Davide Campari-Milano N.V. (CPR) Earnings Call Transcript & Summary

Good afternoon. This is the chorus call conference operator. Welcome, and thank you for joining the Campari Group First Half 2021 Results Presentation Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Bob Kunze-Concewitz, CEO of the Campari Group. Please go ahead, sir.

Thank you. Thank you very much. Good afternoon, and a very warm welcome to our first half 2021 call. As you can imagine, we're quite pleased to celebrate 20 years as a public company with such a nice set of numbers. If you follow me to Page #4, our kickoff with the highlights. As you can see throughout the presentation, we have strong double-digit growth across all of our indicators and importantly, not only versus the first half of last year but also versus the first half of 2019 with quite a strong acceleration in Q2. We have strong momentum across all of our key markets and brands, and this is thanks to a combination of a sustained home consumption as well as the benefits of the gradual reopening of the on-premise across markets. Kicking off of net sales. On an organic basis, we have an overall growth of 37.1% versus the first half of last year. The second half, as I mentioned earlier, accelerated -- sorry, the second quarter accelerated by 54%. Clearly, these numbers are also benefiting from a favorable comp base. Last year, we were down in the first half by 11.3% and in the quarter, the second quarter by 15.9%. And if you look at our core markets, the U.S. is up 29%; Italy, 55.8%; Germany, 11.9%; and Australia 11.5%. All of our priority brand clusters are up double digits. Global Priorities 35.7%, driven by very strong Aperol, Campari and Grand Marnier. Regional Priorities are up 44.3% mostly driven by Espolòn. and Local Priorities are up 39%, driven by our RTDs. Our overall organic growth was 22.3% versus the first half of 2019. And I think that's very important given all the fog due to the fact of comp bases and shifts from channels. With regards to the second quarter, we're up 30.2% versus the second quarter of '19, and this underlying solid business momentum. I already discussed most of our core markets, but clearly, across the range, all markets are growing very, very strongly. Brand-wise, as well, Aperol, Campari, Wild Turkey, Grand Marnier and Jamaican rums and Espolòn, all grew by double digits. On a reported basis, we're up 30.2%, and this reflects a negative perimeter down 1.3%, mainly due to a termination of an agency brand portfolio in Germany. But on the other hand, from a ForEx standpoint, we have a negative effect of 5.6%, so quite substantial driven by the devaluation of the U.S. dollar as well as emerging markets currencies. Looking at adjusted EBIT. Organically, we're up 88.7% versus the first half of last year, leading to a 640 bps margin accretion. And this is driven by the favorable sales mix as well as the easy comp base. You'll recall that last year, in the first half, we were down 30.8% and had a 470 bps dilution in marginality. Gross margin was accretive by 130 basis points. Again, here, a favorable sales mix was driven clearly by the aperitifs, which more than offset the dilutive effect of Espolòn. A&P was slightly dilutive, only 10 basis points, whilst the SG&A were highly accretive, 520 basis points, driven by the very strong top line growth as well as the easy comp base. Versus 2019, our organic growth is a very solid 33.3%, leading to 190 bps accretion driven clearly by the top line. On a reported basis, the adjusted EBIT is up 71.2% after the negative perimeter effect as well as the negative ForEx effect. Net profit on an adjusted basis came in at EUR 156.8 million, up triple digit, 101.9%. And on a reported basis, even stronger, EUR 159.6 million, up 118.7%. Moving on to free cash flow and then financial debt. We've generated recurring free cash flow quite strong at EUR 141.6 million, up triple digits, 117.7% versus 2020 and up a very strong double digit versus 2019 of 64.2%. On the basis of this, our net financial debt stood at the end of the period at EUR 1.65 billion, which is down EUR 39 million versus the end of 2020. And it's mainly driven by the positive free cash flow generated by the business. This, together with the strong generation of EBITDA led to a net financial debt-to-EBITDA ratio down to 2.2x, significantly down from the 2.8x we had at the end of the year. Moving on to Page #6. And here, we illustrate the off-premise sell-out value growth as well as our shipment value growth, both versus the first half of last year and the first half of 2019. And it's important, we believe, to look at it from a 2-year stack standpoint because, as I mentioned earlier, there's quite a bit of fog there due to the high comp base. You will recall, our consumption indicators were very, very strong in Q2 of last year. And obviously, that forms a comp base. It's also interesting to make the comparison versus 2019 to see what the lasting effect is of the penetration of cocktail culture at homes. If we look at the anchor market of the Americas, in the U.S., the sell-out versus 2021 is slightly down. That's because we were very, very strong, one of the fastest, if not the fastest-growing company last year. If we compare it to 2019, we're up 33%. In Germany, we're up 6.3% versus a very strong first half of last year and up 29% versus 2019. In Italy, our sell-out is up 23.8% versus last year and 45.8% versus 2019. Clearly, in Italy, when you look at shipments, there's a big difference between how we did versus last year as we suffered significantly from the lockdown in Q2. But net in net, even in Italy, we're up 4.3% versus 2019, really showing the solidity of our brands and their momentum. Australia, least (sic) [ last ] but not least, sellout up 9.5% versus a very strong 2020 and up 27.5% versus 2019. The following chart, Chart #7, is probably my favorite from this whole presentation because it shows that we're firing on all of our cylinders. Effectively if you see the performance of the top line by region as well as by priority cluster, you'll see that we're growing double-digit across all of our regions as well as all of our priority clusters, not only versus 2020 but also versus 2019, and that's quite a remarkable thing. Moving on to Page #8, there's not much actually to report here. I think it's more interesting to move on to the following one in the Americas. The Americas overall were up 34.2% and. And again, here, it's a combination of resilient home consumption as well as the very positive effect of the gradual reopening of the on-premise. Our largest market, the U.S., was up 29%, and solid growth across all of our core brands with acceleration in Q2, where we were up close to 43%. The reasons I just highlighted earlier. Bear in mind though, that we are in the U.S. favored by an easy comp base in Q2 2020, driven by destocking. We were down by 8.6%. In particular, our heroes in the U.S. are Espolòn, Grand Marnier, Wild Turkey and the Jamaican rums, which had -- all of them had strong double-digit growth in the half. Also very pleased to see our aperitifs, comparing Aperol back to very positive territory in Q2, growing respectively, 47.6% and 145%. So we're clearly back in recruiting mode. Our overall sales performance was up 24.6% versus 2019, which you will recall was also a very strong first half. So on the back of strong numbers, we're growing double digit. And this is thanks to strong brand momentum across the portfolio. Sell-out on the other hand, reflected a very tough comp base versus H1 2020. But again, as I reiterated earlier, when we look at it versus 2019, which is the right benchmark, you can see that mostly our in-house consumption is holding on. It has actually grown significantly, and we're up by 33%. Canada is up by 20.7%. We're seeing nice, sustained growth led by Forty Creek, Aperol, Appleton Estate and Grand Marnier. And this despite the normalization, obviously in Q2 due to the same tough comparable base effect we saw in the U.S. Jamaica, up strong double digit, 33.9%, very positive growth. On the one hand, yes, we had an easy comp base, thanks to the resilience off-premise performance as well as some -- we are seeing some initial recovery of the local tourism sector, which is obviously helping with the on-premise consumption. Strong performances, again, across our core brands, Wray & Nephew Overproof, Campari, Appleton Estate and Magnum Tonic. If we look at the remainder of the region, a very strong growth, 74.4%. Clearly, this is happening in a very volatile trading environment and is helped by a very easy comp base from last year. But it's also good to see markets such as Brazil, Argentina and Mexico returning to an accelerated growth in Q2. Moving up to SEMEA on Page #10, where we see the strongest bounce back up 57.4%, very strong in Q2. Italy leads the way, up 55.8%. So we're clearly seeing revenge conviviality. I mean if you come to Italy, all of the sidewalks are full of tables, bars, restaurants, and you'll see wave after wave of orange and red. Quite positive results. Yes, the comp base was easy. We were down 33.1%. But we're really seeing the effect of the reopening of the on-premise in the second quarter, which was up 106.5%. And this is clearly traced to the positive developments linked to the acceleration in the vaccination campaign, where Italy is doing very nicely. There's also some slight stock replenishment ahead of the peak summer season, but it's important to say that these aren't really material. Now very positive performance in Q2. And if we look at it on a brand basis, Campari, up triple digit, 121%. Aperol triple digit as well, 124%. Nice bounce back on Crodino, up 74.7% and Campari Soda continuing with its positive momentum, up 81.8% compared to the first half of 2019, which was obviously -- which is the benchmark as it was unaffected by the COVID-19 pandemic. The Italian business is up 4.3%, which really confirms the strong brand momentum. France also is going from strength to strength, up 61.8%. Very positive brand momentum driven by the likes of Aperol, Riccadonna, Trois Rivières rums, which have actually reverted to our distribution network from January onwards, Campari, Grand Marnier and The GlenGrant are also giving us satisfaction. GTR is up 24.3%. It looked like a nice number, but we need to bear in mind that last year, we had a very easy comp base, unfortunately, where we were down 60.7%. The initial lifting of travel restrictions is helping. But clearly, we're very far from where we were from the unaffected base of 2019. And if we compare versus that base, we're down 52%. The rest of Southern Europe, Middle East and Africa is up 67.5%. Again, these are performances driven against an easy comp base, particularly in on-premise food markets such as Spain, which were up 58.3%. In South Africa, we've had, again, progressive restocking as we had changed our route to market last year. But when we look at it from a total group basis, that clearly is not material. Moving on to North, Central and Eastern Europe going from strength to strength, up 23.5%, sustained strong performance, helped also by the on-premise reopening. Germany, up double digit, 11.9%. Nice strong Q2, up 14.4%. And importantly, it's -- one must look at those numbers within the context of a prolonged lockdown as well as record cold weather in Germany in the month of April. So these are very, very strong numbers within that context. The performance of the group in the first half was largely due to Aperol, up 17.1%, Campari, 6%. And we've had also a very, very successful launch of the Aperol Spritz Ready to Enjoy. We're seeing nice resilient home consumption. And as soon as the on-premise opens, we see droves of consumers going back to it. And that should also start impacting positively Averna and Bulldog. Crodino, which is turning into an interesting business in Germany, but also in the whole North, Central, Eastern Europe cluster, is up 27.7%. Actually, if we look at total Crodino now, about 18% of the volume is coming from this region. So it's a nice development in the past 2 to 3 years. The U.K. continues to remain very, very strong, up 37.1%. Triple-digit growth on Magnum Tonic Wine; sustainable double-digit growth on Aperol, up 42%; Wray & Nephew, 32%, Campari totaled 6.1%. Again, here, we're able to combine resilience in the off-premise as well as strong performances in the on-prem. Russia also strong, up 44.1%, very positive performance with an acceleration in Q2, almost 70% up. Again, double-digit growth rates behind Aperol, Mondoro, Cinzano sparkling wine, Campari and Espolòn. The rest of the region, Central Europe and the Nordics are up 28.1%. Very, very nice performances coming from a strong basis in key markets such as Switzerland and Austria. To round it all up, APAC, up 30.8%. We're seeing nice, continued growth helped also by shipment recovery as we've made a lot of route-to-market changes in Asia last year. Australia, which is -- where, obviously, we didn't do any changes is up double digit, 11.5%. Very positive performance in the half. We've had a strong start to the year, but a normalizing trend in Q2, up 1.7% due again to the very, very tough comp base, we were up 19.2% last year. If we look at the rest of the region, it's up almost 93%, very positive results in Japan, New Zealand, China and South Korea, which were not only positively impacted by consumption but also from the strong shipment recovery due to the post route-to-market changes. If you look at China, we're up 37.5%. And here, the key drivers are X-Rated Fusion Liqueur, Aperol, SKYY Vodka and Wild Turkey bourbon. Japan was also nicely growing behind Wild Turkey bourbon, The GlenGrant and Campari. Moving on to performance by our global priorities on Page #14. Again, some wonderful performance indicators starting with our aperitifs. Aperol up 42% versus a year ago, 25.7% versus the unaffected base of 2019. And as you'll see in the text on the right which I'm not going to go through, we're growing double digit across the range as we're back in the on-premise recruiting via our very effective activations. Campari, the same, up double digit versus both benchmarks, 39.5% versus a year ago and 24.6% versus 2 years ago. Again, strong growth across the base. In Chart #15, you see, from a consumption indicator standpoint, the indicators versus the unaffected base. And again, you see very nice progressions. Moving on to Page #16. Wild Turkey also growing double digit, 26.8% last year, double-digit, 17.4% versus 19. Good strength in the U.S., Canada, whilst Australia was impacted by the very tough comp base where the brand had grown almost 37% last year. SKYY is up 12.6% versus a year ago and down 5.8% versus 2 years ago. But clearly, between the unaffected benchmark. And today, we've had significant destocking in the U.S. on SKYY last year, ahead of the brand relaunch. So obviously, that impacts the KPIs. We have overall a positive performance, mostly driven by the international markets at this stage, Argentina and South Africa as well as Germany and China. In the U.S. the brand was relaunched, as you know. We did the distribution in the second quarter, and we started the activations in the campaign in the third quarter. On a full half basis, we're up 1.5%. Moving on to Grand Marnier, which is really benefiting from the premium tequila brand and the premium margaritas brand with the Grand Margarita, up 52% versus a year ago and 39% versus 2 years ago. We're also seeing nice performances in France and Canada. Our Jamaican rum portfolio, up double digit as well, 29.7% versus last year, 35.6% versus the unaffected base. Appleton Estate, as you know, has reacted very well to the relaunch with new packaging, new ranges, liquids and price repositioning. Wray & Nephew Overproof is just continuing on its regular growth pattern, up 27%, doing very nicely in Jamaica, the U.S., Canada and the U.K. The rest of the portfolio, including Kingston 62, which we launched this year and replaced some of the lower-level Appleton ranges, is doing nicely. Moving on to Page #17. Espolòn, very, very strong 56.4% versus a year ago, 62.8% versus 2 years ago. Clearly, in the core U.S. market, that 56.4% was also helped by anticipated sales. We try to limit them to the minimum possible ahead of the price increase in July. Beginning of July, we took 2 price points on the big size and 1 price point on the small size or regular sizes. And again, we're one of the few companies taking pricing in this category. Bulldog returning to nice growth, again, 50.9% versus year ago and 15.9% versus 2 years ago. And this despite the fact that one of its main channels, GTR remains depressed. And the impact of GTR can also be seen even more on The GlenGrant where the brand is down 2.6% versus the unaffected base of 2 years ago, but clearly up 43.6% versus year. Our Canadian whiskey is progressing nicely, up 15% versus year ago and double as much versus 2 years ago. The Italian bitters are doing nicely versus a year ago but are still slightly down versus 2 years ago, as it clearly -- it's more in the outdoor space of restaurants which are being used. So the quantity of people isn't still back to where it was. Cinzano, up 33.4% versus last year, a solid 8.7% versus 2 years ago. And Mondoro and Riccadonna, which are the more premium sparkling wines, up very strong, both in the 70s versus last year and the year before. Closing up with our local priorities, Campari Soda gives us a lot of satisfaction and that's very important. So we're really benefiting from this ready-to-go cocktail occasion, up 24% versus 2 years ago and 79% versus last year. Crodino is doing well versus last year, but it's still down versus 2 years ago, and this is one brand we're working on. As I mentioned at the beginning of our presentation, we had a very successful launch of the Aperol Spritz Ready to Enjoy in many markets. We're up almost doubled versus a year ago, and up almost triple versus 2 years ago. We've introduced it in 10 markets, including the test market in the U.S., and the results are very satisfactory so far. Our RTDs in Australia continued to perform very nicely, up 14% versus a year ago, 40% versus 2 years ago. Magnum, again, very nice Jamaican gem up 70% versus a year ago and 60% versus 2 years ago. X-Rated, buoyed by strong performances in China and Korea, doing very nicely, doubling versus a year ago and again, almost tripling versus 2 years ago. Last but not least, Cabo, which is mostly an off-premise brand, is obviously penalized by the high comp base in the U.S. last year. but still showing nice progression versus 2 years ago. So this was the roundup on the brands and on the sales. Now I'll pass it over to Paolo for the juicier bit.

Thank you, Bob. If you follow me to Page 20, where we have the analysis of the net sales and EBIT by region. We can see that the Americas as a region still remains the group's largest region in terms of net sales at 43.9% as well as profitability at 45.6% of group's EBIT. SEMEA, which was the region heavily hit by pandemic, given its strong exposure to the on-trade channel, particularly for the high-margin aperitifs, has largely improved its weight in the first half both in terms of net sales at 29.3% as well as profit at 18%. Moving on to the analysis of the largest region, Americas, Page 21. We can see that on a reported basis, net sales were up 22.6% and EBIT was up 47.6%, in value terms from EUR 69 million to EUR 101.9 million with 390 basis point EBIT margin expansion in the first half of the year. But if we focus on the organic performance, we see that net sales were quite robust, up 34.2% and EBITA was up 73.6% overall with 570 basis point margin accretion. Focusing on the organic performance to the right-hand side, we can see that gross profit increased in value by 35.6%, up EUR 74 million. At a stronger pace than sales leading to 100 basis point margin accretion due to favorable sales mix combined with positive impact from the U.S. import tariff suspension. The favorable sales mix by brand as well as channels was made mainly driven by the high-margin brands, namely Grand Marnier, Wild Turkey, Campari, Aperol, which more than offset the negative effect of Espolòn, with margin continuing to be affected by the stable but still elevated agave purchase price. The A&P increased in the first half by 34% in value, EUR 19.5 million with an acceleration in the second quarter behind key brands to benefit from the gradual reopening of the on-trade channel in key countries, particularly the U.S. And in particular behind SKYY Vodka in connection with its complete relaunch. The A&P growth was broadly in line with top line, hence was margin neutral. The SG&A expenses grew at a more moderate pace, 4.1% in value, EUR 3.7 million, leading to a 270 basis point margin accretion, thanks to the very strong top line growth. Perimeter and FX, overall, an haircut of EUR 18 million with 180 basis points margin dilution, primarily driven by the depreciation of key group currencies such as the U.S. dollar, which was particularly negative in the first half, whilst it would be a little bit more is in its comp in the second half of the year, as well as the hyperinflationary effects in Argentina negatively impacted FX and perimeter performance. Moving on to Page 22. Second largest region, SEMEA. On a reported basis, top line was up 60.6% and bottom line, the EBIT moved from negative territory, EUR 1.8 million to positive territory EUR 40.2 million, with EBIT margin expansion of 14.7%. If we look at the organic performance, again to the right-hand side, gross profit increased in value by 60.5%. As you can see, EUR 68.2 million gross profit uplift at a pace that was clearly stronger than net sales, and in so doing leading to 120 basis point margin accretion margin accretion. Margin accretion was driven by the outperformance of the high-margin aperitifs at the beginning of their peak season. So very, very strong results. A&P increased in value by 40%, corresponding to EUR 13 million, reflecting the accelerated investments in the second quarter of this year behind key brands. Particularly, Campari and Aperol benefited from the on-premise reopening and were properly supported. The increase in A&P was below top line growth, and that generated 100 basis point margin accretion. The SG&A increased in value by 12.9%, corresponding to EUR 10.5 million against a very low comp base. And they were highly accretive, 12.7%, thanks to the strong top line growth in the region of organic growth of 57.4%. FX and perimeter, neglectable effect at just EUR 2.7 million with 120 basis point margin dilution. If we move on to the following region North, Central and Eastern European region, Page 23. Overall, net sales grew by 11.6% and EBIT by 26.6% from EUR 57.4 million to EUR 72.7 million with EBIT margin expansion of 450 basis points on an unreported basis. If we focus on the country under organic performance on the right hand side, EBITDA adjusted organic growth accounted for 33% or EUR 19 million, which was higher than the net sales, leading to 260 basis point margin accretion. The gross profit contribution was a 28% growth in value, EUR 31.4 million higher than net sales, driving 250 basis point EBIT margin expansion, totally attributable to the strong performance of the aperitifs in the region. The NPE step-up accounted for 33.3% in value or EUR 8.6 million, again, higher than net sales leading to 120 basis point margin dilution whereas we saw sustained investments -- marketing investment behind key brands, investment that accelerated in the second quarter following the gradual reopening of the on-premise channel. The SG&A were up in the first half by 13.7% in value, EUR 3.9 million against, again, a fairly low comp base, a negative 3.7% in the first half of last year. The SG&A growth was clearly lower than net sales, hence generating the 130 basis points fluctuation that you see in the chart. FX and perimeter performance was overall negative, EUR 3.6 million. But overall, accretive to the margin [ ID ] by 190 basis points. The negative impact was attributable to the depreciation of the ruble. A negative perimeter most attributable to the termination of low-margin agency distribution contracts in Germany. If we move on to Page 24, APAC, still the smallest region, but again, very, very strong results. On a reported basis, top line was up 37.2% in EBIT, up 48.1% in the first half from EUR 5.7 million to EUR 8.4 million. On an organic basis, the EBIT performance was quite robust, 21.3% up, but lower than the net sales, generating a 70 basis point dilution, which is fine given the focus that we have in the region to build up the business on the back of A&P investments and investments in route-to-market capabilities. And in fact, if you see A&P notwithstanding an increase of gross profit of 30%, corresponding to EUR 7.9 million, A&P has been stepped up by 75.3% in value or EUR 4.7 million. And SG&A has been increased by 14.3%, EUR 2 million, more than offsetting the -- almost offsetting the -- sorry, almost offsetting the gross margin contribution. Effects and perimeter, although tiny, drove a positive impact on P&L, EUR 1.5 million on the back of the appreciation of the Aussie dollar versus the euro. Page 25 (sic) [ Page 26 ] the P&L at the glance, again, on a reported basis. This is both versus '20 and both versus 2 years ago, the unaffected basis of 2019 versus last year. On a reported basis, net sales were up 30.2% and EBITA adjusted was up 71.2% from EUR 130 million to EUR 223 million. But if you focus on the organic performance, top line, quite robust in the first half, 37.1% up and EBITDA adjusted, up 88.7% with EUR 115.6 million EBIT uplift coming from existing business and 600 basis points organic EBIT expansion, driven by EUR 181.5 million of gross margin uplift. By the way, driving 130 basis point EBIT margin expansion, partly reinvested in A&P step up by EUR 45.8 million and SG&A investments of EUR 20.1 million, leading to an almost neutral effect on A&P, 10 basis point dilution, but a strong operational leverage within the SG&A line, driving 520 basis point EBIT margin expansion. Perimeter and FX haircut accounted for EUR 22.8 million in the first half with clearly a very negative impact in the first half, which is destined to be easier as a comp base in the second half and 110 basis point dilution again from FX and perimeter. Worth noting the performance versus 2019, where we have net sales up 23% and EBIT adjusted up 33.3% versus quite a strong year 2019. More in detail, Page 27 versus first half of last year. Gross margin on a reported basis, 33% up in value, 140 basis point accretion. The organic performance, which I've mentioned, which was 40.1% in value leading to 130 basis point margin accretion was due, as commented in the segment analysis to favorable sales mix, thanks to the outperformance of aperitifs, starting to benefit also from the U.S. import tariff suspension, coupled with stronger absorption of its production costs. So operational leverage within costs, driven by high production volume and an easy comp base. Those 2 positive effects were able to more than offset the dilutive effect of Espolòn which versus last year, accounted for 100 basis point versus 2 years ago accounted for 180 basis points, as you can see below. Again, A&P, a meaningful organic step-up in A&P, 37.6% in value, neutral on margin, reflecting the accelerated investment in the second quarter behind key brands, aperitifs in their peak season as well as we do a low comp base. And SG&A organically up 10% in value with a very strong margin accretion. EBIT adjusted performance already mentioned before, organically, again, 88.7% in value, up 640 basis point margin accretion. Versus 2 years ago, the gross margin, [ EBIT ] is still quite robust, 18.2%, with still a margin dilution of 200 basis points that we need to recover going forward. We've achieved a 130 basis point organic gross margin recovery versus a year ago, but we're still lagging behind 2 years ago by 200 basis points. And this was due to unfavorable versus 2 years ago sales mix driven by, again, Espolòn, which I've mentioned, which is 180 basis points of the 210 basis point. And the only brand that is behind 2019, that is SKYY and probably Crodino. Indeed 2 brands, SKYY and Crodino in the Italian market. But again, on a 2-year basis, the A&P step-up is still quite strong, 10% over 2 years with 180 basis point accretion given the robust 18.2%, the robust 22.3% top line growth in the SG&A growth over the 2-year period was okay at 10.6%, so 5-plus percent year after year with margin accretion of 220 basis points. EBIT adjusted versus 2 years ago on affected basis, 33.3%, 1/3 higher with 190 basis point expansion. Moving on to Page 28. We see operating adjustments previously called one-offs, [ EUR 6.1 million ], primarily attributable to restructuring initiatives. Last year, we had EUR 27.4 million of negative one-offs, primarily attributable to brand impairment losses, noncash. On the total financial charges, we've recorded EUR 8.8 million versus EUR 19.2 million. But if we carve out the effects of the exchange gain and losses, in the first half of this year, we achieved EUR 4.2 million of exchange gains. And last year, we've registered EUR 1.3 million of exchange losses. So net of the one-off exchange gain losses effect, the total financial expenses before exchange gain losses accounted for EUR 13 million this year versus EUR 17.9 million of last year, with a significant compression of the coupon, down from 3.9% to 2.4% due to the liability management transactions that have been carried out in 2020. If you look at the 2.4% average cost of net debt, excluding the exchange gain and losses, this is due to a true cost of net debt, excluding the negative carry of 1.7% plus a top up 0.7% of negative carry effect. On the financial one-offs, financial adjustments, we have EUR 4.6 million that are relating to interest income resulting from the favorable closure of previous tax disputes in Brazil. So we won the case in Brazil. And then we have a minute put option effect of EUR 0.4 million and a positive effect related to associates and joint venture accounted for EUR 1.9 million. That is due to the assessment of the group participation in the South Korean JV which we acquired a controlling stake in -- at the beginning of this year. [ EBIT ] profit before tax reported was up 112.4%, adjusted of one-offs in operating financial adjustments and whatever. We have a profit before tax adjusted increase of 93.5% at EUR 213.1 million. If we move on to the following Page 29, we can see that the taxation came in at EUR 54.9 million on a reported basis and group net profit came in at EUR 159.6 million, again, on a reported basis, 818.7% (sic) [ 118.7% ] versus a year ago. Adjusted of the one-offs, group net profit came in at EUR 156.8 million and was up and 101.9% versus a year ago. Looking at the tax rate, even here, we see some positive news, the recurring tax rate down from 29.7% on an adjusted basis to 26.5% and on a reported basis from 28% to 25.6%. But most notably, the recurring cash tax rate, cash tax rate, clearly under control and below last year from 23.6% down to 21.8%. If I manage to turn the page and move on to Page 31. We have the free cash flow analysis. I will focus on the recurring performance. EBITDA adjusted up 54.2%, EUR 90 million year-on-year from EUR 169.7 million to EUR 261 million. We then have taxes paid that have been stable on a recurring basis year-on-year at about EUR 23 million. And then we have a change in working capital. It's clearly leading to EUR 43 million increase in change in working capital, from negative EUR 55 million to negative EUR 98.7 million, clearly it's totally driven by the acceleration of the top line of the business in the first half. So increase in receivable, as you can imagine. And cash flow from operating activities increased by EUR 78 million, 80.9% year-on-year from EUR 96.8 million to EUR 175 million. With regards to interest paid, fairly stable at 8.3 -- on a recurring basis, EUR 8.3 million. And then we have the CapEx coming in on a reported basis at EUR 74.4 million with maintenance CapEx at EUR 25.3 million, with an extraordinary CapEx increase related to the purchase of real estate investment in London, the new London office that we've bought to fulfill the regional headquarter in the new office. Recurring free cash flow, up EUR 55.4 million, 64.2% versus a year ago and a very positive news on the ratio of recurring free cash flow over EBITDA adjustment, adjusted that grew from 38.3% of last year to 54.1% this year, which is a level even higher than 2 years ago, 2019 unaffected basis, which posted 40.1% recurring free cash flow over EBITDA adjusted. Moving on to operating working capital, Page 32 as said organically, we have an operating working capital increase of EUR 98.8 million, driven by increase in inventory, EUR 45 million, of which EUR 15.5 million is aging liquid to support the growth trajectory of GlenGrant, Grand Marnier. Increase in receivable of EUR 44 million and minute decrease in payable of EUR 9.7 million. ForEx had a positive impact of EUR 11 million, and perimeter, a negative impact of EUR 2.5 million. Again, on KPIs perspective, operating working capital as a percentage of net sales came in at 36.5%, down 160 basis points compared with last year and down 110 basis points compared with 2 years ago 2019. And totally in line with our target of achieving a 1% operating working capital compression over net sales in comparison to 2019. Page for the full year. Page 33, net debt reduction, thanks to positive business performance. We've seen recurring free cash flow of EUR 141.6 million reported free cash flow of EUR 82.9 million. And then we have the dividend, a net purchase sale of owned shares accounting for an income of cash flow -- positive cash flow of EUR 20.6 million, leading to 6 months June end, net indebtedness of EUR 1,064.8 million. With regards to that maturity profile, again, even here, quite a solid position, long-term euro bonds and interim loans account for EUR 1,150 million. We're sitting over EUR 668 million of excess cash which is more than enough to repay loans and bonds that are expiring in the coming 2 years, with an average nominal coupon of 1.42% and a fixed interest rate that accounts for 78% of the overall gross debt. So with very solid position, vis-a-vis the hedging of interest rate risk in which may or not arise in future years. I think this is it on numbers, but I would happily back to you on the conclusions.

Thank you, Paolo. Before we get to the conclusion, just some updates on business development on Page 36. You'll see we're very pleased to introduce the Notes Collection. It's a new range of nonalcoholic super premium spirits dedicated to the high-end on-premise. You can have them both neat as well as mixers. Now clearly, this is a segment of the market which is seeing a lot of action. It's very interesting, but we do believe that we have an edge in the quality of the liquids. Because unfortunately, whilst there's a lot of action in this category, it is littered with products which don't have much of a taste. So look, at this stage, we're going to take our time to build it on the on-premise, but hopefully in the mid- to long term it will become a nice addition. Our brands continue to receive very strong accolades for their liquids, be it Bisquit Dubouché or the Appleton Estate age range, very active on new campaigns as well as premiumizing our brands. We're launching a premium Cristalino, which is a special form of añejo tequila in Espolòn. We've launched it in Mexico quite successfully. It we'll be launched in the U.S. in the second half of this year, and we have high expectations behind that. Last but not least, we're introducing a 60 years -- a 60-year-old GlenGrant to celebrate our master distiller, Dennis Malcolm, who's been 60 years in the industry. He actually spent most of those years -- he started in GlenGrant, and then came back to GlenGrant after his retirement. And this is a super premium and -- well, ultra-premium, to be honest, and quite unique as nobody else in the industry can claim to have put something into a barrel and then actually put it into a bottle 60 years later. Moving on to SKYY. We're clearly right in the middle of the relaunch. We did the distribution job in Q2. And now the relaunch campaign is in full swing. So we kicked it off at the Independence Day, and we're going to stay on this for quite some time. We're very pleased with all of the assets which were developed, which were very well received by consumers and the trade. But clearly, this is something which we need to stay on for a long time because turning around a brand in the highly competitive U.S. vodka category will take some time. Moving on to Aperol. As I said earlier on, Aperol has become the symbol of the reopening, be it in the U.K., in Italy or even France, where you can see the picture in the bottom of the French President celebrating the reopening of the terraces with a wonderful Aperol Spritz in his hand. But more important than that is the fact that we're back to recruiting new consumers quite aggressively with a lot of activation and a lot of events throughout the world. So the world continues to be turned orange. One nice addition, which we think is going to be strategic for the long term because it's the beginning of a program. We're going to open a Terrazza Aperol in Venice, which is the heartland of Aperol this late summer in Campo Santo Stefano. It took us more than 3 years to find the location and that's where 9 million tourists walk by every year. So clearly, it's going to be a very important, I think, embassy for the brand as well as a model for more Aperol terraces, which will pop up around the globe in the years to come. On Page 42, to evolve -- this is something we've announced a few weeks ago. We've gotten together with our friends at Moët Hennessy, and we've pulled our stake in Tannico, into a joint venture with them, which is 50-50. And this makes 2 strong and complementary players, obviously there to support the growth of Tannico, which already started by making an important acquisition in France, but this will not be the last one. Last and but not least, we're very proud, as you can see on the ESG front, we've been upgraded by MSCI from a BBB to an A, and this is definitely for us a further incentive to continue on raising the bar in this very important area for us. Before moving on to the conclusions, as I kicked off at the beginning of this call, this month, we're celebrating our 20 years as a public company. It all started on July 6, 1991 -- sorry, 2001. I'm getting my math wrong here, taken over by the emotion. And we're quite proud to see that market cap has grown to EUR 13 billion, 15x, and we've delivered an annualized TSR of 16% and outperformed all of our relevant indices in becoming the tenth largest company from a capitalization standpoint in the FTSE MIB. Clearly, we couldn't have achieved this without really the continued support of all Camparistas as well as our shareholders. We've always said this is a business which you build for the long term, and the long-term support of shareholders is absolutely fundamental as well as the daily passion, sweat and tears of Camparistas in building our brands. So we'll be celebrating this tomorrow at the Camparino. And I think some of you who are Italy-based will probably join us, and we look forward to raising a few cocktails to the health of our industry. Now in conclusion, what to say, but that a quite positive business momentum continued in the first half of 2021. And we're benefiting from the buoyant consumption, which is a combination of the partial reopening of the on-premise and sustained home drinking, the penetration of cocktail culture in homes. Clearly, it was also helped by the comp base. But I think overall, the outperformance is driven by consumer pull and consumption. Now looking at the remainder of 2021 and our underlying performance, we're quite positive on our brand momentum. We expect it to continue and it will be fueled by sustained marketing initiatives, which will accelerate the aperitifs peak season, so in Q3. And we will make the most out of the progressive food reopening of the on-premise channel as well as home consumption opportunities across our various markets. At the same time, though, we're living on this planet. And we know that some uncertainty remains and particularly in connection with the achievement of widespread vaccination in some key countries that have slowed down. There is a spread of new variants and that can impact the overall evolution of the global economic environment. So we're quite diligent. We'll remain agile and we'll make the most out of the situation. Looking at ForEx and perimeter, we and the effect on adjusted EBIT on ForEx. Our currency outlook is not -- we're not expecting it to materially worsen in the second half of the year. And on the perimeter also will remain broadly unchanged on a full year basis if we think about termination of agency brands, et cetera. So this is it on our side. And I see there are already quite a few people in the queue ready to ask the questions, and we're all ears, and hopefully, we will give the satisfactory answers.

[Operator Instructions] The first question is from Andrea Pistacchi with Bank of America.

Congratulations to these results. I have 3 questions, please. The first one is on the U.S. There's a lot of moving parts in this very strong performance in Q1 and H1, on trade, obviously, reopening the resilience of the off-trade, et cetera, the comps. Could you talk about maybe where you are, what the situation is with the distributor stock levels? Last year, you said that -- last year, you lost EUR 28 million sales in the U.S., and you thought this probably wouldn't come back. Whether that has changed and some of this is coming back? The second question is on emerging markets. They've been -- a lot of your emerging markets have been in the past 2 or 3 quarters, remarkably strong. Brazil, Russia are something like 50%, 60% ahead of 2019, I think. In H1, Jamaica is strong too. So what do you think underpins, really lies behind this and how sustainable is this performance in emerging markets? And maybe the third one is for Paolo on logistics costs. Some of your peers, some of the other consumer companies are flagging logistics cost as quite a headwind to margins this year. You didn't mention it in your prepared remarks. So I was wondering what you're seeing on logistics cost, whether this could affect your margin? And maybe how much of this could be a headwind to your margins this year?

Andrea, so I'll take the first 2 questions. As I mentioned in the presentation, we don't -- we haven't seen any material restocking across any of our markets. Now particularly in the U.S., our largest market, obviously, there are a lot of moving parts, as you said. And if you look at our distributor stock levels, I mean, in terms of days, they have removed -- remain unchanged. I mean we came down on days significantly last year, and we're committed to maintain those stock days. Clearly, on an absolute level, as the business performs well, that the stocks might increase. I mean the 1 or 2 brands where we've done slight adjustments, but again, it doesn't move the overall needle, It's on imports due to obviously the constraints you see in logistics and the ability of finding containers to cross the ocean. So net-in-net, we haven't seen any -- and we are not looking at having any major restocking in the U.S. In emerging markets, it's a combination of 2 things or 3 things. I mean, I think one is -- also in Q2, as the weather improved, people emerging out of lockdowns have been wanting to live their lives again. There's revenge conviviality in those markets as well. At the same time, though, we've been working very hard at the fundamentals of our business, particularly in South America. And the changes which we're making, both from a marketing as well as -- sorry, management, marketing and route to market standpoint are starting to be felt. In Jamaica, it's a combination of having winning brands with the pandemic overall, pretty much in control and tourists starting to arrive, albeit done on a lower level.

Yes, Andrea, on the logistic cost headwinds and more in general, on input cost, shed a little bit of light on how we see -- we need to separate this year from next year. With regards to this year, more in general, input cost is not an issue to us. We have a very strong gross margin expansion, which we expect potentially that needs to continue in the second half of the year. Logistics and viability of 3PL is more a bottleneck to make sure that shipments regularly flow through the channels, distributors, importers and our own market companies. But nothing that we want to signal. So we're clearly managing it and we do not envisage any issue there. Clearly, the perspective going forward is [ likely benign ]. There is clearly evident signs -- there are evident signs of increase of raw materials. So if you take as a benchmark last year 2020, cost of goods sold in our case accounted for roughly 42% of net sales with gross margin at 58%. Now we need to break down this 42% cost of goods into the 4 buckets. Typically, you have packaging raw material that, in our case, accounted for 50% of net sales. Then you have production that is a 27% logistic, that is about 12%. And then the rest 11% is agency brands that we buy and then sell into the marketplace. If you look at packaging and raw material, this is the area where we're noticing an increase in input costs and some pressure. You have packaging that in our case, account for roughly 20 -- sorry, 24%, where the biggest component is glass, 1%. And contrary to soft drink manufacturers and beer players can -- is cans, it's just 1% in our case. So we're not much exposed to aluminum cost increase as we do not have -- we're not particularly fan of bottled dark spirits as others do. And then you have raw materials that account for 26%. So looking at inflation on raw material and packaging material, we expect that overall, for next 3 years on a per liter per bottle basis, including some procurement productivity programs that we have in place, like central buying of product-related materials. We believe next year, the pressure overall will be at about 3% of overall COGS. So quite a different perspective vis-a-vis a year ago. But that said, we believe we have a number of offsets, which put us in a very strong position. First and foremost is price mix. So we've started taking price this year, and we'll do that more aggressively next year. So we believe we have quite a strong brand momentum. We primarily rely on proprietary band, not directly competing neck to neck on promos. And so with a very low price sensitivity, we feel quite good at raising price to offset input cost pressure. Secondly, we have the possibility of seeing some upside from the agave cost that it's a big piece of it because it's worth this year, a profit opportunity of EUR 40 million. So we'll start seeing signs of -- positive signs on the agave market. So we feel pretty confident that next year we will benefit from some material tailwinds on agave. And thirdly, there is the operational leverage on fixed production cost. Production costs are 27% of net sales, within which the fixed component is at 25%. So given the quite robust top line growth trajectory that we're experiencing that we'll expect to continue in coming months and quarters. Even there on the production operational leverage, there is quite a strong upside that we can enjoy. So net in net, we're not concerned about the inflation effect on raw and packaging materials and also on logistic euro cost. This is something we can clearly manage. If anything, we see COGS as a percentage of sales as an opportunity with upside on gross margin on sales going forward, both this year and next year as well.

Just to clarify one of those numbers you said, Paolo. I think you said that raw materials and packaging combined should drive around 3% of COGS inflation these on a per liter basis, however, you've got various factors that can offset this?

Yes. Correct. 3% of the 42% to be of the whole thing, yes.

The next question is from Simon Hales with Citi.

Congratulations on that 20-year anniversary. Three for me as well, please. Firstly, you called out some stock replenishment in SEMEA in Q2 as the on-premise is reopening. Are you able to sort of quantify how big a benefit that was in the quarter? And are there any other regions where that was material? And perhaps linked to that, Bob, you just said you were happy with stock levels in the U.S. at the end of the half year. Does that hold true to stock levels in all of your major markets globally? So that's the kind of first question. Secondly, you obviously delivered good levels of profitability in the first half, ahead of market expectations. Are there areas where you expect to redeploy some of -- perhaps some of the excess profit through the second half of the year? Maybe specifically your thought process around A&P spend in H2. I noticed obviously, that in SEMEA, A&P spend was running below sales growth in the first half. Should we expect that to catch up? And then just finally, just a quick one for you, Bob. I mean, I think a couple of quarters ago, you talked about the fact that you thought maybe between 10% and 25% of on-premise outlets might never reopen post-COVID. Is that still the sort of range of numbers you're expecting? Or things are a little bit better than you feared?

Thank you, Simon. I'll start with the last one. Yes, I think we were quite pessimistic when we came out with the 10% to 25% on-premise closure rate. I mean, particularly in the U.S. because a lot are reopening. And even in Europe, what we're seeing is that the number is much, much lower because obviously, all of the support which came from government has really kept them afloat. And particularly what they've done, as you know, has allowed outlets to operate outdoors while taking over sidewalks and that has given them quite a bit of oxygen. Now they're not back in rude health, but at least they do have oxygen. Moving on to your question on stocks overall. I mean, overall, last year, we really came down significantly with stocks across markets and brands and channels. And we are still continuing at low stock levels, which means that any surge in demand from consumers and on-premise partners has an immediate effect on our supply chain. And I must say they've done really miracles in this first half to respond to the increases on a weekly basis of forecast. Overall, as I said earlier, there's no material restocking effect. There's some slight phasing in Italy. But I mean if I look at how our Italian business is actually trading in the month of July, there's absolutely no effect from the slight replenishment at the end of June. It's all demand-driven. It's all pull-driven. So we our aim is to remain at low levels and ensure that from a supply chain standpoint, we're able to satisfy that demand and be very active and agile.

Yes. Also, given the constraint on [ availability ], managing shipment is somehow living in a constrained environment. So even if someone wanted to leave stores, it wouldn't be possible realistically. So talking to the second part of the year, how we see H2. Clearly, let's start from top line. Clearly, in the first half in second quarter, there was a clear bit of about EUR 100 million on net sales. We believe this is definitely under our belts, and this is something that will flow through to full year net sales. Then with regards to gross profit, as said, the current positive momentum in terms of gross profit on sales with gross margin accretion of 130 bps in the first half is destined to continue in the second part of the year. So we feel pretty confident about that. Then with regards to A&P on sales, clearly, we manage A&P on sales with a margin neutral stance. So that's the way to go, with some flags of 20, 25 basis points on sales. And depending on top line performance and gross margin expansion, we will maneuver the A&P to maximize potential going forward. And then there is the SG&A line, which given the very robust top line performance again going forward, generate some slight accretive due to operational leverage in SG&A. With regards to phasing of the first and the second A&P and SG&A, clearly, we see A&P on sales heavier in the third quarter where we still have to support peak season for the aperitifs. Whilst we see on the SG&A, the toughest comp in Q4, when basically last year, basically, we had a very low level of SG&A effect that basically we've [ cut a dozen ] back on STIs, MTIs, bonuses and whatever. So the comp clearly this year is tougher as you know, given the robust performance, we're in positive territory on bonuses. So -- but overall, we feel pretty confident that this year we will deliver a very strong result, given the fact that also Q3 started pretty nicely. So we're in a good position. We feel we're in a good position at the moment.

The next question is from Trevor Stirling with Bernstein.

Bob and Paolo, so 3 from my side, too, please. First one, Bob, it's probably too early to say we're post-COVID. But certainly, as we look forward, where do you think the big residual drags are today? I think you highlighted GTR, probably indoor hospitality in Italy. Are there any other pockets of the world where you still see some opportunity for a COVID recovery? Second question is if you look at the U.S., where I suppose we are almost completely open ground in the on-trade. Certainly, it's states like Florida and Texas more than fully open. Any learnings from that reopening process that you'd like to highlight? And the final one, I think a quarter or 2 ago, Bob, we said that one of the impact of the COVID crisis have been -- that maybe some potential M&A partners were more inclined to sell as a result of the experience with COVID, with the recovery in place, so those people now are having sort of cold feet and going back into their shells.

Yes. Thanks, Trevor. With regards to opportunities for recovery, I mean, clearly, there are some markets in South America, which are still quite subdued and they're closed. The same can be said for most of non-Pacific Asia, I mean, we still have quite a few lockdowns across Asia, which isn't helping us as we're more on-premise skewed in those markets. China is the exception, but the rest of Asia is pretty much locked down. And the same can be said on an off-and-on basis in Africa, particularly in South Africa. So in addition to GTR, those would be the 3 geographic areas which I would add to this. Now earnings from the reopenings is it's clear to see that as soon as markets reopen, consumers really go out there with a revenge mentality. I mean they want to go out, they want to celebrate. They want to see their friends. And they're going back to their established cocktails. So we're seeing that across the range. Overall, when you look particularly in the U.S., I mean, the premiumization trend is very, very solid. And the acceleration in tequila, high-end dark spirits, be it American whiskey or rum is happening as we speak. With regards to M&A, I mean, I think some people got scared about what they saw, but they know that it can happen again. So I don't think that the reopenings have really changed fundamentally outlooks. I think overall, there's some deep consideration as to what the future will bring and what is the best choices for individual companies. So we'll have to wait and see what the end result is. But I don't think that necessarily the reopenings have given -- have changed let's say, or eliminated the questions which were planted by the first lockdown.

The next question is from Edward Mundy with Jefferies.

Three questions from me as well, please. The first is around sustained home consumption trends versus the gradual on-trade reopening. On the home consumption element, as spend gets rebalanced between the on and the off trade, are you seeing any reversal of the premiumization trend that we've seen in the off-trade over the last 12, 18 months? The second question, going back to Slide 7, where you showed the very, very strong growth, not just versus last year but versus H1 '19 as well. If we drill into your biggest market, the U.S., I think one of the learnings is just seeing this longer lasting benefit from a consumer reaction to lockdowns, around making cocktails at the home. As we think about 2022, do you think we just grow off the higher base at a more normalized level, say, 4 or 5 in terms of the industry? Or do you think there is scope to grow off the higher base at a much faster level given these habits formed during COVID such as home mixology as well as premiumization. And then the third question is really around your tie-up with Moët Hennessy. I appreciate it's early days, but is there opportunity for a broader global collaboration over time?

No. With the regards to the sustained home consumption trends, is there any reverse of premiumization, we're not seeing it. I mean we're seeing the premiumization continuing, particularly in hot categories such as tequila and rum and American whiskey. So no change there. Now with regards to the U.S., looking at the base versus '19, clearly, all the consumption indicators show that there's been a significant increase of cocktail culture and penetration in home consumption. I mean if you look at our data, we're up in strong double digits across all of our brands. Question mark is what will 2022 give? I think it will probably mean that we will consolidate that acquired overall increase in penetration and build on that, but probably at a more normalized basis. And I'm afraid I'm -- I didn't make a note of your third question.

Moët Hennessy and the e-commerce in Europe. What is the opportunity of a sort of longer term for more global tie-up?

Look, I mean, we're still dating and -- let's see how it goes. I mean our agreement is to have a JV which is focused on Europe. There's plenty to do in a very, very fragmented marketplace. And before we start even building that, we need to go through the usual moves, antitrust as well as bring this to a closing. So that's what we're focused on. Meanwhile, in Tannico, they are busy integrating [Foreign Language], which is the first step of the consolidation on a European basis. And it's exciting. There's a great management team there at Tannico which, with the support of MH and ourselves, I think, has great opportunities ahead.

Next question is from Olivier Nicolai with Goldman Sachs.

Bob, Paolo. Just 3 questions on my side as well. First on Espolòn. The demand has been very strong. You mentioned that there is a price increase in July. Can you give us a bit more details on the magnitude of this price increase? Secondly, just to stay on Espolòn, if you go back to the slide, I think it was Slide 38 in your presentation. So I managed to find the price at the bottom on the right. But actually, I was interested to know what was the price of the bottle of Espolòn Cristalino. And if you think about this Cristalino brand expansion can essentially participate in the super premium tequila segment? Or do you still look to add new premium tequila brands to your portfolio? And then just lastly, since you mentioned very impressive 20 years' track record that has been built on organic growth, but also on a very active role in M&A. Just thinking over the next maybe 20 years, if you think or at least in the future, if you think that M&A will play still a big role in Campari's growth? Or should we expect just perhaps small bolt-on days or perhaps JV announcements like the one you have announced with Moët Hennessy?

Sure. Now on the Espolòn price increase, as I said in the presentation, we took 2 price points. So that means $2 on the large size, on the 1.75 liter and 1 price point on the 0.75 and the liter. With regards to pricing on Cristalino, yes, it will be priced in line with super premium brands because not only is it an añejo, but then it goes through other processes and the packaging is very, very premium. By the way, it's an excellent liquid. But that doesn't exclude the fact that we continue to look at the super premium and up part of tequila as an area of opportunity and between M&A potentially as well as some of the things, developments we have internally, this is certainly an area which we will cater to in the years to come. No doubt about that. Now with regards to will M&A play a role in the next 20 years, I would say absolutely, I mean, the whole move to the Netherlands from a corporate registry standpoint is actually based on that, to create a lot more flexibility in our capital structure. We've said that we're doing it for the long term. It doesn't mean that on day one, there's a transformational deal, but we like to prepare everything for when the opportunity becomes concrete.

The next question is from Laurence Whyatt with Barclays.

Firstly, you mentioned that next year, you expect the agave prices to be beneficial to your margins. I was wondering if you could quantify just sort of in terms of percentage moves where you think agave price has moved over the past few months and sort of what you're expecting to see for next year? Secondly, we've seen a dramatic increase in both at-home consumption but also the recovery of the on-trade suggests, a dramatic improvement in on-trade consumption as well. This looks like overall volume consumption by consumers has also dramatically increased. Do you see that as a sustainable trend? Or is this an increase in per capita consumption? Or is this a more people coming to different alcoholic products? Or how do you see that evolving as maybe we get through the revenge spending and consumption trends? And then finally, on your upgrade from MSCI to A-grade on your environmental credentials. Do you think that was -- what has driven that change? Is that something you've done internally -- you've changed internally this year? Or is this a greater engagement with these agencies?

Yes. I'll let Paolo answer the first question, and I'll take the other 2.

Well, on the agave price, we're, as I said, quite positive, vis-a-vis the prospects for 2022 as well as for 2023 when quite a significant part of in-house agave production will come to -- will be available at fixed internal cost of production costs. The -- with regards to price, actually, we've just started debating and discussing and negotiating with suppliers, the prices for next year. We will start becoming more concrete from September to December. So we're not now in a position of giving a good target, but directionally, we can say that we're in a good spot for next year. And in 2023, we will get more upside from internal production.

With regard to your second question, I think there are really 2 trends which are summing themselves up. I mean one trend is with -- as a reaction to the pandemic, people really do want to make the most out of their free time when they're able to meet friends, be it at their own homes or outside of home. So I think that this revenge conviviality is here to stay for quite a while. I mean, I don't want to be as presumptuous and say that it's going to be exactly like the roaring 20s after the First World War and the Spanish flu. But I wouldn't be surprised if something like that happens, at least that is the sensation I get from whatever I'm reading and people I'm talking to. So it's carpe diem, let's make the most out of life. We've taken too many things were granted. The other thing is that if you look at it from a category standpoint, is that within the setting of conviviality, spirit through cocktail culture are taking market share from beer as well as from wine. So it's a combination of those, which are making for quite robust demand for our products. And we believe in Campari that it is here to stay for quite a while. History will then show whether we are right or wrong. Now with regards to the MSCI upgrade, I mean, it is linked to increased disclosure, particularly on target setting, which we've done this year. And we're also -- this is an area where we've developed an internal organization which is clearly engaging with the relevant institutions out there, and making sure that internally, we all march to the same drumbeat and are there to hit the KPIs.

The next question is from Fintan Ryan with JPMorgan.

Paolo, thanks for the chance to ask some questions. Two from me, please. Firstly, just in terms of the relaunch of the SKYY vodka brands. How -- I appreciate that June was more to sort of sell in and then July be the big push in terms of e-commerce and the activations. But could you give us any sense of how you think that relaunch has gone so far in the U.S.? And any sort of targets you might be looking at for in terms of the market share within the vodka segment? I appreciate just all the calls ongoing, the Nielsen data for a big chunk of July has come out for the U.S. and it still seems the brand is quite weak at least year-on-year. So any color there would be quite welcome. And then secondly, I think the -- I greatly appreciate the sort of on- versus off-trade dynamics and some of the factors you talked about before. But specifically within the RTD or the ready-to-enjoy portfolio, note Australia has slowed somewhat in Q2 and given us quite large RTD markets for you in particular. Are you seeing any -- as the entree reopen is open, are you seeing it maybe a switch away from the RTD part of the portfolio? And how does that affect your thinking when it comes to launch of the Aperol ready to enjoy product across your key markets?

I'll take that last question first. I mean, we're seeing quite a bit of consumer pull behind our ready-to-enjoy propositions, be it the SKYY Blue RTD in Mexico and in Japan, whether it's the Wild Turkey RTDs in Australia, or Campari Soda and Aperol Spritz in Europe. So I mean, this is an area which is going to grow in the years to come. No question. And then depending on the market, there are movements from 1 month to the next, depending again on the opening and closure of the on-premise. I mean, currently, in Australia, the on-premise is mostly closed, and we're seeing very strong growth, again, back on the RTD. So we're going to have this volatility going forward. But having said that, if you look at the secular trends, they're all quite positive. With regards to the relaunch of SKYY, I'm going to disappoint you here because I mean, it is really way too early to come to any conclusions. I mean, every single element of the brand assets as well as a new liquid were thoroughly tested quantitatively in many markets, and they've tested very, very well. So we feel very good about the proposition. But a brand like SKYY in a category like vodka will take quite a bit of time to be turned around. I mean this is a super tanker, get -- build momentum within 2 or 3 weeks of the start of a campaign. We're going to stick to this because we believe in it. And I think we'll have a fairer read probably in a year or 2 years down the line.

Next question is from Mitch Collett with Deutsche Bank.

A couple of quick ones. A follow-up on Aperol Ready to Enjoy. Can you just comment on how many markets you're in now? And can you also maybe give us a bit of color on how the ready-to-enjoy product affects Aperol as a core brand? Is it in any way cannibalistic? Or perhaps even accretive to overall Aperol? And then I would say Crodino is a very small brand. But can you maybe comment on your rollout plan for that and to take advantage of nonalcoholic drinks? And also maybe feels a bit harsh to pick out the 1 brand that has gone backwards versus 2019. But given it's being successful in Germany and Switzerland, can you perhaps comment on the decline that Crodino seeing overall relative to 2019? I guess that's because Italy remains under pressure.

Yes. Look, Crodino, now international markets account for about 18% of the total volume basis or our net sales basis. So this is quite a development coming from basically 0 a few years ago. We've introduced the brand in Central Europe, Germany, Austria, Switzerland and Benelux. And we -- I think it's available now on Amazon in the U.K., and we'll be expanding it gradually across all core markets. So we see a great opportunity there. There's a big difference between the brand's visual identity and the size of Crodino in international markets versus Italy. I mean, it's a much more premium brand in a larger pack and it has a different support or let's say, marketing support behind it. In Italy, it's a very established brand. We're looking at its fundamentals. And this is something we're going to tackle very, very soon. So we'd expect it to -- the same way as what we did with Campari Soda for it to take probably a year or so, but then start responding to what we do to it. There's no question that we've set a standard for the brand internationally. And now we need to reflect that into the Italian proposition. Aperol Ready to Enjoy. I mean it's currently only in 10 markets. And when I say 10 markets, 1 of them is only a -- it's actually a test market in New York state in the U.S. We've just started there, too, about a month ago. So really, we're in 9 markets. It represents about 5% of the total mother brand, again, it's coming from nowhere. And what we're seeing in all the markets is that it is additional volumes because it really is focused in the off-premise in convenience stores, and particularly warmly embraced by people who either live on their own or couples who don't necessarily feel like they want to open a whole bottle of Prosecco when fixing themselves drinks. So large gatherings, which is the heart and the core of Aperol, continue to be satisfied with the perfect serve with the full-size product and full-size Prosecco. You see that -- a case in point. I mean, in Germany, we grew by 17% despite the significant -- or very successful introduction of the Aperol Spritz ready-to-enjoy. We've also had it in Italy now, I think, 5 to 6 years, and we've seen the mother brand continue growing double digit on a regular basis. And again, here, we've kept it very pristine in the off-premise and targeting it to special -- in particular occasions.

Next question is from Paola Carboni with Equita SIM.

I have a few questions. The first one, I appreciate your comment on gross margin and marketing and selling, which we're referring to the comparison on 2020. I don't know if you can give us a sense of how we should expect this dynamics to be compared to 2019, and in particular, if you believe your confidence, let's say, on gross margin trend is enough to offset the drop we saw in 2020? Second question is about your long-term growth. We have had already several questions on what could be a sustainable trend, in particular in the off-trade. I was just curious to hear from you, let's say, kind of updated midterm target you used to midterm organic revenue growth for Campari. In the past, we have already seen a bit more of that in the past years. So I'm wondering if you have probably now a higher guidance for -- as a sustainable growth for the group. Further point, sorry, probably I'm missing something. I would like you to come back on the point of restocking replenishment, which is a word you mentioned here and there in the presentation about in your answers, you have played down a bit this kind of dynamic. And in particular, I was looking to the Slide #6. So in effect, I understand you play down it because we see that compared to 2019 sell-out is still quite ahead of shipments. But I was just struggling to give the right importance, let's say, to the few times you mentioned replenishment or restocking during the presentation. So I'm wondering whether maybe in that case, you were referring to on-trade wise, the -- maybe this chart on Page 6 is comparing sell-out off-trade with overall shipments, including on and off. So I was just -- I would like you to help me in understanding this chart and your comments on restocking. And really last point, probably also a bit more boring. You mentioned the positive impact from U.S. tariff suspension. Could you quantify it for H1? And how much could this help also in H2, should the situation remain like it is today.

Paolo, if you want to let me take the 2 middle questions. Paolo is trying to gather some oxygen.

Yes, exactly.

With regards to guidance, I mean, look, within this environment with the pandemic still being true, et cetera. Economy is going up and down. We're not going to revise any guidance, Paola. I mean, you know us, we'll always sell as many cases as we can. Clearly, if you look at the fundamentals of the business, what we've been doing for the past 5, 6 years have significantly strengthened the fundamentals of the business, our brands, our route to market, the organizations, our capabilities. So if this were a benignly normal world without external shocks, yes, we definitely would be doing better than what we've done historically. But this is not the time to pick out the number from a hat and give you that number further. We're too serious to do that. And with regards to stock replenishment, I was very clear in saying that the stock replenishment has not been material. I mean we're still continuing with low stocks across the board, brands and markets. And we aim to maintain that situation, putting more pressure on the supply chain. On a selective basis, on a brand A or brand B, if it's got to travel 8,000 miles to go somewhere, we might have increased a little bit the stocks, but I mean in the grand scheme of things, it hasn't really moved the needle, and that's where we'll stay.

On the other 2 questions, Paola, if I get the first question correctly, if you look at 2021 versus 2019, not versus 2020 where I've described how we see gross margin and A&P and SG&A moving in the second part of the year. The question is, would you be in a position of recovering entirely the gross margin dilution you've suffered in 2020 versus '19? So if you go back 1 year, we've lost last year versus '19, 280 basis points of gross margin. And if I -- if I may remember it well, we've lost [ 280 ] basis points at EBIT level. Now in June, we've recovered 130 basis points of gross margin. As I said, we're expecting the trend to continue in the second part of the year, but we will not be in a position of recovering the 280 basis point gross margin shortfall that we suffered last year. And this is clearly due to the agave issue, which over the 2-year period accounted for 180 basis point gross margin dilution. As I said, we need to be a little bit patient and wait for 2022 to see the full catch up. That said, we were quite positive because aside of gross margin expansion, that is there and will continue in coming years, we also now rely on some very interesting operational leverage, which give us a little bit of flex on A&P spend on structure cost, and this is very good. So we -- the objective is clearly to fill the gap that pandemic created in '20 versus '19, we will not be in a position of filling entirely the gap this year. Even at this level, we're talking [ 280 ] basis points.

Okay. And just the last question on the U.S.

Yes. The last question, I forgot. Here, the question is tariff impact overall is EUR 18 million, EUR 19 million, of which we settled on 50% this year and 50% next year. In H1, we've registered EUR 2 million positive. And the remainder will be accrued in second half, so further [ 7 ] in H2.

[Operator Instructions] There are no more questions registered at this time.

All right. Thank you. Thank you all very much for joining us, and we truly look forward to hosting as many of you as possible tomorrow at the Camparino. These have been a great 20 years, and we look forward to even better 20 years in the years to come. So stay well. Enjoy your summer. Carpe diem, make the most out of it. Negronis and Aperol Spritzes do make life much more enjoyable. Thank you. Bye.

See you soon. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.