Full Year 2020 Diageo PLC Earnings Call - Q&A Session
[noise] good morning, and welcome to D. I chose tricky to eliminate results investor Q any color you called today will be hosted by Joshi Oh.
And.
Just to make Phil.
I didn't see please take note by pressing star, one and you're going to keep that if you're using speaker phone. Please make sure. Your machinist adults to allowed us to go to reach out right now ready to start the call <unk>. Please go ahead.
Thank you good morning, everyone and welcome to.
Results Cool I hope you and your families have been staying well through the stock.
It's good to when he was the Europe distinct talks and the whole spot we delivered.
Two quick Goldman.
Well based organic growth across regions Gotta Green and we had margin expansion.
I can outperform in cold weather was significantly impacted by the global outbreak of school with my team.
We could be impact occurring in Q4 [noise].
Adapted quickly I'm acted decisively to protect all people are not visible.
Supported our customers freight cost not them community.
Stay connected to up can you most rapidly responded to that changing needs.
We reduced expenditure well gosh and raised additional liquidity.
The strong foundation, we booked older blocks Ixia has increased dog resilient some agility.
Mopped investment does get them up the technology tools to be effective and that's the bottom and [noise].
Oh insights have enabled us to stay close to consumers and we didnt, we refocused on marketing investment.
Sure opportunities and strengthened brand equity [noise].
The U.S., our largest and most profitable markets has been most resilient. Okay demand was strong during blocked I'm not particularly on Canadian whiskey brands could didn't do continue to perform.
I couldn't be well through the year Depletions well ahead of ship them.
Which resulted in a reduction in distributor inventory.
You're not rather region, we had a much holiday on trade exposure, which meant the impact on all businesses. Most the Bill for example in Europe around 50% about two Oh normally on trade and Africa is that strongly on trade oriented regional or at least to reaching its all our largest market.
The decline would not be able to assist with significant deal in Copenhagen team.
Good three quarters of getting the sale on trade in the larger getting those markets in Europe and Africa.
The impact of Golden Monkey look also disproportionately high put all Scotch category due to its great exposure to emerging markets and travel retail together they account for older due to Oh, Scott that's to God to cope with nine team.
So across all markets, we move rapidly to adapt to the reduction in couldn't do you want them on calls my Corbett buying team in keeping with all disciplined sellouts culture.
Switching to pick back up around 500000 getting escape from cost most demonstrates our commitment to quality.
We've also been very disciplined involved working capital management.
While the on trade is gradually reopening in many of our markets. We expect volatility you continue given the significant uncertainty around the pace than shaped recovery, we're not providing specific revenue and profit guidance for fiscal 2000 <unk> [noise].
We expect organic net revenue in the fell to talk with Cisco 21 can be significantly impacted.
However, within Q4 fiscal 20, we saw sequential improvement.
We expect that to continue and keeps its good 21 with sequential improvements in the first and second quarter.
I'm Crazy continues to reopen and consumer demand begins to recover [noise].
Today, we announced that they recommending a final dividend in line with fiscal 19, bringing the full year if it didn't go pick 2%.
This reflects our long term confidence in the resilience of Bob business and the robot fundamentals of our industry.
That's me managed to the spirit were determined to a lot stronger we all rapidly responding to change and couldn't be more opportunities investing with agility marketing and innovation partnering with our customers to win across all channels [noise].
Driving efficiencies and cost him cash management.
Continuing to do business in the likely some great and good luck.
And with Oh gosh.
Ready to pick your question, let's open the lines for questions.
[noise]. Thank you. So we have a first question from Sun Chief Oh, Oh, Yeah from Credit Suisse. Please go ahead.
Good morning Johnson.
A couple of questions empty seats.
Other books.
The new not.
Yeah.
It seems like.
For me the category, but then people channel can you just talked about how youre.
Okay.
Uh huh.
I'm going to imagine bucket or you see signs so concerned that downtrading from Columbus for category too.
Oh, yeah. Thank you.
Sure.
Type wouldn't it.
Your question on U.S. share performance of the upgrade.
If you look at all performance across the portfolio, we've we've got I'd say.
Sure getting brands and show losing ground.
Clearly the Keala O North American Whiskey brands are doing very well.
Well go.
I'm wrong.
Well, what I would point to is supposedly Nielsen that not represent about 40.
45% to the market.
That's why didn't you can't do Dod Depletions Radnet had taposh uplift.
However, with slightly behind the market. If you go back the Pops 18 month, the U.S. I've got to be in line with the markets.
Weve, what's likely behind right now when you look at dog depletion growth relative to the industry Grill.
And we all are very focused in our actions to make sure. We include that going into fiscal 21, I have to say overall the strength of all U.S. performance I'm very pleased with.
And you will see all price mix is higher than the industry.
One of the actions we have taken is lucky chase share.
But do you really keep the quality of upset real strong so oh price mix is running well ahead of the industry.
If you look at the last weekend, a few months [noise].
On the lodging markets I'd say, Oh, you've got a couple of impacts one is imported products like Scott.
Particularly when you have currency devaluations that economic slowdown you do have natural impact of some dogs trading that takes place. Some there and this is not do you believe we faced a dual bust cycles go about maybe many decades.
So you would see some a follow up.
Scott spreads like Black and White said about 69, except for picking up the top end of the Lux them to Padilla called slowing down.
I would say overall, there continues to be healthy Oh and [noise].
The breadth of our portfolio.
So the ability they all mainstream still playing that took oh, we see as a real opportunity for actually starts to getting ship them be out through the spirit.
Well, it's market specific the trend within Scotch in emerging markets, particularly but I don't see but economy. Its oh had taken a downward trend we will see some short term downtrading helps whiskey.
But overall there is a healthy.
I'd say the actions, we've taken to broaden our portfolio positioning better to Oh to maintain all positions I didn't see growth says we go through 21.
[noise] correct. Thank you I've been I'm, just following up on Europe, and any comments on share trends should give up quickly that's good department.
No.
Yeah. So.
Just a context and Europe. One is we are heavily skewed to the on premise youre right because the Bob did business.
No again this is a significantly on premise skewed up if you looked at all the formally.
The most recent among the Aktone performances.
Oh, the offering the form in Colombia is improving getting this is actually getting shot in the upgrade or.
I see on creates comes back up.
Just using the data point that the last few weeks in the UK. We are also seeing Oh goodness performed relatively better within that category.
Feeling very good about getting on spirits, we us under performing the markets lightly, but we feel comfortable going into the let's talk Oh, that's kind of 21 or we've got strong program that didn't update you and.
When do you expect to do better not for its performance going into that 21, we up some specific emotionally shoes in markets like Germany, well double up because the price increases we have taken some short term hit Oh I do believe up the you ought to do you you'll see sequential improvements in all share performance.
As we go wouldn't get Cisco 21.
[noise], that's like bye bye.
[noise]. Thank you.
Our next question Simon hails from Citi. Please go ahead Sir.
Oh thanks.
Hi, guys and holding company.
Two or three to me as well please I'm going to ask about your outlook comments, just so I understand.
<unk>.
This call.
Clearly I appreciate you're going to see some sequential improvements in the building picture.
From Q4 into Q1.
But weve gone through the marching developments in the first halt the if you say you expect to see a sequential improvement.
The h. too.
Level, you saw the improvement relative to the sequential decline we saw in H.T. on organic molecules, yeah, it around sort of in its fixed.
Points or is it tends to be absolute margin level in the second halt the pickup.
From the sort of the but not level.
And then secondly on stock levels within coffee in the presentation, you talked about stopped using trade being up in a number of markets due to the reached about what do you get xtandi little they told us and I wouldn't should we expect to see some thought the de stocking in the first tall.
In travel retail, but perhaps around Scotch whiskey in emerging markets.
And then just a final quick when it's like on.
The bucket the capital markets day last year, you talked about.
I'm good hundred 50 million of efficiency savings they come by the end of the 20 to 22.
Any opportunity to accelerate some of those savings will be more quickly I think that come in fiscal year.
So I think its stock levels than maybe you can take one I'm pretty sure. Okay. So on the stock levels.
Oh, we feel really good about where we closed the year.
Okay. The big variable on stock levels. This is for what the mountains well with consumer demand.
And by talking about very closely and them out culture and the data we have now how that's moving very rapidly a we indicates a global travel it's really hard to call the recovery on global travel and so Oh, that's could be an area, we think which is gonna be much slower than something bag. So.
Well, we will not sell into that channel till we start seeing.
And demand pick up in the rest of the emerging markets I feel good about where we all know stock levels are and we will continue to monitor monitor with real so I'm trying to just very quickly.
Oh, I, so I'm not expecting de stocking another emerging markets in a big way happening.
I'm not the Paulson and could you know demand really dropped call, which which we're not anticipating so we're in good shape from the stock levels and then I'll go ahead and just first question about our outlook on that so it's clearly set as it relates to top line that was expecting to see sequential improvement in the first.
My second corridor in the first half so thats, what we saw in the fourth quarter fiscal 20 as it relates to overall margin improvement I do that that absolute challenging.
I just have to be better than what we saw in the second half [laughter] 20, obviously I also commented that we continue to expect some pressure on a year over year base.
And then you had asked about overall cost savings what I, what I'd say all clearly we will continue to push hard on haven't go fishing see I'm. Joining this call wed period, I'd say, we especially scrubs harder, but I will call discretionary spending so we've tried to take.
The approach of I'll call point, she the paper discretionary spending and really only the spending that we think is critical to the business. So overall efficiencies I would characterize is actually running on the higher side. If not ahead of what I talked about on capital markets day now the flip side.
That is unfortunately seen alban volume decline and that causing negative hearing in the piano and I would just remind you that you know roughly 15% of our businesses at their business in a place like Africa.
Sounds about Africa, all businesses to be our businesses so that.
Uh Huh alcohol hired six call all within Cogs in seven volumes decline, we would see a bit more pressure in terms of negative leverage.
Wow, that's great that's pretty good thanks, so much.
[noise]. Thank you very much I nics, because it's Olivier Nikolai from Goldman Sachs. Please go ahead. Your line is open.
Hi, Good morning, Ivan Cafe. It just kind of question of plays on it come as.
You mentioned in his presentation that you're seeing suddenly expiration of regulation I really need to do more he called us easy USA.
What is the current base has spoken about using and how do you see things evolving as we come out to be crises and just lastly can you remind us what is your fuel SAGD any net income and physical please thank you.
Oh, Hi, Olivia.
He simply just filled supposedly a small base its low single digits, but what I'd point to is.
If you look at dog Q4, he called most sales relative to Q3. It doubled so that's something to accelerate the growth well equipped Paul let's spend a trade to the not Doug can do about product categories, mostly because of regulatory environment.
Now some of those things are changing been market.
And we all see more access to ecommerce channels in.
Latin America Africa in addition to Europe and China.
On the appointed the U.S. the U.S. system that still operating within the requirements of the three T cell system.
So you have the platform like goods Lee.
Oh, the businesses running full right.
Well done.
What they expected in the last few months not what visibly does.
Is it takes its order from because from the consumer that's picks up the product that doesn't retail shop liquor store and then they live with it.
You also had retail loans within escaped who are able to take you got month old doesn't deliver within the state to customers that business is growing rapidly, but it is from the liquor store PDL home or within the state.
So oh, we don't have.
Oh National Big players like I'm, a bomb except the.
Alcohol category or it is.
Very focused on.
Because retailers.
And a few platforms like like gives me and that business is good you also had a.
Pick up at the store is growing but people can place the older electronically.
Goodbye and have the product delivered up the stores. So they don't have to enter the store and you'd see him in states like New Jersey, I mean that has increased a lot. So.
The convenience and delivery to the home is is it has picked up in the U.S., but still very much within.
The freight was good the three fields.
And then the why not.
Yes.
To go yeah.
Oh, Dan enable.
That's a allows people to you know, especially when they're ordering from a restaurant tend not to pick up that pool quick uptake.
Oh.
[noise] you're very much.
Thank you. Our next question comes from Trevor Stirling with Bernstein. Your line is open show.
[laughter] wanting I'm going in Kathy.
<unk>.
I can give you could you give us a little color into U.S. shipment, you're running a little behind the patients how far behind Depletions word age.
Such stabilizing.
They share trends you mentioned earlier, he's back slightly worse shares performance coming from lower share gains from the leadership this world or is it higher share in losses from snow.
[noise] Captain Morgan I mean, just final question, just coming a little bit on the Indian run rate performance Nonres frieden locked on wont see stage It Tonight, India at the moment.
Sure I'll take the U.S., what shoes, and Kathy can handle India.
So what what we're seeing them the U.S. Oh I would say broadly is an industry that we think it's a little harder than the last couple of months, but estimates is is growing year on coal <unk> percent in value.
I'm talking U.S. stood.
Ah you saw should some club to win a bit and I'd say, all depletions out somewhere in between.
So we are still slightly behind the markets.
And Oh the main.
Areas, where we are losing third share it didnt Bostco Captain Morgan.
Hi, good didn't Johnnie Walker and Johnnie Walker adults are linked to the lapping of like Walker from the year before.
So that's that's broadly where we are well you have.
Very focused plan that they'd rather than the team have all know.
While improving the picture as we go into a fiscal 21.
And.
<unk>.
Got somebody goes and ER and Don Julio when crude oil, but you know the share gain of so Oh, that's that's how I would characterize do that and then it just talk about many India. Its everyone is aware they have.
[laughter] locked down in terms of alcohol beverage industry in its entirety production as well as overall sales and so coming out of that we continue to see good sequential improvement. There you know kind of made scaling and then especially into July So July.
Really much stronger so I would say they feel pretty good and confidence about that.
Sean placement in India, now that the a whole kind of countrywide locked down as though.
Thank you very much testing.
[noise]. Thank you for the [noise].
[noise]. Thank you very much. Our next question comes from Edward Mundy of Jefferies. Please go ahead.
Morning.
He wants me.
Uh huh.
Once you won.
You mentioned in the theory, but H one to $1 can be.
Pots it.
By the Columbia before then.
Before I.
Well there any financial metrics will help you provided yeah around hiccups.
Full time.
<unk>.
The second of all innovation, which is being up.
Great.
Yes, good innovation, how does public like to impact your ability to launch innovation.
And then the problems.
I just want to say the citizens.
I'll take that they didn't walkabout.
It's really interesting to your moves you need some T cell C.
They shouldn't garland succeed in target without giving away too much.
The main changes will be fully got such a good.
Yes.
Well I'll go ahead.
First question for you you would've seen our leverage ratio increased to 3.3 times than we had said that we target to maintain that right ratio between two and a half the three times a we made the decision I Board made the decision and we announced today, although this needs to get approved at our AG on that.
We're maintaining our final.
Wow and we really are announced in April that we paused our share repurchase program.
As a result out that leverage increase that you clean and we've heard a sad that program continues to remain calm in fiscal 2001 as you think about the impact of coded 19, clearly it's had its taking part in this fourth quarter and we've said, we expect to see sequential improvement in the first quarter in second quarter.
But when we get into wrong thing what point at that period of time, we'll be reporting a leverage ratio awful by 12 month trailing EBITDA right. So that's going to take into consideration at 12 month period of time that will have been fully impacted by covert as a result, I expect our leverage ratio.
Going to peak at that point in time, you know and then we would see improvements as we go into that second half of fiscal 21 and into fiscal 2002, I try to take a step back from has had and I'd say if you look at that total financial picture since the IPO I mean, we do have real financial strength going.
Hey, minus rated company I was taking actions to further bolster what was already a strong liquidity position. We've got 5.3 billion pounds that standby credit facilities. We ended the year with 3.2 billion in cash. So I think were enough quite good progression. So continues.
To make balance decisions I would say with regard to shareholder returns, but ensuring that we really supports the ongoing investment in that business for the long term.
And that Dong innovation I'd say this is one of the areas we very quickly.
End of reassessed a pipeline no no approach and what do I mean simply what what what we are leaning in walk to is a.
Big.
Recruit couldn't we recruit innovation on big brands and I'd give you. An example in the UK and the last few months.
The the line extensions on Gordon suddenly in Lebanon, and Mediterranean Orange, you've had three of them and literally in the last three months. We've gained seven I think it's going to market share.
In the UK with those launches, they're doing very well or does it captain Morgan line extension going into the U.S.. So has gotten to the U.S., so where they're going back to big brands with innovation brand said need needing than building and particularly on trade support we are delaying because this is all the time to be a.
Building up let's say real wouldn't grow Irish whiskey in the U.S. them beyond grade is down.
So, but scoring goes down and then when looking at new opportunities.
And as an example of the whole space, so ready to serve cocktails.
And pre makes Oh, we see as very attractive and so we all want doubling down maam.
Being much more ambitious.
Gold, though.
So the I'll just how the strong track record of innovation, we're not backing off like reshaping it to the time.
And Oh, I feel confident going into fiscal 21, you had some pretty excited because it's in the pipeline, a which should help outperformed.
Oh, no sustainability or do you point out yes, the Johnnie Walker, a bubble was Oh I got a lot of Oh excitement around it the paper Buffalo Johnnie Walker of also we Oh goodness distillery the new one.
Carbon neutral, which is really a bit first as well.
[noise] you will see no oh, they're just coming to the end up up the rhythm.
In Twentytwenty wed be a set of gold five years ago, and you'll see the result, with our annual report we've done very well I'm really proud of all performing some carbon and water.
Going forward than the 2030 goes it's going to be in Korea is one of the sustainability, so called them water Oh, recyclability that could doing a the the standards.
Metrics that the secondary as an inclusion and diversity.
And the Teligent something positive drinking.
And on all three we are setting.
So pretty ambitious goals the all drew.
Needs in this area, we want to continue to lead and Oh later in the second half, we'll be releasing up are up 2030 objectives, but I can assure you they are going to be ambitious and they are very cold to all strategy. So were putting the resources that nothing beyond that.
Oh, thank you.
Just to come back with us.
They sort of.
<unk> leverage target.
Uh huh.
If it doesn't look at a number of things incident is I'm right.
But it seems to be said, it's nice solid leverage target.
Yes.
It is.
No when in fact that I would in fact, if he went back into the as you have history.
At about the time that we acquired the U.S. our business in India. We also would have exceeded our leverage targets at that time. So we will take a holistic view and a big part of that is just getting more data and information on the pace you know when Oh overall.
Slope of the improvements and positive trajectory that will be saying in the business is the entre starts to open up so that's something we'll obviously be keeping in mind and and we said that the our capital that turns decision you know will continue to be under review two out of 21.
Thank you.
Thank you very much. Our next question comes from <unk> Morgan Stanley.
Please go ahead.
Thank you good morning, I have a quick follow up to Simon and Travis question. All the way we've depletions running ahead of shipments should we expect some catch up in each one.
Do you see wholesalers stocking up ahead of potential timeframe.
Another quick one on the way.
Demand for your products benefit at all from the government stimulus funds here Tonight.
And you see downtrading as a risk at all going forward.
Or would you see continuation of solid demand in the U.S. and finally quick one on India How's your long term view on the gross potential over this market change what was the key driver behind the impairment charge you've taken thank you.
Okay I'll handle the U.S. and then took out the Union do you know well.
Yeah, so long on U.S. third or so, let's see I would not.
Does the Depletions being ahead of shipments is is on the margin. So I'd. This is not a big deals where oh, so I wouldn't sector. The key factor that's gonna be important just because you know offtake it looks like them out.
And that's what we're very focused on up because the the we.
Good and coverage by the trend we continued to see him the U.S.
And you can see it to the overall industry to suddenly you couldn't enough go remains strong.
To your point on the mom that how much of it is supported by stimulus I mean, there's no question that is evident that couldn't do you must have the spending far right now when while they are stuck at home we are seeing.
Both in food and drink I'm interested in getting believed that there was a willingness to spend.
Oh, I would point to a previous up economic recession, you know.
Global financial close says to me is the best set of data to look at where there was a severe impact.
What do you saw what is in very short period of slow down and Downtrading that happened who's lived for me two or three quarters.
And Doug right now, we're not seeing Downtrading in fact, if you look at U.S. food industry data.
It probably wasn't saw the ones that are going to fastest.
But could we see some.
I'd say, we could see it moderate but I don't expect it to be a sustained trend because the main so oh growth spirits in the U.S.
It's still spirits growing faster than be around one.
Younger Americans.
21, plus Oh, I couldn't give me much monster.
In the so I'm not locked where.
Pop kids at home hub, only gone up and so I I see the the long term trends here in terms of premiums third runs up a continuing or we could have some short term impact as it can do not spending get severely hit up but oh hits.
We would say, but that's not the it's not it's I don't see it does have sustained those structural trend that could be short term for a little more [noise].
And then I'd say, specifically with regard to India. We continue to have a lot of confidence in the long term opportunity that we haven't India I'm more recently, we would've seen in the first half a GDP is starting to flow in India. So even ahead of that pandemic intact. They are starting to see the economy.
So a bit.
Thats often does result in the first half India was up about 2% in the first half you know that is later you know then what we think the potential of the market in our businesses in India and then as we've already mentioned in the second half I literally the entire all cabin industry, that's cool down [laughter]. So their impact some cold in the second half how's that.
Very significant and much more material than you would've seen it at the total diageo level, we obviously had to take that into consideration and you've seen that impairment that mistaken, but if it doesn't change our war on India at all for the long term you know the long term trends there in terms of population growth.
Time per capita income growth, enabling more people pull forward, our our brands both our international spirits brands as well is that because we've kinda box plants and and really important money. The people in India shot wall whiskey, and and that really bode positively for the long term for our business.
So I would say you know over the long term, we continued to be fairly bullish that that's a business that's gonna be good for the ABS.
[noise]. Thank you.
Oh.
[laughter].
Thank you next caller Nick's question opinions from Chris pitcher. Please go ahead.
Thank you very much a couple of questions on a clarification placed especially on China. It looks like you had a very dramatic stopped production in the final quarter that could you kind of got give us confidence that you've now cleared out the access Chinese new year stock and that you should start to see the recovery.
You get into a new Hofh and can you give us itself what your such you'll get by shoot market share is doing and secondly on the U.S. you mentioned your price mix is running a head to the industry. It doesn't like excited depicting the second talk despite what I would expect would be to parents expertise promotion. We've been here in the past before where were you priced mixed I had just the.
The industry driven good margin expansion, but market share has suffered how should we think about you'll go relative price position, you're comfortable with the price gaps on some brands all got against with softer economic backdrop should be expect increase pragmatic and then you fund I'm sure yet.
Finally, a clarification I think you said you wouldn't shift to global travel reach out until you saw a recovery I see you must be selling something into global travel retail or is it Oh you literally got should they got nothing at the moment.
Thank you.
I'll take a thick doing pretty good type, Chris up a little bit travel yeah. It so.
[laughter] very little bit does a really I mean does a dramatic reduction.
ER in passenger numbers, so oh, we booked up where were ready to respond quickly as it picks up but right now where we're not doing virtually no very little business.
On the U.S. Oh no with.
One of them things I feel really good about just the and already capabilities that we have built up in the team and they've been magic the last 18 months.
And the second thing I'd say, we all hyper local enough focus in the U.S.. We know that did go down to the ZIP code to the store level and so the analytics and data we are putting behind the execution behind pricing and the management of mix is has moved significantly in the last couple of yes.
And.
You got to get the right about all share price mix margin and Oh I.
Hi, Peter.
Very good about all capability and focus here, we did not FEMA and working with all distributors to get it right.
We have eased off [noise].
Some lower ROI programs that we used to do in the past.
And we are living in mall to wouldn't shortly.
Execution at the point of sale.
In terms of visibility and display ads and the launch of innovation than the basic which we are measuring our execution that stalled snow with all edge up three to five capabilities.
Well all of that did significantly ahead, so oh focus going forward is to get that drive belem.
Oh price mix I'm sure.
And I'd say, but managing it.
I would have varied micro wasn't very sophisticated levels out.
I feel good about going to 21 see improvement in our ship a whole themselves I talked about earlier.
And then specifically as it relates to China and it was all stock reduction so our suasion phone business has a good point. It publicly so you would see that and I'll call Paulo third quarter in fourth quarter, there of course quota in second quarter.
Topline was down we love to do Bakken trade I feel for that so there's quite a lot of kind of corridor topline was down 22% more like 90 performed well in their second quarter fourth quarter.
And that was all about reducing stopping trade so that they could basically kinda and like our second half was in good stead in terms of the stocks that remained in stock and trade. So they made a commentary on their call about pending a the half the stock levels closer to kind of its.
Only 18 2019 models, so I think that feeling very good about where they ended stopping trade and I would've said the same thing, although all flash Fox sports medicine, and that really beginning to see especially I think what multiple swaps business now I'll pick up in China and overall the swaps in Taiwan, which is the point again.
Great.
Later, China market actually Verizon. So again you know during this period of time and then finally I think you asked a question about our buys you kind of market share.
Something I would say that team across the industry in this most recent period of time.
The price point, so that that's 600 R&D level and although a has not performed well some of the higher price points and I think most participates in the price points typically the 600 R&D level.
No that's in part because had a banquets and actually I say business occasion, I have not yet exactly the same degree at better occasions studies here. That's how I didn't know that's performing kind of ahead of this period of time, we were doing very strong sharing so I would say, we're very confident that won't get.
Back to that say pretty quickly.
[noise] experiment.
[noise]. Thank Karen next question comes on these yet at U.P.S. Please go ahead.
Hello, ethnic yet and I think I've been answered the question and let it did you actually.
So it an extension of Pino's question on the U.S. and I guess, if we look back to the financial crisis, I guess, the U.S. market held up fairly well <unk> volume wise I think that truly couldn't office and if we look at knockdown and would not be kind of a sense for run.
Right.
Going forward.
Oh, I would say up based on current conditions and what we see a.
The the U.S. spurred smoking showing kind of.
Modest volume growth, a little better value growth will continue yeah. So oh.
As I said the biggest.
Most of that volume is coming.
Oh, the beer and wine, but it's going to talk to them. So the occasion got shifted so we remain confident about up the long term consistent trend of growth in the U.S. birds market.
And as I said earlier do you have a photo to a good thing if the economy really get stuff and the.
Oh spending.
The constraint I believe you could you could see some slow down in some downgrading, but.
We don't see that sustaining.
Yeah, So I'd say it up that's the reasonable assumption that didn't come to deal with low single digits.
Plugging group [noise].
Okay like.
One final one.
Oh, Oh, this quarter portfolio and you called out of it like that.
<unk>.
It did very well and I guess I'm see them the blend overseas and pumping them that belong to a white booked last year and how you're thinking about like him multiplus. It blends into the next 12 months.
[noise], you're talking about the U.S. Oh, yeah overall.
Yes.
Yeah.
Yes, so I'd say, we Oh, you have the big focus clearly on automotive business as well as Johnnie Walker and you've gotten them when the blends business.
In the early stages of.
The good.
Lockdowns consumer habit.
American whiskey have done better than Scotch.
Paul Pickle sculptures more about the most more about the sudden meant I mean, we also skewed.
To be on played in many of these Brent.
So oh, but we've got a focused from really getting Johnnie Walker.
Coming back in the last few weeks the show called them a little better.
And Oh I'm, So we've got big time, some the brand.
I'm single mode, I mean continues to be.
ER positive.
We expect that to continue as well okay.
So much.
[noise]. Thank Karen next question comes from a mix shift for asking Investec. Please go ahead Matt.
Hi, Good morning, I think Kathy three questions for me.
First one on the U.S.
You mentioned distributor de stocking.
But we've also heard from many consumer company.
In alcohol and in other categories at U.S. retailers are also de stocking. So I was wondering if you could give us your assessment done.
The U.S. landscape.
Near term.
And then secondly.
Fear trends at the end of the she period.
I'm sure. It's had reported significant improvements around channels have you seen a similar.
None.
And then finally.
On exercise you mentioned acts like yeah are there any other key markets, where there isn't really good exercise or other favorable.
He did not.
Over the near term.
Thank you.
Thank you I'll take the U.S., an exercise them or Kathy will.
The good question.
I'd say a broadly for the U.S., just stupid gun repeal of stock levels.
Our Oh, Oh normal where they should be so I don't see a if your question is are there going to be big changes going forward in stock levels in the trade <unk> up the third probably about say no.
The pretty stable or.
Exercise, we we've not seen India had a few states, let's just jumped up the excise when they opened up and many of them.
The both the Oh the duty increases.
Generally I'd say, so far we have not seen ER.
A significant changes one of the things I'd say, that's very much.
In the message we are getting across to government.
The hospitality industry is so critical to the recovery of the economy woman 10 jobs in the world and in most countries sits in the hospitality industry. It's mostly young people and this is not the time to be penalizing, the hospitality industry and I think that messages lending does far more appreciation.
Well, what bars, and restaurants and club lean to the economy Mtus, it's likely that I'll.
Probably doesn't create cobot and are we in the industry and working with.
Bars and restaurants in hotels, I really getting that message to pick up okay, and then as it relates to here I would say you know you have to look at the specifics about their footprint because he up in Africa.
Larger kinda overwhelming majority.
You know kinda two thirds of the overall beer business are in those two large regions and so what we see is they improvements in I'd be a business as that concentrate opens out because both of those we've been thinking there also heavily weighted to the entre. So you mentioned you're up you know what about.
50% later today on trade, but our beer business to be even more heavily weighted than that you know given how popular Guinea pig a in Europe, specifically and then similarly in our Africa business you know you've got countries like 10, yeah, there's kind of where can I get that you know very strong part of that business and it would be.
Over 90% kind of weighted into the on trading so very much tied to the on trade up not I'd say when you dissect that sound the market by market basis, you know the impact of pulls it and the closing of the entrees with very different market, they marketing and it kinda came in South Africa, and Latin America.
Either right then it landed in Europe, and so as we've seen entrees to open we see that improvement coming to our beer business, but it's very market specific and we would certainly back now that the on trade is opening up more broadly across markets that we would see that sequential improvement in deal that we talked about you know for the.
Overall company.
Oh, thank you.
Yes.
Thank you know next question comes from Eco von Steckelberg something the appearance.
Hi, Good morning, everyone can I just summarized here it sounds like you're saying that you do you expect modest recessionary environment, and maybe some down trading for a bit of time, but the recovery be entre should certainly overwhelms any temporary impacts and recession like downtrading.
My second question is on just the growth rates could you provide me with your growth rate for Q4, and how you finished Q4 and the start of Q1 or anything so short term, but it would be interesting here and then finally.
I'm not sure if it can be the answer but I'd be curious year. If you got any comment on consensus for a 521. So you can see what we can see about you think it's achievable and that and yeah. What's your what's your thoughts on consensus. Thanks.
Okay, and so clearly what we're saying I say talk about sequential improvements to our top line in the in the first quarter in the second quarter out that Cisco hat, we are saying that while we are expecting some impact from both a recession overall impact in different markets differently and some level of downtrading.
That we think volumes coming back are going to calm, though other impacts the sequential including that we expect to see coming from the fourth quarter as it relates to kind of overall, what it a fourth quarter look like topline Oh overall for the half was down 20 create their science and for the fourth quarter.
Closer to 40% and then specifically as it relates to the first quarter, we're not we're not giving out a monthly numbers in the quarter I would just go back and again, how you always quarterly already seen increased nicely now in terms of July relative to jail and leave it that the overall are the first quarter.
Sequentially do better than what we saw in the fourth quarter.
And on consensus.
Oh, we're not giving specific guidance for I'm not going to comment on consensus.
Thank you.
[noise]. Thank your next question comes from Maciel Schanbacher, something then not family investment Officer. Please go ahead Sir.
Yeah good morning.
She is basically you know one of them.
Okay.
Hi sensors market it is booming and significant change so I'm pretty sure bucket.
I understand you do you consider that is a focus unfortunately I was just wondering right.
Right.
Got Bihac's does not fit into your question.
Okay and the second one was Oh, you know follow up somebody's machines, I try not chit or China shape.
Oh revenues is less than 5%.
I think there's grows or would it be due to timing anything specific because he's just have to.
Try not to get it becomes a significant part of <unk>.
Thank you.
Sure I'll stick with a in the U.S. we havent.
Talked about as much of the cold the audio deals company with so the good news some ideas and FNB and so close we have a line of Smirnoff services.
It's really really well well, it's it's the among the fastest growing deal companies in the U.S. right now and we have a small positioning himself. So but we haven't deliberately decided not to make a big investment into that guy degree because quite frankly, we have better places to invest in the U.S.
We look across.
Our total portfolio of their rents there.
But clearly benefiting from the trend right now and you see it to not be a business performance.
Oh, the beer company to pull them to be less or do you have taken to sell says didn't to Europe. There in the UK I'm, a nod wouldn't like no.
The snow not lined up so we are participating in that sector.
But not making it the big strategic priority for investment.
China is a we remain to answer your question, Yes, I expect Jonathan to keep becoming a bigger part of the audio and not too many businesses. The baidu has a very good runway ahead a bit.
And we fully expect that to be a a business that gets back on the steady trajectory of growth and were very encouraged by the early sign some Scotch whiskey.
And we are building the top end up such we'll see but I'd say early sign for last few years, where I'd be interested Scotch up the top and Super Deluxe. Most is really building very nicely.
Even in the very challenging period of Scotch whiskey business in mainland China group.
In fact, if you look at E Commerce, Scotch whisky outperform.
Other forms of all international for on E commerce platforms as well [noise].
I'm talking about the China should be up a very attractive growth engine for the company [noise].
[noise] great. Thank you.
[noise] [noise]. Okay. This is the northwest.
Oh.
Thank you very much our last question comes from Richard.
You can from Kepler. Please go ahead.
Yes. Good morning. Thanks for the question I have two please festival in your prepared remarks, you talk about leveraging both stuff column and the bartos can you give some more details what initiatives you you've taken these area and how that benefits your brand portfolios.
And then the second question I've as you mentioned, either you or to protect a market demand.
You talk about what kind of underlying date that go into radar and if the sensitivities to these underlying data into various regions are a very different.
Oh.
Sure.
Oh supposed to be on I'd say digital almost more broadly.
The posture of the company is taking is we want to be.
Neither here in the shaping the digital commerce in beverage alcohol and so we have a number of initiatives, including working with the big platforms working with retailers and as you point out we have some direct to consumer platforms like won't stop government, Bob Dotcom I'd say, that's still small that very much in that.
Experiment Tic mode in market in Europe than Brazil, et cetera, and they're doing it for learning and we were clearly none of them scale up from there but.
If I look at.
What were doing in Europe, and China, and even in the U.S. through the three jail system.
But really busy not digital commerce capabilities, the moving very rapidly in that area were investing behind that because we do believe it's gonna grow faster.
Then the overall market and one of the things I'm encouraged by is actually a market share in ecommerce channels for the most spot tends to be higher than in the physical channels and it just doesn't bother me, where well known brands that are well supported do well [noise].
[noise] and then second actually made up Ah, that's about radar and EW.
Yes, I'll call. It another module that will add on adding on to our catalyst cool. So sometimes we'll talk about our hedges tools with just about every day execution you know at the outlet level in markets that we're able to get a lot of data and information about what's happening around a particular outlets.
You know what our consumers do anything in terms of bars in the neighborhood what are the demographics of the neighborhoods and what would that I tend to lead us to believe are the best type. So yeah, I still plan to know to severely habitat outlets and what our programs that we can run that won't be a window.
In the outlet owner, so it's all about trying to get alcohol hyper local information and really trying to make sure. We're on the ground getting those local insight. So [laughter] next logical within catalyst that it's something similar and it's looking to draw back haul information you know not just about.
The macroeconomic situation in a place like is that what about the specific economic situation. You know what is called level or within the region within the state. So that we understand whats happening both it up at a very micro and local level again. So we can determine what are the back.
All right after that so that we have high confidence that our marketing dollars are really going to get high returns well, it's all about having more and more local information. So that we can make local decisions. We you know clearly we won some national advertising campaign.
[noise] really being able to on the ground to just I think locally.
Great brands and overall, but to the business.
Right right right after tax season.
You're welcome well, what I'm not going through a close here again, a big Thank you to everyone for your interest in the company I Hope you wouldn't your family or stay well unsafe and I've got to you and I look forward to connecting with many appeal in the next few days. Thank you.
[noise]. Thank you everyone. This concludes todays conference. Thank you for your participation you may disconnect.
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