Davide Campari-Milano N.V.

Good evening, this is the Coruscall conference operator. Welcome and thank you for joining the Campari Group 9 months 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 Paolo Marchesini, Chief Financial and Operating Officer and Interim Co-CEO of Campari. On this call, there will be also Chiara Garavini presenting. I now hand you over to Mr. Marchesini. Please go ahead, sir.

Thank you for that. Good afternoon and good evening, everybody, and thank you for joining us today. Given the current circumstances, today with me we have Chiara, who will help me walk you through the presentation deck, which is, as you can see, quite thorough and long. But we'll do our best to keep it as short as possible to leave some room for the important Q&A sessions. In order to provide you with a comprehensive perspective of the many important messages contained in the presentation, including the ones relating to the company reorganization and the cost containment program, we have prepared at the beginning an executive summary, which you have to consider it as the of the presentation. So if you could follow me to page two of the deck, you see the three conceptual buckets of current year performance, key company initiatives, and outlook for year 2025 and beyond. Weiss continued to outperform the industry in key brand market combinations, mainly thanks to aperitifs and tequila, we have to say. Overall, nine-month strength reflects a challenging backdrop due to macroeconomic and sectorial and climactic factors, with a peak in the third quarter of the year. Looking into the rest of the year, cyclical macro headwinds are expected to persist. Full year profitability will also reflect impact of fixed structure costs and committed business investments, which would generate a drift in SG&A pattern in Q4 as it did in Q3. To fully exploit the long-term potential of our diversified portfolio, which has increased a lot following the many acquisitions we finalized, with an increasing share of aged premium spirits, our operating model will evolve towards an organization that combines on one end four newly created houses of brands, two in Europe, aperitifs and cognac and champagne, and two in the u.s tequila and whiskeys and rum on the other hand so on one hand we have the four newly created houses of brand and on the other hand those houses of brands would leverage the existing uh three regions of america's uh emea and an impact in addition We are envisaging an acceleration of portfolio streamlining, which means disposals of tail brands, which will enable to enhance focus on our key priorities, the brand sitting within the brand houses. So the combination of the above two initiatives, so the change in the operating model and the streamlining of the portfolio, together with a significant cost containment program, which we will talk through in coming charts, will allow us to achieve a more efficient cost of doing business, which is critical to support the AMP investments. Now, looking into 2025 and beyond, as the impact of the above cyclical factors fades away, We expect to continue to achieve sector outperformance, which is quite clear. We will go through the outperformance by market and particularly for Apero. With a gradual return in the medium term to a mid to high single digit organic growth in top line in a normalized macro environment. On the other hand, the profitability will be supported by accretion on gross margin that was there and will resume over time. creation of operating leverage you know part of it is also the cost containment program and increase efficiency in brand building spend which is one of the many outcomes of the change in the operating model now if you follow me to the following page three uh in nine months our organic net sales grew 2.1 percent driven by global priority brands primarily in the americas and in emea Notwithstanding, you know, many negative impacts, namely very poor weather conditions in spring and September, some pressure on disposable income from rising inflation, and reduced confidence both on consumer and distributor's end. In the third quarter, the organic net sales grew by 1.4%, reflecting the soft market context, despite the outperformance versus the industry in key brand market combinations. If you look at the three regions, in the Americas, we see, particularly in the U.S., persisting challenges in selected categories, and we'll go through those. An extraordinary impact of hurricane in Jamaica in Q3 leading to supply shortages of run portfolio both for the local Jamaican market as well as for the international markets. If we carve out impact of supply shortages, our net sales would be flattish in Q3. And those negative factors more than offset the ongoing growth in our aperitifs portfolio and on Espolon. In Europe, particularly in on-premise food markets such as Italy, the poor weather conditions at the beginning of spring, summer, as well as in September, coupled with the already mentioned softer than expected consumption led to below expectation reorders in the back end of Europe. the third quarter in the month of September. In APAC, net sales have been impacted by persisting challenges in macro, particularly in China and Australia, and also, you know, adverse trading conditions. The EBITS organically declined in nine months by 4.2% with a marginal 21.9% down 140 basis points versus a year ago. In the third quarter, the organic decline accounted for 18.2% and was mainly impacted by inefficient absorption of fixed costs, particularly both production as well as SG&A. In gross margin, you know, in nine months, we had a slightly dilutive effect of 10 basis points, which was entirely due to negative mixed effect from impact of poor weather and macro impacting the high-margin aperitifs in Europe, in EMEA. The positive pricing in the first nine months was fully offset by COX increase. And, you know, as said, both pricing and COX increase were mainly skewed in first quarter. And of course, you know, the negative impact of lower production volumes drove lack of absorption of the production cost. AMP with ongoing focus on brand building during summer, despite impact of lower activations due to, you know, poor weather, led to AMP on sales at 16% versus 15.9% in prior year. The SG&A has been impacted by continuation of planned investments, including route to market enhancements in a softer market content with muted safe performance leading to lower absorption of fixed costs. Free tax profit of 146.3 million euros was down by 5.6% on an adjusted basis, on a reported basis down 6.1%. If you turn page and we go to page four, We see the performance of our regions and our brands in one pager. So starting from America, which accounts for 45% of our global revenues, vis-a-vis pre-pandemic, year 2019, CAGR has been up, you know, double digit at 10%. In nine months, 2024, we're growing by 5% over a comp of last year of 7%. So, you know, quite a solid performance. In EMEA, which accounts for 48% of our revenues, since pre-pandemic, the CAGR accounted, again, double-digit for 11%. In first nine months, we're up 1%, but the comp is extremely tough at 12%. In APAC, again, double-digit CAGR, 11%. In nine months of 2024, we're down 10%, but the comp is even more challenging at 27% in nine months 2023. Now, moving on to brands that we clustered into global priorities, regional priorities, and local priorities. Global priorities were up 68%, so account for 68% of our total revenues. They were up over the five years horizon, 13% in CAGR. In nine months, they are up 3% over and above a comp of 13% of last year. Regional priorities that are now, you know, a smaller portion of the pie at 17%. They were up 8% on a CAGR basis. You know a decline of 2% in first nine months of this year versus an increase of 3% of last year. And local priorities then now account for 6% of total revenues. They were up mid single digit at 6% on a five year horizon. They are now down 1% but with high single digit companies of 7% in nine months 2023. If we move on to the Americas, 45% of our revenues, as said, you know, 5% in nine months, organic growth, 1% in Q3. Starting from the biggest market, the US, 28% of our revenues, CAGR at 10% since 2019, slight performance in Q3, 0%, resulting in 2% growth in nine months in a quite subdued market context. The performance in the third quarter was impacted by persisting challenges on three fronts. Sky, some softness in Wild Turkey and Grand Marnier that, you know, offset the continuing outperformance on our three, you know, star performers, Espolon, Aperol and Campari. Worth noting that Espolon in first nine months of this year is up 18%, over and beyond the comp of 40% of last year. Aperol is up in the U.S. 7% over and beyond the comp of 51% of last year. And Campari on the back of the Negroni week activation in Q3 is up 16%. Jamaica, 5% of our revenues, 10% CAGR since 2019. Q3 performance was badly impacted by the hurricane in July, which led to product availability constraints, as well as a softer local operating environment. The cumulative performance supported by price increases, both in Rams and Campari, was, you know, enough to offset the negative impact on volumes and in doing so achieving a plus 1% in nine months. Other markets in the Americas regions, they totally, in total account, 12% of group revenues. They've been up double digit 12% since 2019. Ongoing solid performance, mainly driven by double digit growth in Brazil, where Campari is growing quite quickly. And local Brazilian brands quite on a good trajectory. In Argentina, The positive trend, we started in Q2, accelerated further in Q3. You know, in Q1, we had a poor performance. Whilst also in Canada, we have a quite solid growth, mainly driven by both Aperol and Espolon, like in the U.S. Now, a little bit of, you know, perspective on the external, you know, sellout that I think is important for the largest market of America is the U.S., We can see that, you know, the read-across of this chart is that the group is outperforming the sector, particularly in the on-premise channel, which is, you know, strategic to our brand building model. And that is achieved while maintaining a very high pricing discipline. Now, if you look at the three channels, the news and off, NABCA, news and on, The value, which, you know, of course, as you know, comprises both volume and price mix, performance for Campari is 3% against a sector that is negative by 1%. So we have, you know, a bid to sector performance of 4% in the off-trade. In NAPCA, same, 4%, and Nielsen On were up 1% against, you know, market that is declining 6%, so a delta of 7%. Of course, on the back of, you know, reduced disposable income and reduced consumer confidence among the two channels, Off and On is the On that is currently suffering the most. If you look at price mix trajectory, talking to our pricing discipline, in nine months, we're up with our portfolio 3%. Market is up 2%, which means that we're growing prices 50% more than market. Same in NAPCA, whilst we're on par with market in on-trade. Now, if you look at still the U.S. market, if you follow me to page seven, this time around, you know, not by channel, but by brand, you'll see that it crosses solid ongoing performance in key accelerator brands, i.e. Aperol and Up and Espolon, which was partly offset by challenging trends in other categories, and we'll go through that. Now, if we start with Espolon, bologna will separate you know for each and any brand shipment from sellout performance and within sellout you see you know the three channels consistent with the prior chart shipments in first nine months have been up 18 percent against a very high base of 40 percent if you look to the right hand side there is a significant outperformance in sellout so In on-premise, you know, Esplanade is up 23% versus 8% of tequila, so, you know, delta of 15%. In NAPCA, up 27% versus market 7%, delta of 20%. And on-prem, again, we're up 13% versus a negative on-prem performance of tequila of 2%, so a delta of 15%. Of course, the Espolon volumes are mainly, you know, increase, sorry, the Espolon performance is mainly driven by volume performance. But also on price mix, you know, the brand is performing quite nicely. If you take the third quarter in isolation, the price mix on Espolon is a 3% versus a 2% of the category. So we're performing better than the category. If we take Aperol, same, you know, picture, the shipments in nine months are up 7%, but against a very high comp base of 51%. If you look at the sell-out data, again, very positive trends with strong outperformance in key strategic on-premise channels. And actually, as you can see, you know, in on-trade, we're beating market by 17%. We're up 15% versus a negative 2. In NAPCA, which contains on, we're up 17% versus a positive 1 of the market, so a delta of 16. But also in OFF, which is not, you know, the primary driver of our upper brand development strategy, we're still up 10% versus a market that is up 1%. Wild Turkey in carbon category shipments are negative and negative 6%. And those are, you know, the trend is impacted by soft category dynamics. You know, the overall Wild Turkey franchise also has been negatively impacted by temporary shortages on Russell Reserve, which anyway, you know, now represents 17% of the Wild Turkey portfolio. You know, worth, you know, signaling that, you know, Russell Reserve is a brand that is extremely successful. You know, since the pre-pandemic, the brand grew two times in volumes and four times in value. And, you know, a brand that, you know, last year, sorry, this year, we managed to reposition at about, you know, $55 per bottle, taking, you know, five to 10 price points increase this year in a very challenging market. So, you know, this is why, you know, volumes are, seems to be, you know, softer than the category. So, you know, on pricing, price mix is clearly, you know, in the context of increasing and intensifying competition in Bourbon, you know, we're doing quite well. On Grand Marnier, the shipment grew in nine months 10% of a low comparison base of a negative 34% due to the fact that we're cycling through last year, the stocking of Grand Marnier. The sellout is marginally below category trends, and that was entirely driven by volume, as the price mix on Grand Marnier in the first nine months is pretty flat. You know, clearly, you know, we've taken actions to improve the performance in coming quarters with a focused AMP approach, including the partnership with 2Chains. Of course, if you look at the, you know, trading backdrop, you know, we're noticing in in the sector, you know, increasing and intensifying pricing pressure from competition. If you look at Sky, you know, the nine months results are negative 13%, which are, you know, below, you know, the sellout trend and continues to be under pressure, but in line with other major players in the categories. Um, in a category, uh, any needs particular needs of premise, uh, you know, uh, channel, uh, going forward, you know, the, the, the gameplay is to, um, stabilize volumes via limited AMP investments and focus on, uh, on, uh, on innovation. If you move to onto, uh, page eight, uh, uh, EMEA, uh, which has said is 40% of group revenues in nine months is up 1%. with, you know, a small decline of 2% in Q3, starting from Italy, 16% of revenues. Still, in a very large market, since 2019, we've delivered 7% CAGR. The third quarter has been impacted by significantly, as said before, below expectations reorders in the back end of the quarter. with the impact of very adverse weather conditions, both at the start of the spring summer season as well as in the month of September. Just to mention, in Milan, we had the highest rainfall in 250 years, particularly in the northern part of Italy. leading to lower wholesaler appetite to hold stocks. So, you know, the wholesale channel is critical in the Italian market is at the moment that is talking. On the other hand, you know, we've regularly checked, you know, the key brand health indicators, KPIs, and on our portfolio, particularly in the aperitifs, you know, the brands are extremely strong. So, you know, the, the issue that we're seeing is, you know, more macro, you know, and, you know, related and it's definitely not, you know, uh, brand health related. In Germany, that is a 9% of our revenues. You know, again, a double-digit CAGR since pandemic, 13%. Third quarter performance impacted by high, very high base, 39% in Q3 of last year due to the releasing of Apero in the second quarter of 2023 following, you know, commercial disruptions. Aferol remains in Germany the clear market leader with strong brand health. Whilst this is the good news, you know, the launch, the recent launch of Sarti Rosa is taking, you know, quite a good traction. It's now 6% of German revenues, and we're expanding the brand in neighboring markets. So, you know, Austria, Switzerland, Belgium, and so forth. Clearly, it's... It competes in the spritz category, but it addresses more female consumers who definitely prefer sweet products as opposed to bitter ones. Moving on to France, 5% of our revenues. you know, very strong, very strong CAGR since pre-pandemic, 83%, a decline of 8% in Q3 in a very challenging operating environment, which is primarily impacting, you know, how promo intensity categories like whiskey and rum, and clearly we're not following that avenue of deep discounting and increasing promo frequency, whilst the aperitif portfolio remains in France, you know, quite resilient. resilient now in france of course we also distribute third-party brands if we excluded the performance of agency brands in nine months we would be flattish as opposed to negative three percent in the uk which is three percent of our revenues the kager since pre-pandemic is 16 percent and it's you know relatively uh stable uh across you know the performance is relatively stable across most of the portfolio in a quite challenging operating environment, as in France and in Italy, with negative impact due to weather, particularly in the second quarter. And, you know, the resilient performance of the rest of the portfolio has been offset by weakness in the Jamaican ramp and in manutonic due to the supply constraints from Jamaica, which I've alluded to before. In other EMEA markets that account for 15% of group revenues, we achieved in five years a very strong performance, 10% CAGR, with double-digit growth driven by, sorry, nine months driven by positive contribution from most markets, and in particular GTR that is registered within EMEA as it's managed out of here, with nine-month performance of 23% up. but also, you know, other markets like Spain, Austria, as well as the recently established, you know, Greek in-market company. They are all performing extremely well. I think, you know, the launch, the creation of our in-market company in Greece has been extremely successful, and we do see the acceleration of Aperol and Campari in this market. It is crucial to developing the brands because it's not only local consumers, but it's also exposed to international tourists. The share of Greece on the total group is now at 1%, so, you know, quite satisfactory results. Now, if you look at, you know, what is happening, you know, outside of the group, you know, in sell-out data, a few more, you know, data sets for European market, both, you know, channels as well as then markets. Europe off-trade... So in value, we've been up 4% in a market that is declining 1%, so a delta performance of 5%, with, again, a solid bid on price mix front, 3% versus 2% of the sector. Now, if you look at the performance in Europe today, Index 100 being pre-pandemic, year 2019. The market in Europe overall grew by 11%, so index 111. We delivered, you know, a growth of 73%, 133 indexes. With the only exception in Italy, and I'll come to that in a second, you know, in all other markets, you know, we're clearly beating, you know, the reference market. In Italy, we actually are index 117 versus a market of 125. But this is due to the fact that, you know, this is off-trade performance, and clearly, you know, the brands, you know, the aperitif brands in Italy, they are consumed in on-trade. That is where we're gaining market share and we're doing better, or at least in line with the market. In Germany, we're indexed 167 versus market 104. In France, 277, market 103. In the UK, 299, market 113. In Spain, 253, market 130. So the real across is that in markets where we've established our own in-market company, recently, France, UK, and Spain, you know, we're performing way better than the market because we leverage the infrastructure investment to accelerate, you know, our portfolio, particularly the aperitifs in Europe. And the second, you know, key takeaway of this chart is that if you look at the market share of Campari in Italy and Germany, what we have, you know, fairly established, um, you know, business and where. you know, the penetration of Apero and the Aperitif is already at a very, you know, good level, although, you know, plenty of opportunities there. In other markets like France, UK, and Spain, we're between 1% and 3% market share. So there is plenty of opportunity to extract further growth out of these markets. Now, looking at the sell-out performance on a market-by-market basis, if you look at the Europe, you know, the lead across is that there is some softness across the board in sell-out, and this is clearly, as already highlighted, triggered by weather and consumption patterns. But within that context, the company group is outperforming everywhere. So if you start from Italy... Left-hand side, we have shipments. We are down 6%, I said, due to poor weather in both spring and September, and softer macro leading to China's stocking. Now, you have to understand that Italy is, you know, a highly fragmented on-trade environment, and the go-to trade, go-to on-premise, is via a multi-layered wholesaler structure, so it's quite a long distribution chain. And so, you know, this is where we're seeing, you know, the big, you know, the shrink as, you know, wholesalers are trying to reduce, you know, the capital invested. And on top of that, you know, the shipment performance has also been negatively impacted by a commercial dispute with a certain retailer, which is extremely strong in C-stores. a convenience source where, you know, it's clearly the channel where we build, you know, the Aperol and the aperitifs at home consumption. So, you know, the shipment doesn't reflect the sellout that is, of course, negative, 1% in Italy, as a Campari, in line with sector. So, you know, the shipment performance is way above, you know, the market trend. If you move on to Germany, we have a negative 6% shipment performance, but worth noting that the positive 5% shipment performance, but over and above a 25% nine-month performance in shipments. And in Q3, you see the 6% decline over and above a con base of 39% in Germany. So clearly, you know, the performance is good. And this is, you know, the last year performance is due to the relisting of Aperol in one of the retailers. If you look at the sellout, actually nine months, Campari Germany is growing 13% versus a market that is up 1%. So we have a debt of 12 points. In France, The shipments are negatively impacted by soft sector backdrop, a negative 3%. You know, the subdued sector sell-out trends shows, you know, a company performance that is slightly below the sector, slightly below, negative 5 versus negative 3, due to the two categories that I've mentioned, rams and whiskey, whilst, you know, the aperitifs, you know, keep on growing in France. And actually, even considering the rams and whiskeys, the overall Q3 sell-out is trending better than the sector, still negative, but better than the sector, driven by the acceleration of our aperitif portfolio. In the UK, the shipments are showing negative trends, negative 8%. This is mainly due to the already mentioned supply constraints, the negative impact in both Jamaica rams and Magnum tonic. If you look at the external sellout data, the sector is soft, is a negative 1%. Although, you know, we see some signs of our performance improvement in the Q3. We're up 6% against the market that is still negative 1%. If you look at the rest of the European markets, the shipment performance is quite strong, you know, 12%, a double digit as it did as it performed last year. And the growth that is extremely sustained is across all seeding European countries. And this is clearly mainly driven by our operative portfolio. If you move on to APAC, which is just 7% of our revenues. I said in nine months we're down 10% and 8% in Q3. Actually, Australia, which is 3% of our revenue since pre-pandemic is up 5% on CAGR basis. The performance has been impacted by challenging macro in a very competitive environment, impacting particularly the Y30 portfolio. On the other hand, Aperol and Campari, they show double disease growth momentum in Australia. And this is extremely encouraging because we're getting, as we speak, to the peak season for aperitif with a very good trajectory. in uh in australia espalon as well although of a small base is growing uh double digit also thanks to the newly launched espalon rtd you know clearly now that espon is no longer constrained in terms of liquids we're pushing you know the brand in every single market as we see you know a lot of potential on tequila in international markets So in Australia, we also, you know, our business is not only selling, you know, our own products. We also have, you know, a fairly significant co-packing business, which is negative. So it's bustling of, you know, RTDs for third parties. So if we carve out the poor performance of co-packing business, Q3 would be up 8% and the year-to-date performance a negative 3 versus a reported negative 9%. You know, in the other markets of APAC that account 3% of global revenues, the performance since pandemic is quite strong, 20% CAGR. In nine months, the performance, you know, the shipment performance has been mainly impacted by India, South Korea, and China. That, you know, more than offset the ongoing growth in Japan. And Japan is also leveraging the recently successful launch of the Wild Turkey highball ready to drink. In South Korea, in Q2 and Q3, we're benefiting from easier comp. You know, we had a poor performance in Q1, but this is South Korea we think is a very promising market, very high gross margin as a percentage of revenues, very important brown spirit market. So it's a market that we intend to nurture in coming years. And of course, both China and India have been negatively impacted by change in route to market. And in China, that change in route to market impact was coupled with a very challenging macro backdrop. We'll see whether the announced stimulus measures will help improve the consumption patterns in coming quarters in China. If you move on to the analysis of brand performance, starting from our leading brand, Apero, 26% of our revenues, 17% compound average growth rate since 2019. The growth of 3% in nine months on a TAF comp base, 23% in nine months, 2023, was impacted by phasing of shipments and poor weather, as said, particularly in Italy. But if you look at Americas, we've registered on Apple a strong growth in all markets, U.S., Canada, and city markets, also, as I said, in Brazil and Mexico. But also in APAC and in Australia, we had, you know, very good growth. And in Europe, you know, the most successful markets in nine months have been Greece and GTR. Now, if you exclude Italy and Germany for, you know, cyclical, you know, factors I've alluded to, the growth would be in nine months, 9% as opposed to 3%. Campari, which accounts for 11% of our revenues, was up 14% on an annual basis versus 2019. The nine months ongoing growth, was quite solid, 8%, and was led by Americas, particularly Brazil, as said, but also, you know, Greece, ETR, and France. In the U.S., specifically, Campari grew by 16% in the third quarter and, you know, was supported by the Negroni Weeks activation in the month of September. At Poland, 9% of our revenues, you know, 32% annual growth since 2019. Double-digit growth on a very high comp base of last year, nine months, 2023, 38%. The performance was led by the biggest market in the U.S., growing double-digit, but also, you know, in all seeding markets, Australia, Italy, GTR, you know, they are growing, you know, nicely. While Turkey, 7% of our revenues, up 8% on an annual basis since 2008. 2019. In Q3, we had a soft performance driven by CoreUS across the portfolio. As said before, you know, Rasa Reserve was flat in nine months with impact on volumes. And that, you know, impact on volumes due to supply constraints was offset by price repositioning, you know, as said, you know, at Q3. know five to ten price point price repositioning in a backdrop of intensive fan competition particularly in super premium uh uh burbans in uh in japan where we see an ongoing double gd growth also in canada and in other european markets although of a relatively small base the jamaican rams up 10% on one basis since 2019. Of course, the performance of both Q3 and as a consequence of that nine months have been negatively impacted by the hurricane and the product shortages. And so this is something that we have to factor in. But, you know, we believe we'll come to a resolution of the supply chain issues by the back end of this year. So we believe by December, you know, this, you know, supply constraint situation will be fixed. Grand Marnier up 1%, 5% of group revenues up 1% since 2019. You know, of course, in nine months, you know, the brand is up 6% by the pace of growth. is slowing down as we cycle through, you know, the easier combates of the first six months. You know, the category is highly competitive. And this, you know, clearly offsetting the progress that we're making on Grand Barnier in other geographies outside of the U.S. Sky 4%, now the sky is just down to 4% of our revenues is negative. Kager, 4% since pre-pandemic. The negative performance is driven by Core US, in line with other major players in the vodka category. And, you know, the growth in the rest of America and in other international markets outside of the U.S. is not enough to upset the decline in the U.S. If you look at, you know, drill down on Aperol, I think it's an important brand. Again, here we have, you know, sell-out data. The read-across is that Aperol is outperforming the category in all core European markets, except Italy, due to the cyclical factors that I have, and the one-offs that I've, you know, mentioned. But, you know, it's still enjoying a very strong double-digit growth in Sydney market and is delivering on strategy. So starting from Italy, where we have, you know, 8% shipment, negative 8% shipment performance, you know, this, you know, shipment performance is not reflecting the sellout, which is negative by 1%. And this, you know, due to the stocking, the commercial dispute that I have, you know, alluded to. You know, the nine months in sell-out performance has been, of course, you know, negatively impacted by weather, consumption pattern. But, you know, the brand, you know, is performing in line with the category, you know, because, you know, the brand is mostly the category. In Germany, in the first nine months, the shipments were up 3% against a very tough comp of 34%. In the third quarter, you see a decline of 17%. But of course, you have to measure that performance against the plus 44% of last year that followed the releasing of Aperol after the commercial disruptions. You know, Aperol in sellout, you know, in Germany is quite strong, 22% up. So you see Shippen 3 sellout 22%. The aperitifs overall are up 16%. So there is a data performance positive of 6%. In the last week, that is, you know, not just this year, but it's a recurring thing. And now Aperol has achieved the number one spot, the number one spot as a spirit brand and most order spirit brand as in Italy. So, you know, quite a remarkable achievement. And as I said, all, you know, the brand health indicators are extremely, you know, strong in Germany on Aperol. The U.S., you know, shipments were up 7% against a very tough con base of 51%. In sell-out, you know, we have clearly an ongoing outperformance also in this market. You know, quarters are up 1%, upper is up 10%. So, you know, the delta versus market is a healthy 9%. And additionally, if you look at, you know, this is, you know, sell-out. If you look at the on-trade, the means that on-prem is the brander, Our key channel is up in nine months, 15%, driven by increased rotation in core cities. Then, you know, maybe we can elaborate on our, you know, expansion strategy in terms of penetration of Aperol in the U.S., but, you know, clearly, you know, Aperol is in a very good footing in all the, you know, our markets and particularly in the U.S. In the U.S., Aperol is the most popular cocktail in the U.S. If you look at France, you know, where shipments are, you know, flat as a pancake, 0%, where positive sell-out, 5%, beating, you know, market that is up 1%. You know, it is, trend is decelerating due to the subdued sector backdrop. But, you know, clearly the outperformance is still there. If you look at France, You know, brand health indicators. Now, you know, Aperol is the most improved brand by consideration. It means that, of course, in France, you know, the brand is taking, you know, traction. In the U.S., sorry, in the U.K., shipments are down 2% over and beyond a comp of a positive 26%. In sell-out, you know, the brand is down 2%, but, you know, the market is down 13%. So, you know, there is a positive delta of 11%, and the category, you know, decline is totally attributable to the very poor weather condition in the second quarter of this year. Now, if you look at the performance... In the third quarter, you know the brand is up 15% so you know coming back to positive territory. Again, also in the UK, if you look at the brand health indicator, one of those, Aperol Spritz is the number one cocktail in London and the number three cocktail nationally, which means that it's no longer just London, but is taking traction globally in the UK. In the other European markets, again, you know, shipments and consumption is quite healthy at a plus 13% in all markets, and in particular, as mentioned, Spain, Greece, GDR, and also Australia. You know, regional priorities, you know, I will, you know, go quickly through those other specialties up 10% in nine months, mainly impacted by Magnum Tonic, you know, supply constraints. But, you know, other brands like Frangelico, Aperol Spritz and Pecan, you know, they are growing nicely. Sparkling wines and vermouth, they've been up 13% since 2019. In nine months, they're up 10%, driven by Champagne L'Allier, but also the sparkling wines. Cordino, which is just 2% of our revenues, you know, a moderate growth since pre-pandemic, but it's a brand that is getting, you know, very strong momentum and solid double digit growth in international, in all international markets, you know, not only in the Netherlands, Germany, Greece, and Switzerland and UK, but, you know, it's a brand, you know, non-arch is definitely there in Italy, you know, um, the brand, uh, you know, suffer from the streamlining of the offer, you know, of the offering. So, you know, we've discontinued certain Crodino variants and that is, you know, impacting the Italian performance. But if we excluded the discontinued SKUs in nine months, we would be up 5% globally. Other whiskeys have been up 3%, but the performance has been impacted by the softer category trends across all markets. South Korea has said we need to keep an eye on this market because it's quite promising for our bronze spirit portfolio. On local priorities, Campari Soda, you know, 6% up since 2019. You know, solid performance in the core Italian market. You know, it's, you know, recovering following the poor weather condition in second quarter. So year to date in a month is negative three. And then you can see, you know, on other, you know, brands, you know, Wild Turkey, RTD, Uzo 12, we have, you know, solid performance here. And, you know, the only one that in nine months is in negative territory, although up 4% since pre-pandemic is Sky RTD in the highly competitive core Mexican market. A little bit of update now on Courvoisier. I think it's, you know, important to be underlined. So far, we made some good progress on both the integration of the brand as well as on the development of our strategy. So in terms of investments, we've strengthened our sales and commercial capabilities in core markets, namely the US, the UK, the two biggest markets, as well as in China. you know, that the brand has, you know, high exposure to African-Americans and Hispanic, and, you know, clearly it's not, you know, core target of our portfolio. So we've hired, you know, salespeople with, you know, clearly have, you know, filled the head of, you know, cognac and champagne brand house with, you with Cognac Veteran. We are taking commercial actions to clear the trade channels. Probably there is a little bit excess stock, particularly in China, we have to say. We are realigning the pricing structure. So, you know, we are negotiating commercial agreements virtually in all markets as we sense that, you know, the price position of the brand is not yet the one that it deserves. And we've started the brand building investments. We have reopened the Maison Courvoisier in Germac after a multi-year restoration project, which costed, you know, significant amount of money to the sellers. And the brand strategic assessment and way forward will be ready by the end of 2024 for a launch and rollout in January 2025. Now, clearly, you know, there are some, you know, improvements that we need to achieve. You know, first and foremost, we need to go through a structural reset of the brand health And also, you know, as a consequence of that, the profitability of the brand to make sure that we improve its gross margin following the negative impact of the transition, of the brand transition from the sellers to Campari. So we need to clear, you know, the prior tactical price discounting. So we need to reestablish the proper price positioning. And, of course, we need to cycle through the very high cost of the ODV that we're currently using as, you know, those have been, you know, built four, six years ago during COVID at very high, you know, prices. And on top of that, the given, you know, cognac in its biggest market in the U.S., where the brand is most exposed, you know, suffered, you know, since, uh, you know, uh, 2023 and volumes for the category and for who was years where are lower than they used to be. There is an element of making sure that we have a full absorption of production fees cost in our, uh, who was a plant that is, you know, further, you know, diluting the gross margin. In terms of, you know, way forward in the two biggest markets, clearly with the approach that we're taking is that we would focus on BS in the US that is, you know, the key, you know, SKU on the IR marks in APAC. We will go through, you know, portfolio premiumization in all markets, also via innovation and simplification. You know, in innovation, you know, clearly As you know, you know, the offering is, you know, goes through, you know, typically the S, the SOP, XO, and in between you have variants. So, you know, this is clearly an opportunity that we have to tap into the, you know, intermediates. And, you know, in terms of simplification at the upper end of our offering over and beyond XO, you know, it has to be, you know, probably, you know, not probably, it has to be cleaned up. If you look at the performance and contribution, you know, the sellout trends in Q3 are showing, of course, weakness, as I said, in the U.S., driven by value volumes, while, you know, the price mix is negative one versus a category that is down 4% driven, of course, by the market incumbent in the U.S. While in the UK, the stable trend in the category, you know, flattish, on the other hand, Courvoisier is performing quite nicely with a positive 8%. Contribution to nine months in terms of net sales accounts for 35 million euros for the period May to September. It's primarily, you know, achieved in the US and UK with... a quite tiny impact on EBIT due to the already mentioned, you know, in investments. A little bit, you know, update on activation. So on Campari Film Festival, from the pictures you can see the fifth consecutive year celebrating the Locarno Film Festival as official partner. The seventh year as a main sponsor of the Venice International Film Festival. and the debut partnership at the Toronto International Film Fest. So, you know, the film festival platform is clearly key to activate, you know, our company brand internationally. But also, you know, the Negroni Week this year was celebrating through a series of initiatives and experiences across now 93 markets and across almost 14,000 venues. In terms of reach, In terms of number of markets, we're up 18% versus prior years. And in terms of venues, up 16% versus last year. So, you know, quite successful. On Acherol, you know, clearly you see the U.S. Open partnership, which is, you know, second time this year with further expansion of its presence on location. So we're taking, you know, bigger share of the U.S. Open pie. We also collaborated with the actress Ashley Parker from Emily in Paris series across multiple channels, including media and social media. With that said, I happily leave the floor to Chiara, who will help us go through the numbers.

Thank you, Paolo, and everyone. So on page 20, we analyze EBIT adjustments, which amounted to $499 million, down organically by 40%, and generating a margin dilution of 140 basis points, reaching a margin of 21.9% on sales. As we mentioned already, this trend was driven by lower absorption of fixed costs across P&L lines in a softer market context, given that net sales organic change was up by 2.1% in the nine months. This effect was amplified in the third quarter as the organic change inhibit adjusted was negative by 18.2%. showing a margin dilution of 370 basis points, given NETSA's organic change of 1.4% negative. In terms of the key drivers, so we focused first on gross profit, which was up by 1.9%, generating a dilution of 10 basis points. This result was due to mixed effect, mainly in Q2 and September. generated by the impact of poor weather conditions and also macro conditions on high-margin apparatus in EMEA, as well as a rapid growth of espalon, which was up 19% in the nine months. With regards to the other drivers of gross margin, we had a positive pricing impact, which was fully offset by COGS, both many skewed into Q1. So as we mentioned earlier, pricing was driven by carryover effect from the previous year, and COGS inflation was driven by carryforward effect of high-cost inventory from the last year, which we depleted since beginning of 2024. Focusing on the third quarter, the gross margin was accreted by 10 basis points, mainly impacted by inefficient absorption of fixed production costs due to lower production volume, whilst we continued to remain disciplined from the viewpoint of pricing. Looking into Q4, from gross margin, we expect unfavorable seismics and lack of absorption of fixed production costs due to lower production volume, and that is despite benefits on ingredients, including agave and glass. So combined, we expect that this effect to drive and overall dilution, which is also driven by a very challenging comparison base in Q4 2023 when gross margin was up by 160 basis point. So as a result, on a full year basis, We expect the positive pricing effect, as we guided for the year 2024, a positive pricing effect, no more than 1% to 2%. So, positive pricing effect to be more than offset by COGS headwinds, as well as unfavorable sales mix effect. In terms of COGS headwinds, we expect this effect to be generated by the inflation, combined with stock effect. lower absorption of fixed cost, higher depreciation, partly offset by positive benefit in ingredients, particularly agave and glass. Particularly with regards to agave, we are confirming our expectation for 20 million euros on a FULIA basis as a benefit, plus other packaging materials as well as logistics. Moving on to AMP, AMP was up by 3.7% in the nine months with 30 basis point margin dilution, with ongoing focus on brand building during the summer season, despite the impact of lower activations in connection with the pool weather, particularly in spring and September. AMP two sales were 16%, so relatively stable versus nine months 2023 when it was 15.9% on sales. Focusing on the third quarter, AMP was up by 6.6% with a dilution of 140 basis point impacted by soft sales. It reached 17.7% on sales versus 16.8% in Q3 2023. looking into q4 we expect to keep amp broadly in line with q3 as a percentage of net sales so as a result a 2024 level on a full year basis for amp we expect this cost line to remain slightly below 20 23 levels of 16 0.9%, but also clearly depending on the trend in that state. So AMP on a full year basis might be from neutral to slightly accretive overall. In terms of SG&A, SG&A grew 7.6% in the nine months with 110 basis points, impacted by the continuation of planned investment, including our strengthening of route to market, both in Asia with carryover effect from last year investment, plus the setup of the new market in massive company in China. in Greece, and that was in a market context of softer sales. So that led to lower absorption of fixed costs. As we explained, our SG&A fixed portion is about 75% of total cost line. Q3, SG&A grew by 10.9%, generating a dilution of a 200 basis point, mainly driven by muted sales at minus 1.4. Looking into Q4, the trend will be driven by ongoing completion of committed business investments. Therefore, Q4 SG&A organic growth trajectory is expected to be similar to Q3. And so that means that it is expected to generate a dilution on a full year basis. Meanwhile, we define a roadmap ahead with initiatives in place to ensure growth and profitability in the medium term, and Paolo will focus on that in a couple of slides. Overall EBIT adjusted reported was negative by 4.1%. Perimeter was slightly positive on EBIT 0.4 percent or 2.2 million euros resulting from the impact of a courvoisier and other business partly upset by the termination of some agency brands in in france as we explained courvoisier is generating a contained impact on EBIT in this first transition year, also given investment in commercial and marketing teams, which occurred in Q3 and which will continue into Q4. So on a full year basis, with regards to perimeter, we expect a contained contribution combining and also the effects from determination of agency brands. The effect was slightly negative, 0.3%, or 1.7 million euros, and that was generated by positive impact on costs. of U.S. dollar and pound depreciation. In Q3, we benefited from favorable trend in the Mexican peso. And in Q4, we still expect a slightly positive effect or a positive basis effect. EBITDA adjusted was 591 million euros down by 1.8%, of which 2% organic. Just a quick mention to depreciation. Depreciation increased by 11.6% or 9.4 million euros in the nine months as a result of CAPEX plan, which will continue in Q4. In terms of group pre-tax profit on the next chart, so we had total operating adjustments of €30.9 million negative, mainly driven by the Courvoisier deal. related costs plus some more restructuring initiatives. In terms of the financial expenses, the interest overall amounted to 57.7 million, increasing by 7.2 million versus nine months 2023. Line is composed by two items, exchange losses amounting to 2.1 million euros, mostly unrealized, versus negative at 12.1 in 9 March 2023, benefiting from less unfavorable or less volatile trend in exchange rates in 2024. Excluding these effects, financial expenses were 55.6 million euros with an increase of 17.2, driven by higher average net debt, 2.1 billion this year versus 1.7 last year, mainly due to the currency acquisition, and as well as by higher interest average cost of refinancing in the nine months. These two effects were partially upset by the benefit of temporary higher cash position ahead of Courvoisier closing at the end of April. Average cost of net debt was 3.7%. This is 3% in the nine months. And looking into Q4, we expect an amount of net interest in value terms to be slightly higher than Q3, reflecting the impact on available cash from certain corporate transactions, including capping the acquisition of the minority stake, as well as the acquisition of the remaining minority in the Mexican companies, as well as our continuous commitment to extraordinary CapEx plan. That is, of course, part of the positive cash flow generation. Then hyperinflation effect and amount remeasurement were 9.6 million euros, mainly due to Argentina. And then we had overall pre-tax profit adjusted over 446. Pre-tax profit at group level was 426. 3 million euros after a non-controlling interest of 5.8 negative. Moving on into the next chart on analysis of net debt. Net debt was 2.6 billion. at the end of September, up 710.5 million versus last year. And that amount reflects the net impact of the acquisition, 477 net of the capital increase, the acquisition of the minority stake in Cape Vine for a total amount of 83 million euros, extraordinary capex investment of approximately 200 million euros, the dividend payment of 78, and all this partly offset by the positive cash generation in the nine months. Just a quick reference to CAPEX. We confirm our plan for overall 500, 550 extraordinary investments for 2024 and 2025. with about two-thirds of the program to be completed by 2024 and one-third to be completed in 2025, which means that in Q4 we will still have a little bit more than 100 million euros of CAPEX to go. With regards to cash position, we need also to remind the impact on 46 million euros for the acquisition of the remaining 49% in the company owner of Anchor IS and Montelobos, bearing in mind that this transaction has no impact on the net financial position as it was already included in the estimated put option and earn out. Overall, liabilities for put option and earn out reflected first the earn out in connection with the currency acquisition, and then the effect of the reduction from the earn out in connection with the acquisition of the minority stake in Altra Reyes and Nitalod. EBITDA ratio, so net debt to EBITDA ratio was 3.4 times on a pro forma basis considering it could impact only for five months and that would correspond to 3.6 times with an annual estimated effects for courvoisier, and that compares with 2.5 times at the end of December 2023. So that's it for my side, and I hand you back to you.

Thank you. Thank you, Chiara. If you follow me to page 24, we have, you know, in one page the summary with, you know, both description and impact of, you know, key company initiatives, you know, starting from the creation of houses of brands. This is quite a transformational, you know, move as we create, you know, the four houses of brands. Cognac and champagne in Paris, you know, aperitifs in Italy and whiskeys and rum on one end and tequila in New York. In terms of impact, looking first at growth and then, you know, the impact on efficiency and profitability. Clearly, the overriding objective is to accelerate the growth of our brands and our categories, so enhance the ambition. The four houses of brands will be fully accountable for the brands and the category global P&L. They will be accountable at global level for the resource allocation, including marketing and commercial investments. They will be responsible for innovation, and they will have, you know, a very, you know, tight connection with the upstream supply chain. You know, read it as, you know, liquid making, you know, cast finish, ODV procurement, blending, and on and so forth, which is, you know, a key piece of the marketing exercise, particularly in brand spirit, let's say with aperitifs. The, again, another, you know, positive impact on growth is that it goes towards, you know, further premiumization of our portfolio, particularly in brown spirits space. And it will improve the effectiveness of our marketing initiatives where we're going towards a stronger central coordination, central driver. which would leverage the existing local marketing capabilities and local marketing teams. So we fundamentally believe that the, you know, consumers are different, you know, in each and every market. We leverage the existing marketing capabilities, but we want to have, you know, a stronger central coordination of the different local initiatives. In terms of cost, efficiency and profitability, it clearly increases the efficiency and the agility also via the layering of global and local structures and reduction of duplications. And also, if you look at the AMP budgets, we will have a more focused and effective allocation of the investments and the resources, again, to avoid duplication and to get the best ROI of the assets that are developed centrally. The second, you know, vertical of key company initiatives is portfolio streamlining that goes through exposures. As I said before, the global priority is now account for 68% of our total net sales, you know, ahead of the full first-time consolidation of Foursier. And so clearly, as we redirect, you know, investments into, you know, the priority brands and into the houses of brands, you know, clearly we need to make choices and we will reduce, we will cut the tail. As we, you know, redirect funds, focus and investments on priorities, key priorities, of course, that would reduce bode well for their growth trajectory in coming years. And of course, you know, by, you know, reducing, you know, the complexity of portfolio management, we free up resources that we can partly allocate to priority brands and partly, you know, we can reduce costs to support margins. The cost containment program, which I've alluded to, is basically to create, you know, efficiency in structure costs, leveraging, as said, the change in the operating model with the creation of the brand houses, the delaying, the reduction of duplication, the reduction of the portfolio complexity via disposals, but also leveraging the very high-tech investments that we've done in the past, starting from the migration into S4 HANA and the implementation of advanced integrated planning, which would, on one hand, accelerate our growth as we have better business visibility, but also drives a lower cost of doing business with reduction of the organization. In terms of targets, we are setting ourselves a target of 200 basis point overall reduction of the percentage of net sales in the next three years. So a reduction of 200 basis point in year 2027 as a percentage of revenues. It is clearly a creative from an EBIT perspective and would progressively deliver operating leverage. In terms of outlook for year 2024, Chiara has already covered most of it. In terms of net sales, we are looking at a low single-digit top-line growth. America is impacted by ongoing muted consumption environment in the U.S., with growth rate also to reflect high-con base in Q4. as well as, you know, the tail end effect of the hurricane in Jamaica causing supply shortages and poor, you know, trading environment in Jamaica. Whilst in North America, the other countries, we expect that they would continue to grow as they did in the first nine months. EMEA, with ongoing impact of stocking, high competition, and low consumer confidence in selected markets, And no recovery of the Q3 shortfall in a low seasonality quarter for aperitifs. And that's, you know, clearly a fact. In APAC, with some potential benefit from easing macro environment, but still with ongoing impact of route to market finalization, particularly, you know, as said in India and China. The organic performance in EBIT, both in terms of margin as well as value change, will be negatively impacted by gross margin due to dilutive sales mix and lack of absorption of this production cost due to lower production volumes despite all the benefits on raw and packaging materials. The SG&A is driven by ongoing completion of committed business investments. Now, if you look into the medium- uh to a medium long term company group you know we remain confident uh to continue out performance uh to the um remain confident in continued out performance and market share gain as we saw you know in the previous uh nine months leveraging its strong brand in growing categories with a gradual return in the medium term to a middle high single digit organic growth strategy in a normalized mapping environment. On the other hand, if you look at, you know, profit and profitability, gross margin is expected to benefit from, you know, that top line growth, mid to high single digit organic net sales growth, positive sales mix driven by disparities, but also, you know, tequila, That, you know, in 2025 will be, you know, no longer dilutive or if any, you know, marginally dilutive. And, you know, the overall premiumization across the portfolio that we are, you know, achieving as, you know, shown in the prior chart. And also, you know, some COGS efficiencies, namely, you know, tailwinds that will impact positively, you know, 2025 and coming years. EBIT margin accretion will be therefore supported by, you know, the key company initiatives that they have just described with 200 basis points overall benefit on net sales of the percentage of next day in the next three years by 2027, and increased efficiency in brand building spent on the back of the reorganization of our brand management operating model into the houses of brands. With that, you know, we are here to take your questions.

This is the Coral School 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. We kindly ask you to use the handset when asking questions. Anyone who has a question may press star and one at this time. The first question is from Andrea Pistacchi, Bank of America. Please go ahead.

Yes, good evening, Paolo and Chiara. Three, if I can, please. The first one is really to try and unpack a bit what happened in the quarter. On the H1 call in July, you sounded cautiously but reasonably optimistic about the outlook. And you said that Q3 had started pretty well in all regions. So you've highlighted a lot of things today, like destocking in Italy, the hurricane in Jamaica. But if you really had to highlight two or three main things that have completely derailed the quarter, what would these be? Then my second question, please, is actually on the medium-term sort of outlook that you're presenting, particularly on margins. You say gross margins should increase, SG&A to sales, leverage, thanks to some of the initiatives you're doing, an important benefit, 200 basis points over three years. How much of these benefits do you think you'll need to or you'll want to reinvest in AMP? You were talking about efficiencies in AMP, but do you think the 17%, 18% of sales, which is your historic level of AMP, do you think this will be enough given the various growth ambitions that you have now also on brown spirits? Then if I may, with a third question, I don't know how much you're able to say on this, but I was hoping a bit for an update on the CO situation. whether you could share any context possibly on Matteo's departure, but more importantly, how you're thinking about the new CEO appointment, what are the main criteria for the search, internal versus external, does he have to be Italian speaking or is that less important, experience in Asia, et cetera, and where you are in the process.

Thank you, Andrea, for your questions. No, I think, you know, the first one, if I understand it well, you know, vis-a-vis, you know, the July outlook, what are, you know, the major, you know, derailers. Of course, you know, the hurricane in Jamaica, you know, the very poor weather conditions in the month of September. which is critical for aperitifs is another one. I think probably we have maybe underestimated the level of disruption at the level of consumer confidence. That's one. And we were all hoping for a bounce back of consumption following the very poor weather conditions of last year, whilst consumer confidence suddenly fell in a significant manner. And I think also the stocking was highly unexpected, particularly in Italy. Of course, we know that in the US, if you think at inventory levels, You know, you have the, you know, the wholesalers, you have the retailer, you have consumers, you know, stocks. You know, at a seller level, they remain, you know, quite healthy, you know, at about, you know, two months or below selectively on local brands. You know, at retailer level, even there, you know, we've noticed, you know, a shrink in inventory on hand. And so that is clearly, you know, negatively impacting, you know, um, you know, the, uh, the shipment performance. Uh, but you know, that said that we believe all those factors, you know, are quite cyclical and, uh, you know, uh, not recurring and we believe in, you know, we'll be back sooner to our, you know, original, uh, you know, gross, uh, gross trajectory across, you know, the different markets. Um, so, you know, we remain, you know, quite confident is a video launcher, unfortunately. You know this year is a combination of you know. Disappointing you know consumption pattern across you know key categories and across key markets. It's it's more you know external. You know. Elements. With you know planned investments that we've clearly implemented to accelerate the future development of our portfolio performance, including, you know, investments in strengthening recently created market, existing markets, and this is clearly causing, you know, the S&A drift that we will, you know, correct over time. If you look at the second question, it is, you know, the midterm margin guidance, then, of course, you know starting from starting from next year you know of course as you very well known last this year you know it has been impacted by some positive tailwinds and some negative headwinds but if you look at you know year 2025 And we sum up all, you know, the headwinds and the tailwinds. We end up with roughly, you know, a net positive effect of 30 million euros in year 2025. And this is coming from 2024 headwinds that are turning into 2025 tailwinds for 30 million. Namely, you know, the non-recurring effect of lack of fixed cost absorption that impacted this year for 15 million euros. The effect, the negative effect of safety stock that has been built in year 2023 at very high cost and is clearly negatively impacting year 2025. This is another 15 million euros. So those 30 million euros are non-recurring and shouldn't be, you know, seen in the base for year 2025. You then have, you know, tailwinds that remain tailwinds in 2025. That is, you know, the effect of agave, you know, 25 million euros this year. Sorry, 20 million euros this year, 2024, which would have, you know, a tail effect of another 25 to 30 million euros in 2025 and another 10 million euros in 2026. And then you have, you know, glass, you know, logistic costs in 2025 that still are positive. So we're talking another, between Agave and other raw packaging material, another possibly 30 million euros. And then you have, you know, 2024 headwinds that still remain headwinds in 2025. And this is, you know, the higher depreciation due to higher capex. So, you know, we have a very heavy CapEx expansion program that is generating, you know, roughly 500 million euros of extraordinary CapEx. And it is, you know, generating a depreciation drift in our P&L, if you look at EBIT, now EBIT clearly, of 15 million euros. And then you have, you know, the fact that as we dump liquid, agent liquid that has been distilled years ago, You know we are a negative effect. We have a negative effect in our PNF, so you know that negative effect. Was worth 10 million euros in 2025 and again 2024. And it still is worth 10 million euros in 2025. So if you add. The three components you end up with roughly, you know, 30 million euros of positive. So you know we have. you know, outside of Nick's effect, you know, roughly 90 basis point of net tailwinds next year to start with, which is, I think, you know, encouraging. Now, if you look at the question on the AMP as a percentage of revenues, whether, you know, the 17%, you know, perspective is enough or not, we think yes. you know, clearly, you know, as we look into, you know, the AMP budgets and we are, you know, making some very good progress into activity-based budgets. And we not only plan, you know, AMP based on incremental spend, but also, you know, we challenge, you know, the activities and we measure how much you know, the assets that are generated are, you know, leveraged by the organization, we sense that there is, you know, a big opportunity of getting, you know, a bigger bank for the buck. So, you know, I think there is a lot of opportunity of increasing the impact on consumers while skipping, you know, the EMP on revenues at about, you know, the 17% that you've mentioned.

On your last Sorry, Paolo, just going before we move to the CEO question, just if I wrap that up, if I understand. So gross margin, yes, there's a benefit of potentially around 90 basis points, then plus minus any mix effects that we'll see. Then you have some SG&A leverage in theory, which will depend on top line, and then the ANP probably goes up a bit, but the 17%. One thing you didn't really mention on this is promotions and how that may have weighed or whether it will weigh in a, in a, in a competitive environment, is that not a factor on margins?

Well, you know, on, uh, on promo, you know, it's, uh, you know, it's very, you know, difficult to, but, you know, overall, clearly the, we, we, we see, you know, an increased level of, uh, of, uh, of promo frequency, uh, and, you know, um, that's, uh, that's a fact, um, but, you know, but, uh, But, you know, said that, I think, you know, we've proven the fact that on pricing, we've been, you know, quite disciplined so far, and we intend to maintain that stance, both, you know, in key U.S. market as well as in Europe, where You know, most of our, you know, products, you know, particularly the aperitifs are consumed in the entree, so it's not really, you know, promo frequency that drives, you know, consumption in our point of view. So, you know, if you look at the U.S., you know, I think, you know, in our, you know, key categories, you know, full-on is quite well positioned in terms of pricing and, you know, headline pricing, you know, and it clearly benefits from, you know, trading down from a super premium plus and premium super premium tequilas and, uh, bringing up from, uh, uh, from standard, uh, tequilas. So, you know, we don't sense any need of, uh, of being, you know, aggressive on, on pricing tequila. On U.S. whiskey, you know, overall the environment we sense is, you know, fairly benign. There is probably one player, which I'm not going to mention, that, you know, is a little bit more aggressive on pricing. But, you know, on the other, you know, if you look at the other, you know, players, I think, you know, bourbons and U.S. whiskey is in a safe place here. You know, there is, of course, a lot of, you know, distilled whiskey sitting in bars and warehouses. But, you know, the players, you know, seem to be, you know, disciplined. Of course, we're all, you know, reducing, you know, distilling amounts. But I don't sense that, you know, bourbon is at risk. Of course, pressure on vodka is definitely there. On Sky Vodka, clearly, we're, you know, quite active in double-checking, you know, price elasticity on a state-by-state level in the U.S. And I think, you know, in few test markets, we're getting very interesting results by trimming the positioning of Sky Vodka versus key competitors. And it seems that, you know, overall, We're achieving, you know, net positive gross profit impact. So, you know, we will be more, you know, focused on a state-by-state basis as opposed to, you know, going broad with one single, you know, price policy overall. But, you know, even there, I think there will be a little bit of drift. But I don't think, you know, if I can summarize, you know, globally for next year, you know, promo will be, you know, the big mover. Mix mix is key. You know, unfortunately this year it didn't go well. Or for the reasons that we've we've mentioned. But again, you know structurally, you know the business is. Is is structured in a way. That you know the gross margin expansion will will be achieved. You know, on on Espolon. We think that, you know, on the back of the reduction of the cost of agave next year will be at around a 50% gross margin. That I think is a very good, you know, achievement. Also taking into consideration that, you know, negotiating agave contracts in Mexico is quite difficult. The results are there, so next year at least we will not see the significant drift in our growth margin from tequila. So overall, I think on promo we're in a good spot. I think probably the worst is behind us. Of course, in cognac, we've seen some deterioration of pricing, particularly from the incumbent, starting from, I would say, Q2 2023, I would say, looking at the new SEND data. You know, clearly the Curvo SDA brand is not yet where it should be in terms of pricing. But, you know, any price repositioning of the brand should come with, you know, strong, you know, A&P investment to reinforce, you know, the equity of the brand. Of course, you know, some, you know, aggressive and tactical, you know, discounting that has been, you know, implemented by the seller due to the transition will not be repeated in year 2025. And so per se, we will have an improvement of the gross margin in next year vis-a-vis this year that is, you know, quite low for the reasons I've mentioned. I don't know, Andrea, if you have a question. Otherwise, I'll

I posted on, but I posted on. I've been on enough, I think.

Okay, on the CEO, I think, you know, we're making good progress. I think we will realistically come to an appointment in a relatively short period of time. We're not talking years. Clearly, the company is managed by a very strong team of professionals, so everything is progressing as it should. You've seen we've announced a major cost containment program. We're reorganizing the company. The markets and the regions are in very capable hands, and we're filling step by step all uh you know the positions of uh head of the uh maison of the sort of the uh brand houses it is extremely important because it would strengthen our uh leadership team so i think you know it is important to fill the position but it is equally important to to make you know the the right choice in terms of uh you know qualities of course you know campari is uh It's an international player. The biggest market is the U.S., so it's not necessarily to be Italian. It can be by chance, but that's not a necessity to us. The management team of Campari is quite diversified in terms of origin, all FMCGs, and in terms of culture. So it's important to be not Italian, but internationally mindset. have an international mindset. In terms of internal, external, the two avenues are equally possible at this stage, so we cannot disclose, you know, more than that. But, you know, we sense that we're making, you know, good progress and, you know, more to come. That's, you know, what Andrea can say at this stage.

Thank you, Paolo.

The next question is from Sanjit Awela, UBS. Please go ahead.

Hey, good evening, everyone. A couple from me, please. Firstly, as you look out to Q4, is your expectation at this stage for organic sales to be broadly in line with Q3, worse or slightly better? And as you're thinking about building back up to mid to high single digit top line, is that a relevant framework to think about for 2025? Or which of the headwinds you're seeing at the moment across your business do you expect to continue into at least early part of 2025? That's my first question. And then as you're thinking about non-core disposals, I appreciate you might not want to get into brand specific, but can you give us a sense of what percentage of your sales today would you classify as non-core that could be disposed of in the fullness of time? And my third question is really around going back to the US. I think you highlighted a bit of unexpected destocking in your business, but the tone seemed to be somewhat reassuring on sellout. Can you just give us a sense of where your depletions were in Q3, and for how long do you expect retail and destocking to persist? Thanks.

If you look at the Q4 organic sale expectations, You know, we think Q4 will be positive. So, you know, that's, you know, it will not be, you know, of course, you know, super positive. Also taking into consideration the tough comp of Q4 of last year. But, you know, we're definitely in positive territory, you know, with the 2025 or, you know, you know, the mid to long term, sorry, the mid to long term, mid to high single digit top line organic growth rate. I think it very much depends on market conditions. And I believe, you know, realistically, probably, you know, the beginning of next year, it will still be, you know, relatively soft. And then it would improve, you know, we clearly count on, you know, the stimulus measures of the different central banks, Um, and you know, the end of the election period. So there would be, you know, any factors that, that, you know, uh, uh, they bought well, but, you know, in terms of, you know, me twice single digit, but all strategy that we're looking more into 2020, 2026. Uh, but you know, I think, you know, the, the key points is data. If you look at our, you know, gross trajectory, you know, by, you know, we remain extremely, you know, uh, positive, you know, first and foremost, uh, You know, there is an outperformance in key brand marketing combination that is there and is destined to stay. On pricing, as you know, I have answered to Andrea, you know, we remain extremely disciplined. Uh, you know there are no recurring impacts on performance. You know the hurricane, the poor weather in in in EMEA. But that's you know, not recurring percent impact. Uh? After all, is, uh, you know, I said, you know, outperforming across all. Uh, EMEA markets, but also you know in, uh, in the US and is growing double digits in all city markets. In Italy, the performance is soft, but it's totally driven by wholesaler stocking and the commercial dispute. In the US, as I said, the problem is with the muted sector context, but the performance is extremely strong. Espolon is in a very good position. In Tequila, we will see what you know happened on vodka you know esperon is really in a seed spot you know we seen in vodka you know titos where it uh where it went uh as you know uh the uh super premium uh plus vodkas you know started you know decelerating and consumers you know moving into you know brand that has very strong equity you know, a reasonable price and a very strong traction in the on trade and very credible marketing positioning. You know, this is what we are on, on Esplanade. I call it, you know, $27 to $29 per bottle. I think it's the sweet spot. So this is, you can only accelerate. You know, Ankur Wazir, I think it's a long-term slow burn. But, you know, we start seeing, you know, the first positive sign, despite the category that remains, you know, quite challenging. And I think then, you know, we remain positive because of the initiatives that I've mentioned, the RE-ORG, the streamlined portfolio, and the cost containment project. So I think, you know, talking to the top line, you know, I think we are definitely there. You know, macro, you know, we cannot, you know, foresee it completely. but I think, you know, we believe it will improve over time. Vis-a-vis the disposers, we cannot be specific on brands, but clearly we're not fishing in the pond of global priority brands. Those are not for sale, including, you know, if that is the question, you know, Sky Vodka, that is not performing nicely in the U.S. Vodka is still... The biggest category in volume and probably the second biggest, you know, after tequila in value, it provides, you know, critical mass to our US organization is, you know, is a category where you have to play in the US. So this is not, you know, a brand that we intend to sell. But then you have clearly, you know, local priorities and all those are priorities. But, you know, in Regional priorities are probably in the rest of portfolio, you know, it's where we may want to streamline. So the logic at the moment is not per se achieving a percentage reduction of revenues by disposal of assets. It's more reduction of complexities. So we will first, you know, chase, you know, and get rid of brands that are creating a lot of complexity for the organization and limited profits in all geographies. So this is the logic that we're trying to pursue. In terms of, you know, in terms of the stocking, I think is the other one. You know, I said, you know, at a wholesaler level in the U.S., we're pretty fine. I don't think there is anything to signal. In retail inventory, it seems that there is probably a little bit too much there. And given the subdued environment, you know, the retailers are less keen to buy. because they don't want to hold inventory. So this is where, you know, probably we will see some tail end effects, although I do not expect anything meaningful. And then, you know, consumers, you know, at home, you know, probably they bought heavily during pandemic and probably on SKUs that have, you know, low rotation, typically, you know, the high price point SKUs, they still, you know, consumers have something in their pantry. But, you know, less so on high rotation, you know, products like, you know, vodka and tequila. So I think this is not of a concern. So we think, you know, that the stocking will most likely, you know, phase out in Q4 and we should be fine in next year. The last question is the, this is it, yeah.

The next question is from Simon Hales, CT, please go ahead.

Thank you, good evening Paolo, hi Chiara. A couple of quick ones hopefully for me. Just coming back to the 2024 outlook as things stand, obviously you're looking at low single-digit organic sales growth for the full year now. You said it's still slightly positive in Q4. It doesn't sound from the comments you made with regard to the margin outlook into Q4 that we were going to see much of an improvement on the organic margin picture at EBIT versus what we saw in Q3. If my maths is correct, that means we're probably looking at EBIT margins for the full year, maybe down about 200 basis points. Is that the right way to think about the messaging you're giving for this year? So that's the first question. And then secondly, just on perimeter impacts. Clearly a small positive contribution to profitability for the nine months that you highlighted. But given what you said about Courvoisier from an investment and a destocking standpoint, do you still expect parental effects to be positive for the full year 2024?

Yes, on the first one, looking at the year 2024 and the fourth quarter specifically, so we're in positive territory definitely on top line. You know, problem is the lack of absorption of fixed costs, both in COX and in SG&A. So clearly in COX, you know, we're slowing down, you know, production at our, you know, key sites, production sites. And so this is where we see, you know, deterioration of gross margin in the fourth quarter. And equally, you know, as Chiara has just, you know, mentioned in SG&A, 75% of SG&A are fixed. And then, you know, we cannot absorb, you know, the fixed cost and, you know, the, you know, investment initiatives that we've implemented, you know, starting from, you know, unfortunately, July, you know, Q3, you know, they have, you know, Italian effect in Q4. So if you look at SG&A in value, we're expecting SG&A to grow in line with, you know, Q3. So this is dilutive as well. So, you know, you are, you know, mentioning the 200 basis point dilution at the level of gross profit, sorry, gross EBIT margin. And I think it's a little bit on the high side. You know, I think we can do probably a little bit better, but, you know, we need to, we need to, in fourth quarter, we need to see where it goes. On the perimeter, yes, so it will be still positive, the perimeter contribution on Courvoisier, but it will be, you know, quite tiny. You know, honestly, we were, you know, guiding and the markets were at 10 million euro profit contribution from first-time consolidation of Courvoisier. You know, if you take into consideration, you know, cleanup of the market, you know, investment in structure and so forth, it will be not there. It will be, you know, below the 10 million euros. I think, you know, realistically, roughly, you know, 5 million is a sensible number.

Got it. Thanks, Paolo.

The next question is from Chris Pitcher with Redburn. Please go ahead.

Thank you very much. A couple of technical questions and one strategic. On Jamaica, the impact from the hurricane, that shortfall in the third quarter, are you back up and running enough to start to replenish and therefore should you see some bounce in Q4 in Jamaica or is that more into next year? Then on your investment plans, can you say how much you're sort of committed in terms of O2V purchases for Corvazier and what the sort of working capital is? outlay is likely to be because the stocks were pretty high when you consolidated it. And then thirdly, Paolo, if you could just talk briefly about the logic behind the Cape Van Holdings investment. Is there a route to control over the medium term? And what are the short term benefits by having a minority stake in a Scotch business? Thanks.

You know, on the first one, you know, Jamaica, you know, the Jamaican thing is, you know, exactly, you know, two issues at the same time. There is one that is the most evident is the hurricane. There is, you know, a second one that is our ability, this is more, you know, long term to distill, you know, at full capacity in Jamaica. to support the development of our, you know, run portfolio, both JRA and FU, that has, you know, short aging period, as well as, you know, Appleton Estate that is, you know, 12, 18, and so forth. On the first one, clearly, you know, the hurricane disruption has impacted our ability, not only to distill, but also to bottle physically. You know, we will fix it, you know, by, you know, by December. So, you know, we still are expecting, you know, Q4 to be negative in Jamaica. And the shortfall of supply will still impact, you know, international markets, namely the UK and the US, you know, the two biggest ones. The other one, the issue of ability to steal at full steam, that depends. on the investment, you know, the green project of dunder treatment, so waste management treatment. This project, you know, the second one will be completed, you know, in the first part of next year as planned. And that would unlock possibility for us to distill at full steam. You know, benefits would be immediate on JRA and FU overproofed. For both, you know, the Jamaican market, the brand is extremely strong in the U.S., in the U.K., so also in international markets. A little bit, you know, more down there also, think at, you know, H2 2025. And so this is how we see, you know, the Jamaican issue, you know, being solved between, say, December this year. on general operations and on distilling for full steam a little bit more down the road. On the ODV, as you said, we have more than enough given the reduction of volumes in the marketplace. So we can trim the procurement volumes leveraging the, you know, the existing, you know, ODVs, you know, with the acquisition, we've, you know, we've inherited 400 million euros of aging liquids. So, you know, if anything, I see an opportunities in terms of cash flow to, you know, exploit, you know, the existing ODV and have, you know, a positive impact on operating working capital. The other one is the CAPE VIN. Yes, it's a financial investment. We have, you know, achieved roughly 15% of the company. Of course, we have minority shareholder protections. And this is where, you know, I think we have an opportunity in the mid to long term because, you know, of course, The portfolio is extremely interesting. And so, you know, I think, you know, SF for the time being is merely a financial investment. The brand portfolio is quite nice, you know, from Havain to Tobermory, Lade, Dimstone, as well as, you know, Scottish Leader. was you know a very interesting business in uh in taiwan um so uh it's uh it's a financial investment for the time being and then we'll see and just to clarify it's all about consolidating courvoisier sorting that out there's not a risk in the short term that you move to control there this is mid to long term sorry can you i've lost your uh question

Sorry, you said over the mid to long term. There's no risk that while you're trying to consolidate Corvoisier, you then try and take on another increased investment in Scotch. That is very much a longer-term prospect.

It depends, yeah, but it's not for tomorrow, I believe. Okay, thank you.

The next question is from Trevor Sterling with Bernstein. Please go ahead.

Hi, Paolo and Chiara. Two questions from me, please. The first one, Paolo, you talk about a return towards mid- to high-single-digit growth. About six to nine months ago, we were talking about Campari being a business that should be growing high single digits or low double digits. So does that reflect a change in strategic expectations that you think the long-term growth of the business isn't quite as strong as it did six, nine months ago? And the second question was relating to rate of deleverage. I appreciate, Paolo, that a lot depends on the actual level of EBITDA growth. It's not just the level of debt reduction. But can you give us any idea of sort of a range of what you think the underlying rate of deleverage should be in the business?

No, vis-a-vis the, you know, mid to high single digit organic growth trajectory, you know, indication, it's definitely not a change in our expectations. You know, the business is solid as it was in the past. You know, clearly it's interpreted with a pinch of salt given, you know, the current, you know, market dynamics. So you have to read it as a, Okay. You know, structurally the company, the brands, the key brand market combinations are in extremely strong spot. Uh, you know, the market at the moment is in consumer confidence is what, what it is, but it's, you know, you, you don't have to read it as a, you know, a reduction of our ambition. If you, if you will, um, on, uh, on, uh, on the leverage, you know, of course, uh, as you very well know, We have this extraordinary CapEx program that is still ongoing. Therefore, as you correctly pointed out, the reduction of indebtedness of debt is not big in this year and in the coming year. But of course, if I can say, as the market normalizes, and we achieve our target top line growth, and we deliver, you know, the expansion of gross margin that we've commented, plus the expected savings in structured cost, so the 200 basis points, I think, you know, we can achieve a pretty quick, you know, deleveraging in coming years. If I think at the 200 basis point cost compression is in as a percentage of states. You know, in terms of a curve, you know we would see it as a bell shape, so probably you know 50 basis points in year one 90 basis points in year two where all measures will will. have, you know, full impact and then probably a tail of 60 basis point in year three. So that's how we see it. You know, clearly in terms of phasing, if you look at year 2025, you know, given the investments we made in second half of this year, we're expecting some carry forward effect in Q1 and Q2 of next year on SG&A. And so, you know, the operating leverage In year 2025, we'll be, you know, primarily skewed in the second half of the year. But still, you know, we have plans in place, and I think we'll be there by year end.

Super. Thank you very much, Paolo.

Thank you, Trevor.

The next question is from Isacco Brambilla, Mediobanca. Please go ahead.

Hi, good evening, everybody. A quick follow-up on the net financial position side. Just wondering if there is any kind of guidance you may give for this year in terms of leverage.

No, no, we're not giving a guidance, but it would not, you know, materially move from the current position.

Okay, thanks, Paolo.

Thank you. The next question is from Jeremy Fialco with HSBC. Please go ahead.

Hi, good evening. Thanks for taking the question. So a couple from me. First, I wanted to talk a bit more about the U.S. cognac category and just how you see that evolving over the coming period. So obviously, it's in a very difficult spot at the moment. And how can you give yourself the confidence that there aren't some more kind of structural issues within the category in terms of consumer preferences and consumers' previously cognac consumers migrating to other categories second one is on the Asia region where I believe that your predecessor had indicated there was going to be double-digit growth in the second half but still a lot of disruption due to route to market changes so perhaps you could elaborate on those and when you get into a kind of clean situation and And then the final one is on Italy. If you could talk a bit more about whether that retailer dispute has been solved and how you see inventories in the kind of Italian wholesale supply chain. Thanks.

So starting from, you know, the US cognac industry, you know, is one of the categories where, you know, we saw, you know, high promotional activity. And it seems that, you know, the high-end cognacs are, you know, struggling the most with consumers, you know, trending down into BS. Luckily enough for us, you know, our U.S. business is primarily, you know, V.S. So that, you know, is potentially, you know, a positive. Of course, you know, level of inventories, you know, seems to be in Cognac now reasonably okay. And so, you know, in the future, you know, our expectations currently are are that you know the the selling you know the shipments will uh you know mirror depletions and and sell out data so that's uh you know the the our expectations of course uh you know on kuwasi we need to rebuild the equity there is a big opportunity of listing a price over time you know at the moment uh there is probably 30 percent below uh the biggest player I don't need to catch up there because, you know, the brand does deserve more. So on Cognac, we think we will develop, you know, an interesting, you know, marketing platform for the brand in 2025. And that would start, you know, put a little bit of energy into Courvoisier. Vis-a-vis Asia, yes, the double-digit growth strategy is not achievable on a full year. Sealing Q4, we're expecting good results. In terms of disruption, probably China is the market where we've moved from a distributor go-to-consumer structure into having our own organization, you know, as the time goes by, you know, we more and more cover with tier one and tier two wholesalers distribution across, you know, all the regions, you know, clearly, you know, if you think, you know, Cognac, you know, the area where we see, you know, big opportunities is the south and east. And this is where, you know, we're building our organization. So, of course, we have presence in Shanghai and in Beijing, but, you know, clearly in the south, Shenzhen and Guangzhou is where we're making further progress, and Southeast Xiamen is where we're going. You know, if you think at Cognac in Asia, It's, you know, meal consumption in South and Southeast is, you know, energy, you know, venues and gifting, you know, across, you know, the whole country. And probably, you know, for us, you know, there is an opportunity there, not only for Courvoisier, but also for Aperol and Aperol Spritz. So, you know, we are quite confident, but still, you know, it's a big country and the path of execution of our go-to consumer, their consumer strategy is probably slower than what we thought. India is the other market where we've had some changes of, you know, management and distributor. And so even there, I think, you know, we are behind schedule. But if I look at other markets, you know, for example, Japan, it's an extremely promising market. We're growing nicely in this market, and we see, you know, a lot of potential there. South Korea, I've mentioned that. It's a very high-margin market with a significant brown spirits market. You know, we have... basically, uh, to, to control of, uh, uh, of the, uh, distributor. Uh, and so basically it's, uh, it's a focus market, uh, for, uh, for us. Of course, uh, you know, in Asia, the largest market, uh, remains, uh, Australia, uh, which is going through, you know, poor, uh, macro, uh, conditions, but on the other end, we have a very strong performance on our aperitifs. Um, and, uh, and you know we're entering into the into the peak season of uh of consumption for aperitifs in australia we've a little bit tweaked the australian strategy you used to be i have to say you know in sync with the context very much off trade focused with a new management team in place and with new strategy where you know being you know more emphasis on the on trade so you know we think Perigroi Aperol and Campari will benefit of this, you know, reallocation of focus and energies into the on-trade channel that is, you know, fundamental. But still, you know, it's a highly competitive market where we operate with ready-to-drinks, you know, white turkey in particular, and glass business, you know, the bourbon white turkey. So it's, you know, definitely not, you know, it's on a four-year basis, a double-digit gross market. Vis-a-vis, you know, the last question, the Italian wholesalers. Yeah, they have, you know, this stock a lot, I have to say. You know, you have to think that, you know, Italian wholesalers as, you know, small, you know, players, not, you know, the big multinational. It's a small business. So perception, you know, matters a lot to them of, you know, consumer confidence and consumption in the on-trade particularly. So at the moment, you know, the sentiment remains negative. So, you know, they are, you know, aggressively restocking. We think most is done. We don't expect, you know, further restocking. The level of stocks is quite low at the moment. You do not have, you know, all the elements because the set is highly fragmented and it's multi-layered. Uh, but you know, it seems to us that, um, you know, the worst is, uh, is behind us. And most of the stocking as a, as a court, of course, uh, you know, the, you know, consumer confidence, uh, and disposable income in Italy, you know, is, is an important element. And that's what, that's what can really make the difference.

I'm sorry, I just thought that the retailer disputes, I know there's quite a few questions there, but if there's anything you could say about whether that is now resolved or not. Sorry? I think the question about the dispute with one of the convenience store retailers that you mentioned in Italy, whether that is now resolved.

Yeah, the commercial dispute is closed. So we're back to business. Yeah, unfortunately, you know, we've lost the big season with them. So basically, you know, they asked for, you know, price reduction, which is not in our cards. So we prefer to walk away. They had to lease, you know, both Campari and Aperol by buying, you know, the product in the wholesale channel and in the cash and carry channel. But clearly, they position the price at a very, very high level. So basically, the breasts were not rotating in a critical channel. We've lost a million euros on that account in Italy in Q3. But I think it's important because if you keep price discipline, then you can better manage prices. you know, or other retailers in the upcoming negotiations on a price increase for the year 2025. You know, if you give up, then everything becomes more and more difficult.

Perfect. Thanks for those detailed responses.

Mr. Marchesini, there are no more questions registered at this time. Apologies. We have a question from Francesco Brilli with Intermonte. Please go ahead.

Yes, good evening. Thanks for taking my question. Just a very quick one. Just wondering if a link to the cost containment programs, some additional capex specifically for infrastructure in technology or something like that. Very quick one.

No, we're not envisaging any specific capex. It's org design, org, you know, adjustments, and leveraging, you know, past capex. So, you know, we've invested a lot in IT and technology, and this is clearly, you know, unlocking opportunities in terms of reducing the cost of doing business. You know, of course, it's not just the technology. It's also, you know, process design. So we're simplifying our processes, you know, from planning to whatever to be more effective and agile in what we do. And that, you know, comes with cost reduction. But no, we're not, you know, adding any other extraordinary CapEx to the ones that have been already announced. Okay, perfect. Thank you.

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

Yes, hi. Good evening, everybody, and ciao, Paolo. I have a very quick question on your guidance for savings on GNA on the three-year period. I was wondering whether we should take this indication of 200 basis points saving as the gross effect of your initiatives, but then we might expect you to keep on strengthening your route to market in some region as much as supporting, for example, Courvoisier and so on? Or is it reasonable to expect these 200 basis points to be entirely visible as a net effect? And secondly, on Courvoisier, if you can give us a sense of where you are with the clean-up of the range? Has the brand already been impacted by this in 2024, including the current quarter? Or should we expect this headwind to continue in 2025? And to what extent is possible? Thank you very much.

On the S&A front, we are aiming to achieve 200 basis point reduction of SG&A on net sales, you know, net of any, you know, investment. So it's a straight 200 basis point cost containment on revenues. So, you know, any, you know, investment in voodoo market is covered by that. So it's not offset by other incremental, you know, investments. You know, so if you look at the year 2025, you know I said, you know the the shape is bad shape 1596 in 20. 6 and 27. So if you look at 20. 2025 you have, you know the 90 basis point organic or mass gross margin. You know expansion. Due to. You know, you already mentioned, you know, net effect of tailwinds and headwinds, you know, the 30 million euros. You have the, you know, the synergy program, the cost containment program of 50 basis points. And within that, we accommodate potentially, you know, a minimal step up of AMP as a percentage of revenues, if any. So that'd be to be seen on the back of the analysis of our, uh, you know, uh, uh, operating model review with the creation of, uh, houses of brands and the review of, uh, of the, uh, marketing budgets, global, global marketing budgets and local marketing budgets. So we think, you know, there are opportunities for a strategy and efficiency is also in the MP spent. And so, you know, we'll see what's the outcome. So, but, you know, directionally, you know, we may want to step up the EMP to the, you know, say the 17% as percentage of revenues. We'll see whether that occurs in 2025 or in subsequent year.

Okay, thank you. And on Courvoisier, if you can. Thank you.

Yeah, so on Courvoisier, you know, there is, you know, the need of doing, you know, the cleanup, you know, of the range. At this stage, the premium end is primarily over and above XO, targeting China, Asia. At the moment, given the level of stocks that are there, there is very limited business. Actually, the impact on 2025 is negligible. Even if we decided, you know, to proceed with the cleanup as we will decide to proceed with the cleanup of the range in 2025 and onwards, the impact on the business is insignificant. It's not, you know, the Grand Marnier business case where we've cut cordon jaune in Germany, which was, you know, a good 10% of the business. So here is a small difference.

Okay, thank you.

Thank you. There are no more questions registered at this time.

Okay. Thank you very much and look forward to seeing you soon and you know that's about it. Enjoy the evening and the evening for everybody now. Thank you.

Thank you bye.