchanged. In fact, We deliver what we thought we needed to deliver for Q1, and we reiterate our confidence in high-growth performing categories like aperitif and tequila, and our expectation of a more favorable margin context materializing in the second half. When it comes to Q2 and Q3 results, both top-line and mix will rather be dependent on seasonality. I'm pretty sure there will be questions on weather, as well as our AMP investment, and with reasonably easier comp, especially in Q3. As I'd like to remind you that Q2 last year was still pretty positive for us, and brands like Apple were still in very high growth. Yeah. So good news on Courvoisier, which will start to reflect on the perimeter from May, but with unchanged view on first year impact. So look, steady as it goes, continue to outperform reference market and prime it for sustainable medium to long-term growth. That will be my summary. And I think I will now move to questions. Thank you very much.

Thank you. This is the Corus call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver by asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Andrea Pistacchi, Bank of America. Please go ahead.

Yes. Hi, Matteo. Hi, Paolo. I have a question for you, Matteo, and one for Paolo, please. The first one on the U.S., whether you'd be able to give a bit more color on your performance in the U.S. Now, the market is quite challenging at the moment, for sure. But at the same time, your performance was held back by phasing. So really, what are you seeing in the market? What do you reckon your underlying growth is in the US in Q1? Basically, your depletions, if possible, and whether you're seeing much difference for your brands on trade versus off trade. We clearly see all the Nielsen data, but we have a limited visibility on the on trade from our side. And then for Paolo, please. I wanted to dig a little deeper on the COGS gross margin dynamics. So in Q4, gross margin was up, I think, 150 basis points organic. It was flat in Q1. So what are the main factors holding back gross margin compared to Q4? Is it, I mean, the less favorable mix and the, back at full year, you referred to the lower absorption of fixed costs. Was that a factor which is now behind? And I was wondering whether, Paolo, you have better visibility on glass costs for the year now. I mean, whether lower energy costs in January, February, March, whether this has triggered or will trigger contractual reduction in what you pay for glass, and more broadly, whether you expect gross margin to improve in the remainder of the year. Thank you.

Okay, so, well, first of all, Sandra, I hope you're well. So, on U.S., our underlying growth remains positive, and we expect the full-year market to grow. So, that's the simple answer. Now, why is that? First of all, I think two factors. One, you can see in some of the commentary of many of our competitors, one recurring theme is the de-stocking and how much that will last and lasting longer than expected and so on and so forth. Thanks God we don't have this theme in our company at the moment. Our level of stock, we're happy where we are. And I would say, especially now, we go to a situation where across all brands, we don't have any either over or under stock position. The second element is depletions. If you look at the numbers, we're still outperforming and beat across category and tiers. And I will say on that, especially two brands, which thankfully are quite large for us in the U.S., are doing extremely well and on very positive trend, which is Espolon and Aperol. And if you look at channels, I will say when you look at NAPCA versus Nielsen or whenever you look at data that includes also on-premise, our performance is always a little bit better. uh and this is again because as you know uh this is uh where our strength is and where brands like april for sure but even as polon uh are playing and doing well uh and if there is one softness uh that is um that is sky uh which is more exposed to off-premise which is why uh maybe on the nielsen you will uh see a slightly worse data So within this context, yes, we're positive on U.S., and we believe at the moment we're lucky twice in U.S. First, not exposed to stocking or destocking issues. And secondly, we believe we play in the right categories at the right price points.

Andrea, with regards to the question on, you know, on gross margin trend for the full year, you know, clearly, you know, here we're basically, you know, confirming, you know, the full year guidance at this stage. Well, basically, as we have highlighted, there are, you know, a number of tailwinds, you know, the biggest one being Agave. with, you know, at this stage, you know, potential full positive contribution across 24 and 25 of about 50 million euros, which is 30 million this year. Plus, we have other, you know, raw material and packaging material tailwinds amounting to 50 million. So for this year, we have about, you know, 80 million euros potential tailwind. But on the other hand, you know, as we sign out, You know, during the previous call, you know, there are also some headwinds, namely, you know, the safety stock that has been built last year accounting at higher cost that, you know, generates in a carry forward effect of inflation in this year of 15 million euros. This year, an absurd fixed cost due to the slowdown of production at our plant because of the ramp up of last year. that is generating another 15 million euros of unabsorbed fixed production costs. We have higher depreciation due to the extraordinary capex program of last year, accounting to 180 million euros with 15 million euros, again, negative impact to the P&L of this year and the higher cost of aging liquid. And now we're dumping into our, you know, brown spirits bottles. So then they total, you know, the headwinds are 60 million. So tailwinds and headwinds, you know, this year are, you know, fairly balanced. You know, there is a little bit of upside on tailwind by 50 million. But, you know, having said that, as we as we have anticipated this year, it will be, you know, primarily, you know, a, you know, a safe mix play with, you know, potentially, you know, positive comp in vis-a-vis consumption. And then we'll talk through shipments. That is a different story in Q2 and Q3 due to the poor weather conditions of last year. Now, if you look into the, you know, the other question that is, you know, first quarter and phasing of things, if this is, you know, the the overarching, you know, picture. Within that, you know, in first quarter, you know, clearly we signal, you know, still, you know, for the full year, pricing, we've said, you know, we're expecting between 1% and 2% positive pricing, even after having factored in the higher, you know, PROM intensity, you know, particularly that we see, you know, happening in mature markets, you know, Europe, namely, and parts in the U.S., So, you know, call it 1.5% for the full year. Now, clearly the first quarter in terms of phasing is much higher as it does benefit of the carry forward effect of last year. You know, high single digit, you know, price increase that we've achieved, you know, was, you know, you may remember 8.3% last year. So this year we have, you know, in first quarter a positive contribution that, you know, as the time goes by, you know, gets, you know, smaller and smaller in Q2, Q3 and Q4 with, you know, Q4 with basically no price increase, you know, on average versus, you know, a year ago. Now, if you look at Cox, then, you know, the picture is by the opposite, clearly. In a small quarter, like, you know, the first quarter, the carry forward effect of last year inventory, you know, build up, you know, is quite meaningful. So, you know, the inflation effect in the first quarter is disproportionately high in comparison to inflation effect that we see for the full year. So, you know, as the time goes by, you know, the carry forward effect as we utilize, you know, the excess stock, internal stock, you know, gets, you know, thinner and thinner through Q2, Q3, and Q4. Now, the mix clearly in the first quarter was, you know, marginally positive. Also, taking into consideration the fact that last year, due to, you know, the huge price increase of the second quarter, there was, you know, anticipation of shipments of high-margin brands. But then if we look into second quarter, we have to signal the Fed that on an end, of course, you know, weather conditions in the second quarter, you know, were particularly negative. But on the other end, you know, as you cannot forecast, you know, the weather conditions and precisely in trim logistics, the second quarter of last year in terms of mix, in terms of shipment was strong and with positive seismics. So, you know, if I look at seismics in the second quarter, I would not necessarily, you know, come to the conclusion that is a strong contribution to our, you know, gross margin expansion in the second quarter. You know, clearly, if you look at the comps, you know, the third quarter of last year was, you know, relatively poor in terms of volumes and mix, and this is where, you know, we think there is, you know, the opportunity. Vis-a-vis the broader team of negotiations with suppliers, you mentioned the glass, which is the other component on top of the agave that I have specifically called out, we remain positive. Clearly, the commodity indexes are playing in our favor. We're currently clearly discussing, you know, contracts and terms. So, you know, we think, you know, back end of second quarter, we'll have better visibility and we'll be in a position of shedding further lights on that. But, you know, overall, I think, you know, the picture I've described, you know, is mostly confirmed at this stage. Great.

Great. Thank you very much, both.

The next question is from Simon Hales, City. Please go ahead.

Thank you. Hi, Matteo. Hi, Paolo. So two questions for me. First, I want you to just talk a little bit more about your AMP plans. Clearly, you had a phasing benefit again in Q1 this year from slightly lower AMP. Obviously, you had a phasing benefit back at the Q4 stage when you announced the full year results in February. So I think we were expecting a bit of a catch-up Coming into the first quarter, has that just been delayed now into Q2 and Q3? And how should we think about ANP spend for the full year now? And then a second question, if I can, around Courvoisier. Obviously, the deal completed a little bit earlier than expected. Paolo, you just said in your opening remarks you expect around about a €10 million contribution to EBIT for the full year this year. I think that's in line with what you were guiding for back in February. But at that stage, I think the assumption was the deal was going to complete midway through Q3. It looks like it's completed four months earlier. why aren't we seeing any more incremental profit this year? Is there some destocking going on in the US and other markets for Courvoisier, or is there something else that we should be aware of?

Vis-à-vis the EMP phasing by quarter, clearly the first quarter is a very small quarter, so a few million euros of fees here and there may seem big changes. In reality, there's nothing to really be behind that, clearly. You know, there is an intent to achieve, you know, a catch up in AMP as a percentage of sales by 60 basis points in two years, you know, from 16.9% to 17.5%. in 24 to 25, depending on weather conditions of second and third quarter. Now, talking to weather condition in the first quarter, clearly, you know, I don't know whether you have the data, but, you know, actually, you know, on average, we had marginally better, you know, temperatures vis-a-vis, you know, January to April of last year. but with higher rainfall. So, you know, clearly, in terms of, you know, activation of the brand, put aside the fact that the first quarter is not the quarter where you activate the aperitifs, but, you know, that's clearly not, you know, a positive, you know, tailwind. Vis-à-vis Courvoisier in first quarter. Vis-à-vis Courvoisier, on the other hand, no, I wouldn't read too much into, you know, the guidance of the million euros. It's really very preliminary. We need, you know, clearly to assess, you know, the level of inventory sitting at marketplace. You know, as always, you know, whenever we acquire a brand, we tend to clean up as much as we can, both, you know, the channels as well as the offering, because we need to start off, you know, a clean sheet of paper and have, you know, a brand revamp that... you know, doesn't, you know, discount the impact of, you know, previous, you know, actions. So this is, so we are, you know, in the process of, you know, assessing the overall, you just announced the closing, you know, we were not in a position of sharing data with the sellers ahead of closing. So it's the very beginning of it. So That's the situation. No new news, no positives, no negatives on that one.

Thank you. So just to check on the Courvoisier inventory levels, to Matteo's points around being happy with stock levels everywhere, not overstocked, not understocked, that's for the existing business, not necessary for Courvoisier at this stage.

Well, so like Paolo said, we really don't have visibility at this stage, especially on stocking trade. And if you like, we try to accelerate as much as we could. the closing because, you know, we knew that on one hand, the seller will start to prioritize and focus on other brands. And on the other hand, we wanted to avoid any abnormal sales push. What we believe at the moment is that, you know, we will get into the markets and see what's happening. Anecdotally, we think not to have any very bad surprises outside of possibly one market, which will be China, where, you know, the cognac stocking trade, I don't think is a courvoisier issue. It's a bit of a general category issue. But, you know, we'll discover more in the next few months. Like Paolo said, at the moment, the focus is integrating the brand commercially from a supplier at this point, and we were really ready for that. We did a lot of work. I think this is happening really fast. But in terms of starting to work for the strategy relaunch and putting our hands into and marketing brands into the brand, this is going to start now. Equally, at market level, we will have, over the next few weeks, a better pulse of stock in trade situation.

Brilliant. Thank you both very much. Thanks.

The next question is from Sanjit Awila with UBS. Please go ahead.

Hey, Matteo, Paola. Two questions from me as well, please. Mateo, please can you comment on the promotional environment in the US as you see it across the industry? We've heard from other companies about a step change in the last few months. Just love to get your perspective on that and how that is potentially impacting certain parts of your portfolio, namely wild turkey as well. My second question is just on the Jamaica supply issue. Can you just give us a sense of when you expect that to be resolved, please? Thank you.

Sure. Thanks a lot. So, look, when it comes to promo environment in the U.S., I will say that where we see more aggressive promos at the moment are basically three categories, which is bourbon, tequila, and cognac. Now, I will leave coin as a side for now, because like I said, you know, we still need to make up our promo and pricing strategy. Obviously, we have some assumptions, but, you know, we'll do that very fast. But at the very beginning, we'll be more, you know, taking over in line of continuity before to create any disruption. When it comes to tequila, I think we're pretty lucky in that respect. If you look at the promos are happening more aggressively at higher price points, which is a super premium, which is the one that is suffering. And we believe with Espolon to have a real sweet spot. uh in between price positioning and brand equity so so far we don't feel we need to promote and actually with the current brand equity and price point we believe we're able both to trade up from cheaper tequilas for consumers that understand now, you know, as they move away from shot and mix, so that they can trade up to a better quality product, which is still coming up at reasonably affordable price because it is typically in between 28 and 29 U.S. dollars. But equally, consumers are trading down because they want to spend a little bit less, and obviously Espolon is a great, again, combination of quality and price. When it comes to Barbon, yes, that's the other one, and you're right. And maybe that's where, in the short term, we're suffering a little bit. But if you like, it is part of our strategy. So when you look at White Turkey, one-on-one is growing, and one-on-one is growing share. against the main competitor, against all of them actually. Our super premium variances, MK and we just loan generation. So the really high value SKUs are doing phenomenally well. And the one that is suffering a bit is probably the base SKU in the US, which is 8082. And if you like, that's part of our strategy to also restrict a bit volumes to create more value out of the current volumes that we have. as we put our capital investment to work, and we expect in the next two, three years to finally have much more unconstrained volumes across all the price range. So there is more promo in the U.S., but I think we're reasonably so far insulated, including the fact that with aperitif, again, we feel the need to activate more and more apparel rather than discount it. not part of your question, but if there is one place where the promo pressure is something that is happening and we might need to be a bit more careful and respond, that is Europe, but not necessarily the U.S. For Appleton, I think it's more of a supply story and CapEx investment, so maybe I will leave it to Paolo.

Yeah, you know that our ability to Supplying full, you know, the demand on the existing, you know, strong demand on RAM, you know, highly depends on our ability to run, you know, the distillery at its full potential. And this is linked to the waste management process that is, you know, the one which we've, you know, recently invested on to fix and close, you know, the waste management loop. So, you know, the matter has been addressed and fixed, and we think in the second half of the year we'll be in a position of having a smooth supply of our ramps to the Jamaican market, to the international market.

Thank you both.

The next question is from Edward Mundy with Jefferies. Please go ahead.

Afternoon, Mateo and Paolo. Three questions for me, please. The first, Mateo, I think from a strategic standpoint, it sounds like a very steady as she goes. But are there any parts of the strategy that you want to double down on, either by brand or by region or anything on the philosophy that you think might change over time at Campari with the change of leadership? The second, and apologies if I might have missed this, but the bridge from the zero organic growth you printed in the first quarter to the six underlying, I appreciate you called out Asia, but perhaps you can sort of call out what is the bridge from the zero to six. And when all is said and done, given that you're highlighting the macro and some pricing normalization within your outlook statements, do you think 6% is a reasonable proxy for fiscal 24 organic sales growth? And then my third question, just coming back to some of the great pictures you showed in the slide deck on slide 9 and 10, it's kind of interesting that on slide 9 for Australia, the activation of Aperol is being done in sort of plastic cups, whereas on 10, you know, within Europe, you're doing it in the nice glassware, plastic glassware. Does it need the glassware to travel as you, you know, seed and grow Aperol at some of these events globally?

Okay, I'll... I'll start to answer the first one. Sorry, the first one, yeah, about strategy. Strategy, yeah, of course, changing. We might need to ask you to repeat the last one, I guess, on APRO, but let me start with the first one. Look, as we position the change, it's a change in continuity, as you rightly said. What I always say is not a boring continuity because it's a continuity on a transformational journey. As you know, the company was very different 10 years ago, and it's going to be very different in 10 years from now, I'm sure. So now, as we evolve towards the next stage of growth, I think what I'm very determined to make sure it's going to stay the same is our long-term vision, our culture, And I would say our growth strategy and growth mindset and to grow the company organically and inorganically. Now, when it comes to say, is there anywhere where you think you can accelerate? I think it's again, probably in continuity, but if you like, I wish we can actually accelerate even farther. That is definitely US and it will be also APAC, Asia Pacific. um when it comes to markets uh i think we discussed a lot about categories which is obviously a lot of aperitif and and and tequila but obviously now um espalon uh sorry courvoisier is coming up and uh is a good opportunity in the medium term as well in our view And I guess also there is something that we started, but I feel we can also accelerate, which is our overall digitalization, which can also enable greater returns on our investment and commercial capabilities, which include also in the areas of marketing and using more data and analytics and going much more into performance and precision marketing. So I guess this is the bulk of it. And I guess as well, you will hear more about this as we go into the next quarters and we keep evolving our next phase of growth. I guess I will leave to Paolo to cover the bridge. I would just like to clarify, because maybe I created the confusion myself, that the plus six doesn't include any APAC. We didn't want to include APAC because that, yes, is something we're doing, the route to market change. So I was just mentioning to explain the APAC story, but the plus six is something that Paolo would explain. Okay.

So, you know, the adjustments, you know, we're referring, we're alluding to is the adjustment of the first quarter of last year, where we had, you know, two, you know, big one-offs, I said. The first one was, you know, the anticipation of shipments ahead of, you know, significant price increases that would be implemented basically in two geographies, you know, in the uh in european countries particularly in italy and the us so that's the first one and the second one is you know the restocking we had last year particularly in the india's polon brand on the back of you know 2022 land 2022 landing with a very very low uh inventory days at our distributor so you know if you carve out you know, the effect of those, you know, anticipated shipments in Q1, and you normalize, you know, the true comp pace, then you would end up without, you know, adjusting first quarter 2024, which is, you know, as it is, and it doesn't take into consideration any of the Asian effects that we've mentioned, you have an organic growth of 6%.

And if you don't mind to just repeat the question on April, I thought you are good into some glass.

No, so on slide 10, you know, where you're doing your winter activation, you know, it's pretty clear that you've got the perfect serve with, you know, the nice glassware, you know, nice brownie glassware, the orange. But when you look at slide nine of the Australian Open, you know, people on the boat and, you know, people sort of drinking on the terraces there, you know, it's like a normal plastic cup, which is not the perfect serve. Do we need the perfect serve or actually is the brand strong enough to travel now in just a normal, ordinary cup?

Okay. I really like your question because it means you know us very well and you know how obsessed we are about this. And I can tell you that I had personally in my previous job a very long discussion with the team in Australia about those glasses. And the reality is that in some cases, and that including, in fact, the Australian Open Precinct, we cannot use real glass. It's forbidden. So we then thought about creating our balloon glass in plastic, but then it's not stackable. It's more difficult to reuse. So there was an environmental, let's say, concern from our team. So net-net, we're obsessed about the process serve. We do it every time as much as we can, even when it comes to bringing glassware into the ski slopes. but sometimes that is limited by local regulation or the environment we're activating, and that's where we need to do what we can and still try to do a personal serve, but in, let's say, a balloon-shaped glass without the stem. Thank you. Well, they look like they're still having fun on slide nine.

Yeah, exactly.

The next question is from Celine Panuti, JP Morgan. Please go ahead.

Thank you. Good afternoon. My first question is on the pricing. So you said that pricing will roll over from Q2. Am I right to think that in the first quarter you had like high single-digit benefit from pricing and then we'll be looking at one-ish in the coming quarters to get to the one to two you think for the year? And I mean, on the follow up on that, can you comment on what you said about throughout and the promotional environment where you said you may need to step up? And my second question would be on The phasing of gross margin, did I understand correctly that there will still be some headwinds in the second quarter and therefore all of the phasing will be in the second half of the year? And maybe just last one, if I may, you mentioned that Q2 was a tough comp. When I look at Q2 last year, the U.S. was quite weak. So could you elaborate on that? Thank you.

Okay, maybe I start with promo effectiveness in Europe, and then I will leave Paolo to comment on pricing gross margin. Look, when it comes to Europe, it's quite simple. Number one, we honestly observe that some of our competitors that are very much under pressure in other parts of the world, namely U.S. and a bit of China, are obviously trying to catch up in Europe and promoting very aggressively and very heavily. And in some case, even if not in our categories, like in, for instance, gin and flavor gin, trying to promote very heavily and attacking to our aperitif space. So even we know that in Europe, in Q2 and Q3, the numbers are extremely important for us. And if a good season comes, we really want to bank on the current positive brand health and momentum and make sure that we get as much as we can consumers to drink our brands. If we need to respond, we will. I'm not saying we have a super aggressive promo pricing, but we are monitoring very carefully what's happening, and the team is flagging that, hey, it's becoming very intense, and we need to be ready to respond if need to. That's the promotion environment in Europe.

Yeah, with regards to pricing cogs and mix, which I think is the essence of your question, pricing, as I said, in the first quarter is positive. It's well above the 1.5% target for the full year. and say, you know, that, you know, positive contribution of first quarter in our point of view is meant to be offset by, you know, very poor price contribution in the first quarter of this year. And in between, you have Q2 and Q3 where, you know, on average, you know, the target average price increase is in line with full year price increase. So we have a positive comp, positive contribution in first quarter, neutral more or less in the second and third quarter vis-a-vis target 1.5% price increase. And, you know, negative contribution in terms of pricing, still not negative pricing, but no contribution from pricing in Q4. So that's how we see, you know, pricing. On the other hand, you know, Cox, you know, has said that we have, you know, the carry forward effect of last year, high cost inventory build up that is, you know, denting, you know, the first quarter in terms of negative impact from Cox that, you know, more than offset the price increase that we've achieved this year. But then, you know, in the remaining part of the year, you know, this is destined to become, you know, a tailwind from Q2 onwards, from Q3 onwards, sorry. You know, as, you know, the commodity price deflation materializes. On the mix, and this is the point that I wanted to make on second quarter, I was not alluding to poor volume performance in the second quarter. I was alluding to neutral mix effect in the second quarter. What I was highlighting is that if you look at the aperitif portfolio, particularly exposed to weather conditions, the second quarter has not been of last year negatively impacted by poor weather conditions. Because we clearly preloaded the market as we normally do ahead of the spring, summer, peak season. And then clearly consumption was below expectation in second and in third quarter due to poor weather conditions. So there was last year, you know, still a strong shipment of aperitifs in a relatively strong shipment in the second quarter, which then reversed back. So mix, not volumes, will be, in our point of view, depending on many phases, but broadly neutral in the second quarter, whilst we expect, you know, a positive mix contribution in the third quarter of the year. As you know, in this year, we would have, you know, a closer alignment of shipments to depletion, to consumption data across the quarter, missing, you know, the negative surprise of bad weather condition, which we were not expecting, hopefully. I hope I've answered your question.

The next question is from a Chris Pitcher, Redburn Atlantic. Please go ahead.

Thanks very much, Matteo Paolo. A couple of questions, firstly on Grand Marnier. Obviously, the brand was back into growth and had a very strong performance in the US. But internationally, it looks like it's quite a bit weaker. And versus 2019, the brand in the quarter looks to be below those sorts of levels. Are you comfortable that Grand Marnier is now on a sort of steady, steady base to start growing again? And is there more work to be done on that brand. And then secondly, on the Corvazia acquisition, just in terms of high level stuff, forgive me if I've missed it, but are you able to now give us a sales and gross margin figure for 2023? And also the O2V looks to have increased significantly since October. Is this due to higher investment or lower than expected depletions? And do you think you've got enough stock for your plans at these levels? Thanks.

Okay, so I'll do Grand Marnier. And yeah, look, Grand Marnier, no surprise, is a priority for us. And like I mentioned, especially in US, we're putting a big focus on the brand. We started to activate more into the space of also Afro-American and Hispanic community with some association with hip-hop and that territory, and this is working well. You might have not noticed, I didn't myself, because unfortunately I'm not that young anymore. When you were listening to the music ahead of the call, that was an artist called 2 Chain, which you will also see in the closing page. which is a collaboration we just signed up in the U.S. It's a very, very famous artist. At least my kids are telling me that. And it's really popular, and that's another step into the direction of really putting Grand Marnier into that space while keep investing on the margarita and liquid versatility strategy, especially enhancing the cognac credential which we need to play more aggressively as it's not a simple triple-circle league work. That's why it's premium also in pricing, and that's why it's so much of a choice in a cocktail market like U.S. when it comes to the grand cocktail strategy and Grand Margarita. So I feel pretty good about the plans and the investment we have in U.S. When it comes to the rest of the world, you're right. I mean... The reality is that in the rest of the world, the margarita has always been less of a phenomenon. I think what we see is that, number one, if tequila keeps growing also abroad and one of the drinks is always the margarita, we will reinvest more and insist more on our grand margarita strategy. On the other hand, also, we are starting to see very interesting success In places like Asia, in our rare division, for the Grand Marnier, as we call them, High Marks, which is all the super premium SKUs, which are going up to 80 or 90% of cognac content. which has really very nice appreciations for a high-network individual consumer when it comes to collecting or gifting. And those on a very small base and volumes are doing very well, and typically those will help also generate some halo effect for the brand. So the last thing that I will say about Grand Marnier is that as we tap a little bit more into the cognac space, we don't exclude some of the route to market strengthening we're going to do for cognac. It's going to enable us also to have a positive effect for Grand Marnier as well. Certainly in the U.S., but it might be also selectively in some of the other markets.

Okay. So on that point, it was mentioned on the last call, you're looking to hire a dedicated marketing team for Cognac. Would Grand Marnier move into that marketing team and therefore have a much more focused? I worried slightly it would get less focused. Sounds like it might get more focused. Yes, yes.

Thank you. It will. It's going to be definitely a Cognac team, which would include Grand Marnier. And we think that will enable more focus and greater synergies of structure and thinking overall.

With regards to, you know, I'm referring to year 2022 numbers as, you know, 2023 numbers have been, you know, just, you know, released to us, you know, a few days ago to the, you know, the ban on exchange of information because of the antitrust procedure. So, you know, I would not comment on 23, which is, which has been, you know, by the way, I expect, you know, negatively impacted by this stocking in key markets. So in 2022, basically, you know, the business, you know, achieved about, you know, 250 million dollars of revenues, 248.8 precisely, and a contribution after A&P of 78 million euros with a gross margin of about 49%. an A&P of 17.5% brought in line with group average, you know, A&P on revenues. So now, you know, the point of gross margin you made is, you know, we see, you know, gross margin expansion on KUVAZ as a big opportunity per se, looking forward. And the biggest opportunity sits on the price, on the positioning of A&P. of the of the brain which you know has been uh over the years uh you know brought down uh disproportionately so you know we think there is uh an interesting catch-up to be to be done in terms of pricing which would clearly positively benefit the the gross margin the gross profit and the contribution after mp the other one is on cox Clearly, the cost of the Eau de Ville grew in prior years, and then as the cognac market declined, the price of Eau de Ville came down. So we see Cox, Foucault, as they're going forward as potentially short-term, doing a little bit of headwind as we dump the Eau de Ville that has been you know, laid down in prior years, but, you know, thereafter it becomes, you know, a key tailwind to help us, you know, further expand the gross margin as a percentage of revenues. So, you know, directionally, you know, if you look in cognac, you know, the, you know, competition is about, you know, 60 to 70%, you know, gross margin on revenue. So there is a big catch up to be achieved here.

And just on the O2V, it went up a lot, and I just wonder whether you've got enough for your plans or whether we need to see more later.

No, we have a lot of liquid. We have $410 million of aging liquid. And, you know, so it's enough in quantities. But, you know, the very good news is that, you know, top-notch in terms of quality. So that's another, you know, very positive thing. you know, feature that, you know, makes us confident to be able to reposition the brand at a higher price point because, you know, we can rely on a very, you know, an incredible, you know, value of liquids, aging liquids. Thank you.

Thanks. The next question is from Alessandro Tortora, Mediobanca. Please go ahead.

Yes, good afternoon to everybody. I have, let's say, three questions. The first one is, sorry, just a follow-up on Courvoisier. I understood your point on clearly disclosing last year data, but there will be like a sort of press release in order to have, let's say, the full year 2036 and the contribution after the EMP. because otherwise we would have to wait, I don't know, the last official occasion that would be the first results. So just understand if at a certain point you can share this data. The second question is a follow-up on the glass. I can understand the combination of cost A-winds and headwinds that you mentioned before. Can you remind me, in the event you're able to renegotiate your glass contracts today, which kind of incremental cost advantage you would get this year? That's the second question. And the last one is on the financial charges line. Can you remind me your guidance, also considering that the closing occurred some months before? Thanks, Pastor. Thanks.

Yeah, I think, you know, the last two questions, I think I've lost the first one. So, you know, the financial charges, you know, basically, you know, we're shooting for about 85 million euros of interest charges for this year. And, you know, including, you know, the positive effects of the interest yield on, you know, on short-term deposits that we have. you know, made in the first quarter of last year, you know, given the excess cash that, you know, he had following the equity rise and the convertible bond issuance. So 85 for this year and, you know, about 105 for next year. So, you know, we're going to have three quarters Q2, Q3 and Q4 of this year with about, you know, shy of 25 million euros of interest charges Uh, going forward, these are really glad negotiation. You know, we're still, they are still ongoing. We're in process. So, you know, we, we have no new news on that. So, you know, the potential, uh, you know, benefit, uh, is, you know, at this stage, uh, you know, fully reflected in the guidance that we've, uh, we've given so far. And I'm sorry, but I've lost the first question.

I take that one. I mean, thanks, Alessandro. And I don't think I'm going to give you a lot of satisfaction in my answer, but the reality is, I hope you don't mind, obviously, we did the announcement less than a week ago, and in between there was first of May weekend and everything. Until then, there was a clean team, and none of us would be exposed to data and everything. And I think for now we really stick to the indication of perimeter effect of about 10 million EBIT in 2024. And I think it's good enough as an indication for the impact that we assume it can have this year. It's a rough estimation, but again, it could be enough. And the variance either upwards or downwards would not be meaningful to our four-year numbers anyway.

okay okay thanks sir thanks for the answer thanks the next question is from a travel sterling bernstein please go ahead hi mateo and paulo two interrelated questions from my side but i think if my math is right you mentioned that q1 would have been six percent organic growth and 13 ebit without the comp effects in North America and Europe. I think that comes out to about 160 basis points of margin expansion. So if that's right, what's driving that? Mainly, would that be operating leverage on the SG&A? And if that number is right, 160 bps, is that what we should be expecting? So Q2, which is a much more normalized quarter, and then in Q3 and Q4, we get the benefits of the agave prices falling, coming through.

Yes, you know, vis-a-vis, you know, the first quarter, you know, EBIT margin expansion of 150 basis points, yes, that is confirmed, but is, you know, coming from, you know, stable gross margin in first quarter, even on an adjusted basis, whilst, you know, we have, you know, positive accretion in AMP, which is, you know, the bulk of the gain, and slight accretive impact on the S&A line. So that's... you know, the first quarter. Now, when we enter into, you know, the second quarter, clearly, you know, on the AMP, you know, there will be a ramp up of AMP spent. On the SG&A, you know, the second quarter will also, you know, reflect, you know, the additional investments for the buildup of the new route to market in Greece. And so, you know, that's not necessarily, you know, a positive. Uh, so, you know, it's, uh, you know, the second quarter, we see that, uh, still as, uh, you know, as a transition quarter as the first quarter, uh, wise, you know, most of the benefits, uh, you know, on, uh, on, uh, on COPs mix, uh, uh, will materialize in the second half of the year.

Brilliant. Thanks Paolo.

Welcome. Thanks.

The next question is from Richard Wittwegen, Kepler Chevreux.

Please go ahead. Good afternoon, Matteo and Paolo. Two questions from me, please. First of all, on the U.S., you did some major uproar campaigns in 23. What activations are you planning for 24? And is that across the U.S. or do you focus on specific states in the country? And the second question is on France. Now, you added a number of brands via acquisitions and partnerships over the last couple of years. So where are you now on France? Are there still some gaps that you'd like to fill in the portfolio or in terms of channel exposure? Thanks.

So let me start with April. So, yeah, look, as you know, we like to – we're all about the long term, and we don't like to change strategy every other year. So when we take some initiative, we try to build on it, and we do that also because we believe that as you do it year on year, you take the learnings and – you basically generate greater returns out of what you do. So, in a nutshell, in fact, we did Coachella last year and we did it again this year. And this year, it was definitely better than last year in terms of PR and earned media. We expanded our on-site presence with four branded locations, which was one more than the previous year. We did a VIP Apro Terraza, a pretty large one. And we also, again, at Coachella, did a 360 activation, which included programming in e-commerce across Uber Eats and Cocktail Courier and Instacart. And we've seen depletion in the area. almost doubling versus last year. Same is going to happen for U.S. Open. So we're going to be there this year, hopefully bigger and better activation. And those for APO are going to be the two main, let's say, nationwide initiatives, if you can call it that way. But at the same time, to your point, yes, our focus, we always say, was mostly on seven, you know, New York, Florida, Texas, Austin, Vegas, you name it. But as we ramp up our investment, we feel we have a very attractive runway for growth for Apro in the U.S. exactly because we can activate slowly more and more places. And I know the team is planning for H2 this year to expand into some new areas, the Apro activation. um the second question part was kept to be filled in the pre-portfolio in our positions i believe uh and and your gaps to be filled in the portfolio uh was related specifically on us or broadly speaking no in france specifically because that that market has grown quite quite yeah nicely in the last couple of years uh yeah no no absolutely look uh first of all um We feel very good about France. To your point, it's doing well. I think it was the right call to make that investment and to build our own route to markets. Apple is growing very nicely. But again, when we look at Apple runway, even with the current exponential growth, when it comes to consumption per capita versus Italy, that is sitting at 20% of what is the consumption per capita in Italy, which indicates for us that we still have quite some space to grow the brand. The other positive news about France is that Picon is also growing nicely. And this is basically since we took the brand, it started to grow and it's still growing. And also we have a strategy for the brand because in a way we feel the brand is still somehow regional. So it's growing in the strongholds, I would call them, but we can still expand Picon geographically in France. This being said, when it comes to M&A, as you know, generally speaking, we always look at how can we strengthen our portfolio, especially when it comes to strengthening our portfolio to compete and accelerate growth. U.S. and Asia Pacific in the premium space. But equally, if we see opportunities to strengthen our portfolio to get even more scale in one of our strategic markets, that is something that we also do, especially in the premium space, which is why, by the way, we did Picon in France. And so I will not exclude further plays of that kind for France or other markets in the future.

Thanks a lot. Thanks.

The next question is from Paola Carboni, Equitasim. Please go ahead.

Yes, hi. Good afternoon, Matteo and Paola. I have a few questions, particularly about the aperitifs with strong performance in Q1, which surprised me, actually considering the tough comp. So I was wondering if you can elaborate on what the performance of aperitifs has been in your plus 6% organic growth, restated, we can say, um and uh however on the other side uh it would be a bit stranger to me that the gross margin would have been uh flat even in that case where i assume the mix impact in your uh restricted the plus six percent of any growth uh would have been even more material so if you can elaborate a little bit on this so what would have been your performance on an adjusted basis and what is the mix effect implied on that which maybe we can take as a proxy going forward. And moving forward, actually, my question is more on the impact of the event you are sponsoring might have had in Q1 2020. 2024 versus the previous year and if we might expect any specific push in this respect from the next sport event like the European Championship or the Olympics in this case it's not a from your sponsoring, but if you think this might have a possible impact on consumption, based also on your historical past. And the last question, instead, if you can have any comment. I mean, that's really not much of a value-added question, probably, but just from the start of Q2, which in the short term might eventually have been impacted by the rainy weather in some countries. Thank you very much.

Paola, you know, fortunately the line was extremely poor, so we'll try to guess. So, you know, your first question is around you know, gross margin, you know, you know, guidance of flight gross margin in Q1, even after, you know, taking into consideration the anticipated shipments of our aperitif portfolio in Europe and in the US. And what is, you know, the underlying trend of Aperol and Campari, if you factor in, you know, this, you know, phasing effect, that, you know, leads to a 6% organic growth in Q1 on an adjusted base. So, you know, they are, you know, both, you know, double-digit growth rate, you know, April 22 and Campari 15. But, you know, you have also to take into consideration that, you know, the restocking in the U.S., which was, you know, particularly strong on Espolon, that, you know, in year 2022, in December, landed at, you know... single digit inventory days number where to restock it was 37 percent with you know significant dilutive effects so it's uh it's a wash you know the two effects so this is why even on an adjusted basis you know the first quarter uh is uh uh gross margin flat uh maybe as you try to go on the second one look um when it comes to um

Events, yes, we'll have more events. Do they have an impact on brand performance? Our guess is they do. As you know, our marketing model is very much grounded on experiential events and digital amplification. We try to think and ask, I would say, like an editor looking at the cultural calendar and trying to understand what are going to be the key moments in the cultural calendar, in the key geographies, and how do we tap into those conversations. When it comes specifically for the summer, for something like the Olympics, obviously we're not an official sponsor, so legally we cannot really do anything related to the Olympics or use logos or whatsoever. But whatever event that is, you know, increasing the opportunity for people to get together, to socialize. And in a way, whatever event is also something that beer will activate. And as you know, what Olympics typically will be, we believe is an opportunity for approach. So in some short term, yes, The French team has been obviously planning to increase a little bit our presence and visibility across the city, although I'm sure that many others will. But as always, we'll take our fair share of consumption. The last question, I think we didn't get it.

Yes, I apologize. I had some problem with the phone. I am on the mobile now. Yes, the question was on the current trading. If you have experience or you are anticipating any possible impact at the start of Q2 from the rainy weather we are experiencing nowadays. Thank you.

A current trading culture, given the weather conditions.

Well, we are optimistic on our share and performance momentum overall. I think, like I said in the call, we believe we're still sailing through rough seas. But we have two powerful engines that are April and Espolon. And if you like, our boats seem structurally more weather resilient versus some of the industry challenges like US and China. So we feel good about our performance momentum. When it comes specifically to Europe and weather, we know last year was not particularly good, especially second half of Q2 and beginning of Q3. This year, like Paolo said, so far temperatures, you know, one degree Celsius above average across key markets in Europe and U.S., but rain was about around 30%, 30, 40% more than last year, which is obviously very negative, especially for on-premise. But so far we've been somehow resilient. But again, it's sad to put it on weather, but that is going to obviously play a role. So we feel good. We just need to hope we will have okay, decent weather so that we can, have people in the on-premise spend our marketing money on activations and events and experiential. And I think then there will be no doubt the numbers will come.

Okay. Thank you very much.

Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. Fantacchiotti, there are no more questions registered at this time.

Okay. Thank you very much. So thanks again for joining, and we'll speak in the next quarter, and I hope you're going to keep your fingers crossed for the weather, like we said, for the next one, and you'll feel pleased about today's performance. Bye-bye. Bye.

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